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Five reasons why NRIs should invest in Indian real estate now

Anupam Rastogi/Dubai
Filed on August 1, 2020
Many real estate experts and consulting firms in India are expecting a 10-20 per cent correction in the prices of luxury properties.

The bulk of that money sent home by Non-Resident Indians (NRI) goes into the real estate sector.

Any story about India becomes a compelling tale once you use numbers to illustrate the point. It's the world's largest democracy, and is expected to become the most-populous nation by 2028. And when the nation shutdown to contain the spread of the coronavirus, it became the world's largest such exercise because of the 1.3 billion people involved.

Indians also form the largest diaspora in the world, with 28 million people living overseas. When they repatriate their income back home, that exercise becomes the world's largest inward remittance - at more than $70 billion annually. The bulk of that money sent home by Non-Resident Indians (NRI) goes into the real estate sector, fuelling expansion in what was until recently the fastest growing major economy.

But things aren't all hunky-dory now, with the coronavirus outbreak showing no signs of slowing. The pandemic has slashed corporate earnings, household incomes and consumer spending and plunged the economy into uncertainty.

The result: the construction industry - comprising real estate and urban development segments - has taken a knock. The outlook for the industry, which is the second largest employer in India and the second largest recipient of foreign direct investment, looks uncertain.

Yet, in my view there's no better time to invest in the Indian property market than now. And here are five compelling reasons why:

Security of buying a home in India
India has set a benchmark across the world in dealing with market fluctuations and health crises. The country has stood firm during the previous meltdowns of 2001 and 2008 with little impact on the economy. Investing in a property in India is therefore a safe bet for most NRIs in terms of good return on investment and the security of the Indian market in tough situations.

Further, watershed reforms taken in the last few years by the government such as RERA, GST, & other measures to cleanse the real estate sector have instilled a sense of confidence among NRI investors towards the Indian real estate market and increased transparency also. Controlled inflation and speculation free market provide an opportune value to NRI investors and buyers to invest in the real estate market.

Repo rate slashed
The reduction in repo rate by a cumulative 115 basis points so far this year to 4 per cent comes as a good tiding for the real estate sector. With home loan interest rates getting cheaper, it gives a convincing reason for fence-sitters to take the plunge into the real estate market. When we look at historical data of repo rates, in the year 2000, repo rate was at its peak at 13.5 per cent and in 2020 it's nosedived to 4 per cent. It is always considered that the reduction in repo rate is inversely proportional to real estate growth. NRIs looking to invest in Indian real estate can make merry as this move will reduce borrowing costs and facilitate the easy availability of loans.

Plummeting ticket prices
Affordability in Indian real estate is starkly visible with real estate ticket prices taking a tumble in various segments of real estate. Realty players are churning out doles to rein in buyers from all sections of the society and NRIs can take this as an opportune calling to invest in real estate in India. The long-cherished dream of owning a home back in their home country can be easily fulfilled in the present situation. Many real estate experts and consulting firms in India are expecting a 10-20 per cent correction in the prices of luxury properties (Rs25 million and above) depending on the location, city, and demand-supply situation. In the mid-segment, property price between Rs10 million to Rs15 million might witness a slight correction and the affordable segment may register a moderate price reduction of 5 per cent.

Flexible attractive payment plans
To allay the fear of NRIs looking to invest in the property sector in India, several real estate developers are dishing out flexible payment plans to prevent any big dents to the pockets of homebuyers. Godrej, for instance, has unveiled a 10:90 payment plan where potential homebuyers have to fork out just 10 per cent of the total cost of the project to book a home. Deferred payment schemes like 10:90 payment option have empowered homebuyers and investors to reconsider investments in other avenues and veer towards real estate. The flexible payment plans could help NRI investors & homebuyers to save 5-6 percent of the total amount of the property.

Depreciating rupee
The rupee has gone into a downward spiral in the wake of the COVID crisis due to slowing economies and geopolitical tensions raging across the world. The value of rupee against dollar hit a historic low of Rs76.8, before gaining some lost ground. This development can tickle the expectations of NRIs who were waiting for a favourable opportunity to pour money in real estate. With the stock market and gold prices going for a freefall, investing in real estate stand as a good bet for NRIs to hedge against potential risks. In the two years to July 15, the Indian rupee has depreciated about 9 per cent. As the economy faces the pressures of a recession ahead, the rupee might witness a further dip in its value.The correction in Indian rupee value could help NRIs to save around 8-10 per cent while investing/buying property. It is thus an appropriate time for NRIs to leverage on rupee depreciation and invest in real estate.

Anupam Rastogi is Co-Founder and Head GCC, Square Yards. Views expressed are his own and do not reflect the newspaper's policy.

 

 

 



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