Real estate is one of the most popular forms of investment for NRIs. The increased transparency in real estate dealings has certainly ushered in a new investment trend and NRIs are stoked since the rupee is currently on the lower end of exchange rates. This means NRIs stand to gain profitable returns on their Indian investment portfolio, be it non-commercial or commercial real estate types in India.

One must note that there are different types of properties that an NRI can invest in and the specifications of commercial real estate investments are different for Indian citizens and NRIs. So, let’s delve in deeper to understand real estate investments for NRIs in India.

Types of property investments at the disposal of an NRI

It is quite natural for an NRI to wonder- “Where do I begin to invest?” For this, you will need to know about the types of properties and the best locations for investing in real estate. Now, land and property distribution in India can be grouped into 4 categories:

1. Commercial real estate

These are the type of properties that are purchased to carry out professional work. Commercial real estate can be divided into four main categories: retail, office, industrial, and multifamily. The CRE sector is rapidly growing and one of the best ways to purchase such property is through fractional ownership real estate. This form of investment allows investors to procure premium commercial properties and gain returns generated through monthly rental income. As a result, it helps such investors to secure long-term wealth.

With the current commercialization and urbanization of metropolitan cities across the country, the investment potential of CRE has increased by leaps and bounds. Commercial property investment is an excellent choice for those NRIs who are looking to expand their business ventures.

2. Residential real estate

Residential real estate is bought primarily for 3 reasons. One purchases such property to live in it, put it up for rent, or sell it off for a higher price. Residential properties are the most popular investment choice for NRIs who are seeking capital enhancement and asset generation. These properties can be used once an NRI returns to India. Just like commercial real estate types in India, NRIs who own such properties can earn a steady income through deposits made by a tenant.

In general, large-scale NRI investors do not prefer investing in residential properties since the profit margin is lower, and maintenance cost is high when compared to commercial real estate.

3. Agricultural land

NRIs are exempted from purchasing agricultural land in India. The rules of the Foreign Exchange Management Act, 1999 have clearly stated this, and any NRI who wants to procure agricultural land has to follow a separate request procedure with the RBI. However, there still is uncertainty regarding successful purchases.

4. Farmhouse or plantation property

Just like with agricultural lands, an NRI is not eligible for purchasing a farmhouse or plantation property. However, there is an exception to this rule. An NRI can own a farmhouse or plantation property in the form of inheritance. In such a case, it can be requested as a property investment.

The most lucrative cities for real estate investment

1. Bangalore real estate market

The city is ubiquitous among real estate investors across the country and NRIs are quickly taking note of this fact. Bangalore boasts the most developed market for commercial real estate types in India. It is brimming with investment opportunities as it is the IT hub with major technological corporations settled in the heart of the city. As a result, the city has a very high demand for more office space while new corporations are setting up their business ventures.

The commercial real estate market in Bangalore is a great sector for NRIs to invest in as the rental returns in Bangalore office spaces rise to 10% per year. Most NRI investors in the Bangalore CRE market are from the UAE region, but it is garnering the attention of NRIs from across the globe. One must know that Bangalore offers a rate of INR 5,100 per sq. ft on properties.

2. Hyderabad real estate market

The city has been steadily growing as the fastest developing commercial real estate market through the years. NRIs usually consider Bangalore as “the” Southern CRE market but the future for Hyderabad seems quite promising.

The city offers some of the highest ROI to the point that the principal rates and cost of the CRE property have shown an upward gradation of 14%. Also, touted as India’s pharmaceutical capital, Hydrabad holds the lion's share of the country's industrial real estate sector. What’s even more alluring to NRIs is the multi-faceted land distribution that the city has to offer. It is because the properties out here are a great source of long-term financial gains.

There are innumerable property options at nominal rates along with good plot size. With an average cost of INR 4,900 per sq. ft, it is much lower in comparison to most other metropolitan cities. Hence, fractional ownership real estate is a great way for NRIs to invest in the Hyderabad CRE market.

3. Mumbai CRE market

Any real estate discussion is incomplete without the mention of this city. Mumbai is the apple of any NRI investor’s eye as it offers high-yielding investment returns. While the properties are very expensive, it is a popular choice for NRIs mostly from the United States.

Most of the large-scale enterprises dwell here, as a result of which the CRE market out here is booming. The only downside of the city is the lack of space or land area. Hence, there is stiff competition among investors. The going rate for land cost in Mumbai is INR 9,200 per sq. ft. However, this rate varies based on the property location.

4. Pune real estate market

Situated close to Mumbai, the city is another up-and-coming CRE hub with a growth rate of 7% in the rental housing sector. Pune is a highly popular destination for people seeking quality education. Hence, the most growth has taken place within the residential real estate sector.

The city has a quiet and peaceful environment, making it a major attraction for people who wish to get away from the hustle and pollution of major metropolitans such as Delhi, Mumbai, or Bangalore.

Pune offers the best combination of good work culture and serenity. As a result, more and more young professionals are living on rent. Therefore, the residential real estate sector is the most favourable investment option for NRIs who are looking to invest in Pune. Even though Pune is a big city, the cost of land is INR 4,800 per sq. ft. So it is quite affordable for big city pricing.

5. Chennai real estate market

It is another one of those cities that is experiencing a booming industrial sector. The real estate market out here is pretty unique in the sense that the city strikes a perfect balance between residential and commercial real estate types in India.

The major CRE hotpots in Chennai include Korattur, Mogappair, Avadi, Ambattur, and Mambakkam. Moreover, the best residential properties are available for INR 4,378 to INR 4,845 per sq. ft. One must note that the real estate market of Chennai is quite a price sensitive, but promising over the long haul.

So, now that you have a fair idea of what real estate in India looks like, are you ready to dive into the thriving real estate market?