Years 2020 and 2021 have proven to be remarkable years on various fronts. The deadly pandemic may have rattled the length and breadth of the world, but it has also taught us the importance of many aspects of our life. After the pandemic, people have started paying a lot of attention towards their lifestyle to build their physical immunity and in the meantime, people have also realised that they also need to build their financial immunity.
When we talk of financial immunity, many might think of new age investments and the quick fixing options such a digital currency. But, one thing we need to know is that the quick fixes are always volatile in nature and it is not the right thing to do with the hard-earned money. The digital currency has not been legalised and it is yet to stand the test of time.
Hence, when we think of stable financial immunity, real estate has proven to be one of the most fruitful and reliable investments as it is not as volatile as precious metals or stock markets or any other form of new-age investment. This precisely is the reason why it is called ‘real estate’. Real estate investment is nowadays one of the popular investment strategies for NRIs. A study conducted by Swadia and Patel (2018) concluded that NRIs from Gujarat state of India invested mostly in real estate as compared to any other investment options.
Arguably, real estate in India has infamously been in a slump for the last seven to eight years. The prices of flats in some of the top cities have significantly declined and property searches dipped specifically during the periods of uncertain consecutive lockdowns and unlocks. This has led to decrease in new property registrations throughout the country. All these might be a thing to worry about for the residents in the country, but the Indian diaspora has a golden opportunity for investment purposes. Especially with decreasing amount of bureaucratic bottlenecks and stringent and customer-centric regulations like RERA or the Real Estate Regulation Act safeguards the interest of customers or buyers with its strong grievance redressal system, the faith of expatriates have certainly been on the rise now. This has led to increase in NRI real estate investment in India. Amidst all the other major factors, there are other factors that every Non-Resident Indian or an Overseas Citizen of India must consider. This article aims to help the NRI real estate investors in India and make them understand the present situation at a micro level to help them make a wise decision. Through this blog we help on how to buy property in India from USA and give investment options for NRI in India. Also the advantages and disadvantages of real estate investment in India is discussed later on.
The Current Scenario for NRI real estate investment in India
According to Sanchaniya (2021), COVID-19 pandemic has caused huge loss in real estate markets in the United States and Europe, which has led to increased stakes of real estate in India. Hence it has created opportunity for NRI investments in real estate in India. So let’s understand how the current scenario is beneficial to NRIs real estate investment in India.
The “New Normal” and Investment Options for NRI in India:
The pandemic introduced to the world the words or concepts like ‘Work from Home (WFH’ and ‘staycation’) and hence the demand for rented property has been on the rise, opening avenues for earning through investment on property.
Online portals like OYO life, Zostel, Stanza Living and many other similar platforms are looking out for properties to partner with. This is paving way for property owners to earn income without much hassles.
You just need to go through each portal and select the one which suits your priorities. Apart from this, various individuals are looking out for rented properties as the new normal has emphasized the need for personal space for every family member. Besides this, a lot of youngsters are making the best out of the WFH by travelling to places they love the most and staying there for a while, striking off hotels and opting for cosy little homes. So whether you partner with any famous portal or rent your property to any known / unknown individual the new normal will allow every property owner in India an opportunity of good and stable income from the investment from day one. This is one of the best investment options for NRI in India.
Affordable Investment Climate – Rising Investment Property India:
Various real estate portals have stated that in the third quarter of 2020-21 the India real estate investment have not just remarkably improved, but have rather crossed the previous year’s numbers due to rising demands of investment property India during the festive season. This has not resulted in a price rise because of the huge number of unsold inventory pending with all major developers. This can be made very clear with the RBI house price index rising at 5% annually and this case is not just of last year or so but it is the case since 2016. This makes it very affordable, especially for NRI real estate investment with stronger currencies in comparison to the INR. The thing to notice here is that even if the present situation is not so promising, the economic forecast by various national and international organizations about the Indian economy is positive and predicts a U-shaped recovery.
In layman’s words, this is the best time to invest in real estate India as the foreseeable future gives a positive indication. Please note that vision of Prime Minister of India Narendra Modi to achieve $5 trillion economy is going to be possible as the economy is likely to grow at a quick rate. Further, due to demand and supply gap, rising population and improvement in living standards or growth in strong middle class is always going to keep the real estate prices moving upward.
Enhanced Transparency and Strict Regulations For Real Estate Investment in India:
India was rated poor due to its lethargic bureaucracy and several bottlenecks rising due to it. This had left the global investors skeptical with regard to India real estate investment. However, times have changed and so has the system.
With regulations like RERA coming into force, the interests of the buyers are safeguarded and the grievance redressal system has definitely enhanced the transparency factor in the process. With implementations of regulations, the interests of NRI real estate investors in India is always protected. Still, one has to be careful in real estate transaction, as they are yet not transparent.
