5 Reasons Why NRIs Should Invest in Real Estate in India
There is one common aspiration shared by both Indian residents and non-resident Indians (NRIs) — the dream of owning a property in their native. Having a place of residence back home provides long-term financial benefits and a sense of emotional security for individuals staying a thousand miles away from their motherland.
With the Indian real estate market returning to its pre-pandemic glory, people living abroad are seizing the opportunity to pour their capital into immovable properties. A recent Financial Express article stated that NRI investment in India had witnessed a robust 6.4% growth from FY20 to FY21.
Moving ahead, factors ranging from sentimental value to contingency financial plans will favour NRI investment in Indian real estate.
Value of Indian Currency
NRIs have a distinct advantage over native people due to the depreciating value of the rupee against currencies of developed nations like US dollars and pounds.
When their money is converted into Indian rupees, it gives them increased purchasing power. As a result, NRIs can acquire properties in premium locations at a lower cost compared to what it would have been in developed nations.
Prospects of Potential Returns
While the global real estate market crumbled amid an economic downturn, the Indian counterpart stood firm and witnessed an early recovery.
The demand for affordable housing is increasing due to the growing population and urbanisation, which is driving up property values.
Major cities like Mumbai, Bengaluru, and Delhi offer competitive rental yields compared to global markets, making them attractive investment opportunities for NRIs looking for regular income streams.
The emergence of co-working spaces, fractional land ownership, and commercial real estate, among other options, expands the investment opportunities for NRIs, with the potential for better returns on investment.
Properties are Centrally Located
For those planning to shift their base to their homeland, luxury apartments located in the heart of cities are ideal.
Prominent builders carefully select the location for their apartment projects, ensuring excellent connectivity to employment hubs and various social infrastructure. This advantage is highly desired by NRIs who hope to see similar development in their home country.
Residential enclaves situated near renowned educational institutions, prestigious healthcare facilities, lively entertainment districts and bustling shopping centres offer unmatched accessibility for individuals accustomed to a fast-paced lifestyle abroad.
Easy Buying Process
The Government of India (GOI) and Reserve Bank of India (RBI) have implemented rules and relaxed regulations emphasising the importance of luring more NRI investment in India. The regulatory authorities’ moves simplify property buying processes for offshore Indians.
RBI has permitted housing finance centres registered with the National Housing Bank to grant home loans to NRIs to buy properties in India. The loan is credited to the property developer’s account, which can be repaid using the NRO account (Non-Residential Ordinary), NRE account (Non-Resident External) or FCNR account (Fixed Deposit Foreign Currency account).
Transparency in real estate transactions is imperative for people living abroad. Implementing the Real Estate Regulation Act (RERA) 2016 has enforced the much-needed criterion. According to the act, builders must register every property detail, including approvals, completion date, and land status, among others, on the RERA website. Developers must mention their RERA registration number in all their property-related communications.
The Income Tax (IT) Act provides a series of tax benefits for NRIs, such as the following:
a. Under sections 80C and 24(b), an NRI is eligible to file for tax deductions on interest and principal payments if they draw a home loan.
b. An immovable property possessed by an NRI for more than 24 months is considered a long-term capital asset that qualifies the holder for an indexation benefit with easy taxation at 20%.
c. Additionally, the IT Act allows tax exemptions under Section 80TTA.
High Resale Value
The 2023 budget has provided an impetus to the infrastructural growth, pledging about INR 10 lakh crore in direct investment from the central government. This move will have a direct impact on the real estate value of the areas that are scheduled to undergo an infrastructural facelift.
The ongoing focus on the production-linked incentive (PLI) scheme will enhance the commercial sector, leading to a substantial demand for real estate for office spaces and manufacturing units. This increased need for commercial space will positively impact the resale value of properties in the future.
Investing in residential properties in India offers NRIs myriad benefits, ranging from potential high returns on investment and diversification of their portfolio to the emotional connection with their homeland. Given the rapidly growing economy, favourable government policies, and the potential for significant real estate value growth, NRIs should not hesitate to invest in the Indian real estate sector. Relying on trusted professionals and real estate builders will ensure a fruitful investment for Indians living abroad.