An Indian citizen who spends more than 182 days outside of India in a fiscal year but has strong ties to their home country is known as a non-resident Indian or NRI. An estimated 30 million NRIs reside across the globe, making up a vibrant and diverse society made up of individuals from various linguistic groups, cultures, and occupations. While keeping ties to their Indian ancestry, NRIs have greatly helped their adopted countries.
NRIs have many benefits from investing in Indian real estate, including the possibility of significant returns, a diverse investment portfolio, and a link to their home nation. NRIs can customize their investments to their interests and goals by choosing from a variety of property kinds and locations.
NRIs can invest in residential, commercial, and industrial properties in the Indian real estate market in a number of different ways. The estimated 30 million NRIs who reside overseas have upped their financial commitments to the company recently. For NRIs, favorable exchange rates, strong rental yields, and possible property value growth are all benefits.
Long-Term Capital Gains
Property values have significantly increased over the previous few years, and this trend is expected to continue. This presents good opportunities for NRI investors to generate sizable returns on their cash over the long run.
Potential for Rental Income
NRI investors are likely to see excellent returns on their investments in Indian real estate due to the growing demand in the market. The returns on Indian real estate are higher than those on fixed deposits or bonds, for example. A growth in property value and rental income may be advantageous to NRIs.
The ideal rate of exchange
By investing in the Indian rupee at the current exchange rate, NRIs may currently get more for their money, which is advantageous for them. Despite the rupee’s historical volatility, NRIs that have a long-term investment horizon can benefit from currency gains.
Simple Investment Process
Foreign investors’ investment process has been streamlined by the Indian government by allowing NRIs to invest in real estate through a variety of channels. The procedure makes it easy and hassle-free for NRIs to invest in Indian real estate from anywhere in the world.
Investment Portfolio Diversification
NRIs may be able to diversify their portfolios by purchasing real estate in India. Real estate investment offers protection from market volatility and can help NRIs manage their risks.
Regulatory and Legal Considerations
Anyone who has traveled or done business abroad can attest to the fact that the government prefers to maintain strict control over the amount of money that is exported. This is required, among other things, to halt the export of foreign currency, money laundering, and other activities. The flow of foreign currency across Indian borders is regulated by the Foreign Exchange Management Act (FEMA), which has been in force since 1999.
Let’s say you recently or currently qualify as an NRI, or non-resident Indian. In that case, you must abide by new regulations in order to send or receive money inside India. The Foreign Exchange Management Act, also known as FEMA, regulates and manages all financial transactions into and out of India. When you become a non-resident Indian (NRI), your regular Indian bank account will be converted into an NRE account or another suitable account.
The following is a list of the FEMA requirements that every NRI must be aware of.
When you become an NRI, you are legally required to open certain types of bank accounts that are exclusively accessible to non-resident aliens (NRIs). Here are some of them:
With the exception of PPF and other small savings programs, NRIs are permitted to invest an unlimited amount in both repatriable and non-repatriable activities.
Persons of Interest (POIs) and NRIs, often known as people of Indian descent, are allowed to purchase both residential and commercial properties in India. The exceptions to this rule are the purchases of plantations, farmhouses, and agricultural land.
Immovable and Current Assets
NRIs may send money to India that they have earned through assets that are stored outside of India but may be repatriated, such as rent from foreign real estate, in accordance with FEMA laws.
The RBI frequently issues advisories outlining the legislation and granting NRIs-wide licenses to buy specific immovable assets in India without seeking further RBI certification. The RBI has globally permitted NRIs to purchase various movable properties in India under these rules.
Real estate purchases by NRIs in India, whether it be for commercial or residential purposes, are lawful. They cannot, however, own or possess any farmland, plantation homes, or other similar real estate in India.
NRI investments in India must be either residential or commercial as a result. They are not required to notify the RBI of these acquisitions even after the agreement is finalized. In India, an NRI is also permitted to possess an unlimited number of homes or businesses.
An NRI is required to provide a copy of their passport, including the pages with their name, photo, date of birth, and address, as well as a copy of their Permanent Account Number (PAN), which serves as their nation’s identification, in accordance with Know Your Customer (KYC) rules. The correspondence address or the permanent address outside of India must be provided as an additional international address.
Income, housing demands, ability to repay the loan, and previous credit history all play a role in determining how much of a home loan a person is qualified for. The processing fee, which is paid upfront and ranges from 0.25% to 3% of the loan, is included in the annual percentage rate, which ranges from 8.2% to 12%. Loans are only repaid through EMIs in Indian rupees. There are three to thirty-year loan repayment periods available.
