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Should NRIs buy property in India now?

Reasons like the government's initiative to improve the infrastructure development country also encouraged NRIs to consider investing in the real estate sector

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The Indian real estate sector went through a rough time 2018, but it was an opportune time for non-resident Indians to park their money in the sector. Post implementation of key policy reforms, the Indian realty sector has seen a gradual resurgence due to an increase in accountability in the overall system.

Falling rupee, RERA helped revive NRI interest

Indian realty has lured NRI investors due to various factors favouring them, such as, depreciation of Indian currency, reduction in prices post demonetisation alongside major policy reforms leading to more transparency and greater consolidation. More than 75% of NRIs prefer real estate over other asset classes – such as mutual funds, stocks, Fixed Deposits, among others — largely because of the pride of owning a property in their country of origin. Adding to it, the rupee depreciated significantly against the US dollar. This brought down the cost of property acquisition for NRIs by a huge amount.

Reasons like lack of transparency in transactions delays in project delivery and intent of developer are major concerns of NRIs. However, it has majorly been addressed by the introduction of Real Estate (Regulation and Development) Act, 2016. This has turned out to be a big reason for NRI buyers showing a renewed interest in the Indian realty sector with revived confidence. Reasons like the government's initiative to improve the infrastructure development country also encouraged NRIs to consider investing in the real estate sector.

Where do NRIs invest

Owing to the current market scenario, NRIs are inclined towards commercial properties and luxury residential segment, considering the good rental yields and capital appreciation. Conversely, affordable housing is expected to draw the interest of young NRI buyers, as smaller ticket sizes offer better return on investment with lower investment bandwidth and easy maintenance.

NRIs are also cautious enough to invest either in ready-to-move-in projects or park their money in under construction properties offered by established developers with strong financial background and soundtrack record in terms of project delivery.

Fewer new launches, higher sales of inventory

There was a slowdown in new launches due to the liquidity crunch faced by non-banking finance companies, rupee depreciation to its record, low changes in the credit-linked subsidy scheme, etc. However, many developers recorded higher sales of inventory in 2018 compared to 2017.

The year 2019 seems to be opportunistic for an affordable and mid-income housing segment along with investments opportunities from NRI buyers at large. There has been an upsurge in ready to move in units owing to RERA and GST benefits. Under-construction projects are expected to see a massive push too, once the government rationalises GST rates.

The writer is managing director, Paradigm Realty

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