Dubai: The Indian real estate market, which is expected to reach $90 billion (Dh330.3 billion) by 2015, is undergoing a shift. The fall of the rupee is encouraging more investment by Gulf-based non-resident Indians (NRIs) into the realty market which offers relatively higher returns.
"The constant depreciation of the Indian rupee in the past six months is perceived as an exciting opportunity for NRIs to invest in real estate. This can be translated as real estate becoming cheaper and competitive," said Surendra Hiranandani, Managing Director of House of Hiranandani, a leading Indian developer.
House of Hiranandani, previously known as Hiranandani Upscale, was founded as Real Estate Company in 1978 and with time has forayed into education, health care, hospitality, and leisure/entertainment.
The company is based in Mumbai and has a nationwide presence. Surendra Hiranandani, Managing Director, spoke to Gulf News on the latest developments in the Indian property market. Excerpts:
Gulf News: Could you share your thoughts on India's real estate market — especially with the value of the rupee nosediving to new lows — do you see increased investments from the NRIs?
Surendra Hiranandani: Uncertainties in Western economies have rattled the confidence of many who have been staying overseas. The impact of the global meltdown and corresponding effect on the Indian economy has created luring opportunities for the NRIs. The constant depreciation of the Indian rupee in the last six months is perceived as an exciting opportunity for NRIs to invest in real estate. This can be translated as real estate becoming cheaper and competitive.
Yields from NRI investments in commercial as well as residential will improve with rupee appreciation.
How is the demand/supply curve shaping up in the Indian property market?
Growth in the Indian economy has changed the face of real estate in India. The greater impact of growth has been the demographic shift characterised by rising disposable income and exposure to a global environment.
India is strongly developing in the economic front. Regulatory hurdles, scarcity of land, high interest rates and several other factors mean that a demand-supply mismatch will continue to exist in the market as a whole.
How do you see investment in Indian property vis a vis stocks, bonds, mutual funds and other investment instruments — from an NRI perspective?
Investment in real estate has far more advantages than other investment instruments. Returns are assured, far more superior and less volatile. A house is also a basic need for an individual. Thus in a populated country like India, investments in real estate will always be preferred.
What is the percentage of HOH clientele that hails from UAE?
Approximately seven per cent of HOH's clientele hails from the UAE.
Is there any increase in numbers each year after participating in this show?
We have been consistently participating in Sumansa exhibitions for the past four years. Sumansa is doing a fantastic job of promoting Indian real estate to the right audience and at the right time. It's a great platform to meet prospective and existing customers and associates and maximise sales. Overall we have seen around eight per cent growth in our clientele since participating in this exhibition.
What has been the demand like for your projects generally from NRI audience?
NRIs have always believed in ‘quality' and ‘assurity' and we are pleased that we have always been their preferred brand for meeting their needs.
The future is very bright and India is one of the few countries in the world which have enormous potential in the real estate sector. Demand for our products has been consistent, rather has increased in recent times due to the fall of the rupee.
Is HOH planning any projects in the UAE or Dubai?
What is the estimated total worth of the Indian realty sector and worth of the segment that is NRI driven?
It was $12 billion in 2005 and will rise to $90 billion by 2015. We can only comment on the percentage of sales we make to NRIs. This figure is around 25 per cent. We feel the interest of the NRI investor market will continue to remain with known developers in Tier I cities.
NRIs purchasing units in Tier II and Tier III cities will be rare and would most likely be doing so for other reasons than investment purposes.
What is the total property investment inflow into the Indian realty sector from the Gulf in general and UAE in particular?
No data is available with us. India and the Gulf, particularly the UAE, have had very close ties for several years. While it would be easier for a client from say Dubai to make an investment into India than a client sitting in the US, our data still show that is the second highest contributor to NRI sales, the highest being US.
Which states attract the greatest investment inflow? Please give a percentile break-up.
India, as a country in its whole is one of the most preferred destinations in terms of real estate investments. Especially Tier 1 and tier II cities with Mumbai in the lead followed by Bengaluru and Chennai.
What kind of projects attract the greatest inflow?
Projects located in identified growth corridors attract the maximum attention from NRI clients as the price appreciation is expected to be greatest here. Commercial projects in some cities are starting to attract interest because yields are better than residential projects.
What are the NRI preferences when they purchase a home in India? What factors influence this decision?
NRIs seek projects that offer global lifestyle, modern features and convenient living. They prefer well established brands.
What rental yields can NRIs expect on their properties?
Commercial yields are expected to be 32 per cent, assuming rupee goes to 46 to the dollar after five years.
Are NRIs from UAE investing in commercial properties?
Yes. In fact maximum sales for our commercial project at Electronic City, Bengaluru, are from Dubai. Looking from a long-term point of view, people want to come back home and set up their own business. Investing in commercial spaces is still considered a good option.
What commercial projects are attracting greater fund inflows?
Following points attracts greater fund inflows:
1. It should be a landmark destination which gives freedom to own an office;
2. A location which gives the freedom to be part of a lively business hub;
3. Excellent infrastructure and advantageous business proposition.
Which states are benefiting from this trend?
Cities like Bengaluru and Mumbai are benefiting the most from this trend,
Has the Indian realty sector benefited from a shift of liquidity from the UAE market to India? If so by what percentage.
We haven't observed any large impact shift in liquidity, it would have ideally taken place in the 2000 era. But the investment environment in India was not welcoming at that point either. People were not choosing between real estate in UAE and real estate in India.
Could you shed some light on new trends that have come up in the last 12 months with regards to NRI property investment?
NRIs are now seeking ‘exclusivity'. They have a global exposure and lifestyle.
Thus, they are much more aware about latest trends, technologies and designs.
They do not want to compromise on quality. Thus, they hunt for a similar kind of ‘quality' offering back home that matches their requirements and caters to their needs.