The real estate sector in India has witnessed a remarkable increase in foreign institutional inflows, with a staggering three-fold rise of $26.6 billion between 2017 and 2022, according to a report by real estate services firm Colliers. This surge can be attributed to recent structural and policy reforms that have improved transparency and ease of doing business in the sector. Titled ‘India – High on Investors’ Agenda,’ the Colliers report explores the factors that make India a top choice for global investors and tracks the recovery and growth of the real estate market. The report also highlights investment opportunities in both core and alternative asset classes, such as Global Capability Centers (GCCs) and Data Centers.
Leading developers, including DLF and Godrej, have witnessed significant traction from NRI investors especially in the residential segment. NRI investment has consistently played a crucial role in DLF’s residential portfolio. As per the company’s FY23 results, the company achieved sales worth Rs 2000+ crore from NRI investors in the fiscal year 2022-2023. Notably, key markets contributing to these impressive figures include the GCC, USA, UK and Singapore.
Commenting on the same, Aakash Ohri, Group Executive Director & Chief Business Officer, DLF Group, says, “Residential real estate investments offer the NRI community a unique opportunity to convert their hard-earned foreign income into profitable investment opportunities in India. In the last three years, the number of NRIs looking to buy a home in India has substantially increased. The simplified tax regime, indexation benefits for properties held in India, favourable currency fluctuations, digitization of procedures, and transparent regulations are some of the reasons that attract them to park their surplus money in India. At the same time, a strong emotional attachment to the country has led many to return or plan to settle in the future. Demand today spans all regions and product categories, especially in the luxury segment, with projects offering amenities and facilities on par with global standards.”
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High-net-worth individuals (HNIs) and non-resident Indians (NRIs), unaffected by economic variables such as interest rate fluctuations, also play a pivotal role in fuelling the demand for high-end residences. Resultantly India is being perceived as an appealing and promising destination for real estate investments, both by domestic and NRI diaspora.
Vivek Singhal, CEO, Smartworld Developers, says, “The Indian real estate sector currently offers a compelling investment opportunity characterized by appealing rental yields, long-term capital appreciation, and affordability. In recent years, we have witnessed a significant increase in investments across various real estate asset classes, driven by the growing demand for luxury housing. In the current market landscape, discerning homeowners actively seek properties that provide spacious living areas, ample natural light, and outdoor spaces for relaxation and recreation. These features greatly enhance the overall living experience.”
During the mentioned period, foreign investments accounted for a significant share of 81% of the total investments in the real estate sector. This surge was driven by foreign direct investment (FDI) policies that were favorable to investors, increased transparency in deals, and higher investment limits. Notably, institutional investments remained robust in the first quarter of 2023, experiencing a year-on-year increase of 37% to reach $1.7 billion, with the office sector leading the way.
Commenting on the same, Shashank Vashishtha, Executive Director, eXp Realty India, says, “The real estate sector in India has experienced a remarkable increase in foreign institutional inflows, and this substantial growth can be attributed to structural and policy reforms that have enhanced transparency and ease of doing business within the sector. NRIs in GCC are increasingly optimistic about the Indian market and those in the US and Canada are eying to invest in India, which has outperformed numerous countries, including developed ones.”
“Foreign investments constituted a significant 81% of the total real estate investments during this period, propelled by investor-friendly Foreign Direct Investment (FDI) policies, improved transparency in transactions, and higher investment limits. Considering that the GCC is home to approximately 7.5 million NRIs and expatriates, the potential is immense. India has become and will continue to be an attractive destination for ‘back home’ demand due to its strategic location, promising policy outlook, favourable currency rates, and indexation benefits,” he adds.
As the Indian central bank has temporarily halted its series of rate hikes, the bond yield is expected to remain stable. Coupled with an anticipated reversal in the interest cycle over the next few quarters, this is likely to widen the yield spread between bonds and real estate. Consequently, real estate is poised to become an even more attractive proposition for investors.
Leading developers have witnessed significant traction from NRI investors, especially in the residential segment.
