Tips for NRIs before buying property in India

With over 20.20 million of NRIs (Non-resident Indian) and PIOs (Person Of Indian Origin) across the globe, the overseas investment into Indian real estate has never been an issue. Majority of these people have invested in the homeland in consideration to their individual future plans.

Factors for consideration for NRIs while buying property in India

1. Which property can a NRI or PIO buy?
2. How to pay for these properties?
3. Repatriation of the capital gains?
4. Availability of home loan
5. Can a NRI sell or transfer a property?

Which property can a NRI or PIO buy?

An NRI or Person of Indian Origin (PIO) can own both residential as well as commercial properties in India and there is no restriction on the number of properties you can buy. However, you cannot purchase any agricultural land, farm house and plantation property. You can have ownership of such property only if they have been gifted or inherited.

How to pay for these properties

The money for purchase of property can be made either by way of funds remitted to India from abroad through regular banking channels or through the balance in the  Non Resident External (NRE), Non Resident Ordinary  (NRO) or Foreign Currency Non Resident  (FCNR) Account.

Repatriation of the capital gains

NRI and PIO have been allowed to repatriate original investment in equivalent foreign exchange in residential/ commercial properties. However, the gains from such transactions have to be re-invested in the real estate market in India.

Availability of home loan

Loan to an NRI is available the same way they would be to an eligible resident, for reference below mentioned criterion is must for availing home loan

• Minimum age of 18 years.
• Valid Indian passport (for NRIs) / valid foreign passport (for People of Indian Origin – PIOs).
• Steady source of income.
• Employed abroad for at least 2 years.
• Valid job contract or work permit.

Can NRIs sell or transfer property

An NRI can sell property in India to a person resident in India or to an NRI. A PIO can sell property in India to a person resident in India or to an NRI or a PIO but after having a prior approval from the Reserve Bank of India.

Original publication at Content.magicbricks.com by AtulayNehra

Are assured returns schemes in real estate genuine?

From the offers of 100 per cent guaranteed returns to assured returns on investment of up to 14 per cent – anyone would be interested to know more. That’s it and the trap is set.

When you will ask for more information on these real estate offers and you are trapped in the dilemma of earning secured returns on your savings or investing in a fixed deposit  or seeking an assured 12.5 per cent + return on real estate project.

So, what exactly are these offers?

Let us first understand the reason behind such offers. When the commercial real estate developers avail a construction loan from any financial institution this loan is generally offered to them at a relatively high percentage, from 18 per cent to 25 per cent or above in most of the cases. Moreover, only 60 per cent to 70 per cent of the construction amount is funded. In comparison to having funds from the financial institutions, the developers find it easy to raise money from retail investors on a low percentage of 11 per cent to 13 per cent.

How does this work?

The investors are first lured with such juicy offers of over 12 per cent assured returns through radio, television, print campaigns or through realty brokers (please note any transparent and honest broker will never suggest assured return project).

You are made to pay a down payment of up to 95 per cent of the value of the property , the day the amount gets credited to the developers’ account , your annual returns are paid to you through post-dated cheques given to you for a monthly or quarterly credit from the developer.

If you are thinking that it is a great idea, hold on to your thoughts. Have you ever thought where these developers pay these assured returns from? That’s very easy to understand, although you should compare with other neighboring commercial projects as well – but the various payment plans in the same project itself explains the difference of an assured or a non-assured return difference.

For example, you would find that the developer is offering you 12 per cent assured returns at Rs 6,250 per sq ft for 2 years, while in the same project a non-assured return unit is available for Rs 5,000 per sq ft. So, the developer has taken an upfront Rs 1,250 per sq ft extra for the same property. Ideally, this extra money which is paid by you is given back to you over the next two years.

You may now ask, is this regulated and how sure should I be sure about my post-dated cheque getting credited?

The golden rule of investing is to question any deal that looks too good to be true. In most probabilities, it will actually be too good to be true. This may be rude but true. These assured return schemes are non–secure schemes and come at a very high risk. Even the developer having the best credibility in the market will not think twice to not to pay your returns during a financial crunch situation, which most of the developers are in today.

What should you do then?

We suggest that unless you have huge stash of money with you and can afford to look for legal help, stay away from such offers of assured return projects. Even if you still wish to put your money in such lucrative schemes, do calculate the net profit that you will get after all the expenses and taxes on the assured returns or look for a residential project offering assured return with buy-back guarantee. In that case, get the agreement vetted by a legal expert before entering into it. Your investments should be at a lower risk.

Original publication at Content.magicbricks.com by AtulayNehra.

All you want to know about Lal Dora areas

There was a time when we used to have small spots of villages around a central business district or a small city. When these cities started expanding, the need of municipal corporations, development authorities to undertake development and management of these expanding cities was realized and hence Lad Dora areas were formed. Meanwhile, all these small villages had their own Gram Panchayat’s which worked and decided the development of the villages.

