Over the last few weeks we have seen some major changes in the Indian real estate market after the government intervened. The result is that the market is far more transparent today than it ever has been and with further regulations expected in the medium to long term this transparency can only improve. A new report by Square Yards has highlighted a very active group of investors with a particular appetite for Indian real estate. The non-resident Indian community is becoming a major force in the Indian real estate market.
What is the non-resident Indian (NRI) community?
This is simply Indian citizens living overseas either holding Indian passports or with strong Indian origins. In the past the NRI community has found it difficult to invest directly in the Indian real estate market from overseas but a number of recent changes have helped. As a consequence, the 31 million strong worldwide NRI community are fast becoming a major player in the Indian real estate market.
How much does the NRI community invest?
Estimates for 2017 suggest yet another increase in NRI investment in Indian real estate with expectations it could reach $11.5 billion. This phenomenal figure makes up 20% of the Indian primary real estate market and perfectly illustrates the growing strength of this overseas community. One of the main issues of late has been the weakness in the rupee compared to the dollar which effectively makes dollar investments far more attractive (a similar situation to the sterling/dollar situation in UK real estate market).
It must also be noted that the Indian government has over the last few years made it far easier for the NRI community to invest directly in Indian real estate. Those who follow this particular market will know that it is seen as a great honour to own Indian real estate.
The well-documented changes of late did put something of a cloud over the Indian economy but even with this cloud, expectations are for 7% growth in 2017. If this is seen as a “difficult time” we can only guess what the growth might have been in “normal times”. In many ways it is the greater transparency introduced by the current government which has helped to push the Indian economy and the Indian real estate market to the fore. At a time when other countries around the world are struggling to maintain forward momentum India seems to be coping fairly well.
As we touched on above, the recent weakness in the rupee has not only assisted foreign investment in real estate but also foreign investment in the Indian business community. While there are an array of restrictions on how overseas investors can operate within the Indian business community there is certainly more appetite today for overseas investment than there ever has been.
Focused real estate investment
The vast majority of India’s real estate investment, both domestic and overseas, tends to be focused on the eight largest cities. As the Indian economy continues to grow, and hopefully the spread of wealth widens, we should see real estate investors begin to look outside of the “cartel of eight”. For anybody taking a long-term view on Indian real estate there must be some bargains outside of the larger cities, for those brave enough to jump the gun.