Indian real estate for NRIs — under-construction, plotted, ready

The under-construction theme is a structural NRI play. Builders raise pre-launch capital from NRIs at 8–15% discount to ready-inventory pricing of comparable spec. NRIs accept the multi-year construction timeline because they don't need immediate occupancy, and pay over 3–5 years from foreign-earned salary cadence rather than lump-sum-at-purchase.

Mechanics:

• Booking amount: 10–15% of agreement value at allotment; remainder construction-linked over 3–5 years
• Stamp duty / registration: 5–7% depending on state (Maharashtra 6–7%, Karnataka 5%, Telangana 7.5%, Delhi 6%), paid at registration (typically when building reaches a defined stage or 50% completion)
• RERA registration: Mandatory under the Real Estate (Regulation and Development) Act 2016. Verify the project on the state RERA portal before signing
• RERA Section 18 refund right: If the builder fails to deliver per agreed timeline, the buyer can demand refund + interest at SBI MCLR + 2%. Operational reality: enforcement varies by state RERA tribunal
• Holding-period start for tax: Date of ALLOTMENT LETTER per CBDT Circular 471/1986 + ITAT rulings; not date of registration
• OC (Occupation Certificate) / CC (Completion Certificate): Mandatory before possession; without OC, the flat cannot be legally occupied or resold

Where the IRR comes from:

• Launch-pricing arbitrage: 8–15% discount captured at signing
• Construction-period appreciation: 5–8% per year on the agreement value (varies by micro-market)
• Completion premium: 5–10% one-time uplift on OC / possession
• Net IRR over 5–7 years: 10–15% in strong tier-1 micro-markets; 5–8% in weaker zones

Risks specific to under-construction:

• Builder default / RERA delays — even AAA-rated builders have missed timelines by 12–24 months
• OC delays — building physically ready but OC pending due to compliance gaps; flat sits in legal limbo
• Title disputes on the underlying land — verify the builder's land aggregation thoroughly
• Pre-EMI bleed — if you take an NRI home loan, you're paying interest during construction with no rental offset
• Ghost-city risk in tier-2/3 — unsold inventory locks pricing for years

Ready-possession rental sits in the conservative bucket — yield-bearing, occupancy-tested, no construction risk. The rental yield is modest (2–3% gross in Indian metros; well below US / UK / Singapore yields) but the appreciation kicker (5–7% per year) brings total return to 7–10% INR.

Tax treatment of rental income:

• Rent taxable under “Income from House Property” (Section 22)
• Section 24(a) standard deduction: 30% of net annual value, no questions asked
• Section 24(b) home-loan interest deduction: full interest if let-out (no ₹2 lakh cap that applies to self-occupied)
• Section 194-IB tenant-side TDS: only when monthly rent > ₹50,000; tenant deducts 5% of rent
• Section 195 NRI carve-out: if the tenant is paying you (the NRI landlord) and not using a 194-IB / 194-I framework, Section 195 catches the payment at NRI rates — practically rare for individual tenants but real for corporate tenants. Most individual tenants don't deduct TDS at all and you self-declare in ITR-2

Where it fits:

• NRIs with existing rental property — usually inherited or bought during early NRI years
• NRIs returning to India in 5–10 years who want a ready home base waiting
• NRIs who specifically want INR-denominated yield-bearing real-estate exposure (rare; most prefer financial assets for yield)

Where it doesn't fit:

• NRIs who don't have local infrastructure to manage tenants, repairs, society dues
• NRIs who could buy a US REIT or UK BTL fund instead — those usually deliver comparable or higher yield without the operational overhead
• Anyone treating it as a pure tax shelter — Section 24(a) helps, but the headline yield is too low for it to be a tax-driven decision