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FAQs - NRI Legal Issues

Q1.: Does the Agreement of Sale have to be registered?
Q2.: While purchasing real estate most developers demand a Power of Attorney in their favor, is there a way to avoid it?
Q3.: Investment Horizons for Investing in Indian Real Estate?

Q1.: Does the Agreement of Sale have to be registered?
Ans.: In many states in India, the Agreement of Sale between the builder and purchaser is required by law to be registered. You are advised in your own interest to lodge the agreement for registration within four months of the date of the Agreement at the office of the Sub Registrar appointed by the State Government, under the Indian Registration Act, 1908.

Q2.: While purchasing real estate most developers demand a Power of Attorney in their favor, is there a way to avoid it?
Ans.: One can choose not to grant the Power of Attorney (POA) to the developers. However this will mandate the mailing of all documents to your foreign residence and associated time delays. A good compromise is to grant the POA to the builder only for specific necessary items.

Q3.: Investment Horizons for Investing in Indian Real Estate?
Term of Investment
- This is important as you need to hold on for at least 1 to 3 Years for a decent capital appreciation and if you sell your property within 3 years you are in for a short term capital gains which is at par with the Income Tax rules of nearly 30 to 35% as applicable. It is better to stay invested for 3 years and then plan the next investments with Capital Gains etc.

Pre-Launch offers - Investing in property means also an entry load by paying stamp duty and registration fees and other incidental charges to the Builder etc. If you are investing it is always wise to invest as soon as the project is launched as this gives you enough time for appreciation as usually the builder goes in the Stock Market kind of a mode in the first year of its property by hiking the prices every few months.

Know your Builder - It is imperative to know your Builder and the project as at the time of your exit the builder has to be extremely co-operative, the first question to shoot when you are buying an Under Construction Project is - If I sell what happens? When can I Sell? Will you charge me some transfer fees? How the paper work will be done between the Seller, Builder and the Buyer?

Invest with Deep Thought - The present market is volatile in Mumbai and it is imperative for you to give a deep thought on various accounts, which begins from the Project, Infrastructure available within the Project, Outside the project in the neighborhood, Selling prospects, Leasing prospects, Neighborhood development, Distances to Schools, Markets, Malls, Hospitals, Highways, Airports, Railway stations etc. These should act as your analysis points.

For NRIs - especially before coming to India, make sure you are carrying most of the relevant papers with you. You should always have an NRE and an NRO account in India and if you are looking to invest in Mumbai then one should have an account in Mumbai for easiness. Review your NRI allowances by the Government of India every budget etc.

Home Loans - You can set off your EMI's if you invest wisely in a property as the rates are presently around 8% and your rental returns are around 4-6%. You can be a happy man if you do this fool proof homework as your EMI can be hedged off against the rent receipts to a certain degree.

Re-Sale Properties - In a booming market every property owner wants to cash on in his property at the best value. A few issues which we face are the commitment level of the seller and we can stumble on to good transactions at times, but this is more of a time consuming process at times. The repair value, old building and other property documentation issues can be challenging in certain transactions.

Returns - It is always advisable to take a conservative approach in both Capital Appreciation and Rental returns. However one can safely expect appreciations anywhere upwards of 15% Per Year and Rental Yields of 4 to 6%.

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