What are the issues that currently plague the Indian real estate market? What should be made easier to attract foreign investment? International real estate organisations and Indian representatives come together on global platforms and their interactions here act as a bridge between demand and supply to carve out and organise an effective system for investors. The FNAIM Congress is one such international gathering that was held recently in Paris. Farook Mahmood, President, World Council of Brokers (FIABCI), attended the meet and addressed delegates, where issues pertaining to global and Indian real estate were discussed. We catch up with him.
What are NRIs looking for while investing in real estate?
Property investors globally look for opportunities to invest in both residential and commercial spaces. While investing in residential property, they look at the track record of the developer, location of the property, amenities offered, date of delivery, and the price.
A prospective investor also evaluates the long and short-term capital value appreciation of the project. The potential demand from tenants to rent the property is also a major factor. Most investors prefer to rent out the property to a multi-national company. Expats prefer to stay in certain areas, and many long-term investors consider this fact while choosing the location for their investment.
Investors buying commercial property look for a good location to lease it out to a multi-national on a long-term basis. They prefer a property in the suburbs because of the relatively lower cost of acquisition and the resulting extra built-up area coming in their budget. Even if the existing tenant vacates the premises, it is easier to find another tenant for a property that commands a lower rent as against a property commanding a higher rent.
Bank funding is not available for commercial property. This is a significant point concerning investors. Many investors adopt a strategy to make the most of the dollar-rupee exchange rate — they park dollars in a bank here and borrow in rupees against the dollar deposit. This way, they benefit from the trend of appreciation in the value of the dollar, while buying property here. This also hedges the inflation risk. It’s a win-win proposition for them.
What is the market sentiment and where do NRIs intend to buy property?
The market sentiment is positive with the governments at the Centre and State pitching in for the demand. The Bengaluru real estate market is the most affordable one in the country and is value for money. The quality of construction and amenities provided there by the developers are of the highest order.
NRIs always buy their first home in India. They invariably assume they may come back to India to settle down at a later date and therefore a home here is the first option. In most cases, the home is rented out and therefore the location and potential rent it draws is a major factor they consider.
They get tax benefits just as residents do and this too is a major incentive to invest here. NRIs buy property for their children too; this is especially so among those based in West Asia.
