Recent changes in the law in India now mean that there are no restrictions on foreign direct investment in real estate for non-resident Indians (NRIs) and Overseas Corporate Bodies (OCBs) can now invest to up to 100% in the market. For a foreign national not of Indian origin, however, a number of restrictions are in place and unless you fulfil the residency requirement of living in India 183 days out of the year then you cannot legally own an immovable property within India. For foreign national residents there are no restrictions and in these circumstances you will be granted the same rights as other residents (It is worth noting that this policy excludes citizens of the following countries: Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan.) Foreign companies may acquire property in India if it is a branch office necessary to continuing business in the country (and it conforms to the Foreign Exchange Management Act).
When you are ready to proceed with buying a property in India you will need to hire a local lawyer who will be able to draw up an Agreement of Sale. Upon signing the buyer will pay a deposit of between 10% and 20% of the sale price. Your lawyer will then be able to check the title deeds before they are exchanged. Before signing, the conveyance documents have to be stamped at the Stamp Duty Office (the fee for this varies from 4-8% in Banglaore to 10% in Mumbai) after which the remaining balance can be paid and the deed is registered at the Sub-Registrar of Assurance (the fee for this is usually 1% but may vary). Government duties are also paid at this stage and the whole process should be completed in around 67 days.
The Indian government has recently reviewed its taxation policies to attract greater investment by Non Resident Indians (NRIs) and the Royal Bank of India (RBI) has now: removed the lock-in period for the sale proceeds of property credited to NRI accounts, with a cap of USD1 million, permitted the full repatriation of income from the rented property after payment of tax, extended tax exemptions from wealth tax on commercial and residential property for at least 300 days in a calendar year. Both residents and non-residents are only taxed on the income they accrue in India.
In India capital gains are classified as long term and short term depending upon the duration for which the asset is held by the person. Assets which are sold within a period of 36 months after purchase are classified as short-term capital assets. Any asset, which is sold after 36 months of its purchase, is a long-term capital asset. For residential property and land long-term capital gains are taxed at 20.4% or 22.24% if the asset exceeds Rs 10 Lakh (1 million rupees). For short-term assets this rises to 30.6% or 33.99% if the asset exceeds Rs 10 Lakh.
No inheritance or gift tax is levied in India although the recipient of assets is subject to wealth tax. Non-Indians receiving Indian properties, however, may do so only if they have become residents of India.
India is a federal representative democratic republic closely modelled on the British system. The prime minister heads the government while the president is the formal head of state with reserve powers only. While executive power is exercised by the government, federal legislative power is ascribed to both the government and the two chambers of parliament in India. The current government is led by the India National Congress who enjoy the largest majority within a coalition government termed the United Progressive Alliance. Whilst travel throughout India is generally safe there are conspicuous exceptions to this. Most notably perhaps, travel to anywhere near the border of Pakistan (namely the Kashmir and Jammu regions) is not advisable given the ongoing conflict between the two countries. Recent government policies have been geared towards accommodating foreign direct investment as the real estate market continues to boom.
India’s economy continues to gain strength each year and it is predicted that India’s GDP will overtake that of France and Italy by 2020 and the UK, Germany and Russia by 2025. The RBI exercises a number of controls over the Indian Rupee to ensure it has a low volatility in exchange transactions.
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