Why Invest in Property in India

In the search for better opportunities in education, employment and business, several people from our motherland, India, migrate to foreign countries every year. And they have done it in massive numbers. These people have only one sole intention i.e. to immigrate to a country with a higher currency value and settle there forever if they can. These people are known as NRI’s (Non-Residential Indians).

Many of these NRIs are also holders of an Indian passport, but they reside in another country for the sake of work. These people are not permanent settlers, but they have a residential status that shows that they intend to stay out of India for an indefinite period of time.

So what do these people do after they have earned some money in a foreign country? They invest the money back into India. This is called inward remittance. When it comes to inward remittance, India figures at the top of the global list. If you follow the World Bank report, Migration and Development Brief, which is released in April of each year, among the top remittance recipients is India, which is followed by China and Mexico.

Here are the stats from April 2019 :

  1. India($79 billion),
  2. China ($67 billion),
  3. Mexico ($36 billion).
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Time to Head Back Home!

In fact, according to data in successive WB reports, these stats have been seeing a trend of the successive annual rise in India. But where does the regular NRI invest? In the Indian share or stock market? No, it’s way too risky to get into such a speculative field. One market correction and the entire investment could be wiped out.

Then do they invest in Gold? The yellow metal is precious and less speculative as compared to the share and stock market. Moreover, the present gold market is quite bullish and is seeing an upward price trend. Our Indian housewives also prefer this method of investment and have been doing it for quite some time now. But let us leave Gold investment for another day because this is a time-consuming topic.

So, where do NRIs mostly put in their hard earned money? The answer is – They put it in Real Estate market or landed property. The real estate sector in India consists of both residential and commercial properties. These properties could solely be land or it could be a constructed property also.

These reports from World Bank have also predicted that NRI investments from Indian diasporas all across the globe in the Indian real estate market are all set to rise to $13.1 bn in FY21. This section of the market is growing by 5% on a YoY basis. At one time, Indians outside India were a limited force. Today the expatriate community is growing steadily. The overseas citizens of India currently account for a sizable part of Indian housing demand.

But which NRIs invest back in India the most? The major sources of NRI investments include the USA, Canada, GCC, UK, Singapore and Malaysia. In the past few years, NRIs have gone from strength to strength in the Indian housing market.

Where Should The NRIs Invest

Let’s be honest – there is a lot of land in the country! India is the 7th largest country in the world. But not every realty sector in India is equal. Presently, the real estate sector in India is seeing a rapid decline. Owing to market correction, demonetization and the present Covid-19 situation there has been a bearish trend in real estate all over the country.

However, there are three property markets in India that have been seeing an appreciative trend as compared to the whole country. Ideally, the NRIs need to focus on these markets only, but they are free to choose their pick.

So, which are these property markets that are not seeing a price fall even in these distressing times? Let’s find out and discuss what makes them so lucrative:

Investments in GurgaonDelhi – NCR – This region has always been the favourite of many big and small real estate developers. That’s because there has always been a lot of scope in and around the NCR part of Delhi. It comprises of outer areas of Delhi viz. Ghaziabad, Faridabad, Gurugram, Noida, Meerut, Bulandshahr, Muzaffarnagar, Karnal, Rohtak, Alwar, Bharatpur, Sonipat and Panipat.

Out of these districts of Haryana and Uttar Pradesh, the prominent real estate investment section is the Ghaziabad, Faridabad, Gurugram and Noida belt. However, the other portions should not be ignored because the Taj Expressway has brought everything nearer.

Right now, this section is not growing as fast as it was a decade earlier. Still, this remains a hot investment option. You can put your money both in a residential or commercial property to get a good return.

Mumbai – Pune – Another investment favourite among the NRI’s, but it attracts mostly the ones who have an idea of this portion of India. This market is extremely lucrative because this has never seen a negative trend, EVER! Pune has always shown positive sales figures, even when the whole country saw a sharp decline in sales. Only the Mumbai portion is bleeding currently in terms of price fall.

Do not Invest in Commercial Right Now

Although investing in commercial properties was a great option earlier that is not the case post Covid-19 because social distancing norms have made WTF (work from home) the new normal. Thanks to this, companies across India are not renewing their commercial rental leases thus creating a huge gap between demand and supply in the commercial properties market. Investing in commercial properties should not be undertaken by investors atleast for the next 2 years or until a vaccine for Covid-19 is found. Right now it is more prudent to invest in residential projects as there are many wonderful residential properties that are up for grabs at great prices. With developers saddled with more than a lakh of crore worth of inventore in the Mumbai region alone and with desperation growing by the day, developers are willing to bend over and offer atleast a 25 % reduction in price to anyone who is willing to talk with a cheque book in hand! Morover rental prices in Mumbai and Pune will always appreciate because of the large pool of white collar workers who come from all corners of the country to earn a better income thus increasing property appreciation and return on investment.

Bengaluru – The new kid on the block, who is definitely going strong at the moment. It is called as the Silicon Valley of India – the IT hub of the country. The property market is going to always be bullish in Bangalore, because of the high demand and the low supply of the residential plans.

Also, in the last five years, Bangalore has seen a double-digit rising trend in the property market, because of the growth in the commercial area as well. Nearby areas are also being rapidly urbanized so that the demand of the city dwellers can be met.

In the south, other areas such as Kerala, Andhra Pradesh and Tamil Nadu have also seen growth, but none of them can match up to the above mentioned market’s rapid pace.

Types Of Properties Where NRIs Can Invest:

These are the types of properties an NRI is allowed to invest in:

  • Residential,
  • Commercial,
  • Agricultural land,
  • Farmhouse, and
  • Plantation property (only if it is inherited or gifted to the NRI).