Investing in India and its real estate may be a great opportunity for Non-Resident Indians (NRIs) to gain from India’s economic growth and boost their wealth. However, huge earnings also come with great hazards, therefore it’s essential for NRIs to effectively manage their investments to lower these risks. Let’s now look at how to manage the dangers associated with NRI investment.
Many people have racked up considerable debt by making real estate investments. However, did you know that using debt to finance an investment increases risk? That’s accurate, the risk and the amount of debt taken on are directly related. Frequent changes in interest rates could lead to higher borrowing costs, which would be certainly bad for you.
Management of Risk
The ability of the manager will determine the risk involved. This is affected by how it responds to changing economic situations, how it maintains the property, how it negotiates leases, etc. Properties in the business and residential sectors are impacted. You should be aware of the challenges India’s archaic tenancy laws present to property managers and owners who want to regain control of their buildings. Therefore, management should employ registered leases for both residential and commercial buildings.
Selling a home may be challenging when there isn’t a healthy market or not enough buyers and sellers. In these situations, the only choices are to undersell the house or to hold out for the ideal offer for a longer period of time—up to a year!
Legal obligations, such as lease periods, registration procedures, land use restrictions, and other limitations imposed by governmental authorities, offer another significant risk. These dangers need to be taken into account before investing.
It’s critical to comprehend the various elements that contribute to a city’s investment appeal. When choosing their ideal city for real estate investment, NRIs usually consider a variety of factors. Increased career opportunities, easier commuting, renowned medical facilities, and prestigious educational institutions are among them.
The following is a list of all the Indian cities that are soon anticipated to get more NRI investment:
Buying real estate in Delhi could be a great alternative for homebuyers. There has never been a better moment to make investments in this booming metropolis with its well-developed transit system, numerous upcoming developments, and social infrastructure.
Work opportunities for residents of Delhi-NCR have significantly increased during the past several years. Due to the various multinational businesses and industries that have established operations in Gurgaon and Noida, the desire to live in the capital state is at an all-time high.
The best place to invest in real estate is Bengaluru, a city of startups, breweries, and parks. Due to the fact that most big international corporations, hotel chains, and manufacturing companies have established offices in Bangalore, there is a significant increase in demand for real estate, and prices seem to be keeping up with this demand. Popular neighborhoods include Bellandur, Banashankari, Electronic City and the area nearby, as well as the area closer to Devanahalli. Traffic congestion is also anticipated to be alleviated soon thanks to the construction of additional metro lines that will link commuters to numerous other important parts of the city.
Ahmedabad, Gandhinagar, and GIFT City
The real estate industries in Gandhinagar and Ahmedabad have grown gradually over time. One of Gujarat’s most significant cities, Gandhinagar, is sometimes referred to as the Twin City of the state. Gujarat’s present capital, Gandhinagar, is an attractive location for many people to purchase real estate.
When the Smart City initiative is finished, Ahmedabad will be among the country’s first 20 smart cities. The Ahmedabad Urban Development Authority has acquired 6800 hectares of property outside of the town to help with the city’s growing population.
Hyderabad is recognized as one of India’s most affordable major cities due to its low cost of living, especially when it comes to real estate. Due to the city’s outstanding infrastructure, many significant international firms have established facilities there. The city is exceptionally well-connected thanks in part to the passage of two large national highway networks, the NH44 and the NH765.
Mumbai, India’s commercial center, is one of the cities with the highest population growth since so many people want to relocate there. There is no denying that NRI real estate investments in Mumbai are on the rise. Despite being one of the priciest places to live, there has been a large demand for investments in this city. As a result, developers never stop meeting this rising need.
Pune is becoming a hub for infrastructure, technology, communication, and many other industries. It is also known as one of the best cities to invest in real estate due to the excellent returns on investment. In Pune, real estate is expected to rise significantly over the next year, according to experts, by 75%.
Future initiatives like the Mumbai-Pune Expressway, Industrial Park, High-Capacity Mass Transit Route, and Pune Airport aim to not only raise the standard of living for Pune inhabitants but also to bring about a wealth of economic and employment opportunities.
Chennai is one of the greatest places in India to invest in real estate due to its low-interest rates and several discounted offers by well-known developers in the area. There are many skilled and experienced builders in the area who go above and above to make each project outstanding.
The Chennai-Kanyakumari Industrial Corridor and the Chennai-Bangalore Expressway make it easier to get to and from the city. Because the industrial, IT, and automotive sectors are present in Chennai, there are many employment opportunities.
