Dealing With NRI Clients? Here's What You Should Know
NRIs make for a high-potential client base that can take your brokerage business to the next level. Today more than 240 million Indians are living overseas, as per a report from the United Nations. Most of them have high disposable income and have propensity to buy real estate in India. Of course, there is no restriction for NRIs to purchase property in India.
However, dealing with NRIs may not be the same as dealing with domestic clients. They come for a short period of time in India and wish to get things done in a smooth manner. On the other hand, there are several regulatory requirements that NRIs need to fulfill in order to buy property in India.
Now you can sense that it is a game of speed and knowledge. There is no space for trial and error here. So, let us equip you with the necessary information you must have before entering into this space.
Who is an NRI?
As per Foreign Exchange Management Act (FEMA) 1999, an Indian who stays for less than 182 days in India is an NRI. A person is identified as an NRI if he lives outside India for an indefinite period of time, for the purpose of employment or business.
Also read: Why Realty Is The Best Bet For NRIs
Are NRIs eligible to obtain loans from banks and financial institutions for buying property in India?
The Reserve Bank of India (RBI) has authorized financial institutions such as LIC Housing Finance and HDFC to sanction loans to NRIs for buying housing properties in India. However, such loans shall be provided only on properties that NRIs buy for self-use. This implies that NRIs cannot avail of home loans to buy residential properties for the purpose of investment or income generation. Furthermore, the period of home loans for NRIs range between five and seven years only.
Are NRIs allowed to buy real estate in India jointly with other Indian citizen/s or Person of Indian Origin (PIO)?
Yes, it can be done. But an NRI or a PIO cannot buy property jointly with a foreign citizen. Also, NRIs cannot buy agricultural land or farm house in India.
What should a broker must know when it comes to selling a property owned by an NRI?
An NRI can sell his property in India just the way any Indian can do. There is no requirement of any specific permission from any regulatory body, including the RBI. However, there are restrictions with regard to transfer of funds from sale of an NRI property.
In case of a residential property, the repatriation of sale proceeds is limited to only two properties if these were bought out of funds from NRE accounts. Moreover, the amount of repatriation out of India cannot be more than the amount paid for buying that property. This means, if a property, for instance, was purchased at Rs 50 lakh, the NRI seller cannot repatriate more than this amount, not even any capital gains. Thus, the gains from the sale of NRI property in India have to be invested or utilized in India only.
Now that you know the fundamentals of NRI property transactions, you can go start pitching NRI clients with confidence and handhold them in their quest for quality real estate transactions.