With the rupee‘s value against dollar constantly depreciating, NRIs (non-resident Indians) have found another reason to invest in India’s real estate.
At the same time, game-changing policies like RERA (Real Estate (Regulation and Development) Act) and GST (Goods and Service Tax) have streamlined the property-buying process and boosted their confidence in Indian realty. With RERA in place in many states, NRIs can now feel fairly secure about their investment.
Moreover, due to market forces and tepid sales, pricing of residential real estate has remained fairly stagnant, thus making it even more attractive for NRIs to take the plunge.
These factors combined have made investment in Indian real estate an attractive proposition. According to a World Bank report, India received $82.2 billion in remittances so far this year, with a sizeable portion channelled into real estate.
Choice investment spots
The liberalised foreign investment policy with regard to expatriate participation in the economy has made metros hot destinations for NRI funds. They have traditionally preferred high-end properties that match their lifestyles and which can generate sizeable rental income. In recent times, their focus has shifted to affordable and mid-segment housing for higher rental yield and better long-term appreciation.
However, NRI end-users with higher purchasing power still have a penchant for luxury housing as long as the pricing is right.
India’s commercial office property has also emerged as a profitable alternative for NRI investors looking at maximising returns and generating fixed income while maintaining a low-risk investment profile. There has been consistent demand from NRI investors for Grade A offices, IT parks, logistics centres - and now REITs (real estate investment trusts) as well.
A good commercial property can fetch an average rental yield of 6-10 per cent while the current rental yield from residential property is a mere 1.5-3.5 per cent. It’s also convenient for NRIs to invest in commercial real estate as they can lease their property for long tenures, and their maintenance remains the responsibility of the tenants or professional property management companies.
Top city preferences
The allure of commercial property and its returns notwithstanding, residential is an asset class still close to the hearts of most NRIs. End-users obviously prefer their city of origin, regardless of whether it has optimal investment potential. On the other hand, investors are choosing cities and micro markets best-suited for high RoI (return on investment).
Bengaluru has been the most popular home buying destination with NRIs. In fact, Bengaluru has been voted as the top home buying destination by 31 per cent of NRI respondents in our consumer sentiment survey. Other top cities such as Hyderabad, Pune, Mumbai and Delhi-NCR also remain popular choices. At the same time, Tier 2 and 3 cities have also caught the fancy.
The cities with vibrant demand for office real estate, malls and co-working spaces are Bengaluru, Mumbai, Chennai, Pune, Hyderabad and Delhi-NCR. Commercial properties in the IT hubs of Whitefield, Electronic City and Sarjapur Road have also attracted sizeable NRI investment due to high projected rental yield – of between 8-10 per cent.
In Delhi-NCR, Gurugram has become a major destination for NRIs investing in commercial real estate. Its close proximity to Delhi makes it ideal for such investments, and Gurugram has many commercial spaces which are seeing good absorption.
Even as demand from domestic buyers remains tepid, developers are coming up with offers for NRI buyers. They have been offering substantial freebies and even discounts, apart from interesting payment plans, to draw NRIs to their projects.
Developers are also leveraging technology and using concepts like Augmented Reality and Artificial Intelligence to reach out to NRI investors. These digital tools are helping NRIs in their search for property and also in the process of booking and purchasing. Mindful of the importance of fostering more positive sentiments among NRIs, the government has also eased norms to facilitate a less cumbersome property buying process for them.
Shajai Jacob is CEO – Middle East at Anarock Property Consultants.