The dynamic landscape of NRI real estate investment

Anuj Puri, Chairman, Anarock Property Consultants, believes that time has proved this theory erroneous. “NRIs are among the savviest property investors on the Indian market today. This is demonstrated by how adroitly they have gauged the new investment trends on the Indian real estate market. For a long time, the returns on investments that NRIs could get on residential assets were extremely rewarding, considering the significant capital appreciation whilst the rental yields have always been low,” he said.

But, during the last couple of years, the market slowdown has resulted in capital appreciation on residential assets no longer being as per NRI investors’ expectations. “In the current market conditions, NRIs are now showing a greater preference for investing in Indian commercial properties, which offer good rental yields as well as capital appreciation. This is because there is a continuous rise in demand for commercial spaces in the wake of large-scale requirements and the probability of REITs formation, especially for Grade A offices, IT parks and logistics centres,” he added.

Puri said that Mumbai, NCR, Bengaluru, Hyderabad, Chennai and Pune are currently the hottest cities for investments into Grade A offices, co-working office spaces and IT parks. The business being generated in these cities induces a constant upward trajectory on the demand for quality office spaces, while supply is not keeping up with this demand. That means that all available high-quality offices spaces are assured of tenancy.

Incidentally, the strong start-up culture is also driving up the demand for shared office spaces, known as co-working spaces too. Such spaces are snapped up by start-ups which cannot afford the high cost of conventional high-quality office real estate.

“It is only the more experienced NRIs who have been able to gauge the Indian real estate market. Every year gives rise to new NRIs who still need some basic guidance on what they can or cannot do in Indian real estate,” he added.

There are some guidelines NRIs who want to invest in the Indian realty market with some pre-conditions need to follow.

NRIs with a valid Indian passport need no prior approval unless they are citizens of a few neighbouring countries - specifically Pakistan, Bangladesh, Sri Lanka, Iran, Nepal, Bhutan, Afghanistan and China.

They can buy as many properties (residential or commercial) as they want but are not allowed to buy agricultural land, plantation properties and farmhouses. However, such properties can be gifted to or inherited by NRIs.

Transactions must be done in Indian rupee (INR) through regular banking channels via an existing NRI account.

Just like Indian citizens, NRIs are also eligible to avail of loans to purchase a property in India. The maximum loan amount is generally 80% of the property value. The RBI does not have any rule for immovable property which is inherited or gifted. NRIs can lease or rent such properties without any restrictions.