Recent government and regulatory acts such as Real Estate Regulatory Act (RERA) 2016 and Goods and Services Tax (GST) have introduced the much-needed clarity and efficiency into the framework that has earned the NRI community‘s confidence. Investing in a real estate has been much less difficult than it was before. With the developers’ reputation and project completion date kept in check along with strict legislation for the various categories of property, there are also certain legal requirements under which the home financing may be funded. NRIs real estate investment has risen rapidly in the last few years. In their business dealings, real estate developers are now more open and people put their faith in the builders to satisfy their dreams of owning a house.
If you are a resident of a country, buying property in India is very convenient, but when a non-resident Indian (NRI) decides to buy a property in India, there are many guidelines that regulate how to finance such a purchase.
The money to buy a property in India must come only through the channels of banking. As a consequence, payment cannot be made in the shape of a traveller’s cheque or in foreign currency. An NRI can also use the money in its credit account, in non-resident external (NRE) rupee or non-resident ordinary (NRO) or foreign currency non-resident (FCNR) account kept in India. Key difference between these accounts:
- Non-Resident External Account (NRE): The NRE account, providing maximum protection, is an Indian rupee-denominated account. These accounts can be savings, current, recurring, or fixed deposits. Your earnings in other countries are credited in this account in Indian rupees and aren’t taxed.
- Non-Resident Ordinary Account (NRO): To control their income received in India, an NRO account is a savings or current account kept by NRIs in India. Account owners are free to deposit and handle their accrued rupee funds without any inconvenience. You may obtain funds in Indian or foreign currency through the account. However, TDS (Tax Deducted at Source) is subject to the interest you receive from this account.
- Foreign Currency Non-Resident Account (FCNR): As the name suggests, this account is a foreign currency account, and at that, a term deposit one. The interest gained on that account in India is tax-free.
Home Financing for NRIs
NRIs are authorised to buy property from banks or housing finance firms in India, by taking home loans in Indian rupees. The home financing can also be issued for the funding of the property by the NRI employee’s Indian employer.
Since NRI investment in Indian real estate is permitted only in business and residential properties, banks, too, can only fund these properties. Hence almost all banks offer NRIs home loans to purchase a house or one. One can likewise get a credit, for acquisition of land (non-farming), for developing a house in India. one.
The home loan application can be sent online, as well as offline. While many NRIs would be confused by the thought of securing a home loan as you have to be physically present in the bank or finance business it is no longer valid. India has gone global in its true sense and NRIs will procure online home loans.
The documentation would depend on whether it is a salaried employee or a skilled self-employed, and the country of residence of the NRI. Nevertheless, in all cases, copies of one’s passport and visa, passport-sized photographs and proof of residency in a foreign county will be needed.
Depending on whether the NRI is salaried or self-employed, in order to reap the benefits of the home loan, he / she must also serve a minimum stay time in the country of present residence. In certain situations, depending on the nature of the profession, they can need to do a review with the employer.
Banks may also insist upon a suitable co-applicant, or a guarantor of the NRI. The guarantor of the NRI, too, shall request documentation relating to evidence of identity, address proof and proof of revenue.
Payment of EMI:
EMIs on home loans can be charged by out-of-India remittances, a proper banking system, or debiting the NRE or NRO or FCNR account. The rental yields could be used for paying the NRI home loan in the event the property is let-out. The funds transferred from close relatives to the NRO account can also be used for home financing. If the property is bought for self-occupancy, a loan of up to Rs 1 crore against the FCNR or NRE account deposits can be used by the NRI to pay the home loan.
That is why it is essential for NRI buyer to hold any of these accounts.
Remittances out of India:
An NRI can access such funds in the event that the property is sold or purchased, but it is restricted to two assets. The sum repatriated does not exceed the amount denominated in foreign currency received either for purchasing or settlement of the loan as a remittance. An NRI is entitled to remit out of its specified form of accounts around USD 1 million in a year. This balance comprises the money remitted for a house’s sale.
For any money trade in India, taxes can never be left out of the calculation. The government makes things simple as well. All an NRI has to do is submit registration and service fees at the time of booking a home, and they are entitled for all the privileges of an Indian citizen after this move. The property shall be taxable only if it is sold by an NRI within three years of purchase. If an NRI sells the property after three years, by investing in another property, they can offset the long-term capital gains tax.
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