Sound regulatory environment, increased transparency and accountability as well as the establishment of escrow accounts under the Real Estate Regulation and Development Act, coupled with a favourable exchange rate for Non-Resident Indians (NRIs) make investment in Indian real estate a lucrative options against other asset classes, according to Dr Niranjan Hiranandani, President of India's National Real Estate Development Council.
“New housing launches across top seven cities in India have increased 27% year-on-year in January-March 2018,” said Dr. Hiranandani, “The Indian Government has launched various initiatives, including ‘101 Smart Cities’ as also ‘Housing for All by 2022’, which have led to positive results. Similarly, the focus on affordable housing as a segment which has been given infrastructure status as also other benefits including taxation benefits and subvention schemes has resulted in this segment getting a boost. It all leads to a positive situation, which is apt for expatriate Indians to invest in.”
Buying a ‘home, back home’ is a matter of sentiment, but investments by expatriate Indians in Indian real estate have steadily grown over the past few years. Recent media reports mention investments by expatriate Indians in Indian real estate has doubled, from $5 billion in 2014 to $10.2 billion in 2018.
To a large extent, this follows the new regulatory regime which has made Indian real estate more transparent and increased the Indian real estate developers’ accountability in terms of possession deadlines and quality of construction. The recent global currency value fluctuations have made it a sweeter deal for the expatriate Indians, whose purchasing power vis-à-vis the Indian rupee has gone up.
Growth in the Indian real estate market is being driven by the fast rate at which urbanization is happening. A recent survey mentioned India’s urban population is expected to reach 800 million in the next 30 to 35 years, becoming equal in size to India’s rural population.
Most of this demand is expected to be in the affordable housing segment and the middle-income group. From the perspective of GDP growth, the forward and backward linkages mean Indian real estate will also create more employment opportunities.
“The Indian real estate market is expected to touch $180 billion by 2020. Housing sector is expected to contribute around 11 per cent to India’s GDP by 2020,” added Dr. Niranjan Hiranandani. For the expatriate Indian, it is a situation where the advantages just keep adding up: it begins with the recent reduction in value of the Indian rupee - which makes Indian real estate more affordable, new regulatory regime including RERA, which have led to increased transparency, as also growing focus by Indian real estate developers on the expatriate market.
The positive investor sentiment which has been observed among expatriate Indians leads one to conclude that expatriate Indians and foreign consortia are looking for opportunities to invest in Indian real estate ‑ including commercial spaces. The drop in the value of the rupee will have a positive impact in terms of enhanced purchases by expatriate Indians, which is sort of a windfall gain.
“As overseas investor sentiment turns ‘sunnier’, the expatriate Indian will be able to buy property by paying fewer dollars now. Hopefully, in the new regulatory regime, this trend will continue - not just in 2018, but also in the future,” said Dr. Hiranandani.