NRIs favour real estate over stocks

Primary objective of the Overseas Indian Facilitation Centre (OIFC) was to lead Indian diaspora up the investment avenue, but one would certainly not have expected real estate to be the area of greatest interest. At least, not one in which NRIs would want OIFC help. But that’s exactly what’s happened.

We are getting a lot of queries from overseas Indians about investing in property in India. OIFC, a one-stop shop to help overseas Indians invest in India, was launched by the Ministry of Overseas Indian Affairs (MOIA) on May 28. The CII is the private sector partner and host institution of this not-for-profit trust.

According to initial trend, real estate tops the list in terms of interest shown by overseas Indians while stock market investments come second.

With the surging demand for investment in real estate from domestic and overseas investors, real estate investment trusts when operational in India would enable a larger number of players to participate in investment grade buildings. These are currently worth $ 83 bn in India.

Currently, Indian REITs are entering the Singapore market. Ascendas India, the Business Park developer has already applied to the Monetary Authority of Singapore to raise $357m to invest in integrated real estate projects in India.

DLF and Unitech are also deliberating on this option. While Unitech is going in for an overseas listing, DLF Assets has kept its options open for an Indian listing if the trusts are allowed to operate in the next 12 months.

Bangalore’s Real Estate Bank International (REBI) has ambitious plans to reach out to overseas markets with an investment of Rs. 250 m, reports NRI Realty News.

Offices in Sri Lanka, US, UAE, Singapore, Malaysia and Australia will enable real estate services to reach out to non-resident Indians, while REBI’s domestic network will be expanded to 3000 franchises over the next three years.

Pearl Global is also venturing into real estate, as it ties up with Ansal Properties to develop 9.26 acres of commercial land in Gurgaon.

Earlier this month, the Bhoruka Group from Bangalore announced its intention to diversify from its existing power generation business to develop a premium residential project in south Mumbai. The defunct Mukesh Textile Mill property, covering 10 acres will be the site of the new project. The company will also construct an IT Park on 34 acres in Whitefield, Bangalore.
Kolkata based Bengal Shrachi Housing Development in a joint venture with two NRIs has announced the launch of a housing complex, Rosedale Garden, specially designed for non-resident Indians (NRIs). Tapping the desire for fully furnished ready-to-move in apartments for NRIs, the joint venture has invested Rs3bn in this mega project.

Premier realty firm Parsvnath Developers Ltd is set to develop their existing land bank over the next five years by investing over $4 bn. Launching over 100 real estate projects in all its segments, they aim at developing their saleable land bank of 153m sq feet.

They have six projects lined up for Delhi metro as well. Speaking in terms of growth, the company had reported a profit of Rs 2.92 bn in the financial year 2006-07 at an annual growth rate of 110 per cent.

The real estate sector has recorded commendable profit margins, evident from the profits posted by major real estate developing giants in the first quarter. The first quarter was beneficial for almost all real estate developers. Parsvnath Developers posted a record net profit of 179.56 per cent at Rs 1.02 bn against its previous Rs 365.5 m.

Unitech on the other hand has been registering a consistent growth of 8.6 per cent for the last four years. Ansal Properties and Infrastructure Ltd. (Ansal API) reported a net profit of 16 per cent.

Indian realty is growing at 30 per cent, particularly in Tier II and Tier III cities. The $15 bn realty market is expected to reach $ 90 bn within the next eight years. Chandigarh, Gurgaon, Vizag, Coimbatore, Kochi, Jaipur and Nagpur are some Tier II cities witnessing unprecedented boom.

Research has it that realty can give an average return of eight per cent. Realty prices are doubling in some Tier I cities like Bombay, Chennai, Bangalore etc. Residential prices have gone over Rs 5,000 per sq feet and commercial prices are over Rs 10,000 in Tier I cities.

