Over other class of assets, NRIs are more interested to invest in real estate due to the extended benefits offered by it. Even the government is also trying to arouse positive sentiments among the real estate investors by launching the investor-friendly policies. Guidelines, such as any non-repatriable investment by an NRI to be treated as a domestic investment or any funds taken from NRI Rupee account for the purpose of investing in Real Estate shall also be treated as a domestic investment, have drawn the attention of NRI investors in the Indian Realty Segment.
But there is still a number of regulations that govern the transfer of funds to India for the purpose of NRI investment. So, here are the guidelines that need to be followed by NRIs to transfer the funds to India for such investments:
- Out of their personal savings or Income earned abroad, NRIs are allowed to transfer such money to India. In order to buy a property, funds must be transferred to Non-Resident Ordinary (NRO) or Non-Resident External (NRE) account or maybe to Foreign Currency Non-Resident (FCNR) account.
- From their place of residence, NRIs are allowed to remit the funds only through the banking channels. For this purpose, NRO or NRE account is referred as normal Banking channel. A due consideration is required to be given if the country of their residence has a Double Taxation Avoidance Agreement or not. In case of no, the NRI will be held liable to pay the tax in both the countries.
- For the purpose of the home loan, 80% of finance is available from the financial institutions or bank. All the repayments for the principal amount as well as interest must be executed through the same channel. However, NRI can also claim the tax-deduction on such interest receipts. In case of sale of a real estate asset, capital gain arising out from such sale is liable for the capital gain tax. An amount deposited up to 1 cr into FCNR or NRE accounts qualifies the NRI for obtaining a home loan.
- By using FCNR, NRO and NRE account, Equated Monthly Installment (EMI) can be equated easily for the property they purchase. Money can also be remitted directly from abroad as well.
- Funds received under regular banking makes it easy for NRI to procure them in case of buying property in India. While NRE account is a mandate for the purpose of depositing and transferring money to India while there is no requirement for NRO account. In the same way, the funds can be transferred to foreign account after paying the capital gain tax and income tax.
These easy tips will help you to guide your NRI client and you shall be able to crack the great property deals with them.