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Indian Real Estate: A Magnet for NRIs, but Challenges Await!

Are you a Non-Resident Indian (NRI) thinking of investing back home? You’re not alone! The Indian property market is buzzing with NRI interest, thanks to tempting rental yields that have shot up from 2-3% to an attractive 3-5%. Plus, with the rupee falling, buying property in India has become more lucrative.

Historically, real estate in India has appreciated over the long term. This, combined with the fact that many NRIs intend to return to India eventually, makes property investment appealing. Let us Dive into the details of Why and How?

Why the Sudden Rush?

  • Digital Shift: Hunting for that perfect home or plot? Thanks to the digital revolution, NRIs can now easily scout, evaluate, and seal property deals without setting foot in India.
  • Heartstrings: Many NRIs are driven not just by profits but also by an emotional bond with India.
  • Retirement Plans: Many NRIs plan to return to India after retirement. Owning a property ensures they have a place to settle down upon return.

However, It's Not All Rosy!

While buying might be easy, managing properties from miles away isn’t. NRIs often rely on friends and family back in India for help with property management. A study by SBNRI shows:

    • About 1 in 4 NRIs face hiccups in managing rental properties. This includes finding tenants, ensuring police checks, collecting rent, and more.
    • A chunk of NRIs, especially from the UK, Australia, and Canada, either directly interact with tenants or use a power of attorney for property tasks.
    • Issues like rent collection, maintenance, and inspections have become stumbling blocks. There’s also the occasional tenant tiff to deal with!

Mudit Vijayvergiya of SBNRI emphasizes the need for better solutions, remarking, “While India’s a prime spot for NRI property investors, the hurdles in rental management can’t be ignored.”

Regulations, Regulations!

NRIs often encounter obstacles related to FEMA (Foreign Exchange Management Act) regulations when purchasing property. There are restrictions on the type of properties they can buy, and there’s a need for specific bank accounts (like the NRO/NRE account) for transactions. When it comes to understanding property rules, NRIs from Canada and Singapore seemed least bothered, with many navigating smoothly. However, a few did face challenges but were aided by property managers.

COVID-19 and NRI Investments:

The share of NRIs in the local residential real estate market has nearly doubled in the wake of the COVID-19 pandemic. Before the pandemic, NRIs made up less than 10% of sales in the premium and luxury real estate segments. But that’s changed, and they now contribute a significant 20% to the sales of these properties. This trend is reshaping the real estate sector and offering new opportunities for both domestic and international investors.

A survey by Sotheby’s International Realty even revealed that more high net worth individuals (HNIs), many of whom are NRIs, are considering purchasing luxury real estate in India over the next two years. The real estate market in India is evolving, and NRIs are playing a substantial role in this transformation.

In a Nutshell:

India’s real estate is drawing NRIs like bees to honey. However, there’s room for improvement, especially in making property management smoother for those living overseas. As the market evolves, it’s a wait-and-watch for both NRIs and local investors!

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