Purchasing Permanent Accommodation as a Foreigner
Foreigners as a general rule, cannot purchase permanent accommodation or buy property in India, although there are exceptions, and most people living in India for a fixed term do not opt to buy as a) purchase values for real estate are proportionately much higher than rental values, and b) there is a lot of bureaucracy involved in buying real estate.
Foreigners can buy residential real estate only if they are resident in India, which means that you need to spend more than 182 days in a year in India. It is not possible and indeed, illegal, to buy real estate if you are on a tourist visa, business visa or employment visa of 3 years or less. The only exception is foreigners of Indian origin, who hold PIO or OCI cards. Foreigners and PIO card holders are not allowed to purchase agricultural land.
Some windows that are worth exploring are: Foreign companies who have Indian offices can buy and sell real estate; individuals on employment visas can lease a house for a maximum 5-year term.
If, however, you do qualify as a resident, and you wish to purchase a home, you will still need the permission of the Reserve Bank of India to buy, finance or sell your property unless you are of Indian origin.
Good homes in Bangalore cost anywhere from Rs. 35,00,000 (35 Lakhs) for a modest 2 bedroom to Rs. 500,00,000 (5 Crores) for a sumptuous villa, with a per square foot price ranging Rs. 3,000 to Rs. 15,000. Financing a home purchase is complicated for foreigners, and most often the simplest thing if you have the resources, is to make an outright purchase. Banks are not authorized to loan more than Rs. 100,000 to foreigners, which is only a small fraction of what a home costs. For larger amounts, you will need to apply for permission from the Reserve Bank of India, provided that you qualify as a resident, or are a person of Indian origin.
Most major banks and some insurance companies offer housing loans. Interest rates currently range from 8-11% for floating interest rates, and 11-15% for fixed rates. Most banks will fund up to 85% of the total value of the purchase.
- State Bank of India (http://www.statebankofindia.com/)
- HDFC Bank (http://www.hdfcbank.com)
- ICICI Bank (http://www.icicibank.com/)
- LIC Housing Finance (http://www.lichfl.com/)
- Standard Chartered (http://www.standardchartered.co.in)
- Citibank (http://www.online.citibank.co.in/)
- HSBC (http://www.hsbc.co.in)
- Deutsche Bank (http://www.deutschebank.co.in/)
Some banks (HDFC, HSBC, ICICI) will pre-approve you for a loan before you identify a property, while others (usually the nationalised banks) will ask you to identify a specific property and, only then, apply for a home loan.
To get a housing loan, you will normally need to provide ID proof, proof of address, tax returns (from 1 year to past 3 years depending on whether you are salaried or self-employed), 3-6 months bank statements, loan application form and passport size photographs. Specific requirements will vary from bank to bank, and depending on your employment status. The bank will also need to value the property you intend to purchase, and may ask for permissions and clearances from the builder if it is an apartment. Processing normally takes 15 working days.
The Purchasing Process
You may choose to be pre-approved for a loan before you set out looking for a home to buy, or you may choose to identify the home first, and then apply for a loan to purchase it. Either way, it is advisable, given the vagaries of India’s real estate market, to engage the services of a reliable estate agent. Agents typically take 1% of the value of the deal from the buyer of the house and help walk you through the various stages from property hunting, negotiation to closing.
Some reliable real estate firms are:
- Hanu Reddy Realty (http://www.hanureddyrealty.com/) a well-known agency with offices across India and the US. They charge no commission for purchases of new apartments.
- Beary’s Group (http://www.bearysgroup.com) A building and construction company with an agency wing.
It is also highly recommended that you hire a real estate lawyer to go through all the documents and deeds and advise you on the transaction. Your real estate agent can suggest a reliable lawyer to you. Alternatively, you can contact one of the laywers listed on http://www.legalserviceindia.com/lawyers/bangalore.htm. Most firms will have at least one lawyer who deals with real estate law.
The steps to purchase an existing house typically take the following path: Once you have selected the property and agreed on a price, you may pay a token deposit of Rs. 5,000 as an expression of interest. The seller should then give you photocopies of all the deeds and documents so that you can get your lawyer to verify that everything is in order. Your lawyer will then draw up an Agreement of Sale, and ask to see all the original documents and deeds. You will need to pay around 20% of the purchase price at signing, and the rest after the sale has been registered with the office of the Sub-Registrar, and the deed of sale printed on government stamp paper. You will be charged a stamp duty fee of 5% and a registration fee of 1% (of the sale cost) for properties bought in Bangalore.
Buying a new apartment from a builder/promoter is easier, with stipulated payment schedules and methods, and usually clearer paperwork. In any case, these too should be checked through by a lawyer. Buying a house in India is not something that is advisable to do on your own as paperwork is often not transparent, and there are too many loopholes and pitfalls on the way.
The following websites will help give you a sense of the property market and show recent listings and the contact details of real estate agents representing those listings.