Can an NRI invest in real estate in India? Y-E-S. Will the real estate business in India make me money? Y-E-S.
The Indian real estate business, according to NITI Aayog, will be valued at $1 trillion by 2030 and will contribute 13% of India’s GDP by 2025. The real estate industry, now the third-largest contributor to GDP, is expected to continue growing in 2022.
Last year, the real estate index increased by 75%, making it the second-best performing sector index, beating the benchmark index Nifty50. Owing to low loan rates and temporary stamp cuts, real estate has made a comeback and will grow in the following year.
In addition, the Indian government has taken numerous bold moves to stimulate growth in the real estate sector. The Smart City Project comprises the creation of 100 smart cities. It promises a substantial opportunity for Indian property developers. Furthermore, SEBI has permitted REITs to facilitate all forms of investors’ involvement in the country’s real estate market.
How is Indian real estate the ideal NRI Investment?
Should NRIs invest in Indian real estate? Is it worthwhile to invest in real estate in India? Yes, indeed! The real estate industry is profitable. But, how exactly is NRI real estate investment lucrative? Check these NRI metrics for real estate investments in India.
- Less volatile investment: Real estate is a less volatile asset than the equity markets, gold, or cryptocurrencies. While gold can help with market fluctuations, it also has drawbacks, such as theft and storage issues. The newest craze is cryptocurrency. As a result, relatively little is known.
With the implementation of RERA and decreasing home loan interest rates in recent years, the real estate market has developed. Bank savings account interest rates are low, especially when compared to inflation. You may put your spare cash to good use by investing in real estate. It is less susceptible to frequent fluctuations and has a reduced theft risk. Furthermore, the pricing cycle for real estate is longer than that of other securities. As a result, property prices are predictable and consistent.
- Rapidly developing industry: The Indian property market is substantially expanding. The real estate market will grow by 65,000 crores by 2040, up from 12,000 crores in 2019, contributing to 13 percent of GDP in 2025.
- Exceptional growth prospects: As the world’s attention swings away from China, property investments in India may be a profitable option. Foreign firms are relocating to India. Workers in India will grow. Individuals are more inclined to purchase homes due to the injection of funds, raising the market for real estate. It is ideal for real estate investors. They can benefit from capital gains tax advantages under Section 54F of the IT Act.
- Maximum ROI: Real estate investment returns outpace inflation, generating earnings. Real estate offers a higher rate of return with less risk than equities and bonds. The investment process is quite simple, with regulations like registrations and stamping duties in place to reduce the possibility of fraud and fraud.
- Tax advantages: Home loans may allow you to save money on taxes. Section 24 permits you to save 1.5 L on the amount and 2 L on the interest owed as a first-time homeowner. Tax advantages can lower the cost of your investment and make it cheaper.
- Potential Demand: Migration is the main factor underlying job hunting in larger cities. So, real estate has thrived over the last two decades and will continue to increase in the coming years. People are eager to invest in little apartments that fulfill two purposes: dwelling and investment. Demand is rapidly growing and will continue through 2025. As a result, the possibility of need makes it a feasible venture with several players.
Now, where can NRIs better invest in Indian real estate?
- Commercial real estate: Investing in commercial real estate is an appealing option. Despite market volatility, this is because commercial real estate investing delivers a steady stream of cash flows and property appreciation. Once held, commercial real estate is a lucrative source of income in a short period. Offices, warehouses, and factories are examples of commercial-grade property ownership. Due to the sheer financial investment required, CRE priced in crores has traditionally been the domain of HNIs and Ultra HNIs.
As a result, middle-income investors have just two choices: volatile stocks or low-interest bank FDs. However, NRIs may now invest in commercial office buildings because of fractional ownership. Rental turnover for commercial buildings is between 5 percent and 12 percent. Year after year, rents continue to climb. As a result, you outpace inflation. The rate of return on commercial real estate is between 6 and 12 percent.
- Fractional Ownership: We’ve always been scared and discouraged about investing in real estate. Commercial real estate, in particular, has a high value and gets valued in crores. Yikes! Why is this the case? Commercial real estate is pricey and measured in crores. You have a limited budget. Logically, you’d want to run away. But what if I told you you could invest in that high-end office space next door? And all with only 25 L. That is known as fractional ownership. A group of investors pool their capital to buy a high-end office property. The property’s expenses and earnings get shared among the shareholders. Rental income revenue gets distributed to investors in proportion to the amount committed to the asset. The capital gain from the sale is shared equally by the investors. The property’s investors earn from annual rental revenue ranging from 6% to 10%.
- Real estate crowdfunding: Real estate investment was a distant aim for the ordinary investor a decade ago. However, this is no longer a problem. Crowdfunding is a creative approach for real estate investors to combine their money for a project. To begin, they generate income via rental payments. Furthermore, crowdfunding allows investors to engage in high-end commercial real estate initiatives with no management. Operators will be in charge of the properties. All an investor needs to do is provide funds to support the business. A real estate developer offers acceptable assured returns on investment of 12 percent. As a result, real estate crowdfunding offers a steady stream of passive income. Real estate crowdfunding typically lasts 8 to 10 years. As a result, the continuous revenue flows may get reinvested in asset development for two-fold returns.
- REITs: Profitable REITs are the next best possibilities for NRI real estate investing in India. REITs enable investors to invest in real estate without owning and managing it. They are also a better way to learn about the current real estate market without spending massive money. REITs are a superior investment option for equity investors looking for consistent income. They connect investors to nonresidential projects like retail malls and office complexes that would otherwise be out of reach for most investors. REITs do exceptionally well by providing investors with a minimum annual return of 7 to 8%. REITs are also flexible in terms of the lock-in periods. Investors can sell their investments.
- Coliving models: India has a sizable untapped market for co-living houses among millennials. It contains migrant workers and students between the ages of 35 and 18. Millennials account for over 30% of India’s population. If you’re looking for a place to undertake real estate investing, co-living apartments provide both demands and chances. Students and young professionals who live away from home prefer co-living. It is so because the rent gets shared and decreases when it gets hired by more than two people. As a consequence, for tenants, co-living is the superior option.
Real estate investment in India will expand significantly by 2023. The Indian real estate market is growing, and investing in it now might yield significant rewards in the future. So, take advantage of this rising tide to secure your future.
Do you also wish to get involved in real estate investing in India? Connect with Assetmonk.
Assetmonk is India’s fastest-growing wealth tech platform focused on commercial real estate investments. The company also assists in NRI real estate investments by curating investment opportunities in high growth markets after thorough due diligence. Visit the website to start a conversation with Assetmonk’s asset advisors.
