Are NRIs the next big investor group for Indian real estate?

2 min read

The real estate market in India is all set to welcome the entry of a large number of NRI investors this year and beyond. They have been a driving force behind the steady strengthening of the dollar against the rupee in the last few years and at present, the opportunity for property investments is much more convenient for NRIs than ever before across different categories.

In 2019, the dollar had crossed the INR 70 mark and it had gone on increasing from INR 59 in the year 2014 and stood at INR 71.60 in the last weeks of November. The financial indices indicate that the dollar will go on to increase even more in comparison, over the next six months, with the exchange rate somewhere around INR 75. The implication is that the NRI investor will be able to purchase more in the Indian market in the year 2020 as compared to five years ago.

Key aspects to note here

Demand is considerably higher for institutional and commercial properties and that is set to rise further over the next few years. Key housing hubs are set to emerge and grow in various parts of the country and more and more end-users are now investing in properties for at least occasional usage as opposed to buying for only investment purposes. There is also a growing need for shopping complexes and malls, cinema halls and warehouses as the residential segment expands throughout the country.

For the NRIs, the options for investment are no longer simply limited to residential projects. They can now invest in shopping units, malls, logistics spaces and office spaces along with other commercial spaces. NRIs are also investing considerably in co- working spaces where employees from a diverse range of backgrounds come together to work under the same roof, according to their convenience. With the young workforce being more dynamic and refusing to be tied down to a single location, this happens to be a lucrative option for the NRI investors. This is a welcome change from the scenario where investing in real estate in India was always considered a risk as there were a lot of shady builders and the market was largely unorganized. With the new laws and regulations brought in by the Government, the industry is now a lot more transparent.

The Real Estate Regulation and Development Act of 2016 (RERA) saw an important legislation being brought to the property market in the past few years and along with transparency, also promised security to home buyers. It has also promised to safeguard the interests of the homebuyers and ensure their security. It is now mandatory for all the projects to be duly registered with the government, be it commercial, residential or institutional. There is also a fixed timeline for delivery and if the developers fail to stick to the stipulated deadline, they are liable to fined heavily. The quality of the construction is also no longer an issue and all the complaints regarding this matter have to be meticulously addressed by the developer.

Other aspects encouraging NRI investments

A big factor under RERA is that the money which the investors are paying, also has to be kept safe in an escrow account and it can only be used for completing construction activities for the said project without being diverted into paying for other projects. Since the political scenario in India is more or less stable at present, the NRIs are feeling more confident about investing in the country. The service sector in India has also been growing exponentially at a huge rate and there is scope for further growth. The markets that are enjoying the limelight at present are the Tier II cities like Chandigarh, Kochi and Bhubaneswar among others where the service industry is taking off in a big way. The NRIs are eyeing these cities for investments since the realty sectors look highly promising in the same, due to the growing population and need for housing. Rentals on investments from Tier-II cities have been increasing across both residential and commercial segments as well. The fact that many foreign retail brands are venturing into the country and opening up their own stores is an added plus. The Make in India initiative has also promoted greater indigenous production and multiple other initiatives are being taken up now, which NRIs are increasingly interested in.

All of this is bolstered by the fact that many NRIs also hope to become the end- users of the apartments they are investing in today. This is because some time in the future, they hope to return to their motherland and hence an apartment would come in handy then. Buying an apartment in the future would mean paying much higher for it, taking inflation into account. By the time, they are ready to return, they would have a home waiting for them if they invest now. Hence, Indian real estate will keep attracting more NRI investments in 2020 and beyond as opined by industry experts.