–Vinod Behl

As thehome sales show signs of slackening, real estate, real estate developers are banking big on NRIs to boost  housing sales during this festive season. 

In this festive season, NRIs will be leveraging rupee arbitrage to boost purchasing power by 15-20 percent. Compared to this gain, the recent 0.25 percent hike in interest rates has a negligible impact.

The recent TDS reform undertaken by the government will also encourage NRIs to buy property in India . Prior to this regulatory relaxation, there was operational hurdle with regard to buying property from an NRI. But the Union Budget framework which went live on October 1, completely streamlined the exit route. Earlier provisions of domestic property buyers required to secure a cumbersome TAN number to buy from an NRI has been done away with. Now resident buyer can deposit the withholding tax via a simple Pan-based challan. Further under the reform, buyers of NRI property are not required to file complex quarterly TDS returns. This has speeded up transactions of NRI properties, making these more liquid for NRIs and attractive for secondary buyers.

This policy reform has made it easier for NRIs to liquidate old underperforming stand-alone plots, apartments having low rental yields of 2-3%, with property management hassles and go for new age lifestyle luxurious residential properties, particularly premium gated communities which offer strong structural asset protection and professional property management. According to industry research reports, almost three-fourth of NRIs holding old secondary residential assets are looking to sell them. 

Budget rules also expanded repatriation provisions for inherited residential properties, permitting eligible individuals to repatriate up to USD 1 million per property for a maximum of two inherited properties subject to clearing capital gains tax and holding period requirements. 

Moreover, because of the rising demand for premium properties (costing between INR 1.5 crore and INR 3 crore, developers have been pushing this inventory into the market, giving wide choice to NRIs looking for premium properties in this festive season. INR 2-5 crore is the fastest growing segment with good corporate tenant demand and dual return performance, offering annual rental income of 2.6% to 4.6% and capital appreciation of 8% to 15% CAGR. Delhi-NCR has the highest short term capital appreciation of 12-18% and yield of 3%-4.3% , only next to Bengaluru at 3.5%-4.6%.

This festive season the top cities for NRIs to invest in India include Gurgaon (GCER, Dwarka Expressway, Sector 79), Noida and Greater Noida (Sector 150 and Noida Expressway), Bengaluru (Whitefield, Surjapur Road), Hyderabad (Hitech City, Kokapet), Chennai (OMR East Tambaram, Outer Ring Road near Poma mallee, Mumbai (South Mumbai, BKC) and Pune (Hinjewadi and Baner). NRIs are increasingly gravitating towards Tier-2 cities due to high property prices in Tier-1/ Metro cities, compared to comparatively moderate prices and better rental yields in Tier 2 cities like Chandigarh Tricity, Indore, Jaipur, Lucknow, Coimbatore, Kochi, Surat and Vizag. In emerging markets many NRIs are preferring commercial assets and fractional ownership which offer double-digit yield. They are also going for listed REITs which are highly liquid, have low ticket size and are managed professionally by institutional operators with no responsibility of investors unlike in the case of physical property. Also, compared to to 2-4% yield of physical properties, REITs yield 4.8% to 6%

Real estate developers on their part are also wooing NRIS, offering them structured capital management solutions. Some leading listed developers are reaching out directly to NRIs in Middle-East, UK, Singapore etc with dedicated festive offers to push sales. They are also luring NRIS with more structured and transparent subvention schemes besides pre-sales of new launches.