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NRIs eye India while Indians look out

Monday, November 05, 2018
By Prashant Thakur

Prashant Thakur, Head — Research, ANAROCK Property Consultants

NRIs Eyeing Indian Properties
Ever since the Indian rupee began nosediving, more and more NRIs (non-resident Indians) have turned their focus to the Indian real estate market. There are good reasons for this. Other than the favourable exchange rate, the new regulatory environment driven by RERA, DeMo and GST have served to clear up a lot of the misgivings that kept many NRIs from investing in property in India. However, that's not all there is to it.

Most NRIs, regardless of whether they are permanently stationed or well-settled abroad, at some point entertain a fond wish to buy a home in India - if not for themselves, then for their families back home. Buying a property is still a mark of prestige and accomplishment for any Indian, regardless of where they are in the world. Nor will most NRIs ever entirely shed a feeling of responsibility towards their families back home.

NRIs from any part of the world where the local currency is favourable against the rupee would now be interested in buying properties here. That would include NRIs in the US, most of Europe, the UK and Singapore. Gulf-based NRIs are in any case very well disposed towards owning homes in India - depending on which sector they work in, their work tenure and their purchasing power.
The murky past of NRI property deals
In the past, NRIs were particularly vulnerable to being led astray by misleading promotions, legal faults in the property and various other pitfalls, as they are not wired into the market as much residents can be. The times when developers built and marketed projects aimed squarely at relatively more affluent NRIs - often to the exclusion of all other aspiring buyers - still come to mind.
Things ARE changing...
Here is a good example of how India's improving Ease of Doing Business ranking is not just an abstract qualifier but actually percolates down to the common man. With RERA and GST now in force, the potential for hanky-panky by unscrupulous developers and brokers has been drastically reduced. Consequently, confidence in the real estate market is also improving – not yet enough to signal a revival, but enough to indicate that the tide is slowly turning.

Of course, NRIs (or, for that matter, resident homebuyers) can still fall prey to hype not borne out by fact. Misleading information resulting in catastrophic purchase decisions can and do continue to happen. This is because in many states RERA, in its present form, is either non-existent a pale shade of what it was intended to be.

However, with many other states having adopted RERA strictly and the Centre gunning for undiluted nationwide adoption of this key regulatory reform, the scope of such mishaps has reduced and will reduce further. This is also borne out by ANAROCK's consumer survey, which affirms the reinstated confidence of more than 95% NRIs who now see the Indian real estate market as more transparent, disciplined and accountable.
... in more ways than one
For an increasing number of NRIs, returning home may no longer be just a choice but a compulsion. Trump’s increasingly hard-line work visa and immigration policies are causing many NRIs who had long-term plans for the Land of Opportunity to have to consider returning to India.

On the rebound from the soured American dream, many have gravitated towards countries like Canada, New Zealand and Australia. However, not a few of them are discovering that their career prospects in these countries are far from stellar.

How many Indians will return to India under career or policy duress is a matter of conjecture at best. That said, however many do return, it will have an impact on the demand for real estate in India. There has already been a nearly 15-20% surge in serious NRI-specific inquiries for properties in India over the last one year.

Fortunately for such NRIs, property prices in India are still floundering from the combined onslaught of disruptive Government policies and the funding crisis. There has probably never been a better time for resident or non-resident Indians to buy a home in India.
The Flip Side - Indians Buying Property Abroad
The trend of Indians buying properties abroad is more than a couple of decades old, but the interest in such acquisitions keeps fluctuating with the Indian economy (which has a fairly direct correlation to purchasing power), job prospects and family presence in the target country, and the country's changing immigration laws.

As of today, a considerable number of young Indians from the entrepreneurial set, the nouveau riche, those with settled families abroad, and those with upcoming or existing business interests in a certain country will consider buying a property there. The slow-moving Indian real estate market has also pushed a not-inconsiderable number of Indians to consider property investment outside the country.
What and where do Indians buy?
Depending on their purchasing power, objectives and plans in the target country, Indians may opt for affordable housing in the outskirts of main cities, compact office-cum-residences closer to the city centres or – in the case of the very wealthy – condos and townhouses in the most aspirational neighbourhoods.

London, Dubai, Singapore and Australia have been more or less perennial favourites for Indians interested in buying real estate in foreign countries. There is also evidence of increasing interest in Sri Lanka – specifically in Colombo – and some other Middle Eastern countries. While major American cities like New York and New Jersey also numbered among the favourite destinations, they don’t really qualify anymore except for those who can invest at least $1 million, generate a certain number of jobs there and thereby qualify for permanent green cards.
Does it make sense?
It depends. Owning a property abroad is definitely a highly aspirational concept and can also yield good returns on investment. It makes complete sense for those who already have family or business interests in a certain country. However, end-users can only really benefit from a property abroad if they stand a good chance of obtaining citizenship or at the very least residential status there.

 As a pure investment, it can a risky proposition for resident Indians. Much depends on how well the market there works for absentee landlords in general and foreign absentee landlords in particular. And again, changing immigration and property ownership laws in a country can impact the overall viability of the investment. To illustrate, one cannot predict with any degree of certainty how such matters will swing in the United States or the UK.

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