Investing in properties in Tier ii and iii Cities in India
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The rates of properties in High End Cities like Noida, Greated Noida, Gurgoan, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai has become excessively expensive possibly saturated. While it has still may not be completely saturated, the chances of any further sharp increase has definitely reduced. There are several factors that have contributed to this factor. The prolonged slowdown in the US economy has certainly been one of the prominent factor. When the cost of a single floor goes beyond 60 Lakhs, the interest rates on loans become excessively high. Just at 15% rate the interest rate on 50 Lakh rupees loan will be 7.5 lakh rupee a year or about Rs. 62,500 per month. If the rate of appreciation is not substantial, the investment can not be justified.
This leads the salaried class to look for alternatives in real estate investment in India. A good alternative option is to stay in rented accommodation while staying in metro cities and invest in residential land in tier ii cities in India. The tier ii City could typically be near the home town or one of the towns you are familiar with. Some examples of the tier ii Cities are Bhopal, Lucknow, Jaipur, Chandigarh, Dehradun, Visakhapatnam, Vijayawada, Tirupati, Raipur. A quick definition of the tier ii City could be the State Capital and another biggest City of the state.
You may like to note that the tier ii Cities are also getting expensive and in many cases could be out of the reach of the salaried medium class and government servant. In such cases Tier iii cities may not be a good option.
Where to find Residential Plots
The first thing that you should do is to look for any land on sale by the City Development Authority. This is most trusted source, since you deal with the government official directly. Notice that there are rampant palm greasing and bribery in paperwork and your should be prepared for that. But the extra hassle is worth it. You at least do not get in trouble of potential litigation when dealing with private dealers.
If there is not offer from the City Development Authority, you may like to search and look for trusted property dealers, developers or private sellers. It is a good idea to explore is with some of your friends who are also looking for similar residential plots in your area.
Buying Plot Vs Building
If you do not plan to live in the building, plot is always a better option. It appreciates as good or better than a furnished residential building. However, if you plan to live in the accommodation, buying the building may be a good idea, as, it will also give you the satisfaction of living in a better place.Notice that buying your own home comes with a large number of responsibilities. You are required to maintain everything from, kitchen, bath, paintings etc. If you leave the home, there has to be someone to take care of the home.
Whether you buy a plot or a home in Tier ii of Tier ii Cities in India , you can be assured of decent returns. For NRIs it is also a good way for appreciation of their money.
Strategy for NRIs
NRIs living in US typically get 3% return on their dollar deposits. If they invest the money in Tier ii Cities in India, they fetch much higher return. It is a good idea to invest a small amount in Indian Properties. The investment will typically mature to double in 3 to 4 year period ( and in some cases even 2 years). It will depent upon your city and its development.
Issues with NRIs investing in India
When NRIs sell their properties, they get Rupees, and there may be implications when they will be repatriating a large sum to US dollars. They can use some strategies to utilize the money earned from selling a property. They may use a part of it to take cash dollars back. Most NRI families make a trip to India every year, typically costing 3 lakh rupees. The NRIS can utilize the money made from property to pay for their US trips. They may also buy gold jewellery and take it back to US. The god jewellery is expensive in US ( though, the coins are priced same). This way it is easy to think of several options to make use of upto $50,000 that they make from investment in India.
How much should NRI invest in India
We suggest that you invest 10 lakhs to 25 lakhs in Tier ii Cities in India. You should typically buy two residential plots. You may sell one of them after couple of years and expect to get back the invested money back. You may like to leave the second plot and sell it when you need to.