With the decline in Covid-19 cases, real estate has started showing signs of revival in India. Residential sales have started rising again, and the commercial real estate market is also picking up momentum in the top cities of the country, driven by the IT/ ITeS sectors. Gross office absorption stood at 4.39 million sq. ft in the 2nd quarter, showing 32% YoY growth in major cities in India as per a recent JLL report. Bulk hiring by IT/ ITeS sectors is the prime driver of the growing demand for office spaces in major cities. Offices have also started to re-open across cities and developers are bullish on the growth prospects of the commercial real estate market. This is the reason why NRIs are eyeing commercial real estate in India.
Real Estate is one of the top investment tools for NRIs in India. It can be a form of retirement abode or an asset to bind the funds in. With the historical trend of immense growth and expansion, Real Estate has carved a separate niche for NRIs. Although, we need to understand that investing in Real Estate for an NRI is different when compared to a Resident India. Let’s see how:
What properties can NRIs buy in India?
NRIs can buy both residential and commercial properties in India. However, they can not buy any Agricultural Land, Farm House or Plantation property. They can only be inherited or received as gifts.
How can NRIs invest in Real Estate in India?
NRIs can invest in the real estate properties allowed to them through the following mediums:
- Self-Transactions using:
- Funds in their NRE/NRO/FCNR (B) accounts in India
- Funds remitted to India from overseas (in own account; can’t pay to the seller directly)
- Loan Facility (in INR) in India for NRIs; up to 80% of the property value based on individual eligibility of the NRI than can be repaid through:
- Inward Remittance (money transferred into your own account from abroad)
- Funds in their NRE/NRO/FCNR (Bank) accounts in India
- Rent from the purchased property
- Close Relatives crediting the borrower’s loan account (under section 6 of the Companies Act, 1956)
Note: No payments can be made by traveller’s cheque (pre-paid, pre-printed fixed amount cheques for payments across countries) or in foreign currency notes. All payments must be made in India only.
Why invest in Real Estate in India?
NRIs prefer to invest in Real Estate in India because of the following reasons:
- Rental income: A real estate property in India can fetch a very handsome rental income if the property is set in a well established neighborhood. An important point to note here though is that the rent is liable for TDS (Tax Deducted at Source) and the tenant will deduct 31.2% of the rent as tax before sending it to you. In Spite of that, it’s a fair deal and rental income can bring in sizable profits
- Price benefits and Long term Returns: The Real Estate industry in India appreciates at a rate of 19.5% per year (CAGR 2017-18; Source: IBEF). So, the investment value will multiply exponentially with time and it can be easily labelled as a very fruitful investment. Also, The Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 (Source: IBEF). The investment that you put in today will bring in multifold profits in the longer run
- Retirement Plan: Reverse Mortgage (A type of loan where people over 62 years of age with considerable home equity can borrow money against the value of their home as a lump sum, fixed monthly payment or line of credit.) is gearing up in India. So, NRIs can invest in property and use it as a source of income post their retirement
- Tax Exemption: NRIs, if you buy property on loan in India, you can claim an exemption on the interest you pay for your home loan (section 24). Under section 80C, you can claim an exemption on the repayment of the principal amount. Also, there are ways to save taxes on Capital Gains from selling out the property in India and much more. (For Tax Advisory: write to us at [email protected])
Taxation on Real Estate for NRI
Taxation on Real Estate is a bit complex. It can be further subdivided into rent and capital gains. Along with that, TDS on buying a property is also a very essential instrument that must be deducted and paid to the government authorities.
1. TDS while buying property: Deduct TDS as per the table below while buying property in India keeping in mind the associated conditions.
