Home Financing Options For NRI Buyers in India
The present government and their new regulatory acts are very NRI investor-friendly. The demonetisation move has also been instrumental in boosting the morale of the NRI community. With the Real Estate Regulatory Act (RERA) and GST, there is enhanced transparency in the system which is directly impacting the number of NRIs looking to invest in property in India.
To invest in India, NRIs must open a Savings/Transaction account through which they can carry out their financial dealings.
For easing up the process, here are the categories of bank accounts available for NRIs:
1. Non-Residential External Accounts (NRE)
These can be savings, current or term deposit accounts. This is an Indian Rupee account and the funds here must be credited through your earning abroad. The interest on the funds in this account are tax-free in India.
2. Non-Resident Ordinary Account (NRO)
These are also rupee accounts with savings, term deposit, recurring deposit or current account options. However, the interest earned on this account is taxable in India.
3. Foreign Currency Non-Resident (FCNR) Account
A term deposit account, only foreign currency can be deposited here for a said term. Again, the interest earned here are tax-free in India.
NRIs are also allowed to purchase property in India, by taking home loans from banks or housing finance companies. In certain cases, the home loan is even granted by an employer who is in India of the NRI employee.
Procurement of a home loan for NRIs
Gone are the days when you need to be physically present at the bank. Nowadays, home loan applications can be filed online too along with the documents mentioned by the bank/finance company. While the nature of documents is different for different people based on their employment status, certain documents are mandatory like passport and visa, photographs and proof of residence.
Taxes often define how, when and where one can invest in India. For NRIs though, that is also easier. The NRI is expected to pay registration and other service charges at the time of booking the home. Post that, the NRI is eligible for all the same benefits as an Indian citizen. However, if they sell the property within 3 years of purchase, the earnings are then taxable. While if you sell the property after 3 years, NRIs can reduce the long-term capital gains tax by investing in another property.
Investing in a property is the best and most secure form of investment, even for NRIs. And while the rules maybe slightly different, the sentiment is the same. We recommend a thorough understanding of the nature of a deal before one decides to seal the deal.