NRIs Flock to Indian Real Estate: Causes and Implications

The economic impact of the COVID-19 pandemic is something we can still witness today, manifesting in areas such as inflation, supply chain disruptions, and shifts in the global manufacturing landscape. One notable post-pandemic trend in India is the increased interest among NRIs in investing in second homes in India.

What caused this phenomenon?

The COVID-19 pandemic has led people to rethink homeownership. NRIs now consider it crucial to have a secure base in their homeland. Before the pandemic, their primary motivation for investing in Indian real estate was to generate rental income. However, the pandemic has shifted their focus towards owning residential property for personal use. The rise of remote and hybrid work models has made travel easier, further encouraging NRIs to invest in properties in their home country. Goa, in particular, has seen a growing number of NRIs considering it as a permanent residence due to its idyllic location and work-friendly environment. Additionally, technological advancements have made real estate investment more accessible for NRIs by providing easy access to real-time information. Property management services in India also simplify the process, making it easier for NRIs to invest in properties. Moreover, the depreciation of the Indian rupee has made purchasing property in India more financially attractive for NRIs. The implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) has further boosted their confidence by creating a more trustworthy environment and stringent regulations.

What are the implications?

According to a report by NoBroker, NRI investments in India's real estate sector are expected to contribute 20% by 2025. Furthermore, according to JLL, India's residential sector is expected to experience a rise in sales, with projections reaching 290,000 to 300,000 units. This growth is attributed to strong demand, including increased interest in high-quality vacation homes. This surge in demand has led state governments in India to announce plans to boost the real estate sector, resulting in an increase in new projects undertaken by developers. Not only is there a rise in demand for properties, but there has also been a shift towards more luxurious properties with amenities. According to a report by the National Real Estate Development Council (NAREDCO) and KPMG India, the Indian real estate market is on a strong growth trajectory, with the market size projected to grow from $200 billion in FY21 to $1 trillion by FY25. This growth will contribute around 13% to the country's GDP, with NRIs playing a crucial role in this expansion.

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