NRIs can take advantage of slowing Indian realty

Outlook for the Indian property sector is good in the wake of the government's action to take the country's gross domestic growth rate to 10 per cent per annum by 2016-17.

The depreciating rupee, a slowdown in real estate and the government's investor-friendly policies are offering good investment opportunities to non-resident Indians in one of the promising growth segments of the economy, experts say.
Talking to Khaleej Times on the sidelines of an event in Dubai, industry specialists said outlook for the Indian property sector is good in the wake of the government's action to take the country's gross domestic growth rate to 10 per cent per annum by 2016-17.
"The time is ripe for investments and home loan disbursements to NRIs are definitely increasing. The average home loan size is between Rs5 million to Rs6 million, and villas and apartments are in highest demand by NRIs," Ashwinder Raj Singh, chief executive for residential services at JLL India, told Khaleej Times.
Elaborating, he said it is right time for NRIs to invest in the Indian real estate industry. "The primary reason is the value of rupee depreciating against the dollar is offering NRIs excellent returns on their investments," he said.
Referring to another important factor, he said that the Indian real estate market has been in slowdown mode for the last couple of years, with an oversupply of properties in the market. However, things are slowly turning around, and prices will soon start going up along with the demand due to an upswing in the economy.
"It is better to make investments now, when builders are offering attractive schemes to clear their pipelines and attain liquidity," he said. "Invest as soon as possible, because the current advantage of earning in Gulf currencies that trade strongly against the rupee will reduce in the coming times due to a better performing Indian economy," he added.
To a question about the weakening Indian rupee against the US dollar, he said it would be good for NRI investments in the country. The Indian currency has lost over five per cent so far this year and it is likely to sustain the similar trend in 2016. "As per recent reports and predictions on how the markets have been performing of late, barring a major natural or man-made catastrophe affecting global markets, the value of the rupee should be around 67-70 against the dollar. This is closer to the current value and should definitely prove to be lucrative for NRI investments for better returns," Singh said.
He said major property markets of the country such as Mumbai and Delhi are overloaded with unsold stock of properties, and builders are offering amazing deals to offload their inventories. Buying now in markets that will see prices going up in the near future can enhance return on investment significantly, even in the short term of three to five years.
In markets like Bengaluru and Hyderabad, he said the expanding job markets are boosting demand for rentals. Investing in these markets can ensure superlative RoI via rentals and even outright sales after a few years.
Good RoI offered
Sunil Jiaswal, president of Sumansa Exhibitions, organiser of the Indian Property Show, also expressed the similar views and said the government is in a mood of creating a buyer-friendly environment and the real estate sector looks promising for the next five years.
"Recently there has been a lot of action in the commercial sector with Mumbai locking in returns of 12 per cent to 19 per cent per annum, Bangalore 11 per cent to 12 per cent and Delhi NCR eight per cent to 10 per cent. We are seeing some private equity deals happening as well," Jiaiswal told Khaleej Times. He said the government of India has also announced a host of measures to spur the real estate sector, which includes an allocation of $1.16 billion for the development of 100 smart cities. Also, the Reserve Bank of India has cut the repo rate thrice in less than nine months, which has brought down home loans' interest rate at 10.25 per cent.
"So it's a good time to invest in the Indian real rstate market," he said, adding that the current market conditions are in the favour of NRIs and exhibitors are offering some fantastic deals with the corrected prices and good payment plans. "Even the rate of exchange is in the favour of NRIs, hence it's a good time to invest," he said.
"As per the recent statement given by the RBI governor, the central bank is comfortable with the rupee-dollar parity at 65 to 66 levels. Also, the government has clarified on various occasions that they want to make India a global exporting hub, which requires rupee to remain at current levels to maintain competitive edge," he said.
Medium-term property outlook
Singh of JLL India said the Indian real estate outlook for next two to three years is extremely bright owing to several factors that are now playing out.
Firstly, the economy is on an upswing, and this will result in better demand. Secondly, due to smart cities, "Housing for all by 2022" and Amrut initiatives being activated by the Modi government, the real estate sector is going to see a lot of action.
Thirdly, the recent announcement by the government easing foreign direct investment norms in construction sector will give a boost to the construction sector.
"The rules regarding minimum built-up area and the capital requirement will go a long way in helping to alleviate the sector's liquidity issues, and will give a lot of stimulus for growth," he said.
Jaiswal said the government is taking a lot of steps to take the GDP growth rate to around 10 per cent by 2016-17 and maintain it over next decade or so.
"Also, there is a shortfall of more than 60 million homes in India and government wants to provide housing for all by 2022. This will spur demand for real estate in India over next 15-16 months. So homebuyers can take advantage of soft prices currently across India and make returns of over 20 per cent per annum over next three to five years," he concluded.
- muzaffarrizvi@khaleejtimes.com