Real estate is a preferred investment option for non-resident Indians (NRIs) due to its potential for long-term capital growth and rental income. By 2025, NRIs are estimated to contribute around 20% to the real estate sector, a trend driven by sentimental attachment to their homeland and the availability of quality real estate opportunities.According to the Reserve Bank of India, while most NRIs use remittances to support their families back home, a considerable portion is also invested in the real estate sector.
Recent research highlights the enduring appeal of NRI investment in India due to its long-term benefits. The current low rupee-dollar exchange rate makes property investment in India financially appealing. NRIs benefit from government exemptions, including home loan deductions, and residential real estate offers rental income and market stability. Owning property ensures a retirement home and potential for future price appreciation, making it an attractive option for those planning to retire in India.
Real estate in India has consistently provided substantial capital appreciation for investors. This trend is particularly evident as the Indian economy, known for its stability, experiences steady and continuous growth. Rental profits have also increased, ranging from 2.5% to 4% across various markets.
What Factors Should NRIs Keep In Mind When Investing In Indian Real Estate?
Investing in properties is a big decision, whether made by an NRI or a regular citizen. Budget and personal preferences are basic considerations that a non-resident Indian must consider. Here are additional key considerations to bear in mind–
1. Perform Comprehensive Due Diligence
Investors must conduct thorough research before finalising on any property or developer.
“This includes evaluating connectivity, understanding the potential for property appreciation, and checking local infrastructure development. As an NRI, you must also go for a developer with a proven and reputable track record. Thorough due diligence helps identify the best investment opportunities and avoids properties with legal issues or poor growth potential. With detailed assessment or research, you might end up buying a property with legal disputes or in a not-so-convenient area, which might cause you trouble later, like financial losses or stress”, says Anupam Rastogi, co-founder and Chief Business Officer of Square Yards, a proptech platform.
2. Define Your Investment Objectives Clearly
Recent research highlights the enduring appeal of NRI investment in India due to its long-term benefits. The favourable rupee exchange rate against the US dollar makes property investment financially wise. NRIs enjoy government exemptions, including home loan deductions. Residential real estate offers rental income and market stability. Property ownership ensures a retirement home and potential future price appreciation for those retiring in India.
3. Comprehend Financial and Tax Implications
Taxation and financial aspects are paramount when planning to rent out. This includes tax on rental income, capital gains and property ownership. Anupam Rastogi also highlights making all payments with complete paperwork and through proper banking channels in India. An appropriate understanding of financial and tax obligations is crucial for effective planning and legal compliance. Ignoring these can result in unexpected tax liabilities, legal issues, and difficulties repatriating rental income, disrupting your financial plans.
4. Acquaint Yourself with RBI and FEMA Guidelines
It is beneficial to thoroughly understand the regulations of the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA). NRIs can invest in residential and commercial properties but not in agricultural land, plantations, or farmhouses. Being well-versed in these regulations ensures compliance and security. Investing in disputed properties can lead to legal hassles, financial losses, and potential forfeiture, severely impacting your portfolio.
5. Hire a Professional Property Management Advisor or Company
Managing property from abroad can be challenging, and hiring a property management advisor or company, or having a trusted contact in India, is essential. They can oversee maintenance, manage tenants, and keep you informed of any issues. Effective management ensures your property stays in good condition, preventing deterioration and preserving its value. Without proper management, you risk higher maintenance costs, tenant problems, and potential financial losses.
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Published Date: 18 July, 2024
