Property sale overseas is taxable

Parizad Sirwalla :Live Mint :Wed, Mar 06 2013. 05 04 PM IST
If sale proceeds are directly credited to your Indian bank account, 
then the gains shall be taxable.

  Q  :   I was working as a doctor in the UK and moved back to India in 2006. I had a property in the UK which I was unable to sell for the last six years and now I have found a buyer. The money will be transferred to my Indian bank account. What taxes do I need to pay? Will it be only capital gains? I had not disclosed the property previously to the income-tax department. Will I be penalized?

—Arun Kumar

  A  :Under the provisions of the Income-tax Act, 1961, the gains, if any, resulting from sale of any property (whether in or outside India) shall be taxable as capital gains. Further, the tax implications on sale of property (assuming residential property) in your hand would depend upon your tax residential status in India in the financial year (FY) of the sale of property. Your residential status in turn would be determined by your physical presence in India during the FY and the immediate preceding seven FYs.

Depending upon your stay in India, in case you qualify as either non-resident (NR) or not-ordinarily resident (NOR) in the FY of sale of property, you shall be taxable only on India sourced income. Accordingly, the gains, if any, arising from sale of the property located in the UK shall not be taxable in India provided the sale proceeds are directly credited to the overseas bank account. If the sale proceeds are directly credited to your Indian bank account, then the gains shall be taxable in the first instance in India on receipt basis. Please note that the mere remittance of funds from overseas bank account to the Indian bank account shall not attract any tax implications in India.

However, if you qualify as ordinarily resident (OR) of India (likely if you have spent more than 729 days in India in seven FYs preceding the FY of sale of property), your global income shall be taxable in India irrespective of source or place. Accordingly, the gains arising from sale of the UK property shall be taxable in India subject to the benefits available under the double tax avoidance agreement between India and the UK.

Since the property has been held by you for more than 36 months since its purchase, the gains, if any, arising from sale shall be taxable as long-term capital gains (LTCG).

While computing the LTCG, the purchase cost and the cost of improvement, if any, made subsequent to purchase shall be increased based on the cost inflation index published by the Income tax department. You could avail an exemption from capital gains tax by re-investing the LTCG in a residential apartment or specified bonds .

The quantum of LTCG re-invested can be claimed as exempt from tax.

The balance LTCG shall be taxable at a flat rate of 20.60% (including education cess) assuming that your income exceeds the basic tax exemption threshold.

The investment in the residential apartment or specified bonds has a lock-in period of three years. Accordingly, if the new property is sold or the bonds are converted into cash within a period of three years, the exemption claimed from LTCG in respect of the old property shall be revoked.

Further, if you have paid any taxes in the UK on the said income, you may also be eligible to claim a credit of taxes in India subject to examination of the provisions of the treaty.

As per the provision of the Act, effective from the FY12 onwards, an individual who qualifies as OR of India and who has assets located outside India is required to furnish details of assets located outside India such as foreign bank accounts, immovable property in the income-tax return.

Accordingly, depending upon your residential status if you qualify as either NR or NOR of India for the relevant FY, you would not be required to comply with the aforesaid disclosure requirements. However, if you qualify as OR of India, you shall be required to disclose the details of the immovable property, such as cost of investment, address where the property is located in your income-tax return. Any failure to comply with the above disclosure requirement may attract penal consequences.

Under the wealth tax provisions, wealth tax is payable at the rate of 1% on net wealth exceeding Rs.30 lakh on specified assets (for foreign citizens, only assets situated in India). Any residential property (other than one self-occupied residential property) that has not been let out for a minimum period of 300 days is considered as one of the specified asset and hence, attracts wealth tax. Accordingly, considering your citizenship and other assets, you may examine the applicability of wealth tax provisions.

Also, you could check from a Foreign Exchange Management Act, 1999, perspective with your bankers in respect of receiving a foreign inward remittance certificate for remitting the funds from overseas bank account into India if you want to first receive the sale proceeds in overseas bank account. If this is the case, then you will have to check the tax implications in the UK on such transactions.

