COVID-19: Why NRIs May Turn To Indian Realty
As the world reconsiders its notions about asset security amid the Coronavirus pandemic, India’s real estate is likely to reap unique benefits in the form of greater interest from NRIs (non-resident Indians) , the adverse effects of the Novel Coronavirus crisis on the sector in the short-term notwithstanding. With other asset classes, from currency to equity, losing a large part of their value as the virus exacts a human and monetary cost, housing remains the only reliable investment option. For the NRI segment, having the security of a house in their country of origin, becomes more important today than it was ever before, against the backdrop of the COVID-19.
Thankfully, buying property in India is more affordable today than it ever was.
The rupee fall
Swami Vivekananda once said, 'weakness is sin'. However, also true is the fact that one man's loss often proves another man's gain. The falling value of the rupee is giving the government a hard time – it has launched several actions to arrest the fall. However, it gives a certain class of investors, NRIs included, a reason to cheer.
The Indian currency recently fell to 76.40, against the US Dollar. This has made investments in the country much cheaper for the NRIs, especially in real estate.
Moreover, with the sector in the middle of a slowdown, rates of property have not seen any dramatic upward movement, making them even more affordable for NRIs.
Price movement in Indian cities in the past 5 years
City | Average property value as of December 2019 (psf) | Net % change in average price over December 2015 | CAGR |
Ahmedabad | Rs 2,974 | 3% | 0.6% |
Bengaluru | Rs 5,194 | 11% | 2.1% |
Chennai | Rs 5,221 | 4% | 0.8% |
Gurugram | Rs 5,236 | -7% | -1.4% |
Hyderabad | Rs 5,318 | 40% | 7% |
Kolkata | Rs 4,035 | 4% | 0.7% |
Mumbai | Rs 9,446 | 15% | 2.8% |
Noida | Rs 3,922 | -3% | -0.8% |
Pune | Rs 4,874 | 2% | 0.5% |
Source: PropTiger DataLabs
Other price upsides: With a variety of tax benefits offered on property purchase in India, investing in housing is additionally lucrative for the NRI segment. One could claim tax deductions of up to Rs 5 lakh in year, for instance, if they use borrowed capital to make the purchase. Not to mention, interest rates in India are currently at a record low.
The RBI recently reduced the repo rate to 4.4 per cent. Consequently, all loans linked with the repo rate have become cheaper.
Cost effectiveness is not the only incentive that NRI investors get, if they put their money in Indian real estate. Property experts have indicated that prices could eventually witness an uptrend in the coming future, once the Coronavirus pandemic ends.