The Future Of Real Estate For NRI Buyers

The Future Of Real Estate For NRI Buyers

While India is a growing economy, there are several other countries across the world where Indians are getting equally good career opportunities. The NRI population overseas is increasing due to the rise in global options every day. However, even for NRIs living overseas, there are several NRI investment and wealth management options available in India.

5 reasons why Indian real estate is turning attractive for NRIs

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The depreciated rupee value is prompting a large number of NRIs to invest in the Indian realty market.

With rupee witnessing a major fall against the dollar in recent months, non-resident Indians (NRIs) have begun scouting for property buys in India, according to reports. This comes after the lull witnessed in the Indian residential real estate market over the past several years, which was aggravated by demonetization and enactment of RERA. Added to this, NRIs were apprehensive about investing in Indian real estate despite hope for lucrative returns due to lack of transparency, safety issues and fears of sugar-coated sale propositions.

However, the trend is changing. Rajeev Jain, Director, Nirmal said that a year of RERA has hugely influenced the Indian realty industry for good. Transparency and consolidation can help the market evolve and shape the industry in a positive way. Moreover, weakening of rupee against the dollar recently has made investments in India a lucrative opportunity. “India is a strong market for overseas investments in realty,” Jain said.

Dhaval Ajmera, Director, Ajmera Group said that around 30 % of NRIs are looking to invest in property as an asset class and the number is increasing year by year.

However, besides the rupee angle, there are several other factors that making Indian real estate attractive for NRIs. Here are some of them:
  1.  NRI’s can leverage the power of their additional income by investing in properties because prices have corrected over the past few years.
  2. In terms of location, other than metropolitan cities and Tier-1 cities, the momentum of investment in Tier-2 and Tier-3 cities has gained pace. “Adding to that the rate of appreciation which is much more due to fast-paced infrastructural development, property investments in India could be a smart move for NRIs right now,” Ajmera said.
  3. The returns from the property are good. Amit B Wadhwani, Managing Director, SECCPL said that many NRIs from Dubai, The United States or the Middle East are more interested in settling down in India and they are looking at locations like Karjat, Kalyan and to settle in. “NRI’s are attracted to the commercial real estate, which is a different kind of investment, which offer good rental yields as well as capital appreciation,” he said.
  4. The weakening rupee gives more power to other currencies and the current sluggish market enables them to buy properties at a cheaper rate in India. The falling rupee has made it advantageous for those earning in foreign currencies and spending the same to buy property in Indian Rupees. Property buyers get more square feet of space for the same amount in foreign currency.
  5. The new regulatory norms has brought in transparency and accountability on part of real estate developers which has resulted in a win-win situation for property buyers.  Niranjan Hiranandani, National President, NAREDCO said that for NRIs, the situation is a deja-vu of sorts – it is the same as the scenario we witnessed in 2012. “Home buying is regaining traction, RERA has made it better – and in a situation where property prices at primary level are down by 10 to 15 percent, it definitely is a scenario where the NRI buyer is back,” he added.

Real estate transactions, inquiries by NRIs on the rise as rupee depreciates

The depreciation has put more rupees in NRIs’ hands, making properties cheaper for them than they were earlier.

The depreciating rupee has affected most Indians either directly or indirectly, but it has benefitted non-resident Indians (NRIs) when it comes to investing in Indian real estate in India.

In the last one year, the rupee has depreciated around 14% from ₹65 at the beginning of October 2017 to above ₹74 at present.

The depreciation has put more rupees in NRIs’ hands, making properties cheaper for them than they were earlier. As a result, there is an improvement in both inquiries and transactions by NRI in the real estate sector. “The charms to own a property back in their country of origin makes NRIs consider real estate as an option. Needless to say, the depreciating rupee value against currencies such as dollar, pound, the UAE dirham, among others, is prompting a large number of NRIs to invest into the country’s realty market,” said Anuj Puri, chairman, ANAROCK Property Consultants.

With the rupee depreciating at a faster clip in the last few months, real estate experts expect addition in demand from NRIs. “There is a surge of nearly 15-20% in enquiries from NRIs annually,” said Puri.

There has been a gradual increase in investment by NRIs over the last few years. According to a recent report by 360 Realtors, a real estate consulting company, “NRI investments in the Indian real estate sector have doubled from $5 billion in 2014 to $10.2 billion in 2018. The key driving factors are the dwindling rupee which has made Indian real estate more affordable, regulations like RERA (Real Estate (Regulation and Development) Act, 2016 ) that have led to increased transparency and growing developer focus on the expatriate market.”

“NRIs constitute a quarter of real estate sales in the country in 2018-19 till date,” added the report.

With slow domestic sales in the sector and little scope for improvement in the next few years, developers are also focusing on NRIs. “Builders are also leaving no stone unturned in luring them with a host of amenities and features,” said Puri.

The fact that Indian developers had, in the past, launched and marketed projects with an almost exclusive eye on NRI customers is no secret, said Puri.

What should NRIs do before investing?

The Indian real estate sector may look attractive because of the falling rupee, but like all other investors NRIs should also do their due diligence and check the relevant rules before investing.

“Falling rupee against currencies such as the dollar, pound and dirham is prompting NRIs to invest in Indian realty”– Anuj Puri, Chairman, ANAROCK Property Consultants

“NRIs with a valid Indian passport need no prior approval unless they are citizens of a few neighboring countries—specifically Pakistan, Bangladesh, Sri Lanka, Iran, Nepal, Bhutan, Afghanistan, and China. They can buy as many properties (residential or commercial) as they want but are not allowed to buy agricultural land, plantation properties, and farmhouses. However, such properties can be gifted to or inherited by NRIs. Transactions must be done in Indian rupee (INR) through regular banking channels via an existing NRI account,” said Puri.

Though there is an improvement in the transparency level in the real estate sector since RERA got implemented, it’s better to run all relevant checks.

Being at a distance, NRIs may be at a disadvantage in terms of collecting information but they should try to get as much information as they can about the developer, the project, location and so on. Local guidance from a real estate agent, friend, relative or colleague can be helpful. One should also “hire a reputed lawyer to vet property documents, verify the original title deed documents; ensure that the property title is in the name of the seller, verify that the seller has not diluted the right to transfer the property to a buyer and other aspects,” said Puri.

Last but not the least, NRIs should look at the returns real estate as a sector and investment instrument has been giving in the last few years before buying, and shouldn’t just get swayed by the falling rupee.

 

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