Banned from buying houses, foreigners opt for long lease

RENT RUCKUS
Banned from buying houses, foreigners opt for long lease
Preetu Nair | TNN

Panaji: With the state government ‘banning foreigners from buying properties in the state’, local builders have fine tuned their strategies and are promoting five-year leases among tourists.
There are no official figures to prove the trend, but lawyers and builders agree that thsi is definitely increasing, with several builders from the state organizing road shows and exhibitions in UK to attract customers to Goa.
“A large number of builders are leasing houses to foreigners and it is within the law. But something needs to be done as houses are being leased to foreigners at a huge price, making it difficult for Goans to invest in homes” said builder Rajendra Talak of Talak constructions, Margao.
Despite India’s stringent property laws, the affordability of real estate draws foreigners — British, Russians and Israelis — to Goa. “While a two-bedroom villa would cost about Rs five crore or more in Europe, in Goa the flats come at much cheaper rates. Europeans prefer Goa and find investing in homes in the state a cheaper option,” said a builder, who leases out homes to Europeans.
“Purchasing of property by foreigners has come to a standstill and it’s difficult to execute any deed of sale as the procedure is no longer simple, thus forcing them to seek options like lease, if they intend to stay for long periods in the state,” said advocate Vikram Varma.
It is not just builders, but apartment owners who rent their homes through local rental management agencies in the state and earn a quick buck.
The modalities of the scheme are simple. A lease agreement is signed for five years for a nominal annual lease amount between the builder and foreigner. The value of the property is taken as a security deposit, which is refundable at the end of lease period or whenever the foreigner vacates.
“This gives breathing time to foreigners to complete the residential condition of 182 days residing in India and obtain a business or an employment visa and once this is obtained they can transfer the flat or bungalow to the foreigner’s name,” said chartered account Lalit Shah from Panaji, who specializes in the Foreign Exchange Management Act, 1999 (FEMA).
He added that only non-residents require permission from Reserve Bank of India to purchase a house or property in Goa.
“But if the foreigner stays 182 days in India and shows the intention to reside for indefinite period, then they are considered a resident of India and they don’t require RBI permission to acquire property in India,” added Shah. However, the risks for the foreigner are high, as there is a possibility of being cheated and some do complain of fraud. “In case a foreigner pays a high amount of security deposit then the safety of that deposit is at a high risk as the foreigner doesn’t have any legal sanction to occupy the house for more than five years,” added Varma.

2008 Jun 02 Times Of India Goa