UAE's NRI realty investment to soar in India

The UAE's NRIs, who closely monitor developments on political and economic fronts back home, are expected to make more investments in India's real estate sector in the coming days as Prime Minister Narendra Modi begins his second term, indicating consistency in economic policies.

"In macro terms, a stable government, progressive economy clubbed with the appreciated dollar in the last few years has led to a spurt in NRI investments in Indian properties and that too largely in cities like Mumbai, Pune, and Bangalore. In the last three to four quarters, there has been a steady rise in the demand for not only luxury projects but also for affordable/mid-segment projects mainly due to easy affordability, relatively lesser risk and better rental returns along with gradual price appreciation especially in key markets like Mumbai where a lot of infrastructures is taking shape," said Navin Makhija, managing director of The Wadhwa Group.

"With Rera ensuring transparency and laws allowing 100 per cent FDI in construction, the Indian real estate is seeing an investment infusion from NRIs. Rera and GST have brought in the confidence of NRIs back in the Indian real estate sector. Right ticket price, better returns, increasing infrastructure, seamless connectivity, rising influx of professionals and low lending rates are the important factors driving NRI sales in Mumbai. As per the recent market study, residential real estate prices have risen across metropolitan areas."

Real estate experts say that NRIs are mostly interested in buying properties in metropolitan cities such as Mumbai, Pune and Delhi. The Indian population in the UAE has grown to 3.3 million - the largest concentration of Indians outside India. According to the Reserve Bank of India, the UAE accounted for 26.9 per cent of inward remittances in 2018. The NRI segment of Dubai is a particularly large buyer base for Indian real estate. The rupee's decline in value against the dirham has further boosted remittances and made Indian real estate investments even more lucrative for NRIs.

"There has been a significant shift from investors market to end users. People who plan to retire early and return to their hometown are investing largely with the sense of security. The city houses the who's-who of the nation; corporate honchos, Bollywood celebrities, leading sports personalities, etc, live in Mumbai and all these factors shift the attention of NRIs from other cities to Mumbai," added Wadhwa.

NRIs traditionally invested in high-end luxury properties back home. For end-users, such properties offered them the international lifestyle they are accustomed to. For investors, luxury properties generated sizeable rental income. While the end-user demand for Indian luxury properties continues, albeit on a more muted note, many NRI investors have now turned their focus to affordable and mid-segment housing. This is because the Indian government has provided considerable incentives to buyers of such housing, and also because such properties are in higher demand and therefore give a higher rental yield as well as better long-term appreciation.

Sarojini Ahuja, vice-president for sales and marketing at Transcon Triumph, said: "The new class of ultra-rich people is on a buying spree of luxury homes in global cities like Mumbai. The rupee's decline in value against the dirham, heavy returns, good rental, improving infrastructure are the key drivers. With Rera ensuring transparency and laws allowing 100 per cent FDI in construction, the Indian real estate is seeing investment infusions from NRIs."

NRIs now prefer to park their investment with reliable, organised builders who register their projects under the Real Estate Regulation and Development Act, generally known for transparent business practices. NRIs generally prefer investing in properties in their home state or city, largely because they are more familiar with those territories and invariably have family or friends who can handle the management and renting aspects. However, more experienced investors with sufficient knowledge about other cities - or those working with reputed real estate consultancies - do foray into other cities as well.

Rahul Maroo, chief strategist and head international business at Omkar Realtors, said: "Investment in Indian real estate has always been on the top of the mind for NRIs from across the globe in order to own a property back in their country of origin. Lately, the first and foremost reason is the depreciating rupee, which puts more rupees in NRIs' hands, making properties cheaper for them than they were earlier and hence their interest to invest in real estate in India.

"Secondly, a continuation of a strong and stable government and economy for the last five years, and the future five years as well, strong GDP growth, ongoing regulatory reforms with the likes of Rera, and better rental yields is attracting NRIs to invest in properties in India largely in Mumbai. NRI investors and customers also primarily consider the following factors as well to invest in the realty market, namely minimum initial investment, Rera compliance, high rental yield potential and a brand, which has proven delivery track record," Maroo added.

Overall NRI investment into the primary Indian real estate market is estimated to grow to approximately $25.7 billion by 2022 from $11.5 billion in 2017. Currently, the property market is already down by almost 10-15 per cent in the city, and a weak rupee has given the NRIs further leverage.
So they are straightaway getting an average profit of 25 per cent on bookings while entering Indian property market. NRIs own about 8-10 per cent of the total real estate market in the country, particularly in Mumbai as per Liases Foras.

Deepak Vazirani, head of international business vertical at Rustomjee Group, said: "NRIs have been fence-sitters of late. They surely have witnessed a lot of changes getting implemented within the real estate industry which have been quite encouraging for them. The formation of Rera to support clients and penalise errant developers is certainly a welcome move for the community."

Key source countries of NRI investment are the UAE, which account for 20 per cent, followed by the US (18 per cent), the UK (7 per cent) and Canada (6 per cent).

"Also now, post-elections, a lot of NRIs were awaiting the results and now with a stable formation of government there could be some movement and buying interest that could certainly be seen among the NRI community. A lot of category A developers will be benefitted as NRIs would certainly see investing their monies with quality developers who will deliver a good product wherein the livability index is higher and also they can get a better yield. We will certainly also see certain micro markets and projects getting a booster wherein the ticket sizes are relatively smaller and returns better. Luxury among the NRI's would be clearly seen as a end use and not an investment anymore," added Vazirani.