BackIndian Real Estate a lucrative Investment Option for NRI investors
Let’s look at the few reasons, highlights, opportunities and benefits for NRI investors
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For Non-Resident Indians (NRIs), Indian real estate has recently become a compelling investment opportunity. The market offers attractive returns and long-term stability due to a booming economy, supportive government policies and a vibrant and growing polity. Let’s look at the few reasons, highlights, opportunities, and benefits for NRI investors.
- Strong economic growth: India's continued economic growth is driving the rise of the real estate sector. India's Real GDP growth is expected to reach 6.5% in FY2024, according to the Reserve Bank of India (RBI). Nominal GDP growth (approximately Real GDP growth plus inflation) will be much higher. This robust economic growth creates a favorable environment for real estate investment, leading to increased demand for residential, commercial and retail space. Thanks to the Indian government's focus on infrastructure development and friendly regulation, the real estate industry is poised for further expansion, attracting NRIs eager to tap the country's economic potential.
- Government Efforts: The Government of India has taken several initiatives to attract NRI investment, with sectoral reforms paving the way for a resurgence of such inflows to the real estate sector. The introduction of the Real Estate (Regulation and Development) Act 2016 (RERA) brought transparency and accountability to the industry and ensured the protection of buyer interests. The GST regime brought an end to uncertainty with respect to taxation. Governmental reforms and a strong export and manufacturing push from initiatives such as the Production Linked Incentive Scheme (PLI Scheme) and the governmental focus on legislative reform and stability has resulted in strong foreign exchange inflows into the country, which, in-turn, have kept the exchange rate very stable over the last few years. This adds to the stability which NRI investors desire with respect to their monies.
- Rising middle class and urbanization: India's rising middle class and rapid urbanization are major drivers of real estate demand. India's middle class is expected to grow to >500 million, accounting for 40% of the country’s consumption by 2025, according to McKinsey and Company and the Boston Consulting Group. This rising middle class, combined with increasing urbanization, is leading to strong demand for residential, retail and commercial real estate.
- Favorable Return on Investment: The Indian property market consistently offers attractive returns on investment. Over the past decade, property values in several Indian cities have risen significantly, yielding significant returns for investors. With supply now at very healthy levels, we are seeing a balanced market with price appreciation across residential segments, as has been documented widely by consultancies such as Anarock and Knight Frank. These returns, combined with a fast-growing rental market, make Indian real estate an attractive long-term investment option for NRI consumers.
- Affordable quality housing: India's growing population, rapid urbanization and changing lifestyles are driving demand for quality housing. An estimated 25 million new homes will be needed by 2030 to meet this surge in demand, according to a report by National Real Estate Development and EY. Recognizing this opportunity, developers are catering to this demand by offering modern conveniences, green living solutions and smart homes that appeal to socially conscious and aspirational buyers. These developments are more environmentally friendly, allow for meaningful social interactions and a strong community, all of which end up creating neighborhoods which are vibrant and happy. It has been shown time and again that such developments are the ones which hold value better and deliver superior returns to their dated and unidimensional counterparts. Furthermore, such developments are built over time (2-3 years), giving an investor / buyer time to make their payments, enhancing their returns further.
- Real Estate Investment Trusts (REITs): The introduction of Real Estate Investment Trusts (REITs) in India has further encouraged NRI investment in the real estate sector. REITs allow investors to invest in income properties without the hassle of property management. The transparency, liquidity and regular dividends offered by REITs have attracted significant interest from NRIs seeking opportunities to diversify their real estate investments.
Strong economic growth, government initiatives, attractive returns and regulatory reforms have made the Indian property market an attractive investment destination for NRIs to be exposed to. Furthermore, the emergence of REITs has opened up new opportunities for overseas investors seeking liquidity and diversification. NRI investment in Indian real estate continues to grow and given the structural change and demographic dividend the country is expected to reap within the next few years, we believe that real estate will remain a strong and vibrant investment for all.
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