NRIs favour real estate over stocks

Primary objective of the Overseas Indian Facilitation Centre (OIFC) was to lead Indian diaspora up the investment avenue, but one would certainly not have expected real estate to be the area of greatest interest. At least, not one in which NRIs would want OIFC help. But that’s exactly what’s happened.

We are getting a lot of queries from overseas Indians about investing in property in India. OIFC, a one-stop shop to help overseas Indians invest in India, was launched by the Ministry of Overseas Indian Affairs (MOIA) on May 28. The CII is the private sector partner and host institution of this not-for-profit trust.

According to initial trend, real estate tops the list in terms of interest shown by overseas Indians while stock market investments come second.

With the surging demand for investment in real estate from domestic and overseas investors, real estate investment trusts when operational in India would enable a larger number of players to participate in investment grade buildings. These are currently worth $ 83 bn in India.

Currently, Indian REITs are entering the Singapore market. Ascendas India, the Business Park developer has already applied to the Monetary Authority of Singapore to raise $357m to invest in integrated real estate projects in India.

DLF and Unitech are also deliberating on this option. While Unitech is going in for an overseas listing, DLF Assets has kept its options open for an Indian listing if the trusts are allowed to operate in the next 12 months.

Bangalore’s Real Estate Bank International (REBI) has ambitious plans to reach out to overseas markets with an investment of Rs. 250 m, reports NRI Realty News.

Offices in Sri Lanka, US, UAE, Singapore, Malaysia and Australia will enable real estate services to reach out to non-resident Indians, while REBI’s domestic network will be expanded to 3000 franchises over the next three years.

Pearl Global is also venturing into real estate, as it ties up with Ansal Properties to develop 9.26 acres of commercial land in Gurgaon.

Earlier this month, the Bhoruka Group from Bangalore announced its intention to diversify from its existing power generation business to develop a premium residential project in south Mumbai. The defunct Mukesh Textile Mill property, covering 10 acres will be the site of the new project. The company will also construct an IT Park on 34 acres in Whitefield, Bangalore.
Kolkata based Bengal Shrachi Housing Development in a joint venture with two NRIs has announced the launch of a housing complex, Rosedale Garden, specially designed for non-resident Indians (NRIs). Tapping the desire for fully furnished ready-to-move in apartments for NRIs, the joint venture has invested Rs3bn in this mega project.

Premier realty firm Parsvnath Developers Ltd is set to develop their existing land bank over the next five years by investing over $4 bn. Launching over 100 real estate projects in all its segments, they aim at developing their saleable land bank of 153m sq feet.

They have six projects lined up for Delhi metro as well. Speaking in terms of growth, the company had reported a profit of Rs 2.92 bn in the financial year 2006-07 at an annual growth rate of 110 per cent.

The real estate sector has recorded commendable profit margins, evident from the profits posted by major real estate developing giants in the first quarter. The first quarter was beneficial for almost all real estate developers. Parsvnath Developers posted a record net profit of 179.56 per cent at Rs 1.02 bn against its previous Rs 365.5 m.

Unitech on the other hand has been registering a consistent growth of 8.6 per cent for the last four years. Ansal Properties and Infrastructure Ltd. (Ansal API) reported a net profit of 16 per cent.

Indian realty is growing at 30 per cent, particularly in Tier II and Tier III cities. The $15 bn realty market is expected to reach $ 90 bn within the next eight years. Chandigarh, Gurgaon, Vizag, Coimbatore, Kochi, Jaipur and Nagpur are some Tier II cities witnessing unprecedented boom.

Research has it that realty can give an average return of eight per cent. Realty prices are doubling in some Tier I cities like Bombay, Chennai, Bangalore etc. Residential prices have gone over Rs 5,000 per sq feet and commercial prices are over Rs 10,000 in Tier I cities.

NRI Ties Up With London Firm For Mini-Townships

Foreign investment in the booming real estate sector of West Bengal gets a boost with a London-based company joining hands with an NRI entrepreneur to invest $20 million in two mini-townships here.

London-based REIT Asset Management, which plans to create $1 billion assets in India in the next three years, has tied up with Eden Realty Ventures Private Limited, led by US-based Indrajit De, to set up the projects at Bonhooghly in north and Maheshtala in south in greater Kolkata area.

