Investing in a luxury residency in India can be a lucrative proposition for NRIs who wish to grow their corpus, build a foothold in the Indian real estate segment, or procure a retirement home. The decision to invest in luxury real estate needs thorough consideration since the market is complex, and there is a huge monetary commitment involved.
Knowing and understanding these elements is vital for NRIs to make well-informed and fruitful investment decisions. This blog post will familiarise you with some important factors to consider while investing in an Indian luxury property.
Location & Growth Potential
When investing in premium properties in India, location is one of the most important factors that helps in evaluating the current and future value of the property.
NRIs should emphasise those locations that carry a strong growth potential when it comes to financial opportunities and infrastructure development.
Here are some of the vital factors that can be considered:
- Developing Locations with Potential Infrastructure Growth: Regions on the verge of witnessing significant infrastructural progress tend to reap the best growth prospects. For instance, connectivity to new airports, metro lines, commercial centres and highways can greatly increase a property’s value over time.
Also, the government emphasises modern regeneration projects and smart cities in specific locations, which can make these hugely advantageous for long-term investments.
- Well-Established Areas: Though developing locations come with a promise of fetching decent returns, investing in developed areas with a continual growth record can provide stability.
Metro cities like Mumbai, Bangalore and Delhi have been top performers in the premium real estate domain because of their monetary growth, emerging commercial zones and high demand for elite living spaces. In such areas, luxury properties normally witness consistent value growth over time.
- Capital Growth and Market Conditions: NRIs should check the long-term capital growth trends in the area. Regions and cities that show continuous growth in property price and value since the last few years generally continue to give favourable returns in the future.
Assessing property prices, and trends and tracking infrastructure developments can offer valuable insights regarding the growth trajectory of an area.
- Amenities and Social Infrastructure: The progress of an area is also backed by the availability of social infrastructure, which comprises schools, shopping hubs, healthcare centres, entertainment venues, and other recreational spaces.
Elite buyers generally focus on those areas that have good amenities since that can lead to a better standard of living. Locations that combine luxury, safety, and convenience may witness greater demand and enhanced investment returns.
Legal and Regulatory Aspects
NRIs should consider the following aspects before investing in premium property in India:
- Title and Clearances: NRIs need to verify the titles, and approvals and ensure that there are no hassles to assure legal ownership.
- Taxation: For NRIs, understanding the taxation aspects related to inheritance laws, capital gains tax on property laws, and rental income taxation can be useful.
- Power of Attorney: NRIs can consider getting a Power of Attorney for handling property-related aspects in India in case they are unable to be physically present.
Taxation & Financial Planning
Careful financial planning is vital to refrain from getting into any legal or monetary obstacles while also assuring that the investment so made is financially sound and in adherence with all the relevant rules and regulations.
- Short-Term Capital Gains: In case the property gets sold within a span of two years of buying, the capital gain will be considered short-term and will be taxed at 30% (along with other applicable surcharges).
- Long-Term Capital Gains: In case the property is held for more than two years, the capital gains will then be considered to be long-term and will be taxed at 20% post-indexation.
Hence, the property cost will get adjusted for inflation, which can bring down the capital gains tax. Thus, it becomes crucial to know about these tax structures and the ways in which they can impact the overall returns.
- Funds Repatriation: NRIs can transfer sale proceeds or even rental income abroad, according to RBI regulations.
- Wealth and Inheritance Tax: In India, the wealth tax has been abolished. However, NRIs should carefully consider the inheritance process, especially for non-resident heirs and beneficiaries. In such cases, thorough estate planning can be highly beneficial.
Read Also: Legal Disputes in Indian Real Estate: A Guide for NRIs
Developer Reputation & Project Quality
The developer’s reputation and project quality are primary aspects that can create a huge impact on the safety and value of the investment. Here’s how:
- User Reviews: Refer to the reviews from past buyers to assess how trusted and reliable the builder is, construction quality and after-sales services.
- Track Record: Evaluate the builder’s history of previously completed projects, on-time deliveries and the goodwill in the market. Well-established builders are less likely to create any unnecessary hassles or delays in commitment.
- On-Time Delivery: Premium properties should be completed on time as delays can negatively affect the property value and also your investment plans.
- Monetary Stability: A builder’s financial stability assures that the project is completed without getting into any sort of unforeseen concerns, alleviating the risk of abandoned developments.
Selecting a reliable builder with a proven track record and a commitment to high-quality standards is crucial for NRIs. A well-planned and timely executed property offers excellent returns and safeguards investments in the long run. Conducting thorough due diligence helps mitigate legal risks and project delays.
Investment Goals: Rental Yield vs. Capital Appreciation
NRIs must determine whether their emphasis lies on rental returns or capital growth, as both approaches come with different advantages and can cater to diverse investment aims and objectives:
Rental Yield
- Focus: Reaping stable income via renting out of the property.
- Advantages: Offers a consistent cash flow and can be perfect for NRIs who value stable returns.
- Key Elements to Consider: In most Indian cities, rental yields for luxury apartments generally range from 2.5% to 4%, whereas mid-segment and affordable housing tend to offer higher returns of around 4% to 6%.
- Main Factors: Connectivity to commercial spots, educational hubs, and infrastructure developments can impact the rental demand.
Capital Appreciation
- Focus: Offers long-term growth of the property value.
- Advantages: Perfect for NRIs who seek immense growth in property value over time. The value of premium properties can rise exponentially because of various factors like growing demand in prime areas and infrastructure development.
- Key Elements to Consider: Capital growth is harder to predict compared to rental yield and requires a long holding period to generate returns.
- Main Factors: Market conditions, area and upcoming infrastructure projects can impact the growth potential.
NRIs should evaluate their investment horizon and risk appetite before making a choice. Some investors may even opt for a combination of both strategies to build a diversified portfolio.
Read Also: Creating a Diversified Portfolio with Indian Luxury Real Estate for NRIs
Conclusion
Investing in an elite property in India can be a profitable venture for NRIs, providing immense personal and monetary rewards. Therefore, to make successful investment decisions, it is essential to evaluate the location, regulations, and property management options.
Contact Rustomjee to get more personalised insights and solutions and invest in our premium residential properties in Mumbai. Make the right financial choice with us today.
FAQs
- Buying vs Renting a luxury property in India: Which is better for NRIs?
For NRIs, purchasing a luxury property in India is ideal for long-term residence or as an investment with promising growth potential, while renting is a better option for short-term stays or those seeking flexibility.
Additionally, renting allows them to avoid maintenance costs and potential market risks.
- How can NRIs manage their Indian property remotely?
NRIs can manage their Indian property remotely by partnering with a trusted property management company to oversee maintenance and legal matters. They can also use virtual platforms for real-time updates and transactions, while a local representative can handle day-to-day tasks.
- Can NRIs avail of home loans for purchasing luxury properties in India?
Yes, NRIs can apply for home loans from Indian banks and financial institutions, but the loan-to-value (LTV) ratio and interest rates may vary based on eligibility and country of residence.
