Real Estate in India
Real estate is one of the most crucial, significant and distinguishing factors that contribute immensely to the growth and expansion of a country’s economy. The Indian real estate sector stands second after agriculture in regards to employee generation and is anticipated to grow at 30% in the next decade.
The development of this industry is complemented by the corporate sector and rise in the demand for the urban accommodation and office spaces. The ranking of India has reached 9th spot among the list of 55 international marketplaces, thanks to the appreciation in the prices of residential as well as commercial sector.
The Indian real estate sector is flourishing well and the construction work of apartments is at its all-time high these days owing to the recent initiatives taken by the Indian Government. Real Estate Regulatory Authority (RERA) and lower Goods and Service Tax (GST) rates have also succeeded to encourage not just home seekers but also the investors alike to look the realty sector as an option for investment. The Government of India has adopted friendly policies for Foreign Direct Investment (FDI) in the last past years. This has made India a favourable and promising place to invest in the real estate sector for other countries.
The Indian real estate sector holds a lot of potential and is one of the prime sources of generating revenue for the government. The market size of the realty sector in the country is likely to attain the US $180 billion by 2020. To meet this soaring demands of the infrastructure in India, hospitality, retail and commercial real estate will also nurture significantly to complement this surging demand.
Prime industrial sectors, such as Information Technology (IT) and IT Enabled Services (ITES), e-commerce, consulting and retail have recorded a high demand for the office space in the last past year. As of September 2017, the office space absorption in the top eight megalopolises of the country accounted for around 18 million square feet (msf). Owing to the surging demand of office sector and IT/ITES real estate, the private equity inflows have grown to reach 150% between 2014 and 2017. Apart from this, the new retail space of around 6.4 million has been finished and another stock of about 20 msf is expected in 2019.
The NRI Real Estate Trend in India
It is not just Indians who get lured with the glitter of the real estate, but there are numerous NRIs who ride a huge amount as an investment in the realty sector of the country. Nowadays, the investors do not see real estate as a real asset, in fact, their mindset has been changed to a great extent in the recent times. The developers have now started portraying the property investment like it is an integral part of ones lifestyle. This change in their market policy has succeeded to build trust and woo the NRI investors. There is a drastic rise in the purchasing of NRI property buyers in the country who are looking forward for shifting their base permanently in the coming years.
Why NRIs Should Invest In India?
- India is one of the fastest growing economies so it is a melting pot for NRIs to make investment
- The Indian real estate is reliable, risk-free and assures high returns on your investments
- Presence of most reputed and globally-known companies ensures that the demand for the commercial space will never sink in the country
- Real estate investments ensure fixed monthly rentals. NRIs are also liable to get tax benefits like any other Indian citizen
Buying or selling a real estate property is a gruesome task for NRIs, hence here is a list of FAQs that may help our NRI clients in making a right property investment.
Questions For NRIs
Who are eligible to purchase an immovable property in India?
As per the Reserve Bank of India (RBI) norms, NRIs are free to purchase properties in India. Any Person of Indian Origin (PIO), and any individual who is not a citizen of Pakistan, Sri Lanka, Bangladesh, Iran, Afghanistan, China, Bhutan and Nepal can buy immovable properties in India, if (i) he/she, held Indian passport, at any time, or (ii) whose father or grandfather was an Indian citizen as per the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
Do NRIs require any permission from the Reserve Bank of India to purchase a residential or commercial property in India?
No. NRIs do not require any permission to purchase any immovable property in the country.
If foreign nationals, born in India allowed to buy residential or commercial property in India?
Foreign nationals who are born in India, irrespective of the fact that they are residing in India or abroad, have been granted permission to buy immovable properties in India.
What are the facilities available for NRIs?
NRIs are given the following facilities:
- Keep and maintain bank accounts in India
- Investment in immovable properties
- Investment in shares, securities, deposits of the Indian firms and companies
Do NRI nationals need permission from the Reserve Bank of India to acquire residential or commercial property in India?
No, NRIs do not require any permission from the Reserve Bank of India while purchasing residential or commercial property in the country.
What are the formalities that NRIs of Indian origin are required to complete while buying a residential property in India?
While buying a residential property in India, the NRIs are required to file a declaration in form IPI 7 with Central Office of Reserve Bank at Mumbai within 90 days’ time period from the date of purchase of that property.
NRIs can also submit a final payment of purchase consideration along with a certified copy of the document which can be used as an evidence of transaction and the bank certificate relating the consideration paid.
Do NRIs allowed to sell their immovable property without the permission from the RBI?
Yes. The RBI has given general permission to NRIs for selling immovable properties. The funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.
What are the documents needed to buy a property in India?
Here is a list of documents that are required to buy a property in India:
- PAN Card (Permanent Account Number)
- OCI/PIO card (In case of OCI/PIO)
- Address Proof
- Passport size photograph
What are the types of properties that NRIs cannot buy?
NRIs are not allowed to buy agricultural land/plantation property/farm houses in India. The proposal to do such real estate transactions should be specifically sanctioned by the RBI, in consultation from the Government of India. The one last way to obtain an agricultural land is by inheritance only.
How many properties NRIs can buy in India?
An NRI/PIO can purchase a maximum two residential properties in India. It is because if an NRI has purchased two properties, then repatriation cannot be done for more than two residential properties if the funds are from an NRE account. If the funds are from an Indian account then there is a limitation that the person has to keep the money in that account or in India for 10 years’ time duration.
Do NRIs allowed to send the rental income earned from such properties outside India?
No. Such income is not allowed to be remitted abroad and have to be credited to an ordinary non-resident rupee account of the owner of the property in India. Restricted remittances are, however, now permitted.
How are income tax applicable in case of properties owned in India?
As per the Indian Income Tax Act, if a person, whether Indian or NRI, owns more than one residential property, then only one of them will be considered as self-occupied. No income tax will be applicable on the self-occupied property, however, whether the other property is rented out or not, an income tax will be applicable on the rental income of the second property.
How does Double Taxation Avoidance Agreement (DTAA) work in case of NRIs?
The Double Tax Avoidance Agreement (DTAA) with most countries states that capital gains from the property will be taxed in the same country where the property is situated. Hence, if an NRI owns an immovable property in India, then he/she will be liable to pay tax in India on the monetary benefits which comes after the sale of the property. Similarly, renting of an immovable property is subjected to tax in India under most tax treaties.
What are the conditions needed to be fulfilled for repatriation of sale proceeds?
Applications for repatriation of sale proceeds are taken into consideration if the sale takes place after three years from the date of final purchase deed or from the date of payment of final of consideration amount, whichever is later.
Do NRIs remit their current rental income from India?
NRI or POI can remit their rental income from India to their NRE account provided they have necessary documents. The list of documents include a request letter, FEMA declaration, Form A2, rent agreement and proof of rent amount remitted to NRE account, original copies of 15 CA and CB duly signed by the remitter and CA, and proof of tax payment among others.