NRI's guide to selling purchased property in India

Source :ET :25 AUG, 2011, 01.58AM IST, DEEPA VENKATRAGHVAN,ET BUREAU 

Now  we take a look at what happens when you sell property in India. We will only look at properties purchased by a person either before or after he becomes an NRI. The rules regarding sale of properties acquired as gift or inheritance, will be covered in the next column. 

Can an NRI sell property in India? 

Yes, an NRI can sell residential or commercial property in India. He can sell to: 

- A person resident in India (the definition of resident in this case will be as per FEMA) 

- An NRI 

- A Person of Indian Origin (PIO) 

However, an NRI can sell agricultural or plantation land or a farm house only to a person who is resident in India and a citizen. 

In which account must the sales proceeds be credited? 

There are two scenarios that may arise here: 

1. Sale of property purchased as a resident Indian 

The sale proceeds in such cases would have to be credited in the Non Resident Ordinary (NRO) Account. 

2. Sale of property purchased as a non-resident Indian 

If the property was purchased out of rupee resources, that is, income earned in rupees, or the home loan is repaid by a relative who is a resident of India, the amount must be credited in the NRO account. 

In all other cases, there are limits to repatriation that are discussed in the next question. 

What are the rules for repatriation of sale proceeds of property sold in India? 

If the property was purchased while you were a resident of India, then the sale proceeds must be credited to the NRO account. You can repatriate up to USD 1 million per calendar year from your NRO Account (including all other capital transactions), provided you have paid all taxes due. 

Now, if the property was purchased while you were a non-resident, you can repatriate the proceeds outside India provided that you fulfill certain conditions: 

1. You should have purchased the property in accordance with the foreign exchange laws prevalent at the time you bought the property 

2. The amount to be repatriated will follow these limits: -

a. If you purchased by remitting foreign exchange to India through normal banking channels, then the repatriation cannot exceed the amount that you remitted 

b. If you purchased using funds in the Foreign Currency Non Resident (FCNR) Account, then the repatriation cannot exceed the amount paid through this account 

c. If you purchased using funds lying in your Non Resident External (NRE) Account, then the repatriation cannot exceed the foreign exchange equivalent, as on date of purchase, of the amount paid through NRE Account. 

d. If you purchased a property by taking a home loan, then repatriation cannot exceed the amount of loan repayment that has been done using foreign inward remittances or debit to NRE/ FCNR Accounts. 

e. If you purchased the property using balance in your NRO account, then the sale proceeds must be credited to your NRO account and you can repatriate to the extent of USD 1 million (including all other capital account transactions.) 

In all these cases, the balance sale proceeds can be credited to the NRO account and you will be able to repatriate up to USD 1 million per calendar year (including all other capital account transactions). 

Vikas Vasal, Executive Director of KPMG India explains, "This limit of USD 1 million is the limit upto which you can repatriate without any permission from RBI. If you have a genuine need to repatriate above this limit, you can make a specific application to RBI for increasing the repatriation limit." 

In all cases, repatriation is restricted to sale of two residential properties.


What is the capital gains tax applicable on sale of properties in India? 

Before we move on to this explanation, it is important to understand that for all income tax purposes, the definition of NRI would be the one prescribed in the Income Tax Act. For all repatriation purposes, the definition of NRI would be one under FEMA. While in most cases, a person who qualifies under one would qualify under the other, it is better to review both definitions. 

If you sell the property after 3 years from the date of purchase, you will be liable for long term capital gains tax of 20 per cent. The gains are calculated as the difference between sale value and indexed cost of purchase. Indexed cost of purchase is nothing by the cost of purchase adjusted to inflation. 






Cost Inflation Index Notiified by the GOV:


Financial year :2008-09  -582
                             2009-10  -632
                             2010-11  -711     



As an NRI, you will be subject to a TDS of 20 per cent on the capital gains. 

If you sell the property within 3 years of purchase, you will be liable for short term capital gains tax at your respective tax slab. Short term capital gain is calculated as the difference between the sale value and the cost of purchase (no indexation benefit is available). You will be subject to a TDS of 30 per cent irrespective of your tax slab. 

