Non-Resident Indian (NRI) investors are now allowed to keep money in offshore banks for more than six months, as per a new rule. Earlier, individuals were allowed to keep their funds for a 10-year period. However, the current regulation mandates that affluent Indian investors, who have funds across various countries and currencies, must invest in offshore or domestic assets. This government directive is anticipated to have a positive, and far-reaching impact on the Indian real estate market.
See also: How investments from GCC-based NRIs will help boost Indian real estate?
In recent years, investors have understood the significance of owning a house in their country of origin and the sense of security it provides during the time of uncertainty. The real estate sector has emerged as a resilient asset class that weathered the economic turbulence caused by the COVID pandemic, distinguishing it from other investment avenues. Consequently, it has garnered widespread interest from the investment community, resulting in a surge for housing demand.
Further, the change in buyers’ sentiment has resulted in a surge for luxury homes’ demand in Mumbai. The trend for luxury homes and comprehensive living solutions continues to gain momentum as people seek optimal comfort, safety, and improved lifestyle options in the new normal.
In future, this new trend is expected to incentivize individuals to invest in their country rather than depositing funds in foreign banks. Several global and domestic factors, such as currency fluctuations, geopolitical conditions, and favourable investment conditions in India, along with the emotional significance of investing in one's own country, will support this initiative.
For the real estate sector, the new remittance law may encourage NRIs to invest in the Indian real estate, making it easier for them to transfer funds from abroad. Hence, the Indian real estate market has started showing the signs of recovery, with property prices stabilizing and demand increasing in certain segments.
Also, the Liberalized Remittance Scheme introduced by the government allows residents to remit a high amount abroad without requiring specific permission or justification.
With more investments in the real estate sector, the demand for property rises. This increased demand can lead to rise in property prices, particularly in the most sought-after locations or emerging markets, generating potential profits for investors, and encouraging more investments.
The External Commercial Borrowings (ECB) scheme allows Indian residents and entities to raise and collect funds from international sources, including NRIs and foreign investors, for various purposes, such as the real estate development.
Therefore, there are several challenges such as regulatory complexities, and risk of fraud or corruption in the sector. The COVID pandemic already had a huge impact on the Indian economy, adversely affecting the real estate market.
Post pandemic, the new remittance law may create some opportunities for investment in the Indian real estate, however its impact is difficult to predict, and investors should carefully consider the risks and opportunities involved before making any investment decisions.
Investing in the Indian real estate presents the opportunity for capital appreciation, particularly inhigh-growth areas, such as Mumbai, Delhi, and Bangalore. With the implementation of the new law, investors can leverage this potential for appreciation. As a result, we anticipate increased NRI investment in the market, particularly in the luxury housing segment in key metropolitan areas.
While the new regulation is anticipated to encourage investments, there are several difficulties and factors that need to be considered. Transparency and accountability in the real estate industry are important factors. To stop fraudulent practises and safeguard the interests of investors, strict rules and efficient enforcement measures are required. Furthermore, recruiting international investors will depend on the availability of correct data, market information, and unambiguous investment standards.
Investments in the Indian real estate market could be considerably impacted by the new remittance law. It intends to bring in foreign investment and promote economic growth by removing obstacles and creating a more welcoming environment for investors. To take advantage of the opportunities provided by the new law, consistent efforts must be made to ensure transparency, accountability, and investor protection. Strategic partnerships between governmental entities, regulatory agencies, and industry players will be essential to maximize the potential of foreign investments in the industry as the Indian real estate market continues to develop.
(The author is managing partner – Viceroy Properties.)
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