Should NRIs buy property in India now?

The dipping rupee in the past few months has brought a lot of cheer to US-based NRI Tarun Arora. His loyalties are not misplaced, but his glee is justifiable. With the rupee weakening consistently, he will now be able to buy a house in India.

"I have been planning to purchase a house in Mumbai as an investment for some time, but since the property prices have been going up steadily, I kept postponing the decision," says the 35-year-old hardware engineer.

However, as the real estate market has now turned sluggish and the depreciating rupee adds more power to Arora's dollars, he is likely to acquire a property at a cheaper rate. "I expect the developer to offer a good discount as the demand for real estate is low. Also, my mortgage payments will be lower compared with the sum I would have had to pay a year ago," he adds.

Preferred option

Anuj Puri, chairman & country head, Jones Lang LaSalle, reveals that realty purchases by expatriates constitute about 8% of all property transactions in the country. "NRIs prefer to buy real estate as it is considered one of the safest investment avenues. It is also a source of rental income and there is surety that the capital value will appreciate," he adds.

Another reason is that there is a slowdown in most economies worldwide, while a few sectors are still lucrative in India. So, for the Indians who are living abroad and plan to return if they get better job opportunities here, investing in real estate while the prices are stagnant, makes sense.

Cheaper payouts

If an NRI finances the property through a bank loan, he would have to pay much lower monthly payouts compared with the amount he would have had to dispense a year ago (see How weak rupee benefits NRIs). The rupee was valued at 45.04 against the dollar on 22 June 2011, while it was trading at 57.15 as on 22 June 2012.

So, the buyer ends up saving nearly 27% on his monthly payouts. Also, in case he remits his savings to India, he can get more rupees for his dollars. While last year, he could have got Rs 45,040 for every $1,000 that he sent, he now stands to receive Rs 57,150 for the same amount.

How an NRI can buy property

What are the things that NRIs need to keep in mind while buying property in India? They can purchase any number of residential or commercial properties, but cannot opt for agricultural land, plantation land or a farmhouse. They cannot acquire such property even as a gift, though there is no bar on inheriting it.