Owning property in India for a Non-Resident Indian (NRI) may often seem like a mixture of emotional attachment and thoughtful investment. However, managing properties from outside is not easy, as it involves communication with tenants, ensuring legal compliance, managing maintenance issues, and tracking finances.
Introducing technology, hiring professional services, and following best practices will be essential to effective property management. Keep reading to understand the actionable strategies that help NRIs manage their Indian real estate investments seamlessly while safeguarding their value.
Understanding the NRI Property Management Landscape
Under the Foreign Exchange Management Act or FEMA, NRIs are allowed to acquire residential and commercial properties in India. However, they are not permitted to acquire agricultural land or plantations.
States tenancy laws bind rental agreements, and property taxes as well as utilities have to be paid on time to avoid penalties. Other requirements apply when repatriating property income or sale proceeds by NRIs.
Options for Property Management Available for NRIs
NRIs usually rely on one of the following:
- Self-management: Primarily sponsored by friends or family.
- Caretakers: Locals take on general oversight but lack professional experience.
- Property Management Companies: Companies provide complete service coverage including tenant screening, collection of rents, legal compliance, and minor repairs.
As NRIs face a situation where management complexities are growing, they are opting for professional help to reduce risks and simplify services.
Best Practices for Remote Property Management
Here are some of the ways for NRIs to manage their property remotely:
Hiring a Professional Property Management Company
NRIs can seek help from professional property management companies while managing their properties in India. For this service, you need to pay them a fixed monthly remuneration or a part of your rental income.
These companies deal with all your property management aspects. They help you in looking for tenants, handle all the property repairs and maintenance requirements, collect rent on your behalf, etc. The property managers also deal with the regulatory issues and legal matters related to your company.
Utilising Technology for Property Oversight
You can use various property management tools to access the information about your property. There are several online portals and tools where you can access your property’s financial statements, rental agreements, maintenance details, etc. It also helps maintain clear communication with the property management company, streamlining the entire procedure smoothly.
Regular Communication With Tenants
Another effective way for NRIs to manage their Indian properties is to maintain transparent communication with the tenants and property managers. This helps address any issues at the right time and enough room for prompt solutions.
With proper communication, you can always stay updated with the property status and it helps build a reliable relationship with all the stakeholders.
Virtual Property Inspections
You can take the help of the right technology to maintain seamless communication with your tenants, service suppliers, and property managers. Clear communication facilitates successful property management even from a different country. You can handle emergencies via video conferencing, messaging, or email and maintain frequent contact with your property manager to stay updated with all property-related information.
Financial Management and Record-keeping
You can use financial management tools to track your finances and keep a record of property updates. Transparent financial reporting is essential to keep you informed about your property’s expenses and income.
Read Also: Can a Foreigner Buy Property in India?
Legal Considerations for NRIs
Staying updated on local rules and regulations is essential for NRIs investing in Indian properties. Hiring a legal advisor can help you deal with complex regulatory and legal issues, legal disputes, etc. Legal professionals pursue the right knowledge of local laws, including lease agreements, tenant rights, safety requirements, and property inspections.
Tax Implications for NRIs
According to the IT Act of India, any non-resident Indian buying Indian property (immovable) needs to deduct tax at Source (TDS). However, the tax implications on NRIs may change depending on the type of capital gains and the residential status of the person from whom the NRI is buying the property.
For sale considerations above ₹50 lakh, TDS is deducted at a 1% rate. However, the TDS deduction rate rises to 20% when the property seller is a non-resident, and LTCG (long-term capital gains) is applicable. Again, the TDS deduction rate rises to 30% when STCG (short-term capital gains) is applicable.
You get a maximum of 30 days from the date of deduction to complete the remittance of the deducted tax. Any delay in the deduction process will lead to a fine on the outstanding TDS amount at a rate of 1% per month.
Tax Benefits for NRIs
Apart from paying taxes, NRIs can avail of multiple tax benefits and subsidies for buying properties in India. Here are some of them:
- An NRI can claim tax exemptions under Sections 54EC, 54F, and 54 if his annual income in India comes only from investing in assets and already deducted TDS.
- Under Section 80C of the Income Tax Act, NRIs are allowed to claim a deduction on stamp duty, registration charges, and repayment of the principal amount.
- NRIs can claim a 30% standard deduction on property taxes and use a deduction of interest against home loans.
- If they reinvest the capital gains acquired by selling the first property into some particular bonds, tax exemption applies to it.
Read Also: Tax on Rental Income in India for NRIs: What You Need to Know
Dealing With Emergencies and Repairs
Handling emergencies such as urgent repairs and maintenance while sitting in a different country can be challenging. However, with the right strategies and smart planning, NRIs can deal with such situations seamlessly.
They can build a strong network with local vendors who offer reliable services regarding the maintenance and repair of property. Maintaining clear and transparent communication with these vendors is necessary along with timely payments. This helps make arrangements for repairing works such as plumbing, electricity issues, etc., at an early stage, securing potential damages.
Conclusion
Remote property management can be challenging for NRIs, but with strategic planning, the right tools, and professional assistance, it is entirely manageable. From leveraging technology to engaging expert advisors, NRIs can safeguard their investments even remotely.
Partner with Rustomjee, a leading name in Indian real estate, to enjoy seamless residential property management and ensure your investments are in safe hands.
FAQs
- What roles do real-estate managers play while managing an NRI’s remote property?
A real-estate manager acts as the local agent for NRIs owning a property in India. They manage daily tasks such as collecting rent, vetting tenants, maintenance works, etc.
- How can NRIs maintain their properties in India from a different country?
Property management companies have made it easier for NRIs to manage their properties while residing in a different country. These companies appoint professionals to handle all property-related issues and charge a monthly fee from the NRI against their service.
- Is it legal for NRIs to invest in commercial properties in India?
NRIs can own and invest in commercial properties in India, except for agriculture and plantation properties. If you intend to purchase a property in India, you need to be aware of such restrictions while finalising your deal.
- Does an NRI need to pay taxes for purchasing properties in India?
NRIs do not directly pay taxes when purchasing properties in India. However, they are required to deduct TDS if the property value exceeds ₹50 lakh.
