Why NRIs Invest in Indian Luxury Real Estate?

luxury-nri-realestate

“Landlords grow rich in their sleep without working, risking or economizing”
– John Stuart Mill, English Philosopher, political economist, feminist and Civil Servant.

Chennai Floods:

Our hearts and prayers goes to those affected by the unprecedented floods in Chennai. If you reside in Phoenix, mark your calendars to dine out on December 12th in select Indian Restaurants who have pledged to contribute a portion of every bill to the cause. (See the insert on the right) In addition, there are numerous NGOs working to do the relief work and consider contributing for the cause.

Background

Indian Real Estate has evolved from the days of identifying a good location and investing in the same for reaping the appreciation. Today it is all about branded homes and luxury living where the homes cost more than $300,000 with 2000 sq.ft are more. Currently this is the fastest growing sector in the Indian Real Estate market.

Business World reports that it would require 1.5 million luxury homes to meet the demand in the next 15 years. Due to rapid globalization, the consumer in this segment is well traveled and have seen the amenities abroad and demand such facilities. NRIs also demand such quality housing. Fortunately, two of the big ten developers Brigade Group and Puravankara are working with us to share the world-class homes with great incentives.

Market Situation

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NRIs can diversify their assets by investing in branded luxury real estate. Typical High Networth Individual invest in real estate properties with 79% of them owning more than one property and 53% owning more than three. Luxury residential real estate is definitely promising for India as the trend is gaining momentum that could surpass that of traditional real estate.

For an average NRI looking to invest in luxury homes comprising of apartments or row houses or villas, the timing cannot more appropriate. There are many pre-launch offers made by the developers to minimize working capital needs. For e.g the 20:80 offer from Puravankara which requires the investor to put in 20% upfront and pay the rest after the completion or 10-75-15 offer from Brigade group where you invest 10% upfront and 75% bank loan and 15% after completion provide great savings. In addition, since we are channel partners for these organizations, there may be additional benefits. NRIs can look for a two digit return while investing in such projects which could take 18-24 months after completion. There are organizations that can take care of the rental after the completing ensuring continued returns on investment.

Useful calculators evaluation:

Here are some calculators that will help you assess your situation.
1) In order to find out how much you can afford HDFC provides a calculator.
Home affordability Calculator
For e.g. if you can make a down payment of $ 30,000 (Rs. 19 lakhs) and an income of $100,000 per annum ($8,333 per month translating to Rs. 5,25,000) the calculator will show that you can afford Rs. 75 lakhs worth of property and eligble for Rs. 57 lakhs of mortgage loan assuming an interest rate of 10.71% for 30 years. There is a place for adding your existing loans.

2) Now that we know how much we can afford, the next step is to find out how equated monthly payments (EMI) would be by using this calculator.
EMI Calculator
For e.g for the above loan of Rs. 57 lakhs, the monthly EMI would be Rs. 51, 714 assuming an interest rate of 10.71% and a term of 30 years.

Similarly other banks such as State Bank of India, Axis Bank, HDFC bank also have calculators.

Closing remarks

The above newsletter provides an overview of the Luxury real estate segment, which is the most invested segment, for NRIs. Due diligence has to be done prior to the purchase of the property. My role is to provide as much details as possible with regards to the Indian real estate market as well as assist you in navigating the process. Being Channel Partners for Brigade Group and Puravankara in the Residential, Commercial and Investment properties we have the knowledge and background to assist you. In addition, our latest relationship with Serene Retirement to assist in retirement communities have given us an unique opportunity to serve your needs.

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