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Will there be rise in NRI investment in luxury real estate due to rupee depreciation?

Non Residential Indians, or NRIs stand to gain quite a lot in this economic situation. NRIs earning in US Dollars or Euros or any other strong currency have now the highest Rupee equivalent amount in their pockets.

Will there be rise in NRI investment in luxury real estate due to rupee depreciation?
Real estate still remains one of the most lucrative asset classes in India. Image: Reuters

– By Harrish Kumar Jain

Despite the many ups and downs that have followed financial markets since the Covid-19 pandemic, real estate has stood against the tide in providing stability and a great alternate store of value. Real estate still remains one of the most lucrative asset classes in India offering great diversity and a reliable growth rate year on year. The leading indicator for the health of the real estate economy, the single family home creation and its purchase, have shown healthy upticks as life moves slowly back towards pre-Covid-19 normalcy and status quo. 

Dollars & Euros – The NRI advantage 

The other significant trend that arose out of the total chaos that was the past 2 years is a steady decline in the strength of the Rupee against the US dollar. While market turbulence and Rupee depreciation are easily verifiable quantitative facts, the reasons for these phenomena are much more nuanced and better left to the economists to decipher. The fact is that the Rupee has been on a steady downward path and this could spell trouble for businesses and industries that rely heavily on imports for their functioning. However, this does not mean that there isn’t a silver lining here (at least for some), falling value of the rupee means that those who wish to buy Indian assets can do so at the most discounted rate in recent years. Non Residential Indians, or NRIs stand to gain quite a lot in this economic situation. NRIs earning in US Dollars or Euros or any other strong currency have now the highest Rupee equivalent amount in their pockets. Adding to that, the various policy augmentations and schemes that the Central and many State governments have launched to encourage people to buy real estate is really the cherry on the cake. 

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Promising future trends

In general, the Government of India does its utmost to urge NRIs and other foreign investors to buy Indian assets in foreign currencies. This is encouraged due to the fact that our economy is critically dependent on imports and RBI’s foreign currency reserves are at some of the lowest levels in recent history. In what was seen as a timely thrown life-buoy, NRIs flocked to buying high-end properties and resort suites at a time when the pandemic was slowing the real estate sector’s growth to a grinding halt. The billions of dollars of investor money that flowed into the country from overseas rejuvenated a stagnant economy. All in all, NRIs buying real estate assets are a major source of financial support for the real estate economy as well as the entire Indian economy at large. In continuation of this upward trend, the total NRI investments are expected to amount a stunning 15 billion dollars by the end of 2023. With the real estate sector scoring a 12 per cent CAGR, these two stats are a match made in heaven and would continue to scale upwards.

The evolving state of Indian real estate

In a healthy competitive market, sellers adapt to meet their buyer’s rising expectations in parallel to increasing trading and in this vein the real estate industry has upped its game in a number of ways. Most important has been the widespread and high impact digital transformation that has been taking place in almost all sectors of the economy. Property developers are showcasing their flats and offices using cutting edge VR/AR technologies, hosting online launches in a bid to foster better client relationships. The government has although been lacking in this aspect, but have recently come to recognize the supremacy of online paperwork to the conventional grid-locked and time consuming paper based bureaucracies. 

NRI investments in real estate – a win-win for all

The real estate sector has a lot to offer to its overseas clients from swanky resort-hotels, hip office spaces, luxury homes in amenities-flush townships, to commercial real estate funds. Real estate as an asset class and a great store of value has stood the test of time, hardening and becoming more and more “anti fragile” with each new wave of market turbulence. NRIs are truly one of the only real winners in the prevailing market conditions as the Rupee slides further and further down.

(Harrish Kumar Jain is the Vice President of Brihanmumbai Developers Association)

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First published on: 15-11-2022 at 16:38 IST