Why buying property in Trivandrum is profitable for NRIs?

Does it make sense for NRIs to purchase property in Trivandrum? 

Let's assume that some one is working in the United States and earning USD 7,000 per month. Let's assume that he can save about USD 2,000 per month and he wants to invest this money safely but not in the stock markets which tend to be volatile. Since the interest rates in the US being low a good idea is to invest in a secured asset in India.

The two basic options available for an NRI are either to go in for an under-construction property or for a built-up property.In case of a under-construction property, it is advisable to go in for an upcoming area, where there is higher potential for price appreciation. In case of a built-up or a ready to occupy property, one should look for a developed area, as the individual can start getting immediate rental income. 

A typical 2 bedroom apartment in Trivandrum costs about 45 Lacs and a 3 bedroom costs about Rs.60 Lacs. Lets assume that the individual has about Rs 30 lakhs in his NRE account in India. If the property is ready to occupy then once needs to arrange the balance Rs 30 lakhs for a 3BHK, plus another Rs 10 lakhs for registration, wardrobes, electrical fittings and any other necessary fixtures.

The Reserve Bank of India (RBI) regulations permit paying off the Rs.30 Lacs from the NRE account. For the balance Rs. 30 Lakhs the individual can apply for a home loan with any banks.

The bank verification would include  the current job profile, past experience, period for which he will continue to be abroad for the loan tenure, chances of servicing the loan in case of return to India, local income etc. The margin money required is usually 20% so in this case it would be Rs. 6 lacs for the home loan.

Property documents for a home loan include:

Original title deeds tracing the title of the property

Encumbrance certificate Agreement of sale or construction

Approved plan 

Once the property is purchased, a power of attorney can be given by the individual to his or her parents or spouse or another relative to deal with the property. Repayment of the home loan for a NRI is permissible through specific sources, such as remittances from abroad through banks, from any deposit accounts maintained in India or through a specified close relative. Tax deduction benefits on home loan repayments cannot be availed unless the returns are filed in India.

ROI Calculation:

Typical Interest paid per annum on a loan of Rs.30 Lacs - Rs.30,000 per month i.e. Rs. 3,60,000 per annum

Rental income (assume) - Rs. 12,000 per month i.e Rs. 2,40,000 per annum

Less : Property Tax plus annual maintenance - Rs. 30,000 per anum

Net: Rs. 2, 10,000 per annum

Housing deduction: Rs. 3,60,000 per annum

Net outflow : Rs. 1,50,000 per annum i.e. about Rs. 12,500 per month.

So, considering the rental income the EMIs are self-financed to a great extent.The actual cost for the property over a period of 20 years is about Rs. 30 Lacs. 

At an annual appreciation of about 20% CAGR, the value of the property would be over Rs. 1.5 crore  after 20 years and the net gain for the investor would be about Rs. 1 crore and 20 lacs.