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Downward trend of Indian Real Estate - A boon for NRI’s

Written by: Tushar Balakrishna Bungley - Legal Advisor at Pan India portal funded by Suksh Technology P Ltd
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Current Position of the Real Estate Sector

Indian real estate sector has suffered a huge blow because of the global recession resulting in factors such as jobs cuts, salary cut for certain sectors of the economy, stringent measures by the banks in granting of loans to home finance consumers, etc , which has resulted in a downtrend for the real estate sector in India. Most affected are the real estate developers, who are forced to reduce the prices of their projects to bring back the uptrend of Indian real estate. Builders are trying to see that no stones are left unturned.

How it can be a boon to NRI’s?

This downward trend in the real estate sector could be quite beneficial to the Non-Resident Indians, who are in dilemma over investing their money. The local accommodation laws for NRI’s in the Gulf countries & West Asia have compelled several NRI’s to send their families back home due to raising housing costs. This has inturn resulted in NRI’s investing in Indian real estate to meet any contingencies. On the other hand, the downward trend back home has helped the NRI’s to invest in properties like land, residential & commercial projects.

Factors such as the Foreign Direct Investment in realty sector, relaxation of laws by RBI with regard to investment of property by the NRI’s would facilitate the NRI’s to invest in Indian real estate. However there are certain government regulations which prohibit investments in categories like agricultural land, farmland/farmhouse and plantation properties. Those who have inherited such property from relative can retain them. But to dispose them off, one needs to follow certain ground rules laid down by the authorities.

For NRI who are planning to return home, investments in residential property would be the best option. As NRIs have been accustomed to living in places with good infrastructure facilities, investments in housing should be in cities which have educational, health and reemployment opportunities. NRIs could plan well to invest in Greenfield projects which will reduce upfront payment liability .Home loans are available and banks have branched out to several countries to extend facilities to NRIs.

With Foreign Direct Investment in real estate sector, residential townships with world class amenities will usher in the major cities with global standards, integrating facilities like schools, mall, multiplex, office etc within the same complex.

Where can NRI’s invest?

Investments in developed plots are yet another option for those seeking medium to long term options. Land value appreciates much faster than apartments in Indian cities. Those NRIs who are looking for investments purely as an investment option should consider peripheral or suburban areas where potential for land price appreciation is higher.

For high net worth NRIs looking for periodical rental income, city properties would be the best option due to the demand for such units from varied sections of people including corporate, MNCs and serviced apartment operators. Tax soaps are available by way of interest rate concessions up to Rs 1.50 lakh and principal repayment upto Rs 1 lakh if home loans are availed to invest in immovable property. Wealth tax benefit is available if the residential property is let-out for a minimum period of 300 days in a calendar year.

Commercial property is yet another option for those in the high income bracket and who can invest substantially in either office or retail units. Though current rental levels are dipping in view of the spurt in supply levels in select areas across the city, investments in green buildings or with better amenities would enable investors to obtain competitive rentals over a period of time. Commercial properties are completely exempt from wealth tax as the threshold limit for wealth tax is still retained at Rs 15 lakhs.

Repatriation of investments in property is allowed upto two residential units after a lock-in-period of three years to the extent of original foreign exchange remitted through banking channels. NRIs can invest in real estate development both on repatriation and non-repatriation basis. Joint Development of the property with reputed Indian builders and foreign investors could be strategic alliances beneficial to NRI’s.

Thus this downward trend would help the NRI investors as well as the builders and the developers. NRI’s can make use of the downtrend market situation and developers can bring an upward trend of the Real estate sector in India.

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