Hotspots back home

NRI investments in Indian real estate expected to rise by 12 per cent this year, reports suggest

With the appreciation of the US dollar against the Indian rupee, India remains a preferred destination for residential and commercial real estate. The pandemic experience and the current economic trajectory have made many consider investing 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 that figure is expected to grow by 12 per cent in the current fiscal. Further, Q1 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 always given 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 Officer, DLF Ltd.

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. It is reported that queries from GCC countries such as the 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.

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 digitisation of procedures, and transparent regulations.”

Growth of the economy

The Indian economy is likely to grow by 7.1 per cent in FY23 on the back of steady performance by services, manufacturing and the farm sector. Government investment will play a crucial role in boosting the growth rate. The improving industrial capacity utilisation levels will help boost private investment cycle. FY23 started on a good note on account of improved levels of economic activity. Various high-frequency economic indicators such as GST collections, E-way bill registrations and credit growth have performed well during the first four months of FY23, according to CareEdge’s report on the state of the Indian economy. Developers are witnessing rebound in business and positive trends too. Vikas Oberoi, CMD, Oberoi Realty, said: “With the increased economic activity and a strong consumer sentiment towards home ownership, there is a consumption-led momentum across all our residential projects. Our other business portfolios — commercial and retail — have also bounced back. With people coming back to office, there is a strong impetus to the commercial segment. Our retail portfolio has also demonstrated a commendable performance with footfalls going back to and exceeding pre-Covid levels. At Oberoi Realty, we are committed to deliver value to all our stakeholders and believe in developing projects that strive to offer an enhanced, sustainable and healthy lifestyle. With a strong pipeline of new launches and a capability to design space that meets every need of the customer, Oberoi Realty is placed in a leading position in the real estate sector.”

According to Anarock Research’s India Residential Real Estate - Buyer Interest Profiling Report, the service class in India is the dominant socio-economic segment and the primary homebuyer in the large nation.

The report states that a developing nation with rapid urbanisation, rising nuclear families and an increasing population are the most-suited ingredients for the housing sector growth. Anarock Research delved into identifying the new trends among buyers and their preferences. The findings reveal evolving trends, which provide further insights to reinforce developer's strategies in the future like mid-to-high-end segment units are the most preferred; accounting for 79 per cent of the total demand.

Demand for 2 BHK units dominated the market with a 38 per cent share, followed by 3 BHK units at 26 per cent; service class buyers drive housing demand with a 68 per cent share; business class and professionals accounted for nearly 26 per cent of the total housing demand; and 90 per cent of the Indian housing market is driven by end-users.

REPO RATE HIKE AND ITS IMPACT

Recently, the Reserve Bank of India (RBI) hiked key policy repo rate by 50 basis points to 5.40 per cent, leaving the property sector disappointed as home sales may be affected due to increase in equated monthly installment (EMI) in short-term.

Ramani Sastri, Chairman and MD, Sterling Developers Pvt. Ltd, said: “The RBI move might have an immediate impact on home buying for a short-term as the recent consecutive repo rate hikes have already added to buyers’ overall acquisition cost. Rising interest rates along with elevated property construction cost and product price pressures could adversely impact the real estate sentiment when buyers are likely to invest in their dream homes foreseeing the festive season. The real estate sector had just started seeing gradual recovery across key property markets, driven primarily by end-users and this decision will have adverse impact for the interest rate-sensitive Indian real estate sector. However, despite the odds, we’re still hopeful as there is significant pent-up demand from a very large population base and first-time homebuyers. Many high-frequency indicators are also suggesting that the economy has been recovering in a robust way and this will influence real estate positively.”

Lincoln Bennet Rodrigues, Chairman and Founder, The Bennet and Bernard Company, known for luxury holiday homes in Goa, said: “The impact of rate hike will be predominantly on the affordable housing side, which is primarily driven by sentiments and especially first-time home buyers who are heavily reliant on home loans. This decision will not make much difference in the luxury segment as the demand of home buyers in this segment is beyond these considerations. Also, the affordability and the disposable incomes of new-age homebuyers are much better today than few years ago due to the increased job and wage growth in most sectors in the country and this is a silver lining for the sector. The current environment of repo rate hikes is not expected to last forever, and eventually, the rates are likely to come down again. We believe the positive sentiment will continue in the luxury segment driven by changes in buying patterns post the pandemic.”

