How to Navigate the Legal Landscape as an NRI Real Estate Investor?

By Lodha

As a Non-Resident Indian (NRI), you may be living elsewhere, but you will always have a home in India. Whether you fly down often to meet family or to oversee business affairs, having a home base in the country can be a boon. Not only is having property in the country convenient, but it can also add to your portfolio. However, like any other real estate transaction, property dealings involving NRIs are tied up with legal compliances and regulations. If you want your investment to be valid and secure in the eyes of the law, here are a few legalities about the real estate market in India you should know about:

Investment Eligibility:

NRIs are not allowed to invest in property like a resident Indian would. Before investing your money, checking if you are eligible is best. As an NRI, you can easily invest in residential and commercial properties in India. However, you cannot purchase agricultural land, plantations, or farmhouses unless you inherit them or receive them as a gift. NRIs are also encouraged to open Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts to manage funds related to real estate investments in India.

Tax Implications:

NRIs are not completely exempt from tax implications in India; however, they have to pay tax differently as opposed to a resident Indian. If you, as an NRI, receive rental income from a property, you must pay tax on the same. If you sell property, you may have to pay Short-term Capital Gains Tax or Long-term Capital Gains Tax based on the holding period. If you sell the property after a holding period of two years or more, you attract Long-term Capital Gains Tax at 12.5% without indexation benefits. NRIs also have to pay Goods and Services Tax (GST) at the rate of 5% if they are investing in an under-construction property in India.

Financing:

NRIs can apply for financial assistance in India. As an NRI, you can apply for loans designed for non-residents. The terms for NRI loans are similar to those for regular home loans. However, you have to repay the loan amount using an NRE or NRO Account. According to Indian law, NRIs have to pay down payments using NRE or NRO accounts as well.

Documentation and Compliances:

Just like resident Indians, NRIs also have to pay heed to documentation and compliances associated with a real estate transaction. One of the most important documents NRIs should pay attention to is the title deed. Ensure that the title deed attached to a property is clear and free from liens and encumbrances, especially if you are not physically present to verify documents yourself. If you will not be able to handle property dealings in person, you can appoint a Power of Attorney to facilitate the transaction on your behalf. To comply with the law, make sure the property is registered in your name and taxes like stamp duty and registration fees are paid.

FEMA and RBI Regulations:

The Foreign Exchange Management Act (FEMA) lists down regulations NRIs must follow during property transactions. From repatriation to investment limitations, FEMA compliances help legitimise your property purchases. As long as your property purchase complies with FEMA and tax regulations, you can repatriate funds from the sale of up to two residential properties. You might want to hire a legal advisor to help you navigate the legal landscape as an NRI and ensure your real estate investments are legal.

Following the legal mandates listed above can help you, as an NRI, ensure that any property you invest in is free from any encumbrances and valid in the eyes of the law. You should also take care that you buy real estate in India built by reputed real estate and construction companies like Lodha. At Lodha, we offer residential and commercial properties featuring modern construction quality and interiors crafted by the top designers in India. As one of India’s top builders, we go out of our way to ensure that our clients can seamlessly invest in spaces designed to suit their needs without worrying about legal complications.

At Lodha, we strive to help you build a beautiful life in your home away from home.