Presently, Indian real estate is a popular investment option for most of the NRIs. However, since they live outside India, it becomes more vital for them to do proper due diligence in real estate before risking their money.
Important checklists for NRIs
- Nowadays, many Indian real estate developers conduct roadshows abroad. NRIs should not be completely convinced by impressive presentations and glossy brochures.
- They must have someone trusted who visit the property’s site and check the ground realities regarding property in India.
- Like all property investments, the location of the property and land should be attractive and should enjoy good connectivity.
- Pricing is another important issue. Usually, the prices quoted by real estate builders to property buyers abroad, are higher than those quoted to local buyers. Also, builders don’t offer any discounts when selling abroad.
- In such a scenario, the international property buyer must learn the rate at which the property is being sold in India. In addition, they should avoid paying a large part of the cost upfront.
- In fact, NRIs should opt for either the 80:20 or 70:30 scheme or a construction-linked payment plan. In such investment schemes, a small portion of the payment is paid upfront at the time of booking of property, and rest balance is paid on possession. It is better that NRIs should opt for finished apartments or flats to avoid the risk of delay in possession of the property.
- Moreover, it may also be wise for NRIs to take a small bank loan, even if you don’t need the money.
- When an NRI takes a property loan, the bank will do the due diligence on their behalf. It will check whether the property developer owns the land on which he is developing the project and has obtained the requisite licenses. This will help you to avoid a lot of trouble.
Indian laws governing NRI transactions
NRIs investing in Indian Real Estate must understand and follow the property laws that govern real estate transactions. There are restrictions on how promptly the profit from a real estate transaction can be repatriated. NRIs also need to understand whether their gains will be subject to double taxation.
Market research for NRIs
The real estate sector in the developing markets is better governed and more developed, unlike India. Here, property buyers are often facing a lot of hassles. Unless an NRI has a trusted and authorised person running errands in India, buying property in India could be a challenging task. Then there is the management of the property as there are not several companies in India still that offer such services. It is crucial that an NRI has an authorised person to collect the rent and also look after as well as maintenance of property in India.
ROI expectations for NRIs
The theory of mean reversion recommends that returns from real estate, are more likely to be lower as that of they have been in the recent past. Therefore, NRIs investing in residential property in this time should have reasonable return expectations over a long-term period. Finally, NRIs also require to be aware that the depreciation of the rupee against their home country currency, will also have a bearing on their returns.