The return of the NRI investor to the housing market

The past two years have been particularly constructive for India’s real estate sector; witnessing a strong push from all directions – ranging from interest rate cuts, formation of a regulatory body, to policy guidelines on affordable housing and smart cities. The most recent demonetisation drive was probably the ‘boldest’ of them all.

As India’s housing market continues to shift from a pure price play mechanism towards a market driven by commitment to delivery and right pricing strategies, coupled with the landmark Real Estate (Regulation and Development) Act, 2016, having been passed, NRI investors have been increasingly re-looking at this market for investment. While last year a number of important measures and initiatives were announced, with the aim of steering the real-estate sector towards growth and transparency, the year 2017 is expected to be a year of implementation. The hope of the sector is that the government will provide a further thrust to these measures and present a clearer outline on the way forward.

In the global arena, India’s real estate market is still developing towards a mature marketplace. Therefore, while there are opportunities for investors to benefit from higher yields, there are also higher risks to consider. There are regulations and restrictions for property investment in India, especially for overseas buyers. Here are a few directives potential investors should keep in mind when looking at the real estate market.

To begin with, according to the Reserve Bank of India (RBI) guidelines, NRI investors are allowed to purchase property as well as construct residential property for themselves in India. However, NRI’s cannot purchase any agricultural land, farm house or plantation property. Ownership of such properties can only happen if they are inherited or gifted.

It is important to note that an NRI, who has purchased property under general permission in India, is not required to file any documents with the RBI. There are no restrictions on the number of residential/commercial assets which can be held by an NRI. As far as transfer of property is concerned, a NRI may transfer any property in India to any person resident in India. For the acquisition of property, payments have to be made by either funds received in India through normal banking channels by way of inward remittance from any place outside India or funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999 and the latest regulations made by RBI. Such payments cannot be made either by traveller’s cheques or by foreign currency as per RBI norms.

The author is head, Residential Services - India, CBRE South Asia Pvt Ltd