The Non Resident Indian (NRI) population, estimated to be over 12 million, has been growing rapidly over the past decades. Better social infrastructure, improved standard of living, and higher currency valuation in countries such as US, Europe, Middle East etc. are some of the points of attraction. After significant years of savings, NRIs invest back in India as they find real estate to be the safest and best choice for many reasons.
Generally, NRIs prefer to remain in touch with their roots and it makes a prudent business sense for them to invest in Indian real estate market. Experts estimate the market to stand at $180 billion by 2020, owing to rapid urbanization, necessitating robust urban infrastructure buildup. Government has allocated about US$15 billion for urban development under Smart Cities Mission and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). Moreover, private participation is being encouraged to boost the investment in infrastructure. It is a well-known fact that improving infrastructure augurs well with the economic growth, enhancing the quality of life and appreciating property prices.
Considering the commitment shown by the new government towards the economic push, Real Estate (Regulation and Development) is likely to be implemented across the country soon., In addition, the Urban Development ministry is actively working towards a single window clearance mechanism and has assured its implementation in the current calendar year. Corporate Real Estate funding issues have largely been addressed through eased FDI norms and tax simplifications in REIT. These important policies would bring down the time period in getting all the necessary statutory clearances, ease the funding, and warrant timely project delivery without cost overruns.
Attractive Return on Investment (ROI)
Real estate market is on its way to revival after seeing sluggishness over the past couple of years. There has been an overall price correction across the country and fall in interest rate. There is enough supply in the market. According to CREDAI, part of the total units launched, 25-30 % are still unsold. We believe that the prices have bottomed out and the time is ideal to invest. Moreover, any rupee weakening as is the case, makes it a low investment and high return proposition.
The Cabinet has approved 20 major amendments to the Real Estate Regulatory Act (RERA) that seeks to protect home buyers’ interest and at the same time boost investments in the real estate sector.. We can easily assume that as the demand starts picking up in the coming months, developers would look to increase the prices. Therefore, it is advisable to invest at the present prices for an attractive ROI.
Benefits to NRIs
NRIs can benefit from various Income Tax exemptions on all the transactions. A 3-year time horizon for holding the property would not only see decent price appreciation, but also avoid short-term capital gain tax. If the objective is to let out the property, the rentals are tax deductible towards maintenance and repairs of the property.
RBI doesn’t differentiate NRIs with resident Indians, which means absence of any special investment restriction as long as FEMA and Income Tax laws are not violated. They are free to purchase any number of properties, both residential and commercial. Besides, RBI allows financial institutions to fund up to 80% of the property value at low interest rate. Information on other benefits provisioned in the rule book can be availed by hiring broker/consultant, or directly contacting the developers.
A Word of Caution
Indian real estate offers varied luxury and ultra-luxury projects, at par with international standards. Developers have also come up with attractive financing schemes to boost demand. It becomes imperative to understand the real definition of luxury and approach the right developers. Equally important is to make sure that the property is in prime location, offers great view, with ultra-modern amenities and is of top –of-the-line quality. Last but not the least, these projects should be 100% safe and secure.
The Bottom Line
We believe that the prices have bottomed out and this is the right time to invest in the market, to gain substantial property price appreciation. Various factors that make real estate an attractive investment avenue are rupee weakening, prevailing low property prices, a reviving market, NRI friendly regulations and taxes, and a wide range of property options.