Real Estate Investments Bang for The Buck for NRIs

Real Estate Investments Bang for The Buck for NRIs

Raja Mukherjee, Head- Sales & Marketing, Concorde Group

The investment by Non Resident Indians if made today in the real estate sector, will surely bring higher appreciation in the years to come without any regret. As per the said Foreign Exchange Management Act, an Indian citizen who resides outside India is permitted to acquire any immovable property in India other then agricultural/plantation property or a farm house. With such liberal policies of the government, if your children are NRIs, they can buy property in India. It can be a residential or commercial property.

To add to it, there is no restriction on the number of properties NRI can purchase in India as they do not require any Reserve Bank of India (RBI) permission. However, they cannot buy agricultural land, plantation land or a farm house in India. The purchased property can also be rented out and NRIs can earn rental income. This way one can get returns on investment. The rental income can be repatriated abroad. An NRI can also transfer or sell the property. It is to be noted that the sale proceeds of property inherited from a resident Indian not exceeding USD one million can be remitted abroad in one calendar year.

“The Non-Resident Indian can make investment in a residential property or in a commercial property with the objective of receiving a regular flow of rental income. The provisions of taxing rental income are simple, easy and investor friendly.  Broadly speaking, from the rental income derived by a Non-Resident Indian deduction is available in respect of actual payment of house tax as also a special 30 per cent deduction is available towards repairs, maintenance and collection charges of the property. This special deduction is permissible irrespective of the fact whether one spends on the repairs or not. Thus, this is a big deduction available from rental income which is instrumental in cutting down the tax payment by a Non-Resident Indian on rental income”, says Mr. Raja Mukherjee, Head- Sales & Marketing, Concorde Group.

If the objective of a Non-Resident Indian is to make investment in real estate, with the sole objective of making money by selling such real estate, then in such cases it is strongly recommended that they should not sell their real estate at least within three years of purchase of the real estate.

To make the things very simple and clear it may be noted that whenever the property whether commercial or residential is sold by a Non-Resident Indian, then just like Resident Individual income-tax is payable on the Capital Gains amount received by selling the real estate.  In case the property is sold for holding it for a minimum period of three years, in that situation the Capital Gains arising to the Non-Resident Individual is known as Long-Term Capital Gain.

The concept of Reverse Mortgage which is very popular and prevalent in USA and other countries of the world is also now popular in India. Now the senior citizens in particular can take advantage of reverse mortgage in respect of the real estate owned by them in India. The amount taken from the bank consequent to reverse mortgage is not added as income of the Non-Resident Indian. Thus, in old age this concept of reverse mortgage really happens to be a wonderful tool of enjoying your property in India on the one hand and on the other hand taking money from the bank consequent to reverse mortgage of the property.

Finally, the NRI while making investment in real estate in India would find their decision a really rewarding proposition because now a days hassles are less, tensions are less, tax provisions are simple, innovative vistas are available to save your tax and finally repatriation becomes easy and simple. Authored by Mr. Raja Mukherjee, Head- Sales & Marketing, Concorde Group