Property options for NRIs ::Business Line

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The last few years have not been too good for NRIs who have invested in property in India. Unattractive returns (especially in cities like Bangalore and Hyderabad) has in turn caused a slowdown in NRI residential purchases, particularly from US, report some builders.

However, NRIs with a long term horizon for property investments may be able to find value buys in many markets currently. Here are a few ideas from experts on how to pick a property and what to buy to get a better return on your investment.

STICK TO PLAIN VANILLA

NRIs who find it dull to buy yet another flat in the city may be tempted to purchase a holiday home in a hill resort such as Manali or beach property in Goa. Another popular theme is to buy property close to a religious place such as Udupi. There is also some interest among NRIs to purchase retirement homes for their parents. These choices may offer unique benefits to the owner, but they must keep in mind that they may not provide the best returns.

Residential land purchases, however, have paid off well for many investors. “A group of us pooled in and purchased a large chunk of land near Coimbatore a few years ago,” says Murugesh Nanjappan, a software consultant at Fannie Mae, “and we reaped amazing returns.” However, investing in land does carry the risks.

There could be disputes about title, encroachments and pricing or selling the plot in an emergency could be difficult. Hence, investment choices such as buying farm-land and farm-house properties must be approached with particular caution.

BUY MID-PRICED PROPERTY

“NRIs are sold the most expensive property in a project,” says Om Ahuja, Head of residential segment at property consultants, Jones Lang LaSalle (JLL), “and this is not where the most returns are from.” He suggests investing in multiple mid-priced homes as it is also easy to find a buyer for these properties.

However, when selecting the project, NRIs should go for one with high-end amenities.

A strong builder reputation, quality, prime location, desirable amenities and a good homeowners’ association are important. An engagement with external property management agencies will be particularly helpful in the maintenance and renting of property.

JOB GROWTH

Thanks to the real-estate boom in the last few years, even smaller cities and towns have seen price gains.

Factors such as supply-demand mismatch and infrastructure project delays may influence short-term price trends. The long term appreciation in capital and rental value will however depend on availability of jobs.

“NRIs from towns such as Madurai or Lucknow are interested in buying in their hometown,” says Ahuja, “but long-term appreciation would depend on the scope for job growth.”

For instance, cities such as Chennai and Pune, where job growth is driven by multiple sectors and thus hold potential for a wide range of jobs, have seen better property price appreciation compared to Bangalore and Hyderabad, where jobs are primarily from the IT sector.

GROUND WORK

Buying a property requires time and one should not try to finalise on a property during a flying visit to India.

“Ask a few builders in the locality on what the price was initially, and the price for the last transaction,” advises Mathew Mammen, Executive Director, Sobha Developers, “and visit a completed project by the builder to assess quality before deciding to buy.” In any currency, real estate investments are large investments and due diligence is required in checking the builders’ reputation for timely delivery, legal aspects of the agreement and tax matters – more so due to the distance factor.