NRIs investing in real estate

Why NRIs are seeing Indian real estate as their ideal investment destination?

Over the years, Real Estate has been considered as a safest mode of investment, and for all the good reasons. Most importantly, unlike stocks, real estate is a tangible asset and you can generate a stable cash flow from it without being worried about the market conditions. Despite the pandemic had disrupted economies all around the world, real estate sector in India managed to overcome the challenges with the emergence of ‘PropTech’ approach. The recent growth in Indian real estate market has piqued the interest of buyers yet again, especially the Non-Resident Indians (NRIs).

If the reports of 360 Realtors are to be believed, the demand for residential properties in India has been increased due to a surge in urbanization and rising household income. As per the report, NRIs have invested around $13.3 billion in the Indian real estate market in the Financial Year 2021. With the latest investments in the residential sector, India has entered the category of top 10 price appreciating housing markets globally.

According to NITI Aayog, the Indian Real Estate market, by 2040, will grow to Rs. 65,000 crore (US$ 9.30 billion) from Rs. 12,000 crore (US$ 1.72 billion) in 2019.

Factors behind the growth

Many have seen that Indian Real Estate market has grown immensely in the post-COVID times. Resumption of travel along with favourable financial and economic conditions have also prompted the NRIs to invest heavily in the realty sector. Having said that, let’s discuss the key factors which are driving sales and paving the way for buyers to invest their money in Indian real estate.

1. Transparency

As the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) have been rolling out several policies and guidelines to encourage the Foreign Direct Investments (FDI) in the country, more NRIs are putting their money in Indian real estate assets. Further, reforms like Goods and Services Tax (GST) and the launch of Real Estate Regulation and Development Act brought the much-needed transparency in the process which has eventually boosted the confidence of buyers. NRIs also get indexation benefits for properties held in India.

2. Depreciating rupee value

Continuous depreciation in the value of rupees has also fueled Foreign Direct Investment in India. According to the research report of CII-Anarock, the slight drop in the real estate prices in India and the falling currency value due to COVID-19 pandemic attracted a large part of investment from NRIs. If we take 2021 statistics in account, the Gulf Cooperation Council (GCC) continuous to be the major source of NRIs investments with the share of approximately 41 per cent of the total investments. On the other hand, USA includes 17 per cent of the complete purchase, followed by Singapore with 12 per cent.

3. Back-up plan

Coronavirus pandemic was no less than a wake-up call for the Indians living in foreign countries. The two lethal waves of COVID-19 enforced the NRIs to look towards their own country as the primary option to settle down in future. In addition to this, the fact that many companies in India have allowed their employees to permanently work from home has also lured the NRIs to return to their native place.

4. Economic growth

The paradigm shift in the economic conditions in the last few years has been a growth booster for India. As of now, the Indian economy has reached around 2 trillion dollars. If we talk about the investor demographic, it reflects age group of 55 – 70 years is looking to owning a home for themselves in their retirement years, while the young age group in the bracket of 35 to 45 years is investing for higher profitable returns as well as for their families back at home.

Given the current situation, it is safe to say that Indian real estate sector is expected to see a major extension in the coming years with NRIs contributing in its success.