How Non Resident Indians Benefit from Higher Currency Exchange Rates and Structured Property Payments

How Non Resident Indians Benefit from Higher Currency Exchange Rates and Structured Property Payments

How Non Resident Indians Benefit from Higher Currency Exchange Rates and Structured Property Payments

How Non-Resident Indians Benefit from Higher Currency Exchange Rates and Structured Property Payments

Investing in real estate has long been a preferred choice for Non-Resident Indians (NRIs), offering them a tangible asset in their home country while capitalizing on currency and market dynamics. One of the significant advantages for NRIs comes from leveraging favorable currency exchange rates, particularly with the AED, USD, or GBP. By combining this with structured payment plans for under-construction properties, NRIs can maximize their savings and investment returns.

Understanding the Currency Exchange Advantage

The UAE Dirham (AED) is pegged to the US Dollar (USD), providing a stable exchange rate. Over the past five years, the INR to AED exchange rate has fluctuated, offering NRIs earning in AED, USD, or GBP an opportunity to save significantly when converting their earnings to Indian Rupees (INR).

For example, between 2019 and 2023, the INR to AED exchange rate rose from 18 INR/AED to 22.5 INR/AED. This increase means that every AED converted in 2023 fetches more INR compared to earlier years, allowing NRIs to gain more value for their money when purchasing properties in India.

Benefits of Structured Payment Plans

Purchasing under-construction properties often involves staggered payments over several years. This offers NRIs the following advantages:

  1. Currency Gains: Payments spread over time allow NRIs to benefit from favorable exchange rates in future years.

  2. Lower Financial Burden: Staggered payments make large investments more manageable.

Example: Structured Payment Plan and Savings

Let’s consider a real-world scenario to understand how NRIs benefit:

Scenario Details

  • Property Value: 10 Cr (100,000,000 INR)

  • Payment Schedule: 20% of the total value annually for 5 years.

    • Annual Payment: 2 Cr (20,000,000 INR)

  • Exchange Rates (INR to AED):

    • 2019: 18 INR/AED

    • 2020: 20 INR/AED

    • 2021: 21 INR/AED

    • 2022: 22 INR/AED

    • 2023: 22.5 INR/AED

Yearly Payments and Savings

YearPayment in INRExchange Rate (INR to AED)Payment in AEDSavings (Compared to 2019 Rate)
201920,000,000181,111,111
202020,000,000201,000,000111,111
202120,000,00021952,381158,730
202220,000,00022909,091202,020
202320,000,00022.5888,889222,222
Total100,000,0004,861,472694,084 AED

Total Savings in INR

Converting the total savings in AED (694,084 AED) back to INR using the average exchange rate (20.5 INR/AED):

694,084 × 20.5 = 14,216,722 INR

Thus, NRIs saved approximately 1.42 Cr INR due to currency gains alone.

Capital Appreciation and Lease Rent

Real estate investments also benefit from capital appreciation over time, which significantly enhances the overall returns for NRIs. Properties purchased at lower prices during the under-construction phase often see substantial increases in value upon completion, driven by market demand, improved infrastructure, and inflation. Capital appreciation not only boosts asset value but also provides an opportunity for higher resale returns if the property is sold at the right time.

Additionally, NRIs can generate consistent income by leasing out their properties. Lease rents in prime locations, particularly in metropolitan areas, often yield attractive returns. This rental income can help NRIs offset their investment costs or be repatriated as additional financial gains, further improving the profitability of their real estate portfolio.

Repatriating Dollars: The Current Value Dilemma

While repatriating proceeds at a higher currency rate can amplify returns, it can also pose challenges. A stronger dollar or AED increases the amount of local currency required for reinvestment or other financial goals in the home country. For NRIs, the decision to repatriate depends on market conditions and the relative exchange rates at the time.

Sandeep Sadh,an expert in NRI investments, emphasizes, “Real estate is not just a safe investment for NRI's but also a hedge against currency volatility. With structured payments and a growing property market, NRIs can achieve significant financial growth while ensuring stability in their portfolios.”

Conclusion

By leveraging favorable exchange rates and structured payments, NRIs can achieve substantial savings and maximize their returns on property investments. However, the decision to repatriate funds at higher currency rates requires strategic thinking to balance immediate gains with long-term reinvestment goals. Investing in under-construction properties remains a prudent strategy for building wealth while staying connected to their roots in India.

 
About the author
Sandeep Sadh

About Sandeep Sadh

Sandeep Sadh has been in the real estate business since 1993 in Mumbai. He has expertise in Buying, Selling, Leasing properties in Mumbai and a deep understanding of legal and tax related matters due to his experience.

Summary

Over the years, he has experienced the City's growth. He has been a columnist in the Times of India with numerous articles, which bring about a clear picture of the real estate market in Mumbai. He is a regular on NDTV, CNBC, ET Now Real Estate and Zee News, giving his experienced quotes as and when required.

Sandeep Sadh has used information and technology since the year 1998 and now what people call it Prop Tech to cater to the needs of Home Buyer, Seller, Investor and Corporates, HNI and NRI looking to Buy/Sell or Lease their properties in the Mumbai Property Market.

Sandeep has a holistic experience of real estate be it Leasing an Apartment for your CEO in the most upmarket buildings, to enter into a long lease for your office in Mumbai in prime buildings or an Investment in good projects with a detailed analysis keeping in mind the Demand and Supply and other micro factors of the project/property.

Sandeep Sadh has developed a few websites like www.mumbaipropertyexchange.com, www.realestatemumbai.com, www.propi.in which augment the real estate consulting business.

Right from Investments in Primary Markets to Selling, leasing and specializing for NRI’s all over the world. He is an expert in NRI Home Buying and Selling and has a good understanding of the Income Tax laws pertaining to Selling a Property and Repatriating funds overseas or reinvesting based on Capital Gains etc.

Experience

  • Residential Leasing
  • Commercial Leasing
  • Residential Home Buying
  • Commercial Property Buying
  • Investment Properties with complete Property Management as your Real Estate Family office

While transacting in the above segments, he has complete experience and deep understanding of the paper work, his areas of expertise are :

  1. Drafting of the Leave and License Agreements
  2. MOU for Buying/Selling Properties
  3. Drafting Agreement for Sale
  4. Gift Deeds
  5. Computing of Capital Gains with current ready reckoner values
  6. Drafting of Supporting Power of Attorney.

As an add on Service, Sandeep Sadh has tied up with various Professionals like Lawyers and Chartered Accountants who add value in transacting and specially services for Non Resident Indians.

Application to Income Tax for Lower Tax Deduction Certificate – Through a qualified CA and keeping a grip on the traction so that the remittance back to Non Resident Indians after Selling the property is seamlessly transferred.

You can connect with Sandeep Sadh on ssadh@mumbaipropertyexchange.com

LinkedIn - https://www.linkedin.com/in/sandeepsadhmpe/