A report on the state of NRI investments in the Indian real estate sector, compiled by 360 Realtors, a leading real estate consulting company, has found that NRI investments in Indian real estate has already doubled from $5bn in 2014 to $10.2bn in 2018. This growth is largely driven by five cities - Mumbai, Pune, Bangalore, Gurugram, and Noida. The key driving factors are the dwindling rupee that has made Indian real estate more affordable, regulations like RERA that have led to increased transparency, and growing developer focus on the expatriate market.
NRI capital inflow in Indian real estate ($bn)
NRIs from countries like the US, UK, MEA, and Singapore account for a quarter of real estate sales in the country in 2018-19 till date. Around 70% of these sales are retail in nature, from expatriates who aspire to buy a home and settle down in their country of origin, post retirement. While NRI investments stabilized during 2016-18, the market gained momentum recently, powered by a depreciating rupee, high yielding rental returns and capital appreciation. In the current financial year, NRI investments are expected to rise by around 15%.
City-wise growth in NRI investments ($bn)
Mumbai constitutes around 45-50% of the NRI investment in the country. It is a popular investment destination not just for NRI buyers originally from Mumbai, but also for NRIs from North and South India. Over the last five years, NRI investments in the city have grown by 74%. The marked preference for Mumbai is backed by its high capital appreciation (between 5 to 7% yoy) and attractive rental returns (3% annually). Mumbai’s dominance over its peers is also due to its high-ticket sizes. IT hubs like Pune, Bangalore and Gurugram continue to be the first choice of IT professionals working abroad when it comes to buying a home. Capital inflow into these cities has almost doubled over the previous five years.
NRI investments inflow: city-wise growth
The outlier amongst these markets has been Noida, growing by an unprecedented 350% since 2014, raking in $1.4bn in real estate investments in 2018-19. From attracting less than half the investment that Gurugram received in 2014, Noida is expanding at a rapid pace and has become home to industries such as IT/ITeS, consulting, and publishing. Its proximity to Delhi and Gurgaon, comparatively better prices and growing rental yields has led to the increased NRI interest in the city. Many major national developers are heading for the Noida market, thereby giving buyers more options.
Country-wise split of Investments FY18-19 (Till Date)
Mumbai is the number one market for investors from USA (35%), UK (60%), UAE (70%) and Qatar (32%). On the other hand, NRI buyers from Singapore are largely betting on Bangalore (30%) and Gurugram (35%). After a brief lull when investor sentiment slowed down in Gurugram at the onset of the current financial year, attractive schemes from developers gave the market a boost. These schemes, which include subvention and assured rentals, are being increasingly tapped by expatriate property buyers.
NRI investment inflow: country-wise split
Developers are also realizing the rising significance of the expatriate buyer base, and hence, are aggressively trying to tap into the lucrative market. Many developers like Omkar, Godrej, Sobha, Alphathum, Vatika, Raheja, etc. are coming up with exciting offers such as subvention and assured rentals, that are becoming an instant hit amongst the NRI buyers.
Ankit Kansal, co-founder and CEO, 360 Realtors said, “A dwindling rupee along with the transparency that has ensued due to good regulatory decisions like RERA has emboldened the confidence of NRIs in the Indian real estate sector. They are looking to make the most of the opportunity by buying property both for personal use as well as investments. While Mumbai is the obvious number one in terms of investments, Noida is one market that is witnessing some great action. We expect the strong demand from NRIs to continue throughout the year and into 2019 as well.”