How NRI Investments Will Push Growth In Real Estate

The Indian government recently eased the norms governing foreign direct investment (FDI) in India, especially in the construction sector. The move has given non-resident Indians (NRIs) a reason to smile. According to the revised norms, a foreign investor will be allowed to exit and repatriate his investment before the completion of a project after a lock-in period of three years. For hotels, hospitals, special economic zones (SEZs) , educational institutions, and investment by NRIs, there would be no lock-in period. Moreover, companies owned and controlled by NRIs would be treated as domestic investments.

NRI investments in Indian real estate have been rising in the recent past. In the current financial year, many expect it to rise further. As the value of the Indian Rupee is falling against the US Dollar, NRIs are also likely to find real estate here cheaper. The reason is that the value of Indian real estate assets fall relative to the value of the US Dollar and other foreign currencies.

A look at how rising NRI investments may impact the Indian economy:

The real estate sector has been stagnant for a while. Though this has been changing lately, people are still hesitant to invest in the sector. If NRIs invest more in the Indian real estate, the sector would witness more capital flow. This may give the sector the much-needed growth push. 

More capital investment in the sector is likely to make housing less expensive in the country. For example, there would be large-scale projects in which the price of an individual apartment unit will be lower than in a typical residential project. 

NRI investment in real estate will usher in more skill into the sector. For example, when Indian real estate developers want to build homes for the disabled or the elderly, they find that architects and designers lack expertise. They have to hire foreign architects or consultants for this purpose. With their experience in working and running businesses abroad, NRIs would be able to contribute much to the sector, ethics-wise as well. 

Remittances from abroad every year are to the tune of billions of dollars. This is comparable to India's annual plan expenditure. When NRIs invest more in Indian real estate, remittances from abroad will rise, too.