With uncertainties brewing during the pandemic, followed by subsequent lockdowns, the Indian economy and real estate market faced a major backdrop, disrupting the trend of rentals, purchase, and leasing in Indian real estate market. However, it is now resurgent, becoming a hot topic among investors. India being one of the major investment countries, its promising market attracts NRIs from USA, UK, UAE, and Canada due to high return on investments, propelling economy, and several options available in the locations. According to a recent report, NRI investment grew by 12% in the year 2022 and is expected to grow further at a higher rate.
In this article we will understand the trends and the reason of increase in foreign investment.
Depreciating Rupee Value
The depreciation of currency depends on several factors that includes worldwide geopolitical stability, decline in food imports, an increase in oil cost and the concomitant increase in inflation. The depreciating value of Indian rupees against US dollar may not be the good news for Indian homebuyers or investors but it is an opportunity for NRIs to invest in India, a chance to convert their hard-earned money into a lucrative investment. During depreciation period, the value of Indian currency depreciates, and value of US dollar increases. Therefore, in less investment they can buy an exclusive properties and bigger spaces at a lower cost. The capital value appreciation, digital process, and rental income makes pleasing situation for investors.
Real Estate is the second largest employer in India which contributes 6-7 per cent to the India’s total GDP. However, during pandemic it saw a major backdrop but with the help of government policies favouring homebuyers and developers, it is now reviving post pandemic, attracting a huge traction from foreign investors. The government policies and implementation of regulatory body such as RERA has improved the residential sector by safeguarding the homebuyers, ensuring the project completion within deadlines, and reviving the stagnant project for timely possession.
Along with the government policies, the capital appreciation and RBI’s announce reduction in repo rate which increased the investment from homebuyers. In addition, attractive schemes, discounts and offers lured the homebuyers and investors to invest in India’s booming real estate market. The development of sustained infrastructure in India also encouraged investors to invest in India. The Tier II and Tier III cities will act as a driver for upcoming years.
Reduced interest rate in other investment options
NRIs usually prefer investing in FDs, Equity, and Gold from abroad through their NRE account. However, the danger of losing money stays constant with these investments due to market volatility. The interest rate for Fixed Deposits stuck between 4-5 per cent which is subject to the inflation rate, indirectly resulting into poor returns. Moreover, the expat investors have been discouraged by the declining return potential of gold and fixed deposits. Hence, the real estate industry continues to be a profitable financial choice for the NRI community. The potential growth of Tier II and Tier III cities and smaller cities will drive expansion and the prospect of substantial long-term profits will continue to maintain investor’s interest.
Simplified Tax System
As India continues to be one of the leading recipients of foreign currency from overseas, a simplified taxation environment encourages NRIs to keep their surplus money in India. Additionally, NRIs receive an indexation benefit for real estate owned in India. They can easily invest in the Indian real estate market with the help of a set paperwork checklist. When buying a property, NRIs can transfer funds to their NRO account and use these funds to pay the seller. While purchasing a property in India, the NRI investor is also permitted to transfer the money directly to the sellers' account. This simplified payment option also motivates NRIs to continue making real estate investments in India.
The real estate industry in India is expected to grow rapidly soon due to the country's recovering economy. Therefore, to gain long-term profit, the NRI community must continue investing in India.