Should NRIs consider investing in Indian property markets? Will these investments be considered viable? Several NRIs (non-resident Indians) have sought to optimize their investments in several avenues in the country including real estate over the years. The Government has now introduced several schemes with relaxations and major incentives for drawing investments, particularly from NRIs.
The Foreign Exchange Management Act of 1999 (FEMA) governs real estate acquisitions by NRIs and has witnessed RBI and Government control with the anxiety that uncontrolled investments may spark property price speculation. NRIs may buy immovable property (other than plantation/agricultural land property/farm houses) in the country or even get the same as a gift from an Indian resident/Indian citizen residing outside the country/PIO and even as inheritance as permitted by regulations under FEMA. NRIs can also transfer immovable property to any resident person in India or a person residing outside India who is an Indian citizen/PIO.
The payments for real estate acquisitions can be made out of funds that are received through regular banking channels in India by way of inward remittances from any place outside the country or from proceeds of housing loans which can be taken in rupees from authorized banks/housing finance companies/dealers or funds in non-resident accounts like FCNR (B), NRE and NRO maintained in adherence to FEMA and other regulations.
NRIs can also repatriate proceeds from sales of immovable property after compliance as per FEMA regulations and taxation. The funds repatriated are not to cross the amount paid for acquiring the immovable property in foreign exchange received through regular banking channels or amount paid from funds in FCNR (B) account or NRE account for acquiring the property in the country. The Reserve Bank of India, however, has allowed NRIs to remit up to $1 million in a single financial year from balances held in NRO accounts, which is inclusive of proceeds from sales of immovable property acquired through settlement/inheritance. Repatriation of sales proceeds is limited to two properties in case of a residential property.
Refund of the earnest money/application/purchase consideration by the seller/house building agency on account of non-allotment of plot/flat/booking cancelling/deals for purchase of commercial/residential property with interest (if any) may be allowed by the AD Bank through credit to the FCNR (B)/NRE account provided that the original payment was made from the same through regular banking channels.
RERA or the Real Estate (Regulation and Development) Act of 2016, which came into effect from the 1st of May, 2017, has been recognized as a law friendly for consumers and has enhanced the credibility of Indian real estate. RERA has been instrumental in attracting NRIs for investing in property in India. For NRIs, a well-regulated and transparent real estate sector will be a major incentive for investing in property. RERA covers and governs all future and ongoing projects after which developers are directed and mandated to disseminate all project inked information on its web portal for investor access. This will boost transparency and heightened compliance which is essential for investors who are far away from the actual project and may have pumped in their life savings.
RERA assures NRIs of the safety of their investments. Every investment in real estate in India should be carefully planned and evaluated prior to implementation. NRIs are expected to invest hugely in the country over the next year or so on account of the RERA implementation and its effect on the real estate sector by way of greater compliance, transparency and accountability of developers.