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NRI Perspective: 2015-16 Indian realty market outlook

The Indian real estate market, which is expected to reach $90 billion (Dh330.3 billion) in 2015, is undergoing a shift. Interestingly, the non-resident Indians living abroad are showing a renewed interest in the Indian housing market at a time when the local demand is relatively sluggish. NRIs have become extremely important for the Indian real estate market and they contribute 8-10 per cent of the total housing sales volume across India. The fall of the rupee is encouraging more investment by Gulf-based non-resident Indians (NRIs) into the realty market which offers relatively higher returns.

  1. Real Estate Investment Trusts- An outstanding Investment Option: The Securities and Exchange Board of India (Sebi) recently announced guidelines for the creation of real estate investment trusts (REITs) in India. Just as mutual funds do with equity and debt, REITs will pool money from investors and invest them in income-generating (rental assets) offering them a way to diversify their portfolios by investing in property.
  2. Smart City projects by new government: For the realty sector, this has huge implications. A smart city is expected to provide high-quality infrastructure to attract the establishment of several industries and technology establishments. Industrialisation of these smart cities provide employment opportunities. Employment opportunities and a good quality of living due to the information and communication technology infrastructure (ICT) attract a good workforce, which in turn will give rise to a demand for housing.
  3. Growth in Tier III cities: Affordable housing has become the talk of town ever since BJP, in their manifesto, promised ‘housing for all’ by 2022. Post the budget, that opened a jackpot for affordable housing with a mammoth budget of Rs 4,000 crore (Rs 40 billion) and tax incentives for home loans, the mission got another facelift.  In July 2014, RBI also tweaked the definition of affordable houses. As per the changed norms, home loans up to Rs 50,00,000 in metropolitan cities and Rs 40,00,000 in non-metro cities will now come under the purview of affordable housing.  Moreover, RBI accorded the infrastructure status for affordable housing projects. Cashing on this, realty giants such as Mahindra Lifespaces, Tata Housing, Supertech are launching affordable projects in major metro cities.
  4. Strategic Partnerships of Domestic Realty Developers: With the relaxation of FDI norms in the real estate sector, domestic real estate developers are now looking at possible joint ventures with international realty developers. Such a communion is likely to benefit the NRI investors as they can invest in Indian realty sector from their own country of residence with assured paperwork and transparent financial dealing.