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Nri investment in_india

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This report will help your NRI clients looking to buy residential property in India. It is a hand-holding document that talks about various aspects of NRI investments in India

This report will help your NRI clients looking to buy residential property in India. It is a hand-holding document that talks about various aspects of NRI investments in India


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  • 1. 1 I Colliers International NRI Investment in India Can I invest in real estate in India? YES NO NO RESTRICTION YES Can I acquire agricultural land / plantation property / farm house? Is there any restriction on the number of residential / commercial properties I can purchase? Can I acquire immovable property by way of gift / inheritance? Can I sell / gift my residential / commercial property? Can I repatriate the sale proceeds from India? What can be the source of funding? Can I mortgage my property? YES (The property can only be commercial or residential in nature. Prior approval required from the RBI (Reserve Bank of India) for citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan) YES (No prior approval is required from the RBI for loans from authorised dealers in India; approval is required if the loan is from a bank abroad) Properties can be purchased using inward remittances from anywhere outside of India or through funds maintained in NRI bank accounts in India. YES but with certain pre-conditions • Repatriated amount cannot exceed the amount you originally paid for purchase; • Repatriation of sale proceeds is restricted to a maximum of two properties; • Repatriating proceeds from residential investments in the form of dividends is not allowed; • Repatriation limit is US$1 million per financial year. Investment by an NRI in India is always welcomed and the Reserve Bank of India has granted general permission to foreign citizens of Indian Origin (NRIs) whether resident in India or abroad, to purchase immovable property in India. According to this general permission, the NRI needs to file a Form IPI 7 declaration with the central office of the Reserve Bank of India (RBI) within 90 days of the date of purchase of immovable property or final payment of a purchase consideration along with a certified copy of the documents verifying the transaction and a bank certificate showing the consideration paid. There is no restriction on the number of properties an NRI can buy in India. Frequently Asked Questions
  • 2. 2 I Colliers International Costs Involved Besides purchase considerations, investing in Indian property also attracts a few other costs including: • Legal costs – When purchasing property, you need to pay charges such as stamp duty, registration charges, legal charges and mortgage related costs such as processing and valuation fees, etc. • Property Taxes – Yearly property tax needs to be paid. Generally, the property tax on rented property is more than the self-owned properties. • Brokerage – Generally, there is no brokerage fee if you are buying an under-construction property; however, if you are buying / selling / renting a ready to move in property, you need to pay 2 to 4% as brokerage or solicitor fee. • Maintenance Cost – Yearly maintenance costs for painting, cleaning, repairs, etc. to maintain the property need to be paid. In addition, an agent may need to be hired to manage and look after the property in your absence. Taking Out a Loan for Buying Property Getting financing from financial institutions is quite easy in India. For NRI investors, various Indian banks offer special home loan schemes. Loans can be made against the property being purchased by keeping it with bank as mortgage. The repayment of a loan can be done through inward remittance through a banking channel. The maximum loan to value ratio can be 80%. However, it is advisable to consider a loan-to-value ratio of 60% for the purpose of financial planning to avoid any financial crunch at the time of purchase. One can take a fixed or floating rate loan which varies between 9.5 and 12%, depending on the financial institution chosen.
  • 3. Tax Implications TAXES ON PURCHASING REAL ESTATE TAXES ON HOLDING REAL ESTATE APPLICABLE TO PURCHASER / SELLER STAMP DUTY Based on market value 4%-8% CHARGEABLE ON: All types of property EXEMPTION: 1%-2% less as rebate if property registered under a woman’s name CAPITAL GAINS TAX Based on sales capital gains 10%-20% CHARGEABLE ON: Property sold after 3 years 10%-30% CHARGEABLE ON: Property sold within 3 years EXEMPTION: A Captial gains tax exemption is available if the proceeds are reinvested in another residential property or a government bond held for at least three years. CHARGEABLE ON: Under Construction property 12.36% on 25% of the total purchase price if property cash is less than 1 corer. 12.36% on 30% of the total purchase price if property cash more than 1 corer or having area above 2,000 Sq.ft. SERVICE TAX Based on services rendered by the developer in the course of construction of projects TAX DEDUCATED AT SOURCE Based on transacted price 1% CHARGEABLE ON: Property sold TAX ON RENTAL INCOME Based on taxable rental income AS PER THE INDIVIDUAL TAX SLAB WHICH RANGE FROM 10%-30% AS PER INCOME CHARGEABLE ON: Second property even if it is not rented out PROPERTY TAX Based on annual rent TOGETHER WITH MUNICIPAL TAX PAYABLE BY OWNER For Residential Services, please contact: Poonam Mahtani National Director I email: poonam.mahtani@colliers.com For Research related queries, please contact: Surabhi Arora MRICS Associate Director I email: surabhi.arora@colliers.com Diclamier: This document has been prepared by Colliers International for general information only. Colliers International does not guarantee warrant or represent that the information contained in this document is correct. Any interested party should undertake their own enquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damage arising directly or indirectly there-from. Colliers International is committed to accelerating our client’s success. With more than 13,500 professionals in 482 offices across 62 countries worldwide, we use our wealth of market knowledge to help you achieve your goals. Visit us on www.colliers.com

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