Now, the question arises as to who will deduct the tax at source. If the property is sold to an individual, does the individual need to deduct tax at source and deposit the same with the Government? Will the individual then issue a TDS certificate to the NRI? 

Sandeep Shanbhag, Director of Wonderland Investments explains, "Yes, the payer of the sale proceeds, even if he is an individual will be responsible for deducting tax at source and paying it to the Government. He must get a Tax Deduction Account number (TAN) and issue a TDS certificate for the same." 

What if the individual does not go through this process and fails to deduct tax? "The onus of deducting tax is on the payer. So in case the individual does not deduct tax and the NRI too fails to declare the income and pay the tax, the income tax authorities can hold the payer responsible," Shanbhag says. 

Can an NRI avail of any capital gain tax exemptions? 

Section 54 

According to section 54 of the Income Tax Act, if you sell a residential property (after 3 years from date of purchase) and reinvest the proceeds into another residential property (within 2 years from date of sale), your gains will be exempt to the extent of the cost of new property. Suppose your capital gains is Rs 30 lakh and the new property is for Rs 20 lakh, then Rs 5 lakh will be treated as long term capital gains. 

The residential property that you sell may either be a self-occupied property or one that was given on rent. Further, the new property must be held for at least 3 years. 

Now an important question that NRIs have: Can you invest the proceeds in a foreign property and still avail the benefit of section 54? Vikas Vasal, Executive Director of KPMG India says, "Section 54 does not specify that the property must necessarily in India. So yes, a beneficial view can be taken." 

Section 54EC 

According to section 54EC of the Income Tax Act, if you sell a long term asset, in this case, the residential property (after 3 years from date of purchase) and invest the amount of capital gains in bonds of NHAI and REC, within six months of date of sale, you will be exempt from paying capital gains tax. Your bonds will remain locked in for a period of 3 years.

NRI's guide to renting out property in India

source:ET :10 SEP, 2011, 01.16AM IST, DEEPA VENKATRAGHVAN, 

Property is a favourite Indian asset class and one of the main reasons for this is its ability to generate regular cashflows through rent. 

Now we will look at the various aspects involved when an NRI rents out a property in India.

 The definition of NRI for the purposes of repatriation will be that of the FEMA and for the purposes of income tax will be that prescribed in the Income Tax Act. 

Can NRIs earn rental income? 

An NRI can rent out property that he owns in India. The rent proceeds can be credited to the NRE or NRO account. Rent proceeds received in these accounts can be freely repatriated. If you do not have an NRE or NRO account, the proceeds can also be directly remitted abroad but you would need an appropriate certificate from a chartered accountant certifying that all taxes have been duly paid. 

Is rental income taxed in India? 

Yes, since this income is earned in India, tax will be payable by the NRI in India. In fact, tax will be deducted at source by the payer of the rent. The payer of the rent, in this case, must obtain a TAN number and deduct TDS of 30 per cent from the rent amount. He must also provide a TDS certificate to the NRI. 

"The onus of deducting tax is on the payer. So in case the payer does not deduct tax and the NRI too fails to declare the income and pay the tax, the income tax authorities can hold the payer responsible," explains Sandeep Shanbhag, Director, Wonderland Investments. 

Having said that, if the tenant does not deduct tax at source, it is prudent to file your tax returns and pay the taxes thereof. 

Is rental income taxed in the country of residence? 

When you are an NRI, you are obviously a resident of another country for tax purposes. And in most cases, countries levy tax on residents on their global income. So it may happen that as per provisions of the Indian Income Tax laws, tax will be deducted at source on income earned in India, as is in the case of rent. But at the same time, that income will be subject to tax in your country of residence. In such cases, we need to refer to the Double Taxation Avoidance Agreements that India has entered into with various countries. 

The India-US DTAA for instance provides that rent from immovable property will be taxed in the country in which the property is situated. So NRIs who are residents of US would have to pay tax on rental income in India. While they would still have to declare that income while filing their tax returns in the US, they would get a credit for taxes paid in India. 

It is prudent to check the tax laws of the country that you are resident of or consult an expert in that country. 

What is deemed rental income? 

