Why This NRI Couple Regrets Their Indian Real Estate Investment: A Cautionary Tale on Currency Risks

In recent years, the allure of investing in real estate back home has drawn many Non-Resident Indians (NRIs) to purchase property in India. The blend of emotional ties, financial security, and cultural roots all create a compelling case. However, as one couple’s experience with a Hyderabad flat reveals, reality may not always align with expectations. Their journey illustrates how investments can sometimes leave families grappling with unforeseen challenges, despite their initial promise of profitability.

A Seemingly Profitable Exit on Paper

It all began in 2010 when an NRI couple bought a three-bedroom apartment in the bustling Nanakramguda area of Hyderabad for Rs 64 lakh. The couple believed this would be a lucrative investment as they put their money into a growing city while anticipating future appreciation and rental income. Fast forward to 2024: after nine long years of staggered EMIs and an additional Rs 5 lakh spent on woodwork and repairs, they finally sold their apartment for Rs 90 lakh.

On paper, it seemed like a win. After accounting for realtor fees and capital gains tax, they pocketed Rs 84.9 lakh, marking a profit of about Rs 21 lakh. When adding the Rs 7.2 lakh net rental income attained from 2019 to 2024, their total gain stood at around Rs 28.9 lakh in INR. However, the situation takes a drastic turn when we bring in the perspective of currency conversion and investment opportunity costs.

The Dollar Math Tells a Different Story

When the couple converted their profits into U.S. dollars, the scenario quickly soured. Due to the depreciation of the Indian rupee—plummeting from approximately Rs 45 per USD in 2010 to around Rs 85 per USD in 2024—their returns looked disappointingly modest. The initial investment of Rs 64.34 lakh was about $111,740 at the time of purchase. By the time they sold the property, their entire financial journey—including rental income and sale proceeds—culminated in only around $120,000. This translated to a meager actual profit of roughly $8,500, equating to a mere 0.5% annualized return in USD.

If they had chosen to invest the same amount steadily in an S&P 500 index fund, they might have seen returns surpassing $330,000! Instead, they faced an opportunity cost that amounted to over $210,000 (approximately Rs 1.8 crore). The regret didn’t just stem from lost potential finance; it also included the time spent managing the flat—dealing with tenants, pursuing delayed rents, handling repairs, and managing complex tax issues from overseas.

Low Rental Yield and Liquidity Challenges

Examining the rental yield, the couple earned around Rs 12 lakh over five years, but post-taxes and maintenance fees, their net rental income dropped to Rs 7.2 lakh. With this in mind, the property yielded a meager gross rental yield of approximately 2.25%. Financial experts typically suggest targeting net yields of about 3.5% to 5% for real estate investments in India to justify their costs.

Additionally, the anticipated appreciation of property values did not materialize as expected. Despite being situated in a promising “IT corridor,” Nanakramguda failed to develop into the next Hitech City, thus dampening any prospects of significant capital gains. Furthermore, the couple encountered liquidity challenges, taking longer than anticipated to sell their property, revealing just how challenging offloading Indian real estate can be when immediate cash needs arise.

Key Takeaways from a Costly Lesson

Upon reflecting on their experience, the couple gleaned several key lessons that any prospective NRI investor should consider:

• Currency risk can dramatically affect NRI returns. A seemingly good profit in INR may yield disappointing returns when adjusted to USD.
• Opportunity costs are often overlooked. Engaging in U.S. index funds can outperform Indian real estate in the long run.
• Liquidity and rental yield are essential considerations, often more vital than speculative gains.
• Investing based on hype rather than solid fundamentals can lead to disappointing returns.
• Always run detailed USD-adjusted calculations before committing to property investments in India.

Gurgaon Manager’s Warning

This cautionary tale isn’t isolated. A manager from Gurgaon recently echoed similar sentiments regarding a 3BHK apartment purchased for Rs 70 lakh in a Tier II city in 2022, which was sold two years later for just Rs 75 lakh. After taxes and transaction costs, the net gain was negligible. Interestingly, a fixed deposit in a bank would have provided better returns without the burden of property management and market unpredictability.

The Hyderabad flat story is one of many emerging from both NRIs and domestic investors. These narratives consistently underscore a common theme: while Indian real estate holds emotional appeal and has been perceived as a “safe” investment, it does not always deliver robust returns—particularly when factoring in currency fluctuations, tax implications, and the costs associated with missed alternative investments.

As the NRI investor aptly concluded: it’s not about being anti-property; it’s fundamentally about being pro-math.