NRIs often maintain and support a full-spectrum portfolio across all asset classes i.e. shares, mutual funds, FDs, real estate. Along the lines of Wealth Advisors, one can also access duly qualified professional advisors for the full range of property services & advice. A property is not only a high ticket purchase, but also requires regular care & maintenance. NRIs are most familiar with this phenomenon. Ever so often, our overseas brethren rely on their resident friends & families for advice and execution around major items : purchase, sale, maintenance, tenant search & so on.
It is both safe as well as lucrative to invest in properties and there is no restriction on the number of holdings. Consequently, NRIs have diverse real estate investments in India - Residential, Commercial, Retail, Warehousing etc. Sometimes occupied by parents, or rented out, or under-construction, or just lying vacant pending an appropriate tenancy. Well-intentioned suggestions from friends and relatives notwithstanding, NRIs should consider professional advice on realty. There are specialized tasks to be performed – tenancy negotiations, repairs, general oversight and the usual buy/sell conundrum.
A professional Real Estate Advisor ensures a regular flow of market information, pertinent advice, and an efficient support system for portfolio management. Such services are not expensive, and guarantee a certain piece of mind for NRIs sitting far away from India.
A Real Estate Advisor adds substantial value, elucidated as under.
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Market Research & Advisory:
The decision to purchase or sell a property should be backed by comprehensive market research and discussions at the grass root level. However, the same may not be practical for an NRI. There is a tendency for non-residents to base their decisions on secondary sources i.e. feedback from friends, internet reviews, news reports etc. Using a professional real estate advisory service, you can make a correct assessment of potential investments. These are specialized services that collect Primary as well as Secondary market data, study trends, forecast associated risks and potential opportunities, and share unbiased recommendations on profitable investment options.
Valuation and risk assessment:
Internet has literally overloaded our world with superfluous information and data. Even Google displays paid ad results at zero position, atop the qualified search results. So when we rely heavily on the internet or on a close circle of friends & acquaintances, our decision making is not at its best.
Valuation and risk assessment of a property is a critical pre-step for making a buy decision. You need the services of a registered property valuer. A professional service can control the workings of the valuer, and efficiently assess risks & growth potential across residential, commercial and industrial projects in various cities on a pan-India basis.
Also Read: The way you will be taxed in India has changed.
The Decisioning: Buy, sell or rent?
Selling a property is not as straightforward as selling MFs or stocks. Should you buy another property or sell the existing one, or hold the portfolio and rent out? These are some crucial questions, which require comprehensive answers on the back of an in-depth knowledge pool.
Further, each of these decisions involves distinctive responsibilities and are governed by regulatory statutes. For instance, buying a property entails scouting for opportunities, risk assessment, property valuation, legal clearance, exploring lenders’ offers & much more. On the selling side, finding the right buyer at the right time holds prominence. You also need to ensure that your real estate values continue to grow, and that the paperwork is foolproof. Renting would again call for multiple tasks such as identifying a tenant, running background checks, formulating a rental agreement including provisions protecting your property.
All of the above requires time, energy and knowledge; your best friend may not cut it. Hiring a professional is recommended.
Tenancy Management:
Outsourcing tenancy management can offload pressure of constant monitoring of tenants as well as the let out unit(s). A professional service is more than a periodic physical visit by a friend on your property. A paid service will involve a bucket of services such as assigning a professional team that works on your behalf. The Advisor will regularly communicate with tenants, ensure timely rent collections, resolve issues pertaining to safety or maintenance, and effect compliance with local taxation.
Read More: It's the perfect time to invest in mutual funds.
Legal assistance:
In the Indian context, legal checks are of paramount importance. NRI buyers sometimes depend on their lenders for title confirmation. Banks & NBFCs are primarily financing institutions, and utilize third party legal assistance for title search & verification. A loan approval does not automatically make your investment risk free. It is essential to obtain a detailed legal check on the land/flat from a professional legal advisor and figure out the potential of any future risk or dispute.
Tax advisory
An NRI is liable to pay capital gain tax on sale of a property. The taxation norms vary as per the possession duration of the unit before sale. A respected Realty Advisor will coordinate & ensure full compliance with relevant tax laws. Furthermore, you may need assistance in filing of tax returns, compliance of FATCA (as applicable), book-keeping, audit representations (IRS and Income Tax Department), audit per IFRS standards, and GAAP audit, formulation of contracts etc. Some other avenues wherein professional advice is indispensable include gift planning and setting up of a company, LLC and Trust.
Bottom Line
NRI Investments in real estate have an emotional quotient. Besides looking at the rental income or value appreciation, a non-resident purchases land probably for owning a second home, or a back-up asset, or to just maintain a link with the mother country. For a sense of mental equilibrium and for ensuring correct decisioning, seeking professional assistance is a good idea.
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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
