Indian residential real estate: The new hotspot for NRI investments amid Covid-19
September 17, 2020 2:14 PM
The significant drop in property rates, stricter regulatory measures, increased transparency and greater consolidation in the sector have together created a lucrative avenue for NRIs to invest in the Indian real estate market.
The recent depreciation in the Indian rupee has sweetened the deal as NRIs now have to shell out lesser to buy a home.
With uncertainty looming almost everywhere, individuals living overseas are looking forward to have a property in India as well, driven either with a hope to return to India or at the very least own property in their homeland. According to property consultant Anarock, the rupee’s depreciation had been a factor of considerable interest for NRIs considering Indian real estate as a sensible investment option during these volatile times. This calls for developers to address this demand and help revive and grow the residential real estate market in India. Generally, the Indian real estate market has been irrepressible, and in spite of the slowdown that the industry witnessed in these past few months, buyers have become more active and interestingly the demand continues to grow from the NRI clientele.
Now with various international brands also considering India over China as their preferred hub for production, manufacturing plants and business going forward, India is gearing up for some major inflow of global investments, that will have an impact across various industries. The NRI investors have always been the first to forecast such trends and enjoy the first mover advantage, disregarding the general sentiment. As per various reports, the current NRI investments in India will hit an all-time high of $13.1 billion in FY 21. Especially since the formation of RERA, NRI buyers have extended confidence to invest in India, more than ever, through a more simplified format of engagement along with trustworthy developers and properties that are registered under RERA. This helps the investors take interest and enter the Indian market even during the pandemic.
UAE, USA, UK, and Canada are the biggest source of NRI residents who invest in India, with 42% of the total inflow coming from GCC alone. Even after having spent a significant part of their work life in these countries, citizenship is not an option available to Indians based in the Gulf region, which brings them back to India when it comes to investing in assets like a house. Especially due to COVID 19 Indians living abroad are looking at their home country as an option to settle in the future by investing in residential real estate.
In the past the investment decision has been across residential, commercial, and retail real estate, largely to benefit from returns in form of rentals, but today most enquiries have come around residential properties and primarily for end-usage. Today the demand is not limited to luxury properties only, buts cuts across segments starting from affordable and mid-segment housing to premium, luxury and super-luxury properties, especially for cities in Southern states of India – Bangalore, Chennai and Hyderabad, followed by New Delhi and Mumbai.
There has been a steep rise in demand for ready-to-move-in inventory in projects that offer safety and protection in addition to ensuring availability of lifestyle essentials. Rise in demand for ready to move in houses or near-completion projects has largely surfaced from the deferred deliveries related to under-construction units. Also, with no Goods and Services Tax (GST) payable on resale flats, the demand for ready-to-move-in houses has soared. Credible developers with a proven legacy to deliver on commitments will have an advantage in today’s marketplace. The recent depreciation in the Indian rupee has sweetened the deal as NRIs now have to shell out lesser to buy a home. The significant drop in property rates, stricter regulatory measures, increased transparency and greater consolidation in the sector have together created a lucrative avenue for the NRIs to invest in the south Indian real estate market. COVID-19 had a drastic impact on pricings and demand in regions like Hyderabad, Bengaluru and Chennai. Consumer demand has spiked in these markets as more home buyers from across India and abroad are quickly taking advantage of the prevailing conditions to buy their dream homes.
This lockdown has helped people realize the importance of living at home & a community that can be called their own. This psyche will be one of the driving forces in the future as buyers begin to accept and adapt to the new normal where they will continue to consider buying residential properties as the safest investment option. Real estate has always been an important aspect of the Indian economy. Early this year, the industry had been predicted to reach $1 trillion by 2030, contributing 13% to India’s GDP by 2025. Despite the ongoing global pandemic, the real estate market has seen a surge in demand from investors. This can be attributed to the fact that real estate is a safe and secure investment that yields high appreciation.
(By Murali Malayappan, Chairman and Managing Director, Shriram Properties Ltd)