Real Estate Investment Opportunities for NRIs

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 property, mainly office spaces that are usually acquired by way of lease or for license for a specified period, yields 10 - 11 per cent pa together with the built-in increase of about 5 per cent. The investor ia allowed to borrow upto 50 per cent of the property, 70 - 80 percent rarely with the cost of borrowing set out from 12 -14 per cent pa. This is a worth considering investment as the risk involved is relatively low as the property ownership is vested with the investor itself. Another possibility for the investor is the retail segment. 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. Another category to invest could be in housing. With an estimated 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% pa) 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 housing 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 in to the apartment.

Investment in housing is growing incredibly, in recent years. Buying a house has become hassle free with alteration in interest rates and more probability of tax welfare to loan seekers. The need and requirement for housing 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 property to the ultimate consumers. Returnable income greatly depends on the project size. Risk involved in housing investment depends on builders and market condition.

Investing in apartments for the rentals and capital appreciation is another possibility for investment. In this model, investors can expect a rental yield of nearly 6 per cent pa and capital appreciation to the extent of medium to long term, if the demand is good.

With opportunities aplenty, the NRI investor has to choose the most suitable option depending on individual circumstances.

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