Why NRIs Are Investing In Indian Real Estate

Investing in Indian real estate can be significant for a number of reasons such as the Potential for High Returns, Diversification of Investment Portfolio, Stable Income, Tangible assets, long-term asset, Growth of the Indian Economy, etc. Overall, investing in Indian real estate can provide investors with a range of benefits.

In addition to this, the Indian real estate market has shown strong growth over the past few years, with property values increasing significantly in many cities. Investors have the potential to earn high returns on their investments. Also, In this huge growth, Non-Resident Indians (NRIs) have played a crucial role due to hybrid work arrangements in India.

There are several reasons why Non-Resident Indians (NRIs) are investing in Indian real estate:

1. Emotional Connection: Many NRIs have an emotional attachment to their home country and want to maintain a connection with their roots by investing in real estate. They view it as a way to stay connected to their culture and heritage.
2. High Returns: The Indian real estate market has shown strong growth over the past few years, with property values increasing significantly in many cities. NRIs see this as an opportunity to earn high returns on their investments.
3. Currency Advantage: NRIs often have a currency advantage when investing in Indian real estate. They can take advantage of favorable exchange rates to purchase properties at a lower cost, and if the rupee appreciates, they can sell the property and convert their profits into their local currency.
4. Diversification: Investing in Indian real estate allows NRIs to diversify their investment portfolios and reduce their overall risk. Real estate investments are often seen as a safe haven, particularly in times of economic uncertainty.
5. Retirement Planning: Many NRIs see real estate as a long-term investment and a way to plan for their retirement. They can purchase properties and rent them out to generate income or use them as vacation home until they are ready to retire and move back to India.

In India, The depreciation of the rupee has led to an increase in demand for housing as NRIs aim to invest in real estate and protect their investments against currency fluctuations.

Real estate investments against currency fluctuations

Real estate investments can serve as a hedge against currency fluctuations, particularly for investors who reside in different countries or have exposure to multiple currencies. When an investor purchases a property in a foreign currency, they are essentially locking in the exchange rate for the amount of their investment. This can protect them against currency fluctuations, as the value of the property will remain the same in the local currency regardless of exchange rate fluctuations.

For example, suppose an NRI investor purchases a property in India using USD when the exchange rate is 1 USD = 75 INR. If the exchange rate declines to 1 USD = 70 INR, the value of the investment in USD terms will increase, providing a hedge against the decline in the value of the INR.

Certainly reports also reveal a significant increases in the Indian real estate market from both domestic and NRI buyers like foreign investment in Indian realty has surged from approximately USD 3.2 billion during 2011-13 to USD 7.6 billion during 2014-16 i.e. remarkable growth of 137%.