Indian Real Estate: Rupee depreciation, reforms, returns pull NRIs towards Indian real estate

Depreciation of the rupee against the dollar in the backdrop of the geopolitical situation and hardening global interest rates is helping drive sales of real estate to non-resident Indians.

The rising interest from NRI homebuyers is being witnessed across segments, from mid-income projects to premium and luxury segments and plotted developments.

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The Indian currency has depreciated as much as 5.2% against the US dollar in 2022 so far.

“The economic scenario worldwide has thrown up various challenges (but) India comes through as a safe haven in terms of economic growth potential,” said Niranjan Hiranandani, vice chairman of real estate industry body NAREDCO and managing director of the Hiranandani Group. “Beyond just sentiments, Indian real estate is also a good wealth creation and growth option for NRIs.”

According to him, the global currency situation translates into more square feet of Indian real estate for the NRI.

Apart from being a safe haven in these uncertain times, Indian real estate also offers capital value appreciation and rental income. All of these, and digitisation of the processes, add up to being a win-win scenario for the investors.

Enquiries and conversion into actual property sales have improved in the last few months for many developers, especially the large ones with an established delivery track record.

“The depreciating rupee is an opportunity for NRIs to invest in residential real estate in India. This is backed by the rising number of enquiries from multiple geographies, especially the Middle East. We are increasingly seeing that requirements are driven by their international experience and exposure,” said Ramesh Ranganathan, chief executive of K Raheja Corp Homes.

Several of the Middle Eastern countries with large Indian population, like the UAE and Saudi Arabia, peg their currencies to the dollar. This means the rupee has depreciated against them at a similar rate to the greenback.

Premium properties in tier I and metropolitan cities like Mumbai, Delhi-NCR, Bengaluru and Pune, scenic destinations at hill stations and by the beach across India have been garnering rising interest from NRIs, apart from domestic buyers, especially after the pandemic.

“We are seeing a lot of traction from NRIs in the Gulf, which is traditionally a strong market for us. In addition to this, we are also witnessing strong demand from Singapore and Hong Kong as well. Over 30% of our business so far this year has come from NRIs in these markets, apart from London and Malta,” said Dhimaan Shah, founder & chief operating officer of luxury holiday home developer Isprava Group.

The company backed by Nadir Godrej, Anand Piramal and

India’s Burman family has projects in Goa, Alibaug near Mumbai and in South India’s Nilgiris.

Historically, whenever the rupee has depreciated, NRIs have preferred to consider real estate as a good investment back home as this means increased purchasing power for them in India.

Properties have been the most devoured asset by this segment, especially by those in the Gulf who plan to return to their home country post-retirement. However, in addition to the UAE, the demand and enquiries have started to rise from other international markets.

The series of reforms implemented by the government, including the Real Estate (Regulation & Development) Act, 2016, has resulted in bolstering the confidence of NRI investors and they are more open to buying properties in India.

“The global Indian understands the importance of having a home back home. The regulatory environment and enhanced digitisation have also helped in making it attractive and stable for them,” Hiranandani said.

Better returns given the imminent residential property price hikes owing to rising demand are also prompting NRIs to invest here.

While the US dollar continues to remain strong against the rupee, Indian real estate has been buzzing with robust sales across key markets.

The strong demand conversion undercurrent is driving sales of both listed as well as private real estate developers, as indicated by their recent quarterly revenues that have touched multi-year highs.