Property Bought From
|Condition||Tax deducted at source|
|Resident||50 Lakhs or above||
1% TDS of Purchase Value
20% plus surcharge and cess for long term gains and 30% plus surcharge and cess for short-term gains
2. Income from Rent: Rent from property owned by an NRI is subject to a TDS of 30% to be deducted by the tenant. The rent received after the deduction of TDS is added to the total income of the NRI and is applicable for tax according to the Tax Slab of the NRI. NRIs can also choose to pay taxes themselves and file the returns. However, there are certain deductions that must be considered: Municipal Taxes paid, standard deduction of 30% on taxable value, deduction for interest on any loan taken for the property, repayment of principal amount of home loan up to Rs.1,50,000/-.
3. Capital Gains Tax for NRI on sale of Property: The minimum holding period for long term capital gains for real estate is 2 years.
Nature of gains
|Tax Liable||Tax Deducted at Source (TDS)|
|Short Term Capital Gains||As per tax slab||
Long Term Capital Gains
20% (plus surcharge and cess) with indexation
4. Taxation on Multiple Properties: If NRI owns more than one residential property which are self-occupied, then only one of the houses will be treated as self-occupied and all others will be treated as deemed to be let out. In such cases, a notional rent is computed and offered to tax as if the property was rented out
Whether it is FDs, mutual funds, insurance or real estate, NRIs have been aggressively investing in India for the last few years. However, many people still ask ‘can an NRI buy or own property in India? As per the Foreign Exchange Management Act (FEMA), NRIs are allowed to purchase certain types of properties in India.
With an affordable home loan, NRIs can buy their dream home in India. NRIs can avail a home loan at an affordable rate of interest from IIF to buy a house or property in India. IIFL NRI home loan can be availed by salaried and self-employed applicants alike for various purposes that include the purchase of a new flat, renovation or extension of an existing home, or purchase of an existing flat or house, and purchase of land for construction of a flat or house.
Non-Resident Indians (NRIs) face extra challenges when it comes to getting a home loan in India due to the stricter KYC guidelines set by most banks for an NRI home loan. However, Bank of India Star Pravasi NRI Home Loan scheme offers hassle-free home loans to NRI customers.
Non-Resident Indians (NRIs) can realize the dream of buying their own home in India with an NRI home loan. NRI housing loans can be used for a variety of housing needs, such as the purchase of a flat/ house/ plot, construction of a house or renovation/ repair of an existing home. All top banks offer home loans to NRI customers at attractive interest and for flexible repayment terms. NRI home loan interest rate starts from as low as 6.80% per annum.
Federal Bank offers Non-Resident Indians (NRIs) a hassle-free home loan to help them buy their dream home. NRI customers can avail a housing loan at competitive interest rates for a variety of financial requirements such as the construction of a house, acquisition of land, home repair or renovation, extension of the house, reimbursement of debt incurred for construction, purchase of a plot for house/ villa, etc. NRIs can get a Federal Bank NRI home loan for a flexible repayment tenure of up to 20 years at an interest rate starting from 7.65% per annum.
Canara Bank is one of the leading government-owned banks in India. Apart from India, the bank has overseas offices in London, New York, Hong Kong, Moscow, Shanghai, Tanzania and Dubai. The bank offers a wide array of banking and financial products to its customers in India and abroad. NRI home loan is exclusively designed for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) wishing to have their own home in India. Canara Bank NRI home loan provides customers with financial help to purchase or construct a home.
PNB Housing has been catering to the financial needs of home buyers in India for over two decades. PNB housing loan for NRIs is offered to Non-Resident Indians (NRIs) and Persons of Indian Origin for the purchase, construction and renovation of residential property in India. NRI customers who want to buy a house in India can easily get a home loan with attractive interest rates and instant approval from PNB housing finance.
Kotak Mahindra Bank offers several NRI investment products and advances to non-resident customers. Kotak NRI home loan can be availed to buy a new home or upgrade your existing home.
Bank of Baroda is the third largest state-owned bank in India with millions of customers and a global presence in 25 countries (including India). BOB offers a wide range of banking and financial services to its domestic as well as non-resident Indian (NRI) customers. NRI home loan is one of the key products offered by the bank to overseas Indians. Bank of Baroda NRI home loan is offered to help borrowers purchase a home in India while staying abroad.