As COVID-19 cases are starting to recede, we can spot signs of economic revival in the real estate sector. And with the transforming market dynamics, there has been a substantial yet gradual increase in NRI investors.
Indian real estate has always been a good investment option for NRIs, especially in the last few years; we have witnessed the numbers of NRI investors in CRE rise substantially. This might have something to do with the growing demand for office spaces or even the mass movement of MNCs from China to India, both of which are leading to high demands and scope of earning in real estate.
Reasons why NRIs are moving to Indian Commercial Real Estate
The commercial real estate market has just begun its journey to becoming one of the highest-yielding investment options in India. Grade A offices have become a good prospect of capital appreciation for all investors, especially the NRIs.
Government reforms in favor of Foreign Investors
The government initiative of implementing RERA (Real estate regulatory authority) rules along with the Goods and services taxes is attracting a lot of Foreign Direct Investment.
Urban development policies
As more and more people move to urban cities, the demand for living spaces was destined to rise, taking advantage of the rise, co-living spaces also began to boom as affordable and luxurious living spaces.
Apart from this, the urban development policies and Smart city programs also contribute to the rising demand for commercial real estate, so much so that the size of the real estate sector in urban India is expected to cross $1 trillion in 2030.
Growing demand for office spaces
The rise in the number of IT professionals, software engineers, entrepreneurs, and freelancers will be reflected in the Indian demand for co-working spaces. The demand for commercial office spaces and other forms of working spaces is also expected to rise to create an economic boom in the sector, making it ideal for NRI investors.
MNCs in India
The pandemic has had many multinational companies moving their bases from China to India, as India is a developing country with a lot of assets to offer, the MNCs are here to stay.
Therefore, the NRI investment options in India in the CRE sector are highly beneficial.
Benefits of NRI investment in Real Estate
Commercial real estate has always been considered high profit-yielding investments, especially in today’s time when the demand for commercial properties is growing so fast. Some of the benefits of investing in CRE are
Regular passive income and cash flow
CRE investments can make great investments to generate a regular passive income so that you don’t have to depend on your job for all your expenses. As the assets are generally secured by leases (an MNC rents commercial office space on your property), they provide a regular stream of cash flow.
The real estate resource is limited, and its demand is always increasing. The price of a CRE property generally only goes up, this could be due to the basic demand and supply point or some other factors could also be in play.
A superior hedge against inflation
When inflation hits an economy, the price of real estate, especially CRE properties don’t fall, instead, as they have a high ratio of labor and replacement cost, they tend to rise.
CRE is a tangible asset. In CRE, both the land on which the property is built and the infrastructure has great value. As these are usually leased to MNCs they are also leased for longer durations making them a stable investment and they don’t fluctuate as much as the other volatile investments like stocks and shares.
As real estate is a tangible asset whose value tends to depreciate (needing maintenance), the tax rules allow owners to depreciate the value of their property once every year.
While CRE has many benefits, purchasing a commercial property can also have many downsides such as
Commercial real estate projects can cost up to hundreds of crores. If you are planning to go for an A-Grade property, you might have to take a huge loan from the bank or exhaust a very large chunk of your savings.
While these are very profitable in the long run, selling off a CRE property can easily take up to 12 months.
The size and scale of a CRE property, tenants, and management work involved are not small. Owning and operating a CRE property feels similar to working a full-time job that can be very hectic if you were looking for a side investment.
To deal with these problems and make CRE investments more investor-friendly, we have many new investment options as well as modern investment methods that perform most of the work on our behalf.
Fractional ownership of commercial real estate is a modern-day investment option that allows many investors to come together, pool their assets, and purchase a high-end real estate property. As the cost of the property is shared amongst investors, so are the profits and liabilities. Assetmonk, the WealthTech investment platform offers great investment deals in fractional ownership and real estate crowdfunding.
As the company takes care of the management and operations of the NRI investments in property, one doesn’t have to worry about the maintenance as well. Assetmonk offers IRR up to 21% on the A-Grade properties.
Reasons Why NRIs are Aiming at Indian Commercial Real Estate FAQ’S:
Yes, NRIs can easily invest in India.
NRIs can invest in real estate, rental properties, and also in fixed deposits through their Foreign Currency NRI accounts. They can also make foreign direct investments.
Fractional ownership is a relatively newer idea for Indian investors, which also makes it subject to speculation. As misconceptions breed around the topic, more and more people distance themselves from the investment class for their disadvantage.
The biggest investment in India’s real estate sector by an international private equity (PE) recently has caused a lot of activity that might be in your favour.
Property investment is not only limited to buying and selling properties. It is also about generating a steady rental income. An ideal property is one that keeps appreciating in value until it is sold off. Hence, property management is essential.
REITs, in comparison to direct real estate investments, allow investors to make affordable investments by purchasing highly liquid shares of the property. The income tax norms also provide reit investors with indexation benefits and much more.
Development plans are taken at major airports across the world. Many cities around the world have developed an aerotropolis of their own. About 80 aerotropolis towns and aerotropolis cities are operating and developing around the globe.
REITs are good portfolio diversifiers that can help enhance returns and minimize overall portfolio risk.
A REIT is a hybrid investment product with features of equity and debt. It’s a way to get both regular income and capital appreciation.
With more NBFC banks jumping on the low home loan bandwagon, real estate companies forecast a new booming holiday season, while some are concerned about lower home loan rates.
Right when commercial offices and co-working spaces were going to expand, the world went standstill due to the pandemic. The new normal has not just changed our perception of what is right or wrong but also made everyone unsure.
A real estate investment is made successful by the interplay of many factors. While the location is truly a major component in making the investment possible, it is not the only one.
Regardless of whether it is for end-use or just investment, some crucial elements must be taken into consideration when investing in commercial real estate.
Residential real estate property in Mumbai hit its highest recorded sale in India, in the past 10 years, in July 2021. A substantial reason for this are millennials, whose reaction to the pandemic highlighted the change of mindset.
Real estate property has always been one of the favorite asset classes of Indians. This is because it can generate a regular cash flow and show visible asset appreciation. As for NRIs, they rent out their properties to generate a rental income on the side.
GST had a significant impact on the real estate industry, including sale & purchase, lease, rent. This article includes the impact of GST, on residential rent as well as GST on commercial rent.
Rental property ownerships are a safe and efficient way of building long-term wealth. With the rented properties growing faster than owned properties, landlords are going to have an edge over others in the real estate game.
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