Guidelines for investing in the real estate markets of Punjab by the NRIs

For the real estate dealers of Punjab there is some good news. The much favoured Punjabi Non Resident Indian (NRI), who was at one time the only major player in the real estate markets of Punjab, Haryana and Chandigarh, can now invest directly in the real estate development business. As per the guidelines of the Reserve Bank of India, overseas corporate bodies (OCB) can now enter the real estate sector of the state either by forming a partnership firm or investing in a company incorporated in India. The relaxation in provisions has resulted in NRIs being allowed to pick up even 100 per cent equity shares and convertible debentures of Indian companies engaged in real estate development. The other areas where the firms could be operating are:

Construction of residential and commercial buildings including business centres, and offices.

Developing townships.

Development of plots for residential premises.

Manufacturing of building materials.

Financing of housing development Urban infrastructure facilities, including roads and bridges.

The investment made is on a non-repatriable basis since the condition applies that the capital invested is not repatriable, though the interest or income portion of the investment can be repatriated. For a company to be considered an overseas corporate body, it should be a company, partnership company, society, or a corporate body in which at least 60% of the investment is held irrevocably by a non-resident Indian. The RBI has also outlined a lock in period of three years from the date of issue of debentures and shares of the company for repatriation purposes and any profits from the sale of the property can be repatriated only after a three-year lock in period up to 16%.

These changes will be welcomed by the NRIs who invest in their property in their ancestral hometowns, since property will no longer be seen as a tedoius affair for the NRI. However, the total quantum of investment will not change drastically since NRIs have always been investing in land and property development here through relatives and friends. The only difference now is that with a portion now legally repatriable, new development projects both for housing and commercial segments will find takers. In the real estate market of Chandigarh, Mohali and Panchkula as in metros elsewhere, the much awaited surge in property prices has still not come. Prices all over are still near rock bottom rates, though buyer interest has built up. This is especially true for residential property in the middle segment where some of the tax sops offered in the Union Budget are nearing their final date. The Budget had given a tax deduction benefit of Rs 75,000 on interest paid on loans for property. However this is applicable only for those houses which are bought or self occupied by April 1 next year. After which the benefit limit reverts back to Rs. 30,000. For those who have been planning for long or for those whose builder flats are in the process of getting ready, possession should be taken before the said date to avail themselves of this benefit. For those people who are planning to take a fresh loan, hoping to avail the benefit, experts caution that one should do that only in case the house is not self-occupied. This facility is provided only for new construction and acquiring property and will not be valid if one is living in a home on which one wishes to pick up a loan. For the NRIs, too, picking up loans in the country is no longer the paper wader it earlier was and the new incentives will definitely see the property market looking up soon.

The market is seeing a lot of activity and those who have begun saying that prices have not boomed, should remember that the typical Indian property investor was a landlord who hoarded land in anticipation of appreciation. In the present scenario, mere land does not fetch you good returns. The buyers and tenants look for built-up property, tastefully done up, well located- all factors which can be evaluated only in developed property. This is especially true for the NRI who has neither the time nor inclination to go through the cycle of letting land develop into good property. With the turnaround for vacant property to developed property shortening from the earlier period of two to three years to a mere six to nine months for an average plot size of 500 sq. yards of residential space, property has definitely become attractive again. However this time investor interest is focused on to builders rather than land, thus, leading to a situation where land prices may be stagnant but those of built-up property are definitely booming.

Documents required by NRIs for housing loans Latest work permit/employment contract attested by embassy/employer Copy of visa Salary particulars of last three months Identity card General Power of Attorney Holder in India Letter from bank giving details of bank account repayments through NRI account.