As per one estimate, NRI investments in India are likely to hit an all-time high of $13.1 billion in FY 2021.
There is no denying the fact that the outbreak of Covid-19 has had a deep impact on the realty market in India. Additionally, questions like – is it a good time now, and if at all one should look at investing in real estate — are worrying the potential buyers. Historically, the Indian real estate market has been resilient, and in spite of the slowdown that the industry witnessed towards the end of March and the beginning of April, in the past few weeks buyers have become more active and intriguingly the demand continues to grow from the NRI clientele.
Time and again, the real estate industry has proven to be an attractive asset class with healthier relative returns, and with improved affordability in the current scenario, it has gained attention of both locals and NRIs across the world. With dollar gaining strength against rupee, a competitive marketplace with negotiations tougher than ever, and a sense of moving back to homeland, being a few among many reasons, developers have experienced a sudden spike in enquires from international buyers, even while the industry faces the toughest quarter in the past two decades.
With thousands of international brands now looking at India over China as their preferred destination for production and business going forward, India is gearing up for some major influx of global investments, that will have an impact across various industries, directly or indirectly. The NRI investors have always been the first to forecast such trends and enjoy the first moved advantage, disregarding the general sentiment.
Who is this customer?
In the current scenario, while many are considering to move their bases back to India to be a part of this growth story, some purely want to invest in their home cities, to feel a sense of security in a known territory.
As per one of the leading real estate advisory firms, NRI investments in India will hit an all-time high of $13.1 billion in FY 21. Over the years, this cluster with higher disposable income compared to local buyers has become an important driving factor of the real estate market in India. Especially since the establishment of RERA, international buyers have gained confidence to invest in India, more than over, through a more transparent format of engagement, with reliable developers and properties that are registered under RERA, which secures their investment, even while settled abroad.
Where are they coming from?
Predominantly, UAE, USA, UK, and Canada are the biggest source of NRI investment in India, with 42% of the total inflow coming from GCC alone. As per the Ministry of External affairs, nearly 8.9 out of 12 + million Indians living abroad are based in West Asia alone, of which there are 3.3 million in the United Arab Emirates, 2.6 million in Saudi Arabia and 2.9 million in Kuwait, Oman, Qatar and Bahrain. GCC contributes close to $40 billion annually as international remittance to India.
Even after having spent a significant part of their work life in these countries, citizenship is not an option available to the Indians based in the Gulf region, which brings them back to India when it comes to investing in assets like a house. Also, with Dirham gaining value against the rupee, NRI enquiries from Dubai have been among the highest and they are expected to make big-ticket investments in the housing projects in the coming months.
In the past while 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.
Also, 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, followed by New Delhi and Mumbai.
What are they looking for?
The ambiguity which is likely to loom over the next two quarters, has created a sense of urgency and commitment in the minds of these investors. As a result, today there are more serious buyers in the market, who are looking at ready-to-move-in units that are in condominiums, which are well protected and widely enabled with facilities and luxury within the premise.
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.
An NRI customer is not just looking for great property, but also a reliable brand name. Credible developers with a proven legacy to deliver on commitments will have an advantage in today’s marketplace.
How to turn these NRI leads into sales?
The lockdown has demonstrated the challenges the industry will face going forward, not just with the way they deal with their customers, but also run their operations internally. Real estate has always been extremely dependent on face-to-face buying and selling method. But today’s reality is that tech-enabled real estate firms will gain maximum market-share in this decade, especially when it comes to successfully converting international clients.
Digitally-enabled sales tactics will empower brands to replicating physical interaction and creating an evocative experience. The rise of a digital model – for both interaction and transaction – will demonstrate more flexibility with better outcomes. And this new form of engagement will continue to be relevant and practiced even in a post-Covid world, once the lockdown is over.
While all these hypotheses remain speculative at this point, we are optimistic about the future of the industry. Organisations that are nimble, adaptable, strong at core and can align themselves to this new altered reality, are the ones that will survive this wave and come out to be tougher.
(By Aakash Ohri, Senior Executive Director, DLF Home Developers Ltd)