Basics of Investing in India

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“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world” – Franklin D. Roosevelt

FDR succinctly captured the benefits of real estate and the common sense we need to apply prior to any kind of investment. In my past newsletters I have shared the macro trends at the national level and the cities for investment. Now let us dive into personal factors that influence our decisions. I have tried to identify and clarify some of the most common questions.

  • RBI regulations allow that any NRI can purchase residential/commercial property in India. NRIs can acquire the Indian real estate through Gift or Inheritance also. There is also no limit on the number of residences or real estate that NRIs can purchase.
  • RBI regulations allow NRIs to sell properties or give as a gift
  • NRIs can purchase the properties by remitting through NRE/NRO accounts in Indian banks
  • NRIs can also obtain loans from HDFC and other banks to purchase properties
  • NRIs can rent the purchased property if they desire

  • NRIs can also sell the property and expatriate the amount provided they follow the procedures outlined below.
  • In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorized Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:

(i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations;

(ii) the amount to be repatriated does not exceed:

  • the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or
  • the amount paid out of funds held in Foreign Currency Non-Resident Account, or
  • the foreign currency equivalent (as on the date of payment) of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and
  • (iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
  • For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorized dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorized dealer from which it can be converted in foreign currency.
  •  (b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account.  NRI/PIO are also allowed by the Authorized Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance.  Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.

 

  • A Power of Attorney can be executed in a relative’s name but the property will be registered with the name of the buyer. This will be required if you need a loan as well.
  • Give some thought to your final goal that you would like to achieve. Are you looking to get a passive income? Are you planning for an appreciation play? Are you going to retire in India? What is your motivation? It is critical that you understand the reasoning as it will have a direct correlation with what you buy.

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