NRIs Woo Real Estate in India

NRIs wanting to park their funds in India are taking the real estate market seriously enough to form informal groups to back select projects. This is the latest trend observed in the Indian realty market, and nobody’s complaining.

NRIs tend to invest in residential properties in India, preferably in their native towns or cities where their relatives and friends can supervise such projects. However, funds are now being put into some commercially viable projects as well, such as malls, hotels and office complexes. Around $600 million has poured in from such investments in the last one year, with a single investment from a group averaging between $10 to 15 million.

Law firms receive 5 to 6 enquiries every week from overseas Indians who club together and float a fund to build a property, stay on through the lock-in period, and sell it at a good profit.
Jaipur, Hyderabad, Vijaywada, Ahmedabad, Baroda and Surat have seen groups of NRIs making such investments in malls, office spaces and residential townships. These investments are generally routed through Mauritius to avail of tax benefits.

It is a win-win situation for both investors and real estate developers. The former earn handsome returns, while for the latter, it’s low-cost credit. Some projects in smaller cities have yielded as much as 50% returns.

Overseas Indians are allowed to make investments in Indian property without any limit on the quantity or the number of investments.There is a huge gap in supply in almost all sectors of property in India. The IT/ITES sector will require a space of 150 million sq. ft by 2010, while 6.7 housing units are currently in short supply. The emerging retail industry will require vast spaces to accommodate the large hypermarkets coming up.

On a more formal scale, capital management companies are being formed overseas by Indians to work with top builders and offer consultancy services to individuals looking for investment in Indian realty. For NRIs, it’s a gold mine waiting to be tapped