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Should NRI invest in real estate in India

Why Should NRI Invest in Real Estate in India?

By LODHA 21 July 2022

Working abroad usually means a great paycheck. A large portion of the paycheck is usually left for investments, and NRIs are often confused about what would be a good investment option for them. There are many reasons why NRIs must invest back home. Many NRIs plan to ultimately come back and settle in India either after retirement or after working for some years. Even if there’s no plan of coming back right now, it’s best to keep a contingency in case of unforeseen circumstances. Some NRIs may want to invest in India for their families back home. Also, investing back home helps diversify and grow your financial assets.

Though there are many investment options to choose from, like, fixed incomes, gold, stocks, etc., one investment that every NRI must purchase real estate, after the real estate sector slowdown during the pandemic period, the pace of growth has picked up, and now is the right time to invest in the real estate market. Read on to know more about why real estate investment in India is beneficial.

●    Investing in property in India is one of the most popular investments for NRIs. Not only is it a safe, long-term investment, but real estate can also give steady growth. In metro cities of India, the real estate market has constantly been booming, and it is advisable to invest in real estate whenever a fund is available. The Mumbai real estate market is one of the fastest-growing in India, as it is the country's commercial capital. During the pandemic, a short-term stamp duty waiver was announced, during which many NRIs took the opportunity to invest in real estate and saved a significant amount of charge.
●    At a time when the value of the rupee is at an all-time low against the dollar, this is the perfect time to remit money back to India and make investments in real estate. The fall of the rupee coupled with the upward growth of real estate makes this the right time to invest.
●    Another good real investment option is in the outskirt areas surrounding metro cities. For example, areas within 10-20 miles of Mumbai, Pune, Delhi, Noida, Bangalore, etc., lying within a close periphery, have seen a real estate boom in recent times. They are comparatively cheaper, less polluted, and free from traffic jams and congestion.
●    Further, some great options to invest in the real estate market in India are the commercial properties. Commercial complexes, buildings, etc., offer a good investment opportunity as they have a high return rate in rents and leases. Also, if the locations are good, rents are slated to increase every year.  
●    The motivation to invest more in real estate comes with lesser clearance requirements. A recent notification by RBI has made the investment in real estate easier by removing the requirement of prior approval from RBI for investment in immovable property in India. However, prior approval is still necessary in the case of agricultural land, farmhouse, or plantation property.
●    Currently, interest rates for home loans in India are at one of the lowest ranges. This is a great time to apply for a home loan and get that dream house that you have wished for. If renting or leasing is not an option for you, there are ready-to-move-in (RTMI) homes available that can be kept for self-use as and when required. This is particularly useful for those who frequently travel back to India.
●    The same taxation rules govern NRI investment in real estate in India and claim tax benefits under section 80 C of the Income Tax Act, 1961, just like any Indian citizen. The property bought by an NRI is exempted from taxation if it is declared for self-use, but if the property is rented, it will be deemed taxable income. If an NRI purchases a residential property of INR 50 lacs from an Indian resident, then the NRI can withhold tax at the source at the rate of 1% of the purchase valuation. On the other hand, if the property owner himself is an NRI, then the NRI investor can withhold tax 20% of the long-term capital and 30% in case of short-term capital gains. Moreover, the Double Taxation Avoidance Agreement plays a key role in NRI investment. It gives NRI the benefit of claiming credit in the overseas country where he is currently residing on the taxes he incurs on the rental income or capital gains concerning the property in India.

It has been observed that there has been increased demand for real estate investment in India among NRIs, especially in the age group of 35-45 years, despite the economic slowdown during the pandemic. As the Indian economy is in the growth stage, this is the perfect time to invest to earn long time benefits. 

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