NRIs and Luxury Real Estate: Weighing the Costs and Returns

Should Non-Resident Indians (NRIs) invest in luxury real estate worth over ₹20 crore? While such assets can offer strong returns, the real picture goes beyond headline gains. Hidden and recurring costs, such as high maintenance charges, sinking fund contributions, property taxes, insurance, and periodic refurbishments, can significantly impact net returns, especially in premium developments.

For NRIs, a more prudent strategy is to adopt a long-term investment horizon, focus on high-quality assets in prime markets, stagger investments rather than committing large sums at once, and balance returns through a mix of rental income and capital appreciation. While currency cycles can be volatile, strong real estate fundamentals can help cushion these fluctuations over time, say financial experts.

Take the case of Rahul Chaturvedi, a London-based NRI, who invested ₹22 crore in a luxury Mumbai apartment, combining lifestyle goals with long-term investment intent. Including duties, his total outlay reaches around ₹23.8 crore. Over five years, steady appreciation of around 5% and some rental income supported overall returns, though maintenance costs and currency movement moderate gains in dollar terms. While the investment may not have outperformed diversified global assets, it delivered value through asset appreciation, portfolio diversification, and personal utility, highlighting the balanced role of emotion and strategy in such decisions.

An emotional purchase is ordinarily characterized by prestige-driven considerations, prime addresses, architectural indulgence, or familial association, often accompanied by sub-optimal yields and an absence of exit strategy, says Tushar Kumar, Advocate, Supreme Court of India. In contrast, a financially sound investment must withstand objective evaluation, supported by rental yield, comparable market data, identifiable demand drivers, and a clear path to liquidity.

The key question is whether the investment case stands independently of personal use. If the rationale is driven by family requirements, legacy positioning, or convenience, it is more accurately classified as consumption. A financial investment, by contrast, must be supported by a clear return thesis, defined holding period, and credible exit strategy, says Madhura Samant, Partner, Elarra Law Offices.

The erosion of returns is further worsened by a range of hidden and recurring costs that are often underestimated at the time of purchase. Stamp duty, registration, brokerage, and related charges create a significant upfront drag on capital. Ongoing costs, such as maintenance, vacancy periods, property management (especially for absentee owners), and periodic repairs, further reduce the overall net yield.

Upon exit, capital gains taxation and illiquidity discounts often further diminish realized returns. It is, therefore, not uncommon for such assets to require substantial appreciation merely to preserve real value, says Kumar. Luxury real estate in India is increasingly competitive with global investment options, especially when adjusted for currency movement and taxes. For NRIs, a stronger dollar or dirham against the rupee enhances purchasing power, while India’s lower entry costs and stronger appreciation potential in cities like Mumbai, Delhi-NCR, and Bengaluru improve overall returns.

Although taxes such as stamp duty and capital gains apply, many mature global markets offer lower yields and limited upside. Over the medium to long term, Indian luxury housing remains an attractive wealth creation and diversification asset class for NRIs, says Pratyush Pandey, Founder, AARE Consulting, a real estate consultancy.

Understanding currency risks is crucial. An NRI investing a dollar-linked corpus into a rupee-denominated property is effectively taking an unhedged long position on the Indian currency. Historical trends demonstrate a consistent depreciation bias in the rupee against major reserve currencies; consequently, even appreciable nominal gains in rupee terms may translate into modest or negligible returns in foreign currency terms, says Kumar. Unlike stocks or other tradable assets, real estate doesn't allow investors to adjust or hedge their positions easily, making the investment fixed and more exposed to risk.

Currency exposure is central to the investment outcome. With the rupee depreciating at an average of 2% to 3% annually against the dollar, the asset must appreciate at a rate exceeding this threshold to preserve value in dollar terms, says Samant. Any underperformance relative to this benchmark results in real capital erosion when repatriated. The return comparison becomes meaningful only after adjusting for currency and tax. A 4% to 5% annual appreciation in rupees can reduce to ~1% to 2% in dollar terms after factoring in 2% to 3% currency depreciation, before taxes. In contrast, diversified global portfolios compounding at 7% to 9% in dollars present a materially stronger risk-adjusted return profile, says Samant.

So, for NRIs investing in Indian property, returns depend not only on price appreciation but also on currency movement. If the rupee depreciates against their home currency, gains in rupee terms translate into lower value when converted back, reducing overall foreign currency returns. An NRI living in the US bought a property in India in September 2022 for ₹20 crore. Property prices in India grew about 5% each year, so by April 2026 the property is worth around ₹23.7 crore. That looks like a nice gain locally. But when the purchase was made, one dollar was ₹83; now it is ₹93. Because of this weaker rupee, the property’s value in dollar terms has hardly increased. So while the NRI sees a clear rise in India, the return looks much smaller when converted to dollars. Currency changes have eaten into the gain.

The best approach for an NRI is to invest with a long-term horizon, focus on high-quality assets in prime markets, stagger investments instead of deploying all at once, and balance returns through rental income plus capital appreciation. Currency cycles fluctuate, but strong underlying real estate fundamentals can help offset volatility over time, says Pandey.

While luxury real estate can deliver strong returns for NRIs, hidden and ongoing costs can materially impact net gains. High maintenance charges, sinking fund contributions, property taxes, insurance, and periodic refurbishment expenses often rise with premium assets. Vacancy periods or delayed rentals can reduce yield, while transaction costs and capital gains taxes at exit also need to be factored in. Investors should evaluate total holding costs, not just headline appreciation, to assess real returns, says Pandey.

From a portfolio perspective, such a purchase often does little to improve diversification for NRIs and can increase concentration and liquidity risk. A single high-value residential asset introduces concentration risk. It represents exposure to a specific geography, regulatory framework, and market cycle, while also being inherently illiquid and indivisible. From a portfolio construction perspective, it limits flexibility and does not provide the diversification benefits associated with a broader allocation across asset classes and jurisdictions, says Samant.