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Tips for NRIs investing in commercial property in India

Now for a non-resident Indians (NRI) it has become easier to buy a property in India, all thanks to new real estate rules. The Confederation of Real Estate Developers Association of India (CREDAI) regularly organises exhibitions for NRIs where it helps them scan different investment options and offer spot loans from top financial institutions. Factors like easy investment options and reduction in down payment value should play a vital role to attract you to invest in commercial property in India. Therefore, it is important that you check all the offers from CREDAI before you invest in real estate in India. 

So as an NRI if you are looking to invest in a property in India, here are few things you need to keep in mind before you start looking out for properties:

Location- It should be the most important aspect when you are looking to invest in a commercial property. The demand and supply dynamics of the location becomes and important aspect in commercial property loan interest rate. Do a thorough research of that location for which are taking up a commercial property loan like collecting information on the kind of rents that other properties have and make a list of the clients and offices in the area.

Game of high returns with due diligence: You are investing in a commercial property for the sole reason to get higher return of investment. Commercial property are supposed to generate income for you. Make sure it gets you at least 10-12% of return. With all the due diligence in place, approach the seller and negotiate well. Negotiation based on numbers is extremely important to make a good commercial deal. Use commercial property loan calculator to know how much commercial property loan you can avail to buy a commercial property which provides you good returns.

Regulatory Act With your Indian passport, you do not require any prior permission to make a property investment in India. In order to attract more foreign investment, the Reserve Bank of India has made the rules very simple. Real estate transactions are governed by the rules under the Foreign Exchange Management Act (FEMA).

Types of properties NRI can invest: There is no restriction on the number of properties than an NRI can invest in. An NRI, as well as a Person of Indian Origin (PIO), can purchase as many residential as well as commercial properties in India as they want. However, there is a restriction on foreign investment when it comes to agricultural land, plantation property or a farmhouse. Such properties are allowed only in case they are inherited or gifted to the NRI in question.

Fire and safety standards are in check: Before buying the commercial property, get it checked by a a property assessment executive to examine the plumbing, electricals and other fixtures of the property. This will give you lot of benefit in the long run. Municipal Corporation Department ensure strict safety standards especially in terms of fire and other disasters. Check the accountability of any such event on the owner and get appropriate cover for it.

Know the maintenance cost: Maintenance costs is an additional cost that vary across buildings. As it is a commercial property therefore the utilities and others cost would be higher. Cost of the building security and others facilities might not come as surprise for you.

Financial transactions and funding It is mandatory that all the transactions should be done in Indian currency through Indian banks. One of the mandates is to have an NRI account in an authorised Indian bank.
There are several NRI home loan schemes available under different financial institutions in India that are ready to give funding to you on your NRI status provided your paperwork is proper. To make it more proper do get your paper variefied by a lawyer. If you are getting your property funded make sure that you have a minimum of 20% of the value of the property to invest from your own sources as 80% is the maximum funding that you can avail of the value of the property.

No-due certificate Take a no-dues certificate from the seller if you are buying a property and if it’s inherited or jointly held, work to get the title cleared. Also, ensure that there are no pending bills or dues with any authorities. 

Power of attorney In case of buying an under-construction property, you will have to give power of attorney to your builder or a trusted associate. With the help from your lawyer, get a proper document made so that there is no chance of forgery and your investment is secured while the property is being developed.   Tax benefits

You can claim a deduction of Rs. 1 Lakh under section 80 C on the Income Tax Act, 1961. But in case you sell the property within three years of purchase, it will be considered as short-term capital gain, and the earnings through the property will be taxable. If you sell the property after three years, you have the option of reducing the long-term capital gains tax by investing in another property.

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