Indian Real Estate Market Among the Most Lucrative Sectors for NRIs

Indian real estate market is one of the most lucrative sectors for Non-Resident Indians to invest their foreign money. Moreover, this trend will continue for more 4-5 years as the consumption story of Indian real Estate market is not going to get over in near future leading to immense commercial growth prospects that in turn increase the demand for real estate. Although Indian Realty market is facing downfall, it is not correct to say that all cities are experiencing the same situation. It has been observed that some of the cities in India always have good chances of investment and these cities even in worst circumstances would be able to provide good investment returns. One more factor that attracts NRI’s to invest in India is the bigger geographical area. Unfortunately, NRI’s put their money into property prevailing in big cities and metros, but they should be informed appropriately about the outskirts of the big cities and even about the tier-2 cities that offer a great deal of real estate investment in present scenario.
Not only this, but the recent significant depreciation in the value of rupees in respect of dollar/pound/euro has given a profitable chance to the NRI’s to clandestine their foreign earned money into some good  investment plans. However, quite a few times NRI investors face some issues with liaison services in real estate industry, but once these intermediary services will improve more and more foreign investors would be lured to purchase property in India in lieu of high returns.
Foreign investment is also a good sign of growth for Indian Real Estate market as well. In this current state of affairs when the Indian Realty market is experiencing a huge downfall, the foreign investors seem to be the ray of hope. With more and more NRI’s investing in small and even big commercial properties in India, the Real estate market will soon see a huge intensification. It has been observed from past trends that around 70% of foreign investment has been done in residential sector, but according to the Indian developers there are various commercial investment opportunities also existing for the foreign investors who wish to set up a business in India.
However, it has been told by the real estate experts that present time when foreign currency is in appreciation, it is the encouraging time for NRI’s to make some good investment in realty market in India. Office plots, residential spaces and even apartments are easily available for NRI’s.
Indian property developers also have a notion that the downfall of realty market in India is the result of the global meltdown and depreciation of rupee. Their belief is not vague, but they also consider that ambiguities in western economies led to the build-up confidence of NRI’s into Indian market and they are keen on purchasing property here. Their investment is a huge support for Indian Realty market and soon with the rupee appreciation these investments will strengthen the economic situation as well.

Economy and Realty for the Month of April 2012

Healthy office space absorption in 2011-2012 inspite of slowdown in GDP, However 2012-13 seems bleak.

Currently, the top seven cities of India that is Mumbai, National Capital Region, Bangalore, Pune, Chennai, Hyderabad and Kolkata together occupy 389 mn sq.ft of Grade-A office space. During 2010-11, a total of 38 mn sq.ft of new space was constructed in the top seven cities and it was 37 mn sq. ft during 2011-12. Office space absorption in India during 2011-12 was merely 2% lower than 2010-11 despite GDP growth slowing down from 8.4% to 6.9% during the same period. This is in sharp contrast to the popular belief that 2011-12 was a dull year for office market in terms of absorption. Healthy absorption rate ensured a drop in vacancy level to 21% by the end of Q4 2011-12 from 27% in Q4 2009-10.

Share of Banking & IT sector falls in absorption while manufacturing sector has witnessed an increasing trend over the last two years and contributed 19% in total absorption during 2011-12, higher from 13% in 2010-11. GDP growth of service segment is estimated to grow at 8.8% during 2012-13, much higher than industry segment growth of 6%. Absorption of space during 2012-13 is expected to be considerably lower than the previous two years and this will make it all the more challenging for developers to maintain existing levels of rent.

However, the latest move by Reserve Bank of India (RBI) of reducing the repo and reverse repo rate by 50 basis points (bps) each could provide the much needed impetus to the economy and help in reviewing the demand scenario for office space in the coming quarters.