Investing in the home country is the best option for NRI’s, they can either buy a property here as a retirement home to come back to the roots or as an asset that will give them a return in the coming time. There can be many reasons to invest in real estate and trust me it is one of the best options when it comes to investment.
In this current scenario also we have been seeing NRI’s doing investment in Indian real estate. I will not go into the details as to why and how you should choose a property for you, but this post is all about putting down 5 important points that a person living abroad must know while investing in real estate.
Let’s look at them one by one:
- TDS while buying the property: NRI’s should be well versed with the taxation on real estate investment in India. You can check with your real estate consultant or CA on TDS. TDS will be dedcuted as per the table below while buying property in India keeping in mind the associated conditions.
|Property Bought From||Condition||Tax deducted at source|
|Resident||50 Lakhs or above||1% TDS of Purchase Value|
|NRI||No Condition||20% plus surcharge and cess for long term gains and 30% plus surcharge and cess for short-term gains|
Capital Gains Tax for NRI on sale of Property: The minimum holding period for long-term capital gains for real estate is 2 years.
|Nature of gains||Tax Liable||Tax Deducted at Source (TDS)|
|Short Term Capital Gains||As per tax slab||30%|
|Long Term Capital Gains||20%||20% (plus surcharge and cess) with indexation|
2. NRI’s can only do investment in residential and commercial property. There is no restriction on the number of properties that can be invested in. They can not purchase the agricultural land, plantation property, or farmhouse this can be gifted or inherited to them
3. Power of attorney: If you are not able to come to India to do everything yourself, this could be due to personal reasons or pandemics. NRI’s get a special condition where they can have a Power of Attorney (POA) to carry out investments for you. A POA can enable easy buying, managing, and selling of your real estate property in India.
4. Funding the property: If you are going to take a loan on the property then according to RBI, a maximum of 80% of the value of the property can be funded by a financial institution. The remaining has to come from your own sources. All transactions should take place through the banking channels, so make sure to use inward remittances and remit inward from the NRO/NRE account in India.
When applying for a loan, it is best to use a non-resident external (NRE) account, as this will allow you to repatriate the capital invested in the property when you sell it off.
5. Choosing a reputed builder: It is extremely important to choose a builder who is backed by a very good reputation in the real estate industry. A good builder will also have all the adequate clearances and certificates needed, which can help accelerate the process of buying your home.
I hope these points will be useful to you, while keeping these points in mind NRIs can invest in properties without any problems at all.