NRI CORNER

Gulf-Based NRI's May Find Indian Realty Attractive, Here's Why

India is the third largest investor in United Arab Emirates (UAE) with industry giants like L&T, Pioneer Cement and Punj Lloyd bagging new projects in the country. Interestingly, NRIs living in the country, who form a major part of the population, are keenly focusing on newer investment opportunities in India. Industry insiders estimate that the NRI investment in 2017 in Indian cities will touch $11.5 billion. This amounts to 20 per cent of the total market share, presently estimated at $60 billion. The UAE has been particularly in focus post the visit of the crown prince Mohammed bin Zayed Al Nahyan.

Key Drivers:

  • Pro-investors government
  • Technology boosts NRI investments
  • Efforts by developer community and marketing agencies
  • Growth of affordable housing
  • Key investment hotspots
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Five Things NRIs Buying Property In India Must Know

Nature of property:

NRIs can buy all sorts of immovable properties in India other than agricultural land, farm house and plantation property. To acquire agricultural land/plantation property/farm house in India, they have to get approval from the RBI and the government.

Taxation:

When an NRI sells a property in India, TDS (tax deducted at source) calculation is done at the rate of 20.6 per cent on long-term capital gains and 30.9 per cent on short-term capital gains. However, the final taxation rate is similar for NRIs and resident Indians. If an NRI has a lower tax slab applicable to him, he can apply for a refund of the TDS by filing their income tax return.

Home loan:

The RBI has given a general permission to banks and housing finance companies registered with the National Housing Bank to provide loans to NRIs for buying residential property in India. Sanctioned in Indian currency, the loan has to be repaid using the same currency. However, the loan amount, according to the regulations, cannot be credited directly to the bank account of an NRI and has to be disbursed to either the seller’s or the developer’s account. The loan can be repaid using funds in an NRI’s NRO/NRE account or FCNR deposits.

Power of attorney (PoA):

As they live outside, NRIs have an option to give PoA to their friends or relatives to complete the property purchase process in India. The PoA can be general or specific about the rights your representative can exercise

Repatriation of funds back to the foreign country:

There are certain guidelines for repatriation of funds. An NRI or Person of Indian origin (PIO) may repatriate the proceeds from the sale of immovable property in India on the conditions mentioned below:

The property must have been purchased in accordance with the FEMA directives, applicable at the time of purchase. The amount repatriated cannot exceed the original amount paid for the property, if the property was acquired in foreign exchange remitted through normal banking channels or out of funds held in an FCNR (B) account.

However, in the following circumstances, the NRI/PIO may repatriate a maximum of $ 1 million per financial year:

Impact of RERA implementation:

Real Estate (Regulation and Development) Act, RERA is a very significant and crucial law that will impact the entire Real Estate sector in the country. With RERA, transparency and accountability are being introduced in a sector that is widely perceived as big yet unorganized. RERA came into the act after almost a 9 year waiting period. The government said that it will make buyers the king and the developers will get benefit from the confidence of the king in a regulated environment.

To understand the real impact of RERA, we must first evaluate its impact on the primary stakeholders: buyers, builders and brokers. RERA will majorly ensure that there is a flow of institutional funds, making the end-user the real winner and protect them from unscrupulous activities. RERA, along with demonetisation and GST will make sure that the market is largely driven by end users. This article will give you a quick overview of Indian Real Estate after RERA:

IMPACT ON BUYERS:

  1. There will be more accountability and compliance from the developer’s end as RERA renders brokers, agents and developers punishable if they do not comply and abide by the regulations
  2. Home buyers who use the services of real estate agents or brokerage firms will be protected. Under RERA, agents and brokerage firms will have to ensure that they are duly registered with the Regulator. They will be accountable for their business activities and practices
  3. Each state will have regulatory bodies as appellate tribunals to resolve disputes between builders and buyers within 60 days. Once the pending complaints get resolved, and we have the systems in place, we are sure that the future complaints will reduce in number
  4. The push towards timely delivery is possibly the biggest benefit for homebuyers because non-delivery of projects has been a major concern
  5. The buyers who have invested in real estate projects can secure interest at SBI lending rate + 2% per annum for delayed possession
  6. The buyers will be in a better position to seek softer loan terms from the lenders now. As of now when the home loan interest rates have come down to 8.35% p.a., the eligibility of buying a property has gone up

IMPACT ON BUILDERS:

  1. All residential and commercial projects developed over land exceeding 500 square meters or eight units have to be registered with the Regulator before the project launch.
  2. The developer has to clearly mention carpet area also along with a super area in builder-buyer agreements. They are also liable to undertake repairs of structural defects for five years now!
  3. 70 percent of funds for a project received from customers will be held in a dedicated escrow account. This will be used exclusively for that specific project, speeding up work and ensuring timely completion.
  4. Only the organized players, which are cash-rich, will be able to survive. The approval process for the projects will decrease. Moreover, any new project launched will have to be RERA approved and the developers will need the RERA license to start the project.
  5. The new project launches will reduce, but this is a positive aspect for the builders. As the supply will be less, the supply chain gap will be recovered.
  6. The competition will decrease. Homebuyers who earlier have been only focusing on price will now look at the brand, quality of product, location.

Does Capital Gains Tax (CGT) apply to NRI/PIO/OCI?

Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.

If you are an NRI/OCI/PIO, you would have to file your income tax returns if you fulfill either of these conditions:

A. Your taxable income in India during the year was above the basic exemption limit of 2.5 lakh

OR

B.You have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit. Note: The enhanced exemption limit for senior citizens and women is applicable only to residents and not to non-residents.

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