52% NRIs view Indian commercial properties as the new asset class

The Indian real estate segment is getting back on track after a long Covid-induced stagnancy. It has become a popular investment choice for individuals seeking high returns and long-term stability. The lucrative investment option is no longer complicated for overseas investors and NRIs looking to own a chunk of land in their home country.

The Indian real estate segment demonstrates an upward trajectory with the projection to exhibit a growth rate of 9.2 per cent CAGR during 2023-2028. Considering the elevated real estate investment demand by NRIs, SBNRI- One-stop platform for NRIs has recently unveiled its findings about NRIs from top international countries eyeing the Indian commercial realty segment as a promising option for yielding safe and higher returns.

The survey reveals that around 52 per cent of NRIs consider investing in CRE to diversify their portfolio into real estate, indicating their preference when it comes to long-term options. Traditionally, residential sector was the only real estate alternative preferred for investment. However, with fractional ownership emerging in India, CRE investments have become most sought after as NRIs no longer have to inject Rs five to 10 crore to purchase a commercial property. Instead, a set of investors can pool their funds, perhaps Rs 25 lakh each, to purchase a Grade ‘A’ commercial property and enjoy higher returns.

The demand for investing in CRE is largely driven by acquiring better returns as 34 per cent of NRIs see this as a big reason to invest in CRE.

In addition, around 48 per cent of NRIs believe high convenience, including the seamless process to invest, finding the right properties when they invest in CRE. Furthermore, 18 per cent consider property management facilities like finding tenants and upkeep of the property as the biggest reason to invest in CRE than the residential segment.

Talking to Bizz Buzz, Vinod Rajpaul - CEO - Ocus Group says, “NRIs are increasingly considering Indian commercial properties, office space and retail, as a new asset class due to several compelling factors. The Indian commercial real estate market has demonstrated resilience, offering stable rental yields and potential for capital appreciation. The growth of the economy, favourable government policies and the expanding IT and business sectors are driving the demand for office spaces.”

Additionally, the real estate sector underwent a significant transformation after the implementation of RERA. It is now characterized by increased transparency and reