FATCA

Same as bank accounts and mutual funds, its not easy task for the Indian government to identify the property of NRIs and their earnings from them. There are many US based NRIs, who are planning to sell their property in India and for that they are ready to offer big discounts and the reason behind that is the implementation of FATCA (US Foreign Account Tax Compliance Act).

Recently, US and India have signed a new information sharing protocol which will bring the properties, assets, bank accounts, capital market investments and mutual funds under investments in India under the scan of US tax authorities. Now US if going to implement US Foreign Account Tax Compliance Act (FATCA), which aims to ensure that wealthy NRIs are paying tax on the income generated from overseas investments and properties. Due to FATCA, US have to share information about citizen’s assets in every other country. Now NRIs have to share details of their assets with US authorities.

According to BigDeals.in, a Gurgaon-based online property portal, “We have received several enquiries from NRI clients, which are from US in last two months. According to Ashwin Chawwla, CEO of BigDeals.in, “Some of these people are asking about more clarity on the issue as they are little confused about what’s happening and how they have to deal with this issue”. The more he added that while others are asking him to dispose their property in India in very short duration, and they are ready to offer big discounts, as law FATCA is not clear. It is well known fact that in past two decades many NRIs have invested in the real estate sector in India and now property market is on its peak, especially in the regions such as; Gurgaon and NCR. I bought a bungalow in Surat before three years ago for long term investment, but now am planning to sale it, as per the statement of Jignesh Shah, an engineer who works in Silicon Valley. Apart from that on the other side some of the US based NRIs are transferring their property to relatives instead of selling them.

According to one of the tax adviser, who help NRIs with property in India, “If property is first transferred and then sold, so the acquaintance or relative can emit back the money to the US citizen, as currently they are allowed to send $ 2,500,000 or Rs 16.6 crore per annum. And if the property is not transferred, so they can keep the cash in the separate account or tax paid on the amount received through the cheque. In present, there are two different schemes which are operational in US for NRIs with an aim to declare their wealth back home in India. First; there is no penalty for those, who will declare their liability, tax and income generated over the past three years from overseas properties. However; in other scheme; NRIs can pay tax of last eight years with interest and the penalty of 27.5 percent with an aim to compensate it.

According to one of the real estate experts, NRIs are not only selling their property in India, but at this point of time they are avoiding any kind of investment in India as this can lead them towards tax complications in the future. The more he added that Indian banks are reluctant to open accounts, which will help the US based NRIs to invest in India through different accounts because it can increase their reporting obligations.

India – Most preferable real estate destination

According to recent reports, After replacing the Mumbai, Bengaluru is emerge as the most preferred real estate investment destination among other Indian cities. It seems that Indian real estate market has won the back its old favor as it is one of the most preferred real estate destination for investments in Asia Pacific region, as per the reports of PwC India (PricewaterhouseCoopers India).

According to report of consultancy firm which was titled with “Emerging Trends in Real Estate Asia Pacific 2016” and released on Wednesday, “In last one year, the overseas funds accounted for more than 50 percent of all investment activity in India compared to 26 percent in 2013”. The same reports stated that “Flow of foreign capital in India is increasing dramatically from the end of 2014 as the amount invested was almost 200 percent year-on-year by the end of 2015”, however; the reports was based on the data of Real Capital Analytics which provides information on commercial property.

PricewaterhouseCoopers India, attributed that due to growing interest among NRIs and other foreign investors into the real estate market of India was just because of some of the liberalization measures which was adopted by the central and state governments of India. However; for instance, due to reducing the minimum size of built areas in FDI linked real estate projects to 20,000 sq. m (earlier it was 50,000 sq. m ) has increase the confidence among institutional investors because with this for them it was easy to find exist. According to Abhishek Goenka, Partner at PricewaterhouseCoopers India, “As per the perspective of deal structures, the mezzanine financing continues with a shift in favor of equity structures, especially in big ticket transactions for commercial assets such as; IT Parks and Business Parks. The reports pointed out that foreign private equity funds are among the biggest corporate real estate owners in our country, after starting from scratch in the year 2011 – 2012.

In previous years, Mumbai and New Delhi were among the most preferred real estate investment destination, but this year Bengaluru replaced them after emerging as most preferred real estate investment destination in India. The report mentioned that Bengaluru’s ranking is high as it is one of the major Technology Industry Hub with the availability of a large pool of skilled labor which is necessary to ramp up and backup the start-ups. However; reports, didn’t perceived a huge amount of upcoming supply of commercial office inventory which are in Bengaluru because according to experts it will match in next year as developers are expecting high absorption rate.

