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NRIs Investing in Real Estate in Patna  ( 04/05/2013)



NRIs Investing in Real Estate in Patna


 


Globally real estate is and would always be considered as an income-generating asset. This article explores investment in real estate in Patna from the perspective of NRIs.



FEMA- Permissible investments for NRIs


As per the provisions of Foreign Exchange Management Act (FEMA), NRIs can freely invest in real estate in Patna as follows:



Upto 100% in an Indian company in the business of real estate development in Patna with full repatriation benefits i.e. both the business profits and sale proceeds of original investment can be repatriated. Real estate development means construction of residential and/or commercial properties, office complexes, etc. Mere trading in properties is not permitted. Further construction of farmhouses is not permitted.



Acquire residential/ commercial properties in India by way of purchase/ gift/inheritance from a resident Indian or a NRI. Agricultural land, plantation and farmhouse cannot be acquired by a NRI except by way of inheritance. There are no restrictions on letting out of properties and repatriation of income thereon after payment of taxes. The provisions relating to repatriation of sale proceeds are as follows:



1)Sale proceeds of property acquired by way of inheritance can be repatriated without any lock in period upto USD 1 million per calendar year.



2) Sale proceeds of property acquired out of Rupee resources is permitted to the extent of USD 1 million per calendar year subject to the condition that the property/ sale proceeds of property should have been held in India cumulatively for a period of 10 years.



3)Sale proceeds of immoveable property acquired out of forex resources can be repatriated without any lock in period to the extent of equivalent foreign exchange originally invested. The profits can be repatriated to the extent of USD 1 million per calendar year. In case of residential properties, repatriation is restricted to two such properties. The limit of USD 1 million per calendar year is a consolidated limit.


 


 


Analysis of real estate in Patna as an investment opportunity for NRIs.


 


The key evaluation criteria for investment in residential/ commercial property in Patna are analyzed as below:


 


1)  Typically, leasing residential and commercial property in Patna could fetch a pre-tax return of 6-9% and 8-12% respectively. Capital appreciation would provide additional return on investment.


 


2) Investment in real estate in Patna typically carries an entry load of 10-15% towards stamp duty, registration, brokerage etc.



3) Real estate as an asset is not as liquid as investment in stock market, bank deposits etc.



4) A power of attorney to a trusted friend/ relative/ professional would obviate the need of physical presence for legal formalities.



5) Loans can be raised conveniently inIndia and abroad for investment in property in Patna.



6) Loans can be raised in India by the owner and third parties against the security of the property for any bonafide purpose.



7) Tax benefit is available on interest on housing loan raised in India.



8) Tax exemption is available on re-investment of sale proceeds of property in eligible avenues.


 


The key considerations (from the perspective of real estate as an investment in Patna) to be borne in mind while selecting a specific property is:


 


1) The prevailing lease rentals and scope for capital appreciation in the area where the property is located in Patna.



2)  Scope for infrastructure development around the property in Patna under consideration.



3) Location and proximity to schools, hospitals, markets, public transportation etc.



4) Actual property taxes to be paid.



5) Maintenance facilities available in Patna’s property.



 

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