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How NRIs Can Invest in Commercial Property in India

Living abroad opens up a whole new level of opportunities, but sometimes you can miss some great opportunities back in your motherland, India. This is where the option to NRI invest in commercial property comes through! The Non-Resident Indians can take advantage of their global experience together with their financial resources and participate directly in the rising economy of commercial real estate in India. 

This blog will guide the best commercial property investment for NRIs and how NRIs can buy commercial property in India. This blog will provide every step an NRI needs to understand the concept of commercial property investment, the upsides and where the pitfalls are, and everything you can imagine. This is the perfect NRI Commercial Real Estate Investment Guide. Let’s start. 

Why NRIs Consider Investment in Commercial Property in India?

Those NRIs that are seeking a stable stream of Income together with long-term gains in capital can have a significant edge through investment in commercial property. The real estate sector in India is undergoing a significant increase in investment from Non-Resident Indians (NRIs). 

According to a research paper issued in 2023, NRI contributions to the real estate market would increase to roughly 20% from 15% in 2023. Here are all the factors why NRI invest in commercial property, and what exact advantages they will get out of it. Here are all these factors:  

Higher Rental Yields

Commercial properties generate much better rental income as compared to residential properties. This directly translates to a greater level of return on investment. A report from JLL India suggests that offices in Grade A areas in major cities can yield around ₹100 per sq. foot/month, which is directly higher than residential properties. 

Long Term Capital Appreciation

Real estate in India has almost delivered an excellent return on investment, with the value of properties steadily increasing. This trend for capital appreciation helps add another layer to NRI commercial real estate investment. 

Diversification 

Investment in commercial property allows NRIs to expand their financial portfolio beyond just trading shares and stocks. This type of diversification of funds can help in mitigating risks and create a better financial strategy. 

Tax Benefits 

When NRI invest in commercial property they get certain tax rebates and benefits based on the rental income directly from commercial real estate. It depends on their country of residence beside the existing structure of DTAA ( Double Tax Avoidance Agreement) through India. 

These are just some of the main factors why NRI commercial real estate investment is a very lucrative option. Now, let’s jump into different types of properties for commercial real estate and their legalities later.

Types of Commercial Properties NRIs Can Invest In India:

India’s real estate industry offers a wide range of investment options, appealing to a range of risk tolerances and goals for investment. Before investing in any form of commercial property NRIs must assess the following types of properties: 

1. Office Spaces 

With India’s rising economy and the fast development of the service sector, demand for Grade A office space is at a record high. Investment in office buildings, prominent sites, or future commercial areas can result in greater and better rental returns, as well as capital appreciation. 

2. Retail Spaces 

India’s middle class is growing rapidly, and increased disposable incomes are directly driving retail expansion. Great-street retailers, shopping malls, and convenience stores are all in great demand, making these sites a great opportunity for investment, especially for NRIs. 

3. Industries and Warehouses 

The rise of e-commerce and the “Make in India” initiative have driven demand for modern storage and associated infrastructure. Investments in strategically positioned industrial parks and modern warehouses can yield consistent profits with the potential for long-term growth. This is a lucrative option for NRI who want to invest in different types of commercial properties. 

4. Co-working Spaces

The fast-expanding popularity of numerous co-working spaces has increased the number of co-working spaces in various places. Investment in shared working spaces can help young entrepreneurs and startups, while also contributing to India’s economic growth.

This list provides a starting point, and NRIs should be conducting deep research to identify the best commercial properties for NRIs to invest in in India through these types of properties. They should also consider their risk tolerance along with investment goals as well. 

Legal Framework and Regulations for NRI Commercial Real Estate Investment

As you get to know how and where to invest in commercial properties, it’s time to understand the legal requirements for NRI commercial property investment. Here are some major points to remember: 

FEMA (Foreign Exchange Management Act) Guidelines: 

NRIs have to comply with the Foreign Exchange Management Act or FEMA regulations when they invest in real estate in India. These guidelines specify what type of properties NRI can make their investments and different permissible sources of funds. 

RBI (Reserve Bank of India) Regulations

The regulations regarding the Reserve Bank of India or RBI generally repatriate funds when NRI invest in commercial property. Understanding this regulation is essential for an easy and smooth repatriation process of sale proceeds and rental income. 

Real Estate (Regulation and Development) Act (RERA)

RERA aims to protect consumer rights when consumers are investing in Indian real estate. NRIs should ensure that they are investing in projects that are RERA-registered to safeguard their interests. 

Documentation and Compliance Requirements

The commercial real estate investment requires these documents: 

  • Foreign Address Proof 
  • NRI Status Proof ( OCI/PIO Card, Passport) 
  • Power of Attorney ( Although Optional but recommended )
  • TRC or Tax Residency Certificate from your country of residence

NRIS should consult a legal professional and the real estate developer for all the document requirements, meeting all legal requirements and completing the necessary documents precisely. 

Financing Options for NRIs

NRIs have different financing options that are available for commercial property investment. Here’s a simpler breakdown of how NRIs can buy commercial property in India: 

Home Loans ( Limited)

Some banks provide home loans directly to NRIs based on commercial property purchase but with much stricter criteria for loan eligibility and higher interest rates as well compared to resident loans. 

Commercial Property Loans 

Different financial institutions offer NRIs commercial real estate loans with terms that are tailored to their needs. Before taking loans from these institutions do a thorough research of all their terms and conditions of repaying those loans and conditions with it. 

NRIs should factor in all financing options and choose the best that suits their needs and requirements and help them reach their financial aim.

Taxation Implications for NRIs

NRI is directly subject to different taxations from the returns or the rental income of the commercial property in India. The tax rate is controlled through their NRI status along with the DTAA between their country of residence and India. It’s better to consult a professional from real estate or a legal advisor to understand tax obligations and tax benefits. 

Conclusion 

When NRI invest in commercial property this opens up a world of opportunities and a feeling of being connected to their motherland again. This is also the path for any NRI to build a great financial future and invest in the up-and-coming third-largest economy of the world. Through this guide, you have the full know-how on where and  how to buy the best commercial properties for NRIs to invest in India

Ready To Explore New Opportunities 

Contact one of the top developers in India, Omaxe Ltd. today! Our team has experts and professionals who can help you through the entire investment procedure, from identifying to navigating the right properties to all its legal clauses and regulations. Together, we can turn your vision of buying a commercial property in India into a reality.