| NRI GUIDE |
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Inherent
Investment Potential
The real estate in
the Indian sub-continent has an obvious potential for
growth with the rising population. The discerning
investor knows the importance of easy accessibility to
schools, hospitals, shops, offices, entertainment
centres and airports.
A real estate investment
has far higher value in the major towns and cities of
India. A wise investment here can benefit from the
historic movement of population to urban centres. A
process of economic liberalisation has also encouraged
NRI investments into real estate with the advantage of
repatriation of the capital invested and even the rental
proceeds under the circumstances prescribed by
RBI.
Returns from real estate have consistently
performed well and even out performed the other
investment options.
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The Wise
Investor
All property transactions in
India come under a complex web of legislation impinges.
A plethora of municipal rules can cause demolition of
construction for violations. Income tax rules threaten
expropriation for economic offences. Hindu joint family
and other succession rules impact on property transfers.
Land ceiling legislation affect titles. Neighbourhood
groups can hold up construction with lawsuits and
objections.
In this jungle of hidden threats and lurking dangers,
the best option for the investor is to choose an agency
with a proven track record. Past performance in
completed projects is the best assurance to the wise
investor.
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Title
Verification
Project documents are
normally certified by legal advisors before financial
institutions can give loans for flats. They scrutinize
original title, encumbrance certificates, building
permits, land ceiling clearances and other relevant
documents. The buyer-builder agreements should be
equitable and should not contain clauses that violate an
investor's rights and interests. An investor can employ
a legal advisor to examine title for additional
protection.
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Value
Investment
Your apartment has to be
assessed not only from the point of utility but also
from the point of yields and appreciation as an
investment. Desai Flats do have a clear edge in the
market over the others in yields and appreciation. An
apartment has greater value when the project has adhered
to approvals and other sanctions of the various
agencies, government authorities. There is as much
expertise involved in the construction of apartments as
in any other critical production. It needs a builder
with integrity and as well as expertise. Your greatest
assurance is a good track record. A commitment to
quality and aesthetic designs positions Desai above the
rest of the market.
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Loans
The NRI investor can
raise finances from financial institutions to purchase
an apartment. The Housing Development and Finance
Corporation (HDFC) is the leading institution in India
in the field. They have offices all over the country and
respond speedily and efficiently. Desai Homes projects
are eligible for finance and loan applicants can receive
assistance and advice from our offices.
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Unaccounted
Money
The use of unaccounted money for
payments was very prevalent in the real estate field in
India. It is superfluous to warn an NRI investor of the
dangers of accepting such risks. Even if an investor is
not involved, he could be drawn into the problems of his
seller. Fortunately, imaginative tax legislation is
driving the real estate field away from unaccounted
money. Also, computerisation and consequent extensive
cross checking by the tax department has made it
increasingly difficult to hide financial transactions.
In fact, the last recession in India may partly have
been caused by the discovery of thousands of individuals
that unaccounted money has no safe place in the economy.
The population may need time to adjust to the concept
that, just like death, taxes are inevitable. In the
meanwhile, play it safe.
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Who is a non Resident
Indian? (NRI)
Non Resident Indian has
been defined as a person resident outside India. Person
resident outside India under FEMA has been defined as a
person who is a non resident India.
Person
resident in India :-
1) a person residing in
India for more than one hundred and eighty two days
during the course of the preceding financial year but
does not include
- a person who has gone out of India or who stays
outside India, in either case
a) for or on taking
up employment outside India, or
b) for carrying on
outside India a business or vocation outside India,
or
c) for any other purpose, in such circumstances
as would indicate his intention to stay outside India
for an uncertain period ;
- a person who has come to or stays in India, in
either case, otherwise-than
a) for or on taking up
employment in India, or
b) for carrying on in India
a business or vocation in India, or
c) for any
other purpose, in such circumstances as would indicate
his intention to stay in India for an uncertain
period
2) any person or body corporate registered or
incorporated in India,
3) an office, branch or
agency in India owned or controlled by a person resident
outside India,
4) an office, branch or agency
outside India owned or controlled by a person resident
in lndia.
