The process of an ‘NRI buying a piece of real estate in India’. Do's and Don’ts

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

In our earlier articles about Non Resident Indians (NRI) and Person of Indian Origins (PIO) with regards to their investment in India, we covered, range of topics such as:

1. Guidelines that an NRI or PIO must adhere to for selling, purchasing, and financing a property in India
2. Taxation aspects for an NRI, PIO, or a Foreigner for buying an immovable Property in India
3. Opening of NRE-NRO-FCNR-bank accounts in India to buy, sell, rent out immovable property?
4. Reasons why NRIs prefer investment in Indian Real Estate
5. Impact of falling Rupee on investment in real estate sector in India by Non Resident Indians

Having covered the above topics in details, we now move on to the process of an ‘NRI buying a piece of real estate in India’. If the process described below is followed diligently by an NRI investor, then investing in Indian real estate can prove to be rather rewarding.

• Research

First thing first, before you embark on your journey to real estate investment in India, carry out comprehensive online research. How is the builders’ reputation in the market? Locality price indices, city master plan, infrastructure project announcements are some of the things that one should note down. Compare builders’ pros and cons, compare locality pros and cons, and assess the city master plan by visiting the urban development authorities websites. A number of online forums to discuss real estate projects are also available. Visit these independent forums and gauge what others are saying, ask questions if possible. 

• Depute someone or visit the site yourself

“Pictures tell the story” is a proverb which maybe applicable to other sectors but not to real estate sector in India.  Many newly launched websites focus on ‘Real Photos’, but ask yourself, can they tell you the actual story? Can they show you the approach road towards the project? Can they highlight slums in the nearby areas? Can they highlight the construction quality? The answer is big NO. Therefore, when it comes to buying or renting real estate in India, visit the site yourself. With NRIs living in far away countries, it becomes difficult for them to visit the project site location. Instead, ask one of your friends or relatives to do this on your behalf. The bottom-line is ‘One should never rely on pictures shown in glossy brochures or websites’.

• Check the bank approvals

Now, that you have zeroed on 2-3 projects after having done the online research and visiting the project site, the next step is to check the bank approvals. Which are the banks that have approved the project for home loan sanctioning? Kindly note, a bank or housing finance company invests about 70-80% of money in the project in form of home loans sanctioned to buyers. Therefore, they will definitely carry out proper due-diligence including the project approvals, clearances, title certificates, etc. Ask the builder about banks which have approved the project for home loan. Talk to these banks. Go ahead with project that has a minimum of 3 banks approving it for home loan.

• Project approvals

Even though, you have got assurances from banks about project approvals, it doesn't mean that you turn a blind eye to check the approvals yourself. Ask the builder to show you the necessary approvals such as license number issued by Town Planning Department, approved drawings, NOC from various departments. This is to double check that everything is fine with the project and you won’t end up in a soup.

• Ask questions

Be an extrovert buyer; ask questions to builders, banks, brokers. There is never a silly question. You would be investing a size-able amount of your money, therefore, be proactive.

• Builder buyer agreement

In recent times, some of the major developers have landed in trouble with authorities and CCI for sticking to one-sided builder buyer agreement. Read the document carefully, and clarify things before you sign the agreement.

• Hire a lawyer

Despite all the research, one can never be 100% sure. For this, the NRI investor can as well hire a lawyer to do the title verification. The lawyer will ensure that the builder has the ownership title to the land on which he is developing the project.

• Never pay in cash

Whether one books property online or directly at the builder’s office, never pay in cash. Pay by cheque or via the formal routes such as online transfer. Keep receipt of every payment you make to the developer.

Happy investing :)

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