Issues Relating to Investments in Real Estate in India

Issues Relating to
     Investments in
        Real Estate in India
    Interactive Webinar on ‘NRI Investments in Real Estate’
                     25th September, 2014

                   Ankur Srivastava
                Managing Partner, Ezy Laws

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Disclaimer

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    error free and accurate . We have however made reasonable efforts to ensure that the
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    correctness, validity, completeness or suitability for any purpose.. All information and data
    provided by us are for informational and academic purpose only and does not constitute a
    legal advice or opinion. Ezy Laws accepts no responsibility for any reliance placed on any
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    for any action taken based on any of the contents provided for in this presentation.

    The contents of this presentation is proprietary material of Ezy Laws. Any unauthorized usage
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How can NRIs invest in real estate?
   Acquisition and transfer of immovable property in India by NRIs / PIOs /
   Foreign Nationals of Non-Indian Origin is regulated in terms of Sub-
   sections (3), (4) and (5) of Section 6 of the Foreign Exchange
   Management Act, 1999 read with Notification No. FEMA 21/2000-RB
   dated May 3, 2000.

An NRI/ PIO is allowed to do the following investments in property:

 Any immovable property can be purchased by an NRI /PIO in India
  other than any agricultural land, farm house and plantation property.
 There is no restriction on the number of properties that can be bought.
 NRI / PIO can get any immovable property (other than any agricultural
  land, farm house and plantation property ) by gift from Indian resident,
  Indian citizen residing outside India or PIO.
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How can NRIs invest in real estate?

  RI / PIO can obtain any property by inheritance.

  RI / PIO can transfer immovable property to any resident of India by sale.

  RI/ PIO can transfer any agricultural land, farm house or plantation land
  to any resident of India by gift.

  RI/ PIO can also transfer his residential or commercial property by means
  of gift to any person either residing in India or abroad or PIO.

  oreign national of non Indian origin resident outside India shall not
  acquire / transfer any immovable property in India other than on lease
  not exceeding five years, without prior approval of RBI.
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Sources of Finance
The payment of purchase price, if any, for acquisition of
  immovable property by NRI/PIO should be made out of :

 funds received in India through normal banking channels by
  way of inward remittance from any place outside India or

 funds held in any non-resident account maintained in
  accordance with the provisions of the Act and the regulations
  made by the Reserve Bank.

 No payment of purchase price for acquisition of immovable
  property shall be made either by traveller’s cheque or by
  foreign currency notes or by other mode other than those
  specifically permitted as above.
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Sources of finance
 NRI can avail home loans from Financial institutions /Banks .

 A maximum of 80 per cent amount is financed by the financial
  institution. The rest has to be given by the NRI.

 The remittance of the amount for down payment / repayment can be
  done from the place of residence by normal banking channels or if
  someone is already getting income in India from sources like rent or
  dividend, he/she can directly repay the loan as well.

 The NRI has to repay his principal amount as well as interest part from
  that similar channel only.

 Home Loan in rupees availed of by NRIs/ PIOs from ADs / HFI’s in India
  can be repaid by the close relatives in India of the borrower.
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Repatriation of sale                proceeds       of
 immovable property
Immovable property acquired by way of purchase

 NRI /PIO can repatriate the sale proceeds of immovable property in
  India, if the property was acquired out of foreign exchange sources i.e.
  remitted through normal banking channels / by debit to NRE / FCNR (B)
  account.

 The amount to be repatriated should not exceed the amount paid for
  the property in foreign exchange received through normal banking
  channel or by debit to NRE account (foreign currency equivalent, as on
  the date of payment) or debit to FCNR (B) account.

 In the event of sale of residential property by an NRI/PIO, the
  repatriation of sale proceeds is restricted to two residential
  properties .
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Repatriation of sale              proceeds     of
immovable property
    Immovable property acquired by way of inheritance/
    legacy/ out of Rupee funds
 An NRI / PIO may remit an amount, not exceeding
      US $ 1,000,000 (US Dollar One million only) per financial
  year out of the balances held in NRO accounts / sale proceeds
  of assets by way of purchase / the assets in India acquired by
  him by way of inheritance / legacy / out of Rupee funds. This
  is subject to production of documentary evidence in support
  of acquisition, inheritance or legacy of assets by the remitter,
  and income tax compliance .
 Remittances exceeding US $ 1,000,000 (US Dollar One million
  only) in any financial year requires prior permission of RBI.

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Refund of purchase consideration

           Refund of (a) application / earnest money / purchase
    consideration made by house-building agencies/seller on
    account of non-allotment of flats / plots , cancellation of
    booking/deals      for   purchase       of   residential/commercial
    properties, together with interest, net of taxes is allowed
    provided original payment is made out of NRE/FCNR (B)
    account/inward remittances.

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Tax implications for NRIs looking for
property in India
  The benefits for an NRI are very similar to the tax benefits of a resident
   Indian. An NRI is entitled to all tax benefits related to purchase of
   property that a resident Indian is. So, you can claim a Rs 1 lakh deduction
   under 80C.
  Income received from lease of property comes under the head of income
   from property, therefore, standard deduction is applicable as per the
   standard slab. However, the NRI will have to pay the applicable tax if he is
   residing in the country where worldwide income is taxable unless the
   country has Double Tax Avoidance Agreement with India.
  The special advantage for an NRI is the amount which is paid for the
   interest of home loan is deductible from NRI's taxable income without any
   upper limit.
  The NRI is legally responsible for the payment of capital gains tax as
   prescribed under the Income Tax Act, in case he sells off the property.

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Points to be considered at the time of purchase
     Investment in real estate is a simple but long-term move so, one
   should be cautious enough at the time of purchase to secure the deal.
   Few points of consideration are under:

 Property Title: The title of property should be clear from issues and
  the seller should have the required right to sell it, especially if it is
  inherited or any joint property.
 NDC: Always check that there will be no outstanding electricity/water
  bills or any other authority dues pending with the property. Take a no
  dues certificate from the seller at time of purchase.
 Bank release letter: It is advisable to take the bank release letter from
  the concerned bank, if the property had been mortgaged as security in
  any type of loan.
 Permits: The property of sale should have all approvals and permits
  from the civic authorities in terms of construction.
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Always make a safe deal
 Whenever you plan to invest in real estate, you should go through the
  proper channels, either through a friend or relative to ensure the
  authenticity of property.

 You can also approach through property expos and seminars to choose
  a right property and select reputed developer .

 It will be wise to get the title papers of the property   verified by a
  lawyer before going ahead.

 if and when you want to purchase /dispose the property, you can give
  PoA to a reliable person who is resident in India & who may be able to
  act on your behalf to complete formalities such as registration,
  possession, execution of agreement of sale, etc.
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EZY LAWS is a boutique law Firm with an ability to understand the business and with its
   solution based approach is a preferred partner for legal assistance. The Firm practice in
   the area of corporate, & banking laws, real estate & constructions law, fema &
   economic laws, capital market and private equity, EPC & Contract Management,
   litigation and alternative dispute resolution etc. The services provided by the Firm
   encompass all aspects of the specified practices areas, including opinions, drafting and
   vetting of all concerned documents, agreements, implementation, compliances,
   representation before statutory bodies / authorities, obtaining statutory licenses /
   permissions, etc.
                                Ankur Srivastava
                  Ph : 91 22- 26680250| Mobile +91 9967011249
   09/25/14
              ankur.srivastava@ezylaws.com
                                      Ezy Laws
                                               | www: ezylaws.com                      13