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Who is a person
of Indian Origin?(PIO)
Person of Indian
origin means a citizen of any country other than
Bangladesh or Pakistan , Sri Lanka, Afghanistan, China,
Iran, Nepal or Bhutan if - a) at any time held Indian passport or
b)
either of his parents or any of his grand parents was
a citizen of Indian by virtue of the Constitution of
India or the Citizenship Act, 1955 (57 of 1955).
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Acquisition of
Immovable Property by NRIs/PIOs
Under
the general permission to NRIs/PIOs holding foreign
passport, the Reserve Bank of India has allowed them to
acquire, hold, transfer or dispose off by way of sale or
inheritance, immovable properties situated in India. The
taxation provisions relating to purchase/sale of
immovable property in India by Non-Resident Indians
(NRIs) are provided in the Income-Tax Act, 1961.
Consequent on the liberalisation in Exchange
Control policy and procedures, the government has
brought about major legislative and policy changes to
encourage NRI investments in real estate. As per the
liberalised policy, transactions permitted without
permission of Reserve Bank of India are tabulated
hereunder:
NRI |
Type of Property |
Acquired from |
Any immovable property other
than agricultural or plantation or farm
house |
Anyone including those
residents outside India |
PIO |
Type |
Acquired from |
Mode |
Condition |
Any immovable property other
than agricultural or plantation or farm
house |
Anyone |
Purchase |
To be met out of funds received
in India by inward remittance by normal banking
channels. |
Any immovable property other
than agricultural or plantation or farm
house |
NRI/PIO/Resident from
India |
Gift |
- |
Any immovable property other
than agricultural or plantation or farm
house |
NRI/Resident from India |
Inheritance |
The property was acquired in
accordance with the foreign exchange laws at the
time of acquisition or from a resident in
India |
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Sale/ Transfer of
Immovable Property by NRIs/PIOs
As per
the liberalised policy, transactions permitted without
permission of Reserve Bank of India are tabulated
hereunder:
NRI |
Type of Property |
Mode |
Transferred to |
| Any property |
Sale/transfer/gift |
Resident in India |
| Any property other than
agricultural/plantation/farmhouse |
Sale/transfer/gift |
NRI/PIO |
PIO |
Type |
Mode |
Transferred to |
| Any property other than
agricultural/plantation/farmhouse |
Sale |
Resident In India |
| Agricultural/farmhouse/plantation
property in India |
Gift/Sale |
Resident in India who is a citizen of
India |
| Any residential, commercial property in
India |
Gift |
NRI, PIO or resident |
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Permission to
let out Immovable Property
The Reserve
Bank of India has also granted general permission to
Non-Resident Indian citizens and foreign citizens of
Indian origin, to let out their residential properties
acquired for their bonafide residential purpose but
which on account of their residence abroad, are not
required for their immediate residential purpose. The
rental income being the current account transaction is
freely repatriable outside India.
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Remittance of
Assets and Repatriation
Remittance of
Assets. Upto USD 1 million per calendar year is
permitted to be remitted out of the following assets by
NRIs / PIOs / foreign nationals including retired ,
employed and Non resident widows of Indian citizens on
production of an undertaking cum certificate in the
format prescribed by CBDT (Circular 10 of 2002 dated
9.10.2002).
a) NRIs / PIOs can remit the sale proceeds of
immovable properties held by them for a period not
less than ten years subject to applicable taxes.
b) NRIs / PIOs are allowed to remit the sale
proceeds of assets in India acquired by inheritance /
legacy. For this purpose, Non Resident Indian (NRI) in
context to these regulations is a person residing
outside India who may be an Indian citizen or a
foreign citizen of Indian origin.
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Person of Indian Origin (PIO) in context to these
regulations is defined as an individual
1) who has retired from an employment in India,
2) who has inherited the assets which were
acquired, held or owned by such a person, when he was
resident in India or inherited from a person who was a
resident in India, and
3) is a widow resident
outside India and has inherited the assets of her
diseased husband who was an Indian citizen resident in
India.
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Repatriation of Sale
Proceeds.
NRIs / PIOs are permitted to
repatriate
1) Sale proceeds of immovable properties other than
agricultural land, plantation , farm house property on
the following conditions. Acquisition of the property
must be in accordance to the foreign exchange laws.
