Mumbai - top destination for NRI Investment

By LODHA

Mumbai is the capital city of Maharashtra and a city that is the land of dreams. It is known for its versatility and has something for everyone. The total land area of Mumbai is 603.4 sq km, inhabiting around 20 million people. It is the financial and entertainment capital of the country and a major port on the Arabian Sea.     

People across India migrate and reside in Mumbai for work and education, giving Mumbai its unique and diverse cosmopolitan culture. The startup culture has also fortified its stronghold in MMR, attracting talent from all across India. 

Increased migration for work means more scope for rental income, making real estate investment in MMR quite lucrative. The city is the central hub for business, financial services and manufacturing, collectively contributing about 6.16% of the total GDP.

The main drivers of GDP in the current market are the services, new emerging tech, and industries sectors.

Commercial and economic efficiency predict the state economy to grow about 12.1% in 2022. Foreign investments and innovations in services and industries sectors, especially in real estate, have boosted the growth rate at 13.5% and11.9%, respectively.

Real Estate Opportunities in MMR

The consistent improvements to Mumbai's infrastructure have helped the city's real estate growth in the past five years. Mumbai Metropolitan Region (MMR) has uplifted affordable housing in both new supply and housing sales over the last five years. 

If we take the numbers from last year, the residential market in MMR rose more than three times to ‚¹1.33 lakh crore, with the demand and sales standing at 1,71,165 housing units. According to JLL's Residential Market Update - Q1 2022, MMR propelled Q1 2022 residential sales by 148%, and recorded the highest sales of approx. 25,785 units in Q2 2022. Mumbai accounted for 22% of real estate sales in Q1 of 2022. 

Going by these numbers alone, the MMR market is by far the most stable and lucrative in the country with a growing ROI. That is why it is called the real estate goldmine.

What is in it for the NRIs?

Many Indians residing overseas are looking for investment opportunities with a high return on investment. Investing in Indian real estate is one option that yields such returns owing to its rapid growth.

According to a report by 360 Realtors, NRI investments in real estate stand at $13.1 billion in 2021. The same report predicts it to grow by 12% in 2022. Moreover, the property segment across the country is expected to show 5% capital value growth in 2022. 

It is great news since the growth curve favours NRI investors.   So, investing in cosmopolitan cities like Mumbai can yield a lot of rental income, thus creating a reliable mode of passive income for NRIs. Moreover, grade A developers and exotic locations ensure a higher appreciation of properties. It helps diversify and grow your financial assets.

While scouting locations to purchase residential properties, NRIs must ensure strategic location, developed social infrastructures & civic amenities, etc. The MMR region checks all these boxes from an NRI investor's perspective. The region has all the perks, is a fully developed employment hub with many MNCs, and is the epicentre of commercial businesses, an important port on the Arabian Sea. 

Popular NRI investment areas in MMR are Bandra, Thane, Kurla, Mulund, Powai, Borivali, Andheri, Juhu, etc. Development of new projects, such as the new airport at Navi Mumbai, Mumbai Trans-Harbour Link (MTHL), Delhi Mumbai Industrial Corridor (DMIC) and Coastal Road projects, are some of the critical projects lucrative for NRI investors.

Moreover, India's taxation rules for NRI investment in real estate are the same for local residents. NRIs can claim tax benefits under section 80 C of the Income Tax Act, 1961. The property bought by an NRI is exempted from taxation if they declare it for self-use. But if they rent the property, it will be deemed taxable income. 

Suppose an NRI purchases a residential property of INR 50 lakhs from an Indian resident. In that case, the NRI can withhold tax at the source rate of 1% of the purchase valuation.

On the other hand, if the property owner is an NRI, then the NRI investor can withhold tax of around 20% of the long-term capital and 30% in case of short-term capital gains. 

Moreover, the Double Taxation Avoidance Agreement plays a crucial role in NRI investment. It gives NRI the benefit of claiming credit in the overseas country where he currently resides on the taxes he incurs on the rental income or capital gains concerning the property in India.

Conclusion

There has been increased demand for real estate investment in India among NRIs, especially in the age group of 35-45 years, despite the economic slowdown during the pandemic. As the Indian economy is in the growth stage, this is the perfect investment time to earn long-term benefits. 

Though there are many investment options, like fixed incomes, gold, stocks, etc., every NRI must invest in residential real estate. And that too in MMR. The real estate sector in MMR has picked up over the last five years, including during the pandemic-induced slowdown.  

So, looking at the present and near-future scenario, now is the right time to invest in the real estate market in India, especially if you are an NRI looking to invest in MMR.