For an NRI, property investment in India offers a great avenue to grow their investment portfolio and to get good ROI. Any non-resident Indian who wants to invest in property in India needs to know that there are certain regulations and rules that govern the investment in real estate for NRIs in India, including the acquisition or sale of property or the income being generated by the property.
Recently, in the real estate market, NRI investment in India has made up a significant part. NRIs tend to buy property in India for either investment purposes or sometimes because they feel an emotional connect and plan to return to India to settle once they retire. Regardless of the reasons that govern this decision, the country has seen a lot of NRI investment in real estate, especially more recently. For NRIs who wish to invest in property in the country, there are however, certain rules that need to be kept in mind:
Some Important FEMA Rules to be Kept in Mind
In an attempt to foster NRI property investment in India, the RBI (Reserve Bank of India) has made the rules that govern NRI investment in Indian real estate much simpler. Such real estate transactions fall under the Foreign Exchange Management Act (FEMA). Under this, the Indian government has given a general permission to an NRI or a PIO (person of Indian origin) to acquire an immovable property in India. However, this permission excludes farm houses, plantation properties, and agricultural lands.
Real Estate Investment Options in India for an NRI
There are many NRI investment options in India when it comes to real estate, including both commercial and residential properties in India. However, as mentioned earlier, any plantation property, farm house, or agricultural land cannot by acquired by the NRI by the way of purchase. However, these types of properties may be inherited or gifted to the NRI.
Financial Transactions by NRIs for Real Estate Investment
If an NRI or PIO is making a real estate investment in India, their options for making the payment are limited. For any property transactions in India, the NRIs and PIO can make payments in the following ways:
Funds that are remitted to India through any normal banking channel
Funds that are held in an NRE, FCNR (B), or NRO account that is being maintained in India
There is no payment involved in the transaction that can be made by traveller’s cheques or by any foreign currency notes
For real estate investment, no payment can be made outside India
Loan Eligibility of NRIs for Property Investment in India
Like any other citizen of the country, NRIs and PIOs can also apply for and avail home loans in INR for the purchase of a property. Depending on the eligibility of the individual who is the main applicant for the loan, one may get up to 80 per cent of the total property value as a loan. For the repayment of the loan, there are different ways that can be followed. The loan can be repaid:
By the way of inward remittance made through any normal banking channels
By a debit to the NRE, FCNR (B) or NRO account held in India by the individual
From the rental income generated by the bought property
By close relatives of the borrower, as defined in Section 6 of the Companies Act, 1956. They may repay the loan via their own accounts in India, crediting loan account of the borrower.
Keeping these rules in mind can be highly beneficial for NRIs making real estate investment in India, and can result in great returns of investment throughout the lifecycle of the property.