NRIs may rival MNCs as investors in Indian economy

The single-largest source of foreign capital into India, non-resident Indians, may one day become the prime source of investment in the domestic economy. A new report on remittances to India says "NRIs now see India as an investment destination" and are already leaving their mark in real estate and the stockmarket.

Muzaffar Chishti of the Migration Policy Institute, author of "The Phenomenal Rise in Remittances to India: A Closer Look," says the most striking evidence of the fact that NRIs are seeing the Indian economy as an opportunity is the rise of so-called "private transfers."

There are two main types of NRI remittances. The most well-known type is "inward remittance" i.e. when an NRI wires or sends money to an individual in India, usually a relative. The other type is "private transfer" i.e. when an NRI deposits foreign exchange into a rupee account and then spends it inside India.

The little-noticed trend, says Chishti, is how fast private transfers have grown. Between 2000-01 and 2005-06 private transfers grew by 88 per cent, more than double the rate of inward remittances. The former exceeded the latter by $ 2.3 billion last year.

The other trend is that North America, by far, is the largest source of remittances – 44 per cent of the total. The Persian Gulf, which once dominated remittances even 10 years ago, is the source for only 24 per cent.

Unlike the traditionally working-class Indian population in the Gulf, the middle-class North American NRIs are more likely to see India as a place for long-term economic investment. Nearly a third of all remittances are over $ 2,200.

In other words, NRIs are bringing in billions of dollars, converting them into rupees and personally spending them inside India. Chishti cites real estate experts as saying 20 per cent of all properties being sold for over $10 million in Delhi are being bought with NRI funds. "In the end, no one knows where or how much NRIs are investing in India," he says.

The amount of money concerned is enormous. Last year remittances to India totalled $ 24.6 billion, more than foreign direct investment or foreign institutional investment. Private transfers, which overtook inward remittances only in 2003-04, alone totalled about $ 13 billion last year. India received $ 15.7 billion in FDI equity flows during the same period.

The amount of money NRIs are transferring is still growing. Western Union, the world’s largest wire transfer company with $ 4 billion in revenues, says it saw a 102 per cent increase in person-to-person remittances to India last year.

NRI investment in India, believes Chishti, is a vote of confidence in the new Indian economy. In the past, India’s rigid foreign exchange controls, the volatility of the rupee and the lack of growth meant NRIs would keep their money in repatriable foreign exchange deposits rather than convert their money into rupees.

Another factor was 9/11 which drove some remittances out of the informal hawala market. Western Union, for example, experienced a surge in money transfers to South Asia as anti-terrorism finance laws were introduced across the world.

Chishthi is critical of the government’s lack of imagination on using NRI remittance for development purposes. For a while the surge in personal transfers was explained away as being overseas Indians cashing in various NRI-targeted bond issues.

South Indian Bank Targets More NRI Money

The Thrissur-based South Indian Bank is tapping other foreign exchange houses for boosting its foreign currency inflows.

About 30 per cent of its NRI customers are from West Asia, and the bank caters to them through the Haadi Express Exchange exclusively through its staff in Dubai and Sharjah.

“The bank is offering the fastest and the cheapest money transfer facility. Money is transferred within 30 minutes to the customer’s account and the customer will get a message on his mobile about the exchange remittance to his account, if he opts for mobile service,” bank chairman VA Joseph told Business Standard.

Joseph was in Mysore for the inauguration of the Jayalakshmipuram branch and an onsite ATM, and the opening of the renovated premises of its Mysore main branch on the Devaraj Urs Road. He said, “We will further improve our competitive service in the next 2-3 years with more tie-ups for money transfer.”

As against the Rs 20,000 crore business last year, he said the bank was aiming for Rs 25,000 crore business this year. The net NPA was less than 1 per cent last year. It has been planned to bring this down to below half per cent. Established in 1929 with a capital of Rs 22,000 and now having 478 branches spread across 23 states, South Indian Bank has proposed to extend its branch network to 500 by opening 22 branches this year.