The term Lal Dora for the first time was used in 1908 – to define the habitation (Abadi) land of a village. These lands were the extension of existing villages, which was used by the villagers for their livestock and various other living support systems. To differentiate this land from the agricultural land, the land revenue department used to tie a Red Thread (Lal Dora) around the village extension land. While this was done decades ago, even today the Lal Dora denotes that the jurisdiction of municipal authorities or the urban development is not applicable in the specified area.

As Lal Dora is exempted from building bylaws, there is no strict regulation on construction in these areas, which in some areas has led to haphazard construction. With rapid population growth and un-affordability of the urban areas, these Lal Dora areas swiftly got converted into urban villages. Some of the well-known examples in the National Capital Region (NCR) are Hauz Khas Village, Basant Gaon, Khel Gaon, Munirka and Khirki, among others. These urban villages are also host to some of the known farm houses of the rich in the NCR, including the Bijwasan Farms and West End Farms.

Of these urban villages, many are provided facilities like roads, sewerage, water and electricity by the government. There are a few which are not so blessed and due to the non-availability of such infrastructural necessities, these Lal Dora areas are generally looked at with a raised eyebrow. Due to their proximity to the urban centers as well as cheap rentals, many exporters, warehouses, godowns and even corporates started entering the Lal Dora areas.

The rapid population growth and affordability of the Lal Dora Lands in comparison to the urban residential land has generated interest among investors who have been investing in these lands aggressively over the last couple of years.

Areas such as around Kanjhawala, Chhatarpur, Najafgarh, Rangpuri and Mahipalpur have been preferred investment destinations for such investors. The cost can differ from a minimum of 100 per cent and above in comparison to urban residential land, when compared to opportunities available in these areas.

Original publication at Content.magicbricks.com by AtulayNehra

Stuck with a delayed project – Is there a way out?

Time and again there have been stories where the investors have been left unattended, cribbing and stranded with their investments in the middle of nowhere projects. There are developers who are widely known for taking investors on a ride.

In India, the most expensive purchase for any individual – a real estate is bound by a one-sided un-registered agreement called the Builder-Buyer Agreement. On top of it, an investor gets this agreement only after the payment of at least 20-30 per cent of the total cost. The receipts do not even exist in case of so-called soft launch or pre-launch project.

Pankaj Sinha , a Noida based business man , is one among lakhs of buyers who has been in a dilemma due to the slow pace of construction of property projects. Hoping to shift in to this ultra luxurious apartment on Noida Expressway in 2011, Sinha had booked a unit in this golf course facing apartment complex being built by a known developer with multiple projects in Gurgaon and Noida. He paid Rs 30 lakh to book a space in 2008 for the Rs 100 lakh plus apartment in this project.

It has already been over three years that the project has been behind schedule. Even though Sinha can see the tower in which he owns the apartment, the completion still seems a far dream. A developer’s representative has been kind enough to offer refund of the property at the same price at which he booked the apartment, if he wants to move out of the investment, which means huge loss to him.

Over 25-28 per cent of the committed supply has not been delivered on schedule in India, with residential projects in the National Capital Region topping the charts in delays.

Is there a way out?

The draft real estate regulation bill, which proposes a sector regulator, seeks to outline the obligations of project delivery. Though, until regulations are put in place, buyers will have to rely on their rights laid out in their booking agreements.

First and foremost, any prospective buyer should scrutinize the project and the background of the developer. If possible, hire a real estate consultancy firm who has market expertise and is known for unbiased consulting.

If the project is funded through Foreign Direct Investments (FDI), it is more likely to complete on time.

As an investor, you have the right to ask for the copies of approvals of the project, if not buying during a soft launch stage.

Ask for detailed construction schedule and negotiate for penalty clause in case of delay of project.

Consumer courts always come handy in such cases. Refunds can be claimed if a project is delayed beyond the period stipulated in the Builder Buyer Agreement. You can file a case in the consumer disputes redressed commissions at the national, state and district levels.

Original publication at Content.magicbricks.com by AtulayNehra

The legalities of a Will

One day most of us would have to write this document – where we would like to assign rights to our real estate to our successors. This documentation is covered under “ The Indian Succession Act 1925” and everyone calls it by a simplistic sounding word “WILL”

A Will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provide for the transfer of his/her property at the time of their death.

Prerequisites of a Will

• A person must be major, of sound mind and willing to write a Will.
• He/she should be the sole owner of the self acquired property.
• Any ancestral property cannot be bequeathed through Will.
• Any person capable of holding property can be a legatee under a Will.
• A Will being a testamentary document comes into effect after the death of the testator.
• If the person dies without writing any Will then he is said to have died intestate.
• The person in whose favor the testator bestows the benefits is called beneficiary or legatee.
• The Will should have witnesses

There have been times when we have heard of a number of stories about wrongful confinement of the properties or misuse after the death of the original owner, causing lot of issues within families. To avoid such issues one should consider certain facts mentioned below:

Characteristics of a valid Will

• A valid Will should have the name of the testator.
• The testator should have appointed a beneficiary of the Will.
• A Will from the testator can take effect only after his death.
• A Will can be revoked or altered during the lifetime of the testator, any amendment in the Will are called as Codicil.

