Thursday, 30 July 2015

Think local act global

From a real estate perspective, there are certain inherent advantages of having a large Indian diaspora. If you cannot find buyers home, well, go abroad. The current dollar to Indian rupee value pegged at around Rs 64 gives the NRI more rupees per dollar, a factor that offsets house prices to an extent and becomes a motivation to invest into property.

With piled up inventories, the realty market, particularly its luxury segment, is looking up to the NRI community as prospective clients. Select real estate companies are setting up their overseas offices or appointing representatives to canvass and market their products.

The companies are active in countries where the Indian diaspora is strong, like the UAE, Singapore and the US. Many Indian real estate companies are becoming a regular feature at various global trade shows, which keep an eye on prospective buyers.

Experts can scarcely conceal their optimism. Ashwinder Raj Singh, chief executive officer- residential services, JLL India, predicts that the sector has once again become attractive for NRIs. `For a protracted period, investments in India did not offer good returns, causing NRIs to invest in countries of their migration - or anywhere else where the markets were attractive. Today, the Indian realty market is once again a prime focus area for NRI investors,’’ he asserts.

The Indian realty sector as a whole - namely, across residential, retail, hospitality and commercial verticals - is slated to grow at 30 per cent over the next decade, attaining a market size of around $180 billion by 2020. However, the investment opportunity lies less in the sector’s speed of growth than in its overall dynamism. Conventional wisdom has it that long-term investments into Indian realty pay off very well as long as sound investment decisions have been taken, JLL said in a recent research report.

Generally, the NRI community prefers to invest in their state of origin - primarily Kerala, Karnataka, Tamil Nadu, Maharashtra and Delhi NCR. However, since residential inventory has piled up in Delhi and Mumbai, investors are currently very well placed to find good bargains in these markets. Singh says developers, in an effort to sell, are offering discounts and attractive financial schemes.

Last week, Tata Housing announced the launch of its operations in Dubai to cater to the growing demand from consumers. Apart from Dubai, the company has offices in Maldives and Sri Lanka, its managing director Brotin Banerjee points out.

Currently, NRIs contribute between 15-20 per cent of the total housing sales in India, a trend, which shows an upward climb in the last few years. Banerjee believes the contribution could go up to 25-30 per cent in the next three to four years.

With a new office in Dubai, it would reach out to NRIs who constitute more than 30 per cent of the population in UAE. The Gulf market witnessed rapid strides in the past decade with Gulf Cooperation Council (GCC) contributing to more than 50 per cent of international sales.

Tata Housing has announced 'Happy Returns' to coincide with the opening is new office. Under this, customers will get 72,000-10,00,000 Jet privilege miles on the purchase of a home across Tata Housing projects in India. The scheme is applicable to those with a valid non-resident Indian status, including Indian passport holders and green card holders.

UAE-based NRIs earn in West Asian currencies, which is an advantage as they trade strongly against the Indian rupee. This factor offsets a part of the house cost. However, the difference between the currencies will reduce as the rupee strengthens, says Singh.

Indian developers have had to wake up to certain immutable market realities over the last couple of years. In many cities, they have misjudged where the actual demand is and how much buyers - including NRIs - are willing to spend on their first or second homes. This has resulted in worrisome levels of supply overhang of larger-configuration apartments, the JLL India official points out.

Singh says developers are now serious about right sizing and right pricing their products to make them attractive to a larger cross-section of customers. In fact, smaller, better-designed and more efficient homes are in - as project launches in 2015 confirm.

Points out Swaroop Anish, executive director, business development, Prestige Group. “UAE and USA are key target markets for us. Though we have not set up any overseas offices so far, we participate and organise regular exhibitions in West Asia to create awareness of our new project. We have select channel partners overseas who take part in marketing our products. Prestige also has a strong customer base in the UK, Singapore and Hong Kong.

"The company has managed to create a niche in these markets through indirect marketing with the help of local partners. While social media has lend out a strong helping hand, the best sales have happened through word of mouth from its existing customers, says Anish. “Many choose to buy more than one property in the mid-range segment for investment purposes,” he explains, adding that NRIs account for over ten per cent of its customer base. For good measure, Prestige offers its customers assistance in property registration, renting out property, management and upkeep of the same post sale, all sops to widen their customer base.

Other firms too are waking up to this happy trend. Ram Raheja, director, S Raheja Realty, says his company’s priorities are fixed. “We have always targeted buyers who are likely to use the property, not just for investment purposes. In our projects, NRI buyers are the ones looking for second homes back in their country.”

S Raheja Realty too has tie-ups with local real estate brokers and agencies, which market its wares. Currently, it is advertising some of its luxury penthouses in Mumbai’s Natraj and Sapphire projects to international HNI NRIs, explains Raheja.

According to Singh of JLL, selective corrections are taking place in some over-priced pockets of India’s larger cities. As this swing gathers momentum, the industry will start seeing faster sales velocity in the stagnated supply of larger configurations.

The supply pipeline for luxury home projects is slowing down in reaction to the slow demand. “Residential property rates have reached saturation point in both Delhi and Mumbai. Good returns can be expected only if the investment horizon is three years or above. In such cases, annualised returns of 10 per cent can be expected from the third year on. Sluggish sales, especially in the luxury segment, have led developers to offer several financial schemes. Luxury projects are available in Indian cities but the market is currently struggling to sell inventory,” says Singh, adding it is the right time to invest as social infrastructure- hospitals, schools, leisure and shopping facilities, connectivity and availability of utilities- has improved significantly in most of the larger Indian cities.

Once their primary residence is secured, NRIs with surplus funds can invest in rental income-generating apartments, as well. However, they must be aware of taxation regulations that apply to NRI investors. Rental income is taxable in India. It is also taxable in other nations, except in cases where a treaty exists between the two involved countries with regards to double taxation. “Real estate is capital intensive and best returns on investment are not attained by guesswork but by decisions arrived at after weighing merits and demerits,” he avers.

Experts believe prospective NRI buyers should pay heed to the track record of the builder concerned and ascertain that the project has all mandatory clearances. A personal evaluation of projects while visiting India will help. NRI investors can consider projects in pre-launch stage for discounts and competitive prices. Due diligence is a must, particularly if the schemes are in upcoming or peripheral locations of primary cities. If a property is marketed as exclusive for NRIs, then the parameters, which make it exclusive, should be explained. Well, it certainly is getting to be more and more creative.

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