NSDL or National Securities Depository Limited is a financial institution that was established to keep securities like shares, bonds, etc in the shape of non-physical or physical certifications, that is in demat format. The securities are maintained in deposit accounts, which are similar to funds in bank accounts. It allows for quick securities transfer because ownership gets transferred merely by ledger entries. This is frequently done digitally, saving the extra time required in the previous practice of exchanging physical certificates once a deal was concluded. India’s capital market, which has been around for almost a century, has always been quite active. But, due to settlements that are based on paper, it had significant flaws such as poor delivery, prolonged transference execution, and so on. To address these concerns, the Depositories Act 1996 was enacted and went into effect on Sept 20, 1995. This legislation mandated the Security Depositories establishment in India to manage securities. Security is a financial asset that…
Why Real Estate Investment Is The Best Investment For NRI's?
Did you know that an NRI like you could invest in real estate in India and earn rental income?
Did you know that an NRI like you could invest in real estate in India and earn rental income? They say home is where the heart is, no matter how far you wander. And that is frequently the case with many NRIs who have left a part of themselves in India. Also, India is a beneficiary of overseas remittances. It clearly shows that NRIs are still profoundly tied to their roots. No doubt, NRIs have a myriad of investing possibilities and must select the one that best meets their needs ranging from stocks to mutual funds. However, real estate stands out amid the vast investment alternatives in India for an NRI.
According to United Nations data, around 18 million Indians reside outside the country. Over the last two decades, India’s economy has undergone enormous growth, increasing Foreign Direct Investment (FDI). This trend has attracted NRIs, who see it as a viable destination to invest and earn.
However, real estate stands out among the several investment options available to an NRI in India. Real estate has emerged as a hotspot for investment, particularly the large influx of NRIs returning to India. Purchasing a home or a plot of land is all over the place. Some invest for a happy retirement, while others want an asset that generates income.
Real estate is one of the most popular investment vehicles for NRIs. Due to new real-estate market limitations, anybody with an Indian passport may now invest in Indian real estate, making the process exceedingly straightforward. According to a report, NRIs spent US$13.3 billion in the Indian real estate industry in FY 21, up from US$13.1 billion previously estimated. The rupee’s devaluation and the regulatory environment from the reforms have spurred many NRIs to invest in the Indian real estate business.
But why the real estate market is your best and safest bet?
It is natural to assess the advantages and disadvantages of every activity before deciding whether to proceed. Naturally, NRIs contemplating investing in Indian real estate must be aware of the pros.
Here are some points to help you understand why real estate could be your best and safest bet.
- Laws and Regulation: Today’s game-changing policies, such as the Real Estate Regulatory Authority (RERA) and the goods and services tax (GST), have boosted NRI trust and transparency. It has also sped up the home-buying process. As a result, new NRI investments in the Indian real estate business have increased. As a result, Indian real estate is your safe bet.
- Rupee devaluation: Another factor for NRIs to see Indian real estate positively in 2018 was the rupee’s fall v’s the US currency. The recent depreciation of the Indian rupee has sweetened the deal even more since NRIs now have to spend less money to buy a house in the country than they did previously.
- Low property prices: NRI investors should capitalize on the current real estate market collapse. Historically, India’s price inflation has always been higher than in Western developed countries. Thus, India may provide investors with value for money and faster returns. Those interested in investing in low-cost housing may be pleased to hear that, according to the Maharashtra Chamber of Housing Industry (MCHI), the total supply of low-cost flats in Mumbai increased by 300 percent the previous year.
- Tax break: When acquiring a home as an NRI, you are entitled to the same tax benefits as an Indian resident. You can also save capital gains taxes if you sell the property. So, if you sell the property within three years of purchasing it, the gains are taxed as a short-term capital gain. However, if you sell the home after three years, you can postpone the long-term capital gains tax by investing in another property. In India, there are also numerous tax breaks available for home loans. Section 24 allows you to deduct the interest you pay on your home loan, and Section 80C gives you the deduction of the principal amount.
