The real estate market in India is growing fast, which makes it very popular for the majority of NRI investors when it comes to investment options. NRIs are also wooed by the fact that investing in India comes with a sense of emotional support and security for them. However, as they are based abroad, it is essential for them to make proper research on documentation and other methods, so that their money is never put at risk. Here are 5 things they need to do before making investments.
Ensure that the deal is free of legal hassles
With a safe deal, it is possible for a famous developer to offer a property that is clear and lawsuit-free. Developers can also ensure property maintenance and care following purchase. They may also use proper channels, via a relative or a friend, to make sure that the property they are investing on is a genuine one.
Checking whether the Property is free of encumbrances
They should also check whether their property is free of issues and whether the seller has the necessary sale rights. NRI investors should also opt for a no-dues certificate at the time of property-purchase from the seller. In case the property in question had been mortgaged in some loan as security, they should preferably obtain the release letter from the bank concerned. The property of sale needs to have all the construction permits and approvals from the civic authorities.
Understanding the legal norms
NRI investors must also be cautious during purchase, in order to secure the property deal. RBI now has preset home loan norms for NRI property investors. A financial institution funds as much as 80% of a property whereas NRI investors have to finance the remaining 20%. The down payment remittance is possible from the country of residence by standard banking channels such as NRE or NRO account in India. Investors have to use the same channel to repay the interest as well as the principal amount.
An NRI investor has to pay the tax that is applicable in case he resides in a nation that taxes income anywhere in the world, unless the nation signs a Double Tax Avoidance Agreement with India. He has the advantage that the amount paid for home loan interest can be deducted from the taxable income of NRI investors, with no upper limit. They have to be legally responsible for capital gains tax payment, as the Income Tax Act prescribes, if he sells the property off.