All Indians, including residents and non-residents, who earn income in India are liable to taxation by the Indian government. Both commercial and residential properties are available for purchase in India by NRIs. Any income derived from these assets, however, is subject to Indian taxation. It also includes capital gains on real estate investments, other sources of income from investments in shares, mutual funds, term deposits, and property rents that are higher than the fundamental exemption limitations.
After taxes are paid, the rent income from an NRI’s or PIO’s property in India is credited to their NRE or NRO accounts and is then easily transferred home. In India, income from a property is taxable, and the tax is calculated as though the income came from an Indian person. While the interest on a Non-Resident Rupee (NRE) account is tax-exempt, the interest on a Non-Resident Ordinary Rupee (NRO) account is subject to standard taxation in India.
Long-term capital gains are subject to a 20% tax. Please be aware that any long-term capital gains earned by NRIs must be paid as a 20% TDS.
NRIs are able to apply for exemptions from long-term capital gains taxes under Sections 54, 54EC, and Section 54F. Therefore, an NRI may take advantage of the exclusions from capital gains and obtain a refund of TDS deducted from capital gains while submitting a return.
According to the Double Tax Avoidance Agreement, NRIs are not subject to double taxation on the following income:
Residential properties in India hold a special place in the hearts of individuals, families, and investors alike. Owning a home is not just about having a place to live; it’s about securing a future, building memories, and enjoying the comforts of one’s personal space. Let’s delve into the advantages of investing in residential properties in India.
Security and Stability: Owning a residential property provides a sense of security and stability. It offers the assurance of a permanent abode for you and your family, eliminating concerns about rental agreements or sudden relocations.
Long-Term Investment: Residential properties serve as long-term investments that can be appreciated over time. As urbanization continues and demand for housing grows, property values tend to rise, potentially providing substantial returns on investment.
Rental Income: Apart from personal use, residential properties can be a source of rental income. This is especially beneficial for those who invest in additional properties to generate passive income.
Capital Appreciation: Over the years, residential properties have demonstrated the potential for capital appreciation. As the real estate market matures and economies expand, property values tend to increase, making it a potentially profitable investment.
Emotional Connection: A residential property is not just a financial asset; it holds emotional value. It’s a place where cherished memories are created, family milestones are celebrated, and a strong sense of belonging is nurtured.
Tax Benefits: Many governments offer tax benefits on home loans and property ownership. These deductions can significantly reduce the financial burden of owning a residential property.
Diversification: Including residential properties in your investment portfolio adds diversification. Real estate investments have a low correlation with traditional financial assets, which can help mitigate risks and balance your investment strategy.
Leveraging Future Needs: A residential property can cater to various life stages. It can serve as your first home, a vacation retreat, or even a retirement abode, providing flexibility and adaptability to changing needs.
Personalization: When you own a residential property, you have the freedom to personalize it according to your tastes and preferences. This creative expression can enhance your living experience.
Building Equity: Each mortgage payment you make contributes to building equity in your property. Over time, this equity can be leveraged for other financial needs, such as education expenses or starting a business.
Sense of Community: Residential properties are often part of planned communities or housing societies, fostering a sense of belonging and community. This social aspect can enhance your overall quality of life.
Hedge Against Inflation: Real estate is considered a tangible asset that can act as a hedge against inflation. As the cost of living rises, property values and rental income may also increase, providing a safeguard against inflation’s impact.
Investing in commercial spaces presents a distinct avenue for potential returns that appeals to both seasoned investors and newcomers to the real estate market. Unlike residential properties, commercial spaces offer unique advantages that can yield substantial financial gains. Let’s explore the potential returns that can be derived from investing in commercial properties.
Rental Income Potential: Commercial properties, whether office spaces, retail outlets, or industrial warehouses, often command higher rental rates compared to residential properties. Businesses are willing to pay a premium for strategically located and well-maintained commercial spaces to enhance their operations.
Steady Cash Flow: Long-term lease agreements with businesses contribute to a steady and predictable cash flow for investors. Unlike residential rentals that might have shorter lease terms, commercial leases typically span several years, ensuring a consistent income stream.
Lower Management Burden: In many cases, commercial tenants handle property maintenance and repairs themselves. This can significantly reduce the landlord’s management responsibilities and expenses compared to residential properties.
Appreciation and Equity Growth: Similar to residential properties, commercial properties also have the potential for appreciation over time. As the local economy grows and demand for commercial spaces increases, property values can rise, leading to equity growth.
