Policy Reforms Making Realty Market An Attractive Platform for NRI investments in India.
With the series of radical and transformational reforms in last two years 2016 and 2017, the NRIs across the globe are anticipating the Indian real estate market to be more transparent, credible and attractive, now as compared to previous time. The Non-Resident Indian (NRI) investment is poised by the accelerated growth with the consolidation of the market by only organised players on the ground.
Globally, most of the NRIs are the employees and the wage earners. The global job market is unstable and this fact forces them to be more realistic while investing in real estate market in India. The other reason was the lack of a trusted platform for those NRIs who wished to invest in properties here.
The opaque nature of the real estate business, lack of information and proper implementation/ processing channels, has always been the cause of concern for NRIs. Also, lack of a proper regulatory mechanism to safeguard against the misleading marketing and non-adherence of property delivery on stated timelines, has always deterred investor’s interest.
However, with transformational reforms and policy changes in previous two years, the Indian real estate market has got the potential to attract more NRI investment. Game Changing Reforms
The policies which revived and influenced NRIs investment decisions are
• Real Estate (Regulation and Development) Act 2016
• Foreign Direct Investment (FDI) reforms
• Relaxation of norms in Real estate Investment trust (REITs)
• Goods and Services Tax (GST)
• Benami Transactions (Prohibition) Amendment Act
• Changes in Accounting standards IFRS
These policy reforms are helping to bridge the trust deficit between the institutional/ NRI investors and India's real estate property players. In above all mentioned reforms, RERA has been pivotal in addressing this trust block and boosting confidence in NRI investors.
The relaxation in some of the norms in REITs will directly benefit the commercial real estate property segment, especially retail, office, logistics, warehousing, etc. There has been a consistent rise in demand for commercial spaces like Grade A offices and IT parks in Tier I and Tier II cities. Due to which, NRI investor's focus towards commercial properties has risen considerably, as this sector is delivering more satisfactory yields as compared to residential segment.
Many Indian large realtors are experiencing a revival in NRIs investment plans with most of their upper price segment properties which are RERA compliant are being sold out to customers majorly belonging to NRI community.
Major Factors Influencing NRI Investors
As per the industry experts analysis, NRIs always consider four major factors while investing in Indian property market, they are
• Developers with strong delivery record
• Minimum initial investment
• High rental potential
• RERA compliance
• Status of the land & its use
The interest to invest in real estate sector by NRIs is especially driven by long-term fundamentals like safeguarding retirement plans, emotionally connect, better returns and yield on investment.
Right time for Investment
The experts are stressing that this is the right time for NRI investors as there are more investment growth opportunities, in both residential and commercial real estate market of India. This due to following reasons:
• The property prices in India are at the bottom
• Realtors are rolling out highly attractive prices for all projects which are at par with international standards
• RERA compliance making the market more transparent in all its processes
• Not much appreciation in real estate market of developed countries
• Depreciation of Rupee
• Availability of ready-to-move residential properties at affordable rates
• Mid-segment and smaller projects with lower price tags are available
The previous pure price-play mechanism of the realty market is now shifting to facts like quality, commitment to deliver on time and right price strategy. The policymakers are continuously working towards simplifying the purchasing processes, rules and regulations prevailing in the real estate market. Further relaxation in FEMA norms and some laws by RBI regarding property buying by NRI Diaspora are likely to give a big boost to their investment in Indian property market.