NRI interest grows in real estate; affordable, mid-market categories emerge favorites

After landmark regulatory changes in the real estate sector in the country in the last few years, the tides are turning in favour of the market and there is marked buoyancy in both domestic investment and investment by the non-resident Indians (NRIs) in properties across all geographies in the country.

The regulatory reforms like RERA and GST taken in the last couple of years have restored the confidence in the Indian real estate market, particularly among the NRIs who are investing with renewed interest. There has been a sizeable jump in the number of NRI deals in the Indian property market in the recent past. In the second half of 2018, Square Yards witnessed over 20 percent growth in NRI transactions as compared to first half of the year. The total number of deals in 2018 was itself higher by 30 per cent over the previous year.

The movement in the exchange rate of the rupee versus US dollar in 2018 has further tilted the balance in favour of investment in the Indian market and NRIs have latched on to the opportunity with both arms. The change in the currency rates have come at a time when the dust was settling in the Indian real estate market after some necessary tumultuous reforms were made by the government. NRIs have seized the opportunity, especially those who were sitting on the fence for a while for an opportune time to make investment in the real estate market back home.

NRIs most active in the mid-market housing category

The NRIs are especially keen on affordable and mid-market properties being sold by developers across various micro markets in the country. One of the reasons for the popularity of the affordable segment is the fact that developers are aligning their product portfolio in tandem with the realities and where the bulk of the demand is, that is, affordable segment even for the NRI investors. Contrary to popular perception, NRIs are most active buying houses in the affordable and mid-market category. While 13 per cent of the total deals by NRIs were in apartments costing up to Rs 20 lakh, residential units costing between Rs 20-40 lakh and Rs 40-60 lakh accounted for 16 and 26 per cent, respectively, of the total purchases in 2018.

Another factor working in favour of affordable housing is the sops given by the government to woo buyers. For example, the Goods & Services Tax (GST) has been tweaked for the affordable category for homes that are now taxed at the rate of 8 per cent as compared to 12 per cent earlier. This has made the deal sweeter for the buyers.

Emerging hotspots among NRI investors

For the 75 lakh Indians living in the oil-rich Gulf region, Noida Expressway and Yamuna Expressway in Noida, Hinjewadi in Pune and Andheri East in Mumbai are some of the most popular micro markets for investment.

For the NRIs living in Canada, micro markets like Zirakpur and Kharar near Chandigarh are popular locations. For Indians living in Melbourne and Sydney, investments hotspots in like Devanahalli in Bangalore and Greater Noida (Delhi NCR) have especially become popular.

NRI investment gravitating towards grade a developers

The investment scenario for the NRIs is largely gravitating towards Grade A developers and projects by Godrej Properties, Shapoorji Pallonji Group, Kolte Patil, ATS, Omkar, Gaur Developers, Shriram Properties and Emaar Group are the hot picks for the overseas Indians.

A lot more investment by NRIs is anticipated in future as the Indian real estate industry evolves with increased transparency and digitisation of land records. A number of startups in the Indian real estate market are making 'Search & Discovery' process easier for those who are looking to invest while some of them are making the entire transaction smooth and painless. The efforts of the government and these startups are together working towards increased confidence of the buyers in the property market in India and there will be a quantum jump in the NRI investment in real estate assets as their trust grows further.

(The writer is principal partner and head-NRI business, Square Yards)