Over the years, non-resident Indians (NRIs) continue to be amongst the wittiest property investors in the Indian market. An NRI with an Indian passport can invest in Indian real estate, given that it is not an agricultural/plantation land or a farmhouse. Transactions relating to real estate are governed by the rules under the Foreign Exchange Management Act (FEMA) and must be done in Indian currency via Indian banks.
The rupee has fallen more than 15% against the US dollar since the beginning of the year. Rising prices of crude oil import are creating an increased demand for the dollar which is making the rupee weaker. The rupee’s fall against the dollar could attract NRIs to send more money home or rather make investments. Inward remittances are set to rise, especially from the Middle East, the US and European countries amid a falling rupee. This has created a golden opportunity to earn significantly higher value for their foreign exchange.
At current rupee levels, NRIs could benefit substantially if they invest in the property market now. There are also other reasons for NRIs to invest in the Indian property market. Higher economic growth in India, improving infrastructure, and policy reforms could prove lucrative.
Investing in Real Estate
As an investment destination, India offers ample choice, both in terms of location as well as the choice of property. India’s growth story in the real estate market has always enticed NRIs to invest here over other countries in lieu of more returns on their investment. In the present scenario, the depreciating value of the rupee is urging more NRIs to invest in the Indian real estate market. A thorough research and due diligence are needed before taking any decision. Some of the key components to look out would include property deeds, clearances, RERA compliance, and possession time.
Due to the changing dynamics of the real estate market, NRIs have shown greater interest in investing in commercial properties, Grade-A offices, IT Parks, and co-working spaces. In the residential sector, they prefer investing in ready-to-move properties which ensures less hassle and immediate rental income.
NRIs can invest in real estate in India and can still manage to save tax like a regular Indian resident with deductions upto 1 Lakh under section 80C of the Income Tax Act, 1961. They can apply for housing loans from any bank or financial institution with upto 80% of funding. Moreover, a property sold after two years from the date of purchase is exempted from the income tax.
The NRIs currently have the advantage of investing with lesser capital due to low rupee strength. Also, this benefit will be extended when the rupee stabilizes back as they would fetch greater capital gains along with an obvious land appreciation gains. So, a smart investment now can yield significant profits in the future.
Furthermore, NRIs can also grab festive discounts and offers floated by the builder community at this time of the year. Seasonal offers such as cash discounts, tax waivers, free gifts, durables, subvention schemes, etc. can be an added benefit for NRIs.
NRIs can also reap the fruits of their investment post-retirement with a scheme known as Reverse Mortgage. It is a loan which a senior citizen can borrow against the value of his home as a fixed monthly payment or lump sum. In this type of setting the homeowner does not have to make any loan payments. NRIs can take full benefits of their property without having to pay any tax on their mortgage. Though reverse mortgage is a more popular concept in the western countries, India is still catching up to this type of system.