A Few Important Decrees for NRIs to Follow in Indian Real Estate

Posted by Robbin K on November 5th, 2016

In the recent past, it has been evident that Non Resident Indians (NRI) is showing a lot of interest in buying properties in India. The falling value of rupee in the world market is one of the main reasons for NRIs to invest in the Indian real estate market. Not only that, a chunk of them wish to have a home back here in India due to the emotional connect they have with the country they belong.

When purchasing a property in India, NRIs have to abide by the rules set by the Constitution of India under the Foreign Exchange Management Act (FEMA). According to FEMA, an NRI can own both residential and commercial properties across India and there is no restriction on the number of properties he or she wants to possess. However, the rules restrict NRIs to buy any agricultural land, farm house and plantations in India. An NRI can own such properties, only if gifted or inherited.

The development of NRIs' investment in real estate in India has tempted Indian financial institutions to come forward and fund purchase of properties. NRIs can get in touch with investors to fund their property purchase in India. Owing to high returns on investment in the real estate sector, lenders will be more than happy to fund the purchase. However, all the property papers need to be in place, in order to be considered eligible for the funding. It is always advisable to get the papers verified by a lawyer before proceeding ahead. One need to make sure that there is no pending bill to be paid to the authorities and that the property at no point of time was under mortgage. There is an interesting fact that only graduate NRIs fulfill the criteria to avail home loans in India. According to RBI norms, a financial institution in India can fund up to 80% of the value of the property and the rest has to come from the NRI's personal resources. As banks and other financial institutions in India give housing loan for nri in rupee, it has to be repaid in the same currency. Moreover, since all the transactions should happen via banking channels, repayment has to be done by inward transfers. An NRI can either get the money directly remitted from NRE/NRO account in India, issuing post-dated cheques or through Electronic Clearance Service (ECS).

An NRI may be asked to furnish a Power of Attorney (PoA) by the developer favouring them, in case of buying an under construction property. This makes the documentation work swift and easier. It can be given to implement any contract, mortgage, lease or even sale. So, before issuing the PoA, it is always important to consult with a professional lawyer. Giving the PoA to a resident Indian can come as a great help for NRIs in the time of disposing the property, as the resident Indian will be able act on behalf of the owner to complete the formalities like registration, possession, execution of agreement of sale and so on.

Going by the FEMA rules, an NRI can sell any residential or commercial property to any Indian in the world, which had been bought or inherited. However, in case of inherited agricultural properties, plantations or farm house, an NRI should look for a resident Indian to buy it. Apart from the FEMA rules, there are a few specific guidelines from RBI on repatriation of sale that need to be followed while selling off a property in India. According to the set of rules, if anyone wants to repatriate, it needs to come in foreign currency from an overseas bank account, NRE or FCNR account. The other condition for repatriation is that it cannot exceed the foreign exchange amount paid via banking channels, while purchasing the property. It has also to be kept in mind that an NRI cannot repatriate for more than two properties.

[Source: http://ezinearticles.com/?A-Few-Important-Decrees-for-NRIs-to-Follow-in-Indian-Real-Estate&id=9198452]