How to Fund Expenses, being an NRI! -

Investing in the Indian real estate market can be an exciting opportunity for Non-Residential Indians (NRIs) looking to diversify their investment portfolio and capitalise on the country’s growing property market. However, one of the key considerations for NRIs is to explore unique fund options to buy that property. This guide aims to provide a detailed overview of the various funding options available exclusively for NRIs planning to invest in Indian real estate.

Popular Fund Options Available for NRIs

As an NRI planning to invest in the Indian real estate market, there are several unique ways to fund your investment. Here are some options you can consider:

NRI Home Loans

Many Indian banks offer home loans specifically designed for NRIs. These loans allow you to fund a portion of the property’s cost, and the remaining amount can be covered through your personal savings or other sources.

Pros	Accessible financing optionProvides flexibility in repayment optionsOffers competitive interest ratesSimplified application process
Cons	Limited loan-to-value ratioRepayment process may involve complexitiesLoan approval and disbursement process may take longer

External Commercial Borrowings (ECBs)

NRIs can also explore the option of raising funds through ECBs. This involves borrowing money from foreign lenders, which can be used for real estate investments in India. However, it’s important to consider the terms and conditions of the loan and any associated risks.

Pros	Competitive interest ratesDiverse lender optionsLarger loan amounts
Cons	Exchange rate risksRegulatory restrictionsExtensive documentation and approval process

Non-Residential External and Non-Residential Ordinary Accounts

NRIs can use their NRE or NRO accounts to fund their real estate investments. These accounts allow you to transfer funds from overseas to India and can be used for purchasing properties. You can consult with your bank to understand the specific requirements and procedures involved.

Pros	A convenient way to manage finances in IndiaEasy Repatriation of fundsTax Benefits
Cons	Limited Source of FundsFluctuations in exchange ratesAssociated transaction costs

Joint Venture (JV) Partnerships

Joint Venture (JV) Partnerships pool resources and share the investment costs, making it an attractive option for NRI investors.

Pros	Access to local expertiseShared financial burdenMitigated legal and regulatory challengesPotential for higher returns
Cons	Loss of full controlPotential conflicts of interestDependent on partner’s performance

Non-Convertible Debentures (NCDs)

NCDs are debt instruments issued by Indian companies to raise capital. NRIs can consider investing in NCDs offered by reputed real estate developers in India. These investments offer fixed returns over a specified period and can be a source of funding for your real estate ventures.

Pros	Offer a predetermined interest rateAllows NRIs to diversify their investment portfolio beyond real estateNCDs are regulated by regulatory authorities, ensuring transparencyProvide higher returns compared to traditional fixed deposit schemes
Cons	Market RiskNCDs are typically unsecuredNRIs need to be aware of the tax implications associated with NCDs

Private Financing : Fund Feasibility

You may also explore private financing options where you can secure funding from private individuals or investment groups. This could involve negotiating terms and interest rates directly with the lenders.

Pros	Flexible termsFaster approval processLess stringent criteriaCustomised solutions
Cons	Higher interest ratesLimited consumer protectionShorter loan tenure

It’s crucial to note that while these unique funding options present attractive opportunities, they require careful consideration and consultation with financial advisors, legal professionals, and real estate experts. Each funding avenue has its own set of regulations, tax implications, and eligibility criteria that need to be understood and evaluated before proceeding.

Key Considerations While Deciding Fund

Currency Risks: Be aware of the potential impact of currency exchange rate fluctuations on your investment and implement strategies to manage these risks effectively.

Know the Rules: Understand the legal and regulatory requirements for NRIs investing in Indian real estate, keeping up with guidelines from the Reserve Bank of India and other relevant authorities.

Choose the Right Funding Option: Research and compare different funding options that offer finance for NRIs. Consider their reputation, track record, interest rates, fees, and customer service before making a decision.

Conduct thorough Due Diligence: Research the property you plan to invest in, considering factors like location, market trends, infrastructure development, legal ownership, and potential disputes. Engage experts to conduct due diligence and verify compliance with regulations.

Understand Tax Implications: Familiarise yourself with the tax implications in both India and your country of residence, including taxes on rental income, capital gains, repatriation of funds, and any relevant double taxation agreements. Seek professional advice for optimal tax planning.

Plan for Repatriation of Funds: If you intend to repatriate funds in the future, understand the RBI guidelines and the necessary documentation for smooth repatriation. Ensure your chosen funding option allows for easy transfer of funds without legal restrictions or delays.

Stay Informed and Connected: Keep up to date with market trends, regulatory changes, and investment opportunities through reliable sources. Engage with NRI forums, attend seminars, and connect with other NRI investors to share knowledge and experiences.