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The investment is the injection of money to get returns. But due to slow down of economy, investors are really cautioned about the investment of their hard earned money and confused about choosing the right option and in turn started looking for opportunities in the foreign market. And India is ranked at top 3 position among countries to invest in globally. Mathematically, real estate provides the best permutation of returns and risk in India. Real estate has a growth record of superior returns.

Driven by growth in the economy, real estate in India is booming. The year 2006 started on a promising note, when the Government of India opened the construction and development sector in the month of February in the same year and allowed 100 per cent foreign direct investment (FDI) under the "automatic route," in order to spur investment in the vital infrastructure sector. The government has thrown open the lucrative parts of the Indian realty market to global investors for the first time.

This relaxation of the FDI make lots of foreign investors which includes major Indian and international companies to move their funds to real estate in India and specially to real estate in Bengaluru as it is the India's major IT hub. And hence, Bengaluru is ranked as the India's one of the largest FDI market in the realty sector. It is expected that the organized segment is expected to grow from a mere 2 per cent to 20 per cent by the end of the decade.

The development of real estate in India focuses on two primary areas: retail and residential.

In recent years, non-resident Indians (NRIs) have played a very important role in transforming the Indian real estate market. Opening up of the Indian economy provided them with new opportunities and they have shown a great deal of confidence in the changed set up. Since 1994, NRIs have invested a sizeable amount, of which a big chunk has found its way into the property market. Participation by NRIs has brought about a lot of maturity in the market, which in the past was solely dependent on the actual users.

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NRI FAQs

Q. Who is a non-resident Indian (NRI)?

A citizen of India who stays abroad for employment or for carrying out any business for an uncertain period of time is considered as a non-resident. People who are posted in U.N. organizations and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also considered as non-residents. Non-resident foreign citizens of Indian Origin are treated on par with NRI's and are offered the same facilities.

Q. What is an Oversees Corporate Bodies (OCB)?

OCB (Oversees Corporate Bodies) are the bodies that are mainly owned by the individuals of Indian nationality or origin resident outside India. OCB includes all the overseas companies, trusts, partnership firms, societies and corporate bodies which are indirectly or directly owed by at least 60% of individuals of Indian nationality or origin resident outside India. However, the ownership interest should be actually held by them and not by the nominees.

Q. What are the various facilities available to NRI's?

Various facilities offered to the NRI's are as follows:

  • They can maintain their bank accounts in India
  • They are allowed to invest in securities/shares/deposits of Indian companies and firms
  • They are allowed to invest in immovable properties in India

Q. Do non-resident Indian citizens need permission of RBI(Reserve Bank of India) to acquire residential and commercial property in India?

NRI's are not required to take any permission of RBI while acquiring any residential and commercial property in India

Q. Do foreign citizens of Indian origin need permission of RBI(Reserve Bank of India) to purchase immovable property in India for their residential use?

Reserve Bank of India has given permission to the foreign citizens of Indian origin to purchase immovable property in India for their residential use. Hence, they do not need to acquire any permission.

Q. What are the formalities that are needed to be completed by foreign citizens of Indian origin while purchasing residential immovable property in India under general permission?

While purchasing a residential immovable property in India, the foreign citizens of Indian origin are required to file a declaration in form IPI 7 with Central Office of Reserve Bank at Mumbai within 90 days from the date of purchase of that immovable property. They can also submit a final payment of purchase consideration along with a certified copy of document which is an evidence of transaction and the bank certificate of the consideration paid.

Q. Can the foreign citizens of Indian origin sale property without the permission of RBI(Reserve Bank of India)?

Reserve Bank of India has give permission to foreign citizens of Indian origin to sale a property. However, wherever the property is purchased by them, the funds towards the purchase consideration should be either remitted to India or the paid out of balances in NRE/FCNR accounts.

Q. Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift?

