Best time for NRIs to invest in Indian Luxury Real Estate
The Indian real estate sector has continued to thrive over the years, even surviving a pandemic. The advent of the pandemic did raise some concerns regarding the future of the industry, but the contrary happened as robust sales were recorded. Frankly, the pandemic was a catalyst that changed the way home buyers saw a home, to everything that they needed from it. Following this, the reduction of stamp duty, and unchanged left circle rates helped with the rise in demand, leading to the NRI community’s sudden spike in interest in this sector. As time passes, the Indian real estate sector is going to be a promising investment choice for the NRI community, here’s why:
Residential Real Estate has always been the preferred asset class for NRIs
The preferred investment option for NRIs has traditionally been the Indian real estate sector. The funds remitted by the 32 million NRIs saw an inflow of up to $13.1 billion last year in the residential real estate sector of India and that number is expected to grow by 12% this year. Mumbai and Gurugram are the top markets that have attracted a major chunk of these figures.
INR is at a historic low
The INR has been falling against the USD since the start of the year 2022, going from Rs. 74.40 to hitting an all-time low of Rs. 81.88, scoring a drop of nearly 11%. For Indians, the current downturn has increased the spending cost. NRIs on the other hand, especially those who stay in countries with a stronger currency value, have an advantage as after conversion, the stronger currency ends up multiplying faster, getting a better bargain.
Interest rates are rising globally, but prices in India are falling in some markets, and rising in other markets
Central banks across the globe have started hiking rates in a bid to control inflation. The rise in rates has led to pressure on the housing market notably in the US and China. On the other hand, the investment made in the real estate sector in India is largely by buyers either looking for their own property or homeowners who are planning to upgrade their home by seeking a better and more comfortable space. This has put limited to no pressure on home prices. In fact, we have witnessed prices firming in some pockets of the country.
High demand for luxury housing in India
Historically, NRIs have preferred to invest in the luxury housing segment to suit their lifestyle. The rising income levels in India are also one of the reasons for the high demand in the luxury segment.
Investment in the Indian luxury segment stands to provide a higher rate of appreciation than the development market. Investment in luxury real estate will give higher life-long rental yields as the homes are in demand by affluent people.
According to recent data, average monthly rentals in the prominent luxury micro-markets of the top seven cities increased by 8–18% over the last two years. Worli in Mumbai saw the highest rental growth of 18% during the period, rising from INR 2 lakh per month in 2020 to INR 2.35 lakh in 2022 for luxury homes. Bengaluru’s Rajaji Nagar saw a 16% increase during the same time period, rising from INR 56,000 in 2020 to INR 65,000 in 2022. However, the capital appreciation in these luxury housing markets has remained in the single digits (between 2–9%) over the last two years. Rajaji Nagar in Bengaluru saw the highest capital appreciation of 9%, with average prices rising from INR 5,698 to INR 6,200 per square feet in 2022.
Policy development: Investor-friendly policies by the government for NRIs to invest in Indian Real Estate
The past 5–6 years have seen the Indian real estate sector undergo a tremendous transformation as the sector inches toward becoming a customer-focused market. The imposition of measures and policy initiatives like RERA and regulation around payments have made the market more transparent, credible, and profitable.
Wealthy customers belonging to the niche luxury housing segment have continued to engage in high-ticket transactions, investors and even those on the fence are speeding up their decision-making processes.
