Key Considerations for NRI Real Estate Investments in India
Investing in Indian real estate as a Non-Resident Indian (NRI) can be a lucrative endeavor, but it necessitates meticulous planning and thorough due diligence. Several crucial aspects warrant careful consideration to ensure a secure and profitable investment.
Pre-Purchase Due Diligence
- Builder Research: Conducting thorough research on the builder's track record is paramount. A builder's history speaks volumes about their reliability and the quality of their projects.
- Site Visits: It is essential to personally visit the sites before committing to a purchase. This crucial exercise not only safeguards a substantial financial investment but also mitigates potential losses in case of a change of heart. If an NRI is unable to visit personally, a trusted friend or relative can be requested to conduct the site visit on their behalf.
- Home Loan Security: Opting for a home loan through a bank ensures that the funds are disbursed in stages, securing the investment during construction and the overall acquisition process. Banks typically have pre-approved lists of builders known for their proven track record and adherence to legal norms; sticking to these lists is recommended.
Post-Construction Property Management
- Property Management: Managing the property after construction can be a significant challenge for NRIs. Some solutions include enlisting support from society associations for maintenance and rent collection, or hiring professional property management firms, an increasing number of which are expanding into Tier-II cities within a metro area.
Additional Checks for Real Estate Purchases
Area Calculations: Distinguishing between built-up, carpet, and super built-up areas is vital, as there can be differences of 15% to 20%–or even 50% in the case of super built-up. Understanding these distinctions is essential to avoid issues after a building is built.
- Built-up area: Typically used for construction rate quotes.
- Carpet area: Typically used for rental quotes.
- Super built-up area: Includes additional spaces like staircases, common passages, fire escape passages and similar areas.
The 100-20-10-1 Rule: Robert Allen, a stalwart in the real estate business, suggests the 100-20-10-1 rule: Check out 100 properties, shortlist 20 for closer examination, negotiate with sellers for 10, and ultimately purchase the one best suited to your needs.
Statutory Approvals: Scrutinize all statutory approvals, including town planning, water supply, sewage disposal, and fire safety approvals. Obtaining legal counsel on the encumbrance certificate and title deed from the builder is strongly recommended.
Important Advice
- Ask Questions: Do not hesitate to ask questions. In real estate investing, asking more questions often leads to better investment decisions. "Don’t worry about that, we will manage," without further details, is a red flag.
- Take Your Time: Don’t rush the process. A 2-4 week trip to India isn't sufficient. Start the process earlier, and if a decision isn't possible before leaving, consider granting a Power of Attorney to a trusted individual in India to finalize the purchase later.