NRI Investment Made Simple
There is good news for NRIs/PIOs as the government has considerably eased investment and repatriation norms, says V Nagarajan
An estimated 35 million NRIs living in 160 countries are looking at India for real estate investment opportunities. India has been consistently notching up the top slot in terms of the quantum of expatriate remittance for years now from US$55.6 billion in 2010-11 to US$89 in 2022.
A substantial portion of the remittance goes for investment in real estate across India. This is because the NRI investment norms have been considerably eased now. The government has recently approved a proposal allowing investment made by NRIs to be deemed as domestic investment on par with resident investments. It does mean NRI includes OCI cardholders as well as PIO cardholders.
There are no restrictions on number of residential properties that may be bought by an NRI. However, repatriation is allowed only in respect of two such properties. India is a fully convertible on current account and partial on capital account. Remittance of sale proceed is limited to the cost of property only and the amount of gain on sale of property, cannot be repatriated.
Investment Norms Eased:
The Reserve Bank has considerably eased investment norms by NRIs/PIOs while investing in real estate. They can buy, sell, gift and inherit immovable property. However, the prohibited categories of properties include agricultural land, plantation property and farmhouse. In the event of sale of immovable property, the authorised dealer may allow repatriation of sale proceeds upto two residential units.
An NRI/PIO may remit an amount, not exceeding US $ 1 million per financial year out of the balances held in NRO accounts. However, the repatriation is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets and payment of applicable taxes in India.
In a further move to ease the norms, residents can now remit home loan EMI for NRIs. The RBI has also clarified that income and sale proceeds of assets held abroad by the returning NRIs need not be repatriated to India and can be retained and invested outside India.
Returning NRIs’ assets can be retained abroad
Under Section 6(4) of the FEMA Act, any person resident in India may hold, own, transfer or invest in foreign currency, foreign security, immovable property situated outside India, if the person had acquired, held, owned or inherited the same while he was resident outside India. Further, where any amount of foreign exchange is due or has accrued to a person resident in India, such person shall take reasonable steps to realise and repatriate the same within such period and manner as specified by the RBI.
There was lack of clarity as to whether the income, earned on assets held abroad by NRIs who have returned to India for permanent settlement and assets held outside India through Liberalised Remittance Scheme, are required to be realised and repatriated to India.
Now the RBI has clarified that income and sale proceeds of assets held abroad need not be repatriated to India and can be retained and invested outside India
Ground Realities:
NRI investors are advised to follow the ground realities while investing in real estate. Property management companies have entered metros to provide a wide range of services. Even leading developers extend similar services as they are keen to tap the vast Indian diaspora market. Verification of title deeds, revenue documents, encumbrance certificate for a minimum period of 30 years, planning permission and proof of documents to get basic amenities would enable them to minimise hassles while investing in real estate.
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