Pritam Chivukula, Co-Founder and Director, Tridhaatu Realty and Treasurer, CREDAI MCHI, said: “After two years of unchanged repo rate, RBI's decision to hike the interest rates to tackle the inflation and ensure domestic economic recovery was a no-brainer. The sharp acceleration of rates consecutively for the third time in a short period may have a short-term effect on the sentiment of homebuyers as low interest rates have been the biggest factor in the resurgence for real estate demand in the last two years. We hope that the State Government will step in to lighten the homebuyer’s load by reducing stamp duty ahead of the festive season.”

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory, said: “The recent consecutive rate hikes by the RBI were aimed at re-anchoring the inflation expectation and strengthening the economy. Thus far, the rise in property prices due to the increased interest rates, metro cess and higher stamp duty had not affected real estate sales over the last few months, thereby confirming that there is genuine demand for housing. But this move by the RBI to hike the repo rate again might temporarily limit the growth momentum of the real estate sector.”

Cherag Ramakrishnan, Managing Director, CR Realty, said: ''With the upward trajectory in interest rates firmly established by RBI, the homebuyers while feeling the pinch in the short term may rush to purchase their homes and lock in their home rates at the earliest. This has been the trend in the last quarter, and we see that trend accelerating in the coming two quarters as well. Based on the sales data of the last two quarters, even post the rate hikes, the off season sales are at an all-time high. The fear of rising property prices and further interest rate hikes is only further fueling the latent demand conversion. With limited inventory close to readiness, the demand for ready or close to possession homes will see an exponential increase in the coming quarters.''

Shraddha Kedia-Agarwal, Director, Transcon Developers, gave her opinion, stating: “RBI's decision to hike the policy rates for the third consecutive time was anticipated on the back of high inflation and economic recovery. We had already started seeing a vertical movement in the home prices from the past couple of months which had a minimal impact on the housing demand. But, this decision will further put a dent on the homebuyer's sentiments impacting the overall demand for a short period of time.”

Jitrendra Shah, Managing Director, Rockford Group, opined: “The decision by the RBI to hike the repo rate to pre-pandemic levels was anticipated to keep the inflationary expectations under check. This move may impact the overall growth of the industry by dampening sales momentum while property prices are already on rise. However, we believe that this will also encourage the fence-sitters to make the most of the current schemes offered by developers in the market and take the plunge.”

Bhushan Nemlekar, Director, Sumit Woods Limited, said: “Due to the pandemic and the geopolitical issues, the input costs were already high and now with these consecutive rate hikes, it will only dampen the spirit of the entire real estate value chain. The cost of borrowing for both developers and buyers will be impacted and this will result in undesired rate hikes across the spectrum. However, we did not see much impact on the buying spree in the last couple of months since there are genuine buyers in the market to keep the momentum going.”

Jitesh Lalwani, President, HomeSync Real Estate Advisory, said: “RBI’s decision to hike the key policy rates for the third time in a row will have a serious impact on the housing loan EMIs, but we are still bullish about the real estate sector the way it has performed in the past few months. Yes, homebuyers are concerned about the skyrocketing property prices but we believe that this move may push homebuyers who are still deliberating to seal the deal. However, we urge the government to take some necessary measures to control the rise in property prices so that it will help to boost the demand in the upcoming festive season.”

Dr. Sachin Chopda, Managing Director, Pushpam Group, said: “RBI's decision to hike the policy repo rate was anticipated, factoring the rise in inflation. The rate hike is likely to shrink liquidity in the economy overall, especially impacting the investor’s sentiments. There will be a short-term pause on the minds of the investors while assessing the volatility of the current market dynamics. However, they are bound to return soon in the market as the festive season commences.”

— sandhya@khaleejtimes.com