Do's and Don'ts for NRIs Investing in Indian Realty
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NRIs do a lot of real estate purchases in the nation. Data backs this statement; one must know that NRI investments in Indian real estate were almost 15% of the total real estate market in 2023. Expectations were that this percentage would rise to 20% by 2025, which is happening already! Despite multiple steps, NRI banking rules, and cross-border transactions, the number is rising.

Are you an NRI on the lookout for buying real estate in India? This guide serves you well with the important do’s and don’ts that will help you through the details.

Here's what we’ll cover in the article:

  • Real estate is a growing affair among NRIs
  • Know the market before you buy
  • Trust only reputed builders
  • Don’t skip legal checks
  • Get your NRI accounts in order
  • Plan for remote property management
  • Stick to the golden rules

Why are NRIs Interested in Indian Real Estate?

Addressing the important question first. An NRI's interest is driven by factors such as

  • The depreciation of the rupee
  • Attractive rental yields
  • Growing emotional and financial connection to owning property in India

Further, consumer confidence has increased as a result of reforms like the Real Estate Regulatory Authority (RERA) Act. NRIs might thus profit from making real estate investments in the nation.

Do Your Homework: Research, Market & Location

Before investing a single rupee, thorough research is your best friend. The right city matters — Hyderabad, Bengaluru, and NCR top the list for NRIs, according to the Anarocks CII report. When selecting the city, consider:

  • Economic growth prospects
  • Infrastructure development
  • Rental market demand and yields
  • Lifestyle fit for you and your family

If you are buying for rental income, prioritize cities with high rental yields. For personal use, focus on your comfort and convenience.

Choose the Right Property and Builder

Your investment can be residential or commercial, ready-to-move-in or under construction. However, under-construction properties should be approached cautiously; always pick builders with a proven track record of on-time delivery. Reputed builders not only provide quality construction but also transparency and post-sale service, reducing your risk considerably.

Examples: Kotak’s NRI banking services often advise clients to pick projects with clear RERA registration to ensure legal protection.

Understand Legal & Regulatory Compliance

Legal due diligence cannot be overstated. Verify:

  • Clear ownership titles
  • No encumbrances or legal disputes
  • Approvals and permissions from local authorities
  • Compliance with RERA regulations

Also, familiarize yourself with the Foreign Exchange Management Act (FEMA) rules. NRIs can buy residential and commercial properties. They are not eligible to buy agricultural or plantation land. Hiring a legal expert for due diligence is a wise move, saving you from costly pitfalls.

Financing Your Property: NRI Banking Essentials

A critical part of buying property in India involves your NRI banking setup. You need to understand the roles of different accounts:

  • NRE (Non-Resident External) Account: Fully repatriable, holds foreign earnings in INR. Ideal for repatriating rental income and sale proceeds.
  • NRO (Non-Resident Ordinary) Account: For income earned in India, like rent or dividends. While it is only partially repatriable (up to $1 million/ financial year after taxes), current income like rent and dividend can be fully repatriated.

You can fund your property purchase using these accounts, but remember, cash or foreign currency notes are not permitted for property transactions in India.

Kotak Bank comes with specialized NRI banking services. There is ample proper support to manage these accounts efficiently. It also involves guiding NRIs through smooth transactions and repatriation.

For an NRI who needs a loan,

  • They can get home loans from Indian banks
  • Financing available up to 80% of the property value
  • Tax benefits under Sections 80C and 24(b)
  • Credit worthiness plays a key role in the approval
  • Interested in a Home Loan? Click here for more information

Property Management & Repatriation of Funds

A big challenge that an NRI faces when buying or owning property in India is the management part, which is remote. You have the option of hiring either property management companies or caretakers. What they can do is they can handle

  • Tenant screening
  • Rent collection
  • Property maintenance
  • Legal paperwork

An NRO bank account plays a major role when it comes to repatriating rental income or sale proceeds. NRO accounts allow repatriation of up to $1 million annually, post taxes.

Kotak Bank provides seamless solutions for fund repatriation. You get compliance with RBI guidelines and hassle-free documentation like Form 15CA, 15CB, and A2.

Quick Do’s and Don’ts of NRIs Buying Real Estate in India

Do’s:

  • Research market trends and local growth carefully
  • Verify all property documents with a legal expert
  • Use your NRI bank accounts smartly for payments and repatriation
  • Opt for reputed builders and RERA-registered projects
  • Consider appointing a Power of Attorney (POA) to manage paperwork

Don’ts:

  • Don’t rush into buying under-construction properties without due diligence
  • Avoid making cash payments or using unauthorized channels
  • Don’t ignore legal compliances, including FEMA and RERA
  • Don’t neglect property management post-purchase

Final Word

Buying property in India as an NRI can be a rewarding investment when done right. You can reap the benefits of your Indian real estate without hassle. How? With the right research, legal checks, and smart use of your NRI banking facilities. Still, if you feel the need for expert guidance and tailored services, explore Kotak Bank’s dedicated NRI banking solutions today.

 

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Mutual Fund investments are subject to market risks read all scheme related documents carefully before investing

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Frequently Asked Questions

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Can NRIs buy agricultural land in India?

No, NRIs are not permitted to buy agricultural or plantation land in India as per FEMA and RBI regulations.

What type of NRI bank account should I use to buy property?

Your funds in NRE or NRO accounts are used. NRE accounts allow full repatriation. NRO accounts are for income earned in India and allow repatriation subject to limits.

 

How do I repatriate rental income or sale proceeds from my property?

You can directly repatriate funds through your NRO account that you earned from rentals or any other sale proceeds from your property. Kotak Mahindra Bank offers assistance with this process.

 

Is appointing a Power of Attorney necessary?

If you cannot be physically present in India to handle property transactions, appointing a POA can be very helpful.

 

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.