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Success In Real Estate Starts With Believing Your Worthy Of It - Research Team | Posted On Saturday, May 18,2013, 01:22 PM

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Success In Real Estate Starts With Believing Your Worthy Of It -



Real Estate is at the core of almost any business and it is certainly at the core of most people’s wealth .In order to build up your wealth you need to know about real estate. Don’t you want a piece of land which is a sure investment? This never depreciates like a car or a washing machine .Land will quickly double in value and goes up every day. Don’t you read in the newspapers every day of real estate hitting sky-high levels in the metros? Most of the people who reside in the city of Mumbai cannot afford the real estate in the suburbs or city limits. Even in the parallel city of Navi Mumbai prices have skyrocketed. Non Resident Indians in the west and Middle East can take advantage of the foreign currency exchange rates and purchase property in India. For an NRI real estate is a tangible, beautiful, artistic form of investment. I would like to remind all of you that the team of financial planners at are always there for you to plan your real estate needs in an efficient manner. You can explore this unique Free Advisory Service just by giving a missed call at 022 6181 6111.

Why Should A Non Resident Indian Invest In Indian Real Estate?

An NRI always has links and roots to his motherland. How best to meet this need than by owning his own home in India. This helps the Non Resident Indian maintain his roots in India, earn his fortunes abroad and God forbid if he is forced to return to India he would have a roof over his head. Remember the Nitaqat where a number of Non Resident Indians were asked to leave Saudi Arabia. There is no guarantee that the country we reside in may not ask us tomorrow to leave .Don’t you think it is always best to be prepared.....

Types Of Accounts An NRI Can Open In Order To Purchase Real Estate In India

NRE Account

It is one of the most popular accounts for Non Resident Indians where they send money to their families in India and funds from these accounts can be withdrawn in India. This NRE accounts can be opened in the form of savings, current, recurring or fixed deposit accounts. Here the banks are free to determine the interest rates of term deposits with a maturity period of one year or more. However these cannot be more than the comparable domestic rupee deposits. In this account at the time of opening of the bank account, foreign currency is deposited which may be in US Dollars or Euros. The bank uses the current exchange rates to convert this to Rupees and a fixed deposit is opened with it. There is no guarantee rate and the rates offered are those prevalent at that time. Once converted into Rupees the specific tenure and rate are fixed and the bank pays interest periodically. If the rupee depreciates significantly from the time invested we get a loss and if the rupee appreciates we get a profit. This is a bonus above the interest rate. Of course we can keep the amounts in whatever currency we invested and you don’t have to worry about the exchange rate. This is done by a number of Non Resident Indian’s. There is no tax in India for NRE Deposits. A lot of public sector banks offer this service along with private sector banks and since banks in India are well capitalized chances of default even of interest payments are extremely rare .Here only the NRI can deposit the money in the account and the person with power of attorney can operate this account in India.

NRO Accounts

This account is mainly for those NRI’s who have investments in India or for those who want to start investing in India. It can also give interest rate advantages as Indian rates are higher than rates offered in USA and Europe. You can repatriate up to US Dollars 1 Million abroad for a financial year and this is the upper limit subject to the payment of applicable taxes. This also means that if the NRI sells his property in India he can transfer only 1 Million Dollars or close to 5 crores abroad .Deposits can be made into this account from overseas accounts. This account is maintained in Indian Rupees. The account holder’s dues in India such as rent collected, dividends obtained, any interest and pension obtained, funds obtained from sale of immovable property, and also funds received from sale of inherited property are remitted to this account. A foreign national of non Indian origin with funds remitted from outside India through banking channels and also through the sale of foreign currency brought into India can use this account. One very important point to be noted here is that interest income on the NRO deposit is taxed in India.

FCNR Account

These accounts are maintained in foreign currency for those looking to maintain fixed deposits in India without any foreign exchange risk. The currency maintained may be in Euro’s, Dollars, Yen, Canadian Dollars, and Pounds .The term of deposit is between one to five years. Interest on FCNR Deposits is based on Libor rate (London Inter Bank Rate ) based on the last day of the previous month. Deposit rates on January 2013 were based on the libor rates of December 31st 2012.

How Can An NRI Invest In Real Estate In India?

