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Real Estate Investment Basics For Indian Citizens, NRIs and PIOs

While investing in real estate is always trending in these times, thanks to the Indian real estate boom in the last few years, many are not aware of the basics of investing in the sector. In this article, we are going to answer a few common questions that are hardly answered right. First up is – Who all can invest in real estate? It is a no-brainer that Indian citizens are not the only ones who can invest in properties in India. Non Resident Indians (NRIs) and Persons of Indian Origin (PIO) can also do so. They can invest in immoveable assets in India.

Spouses of NRIs are also treated as Indian citizens and are also allowed to purchase properties in India. While foreign individuals and organisations need special permission from Reserve Bank of India (RBI), Overseas Corporate Bodies (OCBs), where NRIs own at least 60 percent, including trusts, are allowed to own properties in India. In case of five year leases, processes get simpler. Next up – Is co-ownership of properties possible and with whom? The fact is it is very much possible if joint ownership is with father, mother, daughter, son or spouse.

However, it must also be in mind that lending institutions could have specific rules of co-ownership, especially when it comes to securing home loans. Some banking and financial institutions require the co-owner to also be a co-borrower of a home loan. There are many who also ask on the types of real estate investments OCBs and NRIs can make in India. They can invest in Indian residential properties but they have to be rented out or occupied immediately. While NRIs and OCBs are allowed to invest 100 percent infrastructure, residential townships, construction of commercial and residential premises and manufacturing building material, they cannot possess any form of farm, plantation or agricultural land in India.

A very important question that comes to mind when investing in real estate is – How much home loan can one secure from a bank/lending institution? According to ongoing norms, it is possible to get 80 percent of the total value of the property as home loan from banks and other financial institutions. A lot depends on eligibility. Pre-approved loans have a validity period that is dependent on the lender and eligibility of the borrower. The bank will apply discretion in fixing on the amount of home loan and eligibility.

The final question – What are the rules that govern income earned by properties invested in by NRIs? The income that is generated from such properties is credited to a Non Residential Ordinary (NRO) account. One cannot repatriate the funds outside India in general. However, the RBI may allow repatriation, the maximum being the original value of the property. This is permitted for a maximum of two properties held for at least three years or longer. Repatriation can also be done via debentures and shares post a lock-in period of three years.

Rental incomes cannot be repatriated and must be kept in an NRO account by an Indian bank. As we have cleared the air on investing in real estate in India by Indian citizens, NRIs and PIOs, It is now time to invest. Happy investing!

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