Despite the pandemic response, currency depreciation, and rising global inflation, India's real estate market is slowly returning to pre-pandemic levels. Non-resident Indian (NRI) investors have seized on the weakening rupee against the US dollar, the Dirham, and the majority of major currencies as an opportunity to buy homes and earn high returns by investing in Indian real estate. Despite the pandemic and its aftermath, 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.
One driving force in this growth has been the success in developing highly interactive virtual tours and digital layout inspections via internet-driven technologies. In addition, the budget for 2022-2023 included highly favourable incentives for NRI investment, which is a significant factor. For instance, the maximum surcharge on both short-term and long-term capital gains has been reduced from 37% to 15%.
NRIs in GCC Countries are "Coming Home"
An impressive 41 percent of such large volumes of investment have come from NRIs in Gulf Cooperation Council (GCC) nations, particularly the UAE. Even now, the number of inquiries from NRIs in the GCC about higher-priced homes is rapidly increasing. A growing number of people are investing in order to have a place to live if they decide to retire to India, illustrating the trend of people relocating closer to family and returning to their motherland. In India's first quarter, property sales reached a new high not seen since 2015. As a result of these encouraging trends, an increasing number of NRIs from the Gulf countries are interested in making high-risk investments in both metro and non-metro cities.
NRI investors from the Gulf Cooperation Council (GCC) have long seen great potential in India's real estate market. Purchasing real estate in India is now more accessible for NRIs earning abroad and many are eager to take advantage of the high returns as a result of the depreciation of the Indian rupee versus the Dirham (and the US Dollar), resulting in an increase in the volume of queries. Residential real estate is an especially appealing investment due to its greater maturity in terms of coverage across multiple locations in India and adaptability in delivering options for just about any budget.
The trend has created a new market for luxury vacation homes in non-metro and coastal locations, as well as high-rise condominiums in major cities. From the perspective of a non-resident Indian, the opportunity for arbitrage is significant in the current market because property prices are higher while the rupee is currently at a low. This is boosted further by the government's offer of a number of incentives for NRIs to invest in real estate in India, such as a simplified taxation environment and an indexation benefit for assets owned in India, which encourages NRIs in GCC countries to park their surplus money in India. Reduced mortgage interest rates, digitised processes, and open rules all play important roles in the decision-making process.
The GCC countries—the United Arab Emirates, Oman, Kuwait, Saudi Arabia, and Qatar—are reportedly among the top regions in the world for super-luxury and luxury search engine inquiries by NRIs who live and work there. Given that the GCC has approximately 7.5 million NRIs and expatriates, the potential is enormous. India has become and will continue to be a magnet for "back home" demand due to its convenient location, promising policy outlook, competitive currency rates, and indexation benefits.
NRIs' Favourite Home Categories
NRIs are now more comfortable making large purchases against the backdrop of the real-estate market's steady recovery. The luxury real estate market is gaining traction and is expected to expand even further in 2024. NRIs have always preferred ultra-luxurious and luxury properties. Since the pandemic, second homes have also dominated NRI preferences. They want to live in a community where everything is at their fingertips. An NRI customer seeks a reputable real-estate developer as well as a home that corresponds to their status. Furthermore, some NRIs in GCC countries simply want to return home after being exposed to the pandemic.
NRI Investment Hotspots in India
Historically, NRIs from the GCC have preferred metro cities such as Delhi-NCR, Gurgaon, Mumbai, and Chennai for investment, but more recently, they have been eyeing upcoming smart towns such as Ahmedabad, Goa, Chandigarh, Panchkula, and Kochi.
Gurugram is one of the most important NRI investment markets. The city has become a major centre for real-estate investment in the last two decades as a result of its cosmopolitan culture and the presence of Fortune 500 companies. It has become a popular place to settle for non-resident Indians (NRIs) and foreign expats due to its well-developed infrastructure and thriving social fabric, which includes some of the world's finest universities, hospitals, banks, and shopping malls.
As a result, there is an increasing demand among NRIs for upscale, well-appointed, and secure residences near Golf Course Road. NRI investment in Delhi is also increasing rapidly. The average capital value of a land parcel in Delhi has increased by 4% year on year, and this trend is expected to continue through 2023 and beyond. In 2022, South-West Delhi experienced the greatest YoY increase in land prices (11 percent). There has been a flurry of real estate transactions in New Delhi's most desirable neighbourhoods, including Prithviraj Road, Vasant Vihar, Greater Kailash, and Panchsheel Park, since the property registration office reopened following the lifting of pandemic restrictions.
Kochi, on the other hand, is a typical NRI investment micro-market. Kochi, a homely and warm town with a population of only 3,301,000 in 2022, is getting a facelift, thanks to significant infrastructure investments by both the federal and state governments.
NRIs in the Gulf Cooperation Council (GCC) are becoming more optimistic about the Indian market, which has outperformed competitors in many countries, including developed ones. NRIs all over the Gulf are concerned about their families' health and safety, and they have an innate love for their motherland.
This explains the recent surge in NRI investments in super-luxury and luxury homes. In 2022, house prices in major metropolitan areas such as Bangalore, Hyderabad, Mumbai, Delhi-NCR, Chennai, and Pune increased by more than 7%, and this trend is expected to continue in 2023 and 2024. Investment in Indian real estate is particularly appealing to NRIs in the Gulf Cooperation Council (GCC) countries today because the country's economy appears to be more robust and stable than that of its western or even Asian competitors. As a result, expatriates from the Gulf understand that they can view their luxury homes in India as an investment that can also generate rental income.
