The Indian government unabashedly woos the Indian diaspora to invest in various sectors in India and is considering easing norms further. Yet, the government makes Non-Resident Indians (NRIs) jump through hoops
The Indian government unabashedly woos the Indian diaspora to invest in various sectors in India and is considering easing norms further. Yet, the government makes Non-Resident Indians (NRIs) jump through hoops when it comes to investment in real estate. Finally, there is some hope. RR Singh, director general, National Real Estate Development Council (NAREDCO), says the industry body has presented a set of recommendations to the government, requesting it to ease regulations in the real estate market. While, at present, NRIs can invest only in real estate, Naredco is pushing for them to be allowed into land developments and large-scale commercial properties as well.
Such a relaxation would help generate liquidity in the real estate market, which is witnessing a slump and delayed delivery on account of subdued consumer sentiment, high debt and slow growth. There is already a high level of inventory piled up, Singh points out.
Indians investing abroad
The figures from the Dubai Land Department (DLD) show that Indians top the list of non-GCC (Gulf Cooperation Council) investors in Dubai real estate. Outside the Arab world, Indian nationals contributed the lion’s share of investments AED7 billion ($1.9 billion) from 3,656 transactions, according to the DLD. This makes them the biggest investors in Dubai real estate during the first half of 2016.
In the US realty market, Indians are the third-largest international investor community, at US$8 bn, after Canadians and Chinese, according to brokerage firm Sotheby’s International Realty. Other corridors such as the UK, Vietnam, Singapore and Australia, which have relaxed investments from foreigners, have also seen a rise in Indian investors buying properties.
What are some of the restrictions?
S.No. Restrictions applicable to foreign nationals 1 Section 6(5) of the Foreign Exchange Management Act, 1999 (FEMA) permits persons resident outside India to hold, own, transfer or invest in… any immovable property situated in India, if such… property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India. 2 A person who is resident outside India (or his successor) has been permitted to repatriate the proceeds of sale of immovable property in India only where the following conditions have been satisfied:
(a) The sale is of an immovable property which was either owned by him when he was a resident of India or he has inherited it from a resident of India; and
(b) Prior permission of Reserve Bank of India (RBI) has been obtained. 3 The applicable regulations under FEMA restricts foreign nationals from acquiring any immovable property in India and specific permission is required from RBI for the same, except in the following cases:
(c) Where the foreign nationals have inherited property from a person who was resident in India.
(d) Where the foreign nationals have leased an immovable property for a period not exceeding five years; or
(c) When a foreign national (except a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau or Hong Kong) becomes a resident in India as per Section 2(v) of FEMA. Such a foreign national is also required to satisfy the conditions regarding period of stay, and the type of visa granted should clearly indicate the intention to stay in India for an uncertain period to determine his residential status. 4 Foreign nationals require specific approval of RBI for transferring any immovable property in India and are allowed to transfer only when the immovable property is either:
(a) Acquired by way of inheritance and with specific approval from RBI; or (b) Was purchased with specific approval from RBI 5 Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau or Hong Kong (‘Restricted Countries’) are not allowed to acquire or transfer immovable property in India without prior permission of the RBI, except when they lease an immovable property for a period not exceeding five years. Indian developers have started realising the investment potential of NRIs and are actively showcasing their property portfolios at exhibitions abroad and simultaneously demanding a relaxation in policies. Experts believe that certain flexibility in relation to acquisition and transfer of immovable property by NRIs is required.
Provide renewable leases: It has been recommended that foreign investments through acquisition of immovable property should generally be allowed and should only be subject to land title agreement and renewable ownership leases. Acquisition of land development/plotted development: A number of developers have come up with villa properties. “Regulations should provide approval for plotted developments and properties such as bungalows, semi-detached and terrace houses,” says a Delhi-based developer and member of the Confederation of Real Estate Developers’ Association of India (CREDAI), requesting anonymity.
Measure to check price speculation: He suggests that to check price speculation, there should be a check on stamp duty payment. The differential treatment to ‘citizens of restricted countries’ from the perspective of acquisition of immovable property should be relaxed to the maximum extent possible. If required, these can be periodically re-evaluated and amendments made.
The restrictions noted above have adversely impacted foreign investments in India while countries like the UAE, Singapore and Mauritius have increased their inflow of investment by liberalising the restrictions applicable to immovable properties. A relaxation in policies will not only stop speculation in the Indian property market but also infuse much-needed liquidity in the market.
Current market conditions for NRIs NRIs prefer other countries over India to invest in real estate.
Developers ask Indian government to ease restrictions on NRI investment in India. Industry body submits recommendations to central government. Permission to allow NRI investment in land developments and commercial properties sought.
By: Housing.com/news Read more at: moneycontrol.com