Picking up from my last post International Real Estate - the rise of a new and profitable avenue, that brought forth the new trend of outbound investments and its key drivers, I am happy to discuss the things to be kept in mind while making such investments. Here are some tips that should come handy:
- Investors should consider total cost of the property which includes stamp duty, registration charges, land tax and annual maintenance charges.
- Amenities available with the project and its specifications. These details benefit to place the investment immediately on rent.
- If investor does not intend to occupy the property invested in, he should plan to put the premises on rent through qualified agencies. One needs to know the terms and conditions and laws of the country. Period of rent needs to be finalised (weekly, monthly or long-term lease) and outgoing charges for these services need to be understood and finalised.
- It is advisable to consult a tax consultant to understand rental income tax, capital gain tax and examine tax liability under the Wealth Tax Act in India.
It will be further beneficial to know the RBI regulations that come into play while making an international investment. Listed below are the guidelines:
- The RBI has permitted investment in real estate outside India by virtue of the FOREIGN EXCHANGE MANAGEMENT (ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY OUTSIDE INDIA ) REGULATIONS, 2000 and Liberalized Remittance Scheme which was introduced by RBI in 2004.
- As per the RBI Master Circular being the “Master Circular on Miscellaneous Remittances from India – Facilities for Residents” and the Liberalized Remittance Scheme (LRS), an individual can remit an amount upto US$ 250,000 per financial year for acquiring and holding immovable property outside India, without the approval of the RBI. However, the LRS facility is not available to Corporates, Partnership firms, HUF, Trusts etc. It applies only to resident individuals.
- Under this facility, resident Indians will be free to acquire and hold immovable property or shares or any other asset outside India, without the approval of the Reserve Bank of India.
- Individuals will also be able to maintain and hold foreign currency accounts with banks outside India for making remittances under the scheme without prior approval of the RBI. The foreign currency account may be used for conducting transactions connected with or arising from remittances eligible under the above scheme.
- A person resident in India may acquire or transfer any immovable property outside India under the provisions of Foreign Exchange Management ( Acquisition and Transfer of Immovable Property outside India ). Regulations, 2000 ( Regulation – “O” ) only with general or special permission of the Reserve Bank of India.
- The modes in which an Indian may acquire immovable property outside India include :
- Gift on inheritance from person resident in India who had acquired it when he was resident out of India or had inherited from a person who was resident outside India.
- Purchase out of foreign exchange held in Resident Foreign Currency (“RFC”) account.
- A company incorporated in India having overseas offices, can also acquire immovable property outside India for its business or for residential purposes of its staff, in accordance with the direction issued by the RBI from time to time.
The above are general interpretations of the RBI guidelines and one must consult their tax expert and lawyer for a better understanding.
About the author
Mona Jalota works at Colliers International India as Senior Associate Director – NRI & International / Residential Services. She is well versed with various aspects of Real Estate in international and domestic markets and has worked for 8 years in the global markets for inbound and outbound sales. She has an elaborate performance track record and has launched in India products of developers from various locations such as London, New York, Malaysia , Kenya , Muscat etc.