In India, property prices have appreciated significantly over the past five years. However, for the overseas Indian, it has only been a marginal increase owing to the depreciation of the Indian rupee against the US dollar. This has made investments in India's real estate sector more affordable and extremely lucrative for overseas investors. Non-resident Indians (NRIs) across the world, especially from the GCC, have been cashing in on the falling rupee, repatriating huge amounts of money to India.
A place in the homeland usually gives a sentimental support and sense of security, which is the other reason of investment in real estate by NRIs.
How can NRIs invest in real estate?
According to the regulations of FEMA and RBI, an NRI is permitted to make specific investment in real estate. An NRI is allowed to do the following investments in property:
1. Any immovable property can be purchased by an NRI in India other than any agricultural land, farm house and plantation property.
2. He can get any immovable property as mentioned above by gift from Indian resident, Indian citizen residing outside India or person of Indian origin.
3. Obtain any property by inheritance.
4. He can transfer immovable property to any resident of India by sale.
5. He can transfer any agricultural land, farm house or plantation land to any resident of India by gift.
6. He can also transfer his residential or commercial property by means of gift to any person either residing in India or abroad or person of Indian origin.
Points to be considered at the time of purchase:
Investment in real estate is a simple move but there are several drawbacks as well. So, one should be cautious enough at the time of purchase to secure the deal. Few points of consideration are under:
Property name: The name of property should be clear from issues and the seller should have the required right to sell it, especially if it is inherited or any joint property.
NDC: Always check that there will be no outstanding electricity/water bills or any other authority dues pending with the property. Take a no dues certificate from the seller at time of purchase.
Bank release letter: It is advisable to take the bank release letter from the concerned bank, if the property had been mortgaged as security in any type of loan.
Permits: The property of sale should have all approvals and permits from the civic authorities in terms of construction.
Always make a safe deal…
Whenever an NRI plans to invest in real estate, he should go through the proper channels, either through a friend or relative to ensure the authenticity of property. He can also approach through property expos and seminars to choose a right property. A reputed developer can provide a clear title property free from a lawsuit. These developers will also take care of maintenance of the property after purchase as well. Always cross check with reliable source to save your investment.
Weak Rupee – Is this the right time to invest ?
Typically, Non-Resident Indians looking at investing in Indian property find periods of depreciation of the rupee a good time to invest principally because of the higher capacity to acquire quality real estate. “It is a good time to remit funds to India for investment. In a totally end user driven market if someone is looking to own their property, it will be advantageous to do so now and invest in India because of higher exchange rates and better ROI,” said Bhawna Dhawan, Deputy General Manager, Sales & Marketing, Brahma City Pvt. Ltd.
Talking about depreciated rupee, NRI investments, inflationary pressures and increasing interest rates Santosh Tandel, Regional Head – MENA Region, Indiabulls, said , “Depreciation in rupee has been a big positive for the Indian expatriates. Inflationary pressures back in India have a higher impact on the resident Indian than the NRI. In fact a short term inflationary trend would ensure slight correction in the Indian market, giving an opportunity to the NRI investor to enter in the market at lower levels. Home loan interest rates have been steady in the recent past and have been in the range of 10 to 11 percent itself. Hence with the rupee depreciating it actually means that a NRI customer who would have required Dh 100,000 to repay a 12 lac rupee loan (Dh-INR rate of 12) couple of years ago would now need only Dh 70,500 (Dh-INR rate of 17) to repay the loan.
On the other hand the property which was costing 40 lacs couple of years ago has already touched levels of 60 to 70 lacs due the inflationary trends back in India. As long as you don’t plan to repatriate rupee back, the investments would always look to be positive under such scenarios over a 5-10 year horizon.”
Advise to buyers
According to Cushman & Wakefield Indian property report, India’s major eight cities saw launch of 1.32 lac homes during January-September 2013, which is up by 5% from the corresponding period last year. However, there has been a decline in the new launch activities in Q3, 2013. It is an end user driven market and hence the demand from first time buyers and end users has been consistent. Genuine buyers view this as an ideal phase to enter the market on account of stable capital values. For a conservative and first time buyer one must go in for residential property as it is considered the safest investment option due to easy-to-understand market dynamics (demand-supply situation). It also gives a small rental around 2-5% value of the house in a year and a good capital appreciation which is generally in double digits. For such kind of investment Delhi/NCR market looks good as it has the maximum options/inventory. Furthermore, the developers are also aiming at strategies that can provide attractive offers to the buyers which will make for a great investment at the same time this is the right time to enter the market. Those with adequate experience of investing in residential properties should consider office spaces as well. It is a good time to invest in “Pure Commercial Property” (not IT/ITES) as it provides better yields to investors. Capital appreciation may be based more on macroeconomic and investment climate, which may vary according to the area. In terms of commercial real estate investment potential, Mumbai, Bangalore, Delhi and NCR will continue to be of highest interest to investors focused on real estate in 2013. The Delhi NCR region will be more popular with high net-worth and institutional investors. It is always advisable to go with prime locations within these cities that offer a good mixed used development.
“Buyers looking at a pure investment deals should concentrate on micro-markets where job generation is high, infrastructure and connectivity is improving, new education facilities are coming up and civil governance standards are high. Cities like Pune, Bangalore, Chennai and Ahmedabad are the best investment destinations,” commented by Amol Shimpi Sr. Vice President – Sales from Lavasa Corporation Limited. Big ticket investments are happening in seven leading micro-markets which are NCR, Mumbai, Pune, Bangalore, Chennai, Kolkata and Hyderabad. Other Micro-markets like Ahmedabad, Coimbatore, Kochi and Chandigarh are also attracting investments. NRI customers can consider these cities for investment.