Indian real estate: An insurance against uncertain foreign markets for NRIs

The diplomatic isolation of Qatar, has highlighted the need for expat Indians to have a safety net of investments, back home. Can real estate serve as one such secure investment avenue? We examine

With more than 6,50,000 Indians working and staying in Qatar, the non-resident Indians (NRIs) there are in a tight spot, after its neighbouring countries, including Saudi Arabia, Bahrain, Egypt and the United Arab Emirates, severed diplomatic ties. A similar situation could occour in any country and brings to focus a major concern: How do NRIs safeguard their earned wealth?

“NRIs in any country, should be prepared for a possible loss of employment and temporary or permanent relocation to India, due to political or financial situations. In such cases, it is very important to create a safety net of investments, back home. This can be in the form of financial investments or investments in real estate for self-use or for earning regular rental income. If these decisions are taken early on in one’s working life, NRIs can achieve substantial savings, as well as peace of mind,” says Amol Shimpi, associate dean and director, RICS School of Built Environment, Mumbai.

What makes the Indian real estate market a good bet for NRIs?

So, is investing in real estate in India, as opposed to the place where NRIs stay, a good way to safeguard their hard earned money? Industry experts point out that the Indian economy was the fastest growing in 2016 and is poised to remain one of the top performing economies in the coming years. “The rate of appreciation for land is going up steadily and investing in the Indian real estate market, as opposed to an already developed and stagnant market, is a secure way for NRIs to safeguard their hard earned money,” maintains Nibhrant Shah, founder and CEO, Isprava.

NRI Sreejit Nair invested in a villa in Bengaluru, instead of the Middle East, where he is currently working and staying. “Although, I have been staying here for 20 years, after the 2011-12 Middle East crisis, I felt that it would be risky to buy a property here. If we have to leave the country, I will have to resort to a distress sale, possibly in an unfavorable environment. It is a big risk to take, considering the prices. I am better off, investing in India,” Nair explains.

Besides the sentimental value of owning a house in one’s motherland, investing in properties in India also gives NRIs a feeling of security and can serve as a home for vacations. Moreover, the ever growing population in India, ensures that there would always be a need for housing in India. Consequently, the returns on investment in real estate, is likely to always remain high. “The difference in the currency exchange rate of their place of stay and India, also makes real estate investment in India quite reassuring. Hence, for NRIs, India can be a very lucrative market to invest in,” says Amit Wadhwani, director of Sai Estate Consultants.

Main reasons why NRIs avoid investing in properties in India

Nevertheless, the lack of information and the opaque nature of real estate businesses, mean that NRIs remain skeptical about investing in India. This scenario will hopefully improve, owing to greater transparency in the market, following the enactment of the Real Estate (Regulation and Development) Act (RERA), the Goods and Services Tax (GST), the Benami Transactions Act, the demonetisation drive and the advent of real estate investment trusts (REITs). Additionally, FEMA policies and relaxation of laws by the RBI, vis-à-vis property buying by NRIs, will boost their participation. The availability of ready-to-move options and affordable properties in the Indian market, are also key attractions for NRIs.

Factors that are likely to boost NRIs’ participation in Indian realty

• Greater transparency
• Tighter regulations
• Affordability
• Enhanced price stability

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