Why do NRIs want a piece of India's real estate?

Those owning a property for at least a decade shared concerns over maintenance of the property.
Those owning a property for at least a decade shared concerns over maintenance of the property.


The risk of losing a job or the expiry of visa could be one of the reasons driving the NRIs to buy property here.

Real estate has been one of the preferred asset classes for most non-resident Indians (NRIs), according to a recent study by CII-Anarock Consumer Sentiment Survey—H1-2022.

NRIs buy property for various reasons, be it for investment and a source of income, or because they want it to be their retirement nest. For many, owning a property in the country also means having an emotional connect with their homeland. “NRIs are probably more nationalistic and want to own a house in the country more than the residents staying there," said Joseph Francis, a NRI based out of Dubai.

Eligibility and taxes
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Eligibility and taxes

The risk of losing a job or the expiry of visa could be another reason driving them to buy real estate here.

Mint spoke to four NRIs to understand why they invested in Indian property and how their experience with this has been so far. All four said they wanted a house for their own use if and when they come back.

One interesting feedback from the discussions with these NRIs was that the interest in this asset class is fading gradually. Those who had recently bought a property expressed optimism in owning a house in India, even if that was for the purpose of investment. However, those who have owned a property for at least a decade shared concerns over maintenance of the property, especially because they are staying out of the country, and the lower valuation it fetches when it is put on sale. Here is what the four NRIs had to say:

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Vidhi Khandelwal, US

Vidhi Khandelwal has been residing in the US for more than a decade and bought her first real estate property in Mulund, Mumbai, very recently. Vidhi, who was able to finalize the house in just one month with the help of her family living in India, is delighted with her new investment, which she says helps diversify her overall portfolio that includes equity (both in India and the US). She is also happy to have a place for herself if she returns to India.

Indian NRI's investment in real estate
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Indian NRI's investment in real estate

Yet, Vidhi said, “for the budget, we had in mind, the property we could afford in India was smaller. In Chicago, where I live, I could probably get a bigger space for a similar investment and not a cookie-cluttered home. But I realized that I cannot compare my Mumbai home with Chicago’s version. It is more comparable with something that I would get in New York, a tinier space for the same value of money."

Vidhi and her husband, though, are very optimistic about the real estate market in India and plan to soon buy another property, preferably a plot of land in a non-metropolitan city.

As for taxes and all other operational aspects, Vidhi is currently dependent on her brother who works in the finance industry in India. She is yet to figure out how the rental income from the property will be taxed in the US; for the uninitiated, the US levies taxes on global income.

According to Chandrika Kadur, a senior tax manager with Petrinovich Pugh & Co., a California-based firm, “in case of residential properties in a foreign land (including India), regardless of whether the taxpayers choose to rent it, or hold and eventually sell it, there is a tax liability."(see table)

Venkatesh Yellampalli, Dubai

Before moving to Dubai less than a year ago, Venkatesh Yellampalli was working with a large accounting firm in Bangalore. He had bought a house in the metro to take advantage of the tax benefits that come with buying a residential property under India’s income tax laws.

But even before the home loan was sanctioned, Venkatesh got the opportunity to work in Dubai. Nevertheless, he was determined to own a property in India, but now with a different intent. “There is no permanent job as such in Dubai. Once the job contract expires, the visa lapses. And if the contract is not renewed, I will have to move back to India."

Venkatesh wants to rent out the new house once the property, which is currently in the under-construction stage, is fully ready.

Though he agrees that under-construction properties come with slightly higher risk than finished properties, he believes that investment in the former is a more lucrative option. “The risk will be lower if we go with a big corporate builder. I went with Shriram Properties."

