NRI Real Estate Investments – The Perfect Indian Setting!
For centuries, the deep-rooted yearning to explore and discover has driven people across the globe to seek new opportunities and lifestyles. The world’s migratory birds, one of the miraculous wonders of nature, with their unerring ability to navigate vast distances, somehow leave us in awe and admiration. We, the human race, can take cues from them, seeking a seasonal change in our lives in the form of geographical locations. A search for a better career, a higher standard of living, or the opportunity to start over – are but a few motivations that lead us to explore new territories. And when the time finally comes when our hearts call us to our homelands again, a peaceful place to lay our heads prevails integral – our piece of land or house that can be called home.
The non-resident Indian (NRI) population has, more than ever before, begun to realize the benefits of investing in property back in India. Not only can this result in potential returns, but it also serves as an emotional connection of sorts.
Investing for financial gains and emotional connection is just the icing. In addition to these benefits though, the NRIs have a slew of reasons to purchase property in India, from financial gains to even cementing ties with their homeland.
Cashing in on India’s booming Real Estate
India's real estate economy is set to skyrocket to an unprecedented US$1 trillion mark by 2023 – and NRIs stand to reap great rewards from this thriving market. The residential segment, in particular, is set to attract a substantial amount of NRI investment, with Bengaluru leading the charge, followed closely by other major cities such as Chennai. Reports from the third quarter of 2021 demonstrate a significant surge of 113% year-on-year in home sales across seven major cities, delivering a much-needed boost to the real estate sector. In light of this promising data, NRIs are being presented with a golden opportunity to invest in a property that is still on the rise – with the potential to convert the asset into a lucrative source of income, should they choose to monetize.
Breezy property acquiring process
The government understands the obstacles that hindered prior Non-Resident Indians (NRIs) from investing in India and has consequently created measures to facilitate the property-buying process. According to the Foreign Exchange Management Act, Section 3.1.1, NRIs and Overseas Citizens of India (OCIs) are capable of purchasing any immovable asset, barring agricultural lands, plantations, and farmhouses. Consequently, NRIs are now permitted to purchase any kind of real estate, apart from the above exempted specified.
Paying for the property is simple too!
In light of simplifying the process of acquiring property for Non-Resident Indians (NRIs)/Overseas Citizens of India (OCIs), the Foreign Exchange Management Act (FEMA) permits two options for payment, namely
- Incoming remittances from lawful channels from countries outside India or
- Funds held in a non-resident account.
These are signals that buyers may remit money from abroad or from their respective Non-Resident External/Non-Resident Ordinary accounts held with an Indian bank. Notably, foreign currency notes or traveler’s checks are excluded as payment methods.
External Funding to buy property
Oftentimes, it is not feasible for NRIs to pay for the property in its entirety. Fortunately, a notable list of Indian Banks is catering to providing property loans to NRIs, circumventing the need to obtain finance in a foreign country. It is important to keep in mind that banks do not transfer loan amounts to buyers directly, but rather to the seller or developer. For loan repayment, NRI investors can access their Non-Resident External (NRE) account or Non-Resident Ordinary (NRO) reserves.
Unable to travel to India to buy the property? Outsource it!
A major concern of some NRIs when considering buying a property is the inability of traveling to India to complete essential transactions and other legal formalities. The good news is that an extended stay is not required! By granting a Power of Attorney (POA) to someone in India, NRI customers can authorize the individual to pursue the real estate process in their stead. Obtaining a power of attorney is as simple as getting the document attested in the presence of the designated consulate authority in the Indian embassy of the respective foreign country.
RERA, a game changer
With the introduction of RERA, NRI property buyers now can heave a sigh of relief as this legislation has incorporated fair play for both buyers and sellers. With NRIs being out of the country, it is difficult for them to track progress. But, with RERA the builders are now accountable and are obliged to complete the project within specified timelines, failing which a penalty is imposed on them. Not that alone, builders also need to provide the buyer and RERA with frequent updates on the progress of the project, thereby bringing more transparency to the whole process.
In the pre-RERA days, the primary reason behind delays in the project was largely due to the inappropriate use of funds. But, with RERA now demanding that builders set aside 70% of the received funds to cover the cost of land and cost of construction, misappropriation of funds is eliminated thereby helping builders to deliver projects on time. The builder will now be able to withdraw funds in proportion to the percentage of completion of the project.
The amalgamation of transparency, accountability, and methods for timely completion, RERA has rendered buying property in India incredibly beneficial for NRIs.
And hence the perfect setting…
Simplification of key processes such as availing loans and making payments, elimination of legal hassles, and adaptation of RERA by the respective governing bodies have significantly reduced the legal chaos and administrative burdens placed on NRIs. Undoubtedly, the current atmosphere is optimal for NRIs interested in investing in Indian real estate.