When it comes to investment, non-resident Indians (NRIs) can pick and choose from a variety of asset classes. The equity markets draw considerable interest as they have performed consistently with a Compounded annual growth rate (CAGR) of 12-15 per cent over the last five years.
Real estate investments in Delhi, Mumbai, and Bengaluru have seen CAGR growth of 2-3 per cent over the same period.
While equities may score higher than real estate in terms of capital appreciation, they do not share some of the additional benefits of real estate. For instance, a residential property also comes with the additional benefit of rental yield.
Moreover, real estate investment carries a relatively lower risk and comes with considerable tax benefits — not only for resident Indians, but NRIs as well.
Always attuned to this high-potential clientele, developers extend attractive offers to NRI buyers and also leverage technology to reach their expatriate audience. Concepts like augmented reality (AR) and virtual reality (VR) help them to reach out to NRI investors across the globe.
Simultaneously, the implementation of Goods and Services Tax (GST) and Real Estate Regulation and Development Act have given the Indian residential property industry an aura of transparency and accountability, which has further strengthened NRI investor interest.
Compared to the opacity of the market five years ago, the Indian real estate market now exudes far more trustworthiness.
Previously, NRIs traditionally invested in high-end luxury properties back home. For end-users, such properties offered them the international lifestyle they are accustomed to. For investors, luxury properties generated sizeable rental income.
While the end-user demand for Indian luxury properties continues, albeit on a more muted note, many NRI investors have now turned their focus to affordable and mid-segment housing. This is because the Indian government has provided considerable incentives to buyers of such housing. And also because such properties are in higher demand and therefore give a higher rental yield as well as better long-term appreciation.
Having burnt their fingers on dubious developers in previous years, NRIs now prefer to park their investment with reliable, organised builders who register their projects under RERA and generally known for transparent business practices.
NRIs generally prefer investing in properties in their home state or city, largely because they are more familiar with those territories and invariably have family or friends who can handle the management and renting aspects. However, more experienced investors with sufficient knowledge about other cities — or those working with reputed real estate consultancies — do foray into other cities as well.
Riding on a wave of economic reforms, improving transparency and better governance, foreign investments in Indian real estate are set to scale new heights. With laws now allowing 100 per cent foreign direct investment in construction development and REITs (real estate investment trusts) now in place for commercial property, the industry will see increasing investment infusions from NRIs.
According to a World Bank report, India received $79 billion (Dh290 billion) in remittances in 2018 — with a sizeable portion going into real estate. NRI investments into Indian real estate are led by Indian expatriates from the UAE, the US, UK, and Canada. In terms of Indian cities, Bengaluru, Mumbai, Pune, Hyderabad, Chennai and Delhi-NCR currently attract the lion’s share of NRI investments.
Several factors have made these cities top picks:
■ Their growing economic environment giving rise to fresh employment opportunities;
■ Ease of doing business;
■ Improving infrastructure upping their liveability quotient; and
■ Improving air connectivity with world cities as well as better intra-city connectivity via escalated highway construction.
The various policy initiatives now herald a sustainable revival for the industry, and NRI investors are once again turning their attention to the asset class that has always been closest to the heart of every Indian, regardless of where they live and work — real estate.
(Shajai Jacob is CEO — GCC at Anarock Property Consultants.)