Upsurge of NRI Investment in Indian Real Estate

A slew of reforms introduced in the Indian real estate sector over the past two-three years are helping the market move towards improved transparency and are therefore attracting more foreign institutional investors. Key policy transformations such as RERA, REIT, PMAY affordable housing, and the GST have positively impacted the realty sector. With laws now allowing 100 percent FDI (foreign direct investment) in construction development and REITs now in place for commercial real estate, the Indian real estate industry is witnessing increasing investment infusions from NRIs (non-resident Indians). Presently, better returns and yield on investments, and depreciation in the rupee’s value also have become the reasons for NRI investments in Indian real estate. Further, the element of risk once associated with property investment in India has been largely mitigated with the implementation of RERA. Ease of FDI norms and general government focus on housing also adds to the confidence of an NRI Investor.

What NRIs Invest In

NRIs generally prefer investing in properties in their home state or city, largely because they are more familiar with those territories and invariably have family or friends who can handle the management and renting aspects. However, more experienced investors with sufficient knowledge about other cities – or those working with reputed real estate consultancies – do foray into other cities as well. NRIs typically invest in their home markets first, followed by key markets where reputed developers, particularly corporate developers, are active. The key markets include Delhi NCR, Mumbai, Pune, Bengaluru and some tier-II and tier-III cities. The largest base of such investors is the US and Canada, followed by the UK, Dubai and Singapore.

Investment in Luxury Residential Market

The NRIs are particularly interested to invest in Indian luxury apartments of major metropolitan cities such as Delhi NCR, Mumbai, Bangalore and Chennai. And investments are not only being made in Tier 1 metro cities in India that are replete with civic and commercial amenities, but also in fast-expanding Tier 2 and Tier 3 cities. As per the research by Anarock, the unsold inventory of luxury and ultra-luxury homes across the top three markets — Bengaluru, Delhi-NCR and Mumbai — fell in the first half of 2019 from a year earlier. “NRIs typically bought luxury homes either for good ROI (return on investment) or for their self-use. After a prolonged wait-and-watch period post the recent reformatory changes in the Indian real estate market, the trend is now decidedly skewed towards personal use” said Anuj Puri, the chairman of Anarock. For NRIs, the real estate still continues to be an end-user driven due to location and unique product offering. NRIs traditionally invest in high-end luxury properties back home. For end-users, such properties offer them the international lifestyle they are accustomed to and also generates sizeable rental income. Several development projects have been offering discounts and freebies, particularly to NRI investors, thereby making the market more attractive and lucrative. Discounts are generally being offered to the segment of first-time NRI buyers in real estate projects in several housing hubs, particularly during the festive season every year. The investment scenario for the NRIs largely gravitates towards Grade A developers and projects by Godrej Properties in Gurgaon, Shapoorji Pallonji Group, DLF, Ambience and Emaar Group are the hot picks for the overseas Indians.

Investment in Commercial Real Estate

With the changing market dynamics, there has been a gradual increase in investment by NRIs over the last few years in the commercial realty. The rental yields in real estate are high on commercial assets, compared to residential. Also, capital appreciation is quite lucrative in the commercial realty. This is what has pushed NRI investors to look for opportunities in commercial real estate. Also, NRIs’ major concern post-sales are the maintenance of property. So, commercial is a better option as it is leased for a long time and maintaining it is the other party’s prerogative. The cities which are witnessing a vibrant demand for office spaces, malls, Grade- A offices, and co-working spaces are Bengaluru, Mumbai, Chennai, Pune, Hyderabad and Delhi-NCR. In Delhi-NCR, Gurgaon has become an investment destination for NRIs to invest in the commercial real estate. Its close proximity to Delhi-NCR makes it an ideal destination for NRIs investment. Many commercial properties in Gurgaon are available which are attracting the end users. The properties are affordable here compared to the other part of Delhi-NCR. The concept of co-working spaces is also fast catching up with big corporations as well as start-ups for firms in the sector particularly of IT and IT-related services. This way, the commercial real estate space is also proving to be lucrative for investments by NRIs.

Gurgaon is an attractive realty investment destination for NRIs

Gurugram and Noida are most popular investment destination for NRI of northern India like Punjab, Himachal Pradesh and Rajasthan. Especially Gurgaon that enjoys good connectivity through three highways: National Highway 8, Dwarka Expressway (Northern Peripheral Road), and KMP Highway. The millennium city has maximum number of commercial spaces which include shopping malls, service apartments and etc. This overall attracts NRIs to invest here. The developers are doing everything thing to attract overseas buyers from setting up offshore offices and organizing events to help find tenants. To push up the sales, the developers are also offering discounts and flexi-payment schemes. Working with local channel partners continues to be among the best ways to market properties to NRI’s. They are well versed with local rules and norms and often have a strong database of NRI’s looking to purchase property. These efforts must be backed up by strong digital marketing and participation in key local exhibitions.

With the strong connectivity and facilities available in Gurgaon, it is a lucrative emerging real estate market for NRIs. The metro connectivity to nearby cities, especially to Delhi, has attracted NRIs to invest here. Gurgaon is the third-highest per capita income among all the Indian cities. With the increase in development in civic infrastructure, Gurgaon is the favourite options for NRI investors.

Sources:

https://economictimes.indiatimes.com/nri/nri-real-estate/luxe-home-sales-rise-as-nris-return-to-market/articleshow/70303615.cms

https://www.financialexpress.com/money/why-nris-are-eyeing-commercial-real-estate-in-india/1580102/