Indian budget changes to spur Gulf NRI investment in residential market

India's interim budget announced tax waivers and rollovers of capital gains tax on the sale of houses
Indian budget changes to spur Gulf NRI investment in residential market
Leading industry experts feel that the affordable housing segment, priced in the range of $55,000 - $85,000, is likely to attract more and more NRI investors, mainly on account of the higher returns on rental income, as well as easy resale propositions.
By James Mathew
Tue 05 Feb 2019 12:52 PM

NRI (non-resident Indian) investments in India’s residential realty segment is expected to see a big jump in the coming months, in the wake of a slew of tax exemptions and reliefs for the sector announced in India’s interim budget for coming fiscal year.

The interim budget, presented last Friday in India’s parliament, announced tax waiver on house rents up to $3,343 (Rs. 240,000) from the previous limit of $2,507 (Rs. 180,000), extension of rollover of capital gains tax on the sale of houses from 1 to 2 houses and exemption of notional rent on second self-occupied homes.

“The budget announcements make investments in residential housing attractive to NRIs again and we expect a significant increase in the number of NRIs, especially from the Gulf region, buying residential properties in India in the coming months,” Shajai Jacob, CEO - GCC, Anarock Property Consultants, told Arabian Business.

The tax reliefs and capital gain tax roll over (up to $279,000) on the sale of two houses will give the much needed boost to the secondary market and we expect a big jump in NRI activities in this segment – both in buying new properties and selling off their current holdings, going forward, Jacob said.

Real estate industry analysts said the latest budget proposal on exempting notional rent on second self-occupied home could influence positively on NRIs deciding for investing in a second home in India.

“Assuming their first home is occupied by their family back in India, NRIs looking to buy another property will now seriously consider it,” a senior executive with a Noida-based realty firm.

Returns

Leading industry experts feel that the affordable housing segment, priced in the range of $55,000 - $85,000, is likely to attract more and more NRI investors, mainly on account of the higher returns on rental income, as well as easy resale propositions.

The average yearly returns, by way of rental income, for affordable housing are estimated to be in the range of 8-10 percent, as against just 2-3 percent in the ultra-luxury segment.

Some of the analysts and financial consultants feel that though there are several measures announced in the Budget aimed at giving an impetus to the residential realty segment, buyer and investors may wait till the May 2019 general elections (in India) are over before taking a decision on their purchases.

“The budget announced some direct and indirect benefits to investors, including NRIs. Thus, it is likely that there will be increased NRI activity in the residential segment in the quarters to come. However, it may see any visible impact only after the general elections, Surabhi Arora, a former Associate Director of Colliers International, told Arabian Business.

“Tax benefits are only one of the factors that influence house purchases. Buyers and investors may want to see the emerging overall economic situation as also the future direction indicated by the new government after the general elections, before they take a call on their purchases,” R Rajaram, a leading financial consultant, told Arabian Business.

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