US NRI Investment in India Property

US NRIs are convinced about investing in Indian real estate because of the stability of the central government, positive policies and reforms which are impending. The final guidelines from SEBI for infrastructure investment, fiscal sops in the budget and the REIT or Real Estate Investment trust and increase in affordable housing projects are some of the steps taken by the government which has convinced US NRIs that Indian real estate is set to improve throughout the country.

Unlike other times, the numbers of NRIs interested in Indian real estate has gone up a lot. Recently a Times Realty show was held for 3 days in Edison which was visited by 400 families. Close to 30 top property developers of India participated in this exhibition and they showcased a wide range of options for investments to US NRIs. The category of investment ranged from luxury villas and home to affordable apartments, aside from projects of plotted development. The participating cities included Pune, Hyderabad, Bangalore, Mumbai, Jaipur, Chennai and Delhi NCR. Some of the states which participated were Gujarat, Kerala, Rajasthan, Goa, Punjab etc. 

India Property

What could be gathered from this exhibition is that almost 22 percent of visitors preferred Surat, Vadodara and Ahmedabad for real estate investment in Gujarat. Over a course of three years, demand did perceptibly shift towards cities in Gujarat. For those wanting apartments Ahmedabad topped the demand list. Among all the US NRIs, Mumbai was the top-most city among participants of the exhibition on Edison in the east coast. Mumbai snatched up the top spot with 25 percent while Gujarat cities came up with 22 percent, NCR and Bangalore tied for 15 percent, Pune being at 13 percent and then Chennai and Hyderabad.

Most US NRIs are optimistic about the newly chosen government and the prime minister’s assurance for resolving upsetting issues that the country is facing. Availability of property management companies which are professionally managed for retailing investors has made NRI investors more enthusiastic towards real estate investment in India.

Some of the Indian property developers have come up with US representative offices and the numbers of property shows are growing every year mainly for showcasing company projects among the US NRI investors. Event managers are thinking of penetrating those cities which were not tapped previously as demand for Indian real estate is wide spread in the US.

The investment pattern among the US NRIs seems to begin with their first investment being in their home city/town. The second investment is not usually centred on a city but is focused on the pattern of growth and investment potential which is prevailing currently and where investment yield is mostly prioritized. A property management service which is uninterrupted along with rental income which is assured brings in NRIs irrespective of investment location in the country.

Most US NRIs want to invest in Indian real estate with Rs 25 lakhs to Rs 30 lakhs. Most investors want to invest their money in selected Indian cities and in certain projects although this is not necessarily true. Some of the investors would become end users and they want to invest in certain cities mainly for their family while others want to buy property for the period returns that they offer on their investment. A survey was conducted in Edison, Houston and Sunnyvale in California at the time of India property shows which were held there. It revealed that the cities in Southern India attracted more of the demand. Most NRIs want to buy flats to live in and the price range in which they would like to have flats in is Rs 60 lakhs to Rs 1.25 crores.

Villas are mostly demanded in the southern cities of Chennai and Bangalore. Other cities which have a lot of demand include Delhi, Pune, Mumbai and Hyderabad. Some of the secondary cities where demand was surging are Mangalore, Mysore and Coimbatore. Post the splitting of Andhra Pradesh Hyderabad’s property market has stabilized which has led to an improvement in demand for Hyderabad’s property.

 The demand for investments which are medium terms such as developed plots which are within USD 10000 to USD 30000 has been constant. They want to leverage the increase for investing in bigger units at later stages as US NRIs are aware that land is the fastest appreciating asset in India. Periodic returns on the investment made through rental income and management of property services are some of the reasons why NRIs demand India property in integrated townships.

In areas such as Houston, demand for India property is low because the local real estate market is booming and by deploying funds in these projects they would earn more. For example, if investors put in Rs 1 crore to Rs 1.5 crores in an Indian apartment, they would earn a rental income of Rs 30,000 roughly. However, in Houston they would be earning $1200 as rent which is equivalent to Rs 72000 in a month. Villas which cost more than Rs 3 crores did not attract much demand at these property shows as they require niche marketing.

HNI meets and road shows are good options for developers to attract NRI buyers whereas niche marketing needs targeted audience. No matter what form of marketing is picked up, emphasis has to be put on the post sales service which is given by a developer via property management firms in present times. Almost 50 percent visitors would like to opt for home loans as the lending rates locally in the US is much competitive for those NRIs who have good credit history. Mobilizing short to mid term funds is much easier for them than those living in India.

Those people working in tech companies and receive stock options such as employees of Google want to deploy funds for investment in either local real estate or in India for capital appreciation. Later on, they would sell the property and repatriate it to the US for buying better properties. These investors are looking to invest in Bangalore and Pune, which have been touted as India’s fastest growing cities.

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