Realty Check for home bound Nris

Key pol­icy trans­for­ma­tions such as RERA, REIT, PMAY af­ford­able hous­ing, and the GST have pos­i­tively im­pacted the realty sec­tor. Shubhra Saini, delves deeper to un­der­stand the trends of NRI in­vest­ment pat­tern.

Realty Plus - - Table of Content -

NRIS pre­dom­i­nantly in­vest in In­dian mar­kets for fac­tors such as emo­tional con­nect with home coun­try, re­tire­ment plans or sim­ply to as an ex­i­gency plan for the fu­ture. Presently, the other bet­ter re­turns and yield on in­vest­ments, and de­pre­ci­a­tion in the ru­pee’s value also have be­come the rea­sons for NRI in­vest­ments in In­dian real es­tate. Fur­ther, the el­e­ment of risk once as­so­ci­ated with prop­erty in­vest­ment in In­dia has been largely mitigated with the im­ple­men­ta­tion of RERA. Ease of FDI norms and gen­eral gov­ern­ment fo­cus on hous­ing also adds to the con­fi­dence of an NRI In­vestor. As the in­dus­try ex­perts ex­plain, ear­lier only NRIS and for­eign­ers with PIO card were per­mit­ted to in­vest in the hous­ing and the real

in ad­di­tion to prop­erty ap­pre­ci­a­tion, a de­cent rental yield is also avail­able to Nri’s adding to the lure of owning a prop­erty in their na­tive coun­try. Nris from UAE, USA and Saudi Ara­bia are the front run­ners to in­vest in in­dian realty.

es­tate sec­tors. For­eign in­vestors, other than NRIS, were al­lowed to in­vest only in de­vel­op­ment of in­te­grated town­ships and set­tle­ments, ei­ther through a wholly owned sub­sidiary or through a joint ven­ture com­pany along with a lo­cal part­ner. How­ever, the new guide­lines have opened out FDI in town­ships, hous­ing, built-up in­fra­struc­ture and con­struc­tion-de­vel­op­ment projects. More­over, re­cent sharp ru­pee de­pre­ci­a­tion has pro­vided stim­u­lus to in­vest­ments from NRIS. Re­in­stat­ing the sen­ti­ment, Fa­rook Mah­mood, Pres­i­dent, FIABCI and Chair­man and Manag­ing Di­rec­tor, Sil­ver­line Realty stated, “The NRI’S are in­clined to the In­dian mar­ket cur­rently as the dol­lar has shot up con­sid­er­ably and they are able to get a bet­ter value in terms of the cur­rency con­ver­sion. Also, the In­dian de­vel­op­ers are be­com­ing more pro­fes­sional and the project qual­ity, work­man­ship and stan­dard­iza­tion has im­proved.” Catch­ing the ‘fdi & Reit’ band­wagon The for­eign Di­rect In­vest­ment (FDI) and Real Es­tate In­vest­ment Trusts (REITS) are in the favour of the Non Res­i­dent In­di­ans. If implemented cor­rectly, both FDI re­forms and REIT norms have the po­ten­tial to boost consumer and in­vestor sen­ti­ment in real es­tate. Over the last cou­ple of years, sev­eral amend­ments were brought to the REIT reg­u­la­tions in terms of tax­a­tion. The ear­lier re­quire­ment of hav­ing to hold at least two projects has now been di­luted to one project. REITS are now also al­lowed to raise funds by is­su­ing debt in­stru­ments. As REIT pro­vides an op­por­tu­nity to gain the ben­e­fits of in­vest­ments in real es­tate with­out hav­ing the has­sle of pur­chas­ing and main­tain­ing prop­er­ties, there is a strong prob­a­bil­ity of NRI in­vest­ments in real es­tate in In­dia be­ing di­verted to REITS.

