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V Nagarajan: Property investment can be made in names of two or more family members
October 01, 2017
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Our family is planning to make substantial investment in real estate in the names of family members. Is individual investment or joint investment an ideal option from the point of tax planning? Please advice. Sanjeev Gupta, Dubai.
Investment in property can be made in the names of two or more family members. For joint purchase, the co-owners’ investment should be in proportion with their ownership in the property. As regards including minors, even if investment is made in property in the name of minor children the income arising therefrom will be clubbed with the income of the father or the mother who has higher income. There should be clarity while demarcating the property if investment is made in a joint property between two or more family members.

 
This will avoid future disputes and tax litigation. Commercial property is completely exempt from wealth tax.

Is loan available for NRIs to invest in land in India? Can we repatriate the sale proceeds if we sell the land at a later date? Please clarify. Bhatt, Sharjah.
Loans for investment in vacant plots are available for NRIs on similar interest rates offered to resident Indians. The loan amount depends on the value of the property from 75 per cent to 90 per cent. The maximum repayment period is 15 years. While computing the land value, the lender may take the guideline value of the property and not the market value.
 
You can’t sell land and repatriate the sale proceeds but you can build house on it and then sell and repatriate the sale proceeds including the value of the land.

My relative wants to gift an immovable property located in Bengaluru? Does it require registration? Maheshwari, Dubai
Gifting immovable property should be accompanied with a registered gift deed. Once the immovable property is registered along with a gift deed in your name, you get the legal ownership of the property and right to possession to such property.
 
Notes:

There has been a paradigm shift in PE investors’ interest. From an average investment of $ 2.1 billion in 2011-14, capital flows rose by 57% to an average of $ 3.3 billion between January 2015 and mid-September 2017.
In 2017 the number of deals dwindled to 13, just over one-fourth of the tally in 2010. However, the average investments per deal increased 10-folds to $ 246 million per deal in same period. Bulk of the investments in 2016-17 went into preleased properties. Investments into development sites saw a sharp drop courtesy the low risk appetite among investors. Now PE investors are avoiding execution risk, approval risk and marketing risk. Some of the biggest path-breaking reforms of independent India became a reality in 2016.
 
The Real Estate (Regulation and Development) Act (RERA) 2016, the Benami Transactions (Prohibition) Amendment Act, 2016, infrastructure status to affordable housing projects, demonetisation, interest subvention schemes, relaxation of norms to encourage REIT listings and the recently rolled out Goods and Services Tax have collectively set a new order.
 
 It is pertinent to note that one major deal of $ 1.8 billion significantly altered the investment scenario in 2017. Nonetheless such deals reflect the remarkable upswing in investors’ confidence. Private equity investment in 2017 is estimated to exceed USD 4 billion this year, well past the 2015 mark — highest since 2010.
 
Affordable Housing
 
To promote affordable housing, the government has announced several financial schemes to make housing loans in this segment cheaper. A 6.5 per cent subsidy on interest on housing loans up to Rs 6 lakh can be availed for 15 years. The government assistance of Rs1.5 lakh is extended for each beneficiary under EWS and LIG.  A 4 per cent and 3 per cent subsidy on interest for loan amounts of Rs9 lakh and Rs1.2 million respectively.

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The author is a business analyst
covering Indian property markets

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