Reasons why NRIs prefer investment in Indian Real Estate over stock market, NRE/NRO accounts, and bonds

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Continuing with the discussion about Non Resident Indians and their propensity for investing in various investment classes, we recently conducted a survey among NRIs and asked the following question:

“Fall of rupee opens up new vistas for NRIs to invest in India. Which asset class is more likely to see increased investment activity?”

About 43 people responded and 27 chose real estate as the preferred investment asset class, the second preferred choice was NRE/NRO account with 12 people opting for it.

What could be the possible reasons for these results?

Also, have a look at our research report showing returns on investment classes such as real estate, gold, bond, and stocks.

• Volatile stock markets

Let’s face it. For last 2 years, the stock markets have been volatile to say the least. With growth slowing down and investment climate at its low due to poor policy making on part of the government of India, investors are looking for assets that are less risky. Unless, the investment climate gradually improves, we may continue to see retail investors abandoning stock markets and invest in relatively risk free asset class such as real estate or bonds.

• Low returns on bond markets

Bonds are risk free and therefore, returns are lower. However, bonds continue to provide stable return over a period of time and many prefer stability over high returns. With volatile stock markets, Indian investors are either preferring real estate or bond market. Non Resident Indians have been no exception to this rule.

• Rupee depreciation

In last 2 years, rupee has fallen substantially. This presents NRIs with an opportunity to invest in Indian real estate. Because of falling rupee, real estate looks attractive to NRIs and they are able to get property at almost 20% discount. For example, if one were to invest rupees 1 crore in commercial real estate such as Office Space in Gurgaon or housing in Chennai, he/she would have paid about 200000 USD. And since the falling of rupee, the same real estate would cost 170000 USD to an NRI. This is a major factor why real estate prices are still not coming down in India despite the sluggish demand at home. With money flowing in from NRIs, real estate prices are stable, if not appreciating.

• Family considerations

For people living abroad, there is the comfort factor that some of their relatives either parents, siblings are in India. And this leads them to buy a piece of real estate, which can be used in times of need for parents or siblings. Many also cherish the dream of returning to India one day and investment in real estate gives them the luxury to come back without worrying about housing or relocation.

• Hedge against inflation

Real estate has always been a preferred investment destination for Indians. It not only provides them with the availability of land or housing, but at the same time hedges ones savings against inflation. With low interest rates offered in deposit accounts, many prefer locking their money in real estate in order to hedge against inflation.

Our research shows that of all the various kind of investment vehicles, returns on gold and real estate have yielded better results over a 6 year period.

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How can NRIs-PIOs-OCBs open and maintain the NRE-NRO-FCNR-bank accounts in India to buy, sell, rent out immovable property?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Foreign exchange management act (FEMA) of 1999 allows Non Resident Indians (NRIs), Person of Indian Origins (PIO) to buy, sell, rent immovable property other than agricultural land or plantation property or farm house in India. One can invest in a piece of land and construct it or buy an under construction property directly from the real estate developer. Overseas Indians can invest in commercial or residential property of their choice. The acquisition of immovable property by person resident outside India is governed by terms of Section 6(3) of the Foreign Exchange Management Act (FEMA), 1999, as well as by the regulations contained in Notification issued by RBI vides Notification No FEMA. 21/2000-RB dated May 3, 2000, as amended from time to time.

Persons resident outside India are categorized as Non- Resident Indians (NRIs) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. A person resident in India who is not a citizen of India is also covered by the relevant Notifications.

To carry out this entire process of buying, selling, renting out the immovable property, NRIs/PIOs are allowed to repatriate an amount up to USD 1 million per financial year (April-March) out of the balances held in NRI account subject to tax compliance. This amount includes sale proceeds of assets acquired by way of inheritance or settlement. Thus, NRIs can purchase property and transfer money earned in India to their country of residence through authorized banking channels.

How can NRIs/PIOs/OCBs open and maintain the bank accounts in India? Find below the detailed document:

NRI-PIO-OCB opening and maintaining NRE-NRO-FCNR-bank accounts in india from Green Realtech Projects Pvt. Ltd

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Tax Exemptions for NRIs, PIOs, and the process of availing these benefits

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

India is among the top beneficiary of remittances from Indian Diaspora across the world. In 2013, India topped the list in inward remittances from Indians across the world. The total money sent by Overseas Indians in 2013 alone stood at 71 billion US $.



This investment from Non Resident Indians, Person of Indian origins is an important cog in the growth and development of the country. Not just India, economies and administration around the world appreciate investments from overseas as an invaluable and sustainable feature of their economies. India is no exception and successive governments at the center have reached out to this huge audience by offering slew of measures ranging from tax benefits to relaxed visa facilities.

The Indian central government is continuously reaching out to Non Resident Indians (NRI), Person of Indian Origin (PIO), and Overseas Corporate Bodies (OCB) by offering several incentives and exemptions such as relaxations on income tax, wealth tax, gift tax, etc. At the same time, sops are also offered to NRI, PIO to invest in real estate sector and housing. Furthermore, recognizing that NRIs and PIOs pay taxes in two countries, the Government signed the Double Taxation Avoidance Agreement (DTAA) with several countries to lessen the tax burden. Incorporation of the Authority for Advance Ruling has also eased the process for tax payers by avoiding disputes with regards to assessment of Income Tax liability in case of Non-Residents and also specified categories of residents.

