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Real estate is one of the largest sectors in India, comprising subsets such as housing, commercial, retail and hospitality. Buying a house of their dreams has always been a wish for everybody. If you go and ask a person in India about their desire to buy a house, the answer would always be a yes, but with certain terms and conditions. The real estate market in India is booming and growing at a fast pace, with new laws and policies being brought in by the government to ease the entire process for consumers.
The traditional concept of second homes is being repeated in the real estate sector after centuries. Earlier, when people in India shifted from their native places to cities in search of work, they kept their house in the village as a second home and did not sell them. It kept them connected to their mother land and their traditions. It is seen in India even today that people visit their villages during vacations where they live in their ancestral homes or second homes that they have bought. With daily lifestyle becoming frenetic and a growth in realisation for a relaxed lifestyle, more and more people are investing in second homes.
Non-Resident Indians (NRIs) today are buying houses in India not merely as an investment option. Under the existing general permissions, an NRI can purchase any number of residential or commercial properties in India. The income tax laws also allow an NRI to own as many as residential or commercial property as s/he pleases. Foreign Direct Investment (FDI) in real estate can create major inflows of funds that can enhance national investment to achieve a higher level of real estate development.
Mostly, NRIs buy homes in India as second homes. They look at the Indian markets with a sentimental value and buy a house that they can come to during vacations or as a memory in their motherland. They feel secure owning a home back in India where they can come back in case of a global crisis. Self-consumption at regular intervals of the year is also a reason why NRIs choose to buy homes in India.
People invest in second homes for various reasons — some invest in them to shift there post retirement, others to have a home away from the hustle and bustle of the city life, and some, to earn rental incomes. Many NRIs choose to go back to where they came from — they think of India as a possible place for retirement, where hired helps are able to run their day-to-day tasks while they relax close to friends and family. The hometowns where they grew up always have a certain draw on their heart strings.
Typically, an Indian second home buyer will look for a balance of both a hassle-free luxury lifestyle for his or her own use, as well as a safe investment opportunity. The days of euphoric buying are gone, and people these days go for calculated decisions. For NRIs, this is not just an investment option, but also something that has sentimental values attached to it. Earlier, the Indian market attracted a lot of FDI from the NRIs as more and more investor sentiments were accelerated, but it is now being noticed that the trend of buying second homes in India has increased due to emotional sentiments with the homeland.
To start with, NRIs look at the norms, financial and legal framework in investing back in India which is governed by FEMA (Foreign Exchange Management Act).
They also look at the credibility of developers and their past performance. The rise in defaults and commitments of Indian developers in the last decade or so has prompted NRIs to have a strong due diligence done before making a financial commitment.
Their investment ranges in a ticket size of not more than Rs 40-80 lakh with houses in premium segments. Most of these buyers do not buy the property from an investment point of view, and hence prefer that the houses are not given on rent and remain available for them all the time. They keep the houses vacant for most part of the year.
For the last 10 years, we have seen a lot of developers investing in the creation of townships in newer destinations for holiday homes. These townships have all the important luxury amenities such as gym, grocery shops or at times, swimming pools, hospitals etc in the society. With this kind of development, NRIs have vast options to choose from.
The real estate sector which was earlier an unregularised sector will become much more accessible to NRIs with the newer laws and policies post demonetisation that have been and is in talks to be implemented by the government . It is a welcoming change and would prove to boost the real estate market.
While buying a property, they consider the following
Location of the project, some where close to their native place
List of amenities provided
Connectivitiy and proximity to the nearest airport
Permissions required for obtaining a property
Tax treatment, DTAA
Power of attorney
Credibility of the developers
(The author is director, Sai Estate Consultants)