Top Bangalore Real Estate Myths for NRIs: Market Trends & Investment

If you’re an NRI exploring Bangalore real estate market, you’ve likely come across a flood of advice, some of it helpful and some... not so much. From sky-high appreciation guarantees to overhyped "hot" locations, there’s no shortage of myths that can complicate your homebuying journey.

In Part 1 of ‘Top Bangalore Real Estate Myths for NRIs’, we demystified taxes and legal stuff—basically, the tricky bits that can make real estate feel like a maze. Now, in this follow-up, we’re shifting gears to focus on the myths surrounding market trends and investments for NRIs.

From the question of whether property prices are really as sky-high as they’re made out to be, to tackling concerns about the market's stability — we're here to clear the fog. 

Let’s break it down!

Myth 1: NRIs Can't Take Advantage of Pre-launch Properties in Bangalore

Myth Debunked: This is entirely false. NRIs have the same rights as resident Indians when it comes to purchasing pre-launch properties. In fact, pre-launch properties can be particularly advantageous for NRIs due to several factors:

• Lower Entry Costs: Pre-launch prices are typically 10-30% lower than post-launch rates, which allows NRIs to enter the market at a more affordable price point and maximize their investment.
• Higher Appreciation Potential: Property value often appreciates significantly as the project develops, offering NRIs the potential for higher returns on their investment.
• Flexible Payment Plans: Developers frequently offer attractive and flexible payment schemes for NRI investors, including construction-linked plans, subvention schemes and extended payment schedules. This makes it easier to manage finances and investments.

How Pre-launch Properties Work:

• Early Bird Advantage: Developers offer lower prices during the pre-launch phase to generate interest and secure early investments. This allows NRIs to enter the market at a more attractive price point.
• Transparency and Trust: The Real Estate (Regulation and Development) Act (RERA) has increased transparency and accountability in the Indian real estate sector. This benefits NRIs by ensuring fair practices and protecting their investments in pre-launch projects.
• Due Diligence: NRIs should conduct thorough due diligence before investing in pre-launch properties, including verifying the developer's credentials, project approvals, and RERA compliance.

What Could Go Wrong?

• No Allotment: You might not get an allotment, especially if demand overshoots supply.
• Wrong Unit Selection: Limited information may lead to picking a poorly located or designed unit.
• Overpaying: Hype can lead to decisions that don’t align with market realities.
• Backing Out Costs: If you back out after paying 10% or registering, you could lose money.
• Approval Delays: If approvals are delayed, developers might revise pricing upwards.

How Propsoch Can Assist in This?

At Propsoch, we guide YOU through the pre-launch property process to ensure you make informed decisions:

1. Priority Access: We facilitate the procurement of Expression of Interest (EOI) forms, giving you priority access to pre-launch offers.
2. On-Site Support: Our market wizards provide guided site visits, helping you make the best property choices.
3. Best Price Guarantee: We work to secure the best price at the time of allotment, ensuring you get the most competitive rates available.
4. Hassle-Free Documentation: We assist with all the documentation required for the purchase.
5. Post-Purchase Assistance: Even after the purchase, we continue to provide support at zero brokerage, helping you manage any issues that may arise.
6. Cancellation Support: If you need to cancel your purchase, we offer continued guidance with no hidden charges.

So, it’s absolutely untrue that NRIs can’t take advantage of pre-launch properties!

Myth 2: Bangalore Has a "Luxury Tax" Specifically for High-Value Properties Owned by NRIs

For you all, here’s a case that came through Propsoch recently, which directly tackles this common misconception.

Mr. Patel, an NRI based in London, owns a luxurious 3-bedroom apartment in Whitefield valued at ₹10 crore. The apartment has top-tier amenities—a swimming pool, gym, smart home features and more. While researching property taxes, he stumbled upon a claim that NRIs are charged a “luxury tax” on high-value properties. Concerned about this extra cost, he reached out to Propsoch, stressing about a massive hike in his tax bill due to his NRI status.

After conducting exhaustive research, our wizards assured Mr. Patel that no such "luxury tax" exists for NRIs. Property taxes in Bangalore are based solely on the property’s size, location, and amenities—not the owner’s residency status. The rules remain consistent whether you’re an NRI or a local resident. It was a huge weight off his shoulders and he realized that this myth was just that—myth!

An article in the Times of India states that "wealth tax was abolished in India in 2015, so no tax is levied on the property value owned by NRIs". Similarly, the BBMP website provides detailed information about property tax rates and calculations with no mention of any special taxes for NRIs or luxury properties.

