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Feb 2018

NRIs to buy realty in India through frictional interest

NRIs to buy realty in India through frictional interest

The realty sector which has remained comparatively untouched by the digital revolution is witnessing a huge operational transformation. The 537 million square feet rent-generating the commercial real estate inventories are estimated to be over $70 billion.

Basically, the real estate sector attracts the investors as the returns are far beyond the fixed deposits as well as stock markets. The FDs return 6% while the equities offer returns in the range of somewhat 15%. In the terms of the taxes, investors pay 21.6% on rent and 10& effective on the capital gains in comparison to 33% in FDs.

The returns in the developed countries have generally been below 5% and this is the prime reason why NRIs even those who were living in Middle-east flock the Indian shores.

In this regards, the commercial realty offers continuous returns through the properties those are generating rent tenanted by the blue-chip organizations, booked for the period to 9-15 years with the minimum of 3 years lock period.

Also, the returns, a contracted yearly appreciation of 5% within the lease agreement factors for the inflation as well as keep the profits afloat.

The final quarter alone witnessed $85.79 billion of FDI inflow in the country which is the highest ever FDI made within one quarter. These regularly growing trade investments are the reflection on a constantly booming business landscape within India and are having a positive impact on realty sector. The industry experts estimate that the NRI investments in Indian realty market will touch $11.5 billion in 2017.

Although the investors understand that the property provides best post-tax returns in the country, a decent proportion of these is hesitant owing to the commitment of personal time as well as the efforts that are required.

Factors that put-off

One of the prime reasons why the majority of overseas investors generally stay away from putting the capital into realty sector is that it needs considerable domain knowledge with the significant investment of the personal time. At times, the realty investors require conducting the extensive research to analyze the future potential of properties take part in successive negotiations as well as initiate the proceedings to liquidate the assets at later date.

Being removed geographically from where the assets are located makes the investors anxious about how property gets adjusted. Therefore, most investors gravitate towards the investing in under-construction or the beginning-stage projects which are managed by the developers where the risks could be a bit higher.

The continuous involvement of the administrative authorities as well as the third-party players, like the independent realty agents and brokerage firms, serves to furthermore complicate the already complex situations. The complications magnify when the perspective is shifted to the commercial properties which at times require exhaustive paperwork to model the complex lease structures and the cash-flow management.

Technology is playing a pivotal role in bringing about the marked change in the mindset. While the end-to-end physical presence was previously required for making the investment into real estate, digital platforms have come to counter the prevailing challenges as well as extend the seamless investment experience to the non-resident Indian investors of late.

The cutting-edge technologies like machine learning, big data, pattern recognition and data analytics come up with the in-depth insight on several properties. Acting as an active gateway, the non-resident Indian investors make some data-driven investments.

Also, individual investors have options of either making fractional investment or buying properties listed on the digital platforms completely.

The fractional investment helps in bringing diversification in the investments, thus increasing the returns while minimizing the risks. The end-to-end management asset is done by platform. All the signatures and the paperwork formalities are digitally completed, making it incredibly easy and simple for the non-resident Indians to buy as well as manage properties in India.


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