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:
Currency Gains: Payments spread over time allow NRIs to benefit from favorable exchange rates in future years.
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.
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
| Year | Payment in INR | Exchange Rate (INR to AED) | Payment in AED | Savings (Compared to 2019 Rate) |
|---|
| 2019 | 20,000,000 | 18 | 1,111,111 | – |
| 2020 | 20,000,000 | 20 | 1,000,000 | 111,111 |
| 2021 | 20,000,000 | 21 | 952,381 | 158,730 |
| 2022 | 20,000,000 | 22 | 909,091 | 202,020 |
| 2023 | 20,000,000 | 22.5 | 888,889 | 222,222 |
| Total | 100,000,000 | – | 4,861,472 | 694,084 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.