India is the first in the world in terms of inward remittances. According to a World Bank study, Migration and Development Brief, published in April of this year, the biggest remittance beneficiaries are India ($79 billion), China ($67 billion), and Mexico ($36 billion). In reality, according to statistics from successive World Bank assessments, it has been rising in India. India has the highest value at $79 billion, followed by China ($67 billion) and Mexico ($36 billion). According to information on the Reserve Bank of India (RBI) website, half of the remittances received by Indian citizens are used for family upkeep, followed by bank deposits. However, a significant portion gets invested in real estate.
Investing in real estate may deliver a strong return on investment while needing a lower initial financial expenditure for NRIs. Assetmonk, for example, provides seamless ways to assist you with your next investment in this area, with a high-quality strategy ranging from finding the best property to acquiring and moving in. NRIs would have a plethora of choices in Indian real estate. Through RERA, the Indian government’s attempt to regulate the real estate sector and provide better transparency and accountability has led to a resurgence of NRI interest in the Indian real estate market. As a result, India is a favorite real estate investment destination for NRIs.
Here is: NRI Investment in India – Best Investment for NRI in India.
But what about the RBI guidelines for NRI investment in real estate?
The Reserve Bank of India has simplified the conditions for NRI investments to attract more foreign investment. Real estate transactions get governed by the Foreign Exchange Management Act (FEMA).
The Reserve Bank of India (RBI) permits NRIs or PIOs with a valid Indian passport to purchase residential/commercial property in India. The investor does not need to acquire specific clearance from the RBI for this. In addition, the investor does not need to notify the RBI while purchasing residential or commercial property in India. According to RBI regulations and income tax legislation, an NRI may purchase an unlimited number of these two categories of properties.
However, an NRI cannot purchase agricultural property or plantation in India under the RBI’s general license. It implies that non-resident Indians (NRIs) cannot invest in farmhouses unless they acquire specific approval from the RBI. The RBI would only entertain such requests on a case-by-case basis. An NRI may purchase a property alone or jointly with another NRI. However, regardless of the participation of the second holder in the acquisition, resident Indians or people who are not permitted to own properties in India cannot become joint investors in such assets.
What are the factors that foster NRI investment in Indian real estate?
Regardless of whether the real estate market is bullish or bearish, non-resident Indians (NRIs) wish to return to India for reasons other than financial gain. But also to remain anchored in their home country. Previously, NRIs had good cause to be wary of the Indian real estate market. But, that is no longer the case due to the following reasons.
- Regulation: Today, game-changing legislation such as the Real Estate Regulatory Authority (RERA) and the goods and services tax (GST) have increased NRI trust and transparency. It has also expedited the property-buying process. As a result, it has fueled fresh NRI investments in the Indian real estate industry.
- Rupee depreciation: The rupee’s depreciation versus the dollar in 2018 was another compelling reason for NRIs to see Indian real estate favorably. The recent weakening of the Indian rupee has sweetened the deal even more since NRIs now have to spend less money than previously to buy a home in the nation.
- Retirement Benefit: Reverse mortgages are becoming more popular in the United States. India, on the other hand, is now planning for this system. NRIs looking to retire in India may invest in and profit from reverse mortgages. The money borrowed from a bank for this type of mortgage is not taxable income for NRIs. In this way, older non-resident Indians might realize the benefits of owning property in India. Simultaneously, they can borrow money from banks as part of the reverse mortgage on the home.
- Tax Benefit: As an NRI, you are eligible for the tax benefits that an Indian resident is entitled to when purchasing a property. Also, if you sell the property within three years after buying it, it gets deemed a short-term capital gain, and the proceeds are taxed. But, if you sell the property after three years, you can defer the long-term capital gains tax by investing in another property.
- Low property prices: NRI investors should take advantage of the present real estate market downturn. Historically, the rate of price inflation in India has always been faster than in western industrialized countries. As a result, when compared to other global real estate markets, India may offer investors better value for money, with returns in less time. Those looking to invest in low-cost housing may be interested to know that, according to the Maharashtra Chamber of Housing Industry (MCHI), the entire supply of inexpensive apartments in Mumbai surged by 300 percent in the previous year.
But where should an NRI invest in real estate?
Clueless much as where to invest in Indian real estate? You do not have to worry. We have got your back. However, to determine where you can invest in India, you must first ask if the property is for personal use or investment purposes.
Here is Checklist for NRIs Looking to Invest in Indian Real Estate.
- Residential Real Estate: Given the stagnation, there are possibilities for personal use. The residential market, in particular, is in better shape this year, as speculative investment activity has decreased dramatically. These are popular among NRI investors who wish to enhance their wealth and develop assets to use when they return to India from occupations abroad. These houses get built for rent, with the owner obtaining a steady income from deposits paid by renters. The market has also become more appealing to NRIs as transparency has increased and investment regulations are relaxed. Developers have also tailored solutions for this market niche by building smart houses with worldwide appeal.
- Commercial Real Estate: Commercial real estate may be a superior investment. While residential real estate is still the NRIs’ first love, the commercial real estate class provides a viable alternative. NRI demand for Grade A offices, IT parks, logistics centers and even REITs (real estate investment trusts) has surged because of strong capital appreciation and rental income. While the present residential property rental return is 1.5-3.5 percent, a suitable commercial property may provide an average rental income of 6-10%.
Here is: 5 Reasons Why NRIs are Aiming at Indian Commercial Real Estate Properties.
- Agricultural Land: The Foreign Exchange Management Act of 1999 exempts NRIs from owning agricultural lands in India. If an NRI wants to purchase agricultural land in India, they must follow a distinct request procedure with the RBI, and the acquisition is still questionable.
- Farmhouse or Plantation Property: As with agricultural properties, NRIs are ineligible to acquire Farmhouse or Plantation property. This rule, however, has several exceptions. When a person receives property as an inheritance, it might get requested as a property investment.
The Indian real estate business, particularly among NRIs, is an enticing location for a safe and secure investment with significant returns. Given the current circumstances, the unforeseeable future, technology improvements, and favorable legislation, it is the moment for NRIs to participate in the Indian real estate market. Thus, their investment in domestic properties will continue to increase fast in the coming years.
Assetmonk is a premium wealthtech platform that links investors to high-yielding real estate assets. This website serves as a channel for NRI real estate investments. It streamlines real estate investing procedures by offering high-quality real estate asset opportunities around the country at reasonable pricing. It saves NRIs time from the time-consuming and unproductive process of looking for a property in India.