There is no lock in period and therefore remittance
can be made irrespective of the period of the property
so held. Remittance should not exceed foreign exchange
brought in to acquire the property or debit the NRE /
FCNR account. Repatriation of sale proceeds is
restricted to not more than two properties. If the
property was acquired out of the loans from authorised
dealer/Housing Finance Institutions, the repatriation
of sale proceeds will not exceed the extent of loans
repaid out of foreign inward remittance through normal
banking channels or by debit to the NRE/ FCNR
accounts.
2) Repatriation or credit to NRE /
FCNR accounts is allowed for refund of application /
ernest money / purchase consideration together with
interest net of Income Tax subject to foreign exchange
brought in through normal banking channels or debit to
NRE / FCNR accounts.
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Remittance of Current
Income
Remittance of current income
including rental income. NRIs / PIOs are allowed to
repatriate / credit through NRE / FCNR account the
current income including rental income subject to
deduction of taxes as applicable. (Refer Master Circular
Misc. Remittance dated 1.7.2003 - RBI). |
Overseas Real
Estate
NRIs can now buy immovable
properties in any country outside India and retain them
even after their return to India for permanent
settlement. In addition the amount lying in the Resident
Foreign Currency Account (RFC) can also be utilised
after their return to India for the subsequent purchase
of immovable property abroad.
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Investment in Real
Estate Development by OCBs
Non-Resident
Indians are now permitted to enter into the business of
real estate development. This can be done by either
forming a partnership firm or investing in a company
incorporated in India. The Reserve Bank of India has
relaxed certain provisions with regard to investment in
Indian companies engaged in housing and real estate
development.
Person of Indian nationality/origin
resident outside India (NRIs) are permitted to invest
upto 100 percent in the new issues of equity
shares/convertible debentures of Indian companies
engaged/proposing to engage in the following areas:
- Development of serviced plots and construction of
built-up residential premises
- Real estate covering construction of residential
and commercial premises including business centres and
offices. Development of township, city and region
level urban infrastructure, facilities including roads
and bridges. Manufacturing of building materials.
Financing of housing development.
- Investment in real estate development has since
been extended to Overseas Corporate Bodies (OCBs)
predominantly owned by NRIs. Overseas Corporate Body
would mean any overseas company, partnership company,
society and other corporate body predominantly owned
directly or indirectly to the extent of at least 60
per cent by NRIs and includes any overseas trust in
which not less than 60 per cent beneficial interest is
held by NRIs directly/indirectly but irrevocably
(notification 159/94 of 5.10.94).
- Dividend/interest on equity shares/debentures can,
however, be remitted as per the procedure laid down in
paragraph 10.C.24 of Exchange Control Manual subject
to payment of applicable taxes without any lock-in
period.
- The facilities are granted to OCBs so long as the
ownership/beneficial interest held in them by persons
of Indian nationality/origin resident outside India
continues to be at least 60 percent.
- The OCBs are required to furnish at the time of
applying for the facility for the first time and
thereafter as and when required by Reserve
Bank/authorised dealers, a certificate from an
overseas auditor/chartered accountant/certified public
accountant in form OAC/OAC-1 as the case may be. The
overseas auditor/chartered account/certified public
accountant has to certify that the ownership interest
in the OCBs is held by NRIs.
- The proformae of the certificates in form
OAC/OAC-1 have been modified to ensure that the
interest held by persons of Indian nationality/origin
in the OCB is actually held by such persons and is not
held by them in the capacity as nominees.
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Disclaimer
Every effort has
been made to avoid errors or omissions. Please inform us
of any mistake, error or discrepancy. Being matters of
vital importance, the reader is requested to cross-check
all material at this website with original Government
publication or notifications. Please seek professional
advice before acting on any information contained
herein. The responsibility for obtaining clearances and
permissions from the Reserve Bank of India and/or other
statutory Authority with respect to the provisions of
the above mentioned Act or any other applicable laws
rests with you. Desai Homes., expressly
disclaim liability to any person, in respect of anything
or the consequences of anything done or omitted to be
done by any person on the basis of the contents of this
website.
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