Simplified Process of Repatriation For NRI Real Estate Investors in India:
Similar to other issues mentioned above, repatriation i.e. the process of getting returns through real estate investment in India was a tedious job, especially, when it comes to selling the property and getting the surplus or re-investing it. But several reforms since 2010 have made it easier to get your returns on your real estate investment.
Before jumping in to any conclusion, I would like you to consider some of the advantages and disadvantages of invest in real estate in India and repatriation through India real estate investment because as far as investment goes it is an individual choice and every individual should consider various aspects before spending their hard-earned money.
Advantages of Real Estate Investment in India
01. The Indian Economy is Likely to Grow at the Highest Rate:
As mentioned earlier, many national and international economic organizations like the World Bank or the International Monetary Fund, or even the central bank that is RBI through various reports have forecasted not only a speedy recovery but also one of the world’s highest growth rates in the near future, making India a profitable investment endeavour for global entities.
02. Demand and Supply Gap Soon Resulting in Price Rise:
It is evident that as the Indian economy starts recovering in the post-pandemic phase the demand-supply gap in the real estate sector will be a huge factor that will certainly result in rising prices of property in different locations pan India. Considering different large-scale projects like national and international airports, new industrial corridors, and a significant number of large-scale transport projects in the pipeline will result in further boosting of prices in such locations. Hence with increase in prices in the near future, this is perfect opportunity for NRI real estate investment in India.
03. Reasonable Pricing of Indian Real Estate Sector:
In the present economic scenario and with the Indian Rupee slumping down in comparison to USD or other international currencies, the prices of real estate in India are low and therefore definitely a factor to consider especially for those who are looking for an apt investment in minimum possible sum.
04. The Best Reason to Connect to Your Roots in the Form of a Second Home:
It is a dream of every expat to get back to his or her roots through one form or the other. It is a great way to keep the culture of the country intact and to pass on the baton to the next generation. To do that, having a second home in your own country can be one of the best options. It is often seen that children of expatriates never hesitate to come down to India if there is a good home in their native place. Apart from owning a home in your country, investment property India can also give you financial.
05. The Size of Investment Property India Matters:
When it comes to Return on Investment (ROI), the size of investment matters. At the same time, there are many factors like location or future government plans in the geographical vicinity which do matter but not to forget that in India real estate investment “The bigger the better” has been a thumb rule for good ROI.
Disadvantages of Invest in Real Estate in India
01. Location Does Matter Most of the Time:
When we are talking of return on investment then we should not forget that like any other sector in real estate too there are some factors which you should never underestimate. To maximize the chances is a no-brainer when it comes to the ROI in percentage terms. All said and done you still need to be careful because even from the location perspective all that glitters is not gold because there are other factors like the green signal from the National Green Tribunal (NGT) if it is one of the decision-making bodies for the project or the land altogether. The best recent example is the New Mumbai International airport which did have to wait until the approval and so did all the projects or land deals in the vicinity (did receive the green signal from the tribunal eventually).
02. Keep the INR-USD Ratio in Check (Higher Dollar Rate May Reduce the Gains in Terms of INR):
In the process of repatriation if you consider the increase in dollar rate then transaction in INR for any investment, in general, may nullify if in case the gap widens. Hence if the dollar rate increases, then the returns on the NRI investment in real estate, which is in INR, may not be significant when converted in dollars. To understand how currency exchange affects real estate, read our below article:
03. Pending Inventory May Lead to a Prolonged Slump in Prices:
As mentioned earlier, in the last quarter of 2020-21 the demand for living and working spaces did increase but the huge amount of pending inventory didn’t result in shrinking of or even reducing of demand and supply gap (supply is still huge), therefore as there is still a lot of supply in major centres the price rise may not happen in Indian real estate sector immediately, i.e. in near future you will have to wait for returns.
04. Real Estate Transactions are Still too Opaque in India:
The Indian real estate sector is considered notorious worldwide due to a lack of transparency in transactions. There has been a remarkable number of instances of people being lured into real estate transactions. This has led to decrease in NRI real estate investment in India. But the relief here is RERA. Though it has not noticeably reduced the number of wrongful transactions, it is mostly dealing with grievance redressal.
Takeaway:
Being an ex-pat of any country is an emotional issue, but when it comes to invest in real estate India, NRIs and Overseas Citizens of India must remember that business is all about a smart move at the right time and right place for the right purpose. The various pros and cons of NRI real estate investment in India must be considered before you invest in real estate India.
India is a growing economy. Despite the real estate sector seeing its bottom, it is certain that the sector will soar like the famous phoenix from its ashes. It is up to you whether to ride the flight high or just astonishingly gaze it once it achieves its helm. Hope this article helps on the prospect of how to buy property in India from USA, along with providing investment options for NRI in India.
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Author Bio
Saurabh Vadgule – Saurabh is a professional content writer and blogger. He has working experience across various domains of electronics, education, real estate & advertising. Presently he works for a digital marketing agency in Nashik, Maharashtra as a content writer. He believes in writing and educating people with an impactful approach.
