Real value for NRIs in realty

India & You

Jan-Feb 2015

Slowdown in the Indian real sector has never deterred non-resident Indians from investing in their homeland and now with the euphoria around the new government, their confidence has been boosted more.

Sreya Nijhawan and her husband Rishabh, hoteliers in the UAE, already own an apartment in their hometown Mumbai and are keen to invest in properties in India that would fetch them handsome return on investment (RoI) five years from now. The enterprising couple, after some good research and bargaining, recently picked up three apartments in Bangalore. “Bulk investment offered us a good bargain along with one-time registration process and will also help in easy monitoring of properties going forward,” says Sreya. NRIs who have so far shown interest in buying properties in overseas markets, are now keen to invest in Indian real estate. They are making bulk purchases, getting decent discounts, and expecting good returns in anticipation of a revival in the market.

Popular destinations

A study by ASSOCHAM suggests that NRI property buyers’ investment is expected to surge by 35 per cent vis-à-vis 18 per cent in the last fiscal year. Bangalore tops the charts owing to its evergreen IT sector. Other markets include Ahmedabad, Pune Chennai and Goa. Property markets in Bangalore, Ahmedabad and outskirts of Mumbai, including Ambernath and Navi Mumbai, are generating good interest among buyers in the UAE, Singapore, the US and Canada. According to the study, Ahmedabad with 32 per cent continues to be the most stable market in terms of demand and absorption of both residential and commercial spaces. NRIs consider Ahmedabad as a safe place to invest in, with lenient government regulations for property investments. Pune takes the third place (30.5 per cent), whereas Chennai (28 per cent) assumes fourth and Goa (23 per cent) is at fifth position. Delhi saw a 21 per cent rise in enquiries this year as opposed to last year from this segment.

Moreover, according to a study by Sumansa Exhibitions that organised Indian Property Show in Dubai recently, Mumbai has once again emerged as the most popular and attractive property investment hotspot amongst the UAE-based Indian expats. Bangalore grabbed the second spot with 24.13 per cent.

Canada-based NRI billionaire Bob Dhillon who is a Founder, President and CEO Mainstreet Equity Corp (Canada), says, “There are a large percentage of NRIs that are successful real estate developers who can bring in foreign capital, foreign expertise, and foreign design. There has been great opportunity for technology, trade, architecture, urban planning and most importantly, institutional long-term capital in the Indian real estate sector,” adding, “North America has been very active in going vertical on affordable housing for the populations of North America, Europe, and Asia.”

New government boosts NRIs’ confidence

The study by ASSOCHAM stated that NRIs feel confident about the new government in India and are waiting for an investment-friendly market in various fields. The government has boosted NRIs’ confidence and they are making bulk property purchases, anticipating realty revival in India. This is clearly helping both sides here as NRIs are getting discounts while developers, the much-needed liquidity.

However, there have been expectations of NRIs from the new government. Dhillon shares, “If the new government is serious about providing affordable housing or middle class housing in a mass scale, then there is need for sufficient amount of capital. To attract institutional capital, changes are required in ownership rights by foreign institutional capital, foreign direct investment, and, repatriation of capital.”

“Real estate land development is a localised business and for the local businesses to become more transparent and clean, you have to be very clear and transparent on zoning, ownership rights, squatters, municipality, infrastructure, utilities hook-ups and dealing with the many levels of permit issues. So, to attract people or NRIs for investment, the government has to eliminate red tape and bureaucracy,” he adds.

Opportunities for developers

Sensing an opportunity of rising interest among NRIs to invest in Indian real estate, some developers are keen on their NRI offerings. J C Sharma, Vice Chairman and Managing Director, Sobha Limited, said, “We have seen an increase in the number of NRI investors for our properties. As of H1 FY15, 27 per cent of our total customers are NRIs.” Mohit Goel, CEO, Omaxe, shares, “NRIs/PIOs have shown a lot of interest in this slowing market. A weakened rupee is a reason big enough where NRI/PIOs can benefit when rupee corrects in the medium-long run with stable government at the centre. Besides investment in the metros, NRI/PIOs have found tier II and III cities as potential investment destination, including Lucknow, New Chandigarh, Ludhiana and Faridabad.”

NRIs who reinvest in India prefer locations that would compliment their luxury lifestyle

“Omaxe has always been NRIs’ paradise. Our projects in cities like New Chandigarh, Noida, Surajkund and Ludhiana have huge NRI investments due to customised product that caters to the lifestyle NRIs are used to,” he adds.

Omaxe is seeking opportunities in Northern region for NRI investments, while, Sahil Kapoor, Executive Director, RE/ MAX India is exploring southern region for this purpose. “With Hyderabad, Chennai, Bangalore and Vishakhapatnam seeing a lot of infrastructural growth and amenities, these cities continue to attract investments by NRIs. In fact, seeing the potential for development and the rich lifestyle that these cities offer, they are one of the locations for the expatriates and also the NRIs who want to relocate in India.”

The NRIs who reinvest in India prefer locations that would reap them high returns and compliment their luxury lifestyle that cater to both their needs as well as demands. With the developers expanding their distribution channels and tie-ups, a lot of investment can be seen from NRIs. Sushant Muttreja, Chairman, Cosmic Group, says, “There are huge investment opportunities and we have a lot of participation from the NRIs and PIO from all over the world. Growing at the rate of 18-30 per cent, Indian real estate sector will never disappoint the NRIs. We have brilliant offerings such as our project ‘City of Romance’ where they can pay 20 per cent initially and rest the amount post possession. Even post possession, we have twin usage of resort and housing in that particular project. It is very beatifically conceptualised. This project is exclusively for NRIs. We have similar offerings for them in commercial segment too. This will bring in return on investment higher than 20-25 per cent. So, there are amazing strategic investments which one can look up for in Cosmic Group and we have received a lot of participation from NRI and Indian diaspora. We expect the same to continue in the coming year.”

To tap the growing business opportunities from NRIs, real estate developers have set up their sale offices in different regions. Omkar Realtors and Developers has started its office in Dubai and now it is looking at setting up offices in Singapore and Hong Kong. Godrej Properties, the real estate development arm of the Godrej Group, has opened its first international representative office in Dubai’s key business district to engage directly with the Indian Diaspora across the GCC market.

“With some high expectations from the realty sector and confidence in the Indian government, the year ahead will be seeing a lot of NRIs showing interest in investing in India,” says Kapoor. Dhillon, who expects transparency, encouraging FDI and corruption free environment with the coming of the new government, says, “There is a bit of Modi fever, which should be capitalised into FDI that would help India in becoming one of the most dynamic BRIC countries in the coming years.”