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Property investments might not be on most people’s minds right now, as the Novel Coronavirus dramatically affects lives, communities and businesses all over the world. However, as and when normalcy is restored, NRI interest in India’s real estate sector is likely to increase. A variety of factors give us reason to believe so.
Why NRIs should invest in Indian realty
The virus has infected nearly two million people so far, despite countries imposing severe lockdowns upon themselves, which could result in an economic paralysis that might takes decades to cure. In a situation such as this, asset markets continue to fall, prompting investors to reconsider their investment strategies.
If people were moving towards other investment avenues, because traditional real estate did not seem lucrative enough, the Coronavirus-induced crisis could force a rethink. For most people, the security of their own homes is the only security that they enjoy right now, as the prevailing negative sentiment affects asset markets, from equities to currencies.
The virus scare has also been instrumental in eroding the value of gold, another favourite asset class among Indians. Gold prices were down 0.6% to Rs 44,800 per 10 gram On April 6. Banks have also lowered interest on fixed deposits, severely reducing the profits on savings. India’s largest bank SBI is offering interest between 5.5% and 5.9% on fixed deposits. Private lender ICICI Bank is also offering interest of up to 6% on fixed deposits.
Rates of property, on the other hand, are unlikely to see any correction, say industry insiders, considering that they are already low.
“India’s realty sector has always targeted the NRI community, which thinks of coming back to India, or at least have a property in their home country. The current situation gives the NRIs an ideal opportunity to secure a lifestyle in India that they are accustomed to,” says Prateek Mittal, executive director, Sushma Group.
What makes real estate a good investment option for NRIs amid the COVID-19 pandemic?
Since it all boils down to money in property transactions, a weaker Indian currency empowers NRI investors with a greater purchasing power. After touching the Rs-70 mark against the dollar in 2019, the Indian currency may weaken further as the Coronavirus ravages the globe. The rupee fell to a record low of 76.55 against the dollar during the day trade on April 9, 2020. If we believe the experts, the rupee is under pressure and no immediate respite is in sight. They also expect to see the biggest losses in the rupee if the situation worsens.
So, if an NRI were to make an investment in India currently, they would find the purchase way more affordable now.
“The fall of the rupee and uncertainty in global markets, will make real estate a safer investment option for long term. Some of the most favourable segments in realty for NRIs, will be commercial complexes and luxury housing units,” says Vikas Bhasin, MD, Saya Homes.
Add to this monetary advantage low interest rates and the outcome would certainly point towards a never-seen-before opportunity. With the RBI brining the repo rate, at which the banking regulator lends money to banks, to 4.4%, home loan interest rates have now come down to as low as 7.90%.
“The interest rates are at the lowest, leading to real estate becoming a very attractive proposition,” says Mittal.
“COVID-19 is going to have a severe impact on the financial position of every sector. However, real estate might see better recovery, due to the variety of housing units available and favourable policy changes by government like the zero-period policy and the three-month moratorium on loan EMIs, along with the willingness and interest of NRIs to invest in Indian realty,” adds Bhasin.
Property options for NRI investors in India
If they were to make a purchase decision now, NRI investors would find a good mix of ready-to-move-in luxury properties across India’s nine prime residential real estate markets. Amid the lockdown, which is being extended across countries, NRIs would also have more time to make an informed decision.
According to Mittal, projects by reputed developers that are attractively-priced would get NRI attention at this time, as those would see good appreciation in the mid-to-long-term.
The lockdown has brought to the fore the use of online tools that make property inspection possible from distant locations.
Unsold luxury housing inventory
|Price bracket||Unsold inventory in 9 markets as of March 2020|
|Rs 1-3 crores||51,997 units|
|Rs 3-5 crores||4,762 units|
|Rs 5-7 crores||2,025 units|
|Above Rs 7 crores||577 units|
Source: PropTiger DataLabs
According to Bhasin, post-COVID 19, financial stability is likely to be achieved with the combined effort and support of government policies, banks, NBFCs and NRI investments.
Will property price rise amid COVID-19?
While downwards movement is not predicted by experts, price growth is likely to be muted.
How is the demand for luxury housing in India?
The demand for luxury housing in India has been muted in the past five years.