By Mr. Ashwinder Raj Singh, JLL India
Over the past few decades, the urge
to ensure a better standard of living for themselves and their families back
home has led countless Indians to migrate to countries offering attractive
work-pay equations.
This income-generating objective is
the highest common factor - and though NRIs' ties with their country of birth
sometimes erode to a certain extent, the willingness to turn a decent profit on
investments back home does not.
For a protracted period, investments
in India did not offer good returns, causing NRIs to choose to invest in the
countries they migrated to - or anywhere else where the markets were
attractive.
However, with the resurgence of the
Indian economy after the arrival of a stable government intent on boosting
business in the country, things are changing. Today, the Indian realty market
is once again a prime focus area for NRI investors.
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| Ashwinder Raj Singh, JLL India |
The Indian realty sector as a whole
- namely, across the residential, retail, hospitality and commercial verticals -
is slated to grow at 30% over the next decade, attaining a market size of
around USD 180 billion by 2020. However, the investment opportunity lies less
in the Indian real estate sector’s speed of growth than in its overall
dynamism.
As such, it has been time and again
vouchsafed that long-term investments into Indian realty pay off very well
indeed as long as sound investment decisions have been taken.
Advantage NRI..!
NRIs today are keenly aware that
Indian real estate once again presents them with a very hot investment
proposition. That said, they do have their own leanings and predilections when
it comes to where to invest. Generally, the NRI community prefers to invest in
their states of origin – primarily Kerala, Karnataka, Tamil Nadu, Maharashtra
and Delhi NCR. However, since residential inventory has piled up in the two
major cities of Delhi (the political capital) and Mumbai (the financial
capital), investors are currently very well placed to find good bargains in
these markets, as most developers there are offering discounts and attractive
financial schemes.
The advantage that UAE-based NRIs
(by far the largest contingent) have is that they earn in Gulf currencies that
have traded strongly against the Indian National Rupee.
This factor off-sets a part of the
house cost already. However, the rupee is bound to strengthen further, and the
advantageous difference between the currencies will reduce as the Indian
economy grows under a stable government at the centre.
Current Indian Real Estate Scenario..!
Indian developers have had to wake
up to certain immutable market realities over the last two years. In many
cities, they have misjudged where the actual demand is and how much buyers -
including NRIs - are willing to spend on their first or second homes.
This has resulted in worrisome
levels of supply overhang of larger-configuration apartments.
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Real estate developers are now
becoming quite serious about right-sizing and right-pricing their products to
make them attractive to a larger cross-section of customers.
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In fact, smaller, better-designed
and more efficient homes are very much in evidence when we study the project
launches in 2015.
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Selective corrections are already
happening in some of the over-priced pockets of India’s larger cities – as this
trend gathers momentum, we will start seeing a faster sales velocity in the
stagnated supply of larger configurations.
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Townships are becoming a lot more
prevalent, since this is becoming the residential option of choice for many
city dwellers looking for a better lifestyle for their families
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The supply pipeline for luxury home
projects is now slowing down in reaction to the slow demand dynamics for these
offerings.
Pricing Trends..!
Residential property prices have
plateaued in both Delhi and Mumbai. Good returns can be expected only if one’s
investment horizon is of three years or above - in which case, annualized
returns of 10% can be expected from the third year on.
Sluggish sales, especially in the
luxury segment, have led developers to offer several attractive financial
schemes. World-class luxury projects are available in Indian cities now, but
the market is currently struggling to sell inventory.
Advice For NRI Property Investors..!
For NRIs who are on the verge of
retiring and planning to do so in India, this is the right time to invest.
Social infrastructure in most of the larger Indian cities has improved a lot.
Social and civic infrastructure is
being ramped up in most of the larger cities, which means that more hospitals,
schools and shopping malls as well as improved connectivity and availability of
utilities are resulting in higher ease of living – equalling a higher-quality
retired life.
Once the primary residence is
secured, NRIs with surplus funds can invest in rental income-generating
apartments, as well. However, they must be aware of all the bylaws and
regulations that apply to NRI investors - especially on the taxation front,
since rental income is taxable in India. It is also taxable in other nations,
except in cases where a treaty exists between the two involved countries with
regards to double taxation.
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Under the best of circumstances,
real estate is a capital intensive investment vertical. The best returns on
investment are not attained by guesswork, but by decisions arrived at after
weighing all the options for their merits and demerits. NRIs are best placed to
reach such decisions if they consult professionals with a strong research-driven
background.
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As a rule, NRI investors should we
wary of projects by unknown developers who have no existing track record.
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Untold numbers of buyers are
currently falling in trouble because they have plugged their funds in projects
which do not have all the mandatory clearances and fall short of even the
minimum standards of quality construction.
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Unless a NRI plans to visit India
and personally evaluate projects, he/she should opt only for reputed
developers.
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In all cases, NRIs should strictly
follow a check-list of points to verify, such as the track record and brand
visibility of a developer, the soundness of the identified location in terms of
social and civic infrastructure, the amenities in the project and the timelines
for possession in the case of under-construction projects.
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NRI investors focused on benefiting
from discounts can consider booking in projects which are in the pre-launch
stage, as prices tend to be competitive. Again - while due diligence is
important for end-users, it is even more important for investors who are
considering projects in upcoming or peripheral locations of the primary cities.
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Professional real estate advisors
should be consulted to establish for the legitimacy of such projects.
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Developers have traditionally tried to
attract NRIs by gearing marketing campaigns of projects which are ordinary in
every respect straight at them. NRIs should be aware that there is nothing
about ‘NRI projects’ that is any different from other offerings on the market –
there are no ‘exclusive’ features that are otherwise unavailable to other
buyers.
A project and property should be evaluated solely on the basis of its
location, legal legitimacy, amenities and facilities, and the strength of the
developer’s brand.
About the author
Mr. Ashwinder Raj Singh is CEO (Residential Services) at JLL India
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