While NRIs may wish to invest in Indian real estate to gain from correcting prices and a deflating rupee, there is much research and thorough planning involved. Here’s what you need to keep track of…
At present, Indian real estate is a very widely held investment option for most NRIs. However, since they live out of the country, it becomes more important for them to do apt due diligence before risking their money.
In this day and age, many Indian developers conduct roadshows in a foreign country. NRIs should not be utterly convinced by impressive exhibitions and sleek brochures. They should have someone reliable visit the property’s site and check the ground authenticities. Like all real estate investments, the site of the project should be attractive and should enjoy decent connectivity.
Pricing is an additional important issue. Often, the prices cited by builders to buyers in a foreign country, are higher than those cited to domestic buyers. Also, builders don’t offer deductions when selling out of the country. In such a scenario, the global buyer must learn the price at which the project is being vented in India. Furthermore, they should dodge paying a hefty part of the price upfront. In fact, they should choose for either a construction-linked payment proposal or the 80:20 or 70:30 system. In such schemes, a lesser portion of the cost is funded upfront at the time of booking, and the rest is paid on possession. Better still, they should choose for finished apartments to dodge the risk of postponement in tenure.
It may also be sensible for NRIs to take a minor bank loan, even if they don’t need the money. When an NRI takes a mortgage, the bank will look after the due diligence on their behalf. It will check whether the constructor owns the land on which he is developing the project and has gotten the obligatory licenses. This will avoid a lot of woe. There are a few examples of NRIs investing in small builders’ projects and then lamenting not having done timely research.
NRIs investing in India must know the laws that administrate real estate transactions. There are, for example, restrictions on how rapidly the revenue from a real estate transaction can be repatriated. NRIs also need to learn whether their profits will be subject to double taxation.
The real estate sector in the industrialised markets is well governed and more evolved, not like India. Here, buyers are often exposed to a lot of hassles. Unless an NRI has a reliable person running errands in India, buying real estate in India could be stimulating. Then there’s the managing of the property as there are not many companies in India still that offer such facilities. This makes it all the more crucial that an NRI has an agent to gather the rent as well as look after its preservation.
The theory of mean reversion proposes that revenues from real estate, are likely to be lesser than they have been in the recent past. Therefore, NRIs investing in housing real estate at this point in time should have sensible return expectations over a long-term period. Finally, NRIs also need to be conscious that the devaluation of the rupee against their home bills, will also have a bearing on their earnings.