A Guide for NRIs Investing in Real Estate in Kerala
NRIs or Non-Resident Indians have invested in the real estate for quite some time in the metropolitan cities, especially New Delhi. This genre of investment has been lucrative in many states of India. Kerala is one of them. After the LPG movement of 1991, there had been a lot of changes in the laws and rules guiding the investment procedures of NRIs. Here in India, NRIs can invest in both residential and commercial houses. The rules guiding the transactions of real estate fall under FEMA or Foreign Exchange Management Act. The NRIs are allowed to buy or rent houses in India and transfer the income to the bank accounts that are legally allowed by the government of India. They are also eligible to take home loans for buying property from the Indian banks. To know more about home loans check out the home loan tips for first-time home buyers. The interest rate applicable to any Indian buyer who is a part of the QIB is also applicable to such NRIs. They can repay their loan from the rent that they receive from the real estate property. They can save the rest of the income in their NRO or NRE or FCNR(B).
This should be the first step toward investing in Kerala. There are various kinds of housings in the real estate of Kerala. However, not every kind should be invested in by each person. First of all the NRI should decide their main objective behind the investment and what would be the duration of their investment. For short term investments, they can buy 1BHKs or 2 BHKs. For long term gain, they can invest in villas or bungalows. One piece of advice would be to choose those areas for investment in real estate which is politically stable and economically sound.
The NRIs should create their NRO or NRE account to save the income generated from the rentals. These accounts can also be used for repaying the loans that they have taken while buying a house or an area on which to build a house.
An NRI willing to invest in real estate should contact a lawyer who is local to the towns or districts in Kerala. Real estate is such an investment that involves a lot of legal procedures. These procedures start right from the acquisition of land. It would be advisable to hire a group of lawyers who would research and investigate the area which is subject to investment. This way most of the legal procedures could be planned and taken care of at the initial stage.
Acquiring RBI approval
The NRIs should act according to the rules specified by RBI. In certain cases of investment, the NRIs are not required to inform RBI in the initial phase. However, they are bound to follow the rules of RBI. On the other hand, certain kinds of investments in real estates are totally banned by RBI. Certain investments require prior approval of RBI and in such cases, an NRI cannot start gaining income from a real estate property unless the necessary documents are submitted to RBI and the concerned authorities of RBI approve of the documents. There is a list of documents that an NRI must have, before applying for approval. Every NRI should make a note of it from his or her lawyer and submit them.
Just like any Indian citizen staying in Kerala, the NRIs who wish to invest in real estates of Kerala should pay income tax. There are some categories of income where they can get a certain amount of tax concessions. These areas could be utilized by the NRIs just like the citizens of Kerala.
An NRI is mostly interested in repatriated incomes. For that, they create their bank account accordingly. Therefore, an NRI should avoid creating an NRO account. Repatriation of inherited property requires the authorization of either RBI or Central Bank. The concerned authority should be informed as and when income is generated from such repatriation.
An NRI can invest in properties that are under construction. However, most of the deals of the under-construction property would be done with the help of a lawyer as mentioned in point 1 and an Indian trustee. This trustee to be selected at the beginning of the investment. It is advisable to keep such a trustee from the local citizens.
To conclude, investing in real estate is filled with a lot of opportunities. This is the reason, many Indian businessmen have involved themselves in real estate businesses. Needless to say, that the NRIs will be interested in this genre. In the initial phase of their investments, they would require to keep themselves restricted to short term capital gain and one kind of property. Eventually, they will gather enough experience to expand their investment plans into various kinds of real estate properties. Hopefully, the above guidelines will be helpful for the NRI real estate investors.