Shaky ground: Now, NRIs shy away from realty market

MUMBAI/BENGALURU: Nonresident Indians, a key category of property buyers in India, have of late been keeping away from the market.

Of the key real estate markets where NRI investment makes a difference, Kerala is the worst affected with a more than 50% drop in sales to this group, according to global real estate consultant Coldwell Banker. Ahmedabad, Surat, Vadodara, Bengaluru, Mumbai, Pune, Hyderabad, Gurugram and Noida have seen around 20% drop in demand annually in the past two years.

The decline is being attributed to a general slowdown in the Gulf region that has significantly reduced NRIs' disposable income. A week rupee too is a concern, because it makes the actual return on investment lower for NRIs, though it improves the buying capacity.

As the property market matures, the upside or investment returns tend to become lower than they were five years ago, said Ramnik Chopra, managing director of Coldwell Banker India. “This, added to the currency fluctuations, has increased the risk of actual returns for buyers,“ he said. “Significant delays in the delivery of properties also make NRIs very nervous.“

Investments made from West Asia, which contribute significantly to Kerala's property market, has been hit due to job rationalisations and slower economic conditions in the Gulf.

According to a senior vice-president of marketing at a leading Kerala realty firm, as much as 70% of property buyers in Kerala used to be NRIs in the Gulf. Sales to that category have now nearly halved, he said. “Investors are not taking big risks any more. We had sold 30 units a month, now it is down to 11.NRIs are reluctant to take long-term housing loan.“

Builders who used to make houses costing Rs 1 crore and more in Kerala are now focusing on homes for the middle income group to attract local buyers.

Quality of client servicing and construction is also contributing to the lower interest among NRIs and peo ple of Indian origins for properties here, say sector experts. Developers primarily focus on the sale but not after sales or customer service, which means NRIs don't get the kind of service that they are used to in their host countries.

“It is not that the developers are trying to mislead clients (though some do that). In most cases, the developers are just not set up to help clients manage their property investments remotely ,“ said Chopra, who has been working on cross-border business relationships, sales channels and new growth opportunities for clients between India and North America. “Developers offer the same service to an NRI that they would offer to a client, who would walk into their office, the need of an NRI who cannot walk into the office is fundamentally different.“

According to him, in order to increase NRIs' interest in Indian real estate, developers or sellers will have to make it easier for clients to buy property . Make the process transparent, the customer service professional and the paperwork simpler, he said.Developers should also provide some kind of concierge service for NRIs to handle property-related tax matters and obtain tax certificates for sales. In some cases, it takes weeks for clients to get a simple payment receipt of the monies they remit towards purchase of properties.

Local brokers, who usually connect with NRIs through their relatives here, are also facing a decline in sales enquiries.“Nearly 10% of brokers' business used to come from the NRI segment two years ago. Now it's less than 5%, that too with very high efforts,“ said Yashwant Dalal, president of the Estate Agents Association of India.“Interest level has certainly dipped due to delay in delivery and stagnant prices.“

Meanwhile, more developers are looking at the NRIs to fill the sales gap. They are opening more sales offices abroad and are stepping up marketing activities targeting the Indians there.

While the NRIs are already a key group of buyers in India’s property market, the potential is still underutilised. Indians working and living abroad sent home more than $60 billion in 2015, but amount attributed towards purchase of property and property-related spending such as interiors and rentals is just $3 billion to $5 billion.