INVESTMENT OPPORTUNITIES FOR NRIs IN INDIA REAL ESTATE

There are lot of options thrown up in the current scenario for NRIs to invest across all types of real estate depending on the bite size, risk factors, staying power, ease levels, to participate in the great Indian real estate story.

First is the Commercial buy property in India, mainly office spaces that are usually acquired by way of lease or for license for a specified period, yields 10-11% p.a. together with the built- in increase of about 5 %. The investor is allowed to borrow upto 50 % of the property, 70-80 % rarely with the cost of borrowing set out from 8-8.5 % p.a. This type of investment would earn the investor, the total returns of 17-18% annually. This is a worth considering investment as the risk involved is relatively low as the property ownership is vested with the investor itself. Next is the property from IT sector, mostly find their place in urban cities and are rented out by IT companies including ITES and BPOs. This has a minimum floor size of 30000 sq.ft. and is particularly configured for IT users who normally occupy the space for years. The rental earning is high and demand exceeds supply in this sector. Thus the cost factor is comparatively acceptable with no sudden hike in prices. This segment is fast gathering pace as more and more malls are in the development stages. Under this type of investment, the investor could buy a mall either to rent it out to MNCs like MacDonalds, KFC, Nike or a local company like Barista, Provogue or enter into revenue sharing model to run a retail business effectively. The reach of the business is anticipated at large but the investors have to keep in mind the excess supply of malls and the dynamic nature of the business. A fourth category to invest could be in residential property in India. With an estimates shortfall of 22 million housing units, the potential is huge. With reduced interest rates and tax benefits given to borrowers (the effective rate of interest is 5.5% p.a.) and with simultaneous increase in salary levels, the average affordability has gone down from a high of 15 years in 1995 to 4.5 years today. This basically means that an employed youth can buy a house with 4.5 years of his income. Thus, the demand for residential property is huge. An investor can come into a project at the construction stage, buy a block of apartments from the developer and then sell them to the actual user upon the building being ready for possession. By riding the construction period, he basically finances the developer to some extent and exits when the user is ready to move into the apartment.

Investment in residential property in India is growing incredibly, in recent years, buy property in India hassle free with alteration in interest rates and more probability of tax welfare to loan seekers. The need and requirement for residential property is apparent, with the mass, witnessing an upsurge in salary income. An investor can enter into a construction project, and buy a block of apartments with the view to sell the residential property to the ultimate consumers. Returnable income greatly depends on the project size. Risk involved in residential property investment depends on builders and prevalent market condition.