With the Covid background and the implementation of the immunisation programme in India, the real estate market has begun to show signs of recovery. Due to the IT/ITeS sectors, residential sales have resumed their upward trend, and the commercial property market is also gaining traction in the major capitals of the nation. NRIs are eyeing the Indian real estate market as the growth is seen as significant in the next few years. Check out the article to get the answer to whether should NRIs invest in Commercial properties in India.
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Why Should NRIs Invest in Commercial Properties in India?
Investment for NRI in the Indian realty sector has always been a popular alternative. Here are the reasons why NRI should invest in commercial properties in India.
- The market for commercial properties in India, which includes retailing and hospitality, is expanding quickly in tandem with the country’s real estate market, which is increasing exponentially.
- The RERA and the government’s implementation of the Goods and Services Tax (GST) have greatly enhanced the commercial real estate industry and drawn an increasing number of foreign direct investments (FDI).
- The regularities and friendly laws make NRIs investment in the real estate sector easier as these laws assure quality construction and timely delivery to the buyer.
- In India, the need for Co-working facilities, and office spaces have been rising. This business strategy appeals to both established IT players and aspiring entrepreneurs. Given the popularity of this workplace style, the need for common spaces is often anticipated to increase over the coming years.
- The need for real estate sector infrastructure is being fueled by governmental initiatives, urban development policies, and programmes like AMRUT, Smart City, etc.
What Factors Determine the Investment for NRI in Commercial Properties
The following are deciding factors which determine the investment for NRIs in commercial properties.
Rental Yield on Property
NRIs should keep an eye on their anticipated rental income on average. It denotes the annual rent expressed as a proportion of market value.
In India, tenants currently receive between 6 to 12 % annual rentals for commercial buildings and 2 to 4 % for residential ones. Along with tenant quality, location and quality are essential considerations.
Immovable property which is leased to reputable businesses and MNCs is more likely to produce greater rents than its competitors.
Diversified Portfolio Aspect
The NRI segment looks for diversification while making investments.
NRIs invest directly in commercial properties that demand a sizable initial investment. Which may be able to reduce the dangers and risks of investment ultimately.
Better Features
Developers should not mislead NRIs by setting greater rental expectations. In business deals, tenants typically give properties as empty office buildings. They must therefore carry out carpet, wiring, and electrical fit-outs at their own expense.
Builders occasionally carry out these tasks for residents, raising rents in the process, which improves the appearance of yields.
However, the rent for such fit-outs is only valid for a short time (3-5 years). Therefore, when investing in commercial property in the nation, NRIs shouldn’t overlook this important factor.
Extended Lease Tenure
The lease duration for commercial properties is a lengthier period of 3+3+3 or 5+5+5 in India.
Over three years, the agreement may include a rent increase of 10–15 %, which benefits investors.
Longer terms have, however, occasionally hampered shareholders, particularly in situations where market prices have spiked.
Extended leases provide income stability, but they could become problematic if market prices start to rise quickly.
Investment Benefits For NRI in Commercial Properties
The commercial property sector has always had a greater return on investment as compared to residential ones. Here are listed the investment benefits for NRI in commercial properties.
Cash Flow and Passive Income on a Regular Basis
You can make a terrific investment in commercial real estate to create a reliable passive income so you aren’t entirely reliant on your salary to cover all of your expenses. Since these assets are typically leased (for MNCs, co-working spaces), they produce consistent cash flow.
Property Appreciation
The demand for real estate is constantly rising despite its limited supply. Commercial real estate property often increases in price. This can be because additional factors are at play in addition to the fundamental demand and supply issue.
Consistent Investment
Commercial real estate investment is considered a concrete investment. Infrastructure and the land on which properties are constructed both have high value in the Commercial sector.
They typically lease the property to MNCs for a longer period, making it a consistent investment and preventing it from fluctuating like other investment alternatives like equities and shares.
Tax Benefits
Real estate owners are permitted to deduct the valuation of their properties once a year since it is a tangible asset whose worth tends to depreciate. NRIs can take the advantage of these tax benefits while investing.
You can also use a calculator to calculate your property taxes Here on your commercial property in India.
A Step-wise Procedure for NRI Real Estate Investment in India
The following procedure must be followed by NRI to buy real estate property in India,
- An NRI could buy a property either on their own or jointly with another NRI under the RBI’s general authorization. Obtaining a Legal Power of Attorney is the smartest strategy for purchasing a piece of property.
- A power of attorney should be designated as your legal advisor. Since he is a specialist in the sector, he will also advise you on any real estate-related issues and other requirements. As a result of its effectiveness and low cost, this strategy is often employed in official capacities.
- The appointed person may be able to assist you with the greatest deals as well because he is already knowledgeable about India’s regulations and real estate market.
Homebazaar.com’s VP Nikhil Naikhare said in a recent discussion, “I emphatically assert that investing in commercial properties in India is a highly beneficial avenue for NRIs. The evolving business landscape, favourable regulatory environment, and robust economic growth make commercial real estate a compelling choice. From office spaces to retail establishments, the potential for a steady income and capital appreciation is substantial.”
At Homebazaar.com, we specialize in guiding NRIs through strategic commercial property investments, ensuring a path to long-term success in India’s dynamic real estate market.
FAQs
| Is investing in commercial property a good idea in India?
If you want to earn greater capital gains and diversify your portfolio then Investing in commercial real estate property is a good idea for you. |
| What is a good ROI for commercial real estate?
An ROI above 15% is considered to be a good investment and above 10% is considered to be a better investment in commercial property. |
| Which are the most profitable cities to invest in commercial properties?
According to infrastructural development, the most profitable cities to invest in are Mumbai, Bangalore, Pune, Chennai, Hyderabad, and Delhi. |
| How is commercial property value calculated?
Split the sale value or cost of a property by the gross rents for the relevant property to determine the Gross Rent Multiplier. GRM determines the value of a property. |