"The cash investment in the two projects is $20 million besides collaterals for bank finances," Eden Realty managing director Sachchidanand Rai told media agency. "REIT India chairman David Cohen finalised three projects in India out of 140 proposals and of the three two are developed by us here," said Rai, an alumnus of IIT Kharagpur. REIT, the London-based real estate management trust, owns $6.8 billion worth assets in Europe.

The twin project in Kolkata in collaboration with Eden is their maiden venture with an Indian partner since their other project at Pune is a 100 per cent FDI. According to David Cohen, the chairman of REIT property Management India, the projects are the beginning of "a long-standing relationship with the state and the city". "We are proud to be associated with REIT," said Indrajit De, the NRI entrepreneur, from USA. Rai said of the two projects in Kolkata might be the state's highest cash investment in the form of FDI by any foreign company on real estate.

In the northern project at Bonhooghly, to be known as Bonhooghly Tenement Scheme, 18 acres of area would be developed after the same was obtained from the West Bengal government's Refugee Relief and Rehabilitation Department. "We will be giving about 800 flats free to the equal number of refugee families living there now in a deplorable state.

The flats would be much bigger than they are living now and they would also be provided open parking space for 200 cars besides community facilities like club, gym, treated water, good sewerage. "While 6 acres would be for rehabilitation with not even stamp duty fee, the remaining 12 acres would be commercially developed with 25 tall buildings offering 1476 flats. We will also beautify the lake inside," said Rai.

In the southern project at Mahestala, which is a joint venture with Mahestala Municipality, 21.22 acres of land has been acquired near Nungi station on the Kolkata outskirts to build 2240 MIG flats in 44 buildings, said Rai.

"We are also offering a full fledged football ground, a centre for sports, science and culture to be donated to the municipality. We have also proposed to build a 2.5 km road in the area besides widening a 5 km stretch of road," he said. "Our aim is to develop through innovations. We want to come forward with deep projects," said Rai.

Source: Economictimes

THE NR EYE: Real estate investments beckon NRIs

The hike in interest rates by the Reserve Bank of India, the ongoing regulatory reforms by the government and enhanced liquidity place non-resident Indians in a very good position to park their excess funds in property back home।

These factors, coupled with the phenomenal growth pattern currently being experienced by the real estate market in India, have not gone unnoticed on the real estate companies which have high expectations of overseas Indians।

India’s FDI climbed to a record-breaking $11।2bn in 2006, a 155 per cent year-on-year increase. Reformed real estate investment regulations for Non-Resident Indians (NRIs) and more crucially foreign investors have provided the impetus to drive the value of the Indian real estate market towards $50bn by 2010.

In 2005, the Indian government announced that FDI in the real estate sector was permitted through the ‘automatic route’, in other words without requiring additional ministerial approvals, streamlining the investment process। Certain guidelines are in place regarding minimum land areas to be developed and minimum capitalisation requirements, but the net effect has been a massive inflow of foreign capital. It is estimated that capital worth $7bn will be pumped into development projects over the next year, much of that emanating from overseas.

The boom is not at all surprising, what with a population of 1।2 billion, growing annually by 1.4 per cent, a cost effective and educated work force and economic growth of eight per cent per annum. These conditions combined with competitive interest rates and a burgeoning IT industry, are driving the demand for not only residential but commercial space that is expected to reach 70 m square feet within three years, with retail developments taking up to an 11 per cent share.

The Indian government now has recognised the demands of NRIs and people of Indian origin to own pieces of property and over a period of time what we have seen is that the investment is both for them to come back and some form of speculation because India as a market now is giving good returns and the economy is booming so a lot of people are looking to come back.
The rules have been much simplified and it has become much easier to buy property for the NRIs। The new act FEMA (the Foreign Exchange Management Act) that is a vast difference from the regulation act (FERA) has made a tremendous difference in acquisition of property and sale of property and even repatriation of money if one has got property and he is selling it of. Overall things have improved for NRIs and it is a great time to be here.

The government of India has granted general permission for an NRI to buy property in India and he has to pay no taxes even while acquiring real estate India but however certain taxes have to be paid if he is selling this property। He would require a PAN card if he has rented out this property and he wants to repatriate that money but if it is going to be a sale of property depending on time or the duration of time he has held the property, the sale proceeds would be subject to capital gains tax and as of now if he has held the property for less than three years then he would be paying roughly about 30 per cent tax and if the property has been held for more than three years then 20 per cent as capital gains tax and that is what he will have to pay.