At the same time, one must also note that different state governments in India levy additional taxes but also offer exemptions offered by central government. How can an NRI, PIO avail these tax benefits?

Find below the detailed document.

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The process of an ‘NRI buying a piece of real estate in India’. Do's and Don’ts

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

In our earlier articles about Non Resident Indians (NRI) and Person of Indian Origins (PIO) with regards to their investment in India, we covered, range of topics such as:

1. Guidelines that an NRI or PIO must adhere to for selling, purchasing, and financing a property in India
2. Taxation aspects for an NRI, PIO, or a Foreigner for buying an immovable Property in India
3. Opening of NRE-NRO-FCNR-bank accounts in India to buy, sell, rent out immovable property?
4. Reasons why NRIs prefer investment in Indian Real Estate
5. Impact of falling Rupee on investment in real estate sector in India by Non Resident Indians

Having covered the above topics in details, we now move on to the process of an ‘NRI buying a piece of real estate in India’. If the process described below is followed diligently by an NRI investor, then investing in Indian real estate can prove to be rather rewarding.

• Research

First thing first, before you embark on your journey to real estate investment in India, carry out comprehensive online research. How is the builders’ reputation in the market? Locality price indices, city master plan, infrastructure project announcements are some of the things that one should note down. Compare builders’ pros and cons, compare locality pros and cons, and assess the city master plan by visiting the urban development authorities websites. A number of online forums to discuss real estate projects are also available. Visit these independent forums and gauge what others are saying, ask questions if possible. 

• Depute someone or visit the site yourself

“Pictures tell the story” is a proverb which maybe applicable to other sectors but not to real estate sector in India.  Many newly launched websites focus on ‘Real Photos’, but ask yourself, can they tell you the actual story? Can they show you the approach road towards the project? Can they highlight slums in the nearby areas? Can they highlight the construction quality? The answer is big NO. Therefore, when it comes to buying or renting real estate in India, visit the site yourself. With NRIs living in far away countries, it becomes difficult for them to visit the project site location. Instead, ask one of your friends or relatives to do this on your behalf. The bottom-line is ‘One should never rely on pictures shown in glossy brochures or websites’.

• Check the bank approvals

Now, that you have zeroed on 2-3 projects after having done the online research and visiting the project site, the next step is to check the bank approvals. Which are the banks that have approved the project for home loan sanctioning? Kindly note, a bank or housing finance company invests about 70-80% of money in the project in form of home loans sanctioned to buyers. Therefore, they will definitely carry out proper due-diligence including the project approvals, clearances, title certificates, etc. Ask the builder about banks which have approved the project for home loan. Talk to these banks. Go ahead with project that has a minimum of 3 banks approving it for home loan.

• Project approvals

Even though, you have got assurances from banks about project approvals, it doesn't mean that you turn a blind eye to check the approvals yourself. Ask the builder to show you the necessary approvals such as license number issued by Town Planning Department, approved drawings, NOC from various departments. This is to double check that everything is fine with the project and you won’t end up in a soup.

• Ask questions

Be an extrovert buyer; ask questions to builders, banks, brokers. There is never a silly question. You would be investing a size-able amount of your money, therefore, be proactive.

• Builder buyer agreement

In recent times, some of the major developers have landed in trouble with authorities and CCI for sticking to one-sided builder buyer agreement. Read the document carefully, and clarify things before you sign the agreement.

• Hire a lawyer

Despite all the research, one can never be 100% sure. For this, the NRI investor can as well hire a lawyer to do the title verification. The lawyer will ensure that the builder has the ownership title to the land on which he is developing the project.

• Never pay in cash

Whether one books property online or directly at the builder’s office, never pay in cash. Pay by cheque or via the formal routes such as online transfer. Keep receipt of every payment you make to the developer.

Happy investing :)

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Non Resident Indian (NRI) and Person of Indian Origin (PIO) looking to sale/purchase property in India

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Non Resident Indians (NRIs) and Person of Indian Origin (PIOs) can acquire Immovable Property (either Residential or Commercial) in India by way of purchase, gift, inheritance, or share of joint property received upon partition of family/property, etc. as per the guidelines laid by the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000.

There is no ceiling on the number of immovable properties acquired or sold in India by NRIs and PIOs. However, NRIs/PIOs belonging to Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan require a prior approval of the Reserve Bank of India for acquiring Immovable Property in India.

It is mandatory to file a declaration of the acquired property with the Reserve Bank of India within 90 days of acquisition of property, on the prescribed Form - IPI 7.

Below is a detailed list of guidelines that an NRI or PIO must adhere to for selling, purchasing, and financing a property in India:

Non resident indian (nri) and person of indian origin (pio) looking to sale purchase property in india from Green Realtech Projects Pvt. Ltd


Source: National Housing Bank

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