The real estate sector is one of the most critical and recognized sectors in the World. Most entrepreneurs are widely attracted to the real estate sector. Due to its high profit, it attracts the entire business community. In earlier days, it drew only entrepreneurs to the real estate sector. But now, the real estate sector attracts all. For both short term and long term, it is well growing. Real estate is gaining so much importance in India, and it is widely employment generating.
The vital thing to note is that NRIs are more interested and involved in the real estate sector. Rapid urbanization and a hike in household income have become the biggest reason for the rise of investing in real estate in India. The concept of the emergence of the nuclear family from the joint family is another reason for the hike in the real estate sector.
Most of the NRIs invest primarily in the real estate sector because they are confident and the government is also promoting and supporting real estate investment. Even though Covid-19 affected the real estate sector, NRIs are still interested in real estate because of its profitability in the long run. There are different measures associated with numerous formalities for Real estate NRI investors. For example, specific properties cannot be bought or sold by an NRI. So, while investing in the real estate sector, NRIs should do good research in the particular industry/sector. Seeking professional help or advice from a real estate advisor will be better. Real estate advisors will give a clear idea of all aspects of the real estate sector.
- NRIs can invest in properties specified by the government of India.
- An NRI can buy any number of properties in India.
- The income tax law permits an NRI to buy any commercial property or residential property in India.
- Critical point to note is that an NRI cannot purchase agricultural land or any plantation property in India.
- Various documents are mandatory for an NRI to purchase property in India. An NRI should be aware of the requirement.
- FEMA – Foreign Exchange Management Act, manages, controls and mentions the rules and rights of NRIs regarding investments in property.
Types of properties NRIs can invest in
The Indian government has given a detailed explanation of conditions and points to remember while NRIs try to purchase property in India. RBI has issued a circular that gives NRIs general permission to buy property in India. Under available instructions, it is explained that an NRI can buy any number of properties in India. So, he is not required to ask for any permission to buy a property. The income tax law also permits NRI to buy any commercial property or residential properties in India. But the critical point to note down is that an NRI cannot purchase or he is not able to buy agricultural land or any plantation property in India. So, it is estimated that, under existing general instructions, if an NRI requires the purchase of agricultural land or plantation property, they have to seek specific permission from RBI.
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Best property an NRI can invest
Buying a property needs some good research. Purchasing the best property and being able to give immense profit is difficult. Here we will discuss the best type of investment property that can earn profit reasonably.
- Multi-Family house: One of the significant investments as they hold their value well.
- Mobile Homes: investing in a mobile home is a good investment plan. The mobile home required only a small amount of maintenance. In the case of a large house, maintenance cost is difficult to manage. But for Mobile homes, it is not much.
- Detached Single Family Homes on Sale: The low mortgage rate advantages the owner reasonably. So, buying a single home gives low risk and high profit.
Points for NRIs to know before making real estate investment in India.
- Documents required before investing in India: They need a passport, address proof, permanent account number, and a recent photograph.
- Important FEMA rules to keep in mind: Under FEMA, an NRI is eligible to acquire by purchasing any immovable property in India other than agricultural land or a farmhouse.
- Mode of Payment for NRIs: NRIs who do not have enough funds can easily apply for home loans. The loan can be repaid by using funds in the NRI account.
- Eliminate Middle man: Always make sure that the price of a property is pure and original. It is always safe to eliminate the middle man.
- POA for buying property: Always purchasing through POA is a better choice.
- First-hand experience: Always connect with existing customers.
- Verification: NRIs should do a mandatory back check of the builder by all means.
- TDS details for NRI property sale: Tax details should be clear and consistent. Avoid all confusion by clarifying and doing good research.
Illegal possession of land
Suppose a person who is not the legal owner tends to occupy the property without the owner’s permission and he enjoys the property peacefully, without interruption of the owner in a hostile manner for 12 years, the law will allow him to claim ownership by way of adverse possession.
