How investments from GCC-based NRIs will help boost Indian real estate?

Positive consumer sentiments and growing demand for space have propelled the Indian real estate industry’s steady post-pandemic recovery. Factors contributing to this include rising income level, rapid urbanization, and spike in interest, driven by the pandemic, among Non-Resident Indians (NRIs) to own a house in India. Investment in the real estate sector has continued to be a preferred option for NRIs, who view luxurious houses as an excellent return on investment.

According to a report, NRI investments in the Indian real estate were anticipated to witness a steep rise to $14.9 Bn in FY22, for which credit goes to GCC-based NRIs. Providing a significant source of liquidity for the Indian real estate market, investments from GCC-based NRIs can help fund new projects and enable developers to complete existing ones faster, in turn increasing the supply and bringing down the property prices. Additionally, NRI property purchases can improve the overall health of the real estate sector by reducing the dependence on traditional sources of funding, such as bank loans and private equity, and providing an alternative source of funding, which is more stable and long-term.

Indian real estate developers understand the sentiment of homebuying more deeply amongst GCC-based NRIs. The luxury market, therefore, strongly caters to them. Developers have brought world-class amenities and infrastructure at par with international standards. Besides, developers also seek to provide an experiential and holistic lifestyle for NRI customers.

While metro cities were earlier the preferred locations for NRI homebuyers from the GCC, there has been a recent shift in preference for micro markets such as Goa, Kochi, and Ahmedabad. These cities and towns benefit from being warmer and more laidback, and they are getting significant infrastructure facelifts from the government.

Factors that make the Indian real estate a preferred investment destination for NRIs in the Gulf Cooperation Council (GCC):

• Strong Economic Growth: India has been one of the fastest-growing economies in the world in recent years, and this growth is expected to continue in coming years. This strong economic growth has led to an increase in demand for real estate, resulting in rise of property prices. NRIs have also become more comfortable, making larger purchases, as the real estate market witnesses a robust recovery. With NRIs interested in investing in luxury and ultra-luxury properties, we expect the luxury real estate market to expand and see a steady demand this year and the next.
• Stable Political Environment: India has a stable political environment, which has helped create a favourable investment climate. The government has taken several steps to simplify the investment process for NRIs, making it easier for them to invest in the Indian real estate market.
• Attractive Returns: The Indian real estate offers appealing returns to investors, which is a major factor in attracting NRIs from the GCC region. The rental yields in India are higher than many other countries, providing investors with a steady stream of income.
• Affordable Prices: Compared to other global real estate markets, property prices are relatively affordable in India. This makes it easier for NRIs to invest in the Indian real estate market, even if they have a limited budget. NRIs can take advantage of the higher returns precipitated by depreciation of the Indian rupee versus the Dirham, as well as the US dollar.
• Cultural Affinity: NRIs in the GCC region have a cultural affinity for India, which makes them more comfortable investing in the country. They are familiar with local customs, language, and business practices, which helps them navigate the investment process easily.

The rising demand from NRIs have also contributed immensely to lifting the mood for the luxury residential segment across India. This need, combined with depreciation of the Indian rupee, has provided NRIs with significant purchasing power in the sector. NRIs in the GCC are especially drawn to luxury housing options to take their lifestyle a notch up.

Having experienced some of the best global markets, NRIs prefer open, lush, and spacious houses, offering accessibility and safety. With the work-from-home trend creating a paradigm shift, health and wellness amenities have taken the centre stage, with yoga studios, meditation rooms, spas, gymnasiums, tennis courts, and jogging tracks becoming the new rage among urban homebuyers.

Technology has played a significant role in bridging the gap between NRIs and domestic buyers. Developers today are arranging virtual tours, digital property inspections, processing documents, finalising paperwork, and facilitating the purchase of properties online without any physical visit. The real estate sector was quite early in adapting and leveraging technology to counter the impact of Covid-19 pandemic. Digital launches, 3D property viewings, augmented and virtual reality-based design projects, and virtual property exhibits have all seen a major boost. This has been a major contributor towards enabling well-informed decisions, improving consumer encounters, increasing brand recall, and deepening customer contact.

Overall, the combination of strong economic growth, stable political environment, attractive returns, affordable prices, and cultural affinity makes the Indian real estate an attractive investment option for NRIs in the GCC region.

(The author is an executive president, residential business, Embassy Group.)