Dr. Renuka Divakaruni, a US-based NRI with over 15 years of real estate investments in Bengaluru, is contemplating exiting her investments due to challenges in dealing with complex paperwork and local policies in property transactions.
Property Management Hurdles
Maintenance of rental properties, especially residential assets, poses difficulties for NRIs like Divakaruni, leading to concerns about profitability.
Kiran Kumar, Vice President at Hanu Reddy Realty, highlights that many NRIs initially invested when the rupee was stronger, resulting in lower returns after the introduction of the 20 percent TDS taxation. Given the high capital prices in prime locations and upcoming general elections, NRIs are hesitant to reinvest.
Survey on NRIs’ Challenges
A survey by SBNRI Technologies Private Ltd. revealed that approximately 24 percent of NRIs face challenges in managing rental properties in India. The survey included NRIs from countries like the US, UK, UAE, Singapore, and Canada.
Direct Tenant Interaction
Around 6 percent of NRIs from Canada, the US, and other countries find it necessary to deal with tenants directly.
Power of Attorney Usage
Seven percent of NRIs from Canada and other countries use power of attorney to delegate tenant management to family and friends.
Self-Inspection and Maintenance
Four percent of Singapore, US, and Canada-based NRIs personally handle the inspection and maintenance of their rental properties during visits to India.
Property Managers and Tenants
Approximately 5 percent, 3 percent, and 1 percent of NRIs from the US, Canada, and Singapore, respectively, rely on property managers for inspection and maintenance. Meanwhile, 4 percent of Canada and Singapore-based NRIs, along with 5 percent of US NRIs, shift maintenance responsibilities to tenants.
Interest in Commercial Real Estate (CRE)
Commercial real estate (CRE) offers better returns than residential real estate in Bengaluru, with a 6 percent return for CRE and 2 percent for residential properties. However, the high capital requirement in CRE presents a challenge for NRIs.
Approximately 52 percent of NRIs consider investing in CRE to diversify their real estate portfolio in India.
Fractional ownership is gaining popularity among NRIs as it allows them to invest in Grade A commercial properties without requiring substantial individual investments. A group of investors can pool their funds for ownership and usage rights.
The SBNRI report highlights that NRIs from different countries have varying preferences in real estate investments. Singapore-based NRIs (9 percent) and UK-based NRIs (8 percent) show a stronger inclination towards CRE. On the contrary, UAE-based NRIs have a greater preference for residential properties (9 percent).