Top 5 Things NRIs Must Know About Investing In Real Estate

Knowing where to invest your money is becoming increasingly important. A good investment not only increases your savings but also increases your income. While we are all familiar with the stock market and cryptocurrencies, real estate is regarded as a more complex investment, particularly among NRIs. However, if done correctly, real estate can provide fantastic returns to consumers while also providing a new route of diversification to their portfolios. If you are an NRI looking to invest in real estate in your home country, here are a few things to consider:

1. Foreign Exchange Regulations

NRIs must follow the Foreign Exchange Management Act of India when investing in Indian real estate (FEMA). NRIs with an Indian passport, Overseas Citizens of India (OCI), and Persons of Indian Origin (PIO) cardholders do not require the Reserve Bank of India (RBIexplicit )'s approval to invest in real estate. Loans in India must be paid in INR and must adhere to Indian taxation laws governing real estate investments. NRIs can only invest in general residential or commercial properties, not in farm or agricultural land.

However, such properties may be received as an inheritance or as a gift. In some cases, the court may grant permission for NRI investments in agricultural land — this varies by case.

2. Tax Benefits

Any proceeds from real estate transactions are subject to Indian income tax laws. If a property is sold within two years of purchase, the profits are classified as Short Term Capital Gains and are taxed at 30%. Long Term Capital Gains (LTCG) are applicable for the sale of properties held for more than two years, with a 20% tax on the gains after inflation adjustment. The LTCG tax must be paid first for the entire sale price, after which the rebate can be claimed.

3. The Property's Type and the Builder's Credibility

Individuals may choose to invest in residential or commercial real estate depending on their goals. Following COVID, residential properties are attracting a higher demand than commercial real estate. Commercial properties in well-located areas, on the other hand, can attract both good rental yields and steady capital appreciation.

Furthermore, it is always safer to invest in well-known builders rather than in newcomers. Before signing the contract, ensure that the builder's firm is ISO-certified and that the project has been approved by government authorities.

4. Durable Power of Attorney

A Power of Attorney, or POA, authorises one person to act and make decisions on behalf of another person, in this case, an NRI. It is obvious that one cannot be present at all times to supervise the development of the invested properties or the maintenance activities. Having a credible and trustworthy POA can alleviate all of that stress because the investor's physical presence is not required. The appointment of a POA is well documented and must adhere to government regulations in order to avoid fraud or disputes.

5. Mortgages

NRIs can obtain home loans to help them purchase a home in India. They can get a loan for up to 80% of the property's value. When applying for a home loan, it is generally advised to use a Non-Resident External (NRE) account. It also enables one to obtain capital from abroad without much difficulty after selling the property.

The real estate market is gaining traction. CRISIL predicts that established residential realtors will grow by 30-35% in FY23, up from 14% the previous fiscal year. 1 Interest rates are rising and starting from a high base for fiscal 2022, making now an excellent time to enter the market and diversify investments. With thorough research and adherence to regulatory regulations, one can position themselves to capitalise on the expanding market opportunity. Brigade Valencia