What should NRIs keep in mind while investing in Indian real estate?

Can NRIs legally invest in Indian real estate? If so, what should I keep in mind while investing?

Yes, NRIs with a valid Indian passport can invest in the Indian realty market, though there are a few restrictions. NRIs with a valid Indian passport need no prior approval unless they are citizens of some neighbouring countries like Pakistan, Bangladesh, Sri Lanka, Iran, Nepal, Bhutan, Afghanistan or China. They can buy as many properties (residential or commercial) as they want but are not allowed to buy agricultural land, plantation properties and farmhouses unless such properties are gifted to or inherited by them. Transactions must be done in Indian rupees through regular banking channels via an existing NRI account. Just like Indian citizens, NRIs can also avail of home loans to purchase a property, with the maximum loan amount generally being 80% of the property value. Finally, the RBI doesn’t impose any rule for immovable property which is inherited or gifted.

NRIs can lease or rent such properties without any restrictions. Be sure to hire a reputed lawyer to vet all property documents. It is important to verify the original title deed documents and ensure that the property title is in the name of the seller. Do a thorough check to ensure the seller has cleared all the dues related to the property. Verify that the seller has not diluted the right to transfer the property to a buyer, and cross-check if the property is built on agricultural land without requisite government permissions as an NRI may get into legal problems in such transactions. In the case of under-construction properties, an NRI has to give a power of attorney to the developer or a trusted associate.

What kind of properties in India can NRIs invest in right now for good returns? I am an NRI living in Australia and have some funds allocated for property investment, but real estate is too expensive in Australia and anyway, I intend to return to India in a couple of years. Please advise.

For a long time, the return on investments on residential assets had been rewarding considering the significant capital appreciation while the rental yields have always been low. However, during the last couple of years, due to a slowdown, capital appreciation has not been as per most investors’ expectations. In the current market conditions, NRIs can consider investing in commercial properties which offer good rental yields as well as capital appreciation. There is a continuous rise in demand for Grade A commercial spaces, especially in the wake of the massive demand for such assets and the probability of REITs hitting the market soon. Apart from Grade A offices, you can also consider IT parks and logistics centres, which are typically yielding very healthy returns on investments.

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