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How to buy a dream house

Real estate information for NRIs on how to buy commercial property and housing in India.

india Updated: Mar 14, 2006 11:46 IST

"I would love to buy a house in India, no doubt. But there are certain hiccups in doing so," said Sudhir Chowdhary, a computer consultant from Chicago. But why invest if there are problems? "My country, my identity, my people and friends," he replied.

Of course, NRIs face many hurdles in buying property in India despite the fact that they can remit money in hard currency and every real estate agent lays down the red carpet for them.

For a start, an NRI needs a lot of cash to buy a property.

Sudhir wants to buy a home near New Delhi as he is from Gurgaon in Haryana, which borders the capital. But he needs around $180,000 for his dream home. He finds the prices sky high and they are still climbing.

Now some banks offer mortgages to NRIs but this is not the norm. Since he has to look for the future of his immediate family in the US, he has to think twice before investing.

A mechanical engineer in Dubai, Apit Shah also dreams of buying a home for his parents to live comfortably. He sends money regularly to his bank in Gujarat but when will he save a tidy sum to buy a property?

Buying a home in India for some NRIs is a matter of security as in the case of Indians in East Africa who had bought homes in Britain since the 60s as they were not sure when they would be kicked out of these countries. They sent money by hawala to buy their homes - just in case.

For other NRIs, it is a matter of convenience as a large number of Indians from Britain and the US have their second homes in India for the winter or just to stay when they visit the country -- and save on hotel expenses.

Three sisters who are settled in Kenya, the US and Canada have jointly bought a flat in Chandigarh to stay during their frequent visits.

Buying a home is also good investment for some NRIs as property prices have been spiralling in India. But the big breakthrough came last year.

Foreign real estate companies operating in India and Indian real estate developers have been flooded with requests after the Indian government allowed foreign direct investment (FDI) in real estate.

FDI up to 100 percent is allowed under automatic route in townships, housing, built-up infrastructure and construction development projects. The last include housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure.

Since land is scarce in major metros of New Delhi, Mumbai, Chennai, Kolkata and Bangalore, there is a shift to 'tier-two' cities and towns that can absorb good quality accommodation. Real estate is growing at a hefty 30 percent a year.

The past year has seen about a billion dollars invested, according to one estimate. The next 18 to 30 months will see an inflow of seven to eight billion dollars, said the CEO of a top construction company.

Overall, India requires 10 million housing units every year. So any investment in housing is bound to get hefty returns estimated between 45 and 100 percent in new estates.

Estate developers have always been wooing NRIs and have developed many estates - called 'colonies' in India - specifically for NRIs with swanky names such as Dollar Apartments, Windsor Manor or Bel Air Heights. In these estates such is the ambience that one has to keep reminding oneself that it is India and not the West! NRIs have readily invested in these homes for regular income from rent or for staying there when in India.

Some towns are preferred such as Pune near Mumbai. Now just three hours by car on the expressway, Pune is bursting at its seams with new housing projects for the well-heeled Indians and NRIs.

Another is a sleepy town in Punjab called Phagwara near Jalandhar. Here property prices are the highest in the state. A similar town near the border of Gujarat and Maharastra was also in the news on this count. Based on NRI demand, Kerala is famous for its high property prices.

Prices of these luxury homes have rocketed by over 100 percent in many cases. With little chance of their falling, property prices just 'firm up' for a short period. Sure, a large sum of money is converted into bricks and mortar when one buys a home and short-term returns are lower than financial markets. But the emotional factor of owning a home 'back home' is what drives NRIs to invest in real estate.

First Published: Mar 14, 2006 11:46 IST