Non-Resident Indians (NRIs) may actually be the new drivers of growth in the Indian real estate market. FDI (foreign direct investment) in real estate is now being majorly driven by NRIs who are being tapped by real estate developers and several industry players. Indians have spread roots all over the world and in several major countries. Naturally, their interest in real estate back home is fuelling the rapid growth of the market overall.
NRIs are the new growth engines for Indian realty
Call it homesickness or a desire to contribute, NRIs have actually been pumping investments into the real estate sector since times immemorial. It has now become more organized and structured in recent times.
Check out these market trends:
- UAE is one of the biggest NRI hubs from where investment is flowing into the realty sector in India. Approximately 3.3 million Indians live in the UAE which is huge by any standards and the largest such population of Indians in any foreign country.
- Foreign investments are going up in Indian real estate on account of several economic and market reforms along with heightened transparency and accountability courtesy moves like RERA and GST. The Government has also allowed 100% FDI (foreign direct investment) in construction and development while REITs are also being setup for commercial real estate.
- Indian realty will see growing investments made by NRIs (non-resident Indians) as a result according to reports. NRIs based in Dubai lead the pack when it comes to investments as per reports.
- Studies state that $79 billion was invested in India in the year 2018 in the form of remittances and a major chunk of this went towards real estate investments. NRI investments are majorly driven by Indians living in the United States (USA), United Kingdom (UK), Canada and the UAE (United Arab Emirates).
- Major cities like Mumbai, Bangalore, Chennai, Pune, Hyderabad and Delhi-NCR are highly favoured by NRIs in terms of investments.
Experts feel that UAE is the clear leader when it comes to investments made by NRIs in the Indian real estate market. With the growth in population of Indians working and living in the UAE, this is a natural phenomenon to say the least! The UAE accounted for a whopping 26.9% of all inward remittances for the year 2018 which is a testament to these facts. The NRI population in Dubai is a huge customer base for real estate in India as per experts. Remittances have gone up on account of the declining value of the Indian rupee against the UAE dirham and hence investments here have become more enticing for NRIs based there.
NRIs usually choose to invest in properties located in their home cities or states since they have more familiarity with these regions as per experts and also have friends and family members to take care of the transaction and management of properties. There are other experienced NRI investors who already possess ample knowledge and understanding of other cities and those who are already working with consultancies and firms for investments. NRIs usually have a propensity to invest in luxury realty in their home cities. End-users usually seek elevated global lifestyles wherever they stay and these properties often fit the bill. In case of investors, luxury real estate helps in earning considerable income through rentals.
Major increase expected for FDI in Indian real estate
End-users continue to have sizable demand for luxury real estate in India however this has steadily been outstripped by the demand of mid-range and affordable housing. These are segments which are now the emphasis for several NRI investors. The Indian Government’s emphasis on affordable housing and PMAY sops are major reasons as opined by experts. These properties have ample scope for appreciation in the long term and also offer good rental income.
FDI in Indian real estate is expected to go up hugely due to the first Indian REIT being listed and the upcoming REITs that may arrive in the market over the next few years. Also, 100% FDI has been allowed for construction and development and NRIs will naturally look to make the most of these favourable regulations. The real estate sector has certainly grown over the last few years with several infrastructural developments across major cities and peripheral zones in addition to several policies and reforms. Grade A office/commercial space is also expected to attract a large chunk of NRI investments as per experts. Here are some key facts worth checking out in this regard:
- Office space (Grade A) is already seeing higher demand from investors with several companies seeking to upgrade offices with better amenities and more space.
- Experts estimate that throughout this year and the next, Grade A office space segments will witness more than 76 million sq. ft. in terms of net absorption.
- Market supply is expected to be higher than 126 million sq. ft. over a period of 3-4 years since multiple new projects may launch across cities.
- India is now known for its improved ease of doing business overall and the economy is forecasted to witness growth of approximately 7.3% for FY2019-20 and 7.5% for FY2020-21 as per reports.
- This will be a major positive for Indian real estate, particularly in terms of higher demand for commercial and office spaces. This will impact residential segments positively in turn.
- This year, the top 7 markets for Grade A office spaces are Mumbai, Delhi-NCR, Pune, Chennai, Bangalore, Hyderabad and Kolkata.
- Bangalore is at the top of the pile with office absorption witnessing an increase of 37% last year on account of availability of high quality spaces, economic conditions, comparatively reasonable office rentals and the spurt in the co-working space.
- GST, RERA and other reforms have made Indian real estate more attractive for investors and with REITs being given the nod by the Government, the sector should witness a sizable influx of funds from NRIs and other institutional investors over the next few years.
In spite of the Indian realty sector facing a sustained drought over a few years, it is now time to reap the benefits of economic growth, better reforms, pro-active Government measures and reviving demand. In fact, both residential and commercial real estate segments look set to witness steady growth journeys over the next few years as opined by several industry watchers and experts. It feels like developers will finally say Ant Bhala toh sab Bhala (All’s well that ends well)!