The new branches proposed to come up are: four in Bangalore, three each in Hyderabad and Chennai, two in Mysore at Banni Mantap and Kuvempunagar, and other centres in the country. “We are opening two branches in Mysore because the city is expected to have a great growth, as Bangalore is getting crowded.

It will be like what Pune is to Mumbai,” he said. South Indian Bank has as many as 270 branches in its home state, Kerala, and 93 branches in the neighbouring Tamil Nadu.

First Click For NRI Investors

When an NRI wants to invest in India, what is his first step? Look for opportunities in India through different government bodies promised as 'a one-stop shop'. As if all the existing bodies to attract investment were not enough, the ministry for overseas Indians launched a new one last week - the Overseas Indian Facilitation Centre (OIFC).

Exploring on the Net, the NRI will come up with many different sites of the Indian government crying for foreign investment in India, especially from NRIs. Frustrated by India's red tape, NRIs want 'a single window' to handle all their queries and hold their hand until they get the approvals.NRIs have been promised and provided 'a single window' to invest in India time and again.

Much before the Internet and since the days of forms that were filled up by hand, the one stop point of contact for NRI investors has always existed in one form or the other.All these government-run facilities, as part of different ministries, remained overburdened with red tape and bogged by infinite delays. Over time, they morphed into new ones promising to be better - and faster - than before.

This has happened at both the central and state government levels. Every new government that takes power in New Delhi or in states wants to boost investment and so investment promotion with foreign tours is the first priority.Just search the web, and an NRI will find dozens of groups all out to assist him to invest in India.

The Indian Investment Centre, a government body with more than three decades of rich experience in investment promotion, is the first contact point and is the single window agency for authentic information or any assistance that may be required for investments, technical collaborations and joint ventures.All its services are free of charge, claims its home page. Of course, it has a special section for NRIs who are offered 'escort services' that include match making, arranging meetings and forwarding applications.

The ministry of commerce and industry is responsible for foreign direct investment (FDI) in India and has a unit to promote investment. The Foreign Investment Promotion Board under the finance ministry approves the investments. The approved projects are listed regularly.Then most state governments have an investment promotion centre as a separate body or a part of one of its ministries. These can also be accessed on the Internet. So what is special about the latest body to tempt NRIs to sink their money in India?

Private sector partnership!This can perhaps be expected to be more efficient as it has the Confederation of Indian Industry (CII) in partnership with the ministry of overseas Indians and is meant for NRIs and not large businesses.The CII organized the Pravasi Bharatiya Divas this year for NRIs and the event showed some improvement in achieving its aims. One of the demands made by NRIs was the creation of a centre where their abilities, qualifications and experience could be harnessed for India's progress instead of merely attracting their funds.Within five months, this demand has been answered with OIFC.

Its website, www.oifc.in, has almost the same information as the other investment promotion sites like India's economic progress. But the section on 'Opportunities in India' is a misnomer. As one goes to it to get a list of potential investment projects, one finds snippets of interesting economic information like 'India has more billionaires than China'! Surely, CII can do much better than this!The centre, through its website and offices, will provide reliable data on investment opportunities free of charge and assist in getting individual projects cleared as a paid value added service.

If the investment opportunities are free, it is hoped that these are listed on its site soon since CII should have a database of these projects both state-wise and sector-wise.The centre will provide 'authentic and real time information', promised Minister for Overseas Indian Affairs Vayalar Ravi. This will include consular and financial services and related advice.

The centre will screen the opportunities available in the country before listing these for NRIs so that they do not fall prey to "fly-by-night operators" and cheats, said Ravi. Thankfully, the centre will be managed by CII and will operate as a non-profit trust.In June, CII is holding a meeting with about 100 NRIs in the US to inform them about this centre in partnership with industry.

India hopes to attract $32 billion investment this year.NRIs remitted $23 billion last year mostly for their family members. Will they invest more after their first click at this new site? Only time will tell.