Why Invest

The importance of making the right investment at the right time can never be undermined but then, that is just easier said than done, particularly when it comes to real estate. Key questions are ‘Where, When and What’. If you are an NRI, a retiree, or an investor who needs advise on investment, let’s begin by saying that real estate is a great option.

The reason is simple – solidity and investment protection even as there is an assured value appreciation unlike the risks involved in stocks or bonds which could vary depending on market performance. Real estate alone assures you of a steady income (if you prefer to rent) while protecting your investment against inflation. We would be happy to advise you on the options available based on your budgets and preference.

Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.

Franklin D. Roosevelt

General FAQs

The valuation process evaluates the market value of the property. Demand and supply forces operating in the market, as well as other factors like type of property, quality of construction, its location, the local infrastructure available, maintenance, are all taken into consideration before the market value is decided.

Typically, if a real estate agent is asked to judge the value of a piece of property, he would do so based on information of recent sales or purchases of similar properties in that area.

Though this may give a fair idea of the property’s market value, an official property valuation would carry more weight. E.g. if you need to use this piece of property as a security against a loan, the bank’s loan approval process would be faster and smoother if the property is certified by an official valuer. Many banks now insist on valuation certificates before issuing loans using properties as security. The value thus certified may also have chances of getting a higher amount of loan sanctioned.

Another benefit of official valuation is that it is a useful negotiating tool when selling the property.

Such certification also becomes essential in situations where the correct value of the property has a legal bearing—such as, a will statement, insurance papers, business balance sheets etc.

The price that a property can command in the open market is known as its market value. Stamp duty is based on the market value or the agreement value of the property, whichever is greater.

When a piece of property is given or ‘leased’ to an individual (known as the ‘Lessee’) for a stipulated period of time, by the owner of the property (known as the ‘Lessor’), the property is referred to as Leasehold Property. A certain amount is fixed by the Lessor to be paid as lease premium and annual lease. The land ownership rights remain with the Lessor. Transfer of property requires prior permission.

When ownership rights for a piece of property are given to the purchaser for a price, that property is referred to as Freehold Property. Unlike in the case of leasehold property, no annual lease charges need to be paid and the freehold property can be registered and / or transferred in part(s).

There are several benefits: if you convert the property to a freehold property, you become a full-fledged owner by getting the sale deed and having it registered. A freehold property has better marketability and can be sold, mortgaged or kept for standing security, which cannot be done with leasehold property.

If the transfer takes place within three years of purchase, the income tax exemption under Section 54F of the Income Tax Act does not hold good.

An agreement of sale, coupled with actual possession of the property would be considered as a conclusion of the sale. Usually, the entire amount is paid at the time of handing over possession.

NRI's FAQs

As defined by the Foreign Exchange Management Act of 1999 (FEMA) an NRI is a person residing outside India who stays outside India for the purpose of employment or carrying on business or vocation outside India or any other circumstances, which indicate his intention to stay outside India for an uncertain period. As per regulation of FEMA an NRI is a non-Indian resident whose is either a citizen of India or a person of Indian Origin. Students studying abroad also can be treated as NRIs under FEMA and are accordingly eligible for foreign investment and NRE/FCNR account.

According the Foreign Exchange Management Act of 1999 (FEMA) a PIO is a person who is either a citizen of any country other than Pakistan and Bangladesh who has:

  • held an Indian Passport at any time or
  • himself or either his parents or any of his grandparents were citizens of India or
  • is a souse of an Indian citizen or
  • is a spouse of a person who held an Indian Passport at any time or
  • is a spouse of a person who either was a citizen of India or his parents or grandparents were a citizen of India

The definition of a PIO when it comes to acquisition and transfer of immovable property in India is a person of Indian origin other than a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan. For this purpose a PIOs father or grandfather’s birthplace of Indian citizenship at any time is to be considered unlike other definitions that refer to parents or grandparents.

Acquisition by purchase:

Yes, under general permission granted by the RBI an NRI/PIO can purchase a residential property in India

Acquisition by gift:

Yes, under general permission granted by the RBI an NRI/PIO can acquire a residential property by way of gift from a person in India or an NRI or a PIO.

Acquisition by inheritance:

Yes, an NRI/PIO/foreign national of Indian origin can acquire residential property by way of inheritance from a person who is a resident of India as per the Provisions of Section 6(5) of the Foreign Exchange Management Act, 1999. An NRI/PIO/ foreign national of Indian origin can also acquire residential property by way of inheritance from a person who is a resident outside of India, with specific approval of Reserve Bank, provided the bequeathor had acquired such property in accordance with the provisions of foreign exchange law in force at the time of acquisition or under FEMA regulations.

An NRI/PIO who has bought an immovable residential property under general permission is not required to file any documents with the Reserve Bank of India.

Yes. Under general permission an NRI can sell his or her residential property in India to an Indian resident/NRI/PIO.

Yes. Under general permission an NRI can sell his or her residential property in India to an Indian resident only.

Yes. An NRI/PIO can transfer their residential property in India by way of a gift to an Indian resident/NRI/PIO

Note:

Majority of the information given above has been taken from the Reserve Bank of India website (www.rbi.org.in). For more information on acquisition and sale of residential property in India, please contact our home advisors.

Overseas Payments

Under the general permission, an NRI/PIO may purchase a residential property in India by funds remitted to India through normal banking channel or funds held in his NRE/FCNR (B)NRO account. No consideration shall be paid outside India.

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., and authorized dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation subject to certain conditions. The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investors’ NRE/FCNR/NRO accounts.

They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

Yes. Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation.

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., and authorized dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation subject to certain conditions. The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investors’ NRE/FCNR/NRO accounts.

a. In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:

1. the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations;

2. the amount to be repatriated does not exceed:

  • the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or
  • the amount paid out of funds held in Foreign Currency Non-Resident Account, or
  • the foreign currency equivalent (as on the date of payment) of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and

3. in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency.

b. In case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account. NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance. Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.

c. A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act 3[3] [3], or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section.

Please refer to the answer at Q.22 above. NRI/PIO may repatriate up to USD one million per financial year (April-March) from their NRO account which would also include the sale proceeds of immovable property. There is no lock in period for sale of immovable property and repatriation of sale proceeds outside India.

Note:

Majority of the information given above has been taken from the Reserve Bank of India website (www.rbi.org.in). For more information on acquisition and sale of residential property in India, please contact our home advisors.