MANOJa

Real estate is popular as an investment avenue not just with resident Indians but also with Indians posted offshore or on secondments to international destinations. If you are already servicing a home loan while going on a posting abroad, nothing much changes.

Your EMIs continue as per the existing PDC (post-dated cheque) or ECS (electronic clearing service) mandate. But bankers advise that you should inform your home loan lender about change in address and your status.

"Be it an NRI or a resident Indian, the terms and conditions of home loan are largely the same for both sections of borrowers. But, it is advisable to inform the bank about change of address or relocation to another country," says Shyamal Saxena, general manager - consumer banking, Standard Chartered Bank. This way the customer will not miss any crucial letter or detail from the bank, which may impact his loan.

But if you are a new borrower who is posted abroad, you are treated like an NRI customer. Hence, you have to repay the loan through your NRE/NRO (non-resident external/non-resident ordinary) account even if you have a fully functional account in India.

As per the Foreign Exchange Regulation Act, 1973, NRIs are Indian citizens staying abroad for employment or for business or vocation outside India. He/she should hold an Indian passport. Working professionals on secondment to another country, government servants posted abroad with Indian missions, and government professionals deputed on assignments with foreign governments or regional/international agencies like the World Bank, IMF, etc, fall under this category.

RBI guidelines

Any NRI holding an Indian passport is eligible to buy a house in the country. But the money for the property should be routed through legitimate normal banking channels by way of inward remittance from any place outside India. Alternatively, you can also use your non-resident accounts to make the payments.

The RBI's guidelines for granting loans to NRIs state:

The loan amount should not exceed 85% of the cost of the property.

The individual's self-contribution should be from direct remittances from abroad through normal banking channels such as the non-resident (external) [NR(E)] account and/or non-resident (ordinary) [NR(O)] account in India.

Even the repayment of the loan, comprising the principal and interest, should be remitted to the home lender form these accounts.

Need for Power of Attorney

"An NRI applicant has to provide the power of attorney (POA) to a local relative before the loan is approved. It is helpful for the bank to have some local touchpoint," says Sonalee Panda, wealth management, liability & marketing head at ING Vysya Bank.

If you are already servicing a loan, a bank may not insist on a POA. But you can avoid procedural hassles by giving a POA to a trustworthy relative in India. "When an NRI buys a property, it may be under construction. Later, the property will need registration. It will not be possible for the customer to physically be present for all the formalities. Hence, the authorised individual with the POA can carry out important decisions on behalf of the customer," says Saxena.

Tax Implications

NRIs usually put money in real estate in India as an investment. Like resident Indians, NRIs, too, get tax benefits on housing loan's interest payments, say tax experts. Of course, the assumption is that the NRI has rental or interest income in India. But the bigger tax implication for NRIs kicks in when the house is ready for occupation. The tax implications depend upon the end use of the house and the host country in which the NRI resides.

If the House is rented out

NRIs residing in the US have to pay income-taxes on their worldwide taxable income. "Therefore, rental income from the house in India is taxable in the US. However, a deduction can be claimed on the interest payable on the loan taken for purchasing the house," says Vaibhav Sankla, executive director, Adroit Tax Services. "In addition, the expenses on renting the property, such as maintenance charges, brokerage paid to the agent, property insurance, fees paid for registration of the rental agreement, depreciation, etc, can be deducted from the rental income," says Sankla.

In the UK, however, the taxability of the rental income from property situated outside the UK depends on the residential status, domicile, remittance, etc. "In case, the rental income from the Indian house is taxable, then one can claim deduction on the interest on the loan taken for the purchase of the property. One can also claim deduction on the maintenance charges, brokerage paid to the agent, property insurance, fees paid for the registration of the rental agreement, etc," says Sankla.

If you are a tax resident in Australia, you are liable to pay income-tax in Australia on your worldwide income, which would include the rental income from the property in India. In such a case, you can deduct the interest payable on the loan taken for purchasing the house. You can also claim deduction on expenses, such as maintenance charges, brokerage paid to the agent, property insurance, fees paid for registration of the rental agreement, etc.

"There is no personal income-tax payable in the Gulf countries. In addition, all the countries offer credit of Indian income-tax paid on the rental income as per the Double Tax Avoidance Treaty," Sankla says.

If the house is occupied by family members, the income-tax implications again depend on the borrower's host country (country of residence). For example, in the US, a deduction is allowed on the home mortgage interest even if the property is situated abroad.

Source: Economic Times

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rakeshp

One quick question I have is, if an NRI buys an under construction property jointly with a resident Indian e.g. Father, mother, can the payments partly be done using the resident Indian's "resident account"?

djvjain

Yes, I think it is doable. What did you declare in the application form at the time of booking the unit? If it is NRI, then you can do either way in my opinion.

MANOJa

NRI's guide to renting out property in India - Economic Times

Vb2309

good post Manoja

Unesta

I think if you are posted abroad you and wish to buy property in India, you now brokers selling India properties in US, UK, Dubai and Singapore. It helps buying through them as they offer you a complete hassle free experience. They will provide all the post sales support and have good relations with developers to ensure you get all all the correct paperwork. You also have Indian banks like ICICI, SBI and HDFC having their local branches in these countries to avail home loans.

madhu2801

Hi,

We have just purchased property in Pune. We are currently in USA. We need to register property as well as apply for home loan. I want to take home loan in my name but register the property on both me and my wife's name. What is the process of obtaining POA.

Banks do provide format of POA. Is same can be used for registration or there is different format? Do we both need to go to indian embassy for obtaining PoA or only notarized PoA can also work.

Please provide suggestion.