Reserve Bank of India has given permission to foreign citizens of Indian origin to acquire or dispose of a residential property by way of gift from or to any relative who is a citizen of India or a person of Indian origin (in case he is not the citizen of India) subject to compliance with applicable tax laws.

Q. Can foreign citizens of Indian origin acquire commercial properties in India?

Reserve Bank of India has given permission to foreign citizens to acquire commercial properties in India other than agricultural land/farmhouse/ plantation property.

Q. Can the properties (residential/commercial) be given out on rent if not required for immediate use?

Reserve Bank of India has given permission to rent out any immovable residential/commercial property in India. However, the rental income or proceeds of any investment of such income are eligible for repatriation.

Q. Are Indian companies allowed to grant loans to their NRI staff?

Reserve Bank of India has given permission to the Indian companies or firms to grant housing loans to the NRI's. However, there are certain terms and conditions that are needed to be met.

Q. How and where to pay stamp duty in Karnataka?

In Karnataka, you can pay the stamp duty through:

  • Impressed stamps from licensed stamp vendors.
  • Adhesive stamps.
  • By making payment through DD/pay order issued by a nationalized bank or scheduled bank or challan.
  • Writing on a plain piece of paper and paying the stamp duty through DD/pay order issued by a nationalized bank or scheduled bank or challan within two months from the date of execution and getting it certified from the jurisdictional District Registrar or Sub Registrar.

Q. When should the Stamp duty be paid according to the law in Karnataka?

According to the law in Karnataka, you should pay the stamp duty before or on the date of executing a document. You can note down the document on a plain piece of paper and pay the stamp duty through DD/pay order issued by a nationalized bank or scheduled bank or challan within two months from the date of execution. You will have to get it certified from the Sub Registrar or jurisdictional District Registrar.

Q. What is the procedure to pay the stamp duty in case the document is executed out of India and is to be used in Karnataka?

It is compulsory to pay the stamp duty within three months from the date of receipt in India. You will be required to produce the document before the District Registrar and he will certify the payment.

Q. How to prevent the use of fake stamp papers?

Note the document on a plain paper or a Rs.2. Document Sheet. You can pay the stamp duty at any authorized bank or at the jurisdictional Sub-Registrar Office.

RBI Guidelines

( Regulations/Directions issued by Reserve Bank of India )

Regulations regarding ACQUISITION and TRANSFER of IMMOVABLE PROPERTY IN INDIA by a person resident outside India have been notified vide RBI Notification No. FEMA 21/2000-RB dated May 3, 2000 as amended vide Notification No. FEMA 64/2002-RB dated June 29, 2002 and Notification No. FEMA 65/2002-RB dated June 29, 2002 and relevant directions issued in the form of A.P. (DIR Series) Circulars.

