Who is an NRI?

Ans: Under the Foreign Exchange Regulation Act of 1973, Non-Resident Indians are: Indian citizens who stay abroad for employment or carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad; OR Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources; OR Government servants deputed abroad on assignments with foreign Governments or regional/international agencies like the World Bank, International Monetary Fund (IMF), World Health Organisation (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP) OR Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

Who is a foreign citizen of Indian Origin?

Ans: A foreign citizen is deemed to be of Indian Origin if : i) he held an Indian Passport at any time or ii) he or his father or paternal grand father 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.

Buying Process

What should a consumer keep in mind while purchasing a housing property?

Ans: Some of the factors to consider while purchasing a property are: a. Locality i.e. transport, schools, hospitals, market, business district, entertainment centers, hotels, restaurants, pollution levels

a. Quoted area of the property i.e. Carpet, Built Up Area and super Built Up Area
b. Car parking space
c. Quality of construction
d. Reputation of the builder or seller
e. Sufficient water and electric supply, other utilities
f. Cost components: price, stamp duty, registration charges, transfer fees, monthly outgoings and society charges, costs of utilities
g. Potential for resale or renting out of the property
h. Any other distinguishing features or advantages of the property.

Checklist for buying a residential property?

a. Market Trends about prevalent rates of property in the vicinity and last known transactions
b. Ask for photocopies of the all deeds of title related to the property to be purchased. Examine the deeds to establish the ownership of the property by seller, preferably through an advocate. Ascertain the survey number, village and registration district of the property, as these details are required for registration of the sale. Previous encumbrances and loans, if any on the property must be cleared before completion of purchase of the property. The title of the Vendor to the property must be clear and marketable.
c. Check for approved layout plan and approved building plan with number of floors
d. Clearance from Municipality, Electricity, Water, Pollution, Lift authorities
e. Check the building bye-laws in that area to verify any issue with setback, side setback, height, etc
f. Confirm transfer fees, stamp duty and registration charges to be paid on purchase of the property as well as outgoings to be paid for the property i.e. property tax, water and electricity charges, society charges, maintenance charges.

Do NRI’s require consent of Reserve Bank to buy immovable property in India?

Ans: No. NRI’s do not require any permission to buy any immovable property in India other than agricultural / plantation property or a farmhouse.

In what way the purchase consideration for the immovable property should be paid under the general permission?

Ans: The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from any non resident accounts maintained with banks in India

Is there any limit on the number of housing properties that may be purchased by an NRI?

Ans: There are no limits on the number of residential properties that may be bought by an NRI. However, repatriation (the process of converting a foreign currency into the currency of one’s own country) is allowed only in respect of two such properties.

Can NRI’s/PIO’s rent out the properties (residential/commercial) if not required for immediate use?

Ans: NRI/PIOs can without restraint rent out their immovable property, whether purchase through application of forex or otherwise, without seeking any consent from the RBI. The rental income being a current account transaction is repatriable outside India, only if proper tax is paid or provided for.

Loan Process

Does RBI have any guidelines for loans to NRI’s/PIO’s?

a. The loan amount shall not exceed 85% of the cost of the housing unit.
b. Own contribution, which is the cost of housing unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India
c. Reimbursement of the loan, comprising of the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.

Can authorized dealer grant loans to NRIs for purchase of a flat/house for residential intention?

Ans: Authorized dealers have been granted permission to grant loans to NRI’s for acquisition of house/flat for self-occupation on their return to India subject to certain conditions Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance through banking channels or out of funds held in the investors’ NRE/FCNR/NRO accounts.

Can authorized dealer grant housing loan to NRI’s where he is a principal borrower with his resident close relative as a co-applicant / guarantor or where the land is owned jointly by such NRI borrower with his resident close relative?

Ans: Yes. Such housing loans availed in rupees can also be repaid by the close relatives in India of the borrower.

What are the documents I have to submit along with the application?

Ans: The following documents are normally to be submitted along with the application: (a) Photocopy of the labor contract and English translation duly countersigned by your employer (b) Latest salary certificate (in English) specifying the following: Name (as it appears in the passport) , Date of joining , Passport Number, Designation , Perquisites and salary. (c) Photocopy of labor card/identity card (d) Photocopy of valid resident visa stamped on the passport (e) Photocopy of monthly statement of local bank account for the last 4 months (f) Property related documents.

Can an NRI take loan against the security of immovable property in India? Are there any restrictions on the use of loan amount?

Ans: An NRI can borrow against the security of immovable property from Authorized Dealer subject to following conditions.

a. The loan should be used for meeting the personal requirements or for borrower’s own business purposes; and
b. loan should not be used for forbidden activities, namely; (a) business of chit fund, or (b) agriculture or plantation activities or in real estate business, or construction of farm houses, or (c) trading in Transferable Development Rights (TDRs).
c. the loan amount cannot be remitted outside India, iv) repayment of loan shall be made from out of remittances from overseas or by debit to NRE/FCNR/NRO account or out of the sale profits of shares or securities or immovable property against which such loan was granted.

