How to Care for Your Indian Real Estate as an NRI

Posted on: Jan 7, 2022 | 3 mins | Written by: HDFC ERGO Team

How to Care for Your Indian Real Estate as an NRI

Real estate has been one of the most popular investment products for NRIs. Because of the updated real-estate market restrictions, anyone with a valid Indian passport can now invest in Indian real estate, making the procedure straightforward. The depreciation of the rupee and the regulatory environment that has resulted from the execution of reforms have prompted a substantial number of NRIs to engage in the Indian real estate industry. Investing in real estate is safe and profitable, and there are no restrictions on the number of assets.

With the Indian government's move to control the real estate sector, providing more transparency and accountability, there has been a boom in NRI investment in the Indian real estate sector.

Market Research & Advisory

The decision to buy or sell a home should be led only by extensive market research. However, this may not be feasible for an NRI. Non-residents tend to rely their views on secondary sources. Irrespective of recommendations from friends and relatives, NRIs should seek guidance from competent real estate guidance. It is wise to consider tenancy discussions, repairs, regular supervision, and the buy/sell dilemma beforehand.

A Real Estate Consultant delivers a consistent supply of market information, topical counsel, and an efficient asset management support structure including provisions for your property insurance. Subscribing to services can provide NRIs with peace of mind.

Valuation and risk assessment

The valuation and risk evaluation of the property in question should not get overlooked before deciding to buy. One will need the help of a licensed real estate consultant. NRIs must exercise caution and select a suitable property to avoid the hazards of delayed possession or even repossession. Despite these reservations, the Indian real estate industry has grown significantly in the previous decade. Investing in this sector will not allow NRIs to remain connected to their roots and yield returns. The risks are undeniably numerous, but taking measures and performing the required checks will keep you safe.

The Decisioning: Buy, sell or rent?

Do you acquire additional property, sell your current one, or keep the asset and rent it out? NRIs who want to benefit from their real estate investment have the option of renting out or selling to buy another one that will yield higher returns. To make the best decision, compare the rental return and capital appreciation to what you could receive if you invested in another property. This decision will be succeeded by a slew of duties, including but not limited to locating the correct party to cooperate with and wading through mountains of documentation. Additionally, each of these choices will further get accompanied by regulations imposed by the Indian government.

Tenancy Management

If you opt to rent out your property, you will be accountable for overseeing your tenants. For an NRI, this will be challenging. For your peace of mind, it is best to subscribe to a professional service. The Consultant will collect rent on time, engage with tenants regularly, manage safety and maintenance issues, and ensure compliance with local taxation.

Legal assistance

Before buying, thorough diligence on the title, ownership, and occupancy of the property is paramount. When purchasing property, it is critical to determine whether the seller is the legal owner of the property. By validating the flow of the title, one can trace the chain of title for the last 30 years. It can get verified by reviewing the property's registered deeds/revenue records. A careful legal check on the property from professional legal counsel is required to determine the possibility of any future risk or dispute.

Tax advisory

Income from the transfer of residential property is taxed under the head 'Capital Gains' in Indian tax legislation, whereas rental taxes get collected under the head 'Income from House property.’ NRIs are eligible for the same tax breaks as local Indian buyers. If they sell the property within three years, the proceeds will be taxed because they are considered short-term capital gains. However, if the property gets sold after three years, they can reduce the long-term capital gains tax payable by purchasing another property.

Tax documentation required, on the other hand, will necessitate help in the filing of tax returns, bookkeeping, audit, FATCA compliance, and GAAP audit, contract drafting, and so on.

Conclusion

A non-resident buys land for reasons including the desire to own a second home, a backup asset, or retain a connection with the mother country. NRI investments in real estate have increased many folds over the last decade as norms and regulations have changed drastically. When it comes to subscribing to real estate consultants, it is advisable to do your homework before seeking their help. Subscribing to this help or service is crucial similar to the property insurance consultants you encounter. Hence, you must inquire with these companies if they can provide you with contact information for their existing clientele so you can acquire feedback on the quality of their services.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

add-on you should opt for your property insurance

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