Over the past few years, we have noted that NRIs are investing into residential real estate specifically in large Indian cities to build a back-up base 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 2008-2009 global financial crisis, India has stood out as a showcase example of financial stability, specifically in terms of its conservative banking sector. More than anything else in the past, the GFC caused NRIs to seriously contemplate owning homes in India as their rattled confidence in all things foreign gave way to a yearning for familiarity and stability on both on the personal and professional fronts.
NRIs have no restrictions limiting them with regards to how many commercial or residential properties they can own in India. However, there are restrictions on the repatriation of sale proceeds, which is limited to two units. Effectively, this means that NRI face no restriction while investing into 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 into 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 also avail of home loans from the employer in India, provided specific terms and conditions listed by RBI are met.
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. Authorised dealers have been empowered to allow repatriation of current income like rent, dividend, pension, interest, etc. 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.
No one can exactly predict the fate of any currency, or the stability of any economy. Economies are notoriously 'subject to market risk' ' for instance, no one had expected that west Asia would see political uncertainty a few years back. However, when it comes to personal and career stability, there must be no margin for error. The current trends suggest that more NRIs are taking important decisions with regard to owning residential real estate in India as bulwarks in uncertain times.
