NRIs turn to commercial realty with eye on yield

The stagnant prices in residential real estate and slowdown in new launches have forced non-resident Indians to shift their investment focus towards commercial properties in India.

The NRI investment in Indian residential market is expected to touch $5.25 billion by the end of this year, significantly lower than $7.5 billion recorded in 2012.

“With the residential real estate sector showing no clear signs of revival until recently, there was a distinct shift of wellheeled 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,” said Anuj Puri, chairman, Anarock Property Consultants.

According to him, a slew of reforms and policy changes such as demonetisation, RERA and GST had a major impact on the residential realty market, which for a long time was the primary focus of NRI investors with their interest skewing towards apartments and villas, followed by plots and other property typologies.

“Stagnant property price movement is not the best incentive for return on investment oriented NRI investors, whose focus will remain on commercial properties for about 6-8 quarters,” Mr Puri added.

However, those NRIs whose focus is on owning a home for themselves would continue to look for opportunities in the residential market.

The launch of Real Estate Investment Trust is expected to further attract investments in commercial properties going forward. However, the consultant added that commercial real estate, especially Grade A properties, which promise the best long-term rental yields are not an investment class that every NRI is financially equipped for.