NRI demand for realty investment up in India

V Nagarajan, Gulf Today

Price stability, flexible lending norms, lucrative rentals and property management company services have nudged NRIs to look at investment in real estate. Gulf NRIs are particularly evincing keen interest in southern cities as a majority of them are hailing from southern cities like Bengaluru, Chennai, Kerala and Hyderabad, according to property consultants.

In the aftermath of RERA and limited supply level, the demand is perking up as corporate leasing is picking up for quality apartments from senior executives and expatriates in metros.

While returning NRIs from US focus on Bengaluru as reemployment opportunities are up in the garden city.

Moreover, the presence of Fortune 500 companies and MNCs drive NRI demand towards southern city.

Rentals are up in cities like Chennai for CBD locations as expatriates and senior corporate executives prefer beach front properties.

Both villas and community development projects are finding instant demand, there is also a section of senior executives in search of limited units in prime city areas.

Rental agreements are usually entered into for a 11-month period with escalation clause at five per cent to 7.5 per cent and in rare instances even upto 10 per cent.

Interest free refundable deposits vary from six to 10 months depending on the bargaining capacity of the lessees.

Of lates, NRI investors and HNIs are increasingly looking at luxury homes where supply levels are limited in city areas and mismatch between demand and supply are pushing rentals up.

Rental income is repatriable every year and fiscal sops by way of exemption from interest income and principal amount are available for investment in units with home loans from banks and financial institutions.

Markets regulator Sebi has come out with rules for merger of foreign portfolio investment (FPI) and non-resident Indian/overseas citizens of India routes to bring in a single regime for foreign investors and regulate NRI and person of Indian Origin fund inflows.

The regulator has also exempted housing finance companies and systemically important NBFCs (non-banking financial companies) from disclosure of increase or decrease in shareholding due to encumbrance or release of encumbered shares, according to SEBI notification.
 
Q: I sold my apartment two months ago but the buyer did not deduct TDS. I have not paid capital gains so far and awaiting details from the tax consultant. For the TDS, am I under obligation to remit the amount? Please clarify. Dayananda, Dubai.
While selling the immovable property, the buyer is under obligation to deduct one per cent TDS on the payment made to a seller at the time of making such payment where the sale consideration is Rs 5 million and above.

This is an obligation on the part of the buyer and you will not be responsible for any tax or penalty under the law.

Assuming that the property has been held by you for over two years, the gain is long-term capital gain.

You can use cost inflation index to arrive at the capital gains liability. You can reinvest in another residential property or in specified bonds upto Rs 5 million to avail exemption under section 54EC.

It has to be done within six months of the sale of the property.

Q: Can I reinvest sale proceeds obtained from two commercial properties sold in Pune in one residential property? Will I get capital gain exemption under section 54F? Chandan, Sharjah.
Yes. Exemption is available under section 54F if investment is made in one residential house from the proceeds of sale of any long-term capital asset when the purchase is made within one year before the date of sale or within two years after the date of sale or construction is done within three years from the date of sale.

Q: As a PIO I have acquired immovable property by way of gift from one of my relatives in Mumbai. Can I sell and repatriate the sale proceeds? Paresh, Dubai.
Yes. You can repatriate the immovable property acquired by way of gift. The sale proceeds of immovable property should be credited to NRO account only.

From the balance held in NRO account, you may remit upto US$1 million, per financial year, subject to the satisfaction of authorised dealer and payment of applicable taxes.