UAE’s NRI Realty Investment to Soar in India

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UAE has around 2.2 million Indians as a part of its population. This Diaspora constitutes the largest part of its population which is distributed in three emirates namely, Abu Dhabi, Dubai, and Sharjah. By allowing 100% FDI in construction and commercial real estate, India is attracting UAEs large NRI population. The decline in the value of Rupee against Dirham has also made investments in Indian realty even more lucrative.

According to the World Bank’s report, India leads the world in receiving remittances ($80 billion in 2018) of which a sizable portion goes into real estate. Most of it received from Indian expatriates in UAE (20%), USA (18%), UK (7%) and Canada (6%). Among the Indian cities Mumbai (31.86%), followed by Bengaluru (24.35%) receive the lion’s share of NRI investment in real estate. The third place was held by Chennai and Pune jointly whereas Delhi held the fourth position.

In spite of the low price rise of property in India, investing in a 1BHK flat in Mumbai is still extremely profitable due to favorable policy initiatives and political scenario.

There is an increase in UAE investors in real estate from 34.98 percent to 40.87 percent in 2018.

Reasons for NRI Investment in Realty:

Simpler Investment Options

The Indian government is riding high on the waves of economic development leading to relaxation in the rules and regulations for NRIs. The investors can take help from banks and property expos which at regular periods bring the investors and developers together in order to strike the perfect deal. Due to capital appreciation and periodical return on investment, real estate projects attract most of the FDI even in mid-segment housing.

Transferable Nature of Real Estate

NRIs can transfer properties (other than agricultural, plantation or farmhouses) in India to an Indian resident or PIO outside India. If the property has been acquired as a resident by the NRI then, he can transfer it to any Indian resident or NRI/PIO through sale or as a gift.

Note: Only NRIs are allowed to invest in trading in transferable development rights and sale and purchase of real estate.

Profit Repatriation

NRIs and PIOs can invest in any number of residential or commercial properties in India. The sale proceeds repatriated in case of a residential property is restricted only to two units. NRIs can repatriate up to USD 1million per financial year which is subject to payment of tax. NRIs can also give power of attorney to their friend and relatives for real estate investment.

Investor Friendly Policies

Important policy transformations such as REIT, RERA, GST and affordable housing under Pradhan Mantri Awas Yojana have impacted the realty sector positively. The element of risk associated in such transactions has been mitigated by the implementation of RERA. Various regulations in taxations have been made under REIT.

Proactive Property Management Services

There are numerous property management companies which manage assets for real estate investors. Many property developers themselves set up property management sections for various selected projects.

Benefits of NRI investment in Real Estate in India:

Low Property Prices:

The prices of property in India are low due to various factors like demonetization and fall in the rupee. The government is bound to increase the FDI and hence has made various policies to favor the same.

Tax Exemption:

NRIs investing in real estate can manage to save tax like a regular Indian citizen. They can also claim interest and tax deducted on home loans on principal repayment.

Rental Income:

Rental income can be earned without any hassle in India by NRIs. The tenant deducts 30 percent TDS (tax deducted at source), while the remaining amount can be repatriated under the rules of Foreign Exchange Management Act. Under this Act, the proceeds which are earned through the sale of property/land in India can also be repatriated.

Planning Retirement Benefits:

Investments in India can help NRIs plan their retirement benefits. They can take advantage of reverse mortgage and the amount earned from banks is not factored in the taxable income of NRIs. Thus, NRIs can benefit from their property in India and can also from money taken by banks as a part of reverse mortgage.

Conclusion:

Most expatriates including NRIs, PIOs, and OCIs tend to secure their financial future and build wealth. The belief in the proactive governmental policies and the positive regulatory development of the new Indian leadership is leading to an abrupt increase in foreign investments. The experts believe that investment in realty by NRIs is most profitable at this point of time due to increased transparency and accountability of the process. Thus, the overall investments will cross $10 billion dollar mark by 2020.

FAQs:

Why is Mumbai leading in NRI investment in real estate?

Mumbai is a major attraction for NRI investors in real estate because it offers a large variety of investment options such as offices, residential flats, houses, etc. Mumbai offers great luxurious locations and amenities which are the major concerns for an NRI investor with a global outlook because he is accustomed to it.

What is the effect of technology on NRI investment?

The market dynamics of a country can be studied by the use of various Google applications. They also help in bridging the geological gap faced by the NRIs. Identifying the right property and booking it is mad extremely simpler by the help of digital tools. Technology helps in bringing both the buyers and the sellers on the same platform. They help in saving a lot of time and energy of the NRI making a new house purchase with just a click.

How can Indian developers attract more overseas buyers?

Indian developers can set up more overseas offices. They can also organize events and participate in expos to find tenants. They can push their sales up by offering discounts and flexible payment schemes. These efforts should be backed up by strong digital marketing.

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