Following the Covid-19 pandemic, the Indian real estate market has witnessed a significant increase in the number of non-resident Indians (NRIs) looking to invest in property in India. The NRI’s share in the real estate market doubles, with nearly 20 percent of sales for numerous real estate developers coming from foreign sources. In this blog we will find out the various reasons for the increase in NRI investment in Indian real estate.
NRIs who want to invest in commercial real estate in India or ask any question related to the same can schedule a call right away.
NRI’s Share in Real Estate Market Doubles
- Industry experts have revealed that the contribution of NRIs to the sales of premium and luxury property in India has more than doubled, reaching 20% of the sales.
- Prior to the Covid-19 pandemic, NRIs accounted for less than 10% of these sales.
- The US, along with the Middle East and Southeast Asia, stands as one of the key markets for the increase in property purchases.
- NRIs have been acquiring condominiums, branded residences, luxury villas, and villaments.
- A recent survey conducted by India Sotheby’s International Realty indicates that a notable number of high net-worth individuals (HNIs), many of whom are NRIs, are planning to acquire luxury real estate in India within the next two years.
- According to the survey, the current period is supposedly a great opportunity for NRIs to invest in large properties in India.
Reasons for the Increase in NRI Investment in Indian Real Estate
Listed below are the several factors that have contributed to the growing interest of NRIs in investing in Indian real estate:
- Digitization of Procedures
Digitalization has played a significant role in facilitating the increase in NRI investment in Indian real estate by streamlining processes, increasing transparency, and providing convenience:
a. With the help of digital platforms, NRIs can view property details, images, and videos online, eliminating the need for physical visits in India. This convenience has made it easier for NRIs to explore and invest in Indian properties without being physically present.
b. Digitalization has reduced the reliance on physical paperwork and simplified the documentation process. NRIs can now submit and verify documents online, such as identity proofs, property agreements, and financial statements.
c. Digital platforms enable secure online payment options for NRIs. They can make transactions, pay booking amounts, and even complete property purchases through secure payment gateways.
- Tax Benefits
NRIs can benefit from various taxation provisions under the Income Tax (IT) Act. Here are the tax benefits that NRIs can avail:
a. NRIs can claim a standard deduction of 30% on their home loan interest. Additionally, they can deduct property taxes and utilize interest deduction, reducing their taxable income.
b. NRIs can claim a deduction for the repayment of the principal amount on their home loan under Section 80C. Furthermore, they can also claim deductions for stamp duty and registration charges incurred during the property purchase.
c. NRIs have the opportunity to avail exemptions on long-term capital gains through various sections of the Income Tax Act, specifically Section 54, Section 54EC, and Section 54F.
i. An exemption on long-term capital gains from the sale of a residential property can be obtained under Section 54.
ii. Similarly, Section 54F provides an exemption on the sale of any asset other than a residential property.
iii. Moreover, Section 54EC enables an exemption if the capital gains from the sale of the initial property are reinvested in specific bonds issued by entities such as the National Highways Authority of India (NHAI), the Rural Electrification Corporation (REC), Power Finance Corporation (PFC), and Indian Railway Finance Corporation (IRFC).
d. By claiming the above given exemptions while filing ITR, NRIs can also seek a refund of TDS deducted from capital gains.
- Advantageous Currency Changes
The appreciation of the dollar against the Indian rupee is facilitating NRIs’ increased interest in the Indian real estate market, making it more convenient for them to invest in properties in India.
- Favorable Government Policies
The Indian government has enacted various policy reforms aimed at promoting NRI investments in the real estate sector. The implementation of the Real Estate Regulatory Authority (RERA) and the Goods and Services Tax (GST) has resulted in increased transparency, improved operational efficiency, and heightened investor trust. These reforms have effectively structured the real estate industry, making it more dependable, credible, and appealing to NRIs.
Can NRI buy Property in India?
Yes, NRIs are permitted to acquire property in India. According to the regulations outlined in the Foreign Exchange Management Act (FEMA) of India, NRIs can invest in properties within the country, with the exception of agricultural land, plantation property, or farmhouses.
Documents Required for NRI Investment in Real Estate in India
NRI can buy property in India provided NRIs submit the listed below documents:
- An Indian passport. In case one holds a foreign passport, he/she must provide a PIO or OCI card.
- PAN card
- Power of Attorney (PoA) in case the NRI is not present in India to execute the transaction.
- Current address proof
- Passport size photographs
How to Invest in Real Estate in India?
NRIs can invest in real estate in India by the following ways-
- Direct Investment
NRIs can opt for direct investment in real estate by purchasing properties in their own name. This can be done through inward remittances from abroad or utilizing funds held in NRE/FCNR(B) accounts.
- Investment in REITs
Another avenue for NRI investment in real estate is through Real Estate Investment Trusts (REITs) in India. REITs are investment vehicles regulated by the SEBI. They provide opportunities for investors to participate in income-generating properties without direct ownership.
- Fractional Ownership
NRIs can invest in commercial real estate (CRE) through fractional ownership. Fractional ownership allows individual investors to acquire partial ownership in high-quality commercial properties, with investment amounts as low as Rs. 10 lakh.
Contact SBNRI
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