Real Estate as we’ve discussed in our previous blogs is a great avenue for long term gains for NRIs. Especially now more than ever, NRI/OCI card holders have a surprising advantage of investing in property and acquiring some great deals even during the pandemic [A Silver Lining for NRIs Looking to Invest in Property During Covid].
However, many people who are overseas have several blind spots that need to be addressed. For example, NRIs have challenges keeping up with local legal rights, changing market trends and finding the right occupant for their property (these are just a few examples).
While there are several problems and challenges, we would like to highlight 5 common ones that many fall prey to. This blog will give you an insight into:
- Legal Rights of NRIs when investing in real estate
- Issue of illegal possession of land
- Builders with Dubious Records
- Delays due to verification procedures
- Getting the right professional advice for managing your property as an NRI
1. Lack of awareness of legal rights: One of the most common problems faced not just by NRIs but everyone who chooses to invest in real estate in india is the lack of clarity on the rights available to them.
A local citizen may be able to navigate their way through with local resources, but for an individual overseas, it can become a difficult task for NRIs to always stay updated with changes in Indian laws.
To begin with, one small detail to keep in mind is that all real estate dealings by NRIs are controlled by the Foreign Exchange Management Act (FEMA). The rules clearly state that NRIs can only purchase/invest in residential or commercial properties. Any agricultural land including farmland or any kind of plantation property cannot be purchased by an NRI or person of Indian origin.
In unfortunate cases or out of desperation, if an NRI opts for a freelance broker to manage their property, the broker may use the lack of awareness to their advantage and deceive NRIs while selling properties. A broker may promise an amazing property deal and trick investors into buying into buying agricultural properties.
To ensure you as an NRI are not subject to such fraud, we advise you to ensure you deal only with certified real estate brokers who are verified by the Real Estate Regulatory Authority (RERA). Another option an investor can explore is hiring a property manager who will ensure the property is managed end-to-end.
2. Illegal possession: Being overseas, you may not be able to visit your property as often as you wish or keep a sharp eye on it. This often leads to illegal possession and gatecrashers.
While you may have left a trustworthy family or friend incharge of keeping an eye on your property, times like Covid-19 present challenges even for them to manage your property.
Furthermore, no matter who the person may be that you are asking to look after your property, it is essential to ensure that you have legal documentation signed with the person before giving possession or decision making power of the property to that individual. [Decoding Power of Attorney [Guide for NRI Property Owners]
If it comes down to it, an NRI has the option of reaching out to the – NRI cells at a police station to take necessary legal actions in the case of illegal possession.
3. Developers with dubious records: Many NRIs suffer huge losses due to delays in project completion, which may impact the quality of the investment.
A few years ago, there was no way to review or get insight into the builders track record (it was based on word of mouth). However, now thanks to the implementation of RERA, buyers can now check the track record of builders on the RERA websites of the respective states.
Though RERA makes projects more transparent in the unorganised real estate market of India, it is only a platform that provides access to all information. Due diligence is still the responsibility of the investors.
Property owners now have access to several online platforms, forums like Quora and other social media pages that an individual can explore for reviews and feedback to get more background information on the developer and the projects.
It is important to keep in mind that tasks, though sound simple as a mere Google search about the developer or property of interest, it can be a tedious task to keep up with the research.
As a property management firm – that is something we take care of for our customers!
4. Delay in process: When it comes to an investment, many NRIs face challenges with respect to various background checks that lead to delay in services and time loss.
An NRI may face issues when they have to invest money in their Non-Resident External (NRE), Non-Resident Ordinary (NRO) or Foreign Currency Non-Resident (FCNR) accounts. That’s why NRIs need to use the banking services of a place that has a smooth process and has credibility in the market.
5. Lack of professional advice: Many NRIs face hurdles when it comes to making not just the right decision, but the best one with respect to their property. They have several things to keep in mind while investing in property and renting it out.
If an investor is looking to invest from overseas or an NRI already has property that needs to be occupied, they will need to keep in mind there are various important tasks involved.
In the scenario, an NRI wants to invest in new property, they have to ensure they find a trustworthy person/broker who is not dubious and does not take advantage of them.
Alternatively, if a person already has property, they have to make sure the property is maintained and gets the attention it needs to ensure its value does not depreciate.
A property management firm is one option to consider as there is a team of in-house experts who take on everything from legal documents to protect you and your property, maintaining low vacancy and upkeep of the property.
A few steps taken in the right direction can secure your future and help reap benefits of your investment sooner and hassle-free in a foreign shore.