NRIs — The Next Leg Of Investors In The Real Estate Market

By: Mr Amit Jain- MD, Arkade

by Priya Jadhav 

Non-residential Indians a.k.a. NRIs hold an Indian passport, but are based in another country, mostly for work and for a long period of time. However, in the recent past, a number of these NRIs from different corners of the world have shown a great amount of interest to invest into India.

As a traditional and relatively safe investment option, NRIs are heavily drawn towards Indian real estate, in both, metro and Tier II and III cities. In fact, research has found that the total investment by NRIs in real estate in India is projected to reach close to the range of $13.5 billion by the end of the next financial year. This has made NRIs warm up to a large extent to invest in the market, besides being attracted to the advantage of huge return-on-investment (ROI).

As per studies conducted, most of the investments in Indian real estate are by NRIs in countries including — the Gulf (Oman, Kuwait, Saudi Arabia, Bahrain UAE, and Qatar). This is followed by Canada, North America, a few European nations, as well as East Asian countries like Korea, Singapore, Japan, and Malaysia. They are heavily investing in expanding Tier II and III markets of India that include Jaipur, Ahmedabad, Nasik, Pune, Bhubhaneshwar, Hyderabad, Kochi, and Lucknow amongst several others. One of the biggest advantages of these cities is that their infrastructure is developing at a swift rate with metros, highways, expressways, and other options for easy connectivity coming up, making them highly appealing to NRIs, who wish to come back to their motherland at some point.

Their interest in investing into real estate here has been further fuelled by the effective implementation of the Real Estate Regulation Act (RERA) of 2016, which has increased transparency within the sector. As a key driver of NRI investments into the real estate market, it has also increased accountability of projects, and timely delivery of the same to investors. Moreover, there is system by the government in place for grievance redressal, promptly as part of the Act.

This has been supported by the Affordable Housing initiative by the government, to boost residential real estate and attract an array of investors. With this, several projects have been offering a number of discounts and freebies, especially to first-time NRI homebuyers, and these sort of attractive offers are generally observed towards the end of the year, amidst the festive season.

Another factor driving heavy-duty investments from NRIs has been the depreciating value of the Indian rupee. NRIs have found it fruitful to invest their forex income into their home country, as every dollar they invest leads to better returns with regard to the rupee. Considering the fluctuating forex values, the real estate sector in India is currently the most lucrative for them in terms of investment, However the above phenomenon becomes negative if A NRI invests in Indian market and Rupee Depreciates and at the time of repatriation of funds it would be taking that hit on his gain hence most of NRI investment in Real Estate stays here for long time unless equity investments as compared to Bonds.

As residential real estate has been rapidly growing, with a large number of completed projects finding occupants, demand for commercial real estate has soared too. The market has thus witnessed a rise in the number of office spaces, malls, multiplexes, shopping centres, and other retail spaces. With this, NRIs are also looking at commercial real estate as a valuable option for investment, as these projects also offer higher value for money. They basically have higher rentals as compared to residential projects and are subject to an annual rise too, which makes them enticing to NRIs.

With the ever-increasing growth and demand of the real estate sector in India, as well as heavy-duty online advertising of the same, NRIs looking to invest have a wide range of choices available in the market. Moreover, as stability of the sector through government regulations and initiatives has increased, NRIs are certainly driving a major chunk of investments into the Indian property market, and will continue to do so.