Here's what NRIs wanting to invest in real estate should know to ensure there are no gaps in property selection

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Investment in real estate has always excited Non-Resident Indians (NRIs) and finds a predominant place in their portfolio. While the advantages of real estate as an investment class are well-known — tangible, rent-yielding, long-term appreciation, second-home option and flexibility for future expansion/relocation - the investment process has some challenges.

Here are some things NRIs wanting to invest back home should keep in mind:

Legal aspects 

The real estate market in India remains largely unorganised. There are different rules and regulations across states.

First, the Foreign Exchange Management Act (FEMA), which governs NRI investments, changes frequently. Secondly, NRIs/PIOs (Person of Indian Origin) can’t purchase agricultural land, including farmland or plantation property. Additionally, they need to know the fine print linked to taxation and repatriation of the proceeds.

Guidance from experienced real estate advisors becomes crucial to ensure there are no gaps in property selection and the buying process isn’t fraught with risks.

Illegal possession or occupation: 

It’s practically impossible for NRIs to keep a tab on their properties. The menace of encroachment or illegal possession is high. Evicting illegal occupants becomes a challenge for property custodians, who usually comprise the owners' friends and relatives.

Given the stakes involved, all the legal documents must be signed by tenants, transactions need to be recorded and executed  the right way before handing over possession.

Developers pedigree

Numerous projects have hit a roadblock due to violations in construction norms, cash crunch and legal bottlenecks. NRIs consequently end up incurring huge losses. Not only is possession delayed,  capital too gets blocked, thereby adversely impacting their overall investment portfolio.

Buyers’ problems aggravate further owing to limited information about the quality and authenticity of legal papers and ignorance of the property’s approval and financial status. Failure to regularly update themselves on the construction status too puts them at high risk.

RERA's (Real Estate Regulatory Authority) role should be highlighted here.

RERA does have a regulatory mechanism to protect the rights of home buyers and makes project information more transparent. While RERA provides access to all information, the body doesn’t do the due diligence on behalf of the investors. Essentially, RERA aims at bringing transparency into the real estate sector.

Checking the pedigree of the developers and investigating facts about the financial and physical condition of the property remain the investors’ responsibility.