Rules for NRI investment in Indian real estate market
The realty sector has hugely remained unaware of the technological developments which are going through the phase of metamorphism and has been recently coming under the scope of the cutting-edge technology. In fact, the technology has made it pretty easy to invest in the property and helps several non-resident Indians invest in India with comparatively lesser inconveniences.
India has rent-generating commercial realty inventory of over 530 million sq. ft which is assessed to worth over $70 billion. The investment avenue proffers favorable growth prospects to non-resident Indians. Settled Indians in the US and Europe at times to invest in Indian real estate to earn the loftier returns as the developed countries proffer low investment returns generally under 5%.
The ones in the Middle East are disposed to invest in Indian realty as they have comparatively fewer investment options available to these within the area due to the legal framework that restricts expat real estate investment. Further, the commercial properties proffer consistent returns through the rent-generating offices tenanted by the blue-chip organizations.
The commercial real estate provides comparatively greater security to the investors as these are leased for 9-15 years with a minimum lock-in period of 3-5 years. The constricted yearly rent appreciation of 5% in lease agreement negates inflation giving inflation-adjusted returns. This is drawing the huge number of non-resident Indian investors to Indian real estate market. But they recognize that the property provides best post-tax returns in the country, there are various other factors at play that keep these at bay.
Normally, the investors stay away from the realty sector since it needs considerable domain knowledge with an important investment of personal time. This certainly is over and above the capital required to step into commercial realty in any meaningful manner. The commercial properties have the ticket sizes of between 5 Cr to 40 Cr (INR). Firstly, huge ticket size screens out a widely held by potential investors with comparatively smaller savings.
Furthermore, the ticket size makes the investment too huge of the rick to take, as it is hugely concentrated with no space for diversification. The investor has to conduct an extensive research to analyze the future potential of the property, take part in continual negotiations and begin sales calls to actually liquidate the assets later.
Being geographically inaccessibly from property makes these pretty concerned about how it is managed, what tenants are up to, whether the maintenance and tax dues are cleared on time. Therefore, most of the investors incline towards investing in the early-stage properties or riskier under-construction the constant involvement of the third-party players like brokerage firms and independent realty agents magnify difficulty drastically when the focus shifts towards the commercial properties. It gets complicated for the foreign investors when they require being available in the country to fulfill the procedural needs.
Tech comes handy
Technology has basic characteristic- It has the power to transform anything. The tech-driven platforms are coming to fore to eradicate the prevailing challenges as well as extend seamless investment experience to non-resident Indians. These tech platforms are making use of machine learning big data, pattern recognition and data analytics along with the fundamental boots-on-the-ground research to bring favorable investment options to the investors.
For example, the companies in today’s time have unique fragmented-ownership investment model that lets the investors to partially invest in the tenanted commercial properties for least investment of Rs 10 lakh. Also, the individual investors can sell the share at any time on a proprietary resale platform that provides them with immediate liquidity should they require to sell the share.
The listed properties are basically rent-generating offices residential blue-chip organizations as well as extend over 7-8% rental yield in addition to the capital appreciation of over 10-15%. Such trendy platforms, furthermore, have end-to-end digital process while making easier for non-resident India investors to buy as well as manage the investment portfolio. This basically enables the investors in making secure ad safe commercial realty investments while maximizing the returns by tapping into the technology.
India is the fastest growing economies with the strong presence as well as future growth prospects. This made the country a promising investment destination for multinational companies who are either foraying into Indian Market or increasing their presence in India through business expansion to establish it. The previous quarter has closed with foreign direct investment which is worth $85.79 billion which is the highest ever foreign direct investment in a single quarter.
The snowballing investments do reflect fast booming business landscape in the country that is having a positive impact on commercial realty sector. Thankfully, the technology-driven platforms are keeping eye on the entire trend and the market development that is affecting the real estate investments.