The circumstances that the real estate sector finds itself in today is perhaps the most opportune time for non-resident Indians (NRIs) to consider investing in property back home. The historically low home loan interest rates at below 7 percent, improved transparency and stricter regulatory mechanisms and ongoing consolidation in the realty sector in India give them a rare opportunity to have a home in their country.
COVID-19 has enhanced the credibility of real estate as a financial and emotional asset. During the lockdown, the sector has witnessed increased interest from NRIs as many are considering moving back to India.
According to a recent report, a realty search portal revealed that it has seen a 254 percent increase in inquiries for ready-to-move homes from the NRI community since March 2020.
The lockdown led to the re-evaluation of investment options for investors and consumers alike. Market volatility loomed over many investment options that experienced acute fluctuations. One sector that has shown resilience despite the lockdown and has begun to pick momentum is the Indian real estate sector.
Traditionally, NRIs preferred investing in the residential real estate segment owing to a good return on investment, reasonable capital appreciation and low rupee value. They are one of the crucial growth drivers and the overall community accounts for a sizeable part of Indian real estate demand.
While the pandemic has hit decision-making process of consumers, inquiries for homes have reached pre-COVID levels. The next stage of development indicates India as a lucrative and safe investment hub, especially in the real estate sector.
Business sentiment has gradually improved and decision-making processes have been revamped. Additionally, the government’s support through different schemes and relief packages has helped boost confidence in the industry.
The acceleration in technology adoption allows NRIs to inspect properties online and close deals digitally.
Developers are also providing customised solutions for this segment by constructing ‘smart’ homes with an international appeal.
There has been an increased interest in ready-to-move-in projects that offer various amenities and are re-designed as per today’s work-from-home requirement. While selecting properties, NRIs now are more drawn towards selecting credible developers with a healthy track record and a proven legacy to deliver quality projects on time.
The real estate market in South Indian cities such as Kochi, Coimbatore, Thrissur, Hyderabad, Chennai and Bengaluru has performed well in the last couple of years. NRIs are attracted to these cities due to affordable pricing, handsome rental yields, and a favorable investment climate in the region.
Most NRIs are now looking at residential properties primarily for end-use across segments from affordable and mid-segment housing to premium, luxury and super-luxury properties. The demand for ready-to-move-in flats has also increased.
The demand for housing will continue to rise as homes have now become a priority for NRIs for their aged parents or for their own retirement. Several recent measures by the government have enabled the developers to streamline project funds and dates, thus speeding up deliveries.
Consolidation in the sector is inevitable and with increased transparency and stricter regulatory measures, real estate becomes the most preferred investment option.
About 31 million Indians are living and working abroad. This important segment is a part of our country’s growth story with deep rooted familial ties. Today Indians make up 6.4 percent of the world’s total expat population. The contribution of this large Indian diaspora to the Indian economy is significant.
NRI money not only helps in national savings and capital accumulation but also unlocks opportunities for investments in key areas by way of remittances. Every dollar that is transferred to India by way of remittances adds to our country’s foreign exchange pool.
According to an RBI survey, a large part of this goes into bank deposits and investments are made in equity shares, property and real estate. Several NRI businesses have announced large investment projects in India. The government, too, has taken steps to attract NRI investments in major sectors like real estate, education, businesses and infrastructure development.
The government has simplified the process of repatriation of income from rental income or the sale proceeds from a property to the country of residence for NRIs or Overseas Citizen of India Cardholders (OCCs).
For NRIs and OCCs, generally, there is a cap of $1 million a year repatriating sale proceeds of property, rent and other income. They can remit a higher amount only in some conditions which include RBI approvals under various criteria.
According to the World Bank estimate, India’s remittances have been the highest in the world, standing at $83 billion in 2019. Such remittances not only help boost foreign currency inflow in the country but also raise India’s creditworthiness, enabling it to borrow more money.
NRI money helps increase the purchasing power of people in India, which in turn stimulates the market and increases demand and supply. Some support their children’s education, make investments or buy real estate. Some NRIs want a piece of good quality real estate back home for safety and security. Others wish to invest for profit and tap the emerging opportunities – and be a part of the growth story of their own country.
India’s strong fundamentals, macro stability, inclusive growth, rule of law, progressive tax reforms, and improved opportunities for the disadvantaged groups are asserting strong pull factor for the NRIs. There is conviction and certainty in the story that is being scripted.
Additionally, India’s ranking in the World Bank’s ease of doing business report has improved from 142 in 2014 to 63 in 2019 . With the third-largest startup ecosystem in the world and with the fastest growing digital economy, India is slated to emerge as one of the top global tech leaders. Within this stimulating ecosystem, we have a resilient real estate sector in India which has stood its ground despite challenges.
According to a report, NRI investments in India will rise to $13.1 billion in FY21 from $6 billion in FY14. A total of 42 percent of the total inflow comes from the Gulf countries along with the US, the UK and Canada. As citizenship is not available for Indians staying in Gulf countries, their plans to move in and settle in their home country have become stronger, more so due to the pandemic.(The author is vice chairman and managing director at Sobha Limited)