The real estate market has experienced a significant shift in trends and trajectories, with Non-Resident Indians (NRIs) emerging as a prominent force in property investments. NRIs, who live abroad but maintain strong ties to their home country, are increasingly recognising the potential of the Indian real estate sector.
Top Locations for NRIs to Buy
Non-Resident Indians (NRIs) have shown interest in buying property in cities like:
| Tier 1 | Tier 2 |
| Gurgaon | Ahmedabad |
| Bengaluru | Chandigarh |
| Hyderabad | Thiruvananthapuram |
| Mumbai | Kochi |
Trends and Statistics of NRI Buyers
- One of the key factors contributing to this surge in NRI buyers is the depreciating value of the Indian rupee against major foreign currencies. NRIs find it advantageous to invest in Indian real estate as they can leverage their foreign currency to purchase properties at relatively lower prices.
- Another significant set of trends are the rising demand for luxury properties among NRIs. As per Knight Frank’s Wealth Report 2021, India has the fourth-highest number of billionaires globally. Many of these affluent NRIs are keen on investing in high-end residential projects in India, either for personal use or as long-term investments.
- Furthermore, the COVID-19 pandemic has played a role in amplifying the interest of NRIs in Indian real estate. The uncertainties and disruptions caused by the pandemic have prompted many NRIs to reconsider their investment options and seek more stable and secure avenues.
Uprising trends : Reasons for NRIs to Invest in Indian Real Estate
Value Of Indian Currency
The fall of the Indian rupee has led to increased demand for homes as non-resident Indians (NRIs) seek to invest their money in real estate and protect against currency fluctuations. In 2022, the rupee’s value continued to decline, reaching an all-time low of Rs 81.88 from Rs 74.40 at the start of the year.
Simple Buying Process
For NRIs buying property in India, the process is straightforward:
- Choose the property and check its legality
- Arrange for funds in an NRI/PIO/OCI bank account in India
- Power of Attorney (POA) if you’re abroad during the transaction
- Execute the sales deed, register it, and pay the stamp duty
- Apply for mutation of the property
Transparency
The government’s introduction of RERA has facilitated increased transparency in real estate transactions, thereby boosting the confidence of both local and NRI home buyers.
Tax Considerations for NRIs
Taxation is a significant aspect of real estate investments, and NRIs must be familiar with the tax implications in India. Here are the key tax considerations for NRI buyers:
Income Tax Trends
NRIs are subject to income tax in India on any income generated from properties they own in the country. Rental income, capital gains on property sales, and deemed income from vacant properties are all taxable.
TDS (Tax Deducted at Source):
The buyer is required to deduct TDS at the applicable rates and remit it to the income tax department. Failure to comply with TDS provisions can result in penalties and legal consequences.
Double Taxation Avoidance Agreements (DTAA):
India has entered into DTAA agreements with several countries to avoid double taxation. NRIs can benefit from these agreements by claiming foreign tax credits or exemptions in their home country based on the taxes paid in India. Understanding the DTAA provisions between India and their resident country can help NRIs mitigate tax liabilities effectively.
Goods and Services Tax (GST):
The implementation of GST in the Indian real estate sector has brought about significant changes. NRIs need to be aware of the GST’s applicability to the purchase of under-construction properties and understand the rates and exemptions based on the property’s value and location.
Implications and Future Outlook on Trends
- The increasing number of NRI buyers in the Indian real estate market has significant implications for stakeholders. It provides a boost to the sector, contributing to its growth and stability.
- NRI investments stimulate the development of new projects, infrastructure, and services, creating employment opportunities and driving economic growth. The presence of NRI buyers also elevates property values, as they prefer luxury properties and are willing to pay a premium for quality assets. This benefits developers and existing property owners while encouraging high-quality project delivery and fostering healthy competition.
- The influx of NRI buyers has led to a shift in property development, with developers catering to their specific demands and preferences. This has improved the overall standard of living and introduced innovative designs and architectural styles.
- Looking ahead, the future outlook for NRI buyers in the Indian real estate market remains promising, driven by the Indian diaspora’s emotional connection to their homeland and the country’s economic potential. The government’s efforts to simplify regulations and create an investor-friendly environment will likely sustain the trend of increasing NRI buyers.
FAQs:
Why are NRIs increasingly investing in the Indian real estate sector?
NRIs are recognising the potential of the Indian real estate sector and its growing market. Factors such as the depreciating value of the Indian rupee and the demand for luxury properties are contributing to their interest.
What financial considerations should NRI buyers keep in mind?
NRIs should monitor exchange rates as they can impact the purchasing power of their foreign currency. They have multiple financing options to consider, such as external commercial borrowing, home loans from Indian banks, or loans from international financial institutions.
What tax considerations are important for NRI buyers?
NRIs are subject to income tax in India on income generated from properties they own in the country. They should understand the tax rates, exemptions, and deductions available to optimize their tax liability.
How can NRIs ensure a smooth property purchase process in India?
NRIs should engage with reputable real estate agents, legal experts, and financial advisors who specialize in dealing with NRI buyers. They should conduct thorough due diligence, understand the legal and financial aspects, and comply with all necessary regulations and documentation requirements.
