Even until the turn of the millennium, NRI’s investment in Indian real estate was a trickle. Some promoters would appoint a part-time local representative in cities with large indigenous populations. The most enterprising participated from time to time in an exhibition where there would be more questions than answers. For the 20 million Indians spread across the globe, India as a real estate investment destination was a long way off. You bought property there if necessary. And he prayed that his money and property would be safe.
In the last half dozen years there has been a sea change in perception. What was a trickle is now a steady stream. No major housing project can afford to ignore the NRI market and many allocate NRI-only blocks in their building plans. Overseas Indians want to shop in their home country not just for parents and annual vacation, but simply as an investment. They have recognized that while, in much of the world, the real estate sector may be slowing down, in India it is growing by leaps and bounds. “You don’t have to sell India anymore,” says Aloke Banerjee, COO of Axiom Estates, India’s largest international real estate services provider. “You have to go with the offers.” “Great interest has developed,” adds Rajesh Goenka, Managing Director, who spearheaded the company’s original push among UK Indians. “Five years ago, the first news was that real estate in India is worth investing in. Today, the brand image of India, and of real estate developers in India, has changed.”
The nature of buyers and the motivation to buy also varies from country to country. In the UK, which Goenka describes as the toughest market, most buyers are second or third generation Indians, who see India as just another investment destination and prefer international attractions like Goa. The US has a higher proportion of first-generation expats, who are open to the idea of returning to India or have parents who live here. Traditional subways, Bangalore and Hyderabad are their preferred destinations. Gulf Indians generally plan to return and therefore look for property in their hometown, often in the smaller towns. Predominantly, however, NRIs are looking for a return on investment with wealthier individuals looking to invest in commercial space where rental income is typically above 10% and offsets the cost of interest.
There have been many factors fueling the demand for NRIs. India’s story now deserves regular articles in major newspapers like The Times, Wall Street Journal or New York Times, encouraging everyone to seek a piece of the action. The relaxation of repatriation rules has made it easier to obtain returns on investment. Developers have become more professional. Banks are more willing to terminate. In recent months, the strengthening of the rupee and the weakening of the US housing market have made India even more attractive. The most important reason perhaps is that the Indian real estate boom is seen as being driven by genuine end-user demand and therefore sustainable in the long term, making the investment safe.
The marketing of real estate is also becoming more organized, facilitating the purchase process. Whereas previously developers would seek to do their own marketing, today they rely primarily on companies such as Axiom Estates, which is based in London with offices in New York, Fremont and Dubai, as well as partners in other cities. NRIs also rely on professional advice and transaction management to ensure a sound investment. “My experience is that Indians abroad are extremely tech-savvy,” says Aloke Banerjee. “They do a lot of research online. But then comes analysis paralysis, so they need someone to guide them. That’s where Axiom Estates comes in. Although we generate many inquiries through our website, we are not a virtual office or portal. but they have a physical presence in your country. We have people who take them by the hand and take them through the entire value chain. This includes the purchase, property management, rental, furnishing, mortgage and, in some cases, resale of the property.”
In addition to services, Axiom offers the NRI buyer a host of property options. The company has partnered with close to 100 Category 1 developers and can offer buyers properties across India, as well as options within individual cities. At any given time, a buyer will have more than 300 projects to choose from. In addition, large investors also have the opportunity to book offers in advance, that is, property offers at a price that is normally only available to the local community. High net worth individuals also have opportunities for block booking or project development through Axiom for higher returns on investment. Many real estate investors also seek out the company’s portfolio management services, where the investment is spread across multiple properties and cities, ensuring an optimal mix of security and profitability.
To market the properties, Axiom uses various techniques, including managing an extensive database to accommodate need and availability. The company organizes real estate fairs in the US, Canada, UK and now in the Gulf, in association with developers. These are publicized through local television campaigns and newspaper articles for several weeks. Paper property catalogs are mailed to potential buyers well in advance. At the fairs there are Q&A sessions with developers, seminars with experts, and quotes and articles are shared. Partnerships with Citibank in the US and SBI and HSBC in the UK add even more credibility and trust. As a result, Axiom shows attract far more visitors compared to individual developer road shows, with several thousand visitors being the norm.
Currently, the NRI market represents around 20% of the Indian real estate sector, which Banerjee describes as the tip of the iceberg. The inhibiting factors are mainly legal, particularly when it comes to land, as titles are not always clear and there is no title insurance. When buying built real estate, the documentation is usually unilateral, charging the legal data in favor of the promoters. Construction delays and quality of service continue to be a concern for many developers. If India caught up with developed countries on matters of title, transparency, service and contract integrity, the floodgates would open. There’s a lot of money waiting in the wings.
