What sort of property can I buy as an NRI?
According to the Reserve Bank of India (RBI), non-resident Indians (NRIs) and persons of Indian origin can buy residential as well as commercial property in India. However, they cannot invest in agricultural land, farmhouses and plantations. “If an NRI wants to purchase such restricted property, he/she needs to request the RBI for a specific permission and the application might be considered on the conditional basis,” says property adviser Dhiren Gupta, Managing Director, 4C Mortgage Consultancy. “An NRI or
a PIO can inherit these as an heir at the death of the
previous holder.”
Can I take a home loan in India?
Yes. NRIs can avail home loans from Indian banks and financial institutions to buy residential units, whether apartments, row houses and bungalows or land for building a home. Documents needed to process loan application include salary slips, bank statement, copies of passport, valid visa, work permit, employment contract, work experience and salary certificates and statements of non-resident external (NRE) or non-resident ordinary (NRO) accounts, says Renu Sud Karnad, Managing Director, HDFC. “Tenure for home loans to NRIs is up to 15 years, depending on the age of borrowers, their profile and credit worthiness.”
Loans for commercial property are also available, although from fewer banks.
Can I repay my loan in Dirhams?
All repayments related to home loans have to be made in Indian currency. “Payments can be made either by funds remitted to India from abroad through regular banking channels or through the balance in the NRE, NRO or FCNR Account,” says Gupta.
Can NRIs choose joint home loans?
NRIs can apply jointly for home loans only if the borrowers are related to each other either by blood
or by marriage. “In joint home loans co-borrowers need
not be co-owners in the purchased property but all
co-owners of the property have to be joint borrowers,”
says Karnad.
Why do NRIs need a power of attorney?
Banks require NRI borrowers to execute a Power of Attorney (PoA) in favour of a resident Indian. This allows a borrower to register or take possession of a property and complete an agreement of sale, in their absence, says Karnad.
Do I need to pay stamp duty?
Yes. However, stamp duty charges vary from state to state. At present this ranges from 4 to 10 per cent.
Can I repatriate proceeds from a sale?
“Yes, but the amount per fiscal year should not exceed Dh3.67 million ($1 million) and the repatriation should be done through officially approved dealers,” says Gupta.
But do i need to pay tax on any profits if i do sell? What are the implications?
“To start the repatriation process, the first step is to get a certificate (Form 15CB) from a chartered accountant (CA) in India to verify that the money being sent abroad has been received from legal sources and the applicable taxes are duly paid,” says Gupta. NRIs are subject to tax deducted at source (TDS) on profits from any property sales. “If the NRI sells the property after three years from the purchase date, he/she only pays the long-term capital gains tax of 20 per cent. If a property is sold within three years of purchase, the NRI will be liable to pay short-term capital gains tax of 30 per cent TDS regardless of
the tax slab.”
What taxes apply to NRIs buying property?
“There are added advantages for NRIs for buying a house on loan,” says Gupta. “NRIs have to pay a withholding TDS at the rate of 1 per cent if the purchased property is worth more than Rs 5,000,000 (about Dh287,000). But it will be exempted from income tax if the property is vacant and declared as self-occupied. Otherwise, he/she will have to rent it out for at least 300 days a year to avoid paying the tax.” This rule applies only for the first property. For any subsequent vacant units, you only need pay the tax at the rate of 1 per cent of the value in excess of Rs3,000,000 (about Dh172,000).
Do I need to pay a commission?
If you’re going through a broker, the answer is yes. Standard commission rates vary from 1 to 2 per cent of the sale value.
Can NRIs repatriate any rental income from Indian property?
Yes, but you’ll be required to pay tax on this rent, since the income is earned in India, says Gupta. The rent proceeds can be credited to the NRE or NRO account and proceeds received on these accounts can be freely repatriated.