The list of incentives is quite comprehensive and, for example, allow an NRI to acquire property in India with exception to agricultural/plantation property or a farm house without formal permission। They are also entitled to transfer this property to any resident Indian without the prior permission of any government agency. An NRI can also inherit property of another NRI provided the property in question was bought in accordance with the provisions of the foreign exchange law in force at the time of acquisition.

However, a declaration form for acquisition of commercial property for carrying on any industrial, commercial or trading activity by their proprietary / partnership firm in India is required to be filed with RBI within 90 days from date of purchase।

Money can be repatriated abroad if bought with the foreign exchange earned abroad. That too, only in the sale of two residential properties but any number of commercial properties.
NRIs wanting to park their funds in India are taking the real estate market seriously enough to form informal groups to back select projects। Around 25 million NRIs are investing in immovable property in India, but unlike HNIs and financial institutions they are keen to invest in the housing segment, rather than commercial projects.

NRIs tend to invest in residential properties in India, preferably in their native towns or cities where their relatives and friends can supervise such projects। However, funds are now being put into some commercially viable projects as well, such as malls, hotels and office complexes. Around $600 million has poured in from such investments in the last one year, with a single investment from a group averaging between $10 to 15 million.

According to media reports, Law firms are receiving five to six enquiries every week from overseas Indians who club together and float a fund to build a property, stay on through the lock-in period, and sell it at a good profit।

Jaipur, Hyderabad, Vijaywada, Ahmedabad, Baroda and Surat have seen groups of NRIs making such investments in malls, office spaces and residential townships। These investments are generally routed through Mauritius to avail of tax benefits.

It is a win-win situation for both investors and real estate developers. The former earn handsome returns, while for the latter, it’s low-cost credit. Some projects in smaller cities have yielded as much as 50 per cent returns. The rise in interest rates is bound to bring real estate prices down in a few months’ time, and that would be the ideal time for NRIs to strike.

NRI Buying Homes, Properties more Easliy

NRIs are now buying Properties, homes in their very own homeland in more relaxed way than ever for non resident status people abroad. Reasons are RBI relaxed and imroved norms for non resident indians to buy property in India.

1. Reserve Bank of India has spelled out clear norms for NRIs to invest in different kinds of property. NRIs holding Indian passport do not require prior permission of RBI to buy residential or commercial immovable property in India.


2. The purchase consideration may be paid either by remittance of funds from abroad through normal banking channels or out of NRE / FCNR / NRO account.
   
   
3. Money can be repatriated abroad if bought with the foreign exchange earned abroad. That too, only in the sale of two residential properties but any number of commercial properties.

NRI’s of Indian nationality do not require any permission for acquisition, transfer or disposal by way of gift of immovable property which is not a farmhouse or agricultural land or plantations property. Declaration on form IPI 7 for acquisition of commercial property for carrying on any industrial, commercial or trading activity by their proprietary / partnership firm in India is required to be filed with RBI within 90 days from date of purchase.

Mr. NAgarajan, editor of Indian Real Estate says, -

"There is huge demand for professional property management services from the NRI segment which has not been adequately met. “These days NRIs do not trust their relatives and want to outsource this function to professional companies to do the renting, leasing, taking care of the documents, maintenance etc. once this function is addressed, there will be a surge in NRI investments."

This corroborated by Amit Mavi, who markets properties by leading developer group, Unitech. “The NRIs prefer investing what they save in their home country. It is generally a long term investment and not a speculative one. This investment also acts as the vacation home for these NRIs when they come to India and also a home from a long term end user perspective.

Source: Economics Times

NRIs seeking home loan? Check this out

While home loans are available to resident individuals as well as non-resident Indians (NRIs), there are some differences in the terms and conditions applicable to the two. Here are a few points to get started:

Who is an NRI?

Banks follow the RBI definition, that is, an Indian citizen who holds a valid Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay.
Terms and conditions

Eligibility:

The NRI has to be a graduate. The same does not apply to resident Indians. He should earn a minimum monthly income of $2,000. This criterion may differ across housing finance companies (HFCs).

Size of loan:

The loan amount should not exceed 85 per cent of the cost of property. In case of Indian residents, banks can lend up to 90 per cent of the cost of property. The size of the loan depends upon the borrower’s repayment capacity. However, there is a maximum limit. For instance, HDFC offers loans of up to Rs 1 crore, while SBI offers a maximum loan of up to 24 times the borrower’s net monthly income.

