An estimated 30 million non-resident Indians (NRIs) spreadover 140 countries have an estimated combined wealth of USD 1.2 trillion. Expatriates constituted the highest remitters of foreign exchange consecutively for the years 2010 and 2011. Over 6-8 lakh resident Indians leave the country in search of greener pastures and an estimated one lakh NRIs return home every year.
Among the various investment options contemplated back home, real estate plays a key role as the rate of appreciation and periodical returns on investment are more in India . Moreover, a number of NRIs, particularly in West Asia, who cannot continue to stay there due to domicile restrictions will have to return home one day or the other. This is one major reason why they always look at various investment options including real estate back home for permanent settlement.
There are three kinds of investors in real estate – low, middle and high income groups. Within these categories there are end-users as well as investors. In the Association of Gulf Cooperation Council countries (comprising UAE, Saudi Arabia, Qatar, Oman, Bahrain and Kuwait), an estimated 55-60 lakh NRIs are working today including semiskilled and unskilled labourers.
Similarly, out of 1.6 million NRIs in Malaysia the preference is more towards southern cities here from where a majority of them come. In Canada, there are NRIs predominantly hailing from Delhi , Chandigarh and other regions . In the US, out of 2.5 million NRIs, southern cities of Bangalore, Chennai and Hyderabad dominate in terms of real estate requirements. The specific real estate needs of NRIs vary depending on the region, savings potential and a combination of other factors. The largest market for affordable housing in the price range of Rs 15-25 lakhs is the Gulf region where there are a large number of expatriates who are either semi-skilled or unskilled, and the salary levels are not too high. There are high net worth individuals and technically-qualified professionals who constitute 10 percent of the NRI population. Many of this segment are looking for apartments in the price range of Rs 50 lakhs to Rs 1 crore and villas in the price range of Rs 1.5 crores plus. There are also others keen on investing in commercial property .
According to banks in the Gulf, the average home loan size is Rs 30-70 lakhs and the predominant demand revolves around apartments. The overall home loan business in Dubai alone ranges from Rs 720-800 crores.
Among the cities that drive real estate demand overseas are Bangalore, Chennai, Jaipur, Kochi, Mumbai, NCR, Pune and some other smaller cities. Even some Tier II cities are in demand. A majority of the NRI buyers are end-users . There are buyers looking for a second home for use by their family members, to earn periodical returns on the investment , or even to retain as a buffer to meet contingencies.
Investing in land is quite popular among NRIs too as those who cannot buy an apartment immediately are keen to invest in a lesser value asset. Land value appreciates fast.
With the relocation of more skilled professionals to developed countries such as UK, USA, Japan, and Australia, there is a growing requirement of apartments in the price range of Rs 70 lakhs plus in metros. Villa developments are sought-after especially in the price range of Rs 1.50-Rs 2.50 crores.
A significant factor is that these days many high net worth individuals prefer income-yielding assets such as leased commercial property or opt for pre-launch offers which yield 18-25 percent during the project implementation stage. A section of NRIs are also keen on investing in project level entities on non-repatriation basis by forming a partnership firm or incorporating private limited companies.