Lessons for NRIs: The Reality of Real Estate Investments in India

For many Non-Resident Indians (NRIs), real estate in India is often seen as a stable and potentially lucrative investment—a connection to their roots and a long-term asset. However, a recent case involving a Hyderabad-based property highlights the risks and underwhelming returns that some overseas investors may face, challenging these conventional assumptions.

A 15-Year Investment, Only 0.5% Return

An NRI couple, residing in the United Kingdom, invested in a 3,200 square foot apartment in Hyderabad in 2009. The property, which cost them nearly ₹90 lakh at the time, was viewed as a long-term asset that would appreciate, provide rental income, and one day serve as a retirement home.

Fast forward to 2024, the property is now valued at just around ₹1 crore—an appreciation of only ₹10 lakh over 15 years. Considered in the context of inflation and opportunity costs, this amounts to a meager annual return of around 0.5%. Worse still, rental returns barely covered property maintenance, taxes, and sporadic repairs, turning this investment into a financial liability rather than a wealth-builder.

Common Pitfalls Faced by NRIs

This is not an isolated incident. Many NRIs pick properties based on emotional considerations or aspirational goals rather than market fundamentals. Some of the key challenges that diminish real estate returns for overseas investors include:

• Poor Rental Yields: In many Indian cities, annual rental yields hover between 2-3%, far lower than global benchmarks.
• Mediocre Capital Appreciation: Real estate markets in India have seen slow or stagnant price growth over the past decade, especially outside of top-tier urban areas.
• Maintenance Burdens: Vacant properties demand regular upkeep, security, and management, which becomes harder for absentee owners.
• Complex Selling Process: Legal paperwork, buyer sourcing, and bureaucracy can turn property sale into a long-winded ordeal, further eroding profits.

Alternative Investment Strategies

For NRIs aiming to invest in India, diversification and objective assessment are key. Here are some strategies to consider:

• REITs (Real Estate Investment Trusts): Offer exposure to real estate markets with better liquidity and lower entry costs.
• Mutual Funds and Equity Markets: Historically offer higher returns than physical assets, especially when maintained over a long horizon.
• Professional Property Management: Hiring a reliable manager can ensure better upkeep and rental optimization of any physical property.
• Location Analysis: Focus on high-growth corridors with strong infrastructure projects and economic activity, rather than emotional comfort zones.

The Takeaway

Real estate remains a valid investment avenue for NRIs—but only when approached with meticulous planning, clear financial goals, and a realistic view of market performance. Emotional connections to a property, while understandable, should not outweigh practical considerations. The Hyderabad couple’s experience is a cautionary tale, emphasizing the need for data-driven decisions and hands-on property management.

For overseas Indians, the real decision may not be whether to invest in India, but how to invest wisely.