bet­ting big on Com­mer­cial Mar­ket

Ac­cord­ing to Mah­mood, the NRI in­vestors who have for long in­vested in res­i­den­tial real es­tate mar­ket are now grad­u­ally shift­ing gears to­ward much lu­cra­tive com­mer­cial real es­tate mar­ket. “The com­mer­cial mar­ket has been per­form­ing rea­son­ably well. Funds are in­vest­ing into world class as­sets of large IT build­ings malls and ware­hous­ing, there is a reg­u­lar rea­son­able de­mand for A grade as­sets as leas­ing is hap­pen­ing and thus the funds are able to per­form well and give good re­turns to the in­vestors. The REIT en­sures trans­parency and easy en­try and exit.” Re­it­er­at­ing Mah­mood’s sen­ti­ment, Rav­ish Kapoor, Di­rec­tor, ELAN Group, also be­lieves that there is a dis­tinct shift of well-heeled NRI in­vestor’s fo­cus to­wards com­mer­cial prop­er­ties as this sec­tor now de­liv­ers very sat­is­fac­tory yields, he said, “There has been a fairly con­sis­tent rise in de­mand for com­mer­cial spa­ces like Grade A of­fices, IT parks, malls, ser­vice apart­ments and etc.” Gu­ru­gram and Noida are most pop­u­lar in­vest­ment des­ti­na­tions for NRI of north­ern In­dia like Pun­jab, Hi­machal Pradesh and Ra­jasthan. Es­pe­cially Gu­ru­gram, that en­joys good con­nec­tiv­ity through three high­ways: Na­tional High­way 8, Dwarka Ex­press­way (North­ern

Pe­riph­eral Road), and KMP High­way. The mil­len­nium city has max­i­mum num­ber of com­mer­cial spa­ces which in­clude shop­ping malls, ser­vice apart­ments and etc. This over­all at­tracts NRIS to in­vest here. Mumbai is an­other ma­jor at­trac­tive in­vest­ment des­ti­na­tion for NRIS as it of­fers sev­eral types of in­vest­ment op­tions such as res­i­den­tial flats, of­fices, houses, etc. How­ever, it does seem to be over­priced com­pared to the sur­round­ing in­fra­struc­ture it pro­vides. Other metro cities like Bengaluru, Chen­nai, Hyderabad and Pune, etc. pro­vide am­ple of op­tions in­clud­ing dif­fer­ent lo­ca­tions, fa­cil­i­ties, prices and in­fra­struc­ture.

Chal­lenges

The main chal­lenges that are faced by the NRI in­vestors, while pur­chas­ing the prop­erty in In­dia are cur­rency fluc­tu­a­tions, lack of clar­ity on le­gal rights of NRI home­buy­ers, il­le­gal pos­ses­sion of prop­erty and gate-crash­ing by the lo­cals. While, in­ter­na­tional mar­kets are mostly reg­u­lated with min­i­mal risk of de­fault or de­layed projects, in the In­dian sce­nario, for­eign ex­change fluc­tu­a­tions, high main­te­nance costs of prop­erty and tax im­pli­ca­tions re­main key chal­lenges for NRIS.

Role of in­dian de­vel­op­ers

The de­vel­op­ers are do­ing every­thing to at­tract over­seas buy­ers, from set­ting up off­shore of­fices and or­ga­niz­ing events to help find ten­ants. To push up the sales, the de­vel­op­ers are also of­fer­ing dis­counts and flexi-pay­ment schemes. Work­ing with lo­cal chan­nel part­ners, con­tin­ues to be among the best ways to mar­ket prop­er­ties to NRI’S. They are well versed with lo­cal rules and norms and of­ten have a strong data­base of NRI’S look­ing to pur­chase prop­erty. Th­ese ef­forts must be backed up by strong dig­i­tal mar­ket­ing and par­tic­i­pa­tion in key lo­cal ex­hi­bi­tions. De­vel­op­ers con­cur that on­line com­mu­ni­ca­tion is cru­cial, as the NRI com­mu­nity re­lies heav­ily on this space, for their home buy­ing in In­dia. On­line medium then needs to be com­ple­mented by off­line ser­vices through lo­cal part­ners in those coun­tries.

the way for­ward

Ex­perts be­lieve that it is a good time for NRIS to in­vest in the real es­tate sec­tor and over­all in­vest­ments are ex­pected to cross $10 bil­lion-dol­lar mark by 2020. A slew of re­forms un­der­taken by gov­ern­ment such as RERA, GST have made pro­cesses much more trans­par­ent, time-bound and has in­creased ac­count­abil­ity. As the sec­tor be­comes more stream­lined on the back of GST and RERA, the in­vestor and consumer sen­ti­ment has been pos­i­tive and should fur­ther boost the ecosys­tem in fu­ture. The re­sul­tant mech­a­nism has made the mar­ket con­ducive enough for NRI in­vestors to in­vest across the as­set classes of real es­tate.

Fa­rook mah­mood

Rav­ish Kapoor

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