Property law in India and its relevance for NRIs

Property law in India and its relevance for NRIs

Property law in India is a vast subject. It is a study under various statutes like The Transfer of Property Act, The Indian Contract Act, Registration Act, Indian Stamp Act, RERA, Land Acquisition laws, etc. Apart from these, for NRIs, special rules and regulations are provided under FEMA by RBI.

Property can be moveable, immovable, tangible or intangible.

There are various property-related activities like an investment in a property through sale and purchase, renting out a property, registration of property documents, updating revenue records and municipal records, exchange and transfer of ownership of property, etc.

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Many top lawyers, including property lawyers and property management companies, offer services to deal with such activities. There are property lawyers in India, assisting in property-related documentation and transactions and settling legal disputes if the need arises.

Property law in India covers a lot of areas. Some of the everyday activities relate to:

  • Under property law in India, real estate investment is a significant area. It has been an attractive option for NRIs and serves the dual purpose of maintaining a connection with roots and profit-making. NRIs are permitted to invest in residential and commercial properties just like any other resident Indian. But for agriculture and plantation, the requirements are different. For promoting the buying and selling of the real estate, the Government provides different loan options through banks and other financial institutions. NRIs have to be aware of the regulations made by RBI under FEMA for the sale and purchase of the real estate, payment as well as repatriation of sale proceeds.
  • For the purchase of property by NRI, money is remitted through proper banking channels. Funds maintained in NRE/NRO/FCNR accounts can also be used. A loan facility is available to buy a house and banks transfer the amount directly to the seller or developer’s account.
  • Intangible property like shares, bonds, and intellectual property rights like patents, copyrights, etc. are also a part of property law in India. NRIs can invest in Mutual funds, Government Securities, Bonds, Equity and Hybrid Funds, etc. Investment in Mutual Funds offers higher returns as compared to investment in Fixed Deposits but is subject to market risk. Mutual Funds Investment is regulated by SEBI (Securities Exchange Board of India).
  • Other property matters concerning NRIs like title search, especially in case of agricultural properties, transfer of ownership in case of inherited properties, settling the issues related to distribution or partition of joint properties or ancestral properties, etc., all come under the purview of property law in India. 
  • Most property-related transactions can be done by NRIs either by personally visiting India or through a power of attorney.

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We have top lawyers, property lawyers, and property management companies taking care of such investments/property matters for NRIs.

The relevance of property law in India for NRIs

The property market in India offers unlimited investment opportunities for NRIs. All investments made in India should abide by the respective laws. There is no doubt that property law in India is relevant for NRIs. Ignorance of the law is no excuse. It is vital to protect and safeguard the huge amount of investments which NRIs make. There has to be clarity of rights and government policies. NRIs need to remain updated on property law in India.

For any investment in property by NRIs, property laws, TDS rules, and tax implications go hand in hand. NRIs must be aware of the tax implications of all the property transactions they wish to undertake. Rules and regulations under FEMA have to be followed. It is imperative to comply with all the legal formalities to avoid any dispute later on.

Property Management Companies help NRIs to manage their property in India while staying in their native place.

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NRIs face many questions when it comes to property-related transactions in India. Some of the most common queries are:

Experts in the legal and financial field, including property lawyers, are available to assist NRIs in understanding the property law in India and helping them sail through the process.

How Power of Attorney Helps NRIs Manage Their Assets

How Power of Attorney Helps NRIs Manage Their Assets

NRIs cannot be physically present in India for each of their financial and legal transactions, and therefore, they need someone to act on their behalf in their absence to complete the formalities of the transactions. POA helps to achieve the same.

Power of Attorney is an authorisation in writing given by a person ( grantor/ donor/principal) to another person (attorney/agent) to act on his behalf. The person who can act on another’s behalf is called an attorney in -fact.

When POA is executed in favour of a person by NRI, he becomes the holder of the authority to act on his behalf. POA is required:

  • to do the necessary acts towards accomplishing any task in the absence of NRI
  • to complete certain transactions in time to avoid delay, e.g. taking possession of the flat, payment of taxes etc

The POA should be used when it is essential to use the same, and there is no other alternative.

Agency Relationship:        

POA creates a relationship of Principal-Agent between the parties. The acts of the agent bind Principal-Donor of the authority.  But an agent has to act within the scope of his authority. POA is given a strict interpretation, and no extra rights are construed. The acts which an agent is authorised to perform must be apparent in POA.

