Several key policy changes in India’s property regulatory system have helped increase the confidence of non-resident Indians (NRIs) in the country’s real estate market. As of result of these changes, the market now offers buyers improved security on their investments with tighter regulations and greater transparency. NRIs have always preferred to invest in Indian realty. In fact, NRI investments are expected to almost double by the end of the year compared to 2013, when it stood at $6 billion (Dh22.03 billion), according to Ashwinder Raj Singh, CEO of JLL Residential (JLLR). Last year, the total NRI investments in primary sales residential real estate reached approximately $9.6 billion, Singh says. This year, the figure is expected to touch around $11.5 billion, which would be 20 per cent of the total market estimated at $60 billion. Out of this, 20 per cent of NRI investment come from the UAE.
“The new residential launches in the eight major Indian cities have dipped by 19 per cent in the first quarter of 2017, post demonetization,” says Singh. “Builders are more focused on clearing existing inventory, which has resulted in unsold inventory reducing slightly by 3.12 per cent in the first quarter this year compared with the fourth quarter of last year. This is definitely a positive development. With some liquidity coming into the system, new investments will be made in the affordable housing sector, where the maximum demand lies, and can result in positive growth.”
Singh says buyers are active in the primary market, supported by financing. “A lot of enquiries are taking place,” he says. “Home loan rates have reduced and buyers are offered exciting schemes, including discounts, parking, club facilities, etc., as well as financing deals by the builders.”
Singh says this indicates that the residential market will start growing faster by the end of the year. “Market activity is picking up and even the secondary market will show signs of recovery in the foreseeable future.”
Rera
Among the key initiatives, the Real Estate Regulation Act (Rera), which was implemented last month, brings clarity and fair practices in the property segment, protecting the interest of all it stakeholders. “Rera is a shot in the arm for NRIs as it will bring in transparency in all residential property deals and ensure timely delivery of projects,” says Singh. “NRIs will now have regulatory support in case of disputes and a working mechanism to ensure they’re not exploited by fly-by-night operators.”
However, Singh says NRIs need to be aware of the rules implemented by the local governments. “There might be some changes while executing Rera at state level,” says Singh. “Also, they need to study the background of the builder and the project’s progress report and verify it with the updated information on the Rera website.”
R. Srividya, general manager of corporate sales and brand engagement of the Indian Property Show, Sumansa Exhibitions, believes that Rera will ease the apprehension of investors. “The legislation’s objective is to protect the right of the consumers and bring forth transparency in the real estate sector by making the developers accountable for every penny invested by the consumer,” explains Srividya. “The central government has given stern deadlines for the implementation of the Act.”
Under the Act, if a developer commits an infraction, the aggrieved party is entitled to relief. “It is even directed that the parties have the right to cancel their booking in case of any legitimate deficiency on the part of the developer and the investment shall be refunded.”
Other boosters
Singh says the other important policy initiatives announced by the government include the Real Estate Investment Trust, Smart Cities, Amrut, the Goods and Services Tax (GST), demonetization and affordable housing being given infrastructure status. “GST will be implemented by July 1 and work on smart cities has begun,” says Singh. “The positive impact of demonetization will become more visible in the coming months, and all these factors combined will continue towards a significantly improved growth graph for the real estate sector.”
Demonetization impact
Srividya says that demonetization affected housing supply and demand in the fourth quarter last year, wherein the developers held back registration of many projects. However, this was short-lived, says Srividya.
“Housing sales and new launches shot up by 70 per cent in the first three months of the year compared with the previous quarter,” she says. “The new launches stood at 30,000 units, and the housing sales also jumped to 23,000 units in the first quarter from just about 14,000 in the previous quarter. However, the secondary sector will encounter certain hindrance due to the massive cash transaction involved, whereas new projects remain unaffected as all the transaction is facelifted by bank loan and is accountable.”
Although concerns about a slowdown in demand and high debt levels of the real estate developers largely remain unaddressed, Srividya says the Union Budget had enough stimulants to turn around the sector.
“With affordable housing now gaining infrastructure status, developers will have access to cheaper funds from big institutions such as insurance companies and pension funds,” she says. “All these measures would improve liquidity, improve margins and increase the supply of this capital-intensive sector.”
Buyer trend
Srividya says NRIs for long have shown constant interest towards cities such as Mumbai, Bangalore, Delhi, Chennai. However, tier-two cities are picking up pace and cities such as Pune, Goa, Cochin, Ahmedabad, Coimbatore, Jaipur, Chandigarh and are drawing attention.
Ajay Nahar, managing director of luxury developer Nahar Group, Mumbai says NRIs are exposed to global lifestyles, which is giving rise to very high housing aspirations.
“The last couple of years have witnessed a marked increase in NRI investment in the Mumbai residential market,” says Nahar. “From a contribution of 25 per cent, the NRI segment today comprises almost 35-40 per cent of any developer’s portfolio.”
Devang Verma, director of Mumbai-based Omkar Group, believes India’s real estate industry is witnessing a positive shift with the new regulatory framework. “The power a buyer has went up by a few notches and this positive sentiment is going to continue for some time,” says Verma.
