Real Estate development in India has been estimated at 15 billion dollars and is growing at about 30 percent each year. It is expected to touch dollar 102 billion in the next 10 years. Obviously, the enormous potential grouth of real estate grouth need not be overstressed. SEBI has recently allowed real estate mutual funds to invest in the real estate market but detailed guidelines are awaited. Whether for self-occupation or as a viable investment option, investors need to observe certain ground rules before plunging into investment in real estate, to make their options transparent.

The following may not be exhaustive but an attempt has been made to compile points that need to be kept in mind before plunging into investment in real estate in India.

An overview of the family size, age of members, income tax and wealth tax scenario needs to be taken into reckoning before deciding on the type of investment in the real estate. Investment in housing by availing home loan is a viable proposition even if you have an invisible surplus from fiscal sops. The yearly interest allowed as a tax deduction for house property is now only Rs 1.5 lakh per annum per person. A housing loan of Rs 18.75 lakh would attract only Rs 1.5 lakh interest at present. There is no limit on the deductibility of interest in the case of let-out premises. The capital repayments are eligible for tax deduction under section 80C within the overall aggregate limit of Rs 1 lakh.

Joint ownership is strongly recommended, as both will be entitled to fiscal exemptions & sops. However, it must be ensured that each co-owner invests his/her portion of the investment pro rata to the ownership in the property.

As far as possible, the golden rule to follow is that each person should own just one residential house property because only one house is completely exempt from income tax and wealth tax.

For NRIs, repatriation is allowed up to two residential units after a lock-in period of three years but there is no limit for repatriation while investing in commercial property.

Investment in commercial property has inherent advantages because there is no wealth tax, irrespective of the number of units acquired. For NRIs, there is no restriction on repatriation. There is no limit on the deductibility of interest in the case of commercial properties for NRIs.

In the event of a person holding on rent more than one residential house property and if it is rented for more than 300 days in a year, it is completely exempt from wealth-tax.

For those who are planning to invest in real estate as a matter of security for their wards or say, daughter, it is suggested they invest in real estate in the name of a 100 percent specific beneficiary trust of the ward daughter.

For those who are investing in real estate for earning rental income, a standard deduction of 30 percent of the annual rental value towards repairs is allowed whether or not they spend any money on repairs.
As gift tax has been abolished, one can gift properties without any limit