NRI investments in Indian real estate may rise by 12% this year

With the appreciation of US dollar against the Indian National Rupee, India remains a preferred destination for residential and commercial real estate.

The pandemic experience and the current economic trajectory have made many consider investments in their homeland.

The demand queries from the GCC are increasing exponentially in price brackets across premium and luxury categories.

The trend also underlines their need to be close to their families, while some are investing with the purpose of having a base back home, should they decide to retire in India.

Industry data suggests that NRIs invested over $13.1 billion in the Indian real estate market last year and will grow by 12 per cent in the current fiscal.

Further, first quarter home sales in India have already spiked at the highest level since 2015. These positive trajectories are only augmenting more pull from NRIs who are keen on high-end investments, across metros, and countryside locales.

“Indian real estate has always been a market of enormous opportunities for NRI investors from GCC countries. As the Indian rupee hits record lows against the dollar, there are all sorts of knock-on effects and buying real estate in India is now relatively accessible for NRIs earning abroad and keen to take advantage of those high returns, as a result, we are seeing a higher level of inquiries. This is particularly true for residential real estate because, factually, the residential asset class has given always high appreciation and it has been a safer investment option, being a lot more mature in terms of coverage in different cities in India and flexibility in offering options for just about every budget,” said, Aakash Ohri, Group Executive Director and Chief Business Offer, DLF Ltd.

It is expected that NRI investments in Indian real estate will rise by 12 per cent this year with continuous developmental activity and resurgent economic momentum. In fact, the trend has created a specific market segment for high-rise properties and integrated townships across metros, as well as large holiday homes in the countryside and coastal areas. Locations such as Shimla, Kasauli, Mussoorie, Goa, and metro regions such as NCR, Pune, Kochi, and others are generating a lot of interest. Luxury interiors, and amenities, with a focus on the environment and wellness are often requisites by NRIs while shortlisting real estate options.

Ohri further added “In current times when property prices are higher and the rupee is lower, from the NRI perspective the opportunity for arbitrage is significant. Factors like a simplified taxation regime and indexation benefit for properties held in India encourage NRI buyers to park their surplus money in India. Other major decision drivers are factors like lower home loan interest, digitization of procedures, and transparent regulations”

It is reported that queries from GCC countries (UAE, Oman, Kuwait, Saudi Arabia and Qatar) amongst other Asian regions are the highest. GCC constitutes almost half the Indian NRI and expat population in the world at around 7.5 million. Given the location proximity, favourable policy outlook, current exchange rates and indexation benefits, India is and will continue to be a hotspot for ‘back home’ demand, bringing in more FDI and circulating a positive sentiment for the domestic sector.

Meanwhile institutional investments in Indian real estate touched $2.6 billion during H1 of 2022, a 14 per cent rise from H1 2021.

Investors are enthused by the recovery seen across the Indian real estate spectrum, after Covid-19-induced disruptions.

The inflows during H1 of 2022 was led by the office sector which accounted for about 48 per cent share, followed by the retail sector with a share of 19 per cent, according to a survey by Colliers India.

On a quarterly basis, inflows into Q2 of 2022 are up over the previous quarter, while registering a 50 per cent increase from the average quarterly inflows of 2021.

“The first half of this year has witnessed euphoria of businesses bouncing back with increased office and industrial leasing, retail and travel spend, and continued buoyancy in the residential sector. However, the market is seeing some caution on account of geopolitical tensions and increased expected risk-adjusted returns. Investments in India continue to increase in both development and operating assets.” Domestic investors were majorly inclined towards mixed-use assets and the retail sector.

However, investments continue to be driven by foreign investors wherein pension and sovereign funds are betting on income-yielding assets in the office, retail and industrial sectors.

During H1 of 2022, the office sector garnered about 48 per cent of the investments. Investors are seeing encouraging signs of revival in the office sector since late last year.

While a hybrid style of work is the dominant mode of working, large technology corporates continue to lap up office spaces. Investors are taking a medium to a long view of the sector, with the intention of bundling assets into REITs. As a result, investments in the office sector rose 20 per cent YoY in H1 of 2022.

The retail sector saw a 19 per cent share in investments as investors look toward completed malls as an investment avenue. India’s retail market is seeing an expansion of fashion and F&B brands.