Home/ Money / Personal Finance/  How NRIs can tackle property management challenges

It was after a roadshow held in London in 2019 by a major Indian real estate company looking to sell properties to non-resident Indians (NRIs) that Parth Nain decided to buy a flat. “I was lured by the prospect of owning a house in India. Only after buying the flat in Gurgaon did it strike me: how would I manage the flat till I moved back to the country?" said Nain, who went to London in 2009 to study for his masters and now works in a consulting firm there.

Nain’s predicament echoes the concerns of most NRIs in managing remotely their properties, either inherited or purchased in the country. Maintaining a property—from its regular upkeep to finding the right tenant and resolving their complaints, to ensuring that all related taxes and bills are paid on time—from several thousand kilometres away can be a mammoth task.

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“Generally, NRIs face issues around proper upkeep of the property and in finding a good tenant who pays rent on time and vacates the property without any hassles when the lease period ends," said Amarendra Sahu, founder and CEO, NestAway.

Chavvii Prabakar, founder and CEO, Indian Global Solutions, concurred and said, “We have even come across cases where a property was vacant for 10-15 years and the cumulative pending maintenance bills and taxes have surpassed its market value."

Typically, NRIs entrust a third party, usually a family member or relative, with the responsibility of regular maintenance, routine repairs and even finding a tenant without a legally binding contract in place. That said, property owners have to issue a power of attorney (POA) to the third party concerned (grantee or attorney) to finalize the tenancy or carry out other property transactions in their absence here.

POAs does not confer ownership rights to the attorney. “This instrument doesn’t give any ownership rights over an immovable property to the grantee. There is no provision under the Stamp Act or in the Registration Act which brings general power of attorney at par to the sale deed," said Vikas Soni, advocate, supreme court, and senior advisor, MVKini Law Fi.

Vaibhav Suri, Partner, Luthra and Luthra Law Offices, said an attorney does not have the rights to sell the property without the owner’s consent, unless so specified. “An NRI who has issued a POA can challenge the attorney if the latter misuses such powers in concluding the sale or lease of the property. As long as the attorney sells or leases the property within the realms of his powers under the POA, it cannot be challenged."

Nain pointed out that relying on family members alone may not be a workable option for those whose families don’t live in the same city where the property is located. “Initially, I gave my father the POA but we soon realized it was not a feasible option because he lives in Agra and cannot regularly commute to Gurgaon," he said.

Decoding cost structure of property management
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Decoding cost structure of property management

Moreover, the system of NRIs involving families in property maintenance has gradually gone out of fashion over the last decade or so, said Prabakar.

Property management companies (PMCs) now serve as an alternative to this.

The key services that a PMC provides include overseeing the rental procedure–finding the tenant, completing the paperwork, dealing with tenant’s queries and timely rent collection–and regular repairs and maintenance.

To hire a PMC, property owners have to first enter into an agreement with the company. Such an agreement ensures that the PMC is vested with the right to represent the owners and their properties. It is not the same as a POA. “Under the agreement, the owner permits us to collect rent on his behalf and represent him and his property on his behalf in the matters of tenancy," said Sahu.

Before letting out the property, the PMC carries out background checks of potential tenants, aids in police verification of such tenants, executes the rental agreement and follows other legal procedures. The owner also has the option to issue a POA to the PMC to execute the rental agreement or authorize a relative who then works with the PMC towards this end.

Since this process is akin to what a broker does, the PMC charges a brokerage fee, equivalent to 15-30 days of rent, from either the tenant or both the tenant and the landlord.

Apart from this, it will deduct a service fee of 5-10% from the rent every month or charge a fixed annual fee ranging between 20,000 and 1 lakh. The fee is determined depending on the size, type (residential or commercial) and location of the property. “Properties in high rental demand areas carry a lower fee. In localities where it is difficult to find tenants , we charge a higher fee of about 9%," said Sahu.

“Some residential localities are far from the city and may require longer travel time for service providers to reach. These are the kind of factors that jack up the fees," Prabakar said.

A service provider who charges a lower fee may also bill you extra for inspection visits, routine cleaning, and facilitating repairs for major damages, besides the rent deposit and invoice generation service (see table). In addition, some companies may charge a fee of 3,000-8,000 at the time of renewing the rent agreement, typically after its expiry in 11 months.

For any requests pertaining to repairs and other services, tenants can reach out to the PMC through whatsapp or the company’s mobile application. As for any structural damages to the building, the PMC carries out the repairs and sends the bills to the owner.

What if the tenant does not pay rent or refuses to vacate the property? While these are not part of their standard services, most of the bigger PMCs provide legal assistance in case of such litigation. So, the onus is on the property owner to check the list of service inclusions before enlisting a PMC. Where court cases are concerned, owners can give a special POA (for a specific purpose and one that ceases to exist after the said purpose is fulfilled) to the PMC to represent them in the cases and so they need not be physically present for court hearings.

Additionally, NRIs can also get support from PMCs with regard to property taxation. “The tenant has to mandatorily deduct 30% tax on rent and deposit the same with the income tax department. We ensure that tax-related transactions are done in a timely manner," said Fahad Ibnu A. R., co-founder and director, Karetakers.

Some bigger PMCs have an alternative model: take the property on lease themselves and then sublet it at their end. Nain said “I find this more convenient as I don’t have to get involved at all while I earn an assured yearly income," he said. Baskar said properties are typically let out under this model to bigger corporations that use them as guest houses for employees.

Do note that PMC services are costly. If that is the case, NRIs can consider issuing a POA to a trustworthy relative who can manage their properties. If that’s not an option or if you want professional upkeep of your property, you can opt for the PMC service. But a Google search on PMCs throws up numerous results. So, how do you decide whom to trust with your home keys? Mint has listed some key questions (see table) that you must ask the property manager to arrive at a decision.

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Updated: 21 Dec 2022, 10:24 AM IST
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