– By Ramesh Ranganathan
The Indian real estate sector has seen remarkable growth in recent years, and Non-Resident Indians (NRIs) have played an instrumental role in this expansion. Rising demand for the luxury home sector, rent inflation, and the depreciation of the rupee are some of the most prominent factors fuelling the demand for Indian real estate. According to a report by the National Real Estate Development Council (NAREDCO) and KPMG India, the Indian real estate industry is showing strong signs of growth, even as the global real estate industry continues to recover from a period of stagnation. The report states that the market size of the Indian real estate industry in FY21 was indexed at $200 billion and is expected to reach $1 trillion by FY25. This growth is expected to contribute to 13 per cent of the country’s GDP.
The preference of NRIs and other High-Net-Worth Individuals (HNIs) to invest in luxury real estate in India has been a growing trend for many years. Various reasons influence their investment decisions, including the urge to come back ‘home,’ a lifestyle that adapts comfortably to the global best, evolving demographics, improving property standards, and offerings from reputed Indian developers. Another significant growth driver is the potential for high ROI that luxury homes offer, along with the prospect of generating substantial rental income. NRI’s increasingly allocating their resources to acquire larger properties in their country of origin, buoyed by government support and enhanced purchasing capacity. The housing segment witnessed significant NRI investments in 2022, particularly in high-value properties, given the declining value of the country’s currency against the US dollar. Apart from these, according to a recent report by ANAROCK, there has been a 33 per cent increase in NRI investment in Indian real estate in 2021 as compared to 2020, backed by supportive policies from the government.
NRIs penetration in the luxury residential sector
Indians believe in the creation of generational wealth, and no matter where we settle, we all aspire to own a piece of land or property in our ‘home country’. With the advancement of technology, people today are living as global citizens and frequently travel between countries for business and other reasons. The growing demand for transit or vacation homes among such people drives the demand for luxury homes in India.
Matching global standards
The adaptability and constant evolution of Indian developers have led to the growth of the Indian luxury real estate market. They haven’t resisted change and have embraced the global buyer expectation, upping the luxury elements in offerings. Buyers looking to invest in ultra-luxury properties are drawn toward automated houses that offer security, wellness, and comfort, without compromising on elegance. The global standards of the Indian luxury realty market have impressed NRI buyers, thus improving demand.
Second homes or vacation homes
There is an increasing preference among NRIs for second homes, which are now viewed as investment opportunities that can provide a steady income stream. In the past, vacation homes were considered an aspirational purchase. However, in recent years, we have seen a shift towards second homes being viewed as a separate asset class. Post the pandemic, people also prefer staying closer to their families, and therefore most NRIs look forward to owning a home closer to their parents or grandparents and staying connected. As per a survey conducted by property consultant ANAROCK, 55 per cent of NRI investors prefer to buy property in their home state, followed by 18 per cent in their current city of residence in India. This indicates a growing trend of NRIs looking for properties closer to their families.
The introduction of new government reforms like the RERA Act (Real Estate Regulatory Authority) has infused confidence in NRIs (Non-Resident Indians) and HNIs (High Net Worth Individuals) to invest in Indian markets. The act has made it easier for foreign investors to buy or sell properties without any hassle or fear of being cheated because all information related to a property can be found on a single portal. This increase in transparency eliminates the scope for hidden costs involved in any transaction, increasing confidence among buyers and sellers alike, and leading to better prices for properties and increased sales.
The enhanced predilection of NRIs and HNIs to invest in Indian real estate markets across asset classes of apartments, villas, penthouses, etc., has bolstered the expansion of an already growing Indian real estate industry. Better policy processes and technologies have also empowered NRI buyers to simplify the process of acquiring and transferring new properties, even if they are not physically present. India’s real estate boom, a depreciating rupee, and improved transparency levels are driving demand for homes among NRIs. These trends are expected to continue in the near future as the real estate sector is on a strong footing.
(Ramesh Ranganathan is the CEO of K Raheja Corp Homes.)
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