Closely linked to the NRI Rupee Dilemma (that I had written about previously) is the NRI Property Dilemma.
Every time there is a major drop in the value of the rupee, the media is full of the same stories. Non Resident Indians (NRIs) are falling over each other in a rush to buy property in India.
For you as an NRI professional, the best thing to do is to ignore all these reports. You should make a decision that seems right for you and is aligned with your financial plan.
In this article we will cover a specific type of India property dilemma that NRIs face.
If you are considering to buy a house in India because you plan to live in it (when you return to India for good) then continue reading on.
NRI House Purchase Decision – It is Emotional
A decision about buying a house in India is different from any other type of investment that you may consider as an NRI.
And that difference boils down to one thing – Emotions.
When you are considering buying a house in India the calculations are no longer about how they look on an excel worksheet.
Your mental calculations when making that decision also include how that house will make you feel when you live in it.
Combine this with the feeling you have about India as your home country, your family and friends – All of these can lead to your emotions playing a very large part in your house purchase decision.
It is this “feeling” about the future that could lead you to make a decision that you may later regret.
Why You Should NOT Buy a House in India as an NRI
When almost everyone keeps advising you to buy a house in India, it can be a little strange to read a post telling you not to buy a house in India as an NRI.
Here is why:
Your Priorities Will Change
Answer this simple question – What are the things you should consider about the neighbourhood when you plan buy a house?
It might be the proximity to a school, grocery store or a good park. You might base your house purchase decision on those (or some other) factors today.
Now think back to the time when you were 5-10 years younger. Would you have picked the same things back then?
For example, if you were still single it is unlikely that a school in the neighbourhood would have had any place in your consideration.
Our professional and personal priorities change with the passage of time.
Some factors that are not so important today become more valuable as time passes by. Similarly some other factors go down in their importance with time. If your kids will be in college by the time you relocate back to India, there is no value of having a school in the neighbourhood.
So overall you will be much better off buying a house that is fully aligned with your life priorities at the time you decide to live in it.
Although you can make a reasonable guess about what will be important to you in 5-10 years (or whenever you are planning to return back to India) but those are just your estimates.
It is impossible to predict specific things that will happen in your life that could alter those priorities. Buying the house when you are actually ready to live in it will help you pick something that is better suited to meet your specific needs.
Reverse Culture Shock
Remember the first time you moved to a new country to live and work in? There is a high chance you experienced what is called a culture shock.
Culture shock comes from exposure to a new language, food or other social aspects which are very different from what you experienced growing up in India.
It can take some time getting used to this culture shock.
A less discussed aspect of this social phenomenon is the “Reverse Culture Shock” – The shock that you will get when you return back to India to settle down for good.
The longer that you have stayed out of India, the stronger will be the impact of this reverse culture shock.
India is changing so rapidly (economically and socially) that you will almost feel like a foreigner in your own country. The picture you may have of India (and your home town) will be of what it was when you left India.
However, the India you return to will be very different. You may have experienced some of this change on your holiday trips back home from time to time, but the real impact will hit you when you start living in India for good.
Make a decision about buying a house after living in the “new” India for some time. This will ensure your property choice is better aligned with the contemporary trends in the country.
Fear of Missing Out
The favourite selling point of all property developers is the fear of missing out.
All of us experience this fear – that the best house location will no longer be available or the current prices will no longer hold.
Now let us be clear on one thing – Any house that you are looking at buying is not the last house that will ever be built in India.
There will always be locations better than what you have now and with facilities better than what are on offer today. So remove this fear of missing out from your mind when making the house purchase decision.
Yes – A house that you buy 5-10 years from now will likely be more expensive than it is today. But there are other ways to prepare for that scenario and be ready for it financially.
We look at that in the next section.
How to Handle the NRI House Purchase Dilemma
If you try to look up information on the internet on this topic, you will notice that most of the advice comes from either property developers or housing finance companies.
As you can guess they don’t benefit if you decide NOT to buy a house so it is in their interest to convince you to buy a house as an NRI.
As an NRI professional, you could benefit from doing things differently rather than following the herd when it comes to making a house purchase in India.
These are the things you can consider to do instead:
Invest Your Down Payment
If you decided to buy a house in India today you would need to make a down payment of a certain amount. This is the sum of money you should instead put in an investment account.
By doing so your down payment investment account too will keep growing in line with (or even faster than) the property price growth in India.
As a result when you finally buy the house in India 5-10 years from now, you would be no worse off in terms of your financial wellness.
This will also tackle your fear of missing out on a property purchase today.
Live on Rent for 1-2 Years When You Return to India
Buying a house is a long term commitment. You should give yourself sufficient time to make that decision.
Don’t rush and buy a house just before (or as soon as) you return to India. Once you return to India take a house on rent for 1-2 years in the city and locality that you eventually plan to buy a house in.
These 1-2 years of actually living there will give you first-hand experience of what it is to live in the “new” India. These will also be the crucial years that you need to get over the reverse culture shock that we talked about earlier.
Once you have done that you will be all set to buy your dream house. Conclusion
Due to social and historical norms, a lot of Indian professionals have a much stronger affinity to real estate. This mind-set continues even when you move out of India and turn into an NRI professional.
India has changed and so have the available investment options to grow your money.
Your future need for a house in India does not mean that a purchase has to be made while you are still an NRI. This NRI property dilemma can be resolved by preparing yourself financially and mentally for the future without making a house purchase.
By doing so you will be much better prepared to make a smarter money decision about buying a house in India.
The house that you plan to live in.
Dushyant Choudhary is the founder of dushyantnomics, an early retirement blog for professionals. Dushyant retired early from his 9-5 corporate life after a successful international career. He brings his knowledge and experience to his current role where he’s dedicated to helping professionals achieve a fulfilling retirement.