According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied. There will be no income tax on a self-occupied property. The other one, whether you rent it out or not, will be deemed to be given on rent. If you have not given the second property on rent, you will have to calculate deemed rental income on the second property (based on certain valuations prescribed by the income tax rules) and pay the tax thereof. 

Now, the Income Tax Act does not specify if either or both these properties must be situated only in India. Vikas Vasal, Executive Director of KPMG India explains, "At the time of drafting the Income Tax Act, one did not envisage a situation where an Indian would own properties overseas. But now, more and more Indians are settling abroad. So from the reading of the Act, the rule of 'more than one property' will apply to global properties." 

What this means is that if you are an NRI and own only one property globally and that property is in India, you would not have to pay any income tax on the 'deemed rental income' in India. 

However, let us say you are an NRI resident in USA. You own and live in a house in USA. You also own a house property in India. Even if you do not give the property in India on rent, you would have to pay income tax on deemed rent in India. The deemed rent is determined by certain valuation rules prescribed in the Income Tax Act. 

Remember that even if you have inherited a property in India and that is not your only property, you would have to pay tax on deemed income. 


Is deemed income from house property taxed in foreign country? 

You would need to look at the tax code in your country of residence. In the case of NRIs in the United States, the US tax code does not tax deemed income. However, Ganga Mukkavilli, a New York City basedCPA whose firm, CPAs, Taxes & Associates PC, specialises in international accounting, taxes and small businesses says that you would still have to show the property if it is an investment property in your tax return in the US (even though you do not have any rental income ). 


"If you do not show this investment property, the problem will arise at the time of sale of property. Suppose you sell a property on which you had no rental income for US tax purposes but had deemed income as per India Tax code, then the amount spent on the maintenance, repairs and renovations and depreciation on this property which may be eligible for deduction or addition to your cost basis while calculating capital gains would become difficult to establish.


 However, if you have not declared the property in your tax returns, the US tax code may challenge the cost basis (purchase + improvements + suspended losses)to claim a tax deduction at the time of sale," he explains. 

"Of course, any investment properties with rental income and related expenses must be reported on Form Schedule E in the US tax returns and rental activities by nature are always treated as 'passive' investments with restrictions on deductibility of the net rental losses. Always consult a tax expert as passive activity rules are quite cumbersome," he adds. 

Income tax exemption, possible? 

If your total income in India, including rental income is below the basic exemption limit of Rs 1.6 lakh, you can get a TDS exemption. But the process can be complicated. You would need to apply to the tax authorities for a tax exemption certificate and submit the certificate to the tenant. The issue of the certificate is at the discretion of the tax officer and he needs to be convinced about your case. 

Alternately, an easier way would be to file your returns and claim refund of the TDS paid. 

In such cases however, the rental income may be taxed fully in the country of your residence (based on the tax laws in that country.) 


So if you are a resident of the US, even though your income is below the basic exemption limit in India and you pay no taxes in India, this income will be added to your income in the US and taxed according to US laws.

Benefits NRI gets by buying property in India

Source:6 AUG, 2011, 07.00PM IST, ASHISH GUPTA,TNN 

There are many families where the children are working abroad. However, the parents stay back in India. Having made a good amount of money, many of these non-resident Indians (NRIs) and persons of Indian origin (PIO) intend to come back to India later. 

Also, they see India as a safe and good investment option. Investing in property here is always a preferable option. But how can they do it? Can they invest in property in India? Are there any restrictions? How can they fund the investment? 

First and foremost, thanks to the liberal policies of the government, NRIs and PIOs can purchase property in India.

 However, one needs to comply with the requirements of the Foreign Exchange Management Act (FEMA). So, if your children are NRIs, they can buy property in India. It could be a residential property or a commercial property. 

To add to it, there is no restriction on the number of properties they can purchase in India. Neither you nor they require any Reserve Bank of India (RBI) permission. However, they cannot buy agricultural land, plantation land or a farm house in India. 

Funding the purchase 

A NRI or PIO can pay either through funds remitted to India from abroad through regular banking channels or out of the balance in their NRE, NRO or FCNR accounts. One can take a loan from a bank to purchase the property. Banks provide housing loans to NRIs to buy a house. The purpose of the loan, margin money and the quantum of loan will be on par with those rules applicable to housing loans to residents. 