Premium realty project for Dubai NRIs in Thane

Piramal Realty has launched a premium residential tower Vivaan for NRIs in Dubai. The real estate arm of Piramal Group is developing Vivaan in Balkum, Thane exclusively for Dubai based Non Resident Indians.

Vivaan is the central tower in a residential complex, Piramal Vaikunth which spreads over 32 acres with a total of 14 towers.

The tower boasts of 60 2-BHK apartments with carpet area ranging from 949 sq ft to 1,027 sq ft Piramal realty has already begun bookings with a special offer price for 30 select residences. Speaking at the launch, the Executive Director of Piramal Group, Anand Piramal said, “We hope to see a good response for Vivaan as Mumbai is the first choice for NRIs in Dubai and buyers appreciate high-quality real estate.”

Indian property market

In 2015, festive season or special Diwali celebration session in Mumbai comes with many surprise gifts from PM Narendra Modi as he relaxed the norms and regulations for foreign investment in Indian real estate sector. This year home buyers are discouraged by the rumors that real estate builders are unlikely to run out of money.

Since the opening of the market, government restrictions was preventing the global investors from putting their money in small and mid size construction projects, whereas; for global investors it was also tuff to make the exits of their money, but this festive season Indian government settles all restrictions with a stroke of a pen. Now global investors can invest their money even in completed commercial property projects as earlier they were not allowed to do that. After new rules some imported brands will be able to set up their own stores and in that Indian shopping malls will be proved as more valuable assets in near future. If like this PM Modi is going to respond every time after losing elections, so investors will gladly wish him more defeats.

Cash strapping Indian real estate developers aren’t complaining about the investment policies and foreign investment regulation, which announced at the evening of Tuesday. Now Indian real estate developers can redevelop small projects with more luxury and facilities at the centre of the city with foreign equity. In past due to rumors that Indian real estate builders are unlikely to run out of money, many home buyers get discouraged from investing in the market. In present, purchasers have no idea that when they will get the possession, however in top six cities there are more than 70% of unsold homes which are getting delayed by east 18 to 24 months for completion due to lack of funds, as per the reports of Rising Straits Capital Management, a private equity firm located at Singapore and has invested $1 billion in focused Indian real estate and infrastructure sector.

However; it’s clear that access to foreign money will not repair the financial foundations of builders because intolerably high cost of capital is meaningless until the domestic banking system becomes more confident about lending money to Indian builders. But it is expected that this new investment policy will at least stem further rot. Liquid, income generating real estate sector is ready to attract new foreign investment because of family offices of wealthy NRIs. However; in India US and Australian property projects are offering return of 14 to 15 per cent, but still its hard to get real estate funds in less develop Indian market at least then when annual depreciation in of rupee is about 5 to 6 per cent. It is expected that in coming year’s Indian property market will emerge as a viable asset class for global investors. Whereas; real estate investment trusts can speed up the process of construction in India.

property protection

Indian people who are living in America and other countries are looking for the way to protect their properties in India. Most of the time NRIs prefer to buy properties in India due to attractive return from real estate sector, but from past few years people of Indian origin who are living in abroad are demanding for legislation with an aim to protect their properties in India against growing number of scams and fast track courts to deal with property dispute cases.

Indian is one of the fastest growing nation and due to attractive return from real estate sector a large group of scammers are not hesitating to cheat NRIs in the property deal, no matter its related to hereditary, residential and commercial domain. At a community meeting in New York before last weekend it was noted that due to these issues NRIs and PIOs are getting discouraged from investing money in Indian property market. This community meeting was jointly organized by New York Chapter, The Indian American Kerala Centre and Global Organization of People of Indian Origin (GOPIO) with an aim to discuss many property related issues such as; property buying and selling from NRIs and owning other kinds of properties in India.

This meeting was chaired by Dr. Thomas Abraham Founder and President of GOPIO and he requested that GOPIO should take up step towards the issue of property scams and setting up fast track courts with the help of Indian Government. The speakers also included that Anand Ahuja, Attorney from New York and he is also the President of GOPIO-New York and Pambayan Meyyan Senior VP of Forest Hills Financial Group. This meeting was called upon the Government of India to enact legislation with an aim to provide title insurance to make sure that their property ownership is protected in India against forged signatures, scams and other fraudulent transfer of their properties. He also pointed out that in India NRIs are subject to higher TDS (tax deducted at source) for capital gains while selling properties. In meeting a resolution was passed while covering all kinds of issues and plans to present it at the Regional Pravasi Bharatiya Divas (RPBD) which is about held on November 15 in Los Angeles.

