If, as an Indian expat, you have decided to live in a particular city in India for the rest of your life, buying a home could be a more suitable option for you, as it is undoubtedly better to pay monthl;y installments rather than monthly rent.
However, that is easier said than done. There are a number of risks involved, especially from the point of view of an outsider – as you are not well versed with the ever-changing processes when it comes to buying property in India, be it a flat, residential building or simply a property.
There are a number of risks involved, especially from the point of view of an outsider – as you are not well versed with the ever-changing processes when it comes to buying property in India.
Keeping that aside, first and foremost, the key question home buyers need to ask themselves when buying property in India is this!
Is the apartment, building or any construction property you’re eyeing Indian RERA approved?
RERA, or the Real Estate (Regulation and Development) Act, 2016, has come as a big relief for home buyers. But many home buyers believe every project is covered by RERA and thus safe. That is not true.RERA covers projects with 500 square meter or more area or eight or more units. For a project to be RERA compliant, the builder needs to register it with the authority. So before taking the plunge, you need to ensure that the project is registered with your state’s regulator.
RERA makes it mandatory for all commercial and residential real estate projects where the land is more than 500 square metre or eight apartments to register with the regulator before the launch.
Ready-to-move-in homes versus under-construction projects
While choosing a flat for purchase is no easy task, what further adds to the dilemma of homebuyers is multiple advantages and disadvantages that are inherently linked to under-construction homes and ready-to-move-in units.
An under-construction home anywhere in the real estate market across the country is invariably lower in price as compared to that of a ready-to-move unit in any other project similar in size, scope, location and amenities. The biggest advantage of a ready-to-move unit is that you know what you buy.
Why then the negative stigma around under-construction projects?
Before RERA kicked in, several builders defaulted on their projects, especially in Delhi-NCR, and left many home buyers in the lurch, which is why buyers preferred ready-to-move-in homes.However, after RERA, builders focus on completing the existing projects instead of starting new ones and leaving the existing ones unfinished.
In many states RERA, in its present form, it is currently either non-existent or hardly what it was intended to be. It is a fact that RERA has been diluted in some states to favour developers, and that it hasn’t even been deployed in others – which highlights a key risk when it comes to property investment.
So, does this mean under-construction projects are now safe to consider?
Ready-to-move-in properties are undoubtedly the least risky. They offer instant gratification, the what-you-see-is-what-you-get assurance, and also do not attract GST. (Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the supply of goods and services.)
Ready-to-move-in properties are undoubtedly the least risky.
However, under-construction properties can be considered as long as buyers focus on only well-capitalised developers who are diversified across other property types and even businesses. Completion track-record is the key concept, experts explain.
An under-construction home is also always a better option for those who don’t plan to move into the houses and live in them, but invest in properties for returns. The cost of an under-construction home escalates with stages of completion.
An under-construction home is also always a better option for those who are not end-users but invest in properties for returns.
The difference in price of an under-construction unit at the time of booking and at the time of taking possession is huge. The highest quantum leap in terms of price takes place as soon as the flat is handed over to the buyer.
Thus, a housing unit falling under this category can yield very high monetary returns for property investors if booked at an early stage of development and then sold off just before taking possession.
NRIs can also explore options such as warehousing, co-working spaces and student housing
With ready high-grade rent-yielding commercial assets becoming scarce and the residential market no longer offering the kind of returns it did a few years ago, investors are now turning to popular choices such as warehousing, co-working spaces and student housing.Such property investment classes have gained traction in 2019, attracting slow but steady investments, collectively amounting to $210 million or Dh770 million.
Why invest in co-working, student housing spaces?
There is a major shift from investors putting in their money into small office spaces to co-working spaces. The concept of co-working spaces essentially involves groups of individual professionals and small and increasingly large-scale businesses who share workspaces.hy
In an age when business cycles have dramatically reduced and companies need to constantly innovate to survive and remain competitive over the long term, a co-working workplace may provide the environment that fosters fresh thinking and innovation.
The concept of co-working spaces involves groups of individual professionals and, small and increasingly large-scale businesses who share workspaces.
Student housing, or dormitory residential units used by colleges or universities, is yet another option as it is a resilient and a risk averse segment for non-resident Indians.
Investing in warehousing is yet another increasingly popular option
The industrial and warehousing sector has attracted INR254 billion (Dh12.34 billion) worth of investments since 2017, with a growing demand for larger facilities among e-commerce companies and third-party logistics.The inflows are expected to touch INR495 billion by 2021 (Dh24.05 billion), research indicates. The actual size of capital movement would be higher, as these numbers only cover the major investments by organised players.
Going forward, demand for large warehousing spaces is likely to see steady increase as occupiers now to move out of their smaller warehouses and consolidate their activities in larger facilities, which are presently in short supply compared to the demand.
NRI FAQs: Common doubts when it comes to buying property in India
Is this the right time for NRIs to buy property in India?
If you are a non-resident Indian (NRI) planning to buy a property in India, time could not have been better for you to do so. While India’s real estate sector has seen a price correction in the recent past, buying property in Indian has also become more lucrative with favourable currency rates.
Can NRIs buy all kinds of property in India? No!
NRIs can buy all sorts of immovable properties in India other than agricultural land, farmhouse, and plantation property. To acquire agricultural land/plantation property/farmhouse in India, they must get approval from the Reserve Bank of India (RBI) and the Indian government.
Can NRIS get home loans in India?
The RBI has given a general permission to banks and housing finance companies registered with the National Housing Bank to provide loans to NRIs for buying residential property in India. Sanctioned in Indian currency, the loan has to be repaid using the same currency.However, the loan amount, according to the regulations, cannot be credited directly to the bank account of an NRI and has to be disbursed to either the seller’s or the developer’s account. The loan can be repaid using funds in an NRI’s NRO/NRE account or FCNR deposits.
To read more about what the difference between NRE and NRO accounts is and how to finance your properties in India, also read the below two stories.
Do NRIs need to get a Power of Attorney (PoA) before buying the property?
As they live outside, NRIs have an option to give PoA, or letter of attorney (a written authorization to represent or act on another’s behalf) to their friends or relatives to complete the property purchase process in India. The PoA can be general or specific about the rights your representative can exercise.
Some interesting tips for first time property buyers
How to know how much I should spend in a property purchase?
A widely used thumb rule, if a person whose income is INR100,000 (Dh4,858), and has a saving of five-times the amount – INR500,000 (Dh24,291), you can can afford to buy a property worthINR3.5 million (Dh170,037) (seven times your savings).
Apart from one’s income and savings capability, one’s credit rating also plays a major role in getting home loan. Unless one has a reasonably high credit score, getting loan is difficult.
What properties are considered value for money?
Property should not be expensive. But how do you define ‘expensive’? Many follow this rule of thumb. When looking into how much rental amount you can get for that property, the rental yield of the property should not be less than 3 per cent.
Suppose the property is valued at INR3.5 million (Dh170,037). If put on rent and is expected to fetch INR10,000 (Dh485) per month. Its rental yield will be 3.4 per cent (10,000 × 12 / 3,500,000) – which is a good deal.