The interest of Non-Resident Indians (NRIs) in the Indian real estate market is gradually coming down in the last few years. The biggest impact has been on the residential market. These investors are now turning their eye on commercial properties.
While the NRIs invested $7.5 billion in the real estate market in their homeland in 2012, this investment is likely to remain just $5.25 billion by the end of this year. Interestingly, from 2000 to 2014, NRI investments in the real estate market reached substantial levels ranging between 10-18% annually.
While there are around 30 million NRIs across different countries, investment into Indian real estate is led by NRIs from UAE, USA and Saudi Arabia.
This decrease in the residential investments, according to sources, is due to the slowdown and steady fall in new launches across all the major cities in the country. Stagnant property price movement is not the best incentive for these investors, whose focus will remain on commercial properties for about 6-8 quarters, say sources.
While there are around 30 million NRIs across different countries, investment into Indian real estate is led by NRIs from UAE, USA and Saudi Arabia.
The Indian real estate sector evokes a lot of interest from NRI investors. This interest is driven by long-term fundamentals such as emotional connect, safeguarding retirement plans, better returns and yield on investments, and depreciation in the rupee’s value.
“When the residential market began to slow down in 2015, the NRI investment fervour into this asset class began to cool off. Add to that, there were several reforms and policy changes like demonetisation, RERA and GST. All this resulted in a decrease in NRIs’ investment in the sector,” said Anuj Puri, chairman of Anarock Property Consultants.
The biggest impact was in the residential real estate market which was the primary focus of NRI investors with their interest ranging from apartments to villas, followed by plots etc.
“With the residential real estate sector showing no clear signs of revival until recently, there has been a distinct shift of NRI investors’ focus towards commercial properties as this sector now delivers very satisfactory yields. There has been a fairly consistent rise in demand for commercial spaces like Grade A offices and IT parks. This is likely to continue until the Indian residential sector gets firmly into revival mode,” added Puri.
However, according to him, those NRIs, whose focus is not so much on the investment growth but owning a home for themselves and their families in the homeland, continue to evince interest in residential properties. The low prices, due to slump in the market, has been an attraction for them.