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India’s economy is bouncing back to almost pre-COVID-19 levels. This is encouraging Non-Resident Indians (NRIs) to look homewards once again. And it’s not just about remittances. It’s about owning a piece of property in their homeland because there is a slew of uber-luxury homes offering the lifestyle they seek in the future.
Business as usual for the uber rich
So, who are these luxury home buyers? According to customers profiled by India Sotheby’s International Realty, large business families, CXOs, professionals and start-ups founders comprised a huge chunk. While a majority of the buyers are Indians, a considerable percentage is NRIs based out of USA, EU, and Asia Pacific. “Demand is much higher than supply in the Indian ultra-luxury residential market today. Most of the buyers buying properties in India are taking advantage of the lower mortgage rates, an all-time high equity market. Some of them are reinvesting to save capital gains from sale of equity shares or stake in a start-up or property,” says Ashwin Chadda, Founder & President, India Sotheby’s International Realty.
Return of luxury rentals
The luxury residential rental market which was greatly impacted last year is experiencing a turnaround of sorts. Realty experts like Manjusrii Manilal, Marketing Head, HM Constructions, points out that the monthly rentals in some of the localities have begun to increase on the back of high demand from the IT sector and NRIs looking for high returns of their investments in prime locations in the city. With vaccinations now rolling out and positivity returning, these rental markets will pick up new momentum.
“India has no housing bubble as seen in the US. Moreover, with the job market steadying at a faster rate and the IT sector, especially in Bengaluru, seeing fresh recruitment with a hefty salary for its employees, their affordability status has increased. This translates to more of these employed seeking a higher standard of living and upgrading to renting luxury apartments in top neighbourhoods,” she says, adding, “This is the target segment NRIs can focus on getting high rental returns from.”
What kind of return from rentals to expect?
You must remember that the pandemic caused a huge setback to the real estate industry globally because of employment uncertainty and economic upheaval.
Despite that, a Track2Realty report states that Bengaluru and Hyderabad have rental yields in the range of 3-4 per cent, the highest among the top 5 Indian cities. Collectively, the average rental yield on furnished properties is pegged at 2-3 percent.
The luxury segment in any way commands a higher percentage of returns on the investment.
As a house owner renting out your home, various factors can give further impetus to claiming higher rentals from your tenants. Some of the major drivers for this are luxury apartments and sky villas in prime residential neighborhoods, furnished office spaces in established commercial districts and tech parks, high on social infrastructure, excellent road infrastructure, and accessibility to all transport connectivity.
Investment goals and taxation rules
As an NRI, before you invest in property in India, you need to assess your goals with a myopic vision. You should also factor in the tax implications along with the returns you gain on the rental income.
Remember, your investments in real estate – residential or commercial – can earn you substantial rental income and short-term or long-term capital gains. However, the rental income you receive from your property in India is treated as income accrued in India and is taxable. This is irrespective of your residential status. There is a standard deduction of 30%, and the remaining is added to the total income and taxed at normal rates.
As an NRI, your journey towards luxury homeownership should be a worthy and lucrative experience. Go ahead and buy that luxury home in India which can fetch you a more-than-decent rental income till you return to your homeland for good.
Call us on 8880225555 and we will help you find a home that suits your lifestyle.