FDI In Indian Real Estate 

Investment in real estate is not just a sustainable and lucrative option but also a secure one. It's the only investment option that gives you exceptional returns with zero risk. Indian real estate, in particular, is growing swiftly, and it's attracting a lot of Non-Resident-Indians (NRIs) to invest. After the Pandemic, Indian real estate saw a surge in home sales. The need for a more spacious home is in demand, and even NRIs are investing to have a permanent home in their native place. NRIs also invest to save taxes and extract high returns in low investments because property prices in India are more affordable than in developed countries. In this blog, we will assess all the paramount factors that are driving NRIs' money to India.

What Are The Reasons Attracting FDI In Indian Real Estate?

The Indian real estate sector has been drawing Foreign Direct Investment (FDI) for several reasons. Let's delve into the factors that make India an attractive destination for global real estate investment:

1-Robust Economic Growth: India's growing economy has been a magnet for foreign investors. As the nation continues to grow, real estate presents lucrative opportunities.
2-Recent policy reforms have revolutionised the Indian real estate sector, making it more accessible and attractive to foreign investors. These reforms have streamlined processes and eased regulations, creating a more investor-friendly environment. This has significantly contributed to the influx of Foreign Direct Investment (FDI) in Indian real estate. Infrastructure Development: The focus on infrastructure development, urbanisation, and sustainability has enhanced the appeal of real estate projects. The 2023-24 Union Budget emphasised these aspects, creating a conducive environment for FDI.

3-Affordable Housing: The government's commitment to affordable housing initiatives has opened up avenues for investment. Developers are actively engaged in constructing affordable homes, attracting both domestic and foreign investors.

Construction Development Projects: FDI is allowed in construction development projects, including:

1-Making new houses or buildings.
2-Developing townships.
3-Constructing residential or commercial premises.
4-Establishing roads and bridges.

Investing in Real Estate Investment Trusts (REITs) adhering to SEBI (REITs) Regulations 2014

1- Rental Income: Foreign investments are permitted in finished assets, especially for generating rental income. This approach avoids property transfer and aligns with the current policy.
2- Key Considerations: To succeed in FDI in Indian real estate, investors must carefully evaluate factors such as land title verification, industry classification (residential, commercial, etc.), resource requirements (labour and local materials), financing sources (equity, foreign debt, local debt), and obtaining necessary approvals (building and development plans, environmental clearances).
3- Ownership and Control: FDI provides direct investment with substantial control over real estate projects. In contrast, Real Estate Investment Trusts (REITs) offer indirect or fractional ownership with limited decision-making influence.

How Can NRIs Invest In Indian Real Estate?

Non-resident Indians (NRIs) who wish to invest in the Indian real estate market should be aware of the rules governing property transactions. Here are some key aspects for NRIs, Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs) interested in Indian real estate:

1- Eligibility: An NRI with a valid Indian passport can invest in Indian real estate. They can purchase commercial or residential properties either as sole owners or in partnership with another NRI.
2- RERA (Real Estate Regulation and Development Act): RERA, enacted in 2016, has provided regulatory certainty and stability in pricing. Developers are now accountable for completing projects on time, which benefits NRIs.
3- NRE/NRO/FCNR Accounts: NRIs can use funds from their NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) accounts to finance property purchases.
4- Loans: Indian financial institutions offer loans to NRIs, allowing streamlined funding for property investments.
Market Outlook: India's real estate market is expected to be worth 266 billion by 2023, with further growth anticipated. The government's commitment to providing housing for all contributes to the sector's attractiveness for NRIs.

Investment Rules For NRIs In Indian Real Estate

Remember that NRIs must adhere to Reserve Bank of India (RBI) guidelines and regulations regarding acquisition, repatriation of funds, and compliance with foreign exchange management regulations. Investing in Indian real estate can be a smart move, given the right considerations and awareness of the legal framework.

Decline Of The Indian Rupees

The recent decline of the Indian rupee against the US dollar has sparked a lucrative opportunity for Non-Resident Indians (NRIs) looking to invest in Indian real estate. With the rupee's depreciation, NRIs find property acquisition in India more affordable, prompting a surge in investments. This trend is a significant departure from traditional investment avenues like gold, fixed deposits, and the equity market, which have shown low returns and volatility, especially in the wake of the COVID-19 pandemic.

Favourable Taxation Policies

India's favourable taxation policies, including indexation benefits and simplified procedures for NRIs, further incentivize investment in real estate. Properties held for over 24 months are treated as long-term assets, offering tax deductions under specific sections of the Income Tax Act. Moreover, NRIs can seamlessly transfer funds to Non-Resident Ordinary Accounts (NRO) and directly credit sellers' or builders' accounts, streamlining the investment process.

Luxury Real Estate

Luxury real estate has become a particularly attractive option for NRIs, driven by India's economic growth and the rise of affluent individuals. The shift towards remote work due to the pandemic has fueled demand for luxury properties featuring modern amenities like temperature-controlled pools, private golf courses, and landscaped courtyards. Renowned Indian architects, sought after globally, are designing these properties, blending traditional Indian architecture with modern luxuries.

Despite initial uncertainties during the pandemic, the Indian real estate sector has displayed resilience, with construction activities resuming and vaccination drives progressing. This stability, coupled with the rupee's depreciation, has positioned Indian real estate as a preferred investment destination for NRIs in 2024.

Conclusion

In 2024, Non-Resident Indians (NRIs) are increasingly investing in Indian real estate for several reasons. Firstly, the Indian real estate market is experiencing growth and stability, making it an attractive investment option. Additionally, with advancements in technology and easier access to information, NRIs can now research and invest in properties more conveniently from abroad. Moreover, the Indian government has implemented various policies and reforms to encourage foreign investment in real estate, such as relaxing regulations and offering incentives. Furthermore, NRIs often have emotional ties to India and view property investment as a way to maintain a connection to their homeland while also benefiting from potential financial gains. Lastly, the depreciation of the Indian rupee against major foreign currencies can make real estate investments more affordable and lucrative for NRIs. Overall, these factors contribute to the growing trend of NRIs investing in Indian real estate in 2024.