- Rental Income: If a property gets located in a well-established neighborhood, it might provide a sizable rental income. It is especially beneficial for NRIs, as most investors invest in real estate and rent it out. As a result, not only does the property become part of the capital, but the renter’s money also acts as a continuous source of cash flow. In the case of CRE properties, these leases may be for periods, ensuring a long-term income. The renter must pay 30% TDS, but the remaining rental income gets repatriated under the Foreign Exchange Management Act.
- Retirement: With the notion of Reverse Mortgage, real estate investment may get used as a source of income after retirement. It is a sort of loan in India where persons over the age of 62 with significant home equity can borrow money against the value of their property as a lump amount, set monthly payment, or line of credit. NRIs who want to retire in India may profit from reverse mortgages. For NRIs, the money borrowed from a bank for this mortgage is not taxable income. In this way, elderly non-resident Indians may appreciate the advantages of owning property in India. At the same time, they can borrow money from banks as part of the reverse mortgage on their home.
Now, what are the best real estate investment options for NRIs?
Investment in real estate is one of the best investment strategies for NRIs. But where should you put your money to work in the real estate market?
- REITs: NRI investors who wish to gain exposure to the real estate industry but do not want to commit a large sum of money might invest in Real Estate Investment Trusts (REITs), which provide a portion of ownership in a high-yielding commercial property. There is liquidity and no commitment to a minimum investment size or duration. REITs get required by law to distribute 90% of their earnings to shareholders in the form of dividends. The dividend provides investors with a consistent source of income.
- Commercial Real Estate: Commercial real estate has traditionally been a popular asset type for high-yielding investments. Contrary to other yield-generating products like fixed deposits, and mutual funds, investment in CRE offers several extra benefits, particularly to NRI investors. The appeal of commercial real estate originates from the rental return that an investor receives from investing in a leased business property. CRE rates may range from 7-9 percent, significantly higher than the 4-5 percent available on FDs. In cases like the COVID-19 outbreak, NRI investors can raise their yield even more by taking advantage of the rupee/dollar exchange rate devaluation. A 5% depreciation can improve the return from 8% to 8.4%. CRE leases contain built-in escalation clauses of 5% each year or 15% every three years to adjust for inflation. It raises the yield on the return in step with inflation while maintaining the profit after the inflation constant. An inflation-linked return enables NRIs to build wealth in India while not eroding the value of their assets or returns. CRE also provides monthly cash flow returns as well as capital appreciation. Over time, the underlying real estate and land grow in value, adding a “kicker” to the overall profits. A 5-10% capital appreciation raises the overall returns or IRR to 15-20% per year.
- Residential Real Estate: The residential market, in particular, is in better form this year, thanks to a significant decline in speculative investment activity. These are popular among NRI investors who want to increase their wealth and create assets to utilize when they return to India from outside jobs. These residences get constructed for rent, with the owner earning a consistent income from tenant deposits. As transparency has risen and investment laws have reduced, the market has become more enticing to NRIs. Developers also specialized solutions for this market segment by constructing residences with global appeal.
Real estate is an excellent choice for NRI investment in India. The Indian real estate market, particularly among NRIs, is an intriguing site for a safe and secure investment with high returns.
Assetmonk is a premium investing platform for high-yielding real estate assets. It is an online platform that acts as an intermediary for NRI real estate investments. It provides high-quality real estate asset options at accessible prices. It saves NRIs time from the time-consuming and inefficient process search for property in India.
What Is The Minimum Amount For NRI Real Estate Investments In India? FAQ'S:
Yes, an NRI can invest in real estate in India. An NRI might buy the property as a sole owner or co-own. However, regardless of the second holder’s participation in the acquisition, a resident Indian or a person who is otherwise not permitted to invest in a property in India cannot become a joint holder in such property.
Yes, an NRI can invest in real estate. An NRI can invest in real estate or any immovable property in India. However, he cannot invest in agricultural land, plantation property, or a farmhouse.
The best investment for NRI in India is real estate. Real estate offers many benefits for NRIs. These benefits are the tax break, rental income, and retirement benefit.