Renting out your home while living abroad can be a profitable business, especially if you know how to make it work. When we say profitable, we mean that your property isn't sitting empty but is bringing in big bucks for you. Thus, it is one of many reasons why NRI property management is vital for NRIs.
The best approach is to have a rental agreement. Apart from the rented property's terms and conditions, your rental agreement should include details such as the amount of rent and the duration of the lease. Before we start, what are the various factors that an NRI should consider before entering into a rental agreement for a house in India? Let’s take a look.
Is it possible for NRIs to earn rental income?
NRIs can rent out property in India that he owns with the help of an NRI property management company. They can deposit their rent cash flows into an NRE or NRO account. Rent received in these accounts is freely available. If you do not have an NRE or NRO account, you can rebate the proceeds directly abroad, but you will need a certificate from a chartered accountant certifying that you have duly paid all taxes.
Is the rental income taxed in your residential country?
When you are an NRI, you are a tax resident of another country. In most cases, countries tax residents based on their global income. As a result, tax may be deducted at the source of income earned in India, as in the case of rent, under provisions of Indian Income Tax laws. However, that income may be subject to taxation in your country of residence. In such cases, you must refer to Double Taxation Avoidance Agreements signed by India with other countries.
Now that you know the factors keep the following points in mind when settling the House Rent Agreement.
The Provisions of your Rental Agreement
First and foremost, the terms and conditions in the house rental agreement are vital, as it is a legal contract – an outline of your offerings and expectations from the transaction. An NRI property management company can guide you with your decisions.
Present Condition of the House
It is crucial to document the property's present condition in the rental agreement since you will not be able to visit your house regularly. Describing the current state of your residence and a list of items you have rented out, such as a sofa or a kitchen chimney, will make your rent agreement more transparent and help keep a damage check on your rental assets.
Rent Inclusions and Exclusions
Is the maintenance fee included in the rent? What is the security deposit amount? How much of it is refundable? Who will be responsible for any damage? What will the monthly rent payment method be? It is best to address these concerns in the house rental agreement because renting involves more than just receiving a check at the end of every month.
In India, the average annual rent increase is eight to ten percent, but don't rely on assumptions. Make a detailed chart outlining how and when you will raise the rent. It will mentally prepare your tenant to part with more money in the future, saving you from financial loss as a landlord.
Our team at PropertyAngel, an NRI property management company in Bangalore, handles all rental paperwork. You only need to sign all agreements and documents.
Verification of Tenant's Background
Though it may seem like extra work for many of us, proper tenant background verification is necessary before entering into a house rental agreement. You can hire an NRI property management company if it's difficult for you. As a landlord, you must exercise caution when renting your home to someone else, mainly because you may not be able to visit your property frequently if you encounter a problem with your tenant. So, before signing the deal, get a proper police verification and ask for relevant documents.
Only finalize the agreement after you are sure that all necessary documentation and personal investigation are complete. Never rely on early introductions to lease your property.
Registration of the Rental Agreement
It is mandatory to register all house rental agreements lasting eleven months or more. According to Section 49 of the Registration Act, an unregistered rental agreement is not admissible in evidence. A registered agreement is also considered proof of address, which your tenant can use to get a new phone or gas connection. NRIs can now register their rental agreement online in some Indian states. Just fill out the owner, tenant, and property information and request an online registration.
At PropertyAngel, an NRI property management company, we not only help you in drafting professional rent agreements; but also help you in registering them.
Power of Attorney
Though it is preferable to be physically present when signing the lease, this is not always possible for NRIs living abroad. In this case, Power of Attorney is the solution (PoA). Today, many resident Indians, not just NRIs, use power of attorney to complete house rental procedures without getting involved in the hassles. Even if you live outside of India, you can execute a power of attorney (PoA) through the Indian Embassy. Legalization and Apostilization are the two methods for carrying out a PoA from abroad. Hiring an NRI property management company will take the stress away from your property legalities.
It is also not always necessary to give a lawyer power of attorney. You can also give it to a friend or relative who will be in charge while you are away. However, the process of registering a POA can be time-consuming. At PropertyAngel, an NRI property management company in Bangalore, we guide an NRI in this regard.
PropertyAngel is the best option for NRIs like you who want to rent out their property without getting too involved in the details. Our NRI property management company will help you with the services mentioned above. We will be your point of contact and ensure that you receive your rent on time each month. Join us now!