Repayment of the loan should be made out of inward remittances or out of funds held in the investor's NRE, FCNR or NRO account. It can also be done out of rental income from such property or by the borrower's close relatives in India. 

They have to purchase the property by way of a registered conveyance deed.

 In case the NRI is not present in India at the time of registration, he can execute a power of attorney in favour of someone, who can then execute the documents on his behalf. This person with the power of attorney should preferably be a relative of the NRI, father, brother etc. 

The normal processes of registration and stamp duty apply even in such cases.

 It is advisable to either purchase jointly with a family member resident in India, or to give a power of attorney to some family member who is resident in India to deal o n behalf of the NRI. 

Non-resident Indians keep falling prey to fake land deals

Source :Thepeninsulaqatar:Friday, 29 April 2011 03:49

by Moiz Mannan

Slogans like ‘India Shining’, ‘Incredible India’ and ‘Jago India’ sound very nice, says a website dedicated to legal matters of non-resident Indians, but it is high time the government provided succor to its diaspora in matters that really hurt.

Real estate is one of them. 

Every few days one now one is hearing heart-rending stories of hapless NRIs being defrauded or robbed of their property back home by unscrupulous elements, even relatives.

 Sitting thousands of miles away, there is very little the overseas Indian can do.

Very recently, the Punjab Newsline reported the case of Kulwant Kaur, an NRI from Canada, who was shocked to know that some people grabbed her land in the name of religion.

When she went to complain regarding this in the local police station, she was stunned to discover that a false case instead had been registered against her by those persons. On verification, the entire land and property was found to carry her name as the owner and the case was shut.

The woman, along with her son, has alleged non-cooperation by senior police officials. This case has been pending from last 19 months and no action has yet been taken by the police. The miscreants continue to threaten the owners and the owners continue to make rounds and rounds of the police stations in hope of some justice.

In another case, a local consumer forum in Chandigarh has directed a real estate giant to pay a compensation of`100,000 to an NRI couple for causing mental harassment and delay in handing over possession of a flat purchased by them.

The agreement was executed in November 2006 for a 4 bedroom apartment and possession was to be handed over within 30 months from the date of construction. However, no offer of possession was received until 2009.

 According to complainants, despite the commitments and the fact that sale consideration was paid by January 2007, the company failed to deliver possession.

Earlier this month, a US-based NRI was defrauded by a trio of real estate agents in Navi Mumbai. The tricksters duped him with forged ownership papers and even fake keys to his ‘dream home’ in Vashi. 

According to police the NRI, Kumar, approached a real estate agent in Navi Mumbai in December with the intention of buying five flats in the satellite city. The agent introduced him to the three fraudsters.

The trio showed Kumar a 1,200-sqft flat which he liked and the deal was finalised at `2.8m. They showed Kumar all the documents related to the flat and asked for `1.6m as token payment. When he paid, the documents and a set of keys for the flat were handed over to him with the promise that he would get possession in March.

Kumar smelt something fishy, however, when he did not hear from them again.

He went to the registrar’s office in the area and was told that the documents were forged. Investigation has revealed that the trio are part of a gang of nearly 40 members, which has a noted real estate agent as the kingpin.

The group not only forged ownership documents but also did franking by themselves and even forged pan cards, ration cards, electricity bills and receipts to obtain bank loans.

NRIs Permitted to buy and sell properties in india

 
Source :: Ashish Gupta, TNN

Non-resident Indians (NRIs) are permitted to buy and sell property in India. The acquisition and transfer of immovable property by NRIs should be in accordance with the Foreign Exchange Management Act (FEMA).

The property should be purchased through a registered conveyance deed. In case the property is purchased on the basis of a Power of Attorney, an agreement to sell and the Power of Attorney should be executed by the seller in favour of the buyer.

However, they are not formally registered with the office of the registrar. As such, no stamp duty is to be paid for the purchase.

The Reserve Bank of India (RBI) has granted permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase property in India for residential or commercial purposes.


NRIs can easily purchase & transfer property in India

The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with a bank in India.