Myth 3: Bangalore Property Prices Are Currently Too High and Can Drop Soon

Myth Debunked!

Yes, Bangalore property prices have been on the rise but don't let those "crash" rumors scare you. While Bangalore has experienced significant property price appreciation in recent years, claims of an impending market crash are unfounded. The city's real estate market is underpinned by strong economic fundamentals – the IT sector, growing population, and ongoing infrastructure development. Average residential prices have risen by an impressive 57%, with experts anticipating continued growth in 2024. Bangalore's real estate market is estimated to be worth $130 billion and is projected to reach $150 billion by 2025, growing at an annual rate of 10%.

Knight Frank's Asia-Pacific Outlook 2023 predicts a 5% annual growth, while Business Insider India forecasts a more optimistic 12% increase in prices. 

This positive outlook is supported by several factors:

• Consistent Demand: Bangalore recorded the highest residential sales volume in India with 16,995 units sold in Q1 2024, showing a 30% year-on-year growth. This trend continued in Q2 2024, with Bengaluru witnessing a 32% year-on-year jump in average residential prices. This consistent upward trend indicates a healthy and resilient market.
• Controlled Supply: While new projects are being launched, the supply is not outpacing demand. In Q1 2024, Bengaluru captured a significant 15% share of new launches across India's top 7 cities. This controlled supply helps maintain price stability and prevents a sudden oversupply that could lead to a price correction.
• Strong Economic Fundamentals: Bengaluru has firmly established itself as an economic powerhouse with over 27,000 companies registered between 2012 and 2023. This has created a large pool of high-earning professionals who are driving demand for housing.
• Infrastructure Development: Ongoing infrastructure projects, such as the expansion of the Metro system and the construction of the Peripheral Ring Road, are further enhancing the city's attractiveness and driving property values upwards.

Myth 4: Investing in Bangalore Real Estate Requires Huge Capital

Myth Debunked: False alarm! Who says you need a king's ransom to invest in Bangalore real estate? The city offers a diverse range of properties to suit every budget. For instance, as per the Statista report, in the first half of 2024, central Bengaluru had the highest average price rate of ₹15,200 per square foot while other areas had more affordable options. 

So you can consider exploring areas like Thanisandra or the outskirts of Whitefield and Kanakapura Road, where you can find affordable housing options with good growth potential. To know more about the price per sq foot of each micromarket, consider going through ‘The State of Bangalore Real Estate’.

Don't forget: NRIs can also access home loans from Indian banks with attractive interest rates and flexible repayment options. So, even if you don't have a huge chunk of capital upfront, you can still make your investment!

Myth 5: NRIs Primarily Invest in Luxury Properties in Bangalore

Myth Debunked: Why do people think NRIs only have eyes for luxury? That’s not true! Studies indicate that the majority of NRI transactions in Bangalore fall within the price range of ₹1 crore to ₹2 crore. This suggests a preference for mid-segment properties that offer a balance of affordability and quality. 

Popular localities among NRI investors include Whitefield, Sarjapur Road, Thanisandra, and Kanakapura Road, where average property prices range between ₹9,000-12,000 per square foot.

As per the data gathered by Hindustan Times, 78% of NRI property purchases in Bangalore are for 2BHK and 3BHK apartments. Interestingly, a majority of these purchases are not first-time investments; they represent second or third additions to the property portfolios held by NRIs. 

Understanding NRI Investment Strategies

NRIs typically approach real estate investment with one of three primary strategies:

1. Buy-to-Sell in the Medium Term (< 5 years)

This strategy involves purchasing a property with the intention of selling it within a relatively short timeframe, typically less than five years. Investors aim to capitalize on the appreciating property values in Bangalore and generate quick returns. This approach often focuses on emerging localities with high growth potential, such as Thanisandra or Kanakapura Road, where property prices are expected to rise significantly in the coming years.

2. Buy-to-Hold for the Long Term (> 10 years)

This strategy involves holding onto the property for an extended period, typically more than ten years. Investors aim to benefit from long-term capital appreciation and rental income. This often favors well-established localities with a proven track record of price growth such as Whitefield or Sarjapur Road.

3. Buy for Stable Monthly Rentals

This strategy focuses on generating a steady stream of rental income from the property. Investors prioritize properties in locations with high rental demand such as areas close to IT hubs or educational institutions. This often involves purchasing ready-to-move-in apartments that can be quickly rented out.

Factors Influencing Investment Decisions

The choice of location, property type and financing strategy varies depending on the investment strategy adopted by the NRI.