Triple Net Leases: Some commercial leases, known as triple net leases, require tenants to cover not only rent but also property taxes, insurance, and maintenance costs. This further alleviates the landlord’s financial obligations.
Inflation Hedge: Commercial leases often include rent escalation clauses tied to inflation rates. As the cost of living rises, rental income from commercial properties can also increase, acting as a hedge against inflation.
Diversification: Including commercial properties in your investment portfolio diversifies your risk. Commercial real estate has a distinct market from residential properties, providing balance and reducing your exposure to any one sector.
Business Growth: As the local business environment flourishes, demand for commercial spaces rises. Investing in a strategically located commercial property can capitalize on this growth, leading to higher demand and rental rates.
Professional Tenants: Businesses that lease commercial spaces tend to be professional entities. This often results in timely rent payments and a lower likelihood of property damage, contributing to a hassle-free investment experience.
Flexibility in Usage: Commercial properties offer versatility in terms of usage. A property that was initially used as an office space can be adapted for retail, medical, or other purposes, potentially attracting a diverse range of tenants.
Tax Benefits: Just like residential properties, commercial real estate offers various tax benefits, including deductions for mortgage interest, depreciation, and property expenses.
Potential for Capital Gains: A well-located and well-maintained commercial property can fetch a substantial return when sold in a market with increasing demand. Capital gains from the sale can contribute to your overall investment portfolio.
Government Support: The Indian government is actively pushing foreign investment in commercial real estate by offering incentives and relaxing regulations. It might be less complicated for NRIs to invest in commercial real estate and reap the rewards of potential profits. The RERA and GST Acts have directly expanded all types of NRI investment in India.
Demand for Commercial Real Estate Is Growing :There is a growing demand for commercial real estate in India as a result of the millennial generation’s swift adaptation to start-ups and entrepreneurship. The rapid growth of logistics, distribution, and IT centers as a result of the expansion of e-commerce operations is another factor influencing the increase in demand for commercial real estate.
The land is one of the most popular investment options for both Indians and NRIs because it offers a wide range of advantages:
Since there is a limited amount of land and there is a great demand for it, the value of the land is anticipated to rise over time. Due to this, Indians living in India and abroad consider land to be one of their most valued belongings.
Land takes very little care and maintenance: Land requires very little care and maintenance. A parcel of land needs almost no care compared to other types of properties like an apartment or a single-family home. For NRIs who don’t need to routinely monitor their plot, this is great.
Land provides a lot of flexibility. You could choose to develop a residential or business property. You will make steady revenues from both over time.
Working with a trustworthy real estate agent can help NRIs save a ton of time and money when buying property in India. A reliable real estate agent can help NRIs navigate India’s legal and regulatory landscape, help them find the residences that are most suited to their needs and preferences, and negotiate favorable terms with the seller.
We offer end-to-end property management services to all our NRI clients. As there is no limit to the number of properties you can buy in India, it may not be easy for you to manage the property in India. One of our property consultants will do the needful for you.
You can make the consultant your PoA and the consultant will take care of document processing when you want to purchase or sell the property, collect the rent and give the property on rent when you want. The consultant will also take care of the property and make sure it is well maintained.
So, as an NRI if you are looking to reconnect to your homeland then you can make property investments in the Indian real estate market. Call us now for more details.
An NRI can buy any number of residential or commercial properties in India there is no limit on this. An NRI, however, can’t purchase any agricultural land or plantation land.
If you have an Overseas Citizenship of India, then you can buy ONLY residential and commercial property in India. You will not be allowed to buy agricultural land/plantation property or even a farmhouse in India.
If you want to reinvest the gains you made, then you can follow Section 54. If you do not want to reinvest in property, then you will need to look into section 54EC, this section allows an exemption if the capital gain amount is invested in certain specified bonds. These 54EC bonds are issued by the National Highway Authority of India, Rural Electrification Corporation, and so on.
The best way to save on capital gains tax is by following what is mentioned under Section 54. Here, it says you can avoid paying tax on long-term capital gains if you reinvest the money you get by buying another property. You will need to buy the new property either one year before or two years after the sale of the old property. The other catch is you can’t transfer the newly purchased property within three years of buying it.
No, any person who is not of Indian origin and who resides outside India cannot purchase immovable property in India. The only exception is if they acquire the property by way of inheritance from a person who was a resident in India. Unless they reside in India for 183 days in a financial year, it is not legal for foreigners to own property in India. Foreigners can’t buy property using a tourist visa and a tourist visa will allow them to stay for only 180 days. A foreigner also can’t buy a property jointly, one eligible person with one non-eligible person can’t buy property in India.