Whether the real estate market remains bullish or bearish, NRIs prefer a place back in India - not just for investment returns but also to remain rooted in their country of origin. Previously, NRIs had every reason to be leery of the Indian real estate market.
Today, game-changing policies like RERA and GST have now boosted confidence and transparency and streamlined the property-buying process for NRIs. This has begun fuelling new NRI investments into the Indian property market.
The fact that the rupee value against dollar depreciated in 2018 was also a sound reason for NRIs to view Indian real estate more favourably. And, of course, developers have been offering substantial freebies and even discounts, apart from interesting payment plans, to draw NRIs as well as domestic buyers to their projects.
Mindful of the importance of fostering more positive sentiment for NRI investments into the country, the Government also eased norms to facilitate a more streamlined and less cumbersome property buying process for NRIs.
With Indian real estate once again becoming an attractive proposition, NRIs who are interested in buying a home in India need to equip themselves for making the best-possible property purchase decisions.
This includes understanding the regulations and processes related to Indian real estate purchase by NRIs and also knowing what they can reasonably expect from such investments.
Here’s a quick 'realty check':
The Foreign Exchange Management Act (FEMA) stipulates that an Indian citizen residing outside the country can invest in Indian real estate, provided that the property in question is not agricultural land, plantation property or a farmhouse.
There is no restriction on the number of properties that NRIs can own in India. However, NRIs obviously need to make informed decisions on such acquisitions. The most important consideration is that of whether the property purchase is for their own or their family’s actual use, or as an investment for rental income and potential capital appreciation.
Understand Returns on Investment
Before generalized market slowdown in 2015, the ROI on residential property in India was extremely rewarding for NRIs. However, post the slowdown which was exacerbated by DeMo, RERA, and GST, there were no convincing signs of market revival until recently.
As a result, there was a paradigm shift in wealthy NRI investors’ focus – specifically, towards commercial properties, which promised far more satisfactory yields. Then, 2018 saw the beginning of a fairly decent recovery in the residential sector, thanks largely to the improved transparency and efficiency in the market.
Historically, NRIs preferred investing in luxury homes by leading developers as these offered better rental income and capital appreciation. Today, NRI investors are also focused on affordable housing for rental income and better long-term appreciation.
However, NRI end-users with higher purchasing power are still taking luxury housing seriously as long as the price is right. Indian luxury developers are turning out world-class properties which appeal to the expanded world-view of well-travelled NRIs.
In short, both residential and commercial real estate now hold very good investment potential for NRIs, with commercial showing increasing viability on the back of favourable macroeconomic conditions, India’s thriving start-up revolution and the interest for the new kid on the office space block - co-working.
Here's a broad spectrum of returns on investment that NRIs can expect from different real estate asset classes, provided that they have selected their properties wisely:
Understand NRI Payments
NRI needs no special clearances or permission to invest in Indian real estate. However, it is pertinent to note that:
# All monetary transactions must be done in Indian currency and through normal banking channels via an NRI account. NRIs can use either their own funds or avail of home loans from banks or other financial institutions in India. RBI mandates that all buyers, including NRIs, can avail of a maximum 80% of the overall property value via loans from institutions.
# NRIs must use inward remittances via NRO/NRE accounts in India. They can also issue post-dated cheques or opt for Electronic Clearance Service (ECS) from their NRO, NRE or Foreign Currency Non-Resident (FCNR) account.
The writer is CEO – GCC, Anarock Property Consultants