  • An NRI can buy any amount of commercial and residential property in India. There are no restrictions here. However there are restrictions on the repatriation of sales proceeds to his country of residence say the USA. He can repatriate only the sales proceeds limited to two units. An NRI cannot buy agricultural land, Plantation land or a farm house in India even as a gift .However there is no law on inheriting such properties.
  • An NRI can invest in real estate by remitting funds through his NRE /NRO/FCNR accounts maintained in India. He cannot make payments using travelers cheque and foreign currency notes. They are restricted from settling payments through exchange of funds outside the country.
  • An NRI can mortgage residential property in India with an Indian Financial Institution without approval from RBI. They can mortgage residential property in India with a foreign financial institution with prior approval from RBI.
  • The NRI can receive rental income from the properties he owns in India without the approval of RBI. These amounts are credited into NRE/NRO accounts. Authorized dealers have been empowered for the repatriation of income earned through rent, dividend, pension income and interest income based on the certification of a chartered accountant confirming that the funds proposed are eligible for remittance and the applicable taxes are paid for.
  • An NRI can sell residential property in India to another NRI or a PIO or a resident Indian. An NRI/PIO can sell agricultural land, plantations or a farm house only to a resident citizen in India .A foreign national would need permission of the RBI in order to do the same. But gifting of plantation and farm house and agricultural land can be done only to a citizen of India.

Things To Note For An NRI When Purchasing Property In India

  • It is very important to choose the right kind of property which fits your strategy .Is it commercial land or a residential apartment you want to purchase ? Are you buying land for development? You must decide why and for what purpose is your investment.
  • Find a real estate developer experienced in property deals. Set up a relation with the broker so that you can do business again and again. Deal with a broker who is experienced in the real estate market and can locate promising properties for you.
  • If property has to be rented out choose prime locations. Choose an area well connected by road, railways in case of metro’s like Mumbai and all metro’s have good air connectivity .Plan for the future. Choose a safe neighborhood with low crime rate. Set up multiple bedrooms and bathrooms. This will appreciate your rental income. If should have good amenities like nearby hospitals, malls and good public transportation .This will also increase the resale value of the property.
  • Plan for these assets and line up the necessary capital. Maintain good relations with relatives or friends who would manage these properties for you when you are out of the country. Have an attorney for tenant issues and a tax planner/Auditor to help you with the taxation issues.

Taxation Of Real Estate Or Property Held By The NRI

  • When an NRI sells property in India he is subject to taxation as per the laws of the land and has to pay capital gains tax. If the property is sold within 3 years he is subject to short term capital gains tax. He will be subjected to a Tax Deducted at Source of 30% irrespective of his tax slab. For long term capital gains for a time period greater than 3 years he has to pay long term capital gains tax subject to a TDS of 20%.An NRI can use the following tax saving options as per Section 54 of the Income Tax act where he can use the entire profit to buy another house or construct one in 3 years.
  • The NRI can invest the profit proceeds in REC bonds or NHAI bonds through funds from his NRO account to save tax on long term capital gains through sale of the real estate assets.
  • In case the NRI is not able to invest in REC and NHAI bonds and invest in another property the amount can be kept in a capital gain account scheme of a nationalized bank before the due date of filing income tax returns to avail tax exemptions. The amount has then got to be utilized to purchase a new property within the specified period.
  • Circle rate has been announced by the government for different properties in different parts of India. When an NRI purchases property he has to take note of the circle rate as stamp duty has to be paid on the minimum circle rate or the actual price of the property whichever is higher. If the NRI sells his property at a value lower than the circle rate, the circle rate will be treated as the minimum sales price and capital gains tax will be charged on the circle rate.
  • The amount taken from the bank as reverse mortgage for a senior NRI citizen is not added as income of the Non Resident Indian.
  • The NRI has to file income tax returns for his rental income in India and this is coupled with the other income earned in India and tax is charged on the amount which exceeds the basic income tax exemption limit.
  • If an NRI inherits a house or an ancestral property from his parents there is no inheritance tax on it.
  • According to the income tax act if an NRI owns two houses the first house is considered self occupied and no tax is charged on it. The second house whether given on rent or not will be considered to be given on rent and tax payment is required on it.

I would like to end this article with the famous saying and I quote " I Will Give A Thousand Furlongs Of Sea For A Barren Piece Of Land " Surely we know what this means.

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