Policy reforms, falling rupee make real estate attractive for NRIs

By: | Published: November 20, 2018 12:39 PM

For most Indians, real estate may not remain a lucrative investment avenue currently as it was earlier, but for most NRIs, it continues to be the favourite investment option in India.

real estate, real estate investment, NRIs, NRI investment in real estate, falling rupee, policy reforms, RERA, With a weaker rupee, a 12-15% depreciation allows NRIs to enter at a clear discount compared to the domestic resident counterparts.

For most Indians, real estate may not remain a lucrative investment avenue currently as it was earlier, but for most NRIs, it continues to be the favourite investment option in India. As per a recent Consumer Sentiment Outlook survey by property consultant ANAROCK, for instance, as many as 78% NRI respondents prefer real estate over other asset classes – such as stocks, mutual funds, FDs, among others — largely because of the charm of owning a property back in their country of origin.

However, there are many other reasons also, like the policy reforms and the falling rupee. “Investor confidence in the Indian real estate is improving on account of policy reforms which have brought in better transparency and accountability in the economy. Especially, post RERA, there is consolidation happening in the industry and only established players with strong financial and execution capabilities will remain in the future. This makes it a win-win situation for the buyers, including the NRIs,” says Surendra Hiranandani, Chairman & MD, House of Hiranandani.

Nakul Mathur, MD, Avanta India, is of similar views. “The new regulatory environment in India after the implementation of reforms has revived the confidence of NRI buyers. Most NRIs today perceive that the recent regulatory changes in India have made the sector more efficient and transparent, rendering the environment conducive enough for investment in property. The government’s initiative to boost the overall infrastructure development across the country has also prompted NRIs to turn their eyes on India.”

Moreover, the depreciation in the rupee presents a very attractive proposition for the NRIs as it enables them to purchase property at cheaper rates in India.

“The Indian rupee has been falling against the US dollar, with close to 15% depreciation in the rupee vis-à-vis dollar since the beginning of 2018. Today, is a great time for the NRIs to get more bang for the buck. This is clearly an opportunistic time for investment in India given the long-term growth potential India as a country offers,” says Divya Seth Maggu, Associate Director, Valuation & Advisory Services, Colliers International India.

The real estate sector in India, in fact, has undergone paradigm changes in the recent past. The most important one being setting up of a regulator. RERA has led to better transparency in the sector with builders being more accountable, thus improving buyer confidence. With a weaker rupee, a 12-15% depreciation allows NRIs to enter at a clear discount compared to the domestic resident counterparts.

Harvinder Singh Sikka, MD, Sikka Group, says that since real estate is considered to be a long-term investment, foreign investors want to take advantage of the depreciating Indian rupee. “Post implementation of various reforms, NRIs are bracing up to invest in the Indian market as transparency and credibility in the realty sector have improved immensely. This is an excellent time for NRI investors to buy property with savings of 10-20 per cent,” he says.

To add to this, home buying among the resident population has been slow in the last few years. “With the interest rates rising in India, drying liquidity and stress on sales in the primary sector, there has already been a dip in pricing in most areas. The added discount the currency valuation provides to NRIs, this is clearly an opportunity for NRIs to scout for bargain deals. The interest shown recently from expat Indians is not only for home purchase in their hometowns, but also increased interest purely for investment purposes,” says Maggu.

The various policy initiatives launched by the government like Housing for All by 2002 and grant of infrastructure status for Affordable Housing have also led to positive results. So, “the investments are not only happening in the luxury segment in metropolitan cities of India. Many residents abroad are actively looking for opportunities in Tier 2 cities to capitalize on the growth story there,” says Hiranandani.

Whatever be the case, developers agree that the positive impact of reformatory changes, including RERA and GST, have begun to bear fruit and are leading to nearly 15 to 20 per cent surge in enquiries from NRIs annually. “Investing in Indian property provides them with an emotional comfort of having a home back home. With a favourable Indian real estate market scenario and backed by more spending power, NRIs are now exploring investment opportunities in projects offered by established developers,” informs Prateek Mittal, Executive Director, Sushma Group.

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