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Return of the native

Every cloud has a silver lining.

Return of the native


Dwindling rupee, which has made Indian real estate more affordable along with buyer optimism post-RERA, is the key reason behind the 15 per cent increase in 2017-18

Geetu Vaid

Every cloud has a silver lining. Thus, while the 13.04 per cent drop in the value of the Indian rupee against the dollar so far in 2018, has etched furrows in the fair face of Indian economy, it has unrolled a positive trend in the realty market. The prolonged slowdown has already brought down the prices by 10 to 15 per cent on an average across the country, and depreciating rupee value has added a window of 10 to 15 per cent drop in property values for NRIs looking to invest in India. This has triggered a spike in queries as well as transactions by NRIs over the past few months. According to market watchers NRI investments are expected to rise by 15 per cent in the current financial year. A recent report on the state of NRI investments in real estate compiled by 360 Realtors, a real estate consulting company, has found that NRI investments in Indian real estate have doubled from $5 billion in 2014 to $10.2 billion in 2018. Though the NRI investments had stabilised in 2016-2018, the market has gained momentum recently due to falling rupee value. “The fluctuation in the value of the rupee has made it advantageous for those earning in foreign currencies and spending the same to buy property in Indian rupees. NRI property buyers get more square feet of space for the same amount”, says Niranjan Hiranandani, President, National Real Estate Development Council (NAREDCO). 

While dwindling rupee value is the key factor, regulations like RERA, GST, Benami Property Act, high rental returns and capital appreciation have led to increased transparency and growing developer focus on NRI buyers. Furthermore, the government’s initiative to boost the overall infrastructure development across the country has also prompted NRIs to turn their eyes on India. All these factors are leading to nearly 15-20% surge in inquiries from NRIs annually, says Anuj Puri, Chairman, ANAROCK Property Consultants. Ankit Kansal, co-founder and CEO, 360 Realtors said, “A dwindling rupee along with the transparency that has ensued due to good regulatory decisions like RERA has emboldened the confidence of NRIs in the Indian real estate sector. They are looking to make the most of the opportunity by buying property both for personal use as well as investments”. 

City-wise investment growth

This growth is largely driven by five cities — Mumbai, Pune, Bangalore, Gurugram and Noida. “While Mumbai is the obvious number one in terms of investments, the real scene of action is Noida”, says Ankit Kansal, co-founder and CEO, 360 Realtors. Noida market has been growing by an unprecedented 350 per cent since 2014, raking in $1.4 billion in real estate investments in 2018-19. From attracting less than half the investment that Gurugram received in 2014, Noida is expanding at a rapid pace and has become home to industries like IT/ITeS, consulting and publishing. Its location and comparatively better prices and growing rental yields have led to the increased NRI interest. “Many major national developers are heading for Noida, thereby giving buyers more options”, adds Kansal.

India's largest real estate transaction player Square Yards has facilitated an investment of Rs. 550 crore in the real estate projects across Yamuna Expressway, over the past 12 months, with 40 per cent of the contribution from the Non Resident Indian (NRI) and foreign investor segments. The trend is a sign of revival in real estate investing market, which has been going through slowdown for quite a while.

Commenting on the development, Anupam Rastogi, Principal Partner and Head - NRI Vertical, Square Yards, said, “The comeback of NRI and foreign investors in the India market is broadly due to enhanced regulatory environment and transparency. As far as Yamuna Expressway is concerned, the belt has been under the spotlight owing to the upcoming international airport in Jewar and extension of Metro rail services in Greater Noida.”

Mumbai constitutes around 45-50 p c of the NRI investment in the country. It is a popular investment destination not just for NRI buyers originally from Mumbai, but also from North and South India. Over the past five years, NRI investments in the city have grown by 74 p c. The preference for Mumbai is backed by its high capital appreciation (between 5 to 7 per cent YoY) and attractive rental returns (3 p c annually). IT hubs like Pune, Bangalore and Gurugram continue to be the first choice of IT professionals working abroad. Capital inflow into these cities has almost doubled over the previous five years. 

Along with this tier II and II cities like those in the Doaba belt have also seen sales pick up over the past few months. “We expect the pick-up in NRI demand to reach smaller cities as well. Cities like Chandigarh and Dehradun have traditionally been attractive for NRIs. The NRI investment in housing in India will continue to increase”, says Pankaj Bajaj, President, CREDAI-NCR 

“In addition to that, commercial hubs are registering great demand, be it Gurugram, Pune or Bangalore. Keeping the same in mind, NRIs are becoming active in looking for locations with commercial growth which are profitable from on investment point of view”, says Avneesh Sood, Director, EROS Group.

Country-wise split of investments

Mumbai is the number one market for investors from USA (35 p c), UK (60 p c), UAE (70 p c) and Qatar (32 p c). On the other hand, NRI buyers from Singapore are largely betting on Bangalore (30 p c) and Gurugram (35 p c). Developers are also going an extra mile to cash in on the NRI customer base. Many developers like Omkar, Godrej, Sobha, Alphathum, Vatika, Raheja etc. are coming up with exciting offers such as subvention and assured rentals, that are becoming an instant hit amongst the NRI buyers.

Impact of on prices

Even though the important question being raised is that will this NRI traffic have some role in giving a positive push to the stagnating prices, the answer is not very encouraging. NRIs may have contributed a quarter of real estate sales in the country so far in 2018, the fact remains that their role in bringing about a revival will remain minscule. “NRI buying still a small percentage of the total property sales in India. So we do not expect any impact on prices on this count. Prices are for more dependent on local factors like local infrastructure, job generation and interest rates”, says Pankaj Bajaj, President, CREDAI-NCR. 

Is it the right time for NRIs to invest?

There are many motivating factors which makes it a good time for NRIs to invest in real estate. Besides the rupee fall, the drop in prices of residential properties and high demand for commercial spaces is attracting NRIs to invest in locations where commercial and residential properties are witnessing a rise in prices. “This is the best time to invest in realty sector in India as developers are offering well priced options to attract investments. Since the sector is still in the revival mode, rates of property have not seen any dramatic upwards movement, making them even more affordable at this point”, says Amit Goyal, CEO, India Sotheby’s International Realty . “Talking about today’s scenario, NRIs now like to buy properties bearing in mind the high returns on their long-term investment plans through construction linked & subvention price plans”, says Sood. According to Rajan Dang, Founder, Zvesta.com,"A weak rupee has given the NRIs a further 10-15 per cent leverage. This together brings them a straightaway average profit of 25 per cent of bookings properties in India. This has made the Indian real estate more affordable". 

If the rupee strengthens, the impact on real estate demand would depend on by how much it has strengthened. “Given the current trends, it is unlikely that it will strengthen enough to kill NRI investor appetite”, adds Puri.

Investment hot spots

  • Noida has emerged as the fastest growing destination (growing by around 30 p c annually) for NRI investments, raking in $1.4 billion in 2018-19.
  • Mumbai accounts for almost 50 p c of all NRI investments. These investments have grown by 74 p c over the past five years.
  • Investment inflow from NRIs in Mumbai, Pune, Bangalore, Gurugram and Noida witnesses nearly two-fold growth in the past five years

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