While the world order has been disturbed by the pandemic and therefore the global economy has been shaken, it’s times like these that distinguish the smart investors from the others and for the NRIs, opportunities back home are lucrative with the fall of the Indian rupee . Of late, NRI investors became wary of the stock markets because the equity markets still fluctuate and this is often the rationale why they’re betting success on real estate.
Why real estate becomes the safest bet for the NRIs:
The year 2019 was one among the worst years for the banking sector and amidst the recent turmoil even the SBI, the country’s largest lender, has reduced interest rates on savings accounts and glued deposits; this has made NRIs averse of trusting the banks.
Even Gold as an asset class has lost its sheen and is facing oscillation in its prices; this is often mainly due to the oil price competition , which has started after the pandemic. So if we compare banks and gold then land becomes a far better investment asset class because the prices in land is at all-time low immediately and may go nowhere but up from here onward.
The property appreciation and an honest rental yield is luring NRIs to have a property in their native country. NRIs from UAE, USA and Saudi Arabia are the frontrunners to invest in Indian realty. Earlier, only NRIs and foreigners with PIO card were permitted to take a position within the real estate sector. Foreign investors aside from NRIs were allowed to take a position only in development of integrated townships and settlements, either through an entirely owned subsidiary or through a venture company along side an area partner. However, the reformation that happened few years back during this regard permits FDI in townships, housing, built-up infrastructure and construction-development projects. Also, NRIs are entitled to varied tax benefits like a deduction of INR 1 lakh under Section 80C under the tax Act, 1961 If they sell their property within three years of purchase, the earnings from the sale are entirely taxable. If they sell their property after three years of purchase, they will recue capital gains tax by investing in another property.
Another pertinent aspect is that over the last few years, several amendments were delivered to the REIT regulations in terms of taxation. REITs are now also allowed to boost funds by issuing debt instruments. As REIT provides an opportunity to realize the advantages of investments in land without having the effort of buying and maintaining properties, there’s a robust probability of NRI investments in land in India being diverted to REITs.
How and why Commercial Property has become the new favourite:
Demand for institutional and commercial properties is additionally set to rise over subsequent few years. With the emergence of newer micro markets and residential hubs, the concurrent need for malls, shopping complexes, multiplexes, commercial buildings, office complexes, co-working spaces, logistic and warehouse spaces also will be growing in tandem, and every one this may be giving enough impetus for the NRI investors to take a position within the commercial properties in India. this is often the reason why NRI investors who have for long invested in residential land market are now gradually shifting gears toward much lucrative commercial asset class. This distinct shift of well-heeled NRI investors towards commercial properties is due to the satisfactory yields that they deliver. There has been a reasonably consistent rise in demand for commercial spaces like Grade A offices, IT parks, malls, service apartments, etc. The funds are becoming invested in world- class assets of huge IT buildings, malls and warehousing. there’s a daily reasonable demand for grade A assets and thus the funds are ready to perform well and provides good returns to the investors.
Gurgaon and Noida are the foremost popular investment destinations in Northern India, as these cities have maximum number of commercial spaces which include IT parks, shopping malls, service apartments, etc. Mumbai is another major attractive investment destination for NRIs; however, it does seem to be overpriced. Other metro cities like Bangalore, Chennai, Hyderabad and Pune, etc. also provides ample of options including different locations, facilities, prices and infrastructure.
Mid-sized commercial assets (Rs 20-40 Lacs) like office and retail spaces are emerging because the new favourites. Buyers and investors are betting big on such assets to hedge against future unpredictability. because the equity markets are staggering and financial markets are distressed, commercial real estate offers a compelling alternative. A grade-A quality commercial asset can render a Rental yield up to 12 per cent. Even in cases when tenant finalization will take around 6 months, commercial assets can give high rental returns. because the overall commercial sector is strong for a few time, elevated returns should continue with none possible compression.
Way forward for NRI investors:
In times of economic turmoil, security – not ROI – is that the key metric for an investment. Despite the sluggish economic process , commercial real estate in India has performed rather well within the last year and even now the office commercial realty has faced the smallest amount wrath of the present scenario. The proven diary of the developers of finishing the projects on the set timelines is another add-on. For NRI investors it’s suggested that they ought to believe a credible real estate consultant/realtor who will guide them to the simplest opportunities and also help them seal the deal. this is often especially important in times when most NRIs are going to be wary of travel within the immediate future, making personal site visits a challenge. For investors focused on the office space segment, the simplest projects are already pre-leased and offer guaranteed rental during construction and post-possession.
As worrisome because the current situation is, one shouldn’t forget that troubled times bring equal opportunities with it and therefore the current scenario may be a highly opportune time for NRIs to take a position in Indian realty and leverage on the present currency depreciation and record low prices.