These are available on RBI website: www.fema.rbi.org.in

Synopsis of important points clarified in these guidelines

  • By NRIs holding Indian Passport
    • NRIs holding Indian passport do not require prior permission of Reserve Bank of India to buy residential or commercial immovable property in India.
    • The purchase consideration may be paid either by remittance of funds from abroad through normal banking channels or out of NRE/ FCNR/NRO account.
    • NRIs of Indian nationality do not require any permission for acquisition, transfer or disposal by way of gift of immovable property which is not a farmhouse or agricultural land or plantations property. Declaration on form IPI 7 for acquisition of commercial property for carrying on any industrial, commercial or trading activity by their proprietary/partnership firm in India is required to be filed with RBI within 90 days from date of purchase.
  • By Foreign Citizens of Indian Origin
    Under the general permission to NRIs holding a foreign passport, the RBI has allowed them to acquire, hold, transfer or dispose off by way of sale or inheritance, immovable properties situated in India.
    The general permission has been granted provided:
    • The property is for the purchaser's bona fide residential use;
    • The purchase consideration is met either by remittance from funds abroad through normal banking channels or out of NRE/FCNR.
    • Income accruing by way of rent from the properties purchased or acquired by inheritance will not be allowed to be repatriated abroad even if the purchase consideration was met out of NRE/FCNR account. It is however, necessary for foreign citizens of Indian origin to declare such property to RBI within a period of 90 days from the date of purchase in the prescribed IPI 7 to the Chief General Manager, Exchange Control Department, Foreign Investment Division, Central Office Department, Foreign Investment Division, Central Office, RBI Bombay.
  • General permission has been given to non-residents holding Indian passports and foreign citizens of Indian origin, whether resident in India or not, to dispose of by sale or inheritance immovable properties situated in India subject to certain conditions.
  • Non-residents holding Indian passports and foreign citizens of Indian origin have been allowed to repatriate original investment in equivalent foreign exchange in residential/commercial properties after obtaining prior approval subject to a maximum of two houses under certain conditions.
  • No transfer of any immovable property exceeding the specified value for different cities can be effected unless particulars are filed with the appropriate authority of the Income Tax department within 15 days of signing the agreement.
  • As per a new scheme of capital gains tax with effect from 1993-94, instead of deducting from the proceeds of transfer, actual amount spent to acquire the asset or the amount spent on improvement or addition thereto, the inflation index adjusted cost will be deducted. Brokerage, legal fees and other expenses incurred in selling the property would be allowed as a deduction from the taxable capital gains.

The RBI has granted general permission to NRI's and foreign citizens of Indian origin, to let out their residential properties acquired for their bona fide residential purpose but which on account of their residence abroad, are not required for their immediate residential purpose. However, there are restrictions regarding the repatriation of the rental income earned from such letting out of the property. The rental income is on a non-repatriation basis. Thus funds (rental income) must be credited to the NRO Account/ Resident Accounts in India.

Loans For NRI

If you are a NRI, acquiring a home loan in India can be a complicated and a confusing process. Go through the following information to understand the process of receiving a home loan.

Home Loans:

The Non-Resident Indians (NRIs) are recognized under the Foreign Exchange Regulatory Act, 1973. Every bank and housing finance companies follow the RBI guidelines to define NRI - "An Indian citizen who holds a valid document like Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a NRI." Broadly categorized, Non-Resident Indians qualifying for NRI housing loans are: Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad; 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; Government servants deputed abroad on assignments with foreign Governments or regional/international agencies like the World Bank, International Monetary Fund (IMF), World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP); Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

*Note:

Documents required for Resident Indians as well as for NRIs for getting Home Loans are different in some respect. Home loans for NRIs are available for construction of new house / flats, purchase of old house / flat addition / alteration to an existing house and repairs / renovation etc. NRIs can avail of loans by mortgaging an existing residential property. However, for availing home loans, NRIs have to fulfill certain conditions according to provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more. The FDI Policy that permits FDI up to 100% from foreign/NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available. Last but not the least, NRIs should take due care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.

Eligibility For NRI:

The eligibility criteria of NRIs differ from Resident Indians based on a few parameters. The parameters include:

Documents required for Resident Indians as well as for NRIs for getting Home Loans are different in some respect. Home loans for NRIs are available for construction of new house / flats, purchase of old house / flat addition / alteration to an existing house and repairs / renovation etc. NRIs can avail of loans by mortgaging an existing residential property. However, for availing home loans, NRIs have to fulfill certain conditions according to provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more. The FDI Policy that permits FDI up to 100% from foreign/NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available. Last but not the least, NRIs should take due care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.

Age

The loan applicant has to be 21 years of age.

Qualification

NRI loan seeker has to be a graduate.

Income

The loan applicant has to have a minimum monthly income of $ 2,000 (although, this criterion may differ across HFCs). The eligibility is also determined by the stability and continuity of your employment or business.

Payment options

The NRI also has to route his EMI (Equated Monthly Installments) cheques through his NRE/NRO account. He cannot make payments from another source say, his savings account in India.

