“Caution” the Catchword for NRIs

It’s homecoming season for NRIs. But this time around,
they are not dashing to their neighborhood realtor to book a flashy
second home. ‘Caution’ has become the catchword. Global real estate
consultants and experts feel that the ‘only real catalyst’ that could
pep up the NRI spirit during this lean period is a significant price
cut, which is expected to happen in the next 3-4 months.

Only reduced property rates can prompt NRI participation in today’s
these market conditions, feels global real estate consultant Jones Lang
LaSalle Meghraj (JLLM). The Indian real estate market has sparked off
a new wave of interest among NRI residential property buyers but they
are awaiting a further fall in property rates. Once this happens in
the next 3-4 months, we will see increased NRI participation in real
terms," JLLM CEO (Business) Sanjay Dutt told ET.

"The promise of a correction in the key metros and tier-II cities
has revived NRI interest in the residential market. We expect a number
of scheduled transactions to happen by the end of the first quarter
of 2009," Mr Dutt said while stating that NRIs will steer clear
of investments in retail projects and other property segments in "unfamiliar
and historically over-speculative tier-II and tier-III cities".

According to him, NRI preferences are also undergoing a sea change,
where they are picking up only existing, fully-leased assets of reputed
developers. "These would primarily include projects by developers
who were intending to launch IPOs and now need to unlock capital to
fund new ventures," Mr Dutt remarked.

Mr Dutt’s remarks find echo in the statements of a US-based NRI, Lalit
Patel. "There is no doubt that the effects of recession will be
felt on the real estate market in India. So I think it is better to
wait. At present, the prices are on the higher side," Mr Patel
said while replying to an email query.

The seemingly lacklustre approach of NRIs has also influenced the business
plans of some developers like Ganesh Housing Corporation. The Ahmedabad-based
developer, which is targeting NRIs with its luxurious villas and apartments
in a 500-acre project, has delayed the launch of this project and is
also thinking of a rejig. Ganesh Housing business development head Bhavin
Mehta says, "NRIs have become increasingly cautious while investing
in property. People may invest as inflation lowers further next year.
But for the time being, the earlier euphoria is missing and people want
to see the project before investing."

The sharp appreciation in the dollar is also another factor that could
drive NRI investments. "Due to the depreciation of the rupee, NRIs
are getting 12% extra benefit in terms of value this year," said
Suresh Patel, vice-president of Gujarat Institute of Housing and Estate
Developers, an association of developers in Gujarat.

"The growth rate of NRI investments in real estate projects in
Ahmedabad had risen from 5-7% in previous years to 10% last year. This
year, we are expecting the growth rate to be flat," Mr Patel said,
adding that NRIs this year were eyeing residential projects in the price
range of Rs 30 lakh to Rs 1 crore in the city.

Photo: Tin Darvaja in Ahmedabad with live activities by Fatemeh M. Saradj, licensed under CC BY-SA 4.0, via Wikimedia Commons.