Repayment:

The NRI has to pay the EMI cheques through his non-resident-external (NRE)/ non-resident-ordinary (NRO) account. He cannot make payments from his savings account (if any) in India.

Tenure:

The rate of interest is almost similar to loans availed by residents. The difference lies in the tenure of loans. Residents can avail home loan for 20 years or even more. However, leading banks or HFCs provide home loan only for a maximum of 15 years.

Paperwork:

NRIs are required to submit additional documents. For example, certain documents like a copy of the passport and a copy of the works contract (also sometimes referred to as the contract card/labour card) are required only for NRI loans. He also has to submit property-related documents including original title deed tracing the title of the property for a minimum period of the last 13 years; encumbrance certificate for the last 13 years; agreement of sale/construction, if any; approved plan/license, ULC clearance/conversion order; receipts for having invested the margin money through normal banking channels from the NRE and/or NRO account in India.
Bankable business

ICICI Bank provides 100 per cent financing if the property is bought from any of the builders it has tied up with. However, this offer is limited to specific projects.

HDFC too has tied up with service associates in Kuwait, Oman, Saudi Arabia and Qatar, apart from having a presence in Dubai. These offices offer advisory services in real estate and real estate financing to Gulf-based NRIs wanting to acquire homes in India. These offices coordinate the entire loan process in India. Even Bank of Baroda provides margin money in the country where the NRI resides if the borrower is not physically present in India to carry out the loan formalities.

NRI Hills-International City at Jaipur

Average NRI real estate project sizes have shot up from around Rs 30-60 crore, when the realty boom began three years ago, to between Rs 500 and Rs 2,500 crore today. Largely because of a far larger scale of these projects.

From now, despite the 200% growth since the past 3-4 years, real estate projects (whether residential, commercial or retail) are expected to reach astronomical levels of a colossal 1,000%. That’s one of the key reasons why rates across the board are shooting through the roof. The first phase of the 2,504 acre hi-tech township by Ansal Properties and Infrastructure Limited in Greater Noida, for which it has signed an MoU with the Uttar Pradesh government, is estimated at a whopping Rs 20,000 crore.

Natraj Buildwell Ltd has launched NRI Hills-International City at Jaipur at a cost of Rs 1,000 crore. The cost of Alpha G:Corp’s project, Alpha International City, Karnal is estimated to be Rs 600 crore. The various projects of Parsvnath launched recently are pegged at Parsvnath Privilege at Greater Noida (Rs 325 crore), Parsvnath City at Dharuhera (Rs 450 crore), a 5-star hotel and multiplex-cum-mall at Vijalpur, Ahmedabad (Rs 250 crore) and a mall at Rohini (Rs 231 crore). The project cost of Pearls Gateway Towers at Noida is said to be around Rs 450 crore. Is this another sign of the real estate industry coming of age? “To a certain extent, yes,” says Manish Uppal, MD, Uppal Housing, “but the factors that are contributing to a rise in project costs include rising prices of cement and the efforts by developers to offer newer and more modern amenities to the customers. The conservative approach in designing is giving way to experiments in the choice of raw material and adoption of methods in energy and space conservation.”

Included in the investment costs is the cost of land (which has risen from Rs 1,200 per sq ft to Rs 2,500 per sq ft), overhead costs and marketing and brand strategies. Adds Navin M Raheja, MD, Raheja Developers Pvt Ltd, “India is witnessing a process of rapid and mass urbanisation and with the wholesale price index set to increase by 300-400% in the next 2 decades, the process will be more perceptible leading to higher inflationary tendencies. The consequential boom in real estate has its own associated nuances. Real estate project costs for NRIs have increased on account of across the board increase in land prices and other input costs like the raw materials, steel, iron, timber, cement, plastic, rubber etc.”

Source:Financialexpress

NRIs: Buying a home in India made easy

In recent years, India has been witnessing unprecedented growth in the real estate sector fueled by the increased business activity.

Real estate development in India is estimated at $12 billion and growing at 30% every year. Though all segments of real estate business such as corporate, retail and residential have been driving this growth, NRI investment in residential property itself constitutes 80% of this sector.

Non-Resident Indians (NRIs) are one of the key contributors to the growth of the real estate industry and considering the immense potential in India, they are likely to step-up the investment in future.

In this article, senior tax professionals with Ernst & Young -- Gaurav Taneja and Rajesh S -- provide an overview of the key exchange control and tax implications that should be considered by NRIs while investing in house property in India.
Exchange control