Number Of Dependants

The number of dependents, assets and liabilities also determines the eligibility of the applicant. An NRI applicant is eligible to get a home loan ranging from a minimum of Rs 5 lakhs to a maximum of Rs 1 crore, based on the repayment capacity and the cost of the property, which although is variable by the priorities of the home loan provider. Also Home Loan Tenure for NRIs is different from Resident Indians. An applicant will be eligible for a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land, based on the repayment capacity of the borrower. However, a NRI can enhance his loan eligibility by applying for home loans with a co-applicant who has a separate source of income. Also, the rate of interest for home loans to NRIs is higher than those offered to Resident Indians. The difference is to the extent of 0.25%-0.50%. Some HFCs also have an internally earmarked 'negative criterion' for NRI home loans. As such, the NRIs who hail from locations that are marked as being 'negative' in the books of HFCs, find it difficult to get a home loan.

RBI Directive Loans:

The Reserve Bank of India (RBI) has clarified that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO), purchasing immovable property in India should pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country. The NRIs and Resident Indians can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued certain directive for sanctioning home loans to Non-Resident Indians.

The guidelines provided are:

The home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining amount that is 15% needs to be provided an own contribution towards the cost of unit financed. The cost of dwelling unit which is own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.

However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.

*Note:

The repayment option for NRIs as they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time. As most of the home loan provider companies consider the economical stability of the applicant, home loans for NRIs are quite feasible, because they are well in economic resource.

Documents Required For Loan:

The documentation required to be submitted by the NRIs are different from the Resident Indians as they are required to submit additional documents, like a copy of the passport, a copy of the works contract, etc. And of course NRIs have to follow certain eligibility criteria in order to get Home Loans in India. Another vital document required while processing an NRI home loan is the power of attorney (POA). The POA is important because, since the borrower is not based in India; the HFC would need a 'representative' 'in lieu of' the NRI to deal with and if needed. Although not obligatory, the POA is usually drawn on the NRI's parents/ wife/children.

The documents needed for obtaining NRI home loans are:

  • Passport and Visa
  • A copy of the appointment letter and contract from the company employing the applicant
  • The labour card/identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East Salary certificate (in English) specifying name, date of joining, designation and salary details
  • Bank Statements for the last six months

List of Classified documents for Salaried and Self Employed NRI Applicants:

  • Salaried NRI Applicants
  • Copy of valid passport showing VISA stamps
  • Copy of valid visa / work permit / equivalent document supporting the NRI status of the proposed account holder
  • Overseas Bank A/C for the last 3 months showing salary credits
  • Latest contract copy evidencing Salary / Salary Certificate / Wage Slips
  • Self-Employed NRI Applicants
  • Passport copy with valid visa stamp
  • Brief profile of the applicant and business/ Trade license or equivalent document
  • 6 months overseas bank account statement and NRE/ NRO account
  • Computation of income, P&L account and B/Sheet for last 3 years certified by the C.A. / CPA or any other relevant authority as the case may be (or equivalent company accounts)

Property Documents:

  • Original title deeds tracing the title of the property for a minimum period of the last 13 years
  • Encumbrance Certificate for the last 13 years
  • Agreement of sale /construction, if any
  • Receipts for payments made for purchase of the dwelling unit
  • Approved plan / license
  • ULC clearance /conversion order etc
  • Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and / or the Non-Resident (Ordinary) account in India
  • Latest tax paid receipt
  • Allotment letter from the co-operative society / association of apartment owners
  • Agreement for sale / sale deed /detailed cost estimate from Architect / Engineer for property to be purchased / constructed /extended / improved Copy of approved drawings of proposed construction/purchase/extension

Photocopy Of PIO CARD:

If the PIO card is not available, photocopies of any of the following documents: The current passport, with birthplace as 'INDIA' The Indian passport, if held by the individual earlier Parents/grandparents Indian passport/birth certificate/marriage certificate substantiating the individuals claim as a person of Indian origin

Permissions And Approvals:

Before a construction can begin, the builder must seek several permissions and approvals from relevant bodies. Without these clearances, the construction may come under litigation.