Steve Waugh

Cricketer Steve Waugh promoted Waugh Global Realty has entered the domestic realty market by launching a portal to gratify the housing demands of NRIs. Waugh’s entry into the Indian real estate has come at a time when the realty sector is going through turmoil as inventories are piling up. This is likely to entice more NRIs to invest in India’s property market as they may fetch good bargains.

“NRIs are enthusiastic about investing in the Indian realty market. Many are looking at good properties in the country not only from the investment perspective, but also to settle down later.

He says that the venture is a result of the commitment Waugh made to himself that “he wanted to play a shaping role in India’s growth story over the next 10 years”. According to a report in Economic Times, this is first such platform that caters to the NRI market. “Our aim is to concentrate on the NRI investment experience through the online medium,” Waugh, founder and chairman of the company has been quoted as saying in a report.

The portal currently has 91 properties listed on its portal of 10 developers across seven cities — Delhi NCR, Mumbai, Pune, Hyderabad, Bengaluru, Chennai and Kolkata. Waugh Global has partnered with leading developers like the Lodha Group, Godrej, Shapoorji, K Raheja, Kalpataru, Kolte Patil and Sobha Developers, among several others.

Dean Honan, the Managing Director of Waugh Global  explained that the focus of the portal is not only confined to listing properties but also to offer a broad range of additional services like property management and rental solutions, land advisory services, NRI qualification and activation services. The company also plans to introduce Australian property sales and market entry gradually.

property transactions for NRIs

Sometimes it’s good to know the tax treatment on property transactions, which depends on your tax status and account for capital gain. In the country like India the taxation of an individual is in directly proportion to the residential status that is dependent on the presence on that particular individual in the country. However; in India we can classified the residential status of an individual as;

1. Resident in India:

1. RNOR (Resident but not ordinarily a resident)
2. ROR (Resident and ordinarily a resident)

2. NRI (Non Resident in India)

An individual will be treated as the resident of India if he/she will be able to satisfy any of the following conditions;

1. In any particular financial year, individual should stay in India for more than 182 days.

OR

1. Individuals should stay in country for more than 60 days in the relevant tax year and it should be more than 365 days in total. On the basis of next 4 tax years of immediately preceding, his or her residential status will be determined.

If any individual is not able to fulfill any of the above mentioned condition so he will be known as the NRI (Non Resident in India).

Any resident individual in India will be treated as the RNOR (Resident Not Ordinarily a Resident) in our country, if he or she will be satisfy any of the below mention conditions;

If an individual is Resident Not Ordinarily a Resident (ROR) in India in any given tax year, so he will be taxed on his total worldwide income in India. Apart from that if same individual is also a resident in some other country and both countries have signed a DTAA (Double taxation Avoidance Agreement), so his residential status will be determined by his netting effect in the relevant country as per law of that country. However; if any NRI will sell his property in India, so the taxation on capital gains will be same as it applies on the Resident Individuals. The only different to be buyer in India is that you will be liable to deduct TDS with the rate of 30 per cent if the property sold is held for the period of less than 3 years and 20 per cent, if the property sold is held for the period of more than 3 years. However; as NRI you will get the exemption under Sec 54 of Income Tax Act. If you will sale your property after 3 years, as NRI you will be liable to get the benefit under Sec 54 of Income Tax Act which states that investment of the capital portion in the property of other person for the period of 1 year after the date of sale or for two years before the date of sale or construction on the property 3 years from the date of sale of the current property.

How to take the benefit of tax exemption?

However; budget for the year 2015 – 2016 has made it clear that to get the benefit of exemption individual have to purchase or construct one house property from the capital gains of the property because that gain from the sale must be utilized to purchase a property in India.

 If individual is selling the property in other country:

If you will sale property in US, UK, Canada or in any other country, so it would be subject to capital gain based on the individual’s residential status in that country for particular financial year (when property is sold) and immediate preceding for the period of the 7 years to determine that individual is ROR or RNOR. If individual will qualify as the NR or RNOR in that relevant financial year  when he has sold the property, so that gain will be not liable for tax in India and he can retain whole amount in the in the overseas bank account. If he will deposit the capital gain in Indian bank account, so his gain will be treated as the taxable in India.

If you are Ordinarily a resident of India and you have stayed in India for 729 or more days in the preceding 7 years in regards to the current Financial year, so his global income shall be taxable in India, no matter from which source he is earning the money. Therefore all the gains which will arise from sale of property in the foreign country would be subject to tax in India with the additional benefits which will be available under the DTAA between India and that particular country. However; you can reinvest the capital gain in another property as well as in specified bonds as per the rules and regulation of the Sec 54 of the Income Tax Act. And rest of the balance amount which will be for the long terms capital gain will be subject to tax at the rate of 20. 6 per cent if the assuming income will exceed from basic tax exemption limit.