Reasons NRI’s Should Invest In India

All across the globe, India is the ever-growing market. But why should you as an NRI investor even be interested to put their capital here? Yes, there are great returns involved, but should that be the only reason to place your liquid assets into this market? There are a set of other factors which makes you get back your money’s worth:

Properties Are Affordable

Current Property Rates IndiaAffordability is one of the biggest consideration factors that are a visible index amongst the expatriate population. The expatriate population which has been living abroad for a decade has earned and saved more than what they were doing a decade earlier. Secondly, due to tighter immigration policies of the UK, USA and Canada especially during and after times of crises, most of the expatriates who are software engineers and who are reaping rich rewards because of higher salaries are looking towards their motherland for some semblance of stability and hope for the future.

In FY 2019-2020, the estimated real estate prices in countries like the USA, Saudi Arabia and Singapore have shot up to stratospheric heights. In the USA the average house purchasing price is around $111,000 up from $113,000 a year. In Saudi Arabia, the average price is $67,000. In Singapore, it’s around $91,000. In UAE the house prices have risen to $87,000.  In India, the mean prices are still in the range of $60,000 to $70,000. 

Global Uncertainty

According to international property experts, NRIs will continue to get drawn towards the Indian real estate market in big droves as the world heads towards a more turbulent and uncertain future. The reason for getting lured to India in big volumes is evident from the present run. Also, one can see how volatile other markets are in the foreseeable future. International real estate market is linked to the market economy more directly in other matured markets as compared to India – so there is a big chance you may lose money in the global markets when a downturn arrives compared to India.

Another factor which we fail to consider is the emotional connection with the country of their origin. Most of us Indians splurge on desi properties, especially in our homeland, because we sorely miss our Indian connection. Currently there is an atmosphere of global uncertainties which is underpinned by a trade and verbal war between the USA and China. All the major global economies are experiencing a slowdown post Covid-19. Hence, we ourselves have seen that many NRIs inquiring about investing in Mumbai and are getting into the Indian property market to hedge against potential risks. After all, who would want to see their money disappear overnight right before their very eyes?

Discounted Prices of Indian properties

Prices of Indian properties are yet to touch their peak values. And currently in the aftermath of the Covid-19 pandemic, prices in Indian property markets have dropped by a whopping 30 %! To keep their inventories mobile and to improve their liquidity, developers are compelled to come up with big offers. Then there are other factors like rebates from state government and central government under the FEMA and other policies that encourage more foreign players to enter the Indian market. Collectively, this means an overall 20-30 % discount to the overseas buyer, which means the government has placed the investors’ interests before their own – and that should mean a huge deal to the NRI population. NRI investors must take advantage of the present situation of the Covid-19 outbreak that has also led to all sorts of never-heard-before discounts being offered by property owners and property developers in India’s biggest cities.

Falling Rupee and Rising Dollar

Why Invest Property IndiaThe rupee values have also depreciated. A weakening Indian rupee will act as an important stimulant for the NRI population. Thanks to the bad debts and a bad annual growth that have led to the fall in the value of the Rupee, purchasing power is further weakening due to the ongoing Covid-19 crisis. But this has spelt a golden time for investors who are capitalizing on the miseries of the mid-segment real estate developers. These mid-level developers need to recover their money from the market and they are offering all sorts of discounts and offers to the customers. As a result, the NRI real estate investors will soon be pillaging the market, due to the bad economic conditions and lack of liquid holdings in the market. If you are an NRI with surplus cash, act soon in order to choose the cream of the properties because if you act late there will only be left overs!

Make In India Initiative And The Indian Startup Scene

The ‘make in India’ campaign initiated by our central government extends to the real estate sector as well. Now, we have already mentioned that there has been a reduction of strictness in policies regarding FEMA and other foreign-related investors. Due to which the startups are purchasing and renting properties like never before. To ease out the property rental and purchase decisions, many roadblocks have been removed, so the NRIs with a strong dollar backup are pumping in more money than ever. An NRI will also get taxed at the same rate of tax as applicable to an Indian individual. The highest tax rate being 30% and surcharge shall be applicable based on the total income. This is simply a wonderful offer and one that is too lucrative to ignore.

Resurgence Of Tier-II Cities

Tier-II cities like Hyderabad, Bengaluru, Bhubaneshwar, Pune, Chandigarh and Kochi have also spelt a lot of positivity for the property market. Here companies from services industries have been setting up base in large numbers to gain an additional customer base. These tier-II cities have huge potential for growth. But the growth is limited to only specific categories of real estate such as luxury and high end properties. NRIs who are eyeing these cities for investment also have a lot of options in which to put their money in and are spoilt for choice. Residential and commercial properties are easy buys, but what’s better is to invest in under-construction projects here. These projects are estimated to give very high capital returns within the next few years.

Rentals against investments in Tier-II cities residential properties are growing at a pace like never before. Commercial properties also offer great returns but as discussed earlier it would be foolish to currently invest in commercial properties due to the current trend of social distancing and WTH norms. It used to be said that one should invest in commercial properties because commercial properties never lie vacant. But that age old assumption has now been turned around on it’s head and it is no longer the case. Instead families are now purchasing larger residential properties so that one or two rooms can be allocated as a home office for the husband and the wife. In the post Covid-19 scenario, go RESIDENTIAL! If you are an NRI and are clueless about where to invest do get in touch with us and our experienced agents will help you form an informed opinion about to where to park your hard earned money for your future generations!

Tushar Bhattacharyya
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