Mahesh Ahuja, a seasoned real estate broker, shares his insights on why residential properties in India may not always be the ideal investment choice for Non-Resident Indians (NRIs).
Challenges for NRI Property Owners
NRIs often face difficulties managing properties remotely, including tasks like repairs, maintenance, and tenant management. While appointing a power of attorney can help, it doesn’t eliminate all the challenges.
Currency Risk and Low Rental Yields
For NRIs, the depreciation of the Indian rupee against their foreign currency earnings poses a significant risk, eroding the real returns on their investment. Additionally, rental yields on residential properties in India tend to be low, making it challenging to generate substantial passive income.
High Transaction Costs and Repatriation Hurdles
Transaction costs, including stamp duty, registration fees, and brokerage, can be substantial in India. Furthermore, NRIs may encounter complex tax and regulatory hurdles when selling a property and repatriating funds back to their home country.
Emotional vs. Financial Considerations
While owning a home can have emotional and practical benefits, Ahuja emphasizes the importance of prioritizing financial security through strategic investments, especially for those nearing retirement age.
Alternative Investment Options
Ahuja suggests that for NRIs, investing in more liquid assets like fixed deposits may be a more suitable option. These investments offer comparable returns without the hassles associated with property ownership.
Challenges for Elderly Parents with NRI Children
Ahuja advises elderly parents with NRI children to consider selling their properties in India and investing the proceeds in more manageable assets. This can avoid potential burdens and complications for their children in the future.
Advice for Young Investors
Ahuja recommends that young investors approach real estate with a strategic mindset, focusing on commercial properties with higher appreciation potential and rental yields. He also emphasizes the importance of diversification and seeking professional advice.
A Broker’s Perspective
Ahuja, who has extensive experience in the real estate market, has shifted his focus from residential to commercial properties, citing better returns and fewer hassles. He continues to actively participate in the market through his brokerage business.
Conclusion
While real estate can be a lucrative investment, NRIs should carefully consider the challenges and risks involved. For many, alternative investment options may provide a more suitable path to financial security and wealth creation.