Categories
Financial Planning Real Estate

Buying/Selling Property in India as an NRI from Germany

Property in India for NRIs

This post is a little different theme from the usual ones, more focused on Indians who moved to Germany and need to figure out property/real estate matters in India. This is because I see these questions being asked in various forums about property in India as an NRI from Germany.

….am I an NRI?

NRI or Non Resident Indian, from a tax perspective, has

  • Stayed in Indian for the current tax year for 182 or more days, or
  • In the last 4 years has stayed in India for 365 days or more, of which at-least 60 days in current year.

As a Non Resident Indian, can I buy property in India while living in Germany?

Yes, you need not visit India to buy a property. As an NRI you can only buy residential or commercial property in India. The mechanism to do this is buy giving a special power of attorney to someone in India.

Any payments should be made from your NRO account only.

Can I sell Property in India as an NRI from Germany, without visiting India?

The Power of Attorney(POA) is again the instrument to help you here. However, few very important things to understand. By Law, Power of Attorney does not allow the power holder to sell a property, the transaction is only valid when a clear sale deed is executed. So, the person holding this POA has to enact the sale deed which might need your document signatures and so on.

How to get a Power of Attorney in Germany?

The Embassy of India does this for you, you should reach out to CGI Frankfurt or Berlin. The steps are:

  • Get a power of attorney(called Vollmacht) made by local Notary in the local Landgericht (Court).
  • Take the original and a copy to Embassy, sign this document in the presence of Consular Officer
  • The Embassy then attests your signature.

Of course this is just the first step, in India you will need No Objection Certificate, Occupation Certification, Sanction Certificate and maybe more to finally get it done.

What about taxation after selling property as an NRI from Germany?

After you make the sale of Property in India as an NRI from Germany, the next step usually is to send this money from India to Germany. The below might changed based on tax laws for the year.

  • If the property is sold <2 years of ownership, then 30% capital gains tax will be applied in India
  • If the sale is after >2 years of ownership the tax claim is 20%
  • You might get exemptions under Section 54, if you are reinvesting the proceeds in other property (within a prescribed time limit).

The money should be deposited to your NRO account if you want to remit it to Germany. For sums <US$ 1 million you only need a certificate from a CA proving the source, this is also referred as Form 15CA

Categories
Financial Planning Personal Post Real Estate

Why we have to delay buying our home

I have not been a keen imitator is template dreams, I still do not own a car, and have argued against buying an apartment at home. However, recent changes in the local European interest rates, changes in life situation and simply higher rents made me start believing that we could own a home. However, recent events have just made us decide that we have to delay buying our home.

For Sale

Why buy when you could have rented Mr A?

True. We tried and are failing.

After becoming a parent, the limitations of the space in our current rented apartment and the struggle of our visiting parents climbing 3 flights of stairs made us search for a bigger rented apartment.

Yet, with the constant struggle of applying and never being called to visit, and the few instances when we did get to visit homes, we are facing an uphill challenge where a bare increase of 10 sq.m area is going to cost us 40% more in rent. Rents have simply skyrocketed in the last 3 years. Additionally, we cannot simply move too far as we are bound by constraints of the daycare (already 7 km away). Thus the brilliant idea of buying an apartment was born, and we started to save for it.

You have to delay buying a home, because you do not have the money, isn’t it?

True again. Isn’t that always the case? I had been keeping an eye on a new development which was in a perfect location, and closer to the day care and yet not so far from the town center. An year of more purposeful saving made us come close to around 12% of the house value we had planned for (based on prices in the same area 18 months ago).

The price list came through on Monday, and it simply crashed through our plan. The prices of the apartments have risen higher than we had estimated, and our down-payment is lower than we wanted. I know I can probably get the apartment at 90% mortgage. I am tempted to try this, the apartment seemed perfect and had parks and no drive zone for children. But paying more than 35% of our monthly income for 30 years and extra maintenance money on top is not a financially wise decision. This is not how we Get FI! I do not want to write this purchase to be the title of my next Money Mistake post!

My wife and I had a long discussion this morning, and she just said,’We cannot take a 30 year mortgage which eats 40% of our income, this is stupid given that our child will be out of his daycare in 2.5 years‘.

She is right.

Delay buying a home. Hurts.

So, we have now reassessed our dreams and take a step back. We will save more next year, and are looking at places within our budget. Hopefully it might work out in 2020. I know I really liked that place, but I also like Maseratis

In the end, our homes are our safe spaces, and it is our loved ones which make them a home else they are just brick and cement.

Categories
Financial Planning Rant Real Estate

The debate around Rent control and Rental yields

Twitter, last week, was filled with a trending topic of #eigentumswohnung. The real culprit behind this massive outrage with an article on Rent control in Berlin, titled Ganz schön unsolidarisch.

The writer has ruffled some feathers, talking about people who bought apartments and with rent control, their yields will collapse. Germany, is a rental country, and very few individuals purchase houses. This opinion peace has received a backlash as rent control will be applied for next 5 years in Berlin. The issue in Berlin is a little serious as rental prices have gone up significantly in the last 5-6 years and risk gentrification. Sadly, all of this sudden hate resulted in the writer quitting twitter!

Now, am no expert on this topic, but a few months ago I did listen to Freakonomics Radio and an excellent discussion happened on this very topic, the website covers the most of it. Housing in Germany is a different animal, house supply is also tightly controlled and coupled with ultra low interest rates the prices are inflated. In fact Munich seems to be have been called out for this.

Suche Wohnung - Searching for an apartment
Suche Wohnung – Searching for an apartment

If you are trying to search for a rental apartment in Germany in a big city, you are probably competing against 60-70 other applicants at any given time!

At the time of this writing my portfolio has a cash component of 53% cash, largely because we are trying to save for a car and an apartment. The biggest challenge I face today is that our speed of saving is slower than the real estate price increase in our city.

For us, buying a home for self use is our primary goal, but we know that this will pin us down to a place. While I do not know what the future holds, but surely capping is not the right solution here. The demand for housing, social housing and approval of such plans has lagged all across Germany in the big cities. The fact is, people are moving to bigger cities, and rental control does not fix the lack of supply.

Sure, the rental yields will be lower, but at the current house prices, they are already insignificant. Getting a rental yield of 4% on an apartment of 400k EUR is just not possible, it may not be a great investment and might just get added to list of money mistakes.