Falling Rupee Is Good News For NRI Real Estate Investors
India has one of the fastest growing real estate markets in the world. NRIs (non-resident Indians) are aware of this fact, and have been investing their foreign currency savings in the country of their origin for this reason precisely. And, the time for investment has never been better.
With the rupee witnessing a major fall against the dollar in recent months, it is an opportune time for NRIs to buy property in India. The depreciating currency value is benefitting NRI investors significantly as investors get more square feet of space for the same amount in the foreign currency. NRIs can also leverage the power of their additional income by investing in properties because prices have corrected over the past few years. This is prompting a large number of NRIs to invest into the India’s realty market.
Historically, the NRI segment constitutes approximately 10 per cent of the annual residential market in India. The contribution of this segment usually doubles when there is depreciation in rupee value for a sustained period, as was the case in 2012.
The slowdown witnessed in the Indian residential real estate market over the past few years has had builders increasing their focus on NRI customers with the hope to revive markets. The lull in domestic sales was further aggravated by demonetisation and other major policy shifts. To attract NRIs, projects were built with the full range of amenities and tended towards luxury living spaces, which have always been the choice of NRI investors. Builders were marketing to NRIs with a host of special offers and features.
Although India has always been a strong market for NRI investments in real estate, stalled projects were a major concern for NRIs. The lack of transparency and communication with builders made NRIs apprehensive about investing in Indian real estate despite the hope for lucrative returns.
Fortunately, the implementation of the Real Estate Regulatory Act (RERA) will go a long way in formalising the sector and inspiring consumer confidence in the Indian real estate market. Previously, although many projects were being launched regularly, there was no guarantee for completion of projects unless you were dealing with a reputed developer. The RERA ensures that a deadline for project completion must be enforced.
Without the RERA registration, builders will not be allowed to promote or sell any project. The RERA also mandates that builders must disclose all information for registered projects including details of promoters, layout plan, land status, schedule of execution and status of various approvals. This will effectively weed out any unscrupulous players from the market and only allow credible builders to flourish. The transparency and accountability amongst builders resulting from RERA has instilled a new level of trust in the market. The RERA’s emphasis on consumer protection and standardisation of business practices will only enhance NRI investment.
As the market becomes conducive to invest in real estate, NRIs are once again looking to India for their investments. NRIs have traditionally remained invested in luxury homes in India. The past decade has seen numerous projects being undertaken in the residential space, especially high-end and mid-range properties. The factors spurring this growth include the availability of high value projects with a wide range of amenities, infrastructure and urban migration.
In addition to the major metros, the momentum of investment in Tier-II and Tier-III cities has gained pace. The rate of appreciation in these new areas is much more due to fast paced infrastructural development. With increased migration of executives to growing cities, NRI property investments in these cities are providing more and more rental opportunities. Furthermore, the residential projects are usually constructed in locations that provide a wide range of facilities and modern amenities. These features heighten the value of the apartment and increase their property rate with time.
NRI property portfolios have largely been based on market cycles and dynamics. Due to the slowdown in the residential segment, NRIs are also looking to invest in commercial real estate which offers good rental yields as well as capital appreciation.
In both cases, projects with excellent property management is crucial as it maintains the value of the property. Purchasing a home from a builder with their own property management services would be an advantage.
Overall, the current depreciation of the rupee makes real estate investment in India a smart move for NRIs right now. The slowdown has been offset by policy reforms and the market is seeing strong signs of revival. The positive impact of the RERA will move the industry towards greater transparency, efficiency and accountability.
Author Rakesh Reddy is the Director of Hyderabad-based Aparna Constructions.