99ACRES: NRIs coming back for Indian realty
Non-resident Indians (NRI) in recent years have been one of the most prominent segments of investors venturing into the Indian real estate realm. Aided by new investor-friendly economic reforms, NRIs have gained unprecedented confidence in the opportunities for investments that home has on offer.
Recent developments in the global economy, like a hostile international paradigm for immigration in the developed nations, civil unrest in the Middle-East, and in contrast, domestic stability coupled with augmentation in civil and social infrastructure is fuelling a homecoming trend for NRIs.
Over the last 5 Years and post the global financial crisis, the overall scenario in real estate in India has matured to a state, where, as an investor, an NRI can rely on a stable and progressive government to put in investment into a calculated and moderately risk-free asset class like real estate. While a gradually depreciating rupee against USD and post demonetization dip discounting by developers is making it extremely attractive for an NRI to put in USD in India. The RERA regime and GST reforms are making it a convincingly safer bet.
Some shifts have been noticed recently in investment patterns wherein the NRIs prefer to invest in commercial real estate rather than the residential asset class. With a progressive reformist economy, the stimulus for entrepreneurship and capitalism is on the rise. This is boosting the demand for commercial real estate. Be it, retail, office space, warehousing, all across the realty domain there is significant growth and this is ensuring a rental yield of 7-10 percent as compared to barely 2-3 percent rental yield in the residential category.
With some decent improvisation in civil and social infrastructure, an NRI can foresee a lifestyle that can match or closely match what he enjoys in the first world countries where he lives. This is fuelling the demand for luxury real estate and developers are now offering a strategy of enhanced discounting to propel such demand in the category. Some sops have also been passed over by the Reserve Bank Of India under the umbrella of the Foreign Exchange Management Act (FEMA). This Act gives NRIs free reign in the Indian real estate realm to purchase any form of property except for agricultural property or farm houses.
However, NRIs have recently witnessed the state of affairs on stalled projects, developer delinquencies, and misappropriations. They are more cautious and more comfortable investing in projects which are nearing completion and completed. This opens the opportunity only for cash-rich developers who can withstand the credit line required to bring the project near completion. The RERA regulations, judging by the level of implementation so far, fails to bring in the required level of confidence with investors to start investing in projects which are at the incubatory level. The recent NBFC crisis and the reservation of the financial sector to infuse credit lines into such projects makes it still challenging for a project to progress with the necessary pace of improvement.
The NRIs have now moved to a different landscape where home is safer, more stable and progressive. They are more aware of investing in the right asset classes, the right opportunities, and the right developers. So as they rightly say, home is where the heart (of real estate) truly is.