NRI investment in Indian realty make headway in first quarter

V Nagarajan

An estimated 30 million NRIs living in 160 countries are looking at India for real estate investment opportunities. India has been consistently notching up the top slot in expatriate remittance for years now from $55.6 billion in 2010-11 to $64 billion in 2020.

Among the investment options, real estate plays a key role. The NRI demand for Indian real estate has been riding strong throughout first quarter of this year on the back of lucrative benefits offered on stamp duty by the state governments of Maharashtra and Karnataka.

This resulted in large number of property transactions and registrations across these micro markets. NRI demand did stutter a bit post the withdrawal of stamp duty offers and the simultaneous worsening of Covid situation in India.

However, with developers once again bringing back price softeners, NRI demand is gradually picking up.

There is significant appetite for properties of Grade A developers, said Shajai Jacob, CEO – GCC (Middle East), Anarock Property Consultants Pvt Ltd.

Anarock’s enquiries have increased by 18 per cent during January to March 2021 as compared to same period last year. Also, the share of revenue generated by digital leads increased to 30 per cent in FY20-21, a clear indication of the sales gaining momentum.

With challenges on physical site visits, buyers are making use of the extensive digital infrastructure scaled up in the last year in the form of 3D models, actual drone videos, virtual site visits and digital transactions.

The interest of an NRI buyer today is heavily skewed towards apartments offering an added flexibility in terms of space. Commercial investments with yield guarantees are also a preferred asset acquisition rationale. NRIs have always trusted developers with a proven track record of timely delivery and quality construction and this is reciprocated in the current demand too, said Shajai.

GCC continues to be the major source of NRI investments in India. Collectively, GCC accounts for around 41 per cent of the total investments. Investment inflow from the expat community in the USA comprises 17 per cent of the total purchase, followed by Singapore (12 per cent). Other major source markets include Canada, UK, Germany, Kenya, South Africa, among others, according to a 360 Realtors survey.

In FY21, average ticket sizes from the USA have reached $124,000 compared to $111,000 in FY20. From Singapore, the average ticket sizes have inched up to $93,000 from $91,000 in FY 20. Similarly, the average ticket size of purchase from UAE-based NRIs has grown by 11.5 per cent to reach $97,000.

Non-resident Indians (NRIs) are increasingly showing interest in the southern markets, especially Karnataka, Tamil Nadu and Kerala, for real estate investments, with over 75 per cent of searches in these markets during 2020, according to a report by Commonfloor. The maximum search or demand comes from those NRIs living in the US, followed by the UAE and Britain

I am planning to sell my real estate assets in Mumbai and Pune and reinvest in overseas assets. Can I claim long term capital gains exemption for the investment made abroad? Please clarify. Anand Jain, Sharjah.

Sale of real estate asset is taxable in the year of sale. If the asset is held for more than 24 months, it will be a long-term capital asset taxed at 20 per cent. However, if the sale proceeds less expenditures are reinvested in one residential house within the prescribed timelines, it will be exempt.

As regards overseas investment, exemption is not available for investment outside India. You can claim foreign tax credit abroad for taxes paid in India against Double Taxation Avoidance Agreement which India has entered into with select countries.

I bought an apartment partly utilising home loan and the remaining through remittance from abroad. Though the loan has not been settled fully, I intend selling the apartment to repatriate funds to UAE. Is there any restriction while seeking repatriation when the loan is partly repaid? Anoop George, Dubai.

No. There is no restriction provided where the funds were raised by way of loans from housing finance institutions, repatriation is allowed to the extent of such loans were repaid in forex. At the same time if the sale takes place on or before the expiry of two years, provision of short-term capital gains and if after two years, long-term capital gains will apply in India. The balance amount, if any, can be credited to the NRO account and can be remitted under the yearly $1 million facility.