Why Indian real estate presents an opportunity for NRIs

October 22, 2018

Weak rupee and reforms give more purchasing power and confidence to invest in realty

A favourable exchange rate coupled with regulatory reforms present an unprecedented investment opportunity for Non-Resident Indians (NRIs) looking to buy Indian real estate. With the rupee depreciating against the dollar, NRIs have more purchasing power for investments back home.

Reforms such as the Real Estate (Regulation and Development) Act and introduction of escrow accounts have made Indian real estate more transparent and increased developers' accountability in terms of possession deadlines and quality of construction. This will inspire more NRIs to regain confidence to invest in India.

Major Indian developers will be out in full force to attract NRIs at the India Real Estate Show 2018 organised by Khaleej Times and Indiabulls Home Loans at Crowne Plaza, Dubai, on October 26 and 27, 2018.

'With the recent depreciation in the rupee's value, the attractiveness of the Indian real estate sector among the NRI community seems to have increased further with a rise in the number of enquiries. Moreover, as the festive season sets in, the developers are expected to offer a number of attractive offers and discounts on real estate purchase. This along with the increased transparency in the post-reforms era will help fuel NRI investment in the Indian real estate market,' said J.C. Sharma, vice-chairman and managing director, Sobha Limited.

According to a recent study 'Indian Brands Going Global' 2018 by KPMG in India and Google, the overall NRI investment into the Indian real estate market was estimated to be approximately $11.5 billion in 2017 and is expected to grow to approximately $25.7 billion by 2022. Approximately 20 per cent of these investments are made by NRIs in the UAE.

'NRI investors have been more conservative in recent times. The one thing we have noticed, however, is that if the product is right, they have a very high inclination to transact. With the dollar strengthening, there has been an increased interest by NRIs from across key global markets. They are spending time in seeking out the right development and the overall ownership experience,' explained Adarsh Jatia, MD, Provenance Land (Four Seasons Private Residences).

According to Prashant Bindal, chief sales officer, Lodha Group, NRIs lay maximum emphasis on the credibility and ability of the developer to deliver a superior quality product.

'In the Gulf, we have seen two kinds of consumer behaviour. One set has been away from home for a few years and intend to settle back in India. This consumer set buys homes for end use and mainly in the affordable housing segment. The other consumer set comprises people who have settled in the Gulf for many years and intend to continue being a part of this society. Their purchase decision is primarily driven by investments in Mumbai, since it is a resilient market and has given good returns in the long run. Most members in this set visit Mumbai often and prefer an owned residence in the city, typically investing in the luxury housing segment,' Bindal added.

Some of the prominent markets for NRI investment include cities such as Bengaluru, Mumbai, Delhi-NCR, Chennai, Hyderabad, Ahmedabad, Pune, Kochi and Coimbatore. It is mostly the metro cities that are currently attracting NRI investors and buyers.

'The preferred investment for people of this profile is between Rs10 million and Rs50 million for a good residential development. The apartment or villa should be in a well-connected location and with all amenities provided,' informed Viswa Prathap Desu, senior vice-president - sales and marketing, Brigade Enterprises Limited.

NRIs prefer to invest in luxury/super luxury projects across apartments, villas, row houses and plotted developments. Some NRIs are also looking at investing in affordable luxury/compact luxury housing in the range of Rs6.5 million to Rs20 million, added Sobha's Sharma.

'Their preferred investment product is always residential apartments as the ticket size is small and as an investor, it is always easy to liquidate an apartment when compared to townhouse/villas. People consider villas/townhouses mostly for end use,' said Javed Ansari, senior manager - international sales, Mantri Developers.

The concept of branded residences are commonplace in cities like Dubai, Singapore, Hong Kong, etc. 'These have now become the go-to addresses for ultra HNWIs who are NRIs,' said Jatia.

A vast majority of NRIs currently looking to invest in Indian realty are second-time buyers who know that the deals they are getting today are the best so far.

'The reasons for purchase of residential property by NRI community varies. While some may look at it predominantly for investment purpose, many buy homes in India for their family or retirement. The KPMG and Google study highlights that 82 per cent of NRIs who want to purchase property for the purpose of long-term capital gains prefer investing in their hometown as it gives them a sense of security,' concluded Sharma.