NRI Investors Zero in on Indian Real Estate’s Revival Signals

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Riding on a wave of economic reforms, improving transparency and better governance, foreign investments in Indian real estate are set to scale new heights. With laws now allowing 100% FDI (foreign direct investment) in construction development and REITs now in place for commercial real estate, the Indian real estate industry will see increasing investment infusions from NRIs (non-resident Indians).

Shajai Jacob, CEO – GCC (Middle East) – ANAROCK Property Consultants

According to a World Bank report, India received USD 79 billion in remittances in 2018 – with a sizeable portion going into real estate. NRI investments into Indian real estate are led Indian expatriates from UAE, USA, UK, and Canada. In terms of Indian cities, Bengaluru, Mumbai, Pune, Hyderabad, Chennai and Delhi-NCR currently attract the lion’s share of NRI investments.

NRI Investors Zero in on Indian Real Estate’s Revival Signals

Several factors have made these cities top picks:

  • Their growing economic environment giving rise to fresh employment opportunities
  • Ease of doing business
  • Improving infrastructure upping their liveability quotient
  • Improving air connectivity with world cities as well as better intra-city connectivity via escalated highway construction

UAE – The Leading NRI Nexus

The Indian population in UAE has grown to 3.3 million – the largest concentration of Indians outside India. According to the Reserve Bank of India, theUAE accounted for 26.9% of inward remittances in 2018. The NRI segment of Dubai is a particularly large buyer base for Indian real estate. The rupee’s decline in value against the dirham has further boosted remittances and made Indian real estate investments even more lucrative for NRIs.

What NRIs Invest In

Previously, NRIs traditionally invested in high-end luxury properties back home. For end-users, such properties offered them the international lifestyle they are accustomed to. For investors, luxury properties generated sizeable rental income.

While the end-user demand for Indian luxury properties continues, albeit on a more muted note, many NRI investors have now turned their focus to affordable and mid-segment housing. This is because the Indian Government has provided considerable incentives to buyers of such housing, and also because such properties are in higher demand and therefore give a higher rental yield as well as better long-term appreciation.

Having burnt their fingers on dubious developers in previous years, NRIs now prefer to park their investment with reliable, organized builders who register their projects under the Real Estate Regulation and Development Act (RERA) and are generally known for transparent business practices.

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.