Bengaluru realty continues to attract NRI money

With the World Bank sounding alarm bells about an economic slowdown in the United States and the rest of the world, global real estate markets continue to remain under pressure.

India, however, is a different story altogether. Three waves of Covid have unlocked fresh inventory in a sector that has been stable over the last few quarters. And new launches continue to drive up real estate prices in cities like Bengaluru.

Areas around the city's central business district (CBD) have witnessed disappearing land parcels and skyrocketing residential rentals.

Dr Rema Ramchandran, India Director, International Women's Federation of Commerce and Industry, and formerly Manager, NRI Services, Standard Chartered Bank, said, "NRIs look for a return on investment, capital appreciation, and facilities in and around the property. But Bengaluru city is saturated in terms of assets."

Investors and developers say rapidly emerging micro-markets in city peripherals have not only expanded development but also helped boost NRI investments in the city's real estate sector.

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However, local realtors say that the notorious Bengaluru floods have somewhat dented NRI investment in flood-prone areas.

Flats, forex, and more

With supply constraints, soaring crude prices, and burgeoning demand the Indian rupee has touched an all-time low, at 82.75 to the US dollar.

"NRIs took advantage of a weak rupee and in recent times, ticket sizes in Bengaluru have crossed the Rs 20 crore mark," said Sunil Singh Director, Realty Corp.

Angad Bedi, MD, BCD Group, a developer, added, "We do not see the rupee depreciating further. It has fallen by around 20 percent over the past year and a half. Today, units are almost 25 percent cheaper in Dollar terms."

"Over the past three years, India witnessed fewer launches and old inventory was consumed. The inventory coming out today gives us headroom for price appreciation and growth, making it an attractive market for NRIs," said Amit Goenka, MD and CEO, Nisus Finance.

Experts say it is a good time for NRIs to invest in projects in advanced stages with all clearances in place, or in projects nearing completion.

Singh added that Bommanahalli, Hennur, and Kanakapura are booming real estate markets, with a lot of NRI investment flowing in.

"In the industrial sector (warehouses, industrial buildings, etc.), NRIs are mostly investing in Nelangamala, Mysore Road, and Kumbalgodu. RR Nagar is a booming market for residential plots — the place has changed over the past decade," he added.

Realtors say most NRIs look forward to investing in Bengaluru Development Authority (BDA) plots in city centres, which offer a 5-6 percent rate of return.

Balaji Badrinath, Managing Partner at the local office of the real estate consultant Coldwell Banker, added, "Recently, some NRIs bought plots in Banashankari 6th stage for Rs 1-2 crore. Such plots have clear titles and offer at least a 10-15 percent rate of return."

Bedi clarified, "The money coming into Indian real estate is mostly from the GCC, (Gulf Cooperation Council members Bahrain, Kuwait, Oman, Qatar, The United Arab Emirates, and Saudi Arabia), China, Russia, Africa, and the US. Not much money is coming from Europe."

"Earlier, the rental yield was 2-3 percent of the cost of the flat, and the interest on home loans was between 10-11 percent. Now the rental yield has come up to 5-6 percent, and home loans have come down to about 9 percent. We see a clear shift in asset affordability," Bedi added.

Flood damage

Realtors say that the floods led to growing awareness among the NRI investors about local conditions.

In places like Bekllandur and Sarjapur, NRIs check for project clearances before doing a transaction, said Raghavendra Rao, AVP-Marketing, Indiassetz, a real estate sales and property management firm.

"Clients have asked me to avoid particular properties in areas on the Outer Ring Road because of the flood. They don't mind going 2-3 km further to keep their investments safe," Singh added.

Micro-markets

In Bengaluru, the CBD has expanded to the Indiranagar area, putting more focus on the region. “In the outskirts, micro-markets are emerging in areas like BTM Stage 4, HSR Layout, Bellandur, and Sarjapura, " explained Badrinath. "Hoskote is another emerging micro market," Bedi added.

Additionally, the recently launched Bengaluru-Mysuru Expressway has piqued NRI interest in industrial areas like Kengeri.

Developers say the Hoskote to Devannahali belt is an emerging corridor with an expressway linking Bombay and Chennai, and KIADB (Karnataka Industrial Area Development Board) industrial parks in the vicinity.

The launch of Terminal 2 at Bengaluru’s Kempegowda International Airport has also piqued interest in areas around the airport, where ample land is available, realtors say.

Most NRI investments in Bengaluru happen in the high-end or luxury segments with more spacious apartments, realtors say. However, more NRI investors are also looking at affordable housing projects for steady returns.