Find out why Indian Real Estate is Ideal for NRI Investment

Why is Indian Real Estate Ideal for NRI Investment?

NRI investment in Indian real estate is not a new concept and it will not stop in the future either. NRI investment in Indian real estate has become a permanent part of the Indian Economy. NRIs go for investment because it is the most common, profitable and beneficial income source in the long run. Their main agenda for investing in real estate is to rent it out but the property also acts as a backup if they ever plan on moving back to India and settling down.

People who have a valid Indian passport can buy properties in India. There are certain exceptions to this rule like agricultural land, farmhouses and plantation lands that can not be acquired by NRIs by law unless the land is inherited. Investing in real estate can open up numerous opportunities for NRIs. Investing in real estate has high returns with low capital investment. They can also plan to settle in India after retirement too if they have an apartment in India.

With the introduction of RERA or the Real Estate (Regulation and Development) Act, 2016, the Indian Government ensured transparency and accountability for real estate properties, sellers and buyers. The RERA safeguards the interests of buyers and supervises the sellers by creating a grievance redressal system with the introduction of which the sellers can no longer siphon the funds away from an unannounced project and will strictly be answerable for delays, misleading ads and the quality of construction and materials used. The RERA has made it easy for NRIs to invest in Indian Real Estate, now NRIs can purchase and rent out both commercial and residential spaces.

Like most other industries, the Covid-19 pandemic has also affected the real estate industry. Because of the Covid-19 pandemic and the government’s lockdown, real estate prices have dropped to 9% in big cities in India, and property searches have dipped 27% in the 2020-2021 financial year. As mentioned earlier, the Covid-19 Pandemic has forced so many working-class NRIs back to India and many of them are not willing to go back abroad to work. Instead, they think of staying back, buying a house and working in India. NRIs are showing a lot of positive attitudes towards investing in real estate in India, mainly because of RERA and the price drop in recent years. Some more benefits are listed below.

Low Home Loan Interest Rates
If NRIs want to get a home loan, they can get the loan with a very low-interest rate. Banks have been offering interest rates as low as 6.5% on home loans. Non-Resident Indians can get the loans they need for up to 80% of the property value. NRI investors have to route the transactions through Indian banks. Thus, the best thing is to use an NRE (non-residential external) account when applying for a loan. The NRE account will allow NRIs to repatriate the capital invested in the property if and when it is sold. Also, NRIs can now directly transfer money to the seller’s bank account without a broker or middleman.

Tax Treatment of the Gains
NRIs must pay taxes on the rising capital gains in India. If NRIs own a property for more than three years, it automatically becomes a long-term capital asset and they get an indexation benefit with taxation at 20%. The income tax department also allows some tax deductions under section 80C to 80TTA. NRIs can also try to reduce their tax burden by using these sections. Please refer to section 80C to 80TTA of the Income Tax Act passed on 1st April 2006.

For better or worse, the covid-19 pandemic has opened a lot of opportunities for NRIs to invest in Indian real estate. The reduced pricing and reduction in home loan interests can be a huge advantage for any NRI looking to invest in Indian real estate.

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Last updated on March 10, 2022

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