• Location: For buy-to-sell investors, emerging localities with high growth potential are preferred. Buy-to-hold investors often favour well-established areas with a proven track record of price appreciation. Investors seeking rental income prioritize locations with high rental demand.
• Property Type: Buy-to-sell investors may opt for smaller units or under-construction properties that offer a higher potential for appreciation. Buy-to-hold investors may prefer larger apartments or villas that can generate higher rental income and appreciate steadily over time. Investors seeking rental income typically choose ready-to-move-in apartments that can be quickly tenanted.
• Financing Strategy: NRIs have various financing options available, including home loans from Indian banks and international lenders. The choice of financing depends on factors such as the investor's risk appetite, financial situation and investment goals.

With all this power-packed information, it’s clear that the myth of NRIs primarily investing in luxury properties in Bangalore doesn’t hold water.

Myth 6: NRIs Should Only Buy Property in Familiar Localities

That’s largely accurate: According to a report by HT 2024, NRIs prefer purchasing homes in areas they are familiar with. However, the limited availability of inventory in their preferred locations often becomes a barrier, which can become a deterrent to making a purchase.

While it’s natural to feel drawn to familiar places, limiting yourself to just one area is like vacationing every year in the same Bali villa when other stunning destinations like the Swiss Alps or Kyoto waiting to be discovered!

Bangalore is a dynamic city with diverse micro-markets, each offering unique advantages and growth potential. 

Here's why sticking to the familiar can be a disadvantage:

• Emerging localities often offer higher appreciation potential compared to established areas.
• Newer developments often boast better infrastructure, amenities, and connectivity compared to older neighbourhoods.
• Exploring different areas gives a wider range of property options to choose from, which allows you to find the perfect fit for your needs and budget. 

Insider Tip: Don't let nostalgia cloud your judgment! Do your research, explore different areas, and consider factors like connectivity, amenities, and future development plans. Who knows you might find a hidden gem that offers better value and higher returns.

NRI Investment Trends in Bangalore

In addition to residential properties, NRIs are increasingly exploring commercial real estate investments in Bangalore. This includes investments in office spaces, retail spaces, and other commercial properties. This trend is driven by the city's position as a global hub for IT and multinational corporations, which is offering high rental yields and the potential for capital appreciation.

Why Bangalore Real Estate Appeals to NRIs

Bangalore has that special something that keeps calling NRIs back. Here's why it is a favorite among NRIs:

• Stable Real Estate Market: Bangalore’s property market has shown impressive stability over the years and even a sudden boom after the COVID-19 pandemic. Whether you’re buying your first home or looking to rent out a property, Bangalore's market is known for being relatively stable compared to other cities.
• High Rental Yields: With the growing housing demand, rental properties in Bangalore are seeing attractive returns. NRIs can take advantage of the high rental yields, especially in areas close to IT hubs and educational institutions. It's a great opportunity to earn passive income while your property value steadily appreciates over time.
• Booming IT and Tech Sector: This goes without saying that Bangalore continues to attract professionals in the IT and tech industries. With countless global companies and startups setting up here, the city is experiencing consistent job growth, which is leading to a strong demand for residential and commercial spaces.
• And of course, Propsoch is also Bangalore-based! 😉 We might be a little biased but we truly believe that it’s the best place to seek real estate advice.

Potential Risks and Advice for NRI Investors

While the Bangalore property market offers attractive investment opportunities, NRIs should be aware of potential risks and challenges:

And that’s a wrap for today, lovely readers!

I hope it's pretty clear now that the Bangalore real estate market offers a plethora of opportunities for NRI investors. But it's crucial to separate the facts from the fiction. By understanding the market dynamics, legal framework, and potential challenges, NRIs can make informed investment decisions and maximize their returns.

If you’ve made it this far, congratulations! You’re now armed with a clearer understanding of the market trends and investment realities for NRIs in Bangalore. The journey of navigating myths and separating facts from fiction isn’t easy but it’s the key to making smarter, more confident homebuying decisions.

At Propsoch, we believe that informed investors make the best investors. Whether it’s uncovering hidden opportunities, analyzing market dynamics, or busting common myths, we’re here to guide you every step of the way.

Ready to move forward? Here’s how Propsoch can help:

• Explore our platform to discover how we simplify property investments with transparent, data-driven insights.
• Book a personalized advisory call with our team to discuss your specific goals and questions.
• Access our (Peace of Mind) POM report to get over 80 data points on properties that interest you—helping you avoid red flags and make intelligent choices.

Until next time, stay curious and keep exploring. 😊

Bangalore Real Estate Myths for NRIs: FAQs