To deal with illegal possession, the owner should be vigilant. In case he has given property for rent he should keep his eye on tenants such that the property does not fall into the hands of fraud. Some of the solutions are
- Keep changing the tenants: Changing the tenants is the most common way of protecting their property. So, most owners always try to keep their tenants only for 11 months, and after 11 months, they will renew the agreement according to the comfortableness.
- Constructing boundary wall: This is one of the most important ways to protect one’s property. So, making the boundary wall around the house will be a better idea. Whether the owner lives in the plot or not, the boundary wall is essential.
- Legal caretaker: As NRIs cannot visit them regularly, keeping PoA is better. The safest and most common way of protection.
Real estate builders with dubious records.
Investing in the real estate sector is a common way of investment. But investing in a home always needs some research. The person who will buy the property should always check all the documents in detail. Unfortunately, fraudulent and dubious sellers thrive in selling the property to others that do not belong to them, without any valid documents, and knowingly fall within government acquisition.
NRIs face several problems while investing in property. They get stuck with fraud or wrong builders who always delay the project completion. It is suggested that before investing, good research about the property’s previous records is mandatory. An NRI should be aware that every builder may not be transparent. Only some Builders will be honest and faithful.
The real estate builders will make duplicate or dubious records to make a sale by displaying fake documents to the customers and making them feel genuine. Customized persons who are fraud experts will incorporate the story very well. Eye-catching advertisement is also typical to make a good sale. So, one who will deal with property and documents should always be keen and vigilant. Otherwise, one can incur a loss of hard-earned millions.
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Delay in verification process
Every process requires some legal procedures. Legal procedures always need much more time than any other procedures. There is also a considerable delay in the verification process in real estate. The home loan procedures also take a lot of time, and it is time-consuming. The time required for verification depends on the technical process also. All the methods are highly dependent on every process. Delay in the verification process makes the real estate process quite tricky and risky.
Getting professional legal advice for managing property as an NRI
As we know, NRIs are the assets of a mother country. Most NRIs face issues in dealing with property management. A bit of professional and legal advice always makes them comfortable and creates a safe zone. For solving any problem and better property management, getting professional help is the best choice.
Lack of clarity on legal rights
One of the critical problems an NRI faces in property investment is a lack of knowledge about their legal rights. All the investment dealings are managed and controlled by FEMA. FEMA stands for Foreign Exchange Management Act, and it mentions the rules and rights of NRIs. It states that NRIs will be able to purchase only residential property and commercial property. For the purchase of agricultural property, permission is needed. NRIs, especially from Gujarat and Punjab, witnessed a lot of fraud. NRIs or the government itself should ensure that all the transactions are discussed in detail by cross-checking legal documents.
Land grabbers or property gatecrashers
Another most common problem faced by NRIs is land grabbing. So, it is crucial to make sure that signing a legal document is mandatory, whether it is a close relative. So, getting the help of a professional lawyer who will be able to provide a solution will be an asset to the NRIs themselves. In addition, there are NRI cells that deal with illegal land grabbing.
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The real estate market is the sunshine sector. The role of NRIs in investments has a significant role. The NRIs who are not aware of their rights and liabilities will face severe issues in real estate. They are not aware of the loopholes themselves. So, the NRIs should be keen on these types of issues to solve the problems better. We get a clear view of the importance of NRIs’ real estate rights and liabilities from the above.
Under FEMA regulations, it is clear that NRIs are not permitted to buy agricultural land in India. But under certain circumstances, by getting special permission from the RBI, NRI will be able to purchase such land.
It is possible to gift property by an NRI. But the property should not be agricultural land or any plantation property. No tax is levied on gifts when relatives receive the gifts. But have to pay prevalent stamp duty and registration charges
Can an NRI use a Will to bequeath property in India to another person- another NRI or a resident Indian?
It is possible to bequeath property to their legal heirs and anyone as per the choice through the Will. An NRI is also allowed to inherit property from another NRI or resident of India.
It is essential to pay attention to the factors like environmental clearances etc. However, getting a bit of legal advice will be beneficial.
NRIs are not allowed to file property dispute cases other than in the property’s location.