NRIs are keen on diversifying their investment portfolios and prefer to invest in commercial real estate.
The real estate market in India is experiencing a steady upward trend. Various reports highlight the increased investment flow in the Indian realty sector augmenting the brighter prospects. The latest survey done by SBNRI, a firm specializing in investment and advisory services for NRIs, highlighted the surge in NRI investment in the commercial real estate segment. The study shows that over half of the NRIs surveyed are keen on diversifying their investment portfolios and prefer to invest in commercial real estate.
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The survey also predicts a compound annual growth rate (CAGR) of 9.2% for the Indian real estate sector between 2023 and 2028. The surge in interest in commercial real estate investment among NRIs can be attributed to various factors. Gone are the days when residential property was the only lucrative investment option, investors are showing an increased interest in commercial property as well. With the evolving market scenario and the availability of Grade A commercial properties, it has become a highly preferred asset class for NRIs.
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Aman Trehan, Executive Director, Trehan Iris, says, “Commercial property investment has always been one of the most preferred investment options. The growing economy, supportive government policies, and the higher return on investment in commercial properties make it a lucrative investment option. NRI investors have also been actively investing in commercial real estate. The government and the RBI are focused on facilitating the seamless investment process to enhance NRI investment across the commercial realty segment. According to industry reports, the Indian commercial real estate market has seen a significant surge in NRI investments in the last few quarters. The top cities such as Mumbai, Delhi-NCR, and Bengaluru continue to dominate the highest NRI investment share, which reflects the bolstered confidence and strengthened market sentiments.”
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The Indian commercial real estate sector offers a wide range of benefits that can generate passive income, including capital appreciation, protection against inflation, and portfolio diversification. As such, it is a valuable asset class for investors seeking to mitigate risks and optimize returns. According to the survey, a significant proportion (34%) of NRIs are motivated by the potential for higher ROI. Additionally, almost half (48%) of NRIs cite the convenience factor, including a streamlined investment process and easy access to suitable properties, as a key driver for investing in CRE.
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Kaustubh Chandra, Manager, Marketing and Leasing, Brahma Group, says “The winds of change are blowing in the Indian real estate market with NRIs showing a growing inclination towards commercial realty. With the integration of technology and the establishment of standardized frameworks, NRI investors have been quite active in the Indian commercial segment. It offers a wide range of benefits that can generate passive income, including capital appreciation, protection against inflation, and portfolio diversification. As such, it is a valuable asset class for investors seeking to mitigate risks and optimize returns.”
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The enhanced accessibility of investment opportunities is making it more feasible for NRIs to invest in the sector. This positive development is good news for commercial real estate developers, who can expect a surge in demand for their properties.
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The survey reveals that only 9% of the NRIs surveyed prefer to invest in the residential segment for a diversified investment portfolio, while a whopping 18% are strongly drawn toward the commercial realty segment. Due to the advent of fractional ownership in India, NRIs are now able to pool their resources and invest as little as Rs 25 lakh to acquire Grade A commercial property. No longer do they have to fork out Rs 5 crore to Rs 10 crore for a commercial property, making CRE investments an attractive proposition with potentially higher returns. SBNRI predicts that this trend is only set to grow stronger.
Vinay Wadhwa, General Manager-Sales, Vatika Ltd, says, “NRIs are increasingly interested in investing in commercial real estate in India due to the potential for high rental yields and capital appreciation. NRIs are particularly interested in commercial real estate in major Indian cities such as Mumbai, Delhi, Gurgaon and Bangalore which are known for their strong economic growth and high demand for office and retail spaces.”
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The survey also found that 18% of NRIs consider the property management facilities offered by CRE investments, such as property maintenance and finding tenants, to be a compelling reason to invest in this asset class over the residential segment. This highlights the growing demand for professionally-managed properties, which can provide a hassle-free investment experience and generate stable rental income.
NRI investment in Indian commercial real estate is likely to continue, thereby solidifying its position as a major asset class in their Indian investment portfolio. This trend is likely to persist among NRIs from various countries, underscoring the growing importance of commercial real estate as a favoured investment option in the Indian real estate market.
