It would not be an exaggeration to say NRIs remain the most sought-after segment of homebuyers for Indian developers. A 16-million strong community globally, NRIs have brought liquidity to the market and forced developers to upscale their offerings to match the more sophisticated products they are used to.
Last year saw revived NRI interest in Indian real estate following recent economic and realty regulatory reforms, says Rahul Maroo, Senior Vice-President and Head of International Sales, Omkar Realtors.
Jaxay Shah, President, Credai National, agrees. “NRIs, especially from the Gulf, have a keen interest in Indian realty,” he says. “This interest has been further amplified with the implementation of Real Estate Regulatory Act (Rera), enhancing their confidence and trust in the newly transformed ecosystem. The introduction of REITs will also encourage widespread participation from consumers who now have the opportunity to make safe and
Market data suggests the main metros continue to hold NRI interest and their contribution to developers’ sales looks set to increase this year. Data from listings agent Quikr Homes shows that Mumbai, Hyderabad, Chennai and Bengaluru remain investment hotspots due to increased employment opportunities, improved connectivity and better infrastructure. “The NRI contribution to real estate developers portfolio was 10-12 per cent in 2017-18, which is expected to increase to 18-20 per cent in 2018-19, mainly because of higher transparency in the market post Rera implementation,” says Sonu Abhinandan, Head of QuikrHomes.
But as residential real estate deals with a staggering inventory overhang and slowing returns, NRIs have turned to other segments. We look at five segments that hould be on the radar of NRI property buyers.
Although the sector has taken a beating due to lower consumer confidence, the industry is banking on a revival in 2018, following policy reforms such as Rera, Goods and Services Tax and the Benami Property Act. “Over the past 12 months, we have seen that the demand is strong across all price points,” says Abhishek Lodha, Managing Director, Lodha Group.
“We expect this trend to increase over 2018. Going forward, we think the demand will be for quality projects from reputed developers — in every city, 4-5 trusted developers will get most of the sales volume. Over the past three years, new starts have been far lower than new sales and we expect that by early/mid 2019, the market will start experiencing good pickup in prices.”
NRI investments are unlikely to stay confined only to the major metros though they will account for the majority share in a NRI buyer’s portfolio.
According to a survey by think tank Track2Realty, job magnets such as Mumbai and Bengaluru are the preferred cities for an average salaried-class homebuyer, but more than three-fourths (78 per cent) of NRIs want to buy in their hometowns, because of lower ticket sizes and family ties.
Some 58 per cent of NRIs feel the metros are saturated in terms of price point and future appreciation potential and 64 per cent see tier 2 cities as the next growth drivers. NRIs’ top choices are in order: Kochi, Coimbatore,
Bengaluru, Chennai, Ahmedabad, Hyderabad, Thiruvananthapuram, Chandigarh, Pune and Mumbai.
With better ROI and fewer delivery timeline issues, NRI interest in commercial real estate has grown. “Young NRIs who wish to settle in India and continue with their work are investing in commercial spaces, and even residential investment is largely guided by the preferred place to work,” says Ravi Sinha, CEO, Track2Realty.
The salaried class picks cities such as Mumbai, Ahmedabad and Bengaluru while professionals and self-employed NRIs like Bengaluru, Gurgaon and Pune. Sachin Sandhir, Global Managing Director — Emerging Business,Rics, says strong economic growth will continue to generate demand and the gap between demand and supply will keep office rentals strong. “In 2018, the demand for office space is expected to remain strong. Pan-India vacancy levels will remain more or less same at 14-15 per cent. We could even see a fall in vacancy levels in some cities such as Bengaluru, while office rentals in the cities of National Capital Region, Mumbai and Bengaluru will continue to outperform.”
Meanwhile, retail properties saw lower rental value appreciation, especially in the NCR. Mumbai and Bengaluru fared better.
Analysts see senior living homes as the sunrise segment of Indian real estate with supply lagging behind demand from NRIs looking for retirement homes. Recent research by PHD Chamber of Commerce posits sector growth from$1.26 billion (Dh4.63 billion) in 2016 to $7.7 billion by 2030. According to the research, prices vary from Rs9,000 (Dh517)- Rs10,000 per square foot in the west to Rs5,000- Rs7,000 in the north and Rs4,000-Rs8,000 in the south.
About 78 per cent of senior housing projects in India are operating in the west and south, while only 22 per cent exist in northern India. Various offers and facilities are available. Sixty per cent of developers offer a complete sale model, 30 per cent offer only a lease deposit model and 10 per cent offer the pure rent model.
About 70 per cent offer loan facilities, and a third provide post-retirement employment assistance for residents. The average price range of senior housing projects varies across India witha one-bedroom apartment
ranging from Rs2.5 million- Rs4 million, two bedroom from Rs4 million-Rs8 million and three bedroom from Rs8 million-Rs15 million. Besides the metros and capitals, emerging retirement-friendly destinations include Dehradun, Amritsar, Guwahati, Shillong, Ranchi, Jamshedpur, Nasik, Vadodara, Panaji, Surat, Coimbatore, Mysore and Puducherry.
The growth of the second homes segment is testament to changing mindsets. Buyers today don’t just want a leisure home. They also look at longterm ROI and rental income prospects. The buyer segment is usually of 35-45 years old and the main preference is that they must be within a few hours’ drive from the parent cities.Those from the Delhi- NCR region seem to prefer farmhouse developments in areas such as Mehrauli, Kasauli, Bijwasan, Rajokri and Chattarpur, priced between Rs25 million and Rs120 million. Mumbai residents pick Lonavala, Khandala, Alibaug, Karjat and Goa, where row houses range from Rs10 million- Rs25 million, bungalows cost between Rs15 million and Rs45 million and plots range from Rs2.5 million-Rs10 million.Puducherry, Coorg and Coonoor are preferred destinations for Chennai residents.
As per Track2Realty data, 72 per cent of buyers look at appreciation potential and ROI when choosing a holiday home, and only 28 per cent buy a holiday home for a vacation.
One of the most awaited investment vehicles, REITs have struggled to take off on account of initial regulatory logjams and tax uncertainties. But clarity is now slowly emerging. In December the Securities and Exchange Board of India amended regulations for REITs and infrastructure investment trusts. Borrowing options were expanded, strategic investors defined, minimum holding norms relaxed and lending to holding companies was permitted.
As foreign investors expect the country’s maiden REIT to be launched in the next couple of months, domestic investors are still in a wait-and-watch mode, according to a report by PwC and Urban Land Institute. The report says the main problem for REITs no longer appears to be a regulatory logjam, but how to price the assets at a level that appeals to both sponsors and investors. Niranjan Hiranandani, President, National Real Estate Development Council, speaks for the sector as he states: “REITS are still at the take-off stage and we hope to see REITS take flight in 2018.”