Recently an acquaintance, a fund manager by profession, relocated to India to set-up a domestic PE fund here. He had invested in a Mumbai residential property strategically located close to the primary business district and an international school for his kid. This investment, done a few years back, helped him crystallize his plans for relocation to India and start his venture without spending time in finding the right location, house and school. What I found most interesting was that he had not even considered relocating to India when he had bought this apartment. He had simply done it for investment five years previously.
There are similar examples in the metros and tier two cities in India. To date, I have not met a single NRI who is not keen on buying property in India. Very often, such investments in their country of origin help them maintain their relationships back home, while they make their fortunes abroad.
THE WAY OF THE NRI
Over the past few years, we have noted that the NRIs are investing in residential real estate, specifically in large Indian cities, to build a back-up in the country. This particularly applies to NRIs with professional/entrepreneurial ambitions who intend to set up businesses in these cities in the future. Post the 2008-09 global financial crisis, India has stood out as an example of financial stability. More than anything else in the past, the crisis caused NRIs to seriously contemplate owning homes in India .
RULES OF ENGAGEMENT
- There are no restrictions placed on the number of commercial or residential properties NRIs can own in India. However, there are restrictions on the repatriation of sale proceeds, which is limited to two units. This means that they face no restriction while investing in commercial or residential real estate in India. However, when a NRI decides to sell and take the money back to the country of residence, he can do so with the sale proceeds of only two units.
- NRIs can invest in real estate by remitting funds to India through normal banking channels, or by invest through funds in NRE/FCNR/NRO accounts maintained in India. They cannot make payment via travelers’ cheque or foreign currency notes. They are also restricted from making any payments outside India or settling payments through exchange of funds outside the country.
- NRIs can avail home loan from Indian Institution approved by the NHB, and loan repayment can be done either through inward remittances, debit to a NRE/FCNR/NRO account, via rental income earned in India or by borrowing from close relatives residing in India.
- NRIs can mortgage residential property in India with an Indian financial institution without any approval from RBI. They can also mortgage it with a foreign financial institution with prior approval from RBI.
- NRIs can rent out their residential property without the approval of the RBI in India. Rent received can be credited to NRO/NRE account or remitted abroad. Authorized dealers have been empowered to allow repatriation of current income like rent, dividend, pension and interest of NRIs/PIOs who do not maintain an NRO account in India, based on appropriate certification by a chartered accountant confirming that the funds proposed are eligible for remittance and that applicable taxes have been paid or provided for.
- Economies are notoriously subject to market risk. However, when it comes to personal and career stability, there should be no space for error. The current trends suggest that more NRIs are taking important decisions with regard to owning residential real estate in India in uncertain times.
– The writer is CEO, Residential Services, Jones Lang LaSalle India
Source – TOI