Earn in dollars, spend in rupees — Does that sound like your dream?

Well, it’s not your dream alone, but the dream of 900 million young Indians. Unfortunately, for our NRI brothers & sisters, they can’t spend in rupees (we’re not counting the stuff they carry along with them from India to abroad on their every home trip). But they sure can Earn in dollars and invest in rupees.

Since COVID times, India has moved past the spending mentality and moved into an investment mentality. And that holds true for our dear NRIs who are looking for investment opportunities that get the bang for their buck. Lucky for them, they are Indians so they get to invest, without any bounds, in one of such Indian assets that the world has its eyes on — Indian Real Estate.

What? You don’t believe us? Well, let’s hear the views of some of the experts on the Indian Real Estate Market.

There are 32 million NRIs and PIOs (inc. OCIs), and they are also some of the high-average-income communities in their respective countries. The depreciation of the Indian rupee against major currencies, such as the US dollar, has made property investments more attractive for NRIs. This exchange rate differential allows them to acquire properties at a lower cost and provides an opportunity to generate higher returns on their investments.

India offers diverse Real Estate investment options for NRIs, from affordable housing to luxury villas and commercial spaces.- Says MK Khusro, Founder & Chairman, Zoltan Group

"I am seeing a very good year to continue in 2023. The calendar year looks extremely exciting and the next nine months is probably going to see a 10 to 15% hike in total sales across the board," says Niranjan Hiranandani, Chairman, Hiranandani Group.

The market size of the Indian real estate sector in FY21 is $200 billion which will be $1 trillion by FY25 and will be 13% of the country’s GDP. - Vishnu Prakash Rathore, CEO – Credent Asset Management

"India is now seen as a more mature and investable commercial real estate market, with an average fund flow of approximately $5 billion per year. This has led to increased confidence among institutional investors, and there is a growing willingness to explore India as a market," - Andrew McDonald, president of property consultancy Cushman & Wakefield.

We’re sure you don’t have any doubts left now! So let’s move on to Why real estate is still the best investment in India for NRIs.

Why real estate is still the best investment in India for NRIs?

India being the 5th largest economy in the world, and still a developing nation has opened a whole new world of possibilities for investment, particularly in infrastructure (Real estate in particular).

NRIs to contribute 12% to the Indian real estate sector by 2023 and have contributed $15 billion in 2022. - said Vishnu Prakash Rathore

The rising trend of NRIs investing in Indian Real Estate has been fueled by a combination of factors, including the growth of the Indian economy, the rising value of the Indian rupee, and the attractive returns that can be found in the country's property market. But why are NRIs choosing to invest in Indian real estate, and what are the benefits of doing so? In this article, we'll explore the reasons behind this growing trend and examine some of the key advantages of investing in Indian property as an NRI. 

A Booming Sector

Well, this one is obvious from the above experts’ opinions. The Indian property market has been experiencing steady growth in recent years, with property prices increasing by an average of 7-10% annually. This trend is expected to continue in the coming years, making real estate a potentially lucrative investment opportunity for NRIs

“The current average prices in the top 7 cities (NCR, Kolkata, MMR, Pune, Hyderabad, Chennai, and Bengaluru) are collectively approximately Rs 6,150 per sq. ft which indicates that there has been an increase of over 11 percent since the last five years from Rs 5,551 per sq. ft. in 2018 to approximately. Rs 6,150 per sq. ft. in 2022”, an analysis by Anarock Research said.

Talking about average returns of Real estate in India Ankit Aggarwal, MD, Devika Group said “...IT parks/ business zones give returns in the range of 6-8%. Commercial offices in much sought-after CBDs can give a higher yield of 7-9%. Meanwhile, shops in malls & shopping complexes can give a yield of up to 9%. Other assets such as warehouses can also give a competitive return in the range of 5-6%.”

Value Of Indian Currency

The famous words by Petyr Baelish aka Little Finger in Game Of Thrones seem true for NRIs investing in Indian Real Estate.

Well, we’re not talking about actual chaos here, but the rupee's decline to USD, Dirham or other major currencies. NRIs benefit from the rupee's depreciation, especially those who are residing in countries with stronger currencies. They have an advantage because they can buy a residence for far less than it would cost them to live in the country after converting their balance to their home currency.

Since 2018, it has fallen by 8.6 percent against the USD, and the INR has been losing ground: 2% in 2019 and 2020, and 1.5 percent in 2021. Since the beginning of 2022, the rupee has lost value, going from Rs 74.40 to an all-time low of Rs 81.88 this year. 

“In contrast, NRI investment in Indian real estate increased by more than $13.4 billion (6.4 percent) in FY21 compared to FY20. Many factors have contributed to this increase in investment.” Shashank Vashishtha (Executive Director, eXp India) to Financial Express.

Increasing Demand 

With a growing population and a shortage of affordable housing, there is a high demand for rental properties in cities across India. This presents an opportunity for NRIs to generate passive income by renting out their properties to tenants. The rent earned can help offset the investment costs and provide a reliable source of income.

The aggregate residential demand, as measured by searches, climbed 19% year on year, led by big cities such as Mumbai with a 52.1% increase, followed by Noida with 35.8%, Gurgaon with 34.5%, Delhi with 14.8% increase, and Bengaluru with a 33% growth, showed the Magicbricks’ PropIndex Report for October-December, 2022

Favourable policies

The Indian government has implemented several policies aimed at encouraging foreign investment in the country's real estate sector, including relaxed regulations for NRIs investing in property. This has made the investment process more accessible and streamlined for NRIs.

“Policy initiatives like the Smart Cities Mission and AMRUT (Atal Mission for Rejuvenation and Urban Transformation) are expected to further amp up this demand. These initiatives, channeled towards developing ground-level infrastructure in strategic locations across India, will help encourage corporates and global conglomerates to set up their businesses and manufacturing units in these places,” says Sudarshan Lodha, Co-Founder, and CEO, Strata.

Reforms by the government, such as the RERA Act (Real estate regulatory authority), have also given NRIs more trust. Greater openness in real estate transactions is now possible thanks to RERA. The confidence of local and NRI home buyers has improved as a result. It is well known that the Indian real estate market faces numerous difficulties. The lack of transactional openness was among the main issues, but that has been dealt with by RERA to a significant extent.

Conclusion

Potential capital appreciation, rental income, and portfolio diversification are the reasons why real estate is still the best investment in India for NRIs. However, it is important to understand the legal requirements and risks involved in the investment process. Working with a reputable real estate company and conducting thorough due diligence can help to mitigate these risks and ensure that the investment is in compliance with Indian laws and regulations. With the right approach and careful consideration, investing in Indian real estate can be a rewarding experience for NRIs looking to secure their financial future.