NRIs investments in Indian real estate
–Sajal Gupta, President – Finance & Corporate Strategy, Rustomjee Group
Going by recent industry reports, while India will celebrate the 75th year of independence by 2022, NRI investment in real estate sector according to estimates will be around 30-35 percent of total NRI remittance. Furthermore, according to a World Bank report, in 2018 India received $80 billion in remittances, which included nearly $13 billion worth of investments in the real estate sector. Indian real estate has emerged to be extremely lucrative for NRIs. With rupee value stabilizing, there has been an upswing in demand from NRIs which is paving the way for price negotiations. Moreover, with increased transparency and ease of doing business, as also the implementation of GST and RERA, have brought in transparency in the sector thereby increasing NRI homebuyer’s confidence for investments.
NRI investor in the real estate sector is getting an average edge of 25 percent on bookings right at the time of entry. While in earlier times, they mostly invested in luxury housing, this segment is now more open towards investing in mid-segment as well as affordable segment owing to better structure and layouts offered along with tax sops. However, it is the brand name that matters the most, and they keep their investments secure with well-known and transparent real estate developers.
Currently, NRIs own about 8-10 percent of the total real estate market in the country, particularly in Mumbai, as per LiasesForas, an independent market analyst. Recognizing the structural shift in India’s economic and political landscape, foreign capital has been competing to find opportunities to invest in this country’s potential growth. NRIs are investing in residential real estate at this point looking at the reasonable return expectations over a long-term period. Affordable housing has emerged to be the most lucrative investment for NRIs on account of higher rental yields from lesser capital investment, property appreciation value, and better return.
Metros particularly Mumbai is the most preferred location for residential investments for NRIs. This is because Mumbai being the commercial capital of India attracts humungous working populace from the Tier 2 & Tier 3 cities. This demography mainly looks rental properties, and they do not mind moving to farther places since the city is witnessing massive improvements in terms of infra developments such as freeways and metro lines. NRIs now must consider investing in locations such as Virar and Thane because of excellent connectivity. These locations are gaining more NRI traction as the price appreciation of these localities is higher, and the rental yields for the location are good.
Also, NRIs mostly face the brunt of delayed projects delivery. Hence Escrow provision under RERA is a useful mechanism that protects the interest of NRI Investors which upholds trust amongst the NRI home buyers. The money put in these accounts ensures timely completion of the project and the proper use of fund utilization. To provide hassle-free home buying and leasing process, nowadays, real estate developers offer subvention schemes and also help them to rent out the property.