Foreign citizens of Indian origin, purchasing residential property in India under the general permission are required to file a declaration with the central office of the RBI at Mumbai within a period of 90 days from the date of purchase of the property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

The RBI has granted general permission for such a sale. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of a NRE/FCNR account.

NRIs can easily purchase & transfer property in India


The RBI has granted general permission to let out a property in India. The rental income is eligible for repatriation .

The RBI has also granted general permission to certain financial institutions providing housing finance and authorised dealers to grant housing loans to NRIs for acquisition of a house for self-occupation subject to certain conditions.

The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans for residents.

Repayment of the loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in a NRE, FCNR or NRO account.

NRIs can easily purchase & transfer property in India

In addition to these, properties other than agricultural land, farm houses, an plantations can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds in a NRE or FCNR account maintained with a bank in India.

A declaration is to be submitted to the central office of the RBI within a period of 90 days from the date of purchase of the property or final payment of purchase consideration . They can also dispose off such properties.

The RBI has also granted general permission to foreign citizens of Indian origin to acquire or dispose off properties - up to two houses - as gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws.

The RBI also permits non-resident persons (foreign citizens ) of Indian origin to transfer as gift property held by them in India to relatives and charitable organisations subject to the condition that the provisions of any other law, including the Foreign Contribution (Regulation) Act 1976 are complied with.

Whether buying property in India safe for NRIs?

Thursday 19th, November 2009


The Indian economy market and the real estate is now
becoming a popular investment method for NRIs.
Now a days, various schemes and avenues are
offered which open up the gates for safe investment.

Stability in market has led to immense increase in
interest with regard to it. A good deal and base in
motherland attracts NRIs and PIOs to make investment
in residential and commercial property in India. It gives
them good returns which multiply rapidly.

The Reserve Bank of India (RBI) and FEMA (Foreign Exchange
Management Act) now inculcates the sense of security in
property investment.

 FEMA now gives prescribes for more
 liberalized rules and regulations in addition to repatriation
of capital so invested and rental proceeds as given under RBI.
It also ensures 10-12% returns.

The flexible rules now give an excellent
opportunity for NRI investment as opposed to
earlier times where they had to suffer issues
regarding income and wealth tax, Hindu joint
 family act and Municipal rules.

Unlike Indian residents, NRI enjoys the same status as property
owner, despite of different rates of property tax. Finances can
also be raised from financial institutions to purchase an apartment
and property tax is to be paid to the concerned authorities.

Home loan can be repaid by inward remittance through normal
banking or by direct debit for those who earn income through rent,
 pension etc. in India. Real estate business has witnessed boom by
crediting the existing balance in Non Repatriable rupee accounts on
 maturity to convertible NR account.

The transactions involved in
NRI investment in India has been made
easy through these accounts
and the online NRI banking.

Moreover, the consultants, builders and the estate dealers
ensure fair deal and transparency in projects. This allows NRI
 to consider their investments as safe.

High quality construction so guaranteed plays
major role in attracting NRI investment
in real estate. There is no doubt that investing in property in India
is the best option for NRIs that bears long term benefits and security.

A check list for NRIs buying a house in India

NRI Real EstateInvestment from any source in the housing sector
 is an appreciated aspect in today’s indian real estate scenario,
 from an industry perspective. Let it be Resident Indians, NRIs
or even companies, constructing houses creates jobs for a lot of people.

A back of the napkin calculation shows that for a 1000 sq feet house,
 100 direct employment (architect, building engineer, masons, helpers,
 electricians, plumbers, painters, carpenters, etc) and over 1000 indirect
 employment (people working in cement plant, brick kilns, tiles kilns,
 electrical fittings companies, saw mills, steel plants, paint companies, etc)
opportunities are created. Of course the duration of the employment will
 depend on a number of factors like nearness to a supply sources for
material and labour, access to high tech equipment, architecture, etc.

But to construct a house is not all that easy. It is not without substance
 that a Tamil saying goes, “Veetai Katti Par, Kalyanathai Panni Par”
(Basically the saying rates constructing a house and having a child’s
 marriage done among the toughest).