Course of action while making a Will

• A Will should carry all the details of the properties or all the documents
• The value of all these properties should be mentioned.
• The details of benefits to the beneficiary or beneficiaries from the Will should be clearly stated.
• The Will should have been attested by at least two independent witnesses.
• Post the lifetime of the testator, the executor of the Will has to apply for probate.
• A probate is the only conclusive evidence for authenticity of the Will.

The above provides some basic information on Will, which if considered by testators, would help them avoid making basic errors while writing for a beneficiary.

Original publication at Content.magicbricks.com by AtulayNehra

Decoding lease, rent agreements: What you should know

Decoding lease, rent agreements: What you should know

There have been times when you would have come across terms like rental agreement, lease agreement, leave and license agreement, though they may sound similar but there are some crucial differences between them all.

Before getting into core details, let us understand some important often used terms:

Lessor/ Licensor: A person who leases or lets a property to another; a landlord

Lessee/Licensee: A person who holds the lease of a property; a tenant

License: The word ‘licence’ has been defined in section 523 of the Indian Easement Act, 1882 “where one person grants to another, or to a definite number of other persons, a right to do or continue to do in or upon the immovable property of the grantor, something which would, in the absence of such a right, be unlawful, and such right does not amount to an easement or interest in the property, the right is called a licence.

Lease: A lease is defined in section 105 of the Transfer of Property Act, which provides that “A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time expressed or implied or in perpetuity in consideration of a price paid or promised, or of money, a share of crops, service or any other things of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.”

A rental agreement also referred to as a tenancy or lease agreement. In these agreements, there is a transfer of interest from the lessor to the lessee while in case of a leave and licence agreement, there is no transfer of interest, but only a permission is granted.

In a leave and licence agreement the legal possession of the premises remains with the licensor and the licensee is said to be in constructive possession of the said premises.

Therefore, a leave and licence agreement does not create any interest in the premises in favor of the licensee but gives the licensee the mere right to use and occupy the premises for a temporarily defined period.

A leave and license agreement is also the mostly used for renting property as it mentions the limitation of use and ownership of property within the agreement. Which would include details about fixtures and fitting, maintenance, term of agreement, penalties etc . These terms are generally accepted by both the parties at the time of signing of agreement.

The right of termination of agreement lies with the landlord, it is a common practice of not registering a leave and license agreement as a specific amount of stamp duty has to be paid. The benefits of registering the agreement include putting the landlord on the stronger side in case of any issues with tenant. Therefore, a leave and licence agreement should always be registered, ignoring the miniscule expense at the time of execution of agreement.

Renting a residential or commercial property seems to be an easy task to do and most people follow the standard agreements available in the market yet it is wise to consult a lawyer to prepare your agreement for renting the property to avoid any future issues.

Original publication at Content.magicbricks.com by AtulayNehra

How to choose a realty broker?

The other day I was sitting with some of my pals and suddenly one of them spoke about his willingness to invest some money in real estate projects, with an anticipation to multiply it within a pre-conceived timeline. Although, with his previous experiences, he was not sure where to invest and how to do it having a limited reach and knowledge about the field. In addition, he had read and heard enough horror stories of investors running from pillar to post after investing their hard earned money without any clue on how to get out of the situations created by their own wrong decisions.

Above is an example of many such discussions that I have been a part of over the last decade and a half, and the same apprehensions have been spoken about in most of the discussions. Choosing a right property and a realty broker has become an important factor.

Some pointers for choosing the consultant for your biggest investment:

• Have Clarity on the scope of services and the term of engagement that the agent offers.
• The role, responsibility and liability of the agent should be clearly defined.
• Check the agent’s knowledge about the area, do not limit yourself to just one project.
• Ask for the reason for pitching a particular project or area. If the agent claims to have done a research ask for the source.
• Evaluate the level of questions that are asked by the consultant while suggesting a particular project.
• Ask for details of the company the agent is representing.

What should be avoided?

• Do not just go with the agent who offers “HIGHEST DISCOUNTS” or the “BEST DEAL”
• In case someone is offering the highest discount, ask for an upfront adjustment in the booking amount and fill the discounted pricing details of the property in the booking form yourself. It is to be noted that majority of the developers do not adjust more than two percent of the basic selling price on the booking form.
• Keep a copy of the booking form and cheque given to the agent and ask for a receiving copy of the signed and stamped cheque and booking form by the developer’s office.
• In the absence of a booking form, a copy of the cheque received by the developer’s office should be kept as a record.
• Do not fall in the “CREDIT NOTE” trap – some in the real estate brokerage business offer the facility to their investors where their sales representatives issue a credit note – not to be honored by them or the developer at a later date. So, avoid such arrangements.

Investing in real estate is a decision which a majority of the people take for the first time. In accordance, it is extremely important to choose the right agent to pick for you the best property matching “YOUR REQUIRMENTS” – “NOT THEIR’s”.

Original publication at Content.magicbricks.com by AtulayNehra