Investment Potential for NRIs

M H Ahssan outlines some options for NRIs in the city’s realty sector.

At a time when the global financial crisis is impacting the real estate sector across the globe, NRIs are invariably in a dilemma about where to put their money in real estate. The local accommodation laws in countries like Dubai have compelled thousands of expatriate Indians to send their families back home due to soaring housing costs. This is why it makes sense for expatriate Indians abroad to invest in Indian real estate to meet any contingencies.

Barring Dubai, West Asia does not encourage expatriate investments in housing. Anyway, not all NRIs can afford to invest in local housing. There are different kinds of NRI investors looking for investments in real estate back home. What is ideal for one group may or may not fit in to the investment category for others. However, a cursory glance at the options will enable them to take a pragmatic approach to the investment exercise.

The government regulations prohibit investments in categories like agricultural land, farmland/farmhouse and plantation properties. Those who have inherited such property from relatives can retain them. But to dispose them off, one needs to follow certain ground rules laid down by the authorities.

For NRI end users who are planning to eventually 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 FDI in real estate, a number of integrated townships will dot the skyline in major cities. The entry of global realtors will herald a new era in housing with the introduction of global standards, integrating facilities like schools, mall, multiplex, office etc within the same complex. Returning NRIs who are looking for lifestyle projects should consider investments in such options. Investments in developed plots is 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 corporates, MNCs and serviced apartment operators. Fiscal benefits are available by way of interest rate concessions upto 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 but it is ideal 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. A number of joint development options are now available where landlords are keen to forge strategic alliances.