Why NRIs are investing in Indian real estate

The Indian real estate sector has seen phenomenal growth in the last decade, and Non-Resident Indians (NRIs) have been a huge part of this growth. NRIs are increasingly inclined towards buying a home in India, driven by hybrid work formats, the decision to return to one’s homeland, and a desire for a better quality of life.

NRIs see investing in Indian real estate as a profitable investment opportunity that will give them a good return on their money and help them diversify their investment portfolio. NRIs in the US, Canada, the Middle East, Europe, and other Asian countries have shown a marked preference for investing in cities such as Gurgaon, Bengaluru, and Hyderabad. Tier two cities have also seen an increase in interest from NRIs, who want to buy large homes in their own hometowns. The pandemic changed the dynamics of Indian families. It has strengthened the extended family system, with many preferring to live with their grandparents and parents. Work-from-home (WFH), which has become a trend post the pandemic, is also fuelling demand for larger homes. Professionals are now seeking additional space in their homes to set up workstations. 

The rupee depreciation has also fuelled demand for properties, as NRIs are looking to invest their money in real estate and hedge against currency fluctuations. The INR has been falling against the USD since 2018, when it fell by 8.6 percent, 2 percent in 2019 and 2020, and 1.5 percent in 2021. Since the beginning of 2022, the rupee has depreciated, going from Rs 74.40 to an all-time low of Rs 81.88, dropping by nearly 11% this year. The rupee had already been under pressure due to a widening trade deficit and rising crude prices, but it was also hit by an increase in US interest rates and fears over a global economic slowdown. NRIs benefit from the rupee depreciation, especially those who stay in countries with a stronger currency value. They are at an advantage as after converting their balance to their home country’s currency, they can buy a property that is much cheaper than what it would cost if they were living in the country.

Real estate developers are catering to this new surge in demand for homes from NRIs by launching properties with better amenities. Recent trends show that NRIs are seeking spacious, smart, modern spaces that support the ‘new normal’ lifestyle in terms of flexibility or energy efficiency. They prefer well-connected and self-sufficient gated communities with open spaces that are close to the city. These are the type of communities that offer a better quality of life, as they have all the amenities that an NRI could want – schools, hospitals, sports facilities, shopping malls, and more.

Government investment in infrastructure has also led to improvement in connectivity and the rise of tier-two cities. In general, tier-one cities are the most connected ones, while tier-two and tier-three cities are less connected. But with the rapid infrastructure growth in tier-two cities, connectivity has improved, and more businesses are in these locations. This change has been seen not only with the physical infrastructure but also with the digital infrastructure. Mobile data prices have gone down, broadband speeds increased, and there is more data availability across these new locations.

There is also an increasing preference among NRIs for second homes, which are now viewed as investments that can provide a steady income stream. In the past, weekend homes were considered a luxury and aspirational purchase. However, in recent years, we have seen a shift towards weekend homes being viewed as prudent and secure. 

Government reforms such as RERA Act (Real estate regulatory authority) have also infused confidence in NRI’s. Rera has enabled greater transparency in real estate transactions. This has increased the confidence of local and NRI home buyers. It is a known fact that the Indian real estate industry faces many challenges. One of the biggest problems is the lack of transparency in transactions. This led to a lack of trust among buyers and sellers. Rera was introduced to solve this problem. The introduction of Rera has made it easier for people to buy or sell properties without any hassle or fear of being cheated or duped because all information related to a property can be found on this portal. This increase in transparency also means that there are no hidden costs involved in any transaction, which increases confidence among both buyers and sellers alike leading to better prices for properties as well as a higher volume of sales.

The Indian real estate sector has indeed come a long way from an opaque and inefficient market to a transparent one. Technology has enabled NRIs to streamline the process of acquiring and transferring real estate even if they are not physically present in India. India’s real estate boom, improved transparency levels, a depreciating rupee, and stronger real estate laws are driving demand for homes from NRIs. This trend is expected to continue in the near future as the real estate sector is on a strong footing.