The Non-Resident Indian (NRI) community – made up of India’s citizens living overseas – is increasingly becoming a dominant force in Indian real estate.
According to a new report published by the real estate transaction platform Square Yards, the total amount of NRI real estate investment in India’s eight largest cities is estimated to reach 11.5 billion dollars in 2017. This represents roughly 20% of all Indian primary real estate.
Expats: Investment Euphoria
The NRI community worldwide broadly constitutes a population of nearly 31 million people, consisting of Indian passport holders living abroad and people of Indian origin with international passports.
Economically and politically advanced, the NRI community’s involvement in the Indian economy has often been limited. However, during the beginning of the previous decade, prudent steps were taken by the Government to reach out to it. Since then, there has been a steady increase in investment from its expats.
Given the pride associated with owning a home amongst the Indian community, real estate has become one of the major engines for investment. Over the last few years, NRI investment in primary Indian real estate has been moving remarkably up the curve. The rise in investment is not just down to the emotional connection with homeownership but also capitalises on a host of events that have unfolded in recent times.
A Bright Future for India
Recent years have seen India upping its ante on the global stage, with Indian GDP clocking growth numbers that outshine the global average and GDP growth rates of various other major economies in the world. Even amidst the recent chaos created by demonetisation, the Indian economy is expected to grow by around 7% this year.
Promising economic parameters make Indian real estate a prolific platform for wealth preservation & creation. Another factor that is stimulating NRIs to make investment has been a depreciation in the rupee against the dollar and other foreign currencies, making Indian property more affordable for the expatriate base.
Where are India’s Strongest Expat Links?
The Square Yards report argues that NRIs based in the UAE will be one of the major forces in NRI investment in 2017, constituting around 20.2% of its total this year.
The higher level investment coming from the UAE’s Indians could be explained by the backdrop of the two countries’ geographical proximity along with the strong bilateral relationship between the UAE and India. The UAE’s standing in its expats’ financial ties to home is followed by countries like the USA and Saudi Arabia.
Other countries such as Australia, Canada, and Singapore are also expected to be sources of substantial NRI capital inflow into Indian primary real estate.
Government Transparency: An Investment Pull Factor
It is believed that strong sentiments will persist in the NRI community, with greater numbers of expats looking forward to real estate investment in India in the near future.
The Indian government continues to embolden the sector with a host of major policy-level initiatives, including: ‘smart city’ programmes, housing for all, facilitating REIT involvement in the commercial real estate market, implementation of Real Estate Regulation Act (RERA), and the curbing of black money circulation in the sector through the recent demonetisation of high-denomination currency notes.
All these initiatives in tandem can play a major role towards ushering the industry towards greater transparency, thereby accelerating investment inflows. Heightened transparency will also lead to consolidation of the industry, along with the opening up of new credit lines for developers in the form of private equity and other institutional investors.
As Square Yards’ COO and co-founder Kanika Gupta Shori put it,
“A transparent industry outlook and surge in institutional investment could give an exponential push to the already bullish NRI sentiments. This will fuel more investment in the times to come. Increasingly, developers and real estate marketing agencies are acknowledging the rising significance of the expatriate community and are spending heavily to unlock the potential of the market.”