Diversifying global portfolios through investments in Indian real estate

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    Bhavik Bhandari, CSMO, Ashwin Sheth Group

    Global markets offer a plethora of promising investment avenues to long-term investors, enabling them to capitalize on growth trends across asset classes and regions. Among the most compelling investment opportunities that India presents is real estate. Projected to grow to a USD 1 trillion market size by 2030, the Indian real estate sector holds immense potential for global investors to diversify their holdings, mitigate risk, and optimise returns.

    NRI’s in particular have emerged as a significant cohort drawn to the lucrative opportunities offered by Indian real estate. Echoing the sentiment that “Home is where the heart is,” a strong desire to maintain connections with their homeland also plays a crucial role in driving NRI interest in this field. The statistics validate this trend: NRI investments in the first half of 2023 saw a notable 15% increase compared to the same period the previous year. Furthermore, NRIs are now responsible for approximately 20% of all primary sales in the real estate market, marking a considerable rise from the 15% contribution observed in 2022.

    A conducive environment

    The consistent stability and robust economic growth offered by India play a key role in enhancing the appeal of its real estate sector to NRI’s and other global investors. Widespread infrastructure development, and the emergence of technology and innovation hubs, significantly boost investor confidence in the country. Further, efforts by the government to create an enabling environment for real estate investment have also borne fruit. Measures such as the RERA Act and the implementation of GST have enhanced transparency and strengthened regulatory frameworks within the sector, elevating investor-friendliness. Relaxation of FDI norms has also paved the way for increased global investment. Moreover, the introduction of Real Estate Investment Trust (REITs) serves as a valuable instrument to facilitate investment in commercial real estate projects.

    Economic factors enhancing real estate’s appeal

    Investing in real estate provides investors with the advantages of a secure asset that delivers both long-term value appreciation and consistent rental income. Even as the demand for residential and commercial spaces continuously grows in line with an expanding population, the supply of high-quality real estate remains limited. This demand-supply mismatch fuels considerable property appreciation, delivering substantial returns on investment. The weakening of the Indian rupee against foreign currencies due to exchange rate fluctuations provides another avenue for NRIs and other global investors to make significant gains, by enabling them to acquire luxury real estate in the country at favourable prices. Additionally, investing in Indian

    real estate serves as a potent risk mitigation strategy for these investors, allowing them to hedge against potential downturns in their home country’s economy.

    Looking Ahead

    Ensuring a smooth and successful real estate investment journey for global investors hinges on adeptly navigating the intricate legal and regulatory landscapes, encompassing taxation, property rights, and the repatriation of funds. The practical challenges inherent in managing properties remotely, particularly luxury properties, also need to be addressed by these buyers.

    Nevertheless, the Indian real estate sector holds immense promise for discerning investors, enabling them to reap the rewards of progress and prosperity in the world’s fastest-growing economy. Moreover, by infusing capital and stimulating the development of high-quality projects, as well as bringing international best practices and technological innovation to the sector, global investors in turn make a substantial contribution to the ongoing evolution of Indian real estate.

    Also read : RBI’s MPC Meeting: What it Means for Real Estate Borrowers and Investors

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