REAL ESTATE FIRMS BAIT NRIs WITH INCENTIVES

By Javid Hassan

With the real estate sector, too, caught in the grip of recession, NRIs and PIOs (persons of Indian origin) are being targeted with a range of incentives that they cannot gloss over.

In Bangalore, for example, promoters are offering 100 percent home loan at 0.25 percent per month for an apartment (on Hosur Road) consisting of one bedroom, kitchen and hall (BKH) for Rs. 10 lakhs and at Rs. 15 lakhs (including taxes and registration fee) for a 2 BKH. The icing on the cake gets all the more attractive in Bannerghatta, near the National Park, 21 km from Bangalore, where a 2 BKH apartment is available for Rs. 25 lakhs. What is more, it is fully furnished and the buyer also gets a 30x40 site free.

This package of incentives reflects efforts now under way to revive the real estate market, which is also facing a slump in line with the overall recessionary trend in the Indian economy. According to analysts, sales of residential units have plummeted between 30 and 60 percent over last year.

One of the corrective measures launched to attract overseas investments in this sector is to allow an NRI or a PIO to buy residential property in India. They can rent it out, or dispose it of as well. Another major incentive is to allow them to repatriate the income either from rent or any other investment channel out of the country. These concessions, however, are subject to the foreign exchange regulations, which have relaxed conditions for NRIs’ investments in property.

In addition to his own funds, he may also avail a housing loan from a bank. The guidelines of the Reserve Bank of India stipulate that a person could obtain a maximum loan equal to 85 percent of the cost of the house. The applicant’s contribution should be remitted direct through the NRE (external) or NRE (Ordinary) account. Repayment of the monthly loan installment should also be through direct remittance or through NRE account, according to information released by S.S.Rasool of Osmania University Old Boys’ NRIs’ Association (OUOBNA). The applicant can download the form online from the website of any bank. In addition to the routine information that a resident has to furnish, NRIs have to provide additional particulars, such as the details of occupation and income, duration of one’s stay abroad, special reasons for the proposed investment, besides the name and address of the employer, letter of introduction from his organization, copy of the Iqama, bank account, credit history, assets in India, etc.

He is also required to cite references in India, including that of a relative, together with relevant information, such as his passport number and date of expiry, along with an attested copy of specified pages in the passport.

With the housing sector feeling the bite of recession, banks are rolling out their NRI housing loan schemes up to a maximum of Rs.1 crore, or 85 percent of the cost of the property, including the cost of the land, whichever is lower. The rate of interest varies from 11.25 to 14.25 per cent per annum, depending on the financial institution.

In the midst of these opportunities, however, an element of risk also lurks underneath. Consumer cells have advised prospective buyers to tread gingerly through the minefield of hidden bombs in the shape of properties under construction. Vinod Sampat, president of Cooperative Societies’ Residents, Users and Welfare Association, notes that housing projects, not yet completed, could grind to a halt due to financial constraints. “ In this situation, the consumer is literally helpless, especially if a certain portion is paid in cash. But for the white component at least, he can file for deficiency in service on the builder’s part in a consumer court.”

The viable course of action, then, is to invest in property ready for occupation located near cyber cities and technology parks. The going rate will be relatively cheap with prospects of a price surge guaranteed in the long run. Keeping one’s eyes and ears open is the need of the hour.