Why Are NRIs Putting Money into Commercial Property in India

According to a report from the Ministry of External Affairs, around 35.4 million NRIs and PIOs (including OCIs) live outside India. That’s a large number—more than the total population of many countries. With India's growing economy and favorable market conditions, NRIs see commercial properties as a great investment opportunity. The commercial real estate sector in India, including office spaces, retail spaces, warehouses, and coworking centers, is popular because it offers high returns, steady income, and long-term value.

1.Strong Economic Growth and Urbanization

With India's GDP projected to hit $10 trillion by 2030 and per capita income expected to grow by 5.4% each year from 2024 to 2033, NRIs view this as a major investment opportunity. Even with global economic uncertainties, India remains strong, especially in sectors like IT, e-commerce, manufacturing, and financial services. These industries need a lot of commercial space, leading to a booming market for commercial real estate.

2.High Rental Yields and Stable Income

NRIs are attracted to Indian commercial real estate because it offers high rental yields and stable income. Commercial properties generally provide better returns on investment compared to residential ones. Rental yields for commercial properties can range from 6% to 10%, depending on the location and type of property. In contrast, residential properties usually yield only 2% to 3%.

3.Long-Term Leases and Reliable Tenants

Commercial properties typically have long-term leases, often between 5 to 10 years, which provide a steady and reliable income. Moreover, corporate tenants, multinational companies, and retail chains tend to be more dependable, resulting in fewer vacancies and missed payments compared to residential tenants.

4.Currency Advantage for NRIs

Another key reason NRIs are investing in Indian commercial real estate is the currency advantage. The Indian rupee (INR) is weaker compared to major currencies like the US dollar (USD), British pound (GBP), and Euro. This means NRIs can invest more in Indian properties using their foreign income, giving them more purchasing power.

5.Favorable Exchange Rate

For example, an NRI earning in USD or GBP can purchase commercial properties in India for less than what it would cost to buy similar properties in their home countries. This allows NRIs to invest in high-value properties in prime locations in India without spending as much as they would in the US or UK.

Growing Demand for Co-Working Spaces and Flexible Offices

6.Attractive Government Policies and Reforms

The government has implemented various reforms and policies to simplify NRI investment in commercial real estate. These changes have made the market more transparent, efficient, and welcoming for investors, encouraging more NRIs to invest in commercial properties.

7.RERA (Real Estate Regulation and Development Act)

The introduction of RERA in 2016 transformed the Indian real estate market. It introduced greater transparency, accountability, and legal protection for property buyers, including NRIs. By enforcing strict guidelines and timelines for real estate developers, RERA has boosted trust in the market and lowered the risks for NRI investors.

8.Ease of Doing Business

The government has significantly improved the Ease of Doing Business, particularly in real estate. They've relaxed FDI (Foreign Direct Investment) rules, making it easier for NRIs to invest in commercial properties. Changes like the GST (Goods and Services Tax) and the benami property law have simplified the buying process, allowing NRIs to invest more confidently.

9.Potential for Long-Term Capital Appreciation

One major reason NRIs are attracted to commercial real estate is the potential for long-term capital growth. Properties in key cities in India have consistently increased in value over time, making them a valuable investment for NRIs.

10.Booming Infrastructure and Development

The swift development of infrastructure is driving up property values. Projects like smart cities, metro systems, industrial corridors, and better connectivity are boosting the demand for commercial spaces in both urban and semi-urban areas. As India advances economically, NRIs believe their investments in commercial real estate will see substantial growth over time.

Conclusion

NRIs are putting more money into Indian commercial real estate for several reasons: robust economic growth, high rental returns, favorable exchange rates, and supportive government policies. The Indian commercial real estate market provides steady income, long-term investment potential, and various other advantages.

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Frequently Asked Questions (FAQs)

  1. Why are NRIs investing in Indian commercial real estate?
  • NRIs are attracted to Indian commercial real estate due to strong economic growth, high rental yields, favorable exchange rates, and supportive government policies. The potential for long-term capital appreciation and stable income also plays a significant role.
  1. What are the expected returns on commercial properties in India for NRIs?
  • Rental yields for commercial properties in India typically range from 6% to 10%, which is higher compared to the 2% to 3% yields often seen in residential properties. This makes commercial real estate a lucrative investment option.
  1. How does the exchange rate affect NRI investments in Indian real estate?
  • NRIs benefit from a lower Indian rupee compared to major international currencies like the USD or GBP. This exchange rate advantage allows them to purchase more valuable properties in India at a lower cost.
  1. What role does government policy play in encouraging NRI investment in Indian commercial real estate?
  • The Indian government has introduced reforms like RERA and relaxed FDI rules to make the real estate market more transparent and investor-friendly. Policies like GST and benami property laws have also streamlined the investment process for NRIs.
  1. How does the RERA (Real Estate Regulatory Authority) benefit NRI investors?
  • RERA has increased transparency and accountability in the real estate market, ensuring that developers adhere to strict guidelines and timelines. This reduces the risk for NRI investors by providing greater legal protection.

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