Mark Twain once said, “Buy land, they don’t make it anymore”. That sums up the average Indian’s unshakeable faith in real estate investments.
Investment in immovable property is considered valuable in India. An expanding economy, increased disposable incomes, and lowered interest rates have made investments in immovable property more attractive.
Does this hold good only for resident Indians? Or does investment in immovable property makes sense for Non-Resident Indians (NRIs) as well? Let us explore.
Economic growth
India is making good economic progress over the last few years. It holds the distinction of being the fastest growing economy among emerging nations, outdoing China. The country is expected to grow at a rate of 7.6% during the fiscal 2017-18 and rise to 7.8% in the year 2019. There is a certain sense of economic and political stability right now in India. Public sentiment remains favourable that India’s economic juggernaut is not going to halt anytime soon.
Ability to finance immovable properties: Banking regulations in India are favourable towards NRIs wanting to invest in immovable property. Loans are available through leading financial institutions, subject to a few conditions. Finance is obtainable for buying of land, construction, renovation or purchase of a dwelling unit or commercial property. EMIs are payable by remittances from abroad. There are hurdles, still. NRIs are not allowed to buy agricultural or farm land in India.
Positive regulatory changes
The introduction of The Real Estate (Regulation and Development) Act, 2016(RERA) promises to bring in transparency to the otherwise tainted real estate sector. RERA looks at quality, timeliness, price, title, and such issues. RERA brings in strict penalties on developers who fail to hand over projects on time. Developers now are required to open separate escrow accounts for each of their projects. Migration to the Goods and Service Tax (GST) from this month is further expected to bring down costs of construction due to decreased taxes on inputs and logistics.
Good rental income
India’s economic growth has led to an increasing number of people gravitating to its heaving cities, attracted by the prospect of landing better-paying jobs and employments opportunities. This will create more pressure on housing and accelerate demand. NRIs investing in homes in such areas/cities can expect a steady rental income. Rental income earned in India is taxed at normal rates as a Resident Indian.
Interest rates
The Reserve Bank of India (RBI) has introduced Marginal Cost of Lending Rate (MCLR) which has benchmarked the interest rates to the Repo rates of the RBI. This has ensured faster transmission of rate cuts to borrowers. Currently, home loan interest rates linked to MCLR are in the range of 8-9%.
Currency conversion advantage
NRIs working in countries like Singapore, UK, USA, and the Middle East earn in local currencies, which are stronger than the Indian rupee. This gives NRIs an added advantage when investing in India. They get more for their buck, which brings down the cost outlay.
Retirement homes
Investment in immovable properties now can serve as retirement homes when the NRIs wish to return to their base.
