Recently an acquaintance – a fund manager by profession – relocated
to India to set-up a domestic PE fund here. He had invested in a Mumbai
residential property strategically located close to the primary business
district and an international school for his kid. This investment, done
a few years back, helped him crystallize his plans for relocation to
India and start his venture without spending time in finding the right
location, house and school.
What I found most interesting was that he had not even considered
eventually relocating to India when he bought this apartment. He had
simply done it for investment five years previously.To date, I have not met a single NRI who is not keen to buy real
estate in India. Home ownership in this country is one of the most
satisfying means available to them to stay connected to their
motherland. Very often, such investments in their country of origin help
them to maintain their relationships back home while they make their
fortunes abroad.
A few weeks back, I met another NRI businessman – earlier based out
of Madrid and now relocating to NCR on the heels of the Euro crisis –
who was seeking to build a local business base here. Achieving this
while resettling family on all fronts has not been an easy task for him.
He is on the lookout for the ‘best’ location for a residential property
in NCR and naturally finds the cost of properties in the prime areas
staggering and beyond belief.
He had not considered investing in a property earlier. Completely out
of synch with the market dynamics back home, he blithely assumed that
his foreign-earned savings would make finding a luxurious home a breeze.
He was ill prepared for the astronomical ticket sizes that now prevail.
The Way Of The NRI
Over the past few years, we have noted that NRIs are investing into
residential real estate specifically in
large Indian cities to build a
back-up base in the country. This particularly applies to NRIs with
professional/entrepreneurial ambitions who intend to set up businesses
in these cities in the future.
Post the 2008-2009 global financial crisis, India has stood out as a
showcase example of financial stability, specifically in terms of its
conservative banking sector. More than anything else in the past, the
GFC caused NRIs to seriously contemplate owning homes in India as their
rattled confidence in all things foreign gave way to a yearning for
familiarity and stability on both on the personal and professional
fronts.
Rules Of Engagement
� NRIs have no restrictions limiting them with regards to how many
commercial or residential properties they can own in India. However,
there are restrictions on the repatriation of sale proceeds, which is
limited to two units. Effectively, this means that NRI face no
restriction while investing into commercial or residential
real estate
in India. However, when a NRI decides to sell and take the money back to
the country of
residence, he can do so with the sale proceeds of only
two units.
� NRIs can invest into real estate by remitting funds to India
through normal banking channels, or by invest through funds in
NRE/FCNR/NRO accounts maintained in India. They cannot make payment via
travelers’ cheque or foreign currency notes. They are also restricted
from making any payments outside India or settling payments through
exchange of funds outside the country.
� NRIs can avail home loan from Indian Institution approved by the
NHB, and loan repayment can be done either through inward remittances,
debit to a NRE/FCNR/NRO account, via rental income earned in India or by
borrowing from close relatives residing in India. NRIs can also avail
of home loans from the employer in India, provided specific terms and
conditions listed by RBI are met.
� NRIs can mortgage residential property in India with an Indian
financial institution without any approval from RBI. They can also
mortgage it with a foreign financial institution with prior approval
from RBI.
� NRIs can rent out their residential property without the approval
of the RBI in India. Rent received can be credited to NRO/NRE account or
remitted abroad. Authorised dealers have been empowered to allow
repatriation of current income like rent, dividend, pension, interest,
etc. of NRIs/PIOs who do not maintain an NRO account in India, based on
appropriate certification by a chartered accountant confirming that the
funds proposed are eligible for remittance and that applicable taxes
have been paid or provided for.
No one can exactly predict the fate of any currency, or the stability
of any economy. Economies are notoriously ‘subject to market risk’ –
for instance, no one had expected that west Asia would see political
uncertainty a few years back. However, when it comes to personal and
career stability, there must be no margin for error. The current trends
suggest that more NRIs are taking important decisions with regard to
owning residential real estate in India as bulwarks in uncertain times.
( By Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India)