To an already difficult task, the sheer distance and absence during
construction become problem multipliers for the NRIs.

There was an NRI based out of the USA who
got a wonderful sales pitch from a builder.
 The salesman met the NRI at his office in the USA and arranged for all
 the documentation and also sent video clippings of the apartment at
 Bangalore. Convinced on the genuineness, the NRI
transferred Rs.50 lakhs to the builder’s account.

The date for the house warming was fixed after one month.
The NRI could not make it to the function due to a pressing office
 work and had asked his parents to do the poojas.

The parents got the shock of their life, when they landed at
the apartment complex the day before the poojas.
The complex had only one sample apartment finished
 (the one in the video). They were told by the Project Manager
 at the site that the poojas can be done at anytime but the
apartment can be delivered only after “6 months”.

Another NRI who was building the house himself using an
experienced and well referenced engineer found that his
house orientation has been shifted by 15 feet. This left him
 space on the wrong side of the house squashing his plans
 to build a small commercial complex in future. They now
 have space for parking 4 cars but none for building a
rent worthy space !!!

A number of checks could have been used to be on the
safer side in both the above cases:

Thankfully there are a number of professional builders who
 are a lot more trust worthy. So doing a bit of research on the
 track record of a builder can help.

1.For any real estate purchase it is preferable to make visits to
 the sites before buying them. This exercise is worth it not
 only because we are committing a large amount of money
 but also because reversing the decision proves costly as well.
 If the NRI is not able to make it, he can request a trusted friend
or relative to opt for the site visit.

2.Going for a housing loan through a bank will ensure that the
 money is released in stages only. This keeps the money safe
during the construction. Also, all the banks at their local branches,
have their list of shortlisted builders for whose constructions loans
are pre-approved. It is better to buy only these constructions, as the
 banks are quite stringent in their norms for pre-approval and shortlist
 only those builders who have a proven track record and those project,
which comply to all legal norms.

3.Post the construction, the management of the asset is one of the major
 issues faced by NRIs. There is no easy solution for this. There are some
 society associations which support the owners of the buildings with
 services like maintenance and rent collection. There are again the
 “friendly neighbor hood real estate agents” who may some times
 double up as the maintenance manager too. Many times though the
 “friendly” turn into “greedy” after some time. There are a few
 professional real estate management firms in most metros, who
 are now expanding into the 2nd Tier cities too.

4.Whether the construction rate quoted is for Built-up area or
Carpet area? Construction is generally quoted for built-up area
 and rental is quoted only for the carpet area. There can be
a difference of 15 % to 20% between the two based on the type
of construction. Today in apartments there is the concept of super
 built-up area which apart from the built-up area includes stair
case, common passages, fire escape passage, etc.

 The super built-up area can be bloated by as much
as 50% of the carpet area.

5.Robert Allen, the Real Estate Mogul suggests the 100 - 20 - 10 - 1 rule
 for any real estate purchase. The idea is to check out 100 properties
in person; shortlist 20 of them for a deeper scrutiny; enter into negotiation
 with sellers for 10 of the properties and finally buy the ONE that is best suited.

6.Technically there should be a check for all the statutory approvals - town
planning (Nobody wants a flyover at arms length from the balcony!),
water supply and sewage disposal, safety approval from the local fire
 department, etc. It is always better to ask for the encumbrance
certificate and the title deed from the builder to get a legal opinion
 from a lawyer.

7.Don’t hesitate to ask. This is probably the most important point.
Many times, for avoiding being thought of as less intelligent, we
question less. For any investing and particularly for real estate the
 more the questions asked the better the investment.
The genuineness of the promoter can be gauged by the
patience, the promptness and depth of the answers.
Answers like, “Don’t worry about that, we will manage”,
without going into the specifics are danger signs.

8.Take time. Do not restrain yourself by limiting the time for
checking the properties and decision making to the time that
 you are present in India. A 2 to 4 week holiday cannot be
hoped to be converted into a real estate investment period.
Start the process before you come here. In case you cannot
decide before you leave, it is OK. A Power of Attorney to a
parent or a relative can be used to decide on the actual
 purchase even after you leave the shores of India.