The rupee’s downward spiral may have been a cause for worry to Indian citizens, bankers and the government alike but it could prove to be a bonanza for the Indian diaspora spread across the world – in other words the NRI population. The depreciating rupee virtually and effectively ensured that real estate prices went down 20% – the appreciating dollar ensured more square footage per rupee invested.
Data from various studies on NRIs also indicate that they are more than willing to invest in Indian real estate since they perceive an appreciation in the value of their investments. Indian bankers too have huge deployable funds on hand and would prefer a cash rich NRI clientele in view of the decline in local credit worthiness and shrinking industrial output. Given solid supporting financial statements, bankers might be willing to give loans at preferential interest rates.
NRIs may also gain tax advantages from investing in real estate. Any housing interest paid may be reduced from rental income received and only the net would be subject to tax if the property is let out. In case it is self-occupied by the NRI’s parents, he may still deduct housing interest paid against other income. The NRI would also be allowed to deduct a straight 30% of rental income for collection and maintenance charges of the property and no receipts would be required for the same. He would also be entitled to certain credits under the Double Taxation Avoidance Agreement between India and his resident country as applicable.
Notwithstanding the gains to individual NRIs, there is also the additional advantage to be had by the country as a whole. Any inflow of foreign exchange would contribute to improving foreign exchange reserves. Real Estate companies would be able to still maintain good cash flows and sell their projects despite the disadvantages in the local market.
Real estate and the automobile industry still remain the two crucial macro indicators of economic growth or slow down. Statistical reports suggest that the two are facing a downturn currently. Investments in Indian real estate are expected to pick-up eventually both locally and internationally, though perhaps the international investment portion may be expected to be relatively higher in the short run.
Apart from the financial considerations, it may also bring a majority of the Indian diaspora back to its roots or at least help establish a strong connection between them and what was once their home. As Mary Angelou said, “The ache for home lives in all of us. The safe place where we can go as we are and not be questioned.”