Why are NRIs eyeing commercial property investments in India?
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Why are NRIs eyeing commercial property investments in India?

By Harshvardhan Sharan

Last updated - Nov 30th, 2022

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The real estate sector in India is slowly reviving after a downfall in the mid-pandemic period. Many IT companies, E-commerce sectors, and startups are bulk hiring. Hence, the demand for office spaces has increased.

During the global pandemic, many lost their jobs and started their startups/businesses. This further increased the demand for commercial spaces. Owning a vast real estate portfolio in India is a luxury and a financial game changer! India is in its development stage, and real estate investments, especially commercial investments, are undoubtedly beneficial.

Investing in a country with high development potential is a big yes. This implies to both- Resident Indians and Non-Resident Indians (NRIs). For NRIs, commercial properties are cheaper to invest in. Recently, 50% of NRIs showed interest in buying commercial properties in India. But why are NRIs inclined towards investing in Indian commercial properties?

Here are some of the factors influencing NRI investments:

  • Depreciating INR against USD and other major currencies gives NRIs a chance to invest at cheaper rates.

  • Reduction in down payments and easy availability of loans.

  • Easing FEMA regulations, FDI norms, and automatic route investments.

  • Tax benefits.

  • RERA regulations that have increased transparency and streamlined real estate transactions, gaining back trust in the sector.

What are the types of commercial properties NRIs invest in?

NRIs are interested in investing in these kinds of commercial properties-

  • Office spaces: There has been a vast development in the industrial, retail, and IT sectors. Entrepreneurs are starting their businesses and looking for office spaces. Owning a property and renting it as office space is an excellent opportunity for NRIs to invest in the commercial real estate industry and earn a good income.

  • Industrial: Due to the growing e-commerce sector, investment in industrial properties like warehouses and logistics has increased.

  • Data centers: As the country’s data is going to be localized and incentivized by the government, many big companies are heading towards India to set up their data centers. At such times, NRIs benefit from investing in data centers to lease these data centers to the big players and earn passive income.

  • Co-working spaces: As mentioned earlier, startups and businesses have accelerated rapidly after the pandemic! Hence, the demand for office spaces has increased. At such times, NRIs grab the opportunity to lease these spaces and earn an excellent rental income.

This is how commercial property investments benefit NRIs:

  • Better returns: The returns on commercial property investments in India historically give 8%-10% returns compared to residential properties, which give about 3%-5% returns. These high returns are more profitable to NRIs, as they invest less and earn more on these properties.
  • Easy tenancy: As most commercial properties are located in prime locations in India, finding tenants for them is not a task. Additionally, there is an excessive demand for office spaces in this startup and business-oriented world. Hence there is a possibility of getting quality tenants for commercial properties.

  • Capital appreciation: Commercial properties in India bag a substantial amount of capital appreciation. Hence, finding a property at a good location with quality tenants and high development potential is a must for NRIs.

  • Emergence of fractional ownership: Commercial property investment in India has opened doors to all types of investors. One can invest in commercial properties that they could have invested in residential properties through fractional ownership. This is even more gainful for the NRIs as they are relatively investing less but can produce about 10%-12% returns! This investment class is the most profitable and convenient way of investing.

Keeping that in mind, let’s closely look at the factors that an NRI should consider before investing in commercial property in India:

If you are an NRI, you need to keep this in mind!

  • Location:

Location and capital appreciation are interdependent. If the area possesses development potential, your capital appreciation will undoubtedly be higher. You might get the highest footfall and a variety of tenants for your commercial property. Hence, location plays an important role when considering commercial property investments.

  • Tenant quality:

    Good quality tenants ensure timely rental payments. This means you get regular monthly rental income and a continuous cash flow. NRIs should wisely decide what kind of tenants to keep after deciding upon the proper location.

  • Due diligence:

NRIs should see that the property they invest in should produce high returns in the future. Hence, you must get the property’s complete data analysis and metrics, understand the market trends and then invest. Moreover, one has to go through numerous options before fixing an asset. This ensures that you don’t miss out on a good investment opportunity.

  • Documentation and legal procedures:

The property should be assessed for any remaining dues, titles, and flaws. As an NRI, you might only be available some of the time to look after the property. Hence, complete the documentation procedure and only then close the deal.

  • Real estate laws and regulations in India:

Foreign Exchange Management Act (FEMA) rules govern real estate transactions. With an Indian passport, you do not need any prior permission to invest in commercial property in India as an NRI. The RBI has simplified its investment rules to encourage foreign investment in the real estate sector.

That is it! Invest in high-profit-producing properties on the go! To learn more about the taxation laws, an NRI should follow when buying a commercial property in India, head to our blog page! If you are an NRI, our platform has top-listed Grade-A commercial properties; go check them out!

Author avatar
Harshvardhan SharanInvestment Associate

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