NRI Investment Guide

Are Non-Resident Indians (NRIs) allowed to purchase a Residential Property in India?

Non-Resident Indian’s and People of Indian Origin with Foreign Passport Holder can purchase of residential property in India. They are treated wholly as Indian Citizens and therefore don’t require permission to purchase from the Reserve Bank of India.

 

How do you define a foreign passport holder but of an Indian origin?

A foreign passport holder is deemed to be of Indian Origin if: 1) he held an Indian Passport at any time or ii) he or his father or paternal grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955. However this does not apply to citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal.

 

How should the purchase of residential immovable property be paid for by NRI’s under the general permission?

The purchase consideration should be met either out of inward remittance in foreign exchange through normal banking channels, or out of funds from NRE/FCNR accounts maintained with banks in India.

 

Do you have to inform Reserve Bank of India when selling property?

Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another NRI, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

 

What formalities have to be completed by NRI’s to purchase residential immovable property in India under the general permission?

They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property (Sale Deed) or final payment of purchase consideration along with a certified copy of the documentary evidence for the transaction and bank certificate for the money paid.

 

What are the Tax Implications on eventual sale of the property by an NRI? Can an NRI take the net amount outside India in sterling or dollars after tax has been paid?

On an eventual sale of property, there will be tax implication on profit gain in case of individual. Individual will be charged upto 30% tax on the gain. Also in case of short term gain, the charge will be taxed at 30% if within three years. And above 3 years i.e. Long Term gain will be taxed at much lesser rate i.e. approx. 15%.The Net amount, after deducting the necessary taxes and charges, can be taken back in any currency outside India .

 

How do we ascertain the credibility of the Builder and the Project?

It is essential that you may know the background of the Builder? Since there are already existing projects, it will be easy to understand the working of the concerned builder. If earlier Projects have been completed in time & possession of the Apartments, especially those sold to NRI’s. Reference can be made and enquiry sought with such owners of apartments about their satisfaction with regards to their stay, maintenance and overall project work.

 

What would be the total cost of purchasing the Apartment/Villa?

The price will differ depending on the size, location and view of the Apartment, so only on enquiry one will know the exact price at the stipulated time, besides the cost of the apartment, there will be other incidental costs such as Maintenance charges, Registration charges, Local Taxes as applicable, etc. Details will be provided on request.

 

What is the role of the Agent? And what would be his fees?

All Agents will see you through the entire Sales Process and will be responsible from the initial contact to the final stage that is receiving your keys to the Apartment. For all this he will be paid or will charge a fee at a percentage of the basic price depending on the work load undertaken.

 

What are the legal steps before pursuing the Purchase?

Besides being impressed with the work of the Builder, the Purchaser must check all the title documents of the said property that the Builder is the sole owner of the same. Ensure that the Construction plans have been approved by the concerned authorities and that the all necessary Government Approvals have been obtained to build and sell the same.

 

What other expenses will I incur?

The Purchaser has to bear the expenses pertaining to Registration and Stamp Duty of the Apartment. There may be additional Government Taxes as applicable, such as Service Tax, any deposit in the name of the Purchaser or any other.

 

Is the price of the Apartment likely to increase?

The price as quoted may increase periodically depending on the market by 7.5% to 10% at the discretion of the Builder. Thus, the earlier you book the Apartment the better rate you will receive.

 

On or after booking/purchasing an Apartment, whether there will be any price variation on escalation?

No, the price quoted for an apartment, at the time of booking/purchasing will not change on escalation.

 

Can NRI’s obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?

The Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, ICICI, SBI and various other Banks and authorized dealers to grant housing loans to non-resident Indian Nationals for acquisition of a house/flat for self-occupation subject to certain conditions. Details will be provided upon request.

 

If I require more specific details regarding Reserve Bank of India ?

Please go to: www.rbi.org.in for the website of Reserve Bank of India , click on FAQ then again on Foreign Exchange under “ Jan. 01, 2006 , Acquisition and Transfer of Immovable Property in India by a person resident outside India ”. This site gives a detailed account for all types of Foreign Nationals purchasing Residential Properties in India.