India’s metropolitan cities have experienced rapid economic growth in recent years, prompting NRIs to invest in the real estate sector for higher returns.
From easy management to tax benefits, NRIs are drawn to investing in India’s Tier-1 cities for several reasons, but many encounter challenges when executing these investment plans effectively.
Cities like Mumbai, Delhi, Bengaluru, and Hyderabad are economic powerhouses and hubs of opportunity for residential and commercial investments. According to various sources, it has been estimated that by 2025, almost 20% of real estate investments will be made by NRIs only, a considerable jump from 10% of investments in 2020. This can be due to high rental yields of 4.5% from Indian properties or multiple financing options from almost all private and public financial institutions.
This article will provide tips and lesser-known hacks to help you make the best investment decision when purchasing residential properties in cities like Mumbai, Delhi, and Bangalore, maximizing your returns. These insights can also prepare you for all the future possibilities and realities of India’s real estate market, helping you in short-term and long-term financial planning.
1- Research the Property Type and Location Before Investing
In India, there is a huge difference in funding options and investment returns from different types of properties. So, consider the kind of property you invest in, residential or commercial. Investing in cities with high rental yields or industrial cities will enhance your earnings. You can invest your money in commercial properties if you want to gain more profits.
Try thoroughly researching the property you want to invest in and in which neighbourhood, as it will give you a proper estimate of what to expect from your investments. This includes researching connectivity, modern amenities, and legal clarity of the locality, along with the construction status and builder details. Familiarity with the market and dealing directly with the developers can simplify the process.
2- Understand the Taxation Policies in India
Just like any other property investor, NRIs have to pay taxes on rental income and capital gains, which is taxes on rental income and capital gains. If you want to claim certain tax deductions, try to get familiar with the taxation policies in India. In India, Rental income is treated as ‘Income from House Property’, so NRIs are allowed a 0% deduction for repairs and maintenance.
This further includes deductions from interest paid for home loans. If the tenant of a property is an NRI, for example, in a 2 BHK apartment in Mumbai, they can choose to pay rent via an NRE account. You should avoid making direct transfers between a resident savings account and an NRE account, as they are prohibited in India.
3- Avoid Legal Hassles by Following FEMA Regulations
As an NRI planning to invest in India, understanding the FEMA regulations is very important. Why? Because RBI makes the rules for all investments by NRIs in India. These regulations can help you avoid any legal trouble and ensure smooth transactions. NRIs are restricted from buying farmlands, plantation properties, or agricultural lands but can easily acquire these through gifts from family members.
If you want to buy properties in India, you might use NRE, NRO, or FCNR accounts instead of foreign currency, traveller’s checks, or other prohibited methods. NRIs can transfer up to $1 million annually into their NRO account and even appoint a Power of Attorney (PoA) to handle property deals and finances more efficiently.
4- Hire A Power of Attorney
A power of attorney is a legal authorisation letter that is one of the greatest assets of any NRI trying to invest in India’s real estate industry. Suppose you are unable to attend the registration of your home. In that case, a trusted individual can perform this task for you and sign the required documents on your behalf, ensuring the transaction proceeds smoothly and without any legal constraints. For the same, NRIs are advised to visit any sub-registrar living inside or outside India to appoint their respective POA.
5- Meet All the Legal Requirements
NRIs are advised to handle the legal formalities and due diligence for property-related transactions. You should also ensure that the property has clear and marketable titles and complies with local zoning laws. The RERA number can be a great identifier for verifying under-construction projects and confirming that any obstructions will not affect the ownership title of your land/ home.
Explore the Biggest Investment Opportunity for NRIs
Given the high rental yields and long-term investment returns, investing in metropolitan cities in India can be a rewarding venture for NRIs. Before making such a big financial decision as purchasing a 2 BHK in Mumbai, it is suggested that you first conduct thorough research and select the correct property type and builder. Evaluating market trends, tax implications, infrastructure, and legal compliance can help you avoid any hassles and correctly estimate the approximate returns on investments. By following these tips, NRIs can minimise risks and align their investments with financial goals.
(This article is part of DMCL Consumer Connect Initiative, a paid publication programme. DMCL claims no editorial involvement and assumes no responsibility, liability or claims for any errors or omissions in the content of the article. The DMCL Editorial team is not responsible for this content.)