India: Overview

RENTAL YIELDS

India yields still very poor at 3.9%

Gross rental returns on apartments in South Mumbai have not improved, sitting at 3.9%, with a regular 120-sq. m unit generating a yield of 4.02%. Average apartment price increased to US$12,821 per sq. m, at almost US$4M for a 250-sq. m unit.

New Delhi and Bangalore apartments are much cheaper at US$3,865 and US$934 per sq. m, respectively. Yields, however, are slightly higher above 4%.

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TAXES AND COSTS

Rental income tax is low to high in India

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	8.1%	19.3%	21.1%
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Source: Disclaimer

Rental Income: Non-residents earning rental income are taxed at progressive rates of 10%, 20% and 30% with net rental income tax ranging from 8% to 21%.

Capital Gains: It is important to note that there are significant differences in taxing Non-Resident Indians (NRI’s) and nationals. Capital gains tax, for example, which is at 20.4% is waived for nationals if the money is reinvested in another residential property within two years. NRIs are only given six months to reinvest the money.

Inheritance: No inheritance or gift tax is levied in India.

Residents: Residents of India are subject to tax on their worldwide income.

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BUYING GUIDE

Buying costs in India range from low to high

Total roundtrip transaction costs, i.e., the cost of buying and selling a property, are between 7.5% and 17%, inclusive of the agent’s fee of 1.1% to 2.1% (inc VAT). Stamp duties and registration fees vary according to city and locality.

The total cost of property registration is around 7.9% of the property value. The six procedures required can be completed in roughly 67 days.

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LANDLORD AND TENANT

Pro-tenant laws in India often inhibit rental market

Indian law is pro-tenant.

Rent Control: For Delhi, the maximum annual rent is 10% of the cost of construction and the market price of the land. But both construction cost and land price are based on historical values, not on the property's current market value.

Tenant Security: It is difficult for a landlord to protect his property from unwanted overstaying tenants. Though contracts may be enforceable in the courts, the enforcement process is likely to take years, or even decades.

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ECONOMIC GROWTH

An emerging economic powerhouse

India is the world's second most populous country, with 1.1 billion people. Occupying more than three quarters of the land mass of South Asia, it is an emerging economic superpower. India’s economy is the 4th largest in the world at purchasing parity terms and 12th largest at market exchange rate.

India’s rapid economic growth started after the government gradually opened the economy in the early 1990s. The government instituted economic reforms and reduced control over foreign trade and investment.

The Indian economy, one of the fastest growing in the world, expanded by an average of 5.8% annually from 1993 to 2002. GDP growth accelerated to more than 7% in 2003 and 2004, and to 9.2% in 2005 and 2006. The economy grew by 8.5% in 2007, and is expected to expand by 8% in 2008.

From 1991 to 2006, real income per person rose by around 90% in local currency terms. However, India’s GDP per capita is still very low in international terms, at US$840 in 2006.