A Silver Lining for NRIs Looking to Invest in Property During Covid

Article summary:

Why is it the right time to invest?

  • The fall of the Rupee
  • Lower Property price & Attractive deals
  • Government Reforms & Regulations
  • Good Rental yields
  • Reduced Home Loan Rates

The Covid-19 Era

The world has witnessed some unprecedented circumstances with Covid-19 taking over daily lives and disrupting all industries, sectors and the economy of many countries. 

Since March 25th (when the lockdown was announced), there has been an unfolding of a series of unfortunate events with the national GDP plunging into negative figures, the country seems to be facing one of its worst economic recessions. 

The real estate sector, too, touched the lowest of lows during the almost three-month-long nationwide lockdown. Home sales and new property launches suffered as the nation struggled to battle the pandemic. 

As the dust appears to be settling and more people want to go back to ‘normalcy’; the real estate demand seems to be picking up with home buyers willing to take advantage of the reduced demand and increased negotiation potential. This can largely be attributed to the fact that real estate is a safe and secure investment that yields high appreciation.

Opportunity for NRIs

Knight Frank observed – while domestic real estate buyers are still in the wait and watch mode, the pandemic has presented Non-Resident Indians (NRIs) opportunities to actively explore property deals.

UAE, USA, UK, and Canada are the biggest source of NRI residents who invest in India, with 42% of the total inflow coming from GCC alone. Even after having spent a significant part of their lives overseas, citizenship is not an option available to Indians based in the Gulf regions, which eventually brings them back to India – resulting in investing in assets like a house for when they return. 

Interestingly, Bangalore is leading the nation in terms of real estate recovery followed by Gurgaon. According to a trend observed by real estate consultancy firm Liases Foras, the luxury homebuyers in Bangalore have invested in premium properties during the Coronavirus pandemic. The primary reasons behind this trend are attractive discounts and deferred payment facilities offered by the developers during the pandemic situation.

Investment Opportunities for NRIs: 

Why is it the right time to invest?

The recent depreciation in the Indian rupee has sweetened the deal as NRIs now have to shell out less to buy a home. The significant drop in property rates, stricter regulatory measures, increased transparency and greater consolidation in the sector have together created a lucrative avenue for the NRIs to invest in the real estate market. 

COVID-19 has had a drastic impact on pricings and demand in regions like Hyderabad, Bengaluru and Chennai. Consumer demand has spiked in these markets as more home buyers from across India and many abroad are quickly taking advantage of the prevailing conditions to buy their dream homes or make great investments for the longer run.

The fall of the Rupee:  Covid-19 has created an investment opportunity for Non-Resident Indians (NRIs) in the Indian realty sector since USA and Europe were severely hit by the pandemic, adversely impacting opportunities in those regions. This has fueled the market value for Indian markets, as expats increase their focus on investments in the real estate market back home.

Since March 2020, the value of the Indian Rupee has fallen by 7% as compared to the US dollar. This means that NRIs can now look at bigger and better properties when they invest their money. Additionally, since real estate is a safer investment option than other investments, they can be assured of good returns too.

Although the fall of Rupee is not suitable for the economy of the country, it is beneficial for NRIs, as it leaves them with more disposable money to make investments in Indian markets.

Lower Property price & Attractive deals: Aimed at attracting new customers and increasing liquidity, developers are offering buyers some of the best deals. 

Offers such as innovative payment schemes, lowest home loan interests and rental guarantee have resulted in increased demand for residential real estate. The combination of these exciting deals makes investing in residential properties advantageous and worthwhile. 

Government Reforms & Regulations: Implementation of Real Estate Regulatory Authority (RERA) addresses major concerns like lack of transparency in transactions, delays in project delivery and the intent of the developers which often used to be a blindspot for NRIs looking to invest from abroad. 

As RERA has now enforced basic hygiene when it comes to property, the blindspot is reduced and you as an NRI can feel more confident in your investments. 

Currently in India, home loan is at the lowest rate in the last 15 years which makes it ideal for buying homes. 

Good Rental yields: Rent is a big source of income and residential properties have a huge demand. Real estate is not only an attractive asset class today but it also promises healthier returns when compared to other investment options. 

As an NRI you should consider the fact that investing in property will result in good rental yields and capital appreciations. 

Reduced Home Loan Rates: The Reserve Bank of India reduced the Repo Rate from 5.75% to 4.40% on March 26 to provide a boost to the economy. It has caused the home loan interest rates to drop as well. As of May 2020, the interest rates are at an all-time low of around 5.14% to 5.8%.

The significant drop in property rates, stricter regulatory measures, increased transparency and greater consolidation in the sector have together created a lucrative avenue. This again is a boon for those living overseas to invest in the Indian real estate market. 

Final Word

COVID-19 had a drastic impact on pricings and demand in regions like Hyderabad, Bengaluru and Chennai. As Warren Buffet said: the time to be bold is when others are fearful. So, this downfall, for many NRIs, has a silver lining when it comes to making a long term investment.

If you’re an NRI looking to purchase property or manage a property in India, Propadis can help. We will be your eyes, feet and hands on-ground and take over the hassle so you can stay stress free and enjoy the benefits of a real estate investment.

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