India, a destination where loss becomes a gain

Mumbai: The rupee (INR) has been continuously declining against the US dollar in recent times. This free fall is sending jitters across various sections of the Indian economy. However, not everyone is under stress. For the vast Indian diaspora a depreciating domestic currency is a big trigger to invest back in India giving them greater value for money.

According to the overseas Indian facilitation center (OIFC), a central government initiative to help diaspora connect better with India, every second enquiry these days are pertaining to property purchase in India.

Though there are various investment instruments available in India to leverage a downward spiraling rupee, real estate is increasingly becoming the most sought after asset class for NRIs. Equity markets and financial bonds are other alternatives to invest, but the former’s performance has been very choppy in the recent past and the latter generally cannot generate the kind of RoI, which realty ensures.

NRIs are also capitalising on easy EMIs as a depreciated rupee means easier installments. For an EMI of Rs 40,000, an NRI investor had to shell out $664 (Considering 1$ was equivalent to Rs 60.3), a year before. Today for the same EMI, one would need to pay $600, a substantial saving

Big bucks from the NRI segment:

The subdued value of rupee and its subsequent effect on NRI investments has also resulted in generating positive sentiments among builders and other property companies in terms of the revenues coming from this segment.

Property advisors such as Square Yards, where NRIs comprise a large chunk of clientele, have met with significant success in terms of leads and deal closures. Almost all our international offices have shown 25-30 per cent increase in terms of enquiries and transactions. Even our new offices such as Abu Dhabi and Doha are doing significant business in the first quarter of their inception.

It is believed that a large chunk of NRIs residing in USA, UK, GCC and Australia, prefer to purchase residential assets in cities such as Mumbai, Bangalore, Ahmedabad and Cochin. Gurgaon, Navi Mumbai, Hyderabad and Chennai are other sought after locations where high-end apartments are a favourite among NRI investors.

Similarly, there is also rising interest in the commercial asset class as an increase in economic activities in India coupled with government initiatives such as “make in India” are expected to drive the commercial market.

Besides the depreciating rupee, other factors that are stimulating the momentum include, higher price appreciation witnessed in Indian cities, availability of top class properties with state-of-the art amenities that can match the taste of the globally exposed Indian and a relatively easy property law facilitating easy transaction for NRIs.

It should be noted that NRIs enjoy roughly the same privilege, which local residents have, when it comes to property purchases. NRIs can invest in almost any type of property apart from plantations and agricultural land in India.

Most developers and real estate advisors are aggressively spending on road shows, property exhibitions and setting up representative offices overseas.

Increasingly, in order to capitalise on the NRI investment wave, developers are coming up with new schemes, which may not even be available to domestic buyers. These deals generally involve significant price advantage, buyback guarantees, exclusive inventory and specially structured products. Some of the deals can ensure as low as 40 per cent rebate compared to the present price in the market, thereby luring the NRI clientele base to make investment decisions.

Bottlenecks :

However, NRIs have to face their own share of challenges. The challenges primarily emanate out of their lack of knowledge about the best performing locations in India and time constraint to conclude an entire transaction. Likewise, since these buyers make property purchases with the intention to invest, it is essential that a prudent exit strategy be put in place. Hence, it is essential that structured project deals should be provided to NRIs that can effectively cover most of their risk involved.

Strong sentiments will prevail: NRIs, who presently constitute 30 per cent of the market (primary residential sales), will continue to invest in the Indian market, irrespective of the strength of the rupee.

 

 

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