Buyer's Guide

Investment property buyers need to make a down payment of around 20-25% for financing an investment property. The amount of down payment may differ based on the type of finance used to purchase an investment property. The amount of down payment will also depend on an investor’s financial standing.

Factors Affecting Down Payment

• Most lenders will consider an investor’s debt-to-income ratio and credit score.
• Whether investor plans to live in the property or not.

While buying your first property, keep the following factors in mind :

• Locality

Choose the location that meets your requirements. Consider the area and its current and future prospects. Also, take into consideration the amenities available nearby.

• Neighbourhood

Though the neighbourhood is a matter of personal choice but a good neighbourhood should have a few critical factors in common such as appearance, accessibility and amenities.

The neighbourhood should be near the city’s major transit routes. The appearance of the neighbourhood is also very important. Beautifully landscaped areas with parks and community spaces are more desirable. An ideal neighbourhood should also have essential amenities like grocery stores, shops, schools, hospitals and restaurants.

• Civic Infrastructure

Good civic infrastructure such as public transportation, schools, hospitals, shopping complexes improves the property value in the area. So, the residential, commercial and public development of an area affects the desirability of properties in that area.

Tax liabilities when purchasing a property in India are as follows:

• No income tax implications are available at the time of purchase of the property if the amount paid for purchasing property is equivalent to or higher than the stamp duty value of the property.
• In the event the stamp duty value of the immovable property is more than the consideration, in that case, the difference shall be taxable in the hands of the buyer. The law requires the buyer to pay 5 percent of the consideration or INR 50,000.
• If the property is acquired from a resident Indian, in this case, the purchaser needs to deduct TDS at the rate of 1% of the sale consideration if the amount is more than
  INR 5 million.

Choosing the right real estate developer can result in fruitful investment but choosing the wrong real estate developer can be catastrophic to your investment. herefore, you must choose a real estate developer wisely. Here are some of the points you must consider before shortlisting the real estate developer:

• Before investing in a property, thoroughly research about the developer. Ascertain the developer’s credibility and track record.
• Inspect the construction quality as it instantly brings the developer’s authenticity to the fore. If construction quality, specifications and amenities are not up to the mark, then do not buy that property.
• Check documents including RERA number, land ownership, no-objection certificates and more.

Following are the steps of property purchasing in India:

• Search- Before buying the property, search for the best localities within your budget and ensure you do not miss details like amenities, accessibility etc.
• Shortlist- Explore the options and narrow down your choices. Also, perform encroachment checks.
• Book- Pay the booking amount to block the property for you. Sign a memorandum of understanding.
• Technical Evaluation- Get your property inspected by a civil engineer to see if it meets the norm and is eligible for an Occupancy Certificate.
• Legal Verification- Ask the builder to give you documents related to the property and verify these documents.
• Sale Agreement- Next step is to execute the sale agreement, which forms the basis for the sale deed.
• Registration- The next step in this process is to execute and register the sale deed.
• Moving In- The last step is to move into the property.

The complete guide to home loan approval is as follows:

• Applying for a home loan
• Payment of loan processing fees
• Applicant’s scrutiny and verification
• Evaluation of repayment capacity
• Home loan offer letter
• Property verification
• Home loan disbursal

On selling property in India, the non-residents face the following tax liabilities:

• In India, tax shall be paid on capital gains from the sale of immovable property. The rate of tax depends on the time for which the person holds the property.
• Capital gains unused before the date of filing tax returns can be deposited in a capital gains scheme.
• If the value of stamp duty of the property sold is more than the sale consideration, then the stamp duty value is regarded as sale consideration.
• Taxes can be saved by investing in long-term capital gain in bonds not exceeding Rs.5 million issued by Rural Electrification Corporation or National Highway Authority of India or any other bond specified by the union government. The taxes on long-term capital gains can also be saved by re-investing those as per the provisions of the Income Tax Act.

The tax liability on lease rentals is as follows:

• Taxes need to be paid on lease rentals.
• Specific deductions are allowed from the income arising out of lease rentals.
• The net lease rental amount is subject to tax according to applicable tax slabs.

NRIs can purchase as many properties as they like, and there is no restriction on the number of properties they can buy. The significant consideration is whether the property is acquired for your or your family’s use or investment for potential capital appreciation or rental income.

The non-residents must make monetary transactions in Indian currency. In addition, the transactions must be done through normal banking channels via an NRI account. The NRIs can use their own funds or take a home loan for purchasing a property. As per RBI, NRIs can avail up to 80% of property value via loan.