Paul Sharma, 46, a portfolio manager with a hedge fund in London, plans to apply for an overseas Indian citizenship that would let him buy real estate in one of the fastest appreciating real estate markets in Asia.

A building (left) in Bangalore with a helipad

“I am basically from Himachal Pradesh and I would like to buy a property somewhere around my native place," Sharma says. Though he has property in the UK, he isn’t buying more there.

“I think one of the issues in the UK real estate market is that it is really difficult to track the market. The last time there was a softening in the UK property market, it was for six years—from 1989 to 1995."

Developers say that even as sales in the Indian real estate market are declining, demand from overseas and non-resident Indians (NRIs), especially in the luxury housing segment, is on an upswing.

The real estate sector in the country has been growing at 30-35% a year to touch $12 billion (Rs47,760 crore) this year, according to consultancy firm Ernst & Young’s report.

In the last six months or so, the real estate market has seen a drop of 60% in sales in the top cities as higher interest rates crimp buying. But demand from the overseas Indian community continues to be strong because it is not facing a similar sharp rate hike in those countries, where the real estate market is more mature and the returns less assured.

“There is a lot of interest in the Indian property market among the Indian diaspora, especially for high-end houses," says Kunal Banerji, head, international marketing, Ansal API Ltd said.

NRIs account for 20-25% of the company’s sales in the premium housing segment, which consists of houses above the Rs45 lakh mark. The demand is mostly from the West Asia, UK and US regions.

“The housing markets in the US and even in West Asia have hit a low," Banerji said. “So, buyers cannot expect a good return on investment there."

In the US in particular, home prices are starting to soften sharply after a series of bad loans to home owners, who had a high risk profile and failed to repay their mortgages on time. Home values have fallen and are now worth less than they were a year ago.

On the other hand, the Indian property market offers a minimum of 15% return on investment a year, even though that is a climb down from a doubling of values seen two years ago.

“Anybody who bought property two years back has made a good return, so this could encourage NRI buyers," Anshuman Magazine, chairman and managing director of real estate services provider CB Richard Ellis, South Asia, said.

Government policy has also made it easy for NRIs to buy a house in India. Under the present government regulations, overseas Indians can acquire residential property in India, rent it out, transfer or sell it. NRIs can also remit the rental income and capital investment made in Indian property abroad.

Developers are making a special effort to attrack NRI buyers. Ansal, for instance, plans to offer its prospective NRI buyers a special discount at a property exhibition, which it plans to organize in Dubai around the time of Diwali. The amount of discount to be offered has not yet been ­decided.

“We have never really tapped the NRI market. We feel we need to make a conscious effort to tap this market," Banerji said. Interestingly, this discount is not yet being extended to the company’s domestic buyers.

Omaxe Ltd, another real estate company which predominantly builds high-end homes is seeing a lot of interest from NRIs in Europe and the US. “I can’t put a figure to the demand from NRIs but the response is certainly very positive," Arvind Parikh, chief financial officer, Omaxe said.

Omaxe has its marketing representatives in Europe, US and West Asia either on its own or through tie-ups with the local real estate agents to tap the NRI market.

While property prices have increased in India by as much as 50-100% in the last three years, making it costlier for NRIs to buy houses, this price increase has not affected the demand from NRIs.

Even a fast appreciating rupee, which is hurting the value of the dollar, isn’t damping demand from the overseas Indians. Since the start of the year the dollar has fallen against the rupee and now fetches only about 39.5 to a dollar compared with about 44.6 in January.

“Yes, it is cheaper to buy homes abroad than in India but NRIs are still investing in the Indian property market with a long-term view," Magazine said.