POA can be revoked once the task for which POA was executed has been accomplished or if the representative is misusing the power.

POA may cover any or all aspects of asset management. POA can be – General or Special Power of Attorney.

  • In General Power of Attorney, power is granted to do all the acts necessary concerning the subject matter.
  • In Special Power of Attorney, authority is assigned to perform specific tasks only.

POA can be used by NRIs to manage their assets in India in many ways like:

  • Collection of rent
  • Sale, Purchase, Mortgage, Lease, Settlement, Agreement or Registration of transfer deed
  • Banking transactions
  • Representation in Legal disputes
  • Managing affairs related to real estate – signing of contracts for renovation, taking possession from the builder etc.

Joint ownership:    

In case of joint ownership of property between NRI and Resident India, POA can be executed in favour of one owner to take important decisions and do the requisites concerning the subject matter of POA.

POA holder:    

POA can be given to relatives, blood relations and friends or even to a third party. In case of property matters, some states allow POA only in favour of blood relations.

Execution of POA:

If NRI is executing the POA   

  • While he is in India, POA is made on a non-judicial stamp paper and got notarized.
  • While he is abroad, then POA is made on plain paper (Indian Stamp paper not required) and got notarized there. It is sufficient for the countries signatory to the Hague Convention. But in India POA is given more weight if it is got attested through the Indian Embassy/ Consulate in the foreign country where NRI is residing.
  • If executed abroad, POA holder will have to get the POA registered in India in particular sub Registrar’s Office and stamp duty is to be paid.

 Registration of POA:    

POA concerning an immovable property which can confer title needs to be registered compulsorily, although, it is prudent to register any POA. In case of legal disputes, courts give more weight to registered documents.

Consulting a lawyer for the drafting of POA and for processing the same is always better to avoid future hassles.

What are the things to remember while investing in property in India?

investing in property in India

Property investment in India is popularly thought to be a safe and profitable long-term investment option. It has always been more reliable than investing in stocks. However, the market does face liquidity and other risks from time to time.

To avoid such risks involved in the property market as an investment, one must remember the following tips before finalising on any property:

Selection of property

  • For a property investment in India selecting the right property at the right place as per the budget is very crucial.
  • There is a surplus of choices available in the market, so one must decide as per his/her requirement rather than get swayed by any market gimmicks. Pick a property that is according to the budget and in a preferred location.
  • Researching and reading well on the means of buying is equally essential. Researching is important because it will eventually lead one to his/her desired property, and while researching, consulting a broker, online or directly through the builder before finalising the purchase makes the deal even better.
  • Before shortlisting the property one wants to opt for, a thorough check on the builder’s track record/his credibility is also a must. It can be done through reviews on real estate portals or talking to friends and relatives who have invested before and via actual site visits.

Financial considerations while investing in property in India

  • If one is taking a loan, then one must get the loan eligibility checked from the respective bank even before searching for a property in India. This is important to get the required loan amount sanctioned. It will also ease the process of approval and will give the confidence about one’s worthiness in the market.
  • While investing in property in India, it is suggested to the investors that they get their credit report extracted from Credit Information Bureau (India) Ltd. It is a necessary procedure especially when one is applying for a home loan. A good CIBIL score helps in arranging for better interest rates for the loan sought. It would also help in saving other charges levied by the banks and even get a speedy sanction of the loan, saving a lot of hassles, paperwork and time.
  • Other than your eligibility for a loan, one must check for internal and external quality of construction of the Property, all legal paperwork from the builder and layout plan of the project. Carefully reading the Booking form and Sale Agreement before signing is a must as some of the clauses could be in favour of the builder.
  • Investment in property in India is unlike investing in share market or equities or mutual funds wherein one can spend a short time and accumulate profits. Investing in estate requires an investment of at least five years as the rates of property rise or drop due to the social, civic and road development in the neighbouring area factors.

Legal Considerations

  • Lastly consulting a lawyer or professional for the Agreement of a sale plays an important role. One must take help from a chartered accountant or lawyer.
  • Unless one is an expert, the nuances or clauses mentioned in the Sale Agreement might get missed. A lawyer or CA can explain the needs and importance of documents needed to cross check before closing the deal.
  • Legal intervention is thus necessary in case the other party is not abiding by the laws or trying to fool you.
  • A lawyer also helps the consumer understand the nitty and gritty of various terms and market concepts along with the risks.
  • Property investment in India is still an unorganised sector, and many consumers might be helped to a great extent if they do thorough research before buying a property.