NRI Investment- A Major Contributor to Indian Economy
Non-resident Indians (NRIs) have been significant contributors to the real estate market in India. An NRI is someone who is still a citizen of India but no longer resides in the country and has moved to another country either for work, business, or marriage purposes. NRIs may wish to buy a property in India for two reasons; firstly as an investment since they have always found the returns from real estate investment to be rewarding as compared to any other investment, and secondly as an emotional connection to their homeland since they may wish to return to the country sometime in the future. Whatever the reason may be, NRIs have been major contributors to the growing Indian economy and the real estate market. But since these investors aren’t permanent residents of India, there are many rules which apply to them that may be different from those that apply to a resident of India. In order to attract more foreign investment, the Reserve Bank of India has made the rules simple for NRI investments. Real estate transactions fall under the purview of the Foreign Exchange Management Act (FEMA).
5 Important Rule for NRI Real Estate Investment
The depreciating rupee exchange value has always been a bonus for NRI investors since it allows them a great advantage when looking to buy a property. Since the simplification of rules, India has seen a huge rise in real estate investment which has had a positive impact on the Indian economy. However, there are some key points which global investors must be specifically aware of when planning to make a real estate investment in India.
1)Power of Attorney- NRIs need to give the power of attorney to a local Indian citizen if he/she cannot be personally present to complete the formalities for investment. The power of attorney empowers a local person to act on behalf of the NRI. It allows the person in question to manage all transactions pertaining to mortgage, lease, sell, collect rent and borrow, manage and sell disputes, perform acts required by banks and enter into contracts.
2)Income Tax- When a buyer (Indian resident or NRI) is in possession of more than one property globally, then according to the Income Tax Act, only one of these properties is self-occupied. On the other India properties, the income tax will be levied based on the rental income.
3)Types of Property- NRIs can invest in multiple residential and commercial properties. However, they are not permitted to buy agricultural or plantation lands unless they have inherited it or have been gifted.
4)Financial Transaction- NRIs can carry out all financial transactions via regular banking channels through their overseas account, issue a post-dated cheque, or use Electronic Clearance Service (ECS). However, they are not permitted to use traveller’s cheques or foreign currency notes or pay outside India.
5)Loan Eligibility- For any NRI to be eligible as a home loan applicant, he/she must have a minimum of two years of working experience in the country they are currently residing in. The maximum loan tenure is allowed up to 20 or 30 years.
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