Ankita Sood, director & head of research at, said that the risks with under-construction properties and new homes have become minimal after the implementation of the RERA (Real Estate (Regulation and Development)) Act. “While Maharashtra has been a forerunner in implementing the RERA provisions effectively, all the tier I cities and respective states mandated certain RERA provisions, which brings down the risks with under-construction and new homes significantly," added Sood., is part of REA India, that also owns digital real estate portals - and

Once the home is ready, Venkatesh plans to seek services from one of the property management firms such as NestAway for renting and maintenance matters.

Nancy Sudheer, Dubai

Nancy and her husband Sudheer have been living in Dubai since 2005. The idea of moving to Dubai was to earn good money and return to India, which did not pan out the way it was planned.

They have invested in two properties in India—one in Andheri, Mumbai, and the other in Kochi district of Kerala. For them, owning a property in India meant having a secured asset in the home country.

Over time, they found it very challenging to maintain the properties. “One of the many challenges is to find a genuine tenant. Thankfully, we have had one tenant for 10 years. But after that, it has been tough finding the right tenant. Even for my elderly parents, in whose name the power of attorney over the property is given, it was difficult to visit the place whenever there are issues," Nancy said.

The couple also found it hard to dispose of the Andheri property. “Two to three years went by in searching for a buyer to sell our first property at a decent price. We finally managed to close the deal a few months back. Though the sale value is double our purchase cost, considering the interest paid on the housing loan and inflation, the sale value is not so attractive," added Sudheer.

“Looking back, we realized that repaying loans taken for buying properties in India blocked our liquidity to a great extent. We could have travelled more or done something else. Based on our experience, we can say that investing in real estate is definitely not worth it," said the couple, who does not want to invest in this asset class anymore. “We did not have any idea of how to invest in the stock market or mutual funds back then. Now, we have started with a few SIPs (Systematic Investment Plans) in mutual funds," they said.

Joseph Francis, Dubai

Joseph Francis has been in Dubai for 28 years now. Joseph, who bought his first house in Powai in Mumbai, said this was something to fall back on in case he had to leave Dubai unexpectedly and return to India. “I don’t think, purchasing the first house has anything to do with savings or investment for NRIs here. It becomes some sort of compulsory saving," Joseph added.

Eventually, Joseph too realized that it is a costly affair to maintain a property but not before he bought a house in Kochi a few years back. “Though I was born and brought up in Mumbai, I always wanted a connection with Kerala because of my family. The house I bought in Kochi is a dream house on the banks of a very famous river and temple, close to the airport. But in the last three years, I have been there just for three days."

High maintenance costs of both houses have become a sore point for Joseph. He has been currently paying 10,000-12,000 per month towards maintenance, besides the other costs. “The Kochi house is manageable, because 60% of the flats in the society belong to NRIs. So, there is a joint effort made by all to manage the society well. But that’s not the case with the Mumbai flat," he added. He thought of trying the services of property management firms, but felt these are highly expensive and not very effective.

“Today, if I can turn back the clock, I would park my money elsewhere. I would only buy a house when I came back to India for good because there are plenty of houses available. We can buy it at a time when we really want it. I think having a nest in India because you are unsure when you will go back to the country is an old-fashioned idea now," added Joseph.

Muhammed Shafi, a chartered accountant at a privately held family investment company in Dubai, UAE, says that an individual will not be taxed in the UAE on the income from real estate located outside UAE.

The Indian taxes

Taxes that an NRI is liable to pay in India on purchase, rental income and sale of the property is illustrated in the table. The withholding tax provisions come into picture in all three instances mentioned above.

According to Neeraj Agarwala, partner, Nangia Andersen India, an NRI is required to deduct and deposit taxes at 1% of the sum paid or stamp duty value, whichever is higher, at the time of payment for purchase of the property. The tax is required to be deducted only when the value/consideration is more than 50 lakh.

On the rental income of NRIs, their tenants are required to deduct 30% tax at source and deposit it with the tax department.

Further, under section 195, TDS (tax deducted at source) may also be withheld by the buyer during the sale of the property. The rate of TDS will be as per the provisions of tax treaty and may be up to 20% of the sale consideration.

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