What kinds of incentive can NRIs, PIOs and foreigners look forward to in the Indian real estate industry that favours investment?

Ans: The relaxation of FDI in the construction development sector announced in March 2006 allows NRIs, PIOs and all foreigners equal opportunity with their Indian counterparts in the Indian real estate sector. The new guidelines states that before selling, the site has to be developed, constructed upon or fulfill the criteria of minimum one year development

a. NRIs, PIOs and foreigners can now invest in land, buy it, construct upon it or develop it, sell constructed buildings/developed plots
b. FDI through automatic route can also flow in not just for the housing sector, but also for townships, housing, commercial area, and infrastructure development
c. Restrictions on minimum area of land, minimum number of units has been removed iv) Minimum constructed area required is 50, designated area is 25 acres.

Is there any specific target to actually complete your construction development work?

Ans: The norms are quite liberal. It allows you five years to finish at least 50% of your project from the date of getting all the clearances. In normal circumstances the project can be completed within three years. It helps protect the customer and keeps fly-by-night people at bay.

How does the automatic route work?

Ans: The automatic route has simplified much of the cumbersome investment process. Approval from the Reserve Bank is not required anymore. No need to go to the Foreign Investment Promotion Board either. The easing of paper work and relaxation of formalities has given a boost to overseas investor confidence for investing in India.

What aspects should overseas investors look at in the Indian real estate market to facilitate the suitability of their projects?

Ans: Any NRI before investing in the Indian real estate should also focus on the particular segment that he plans to invest in – like residential, retail or office space. Consulting legal firms and real estate firms providing professional NRI services can be very useful.

What are the steps an NRI should follow for getting all the clearances in a hassle-free manner? Whom should one meet in the process?

Ans: A lot depends on the segment you want to invest in. It helps to gauge the future state and to know what utilities are available. i) An office market investment, for instance, requires you to:

a. Get in touch with consultants for advice on the city of choice
b. Outline your objectives, the size of your investments
c. Have an approximate of the returns you are expecting.
d. The yield that has evolved from distinct parameters ranges between of 8 – 8.5% to 12% for office space and 4% – 6% in residential
e. Whether the land is for investment or for development is also a deciding factor, as is the local demand-supply situation While investing in India, the availability and quality of infrastructure or utilities like power, connectivity, security and long-term future plans need to be scrutinized.

Is a single window clearance possible?

Ans: Single window in a real estate project in India sometimes may be difficult, because of the involvement of several authorities. If it’s a multi-storied building, you need to get clearance from town planning authorities, clearance on design, elevators, fire fighting agencies, etc. Efforts are on to make the process simpler and transparent, though.

Do joint ventures call for better possibilities rather than unfair competition?

Ans: Healthy competition is important and necessary. However, in the case of FDI, joint venture definitely seems the wiser route to take as it has tremendous scope. The Indian partner would always be in a better position to provide inputs in terms of information on land and clearances, where the foreign investors can put their money, use technology judiciously and opportunities where both can complement each other.

Does that signify that, joint ventures best investment option in Indian real estate development?

Ans: Currently, as big foreign investors are foraying into India, their main interests have been in joint ventures. The first couple of transactions or strategies have gone this way and large joint ventures have been struck. Trends show that in the initial years, FDI inflow into real estate in India will come through joint ventures. Efforts to improve infrastructure and speed up reform processes, better tax rules, computerization of land records and more transparency have ensured enhanced investments and developments in the Indian real estate industry

What two or three major things would catapult development in the next 5 to 10 years?

Ans: The response received post relaxation of FDI in the construction and development sector has been very optimistic. This can be seen as a catalyst to investment as it would have a multiplier effect on the economy. Other sectors that will receive a boost include:

a. Technology, associated infrastructure that will be built.
b. Growth of associated industries such as steel, cement, building material, designers, etc.
c. Job opportunities for unskilled, semi-skilled workers, artisans, engineers, architects and the like.

Some information about Investment Property and Rental Income?

Ans:NRIs can freely rent out property (source of acquisition of property not significant) (a) Freely repatriate rental income without prior permission. (b) Tax deducted at source on rental income, adjust rental income against home loans If loan amount is higher, pay through NRE, NRO and FCNR accounts. (a) Short term Capital Gains – property held for less than 3 years.

a. Long term Capital gains – property held for more than 3 years
b. NRIs/PIOs can take the advantage of indexing the cost of acquisition and improvement, investing of sale proceeds in special Bonds
c. On deciding to sell the rental property the NRI can apply to the Income tax authorities for the certificate to be deducted at source