Nidhi Adlakha asks experts why NRIs continue to invest across asset classes in the country
As the real estate sector picks up steam, courtesy new policies and low interest rates, there’s a particular consumer segment showing a renewed interest in investing: NRIs. Primary investments have come in from those settled in the UAE, Singapore, the UK and US, for properties across segments: residential, commercial and even warehousing.
While NRIs have always invested in real estate back home, what has led them to continue the practice given that the past few months have been bridled with uncertainty? The current pandemic has made home-buying a lucrative option for NRIs, says Saurabh Garg, co-Founder, NoBroker, adding that a weaker rupee and lower interest rates for housing loans are additional factors.
The realty search portal has seen a massive 254% increase in enquiries, a majority for ready homes, from the NRI community since March this year. “A number of policies have triggered this. Now, there is no restriction on the number of permitted immovable properties that both NRIs and OCIs may hold and rental income (for NRIs) can be repatriated freely from India without taking any specific permission. No income tax implications at the time of acquisition is another favourable policy,” he explains.
Increased transparency and eased investment norms have made the market further attractive for UHNIs and NRIs, adds Anshuman Magazine, Chairman and CEO, CBRE India. With developers offering customised solutions in the form of ‘smart’ homes, he says such individuals could prefer to make an investment in the housing segment.
Residential vs. commercial
Affordable home prices, stricter regulatory measures along with increased transparency and greater consolidation in the sector have together created a profitable avenue for NRIs to invest in the Indian market, says Jaxay Shah, Chairman, CREDAI National.
The community at large is eager to invest in residential and commercial properties in the country, with a major chunk eyeing the luxury segment for the purpose of settling down there or even renting it out. “Units with well-rounded infrastructure, penthouses, villas and bungalows in gated communities, besides branded residences and golf townships are popular,” he says.
Garg says their platform has seen a good amount of interaction for both residential and commercial properties. “Residential properties account for about 76% of the enquiries. Managing such a property is much simpler when compared to handling a commercial asset. Prices have gone down and home loan interest rates have gone below 2008-09 levels which also adds up to making the residential investment first at this point in time,” he says, adding that interactions for the commercial sector are up by 120% and since the rental yields are higher, he expects better traction.
NRIs can add the commercial segment to their portfolio, recommends Rajesh Gurumurthy, Senior Director and Head of Strategic Consulting at Jones Lang LaSalle.
The availability of strata space in major metro cities provides flexibility for NRI investment and the rise in office space investments combined with limited vacancy (specifically for Grade A spaces) has resulted in appreciation of capital values. “There is an increasing demand for other real estate asset classes such as mall spaces in the retail segment, co-working in the commercial sector, co-living and senior living in residential, and even warehousing,” he says.
At the CII Realty and Infrastructure Conclave 2020, concluded earlier this month, experts further highlighted how the demand for warehousing is now increasing due to an increase in e-commerce activities and investment from NRIs.
If we are to look at the main parameters NRIs look at before inking a deal, those are tax benefits, ready homes, and the developer’s track record. Other factors include the foreign investment regulations of the country, mode of payment, and type of property (NRIs/OCIs cannot acquire agricultural land, plantation property, or a farmhouse). “One of the most important factors considered by NRIs is if they can invest either as a direct purchase or as a gift from a person resident in India or from an NRI/ OCI relative,” points out CREDAI’s Shah.
The investor group comprises two age groups: 35 to 45 years, looking to invest in homes for their parents, and 55 to 70 years, looking at their own retirement years.
Eyes on the South
Mumbai, Kochi, Hyderabad, Bengaluru, Chennai and Gurgaon have received a major chunk of overseas investments this year, with a majority of funds coming into the southern states.
Job opportunities in the IT/IteS sector, coupled with the rise of healthcare and manufacturing hubs, have been the chief draw. “South India has always been an attractive market for NRIs due to the availability of land at reasonable price, higher rental yields, and timely completion of projects along with good track record of developers,” says Garg, explaining that a favourable investment situation and a well-developed corporate ecosystem has boosted investments further.
Other factors working in the favour of cities down south include the fact that most cities have newer and fresh markets due to the on-going infrastructure development and availability of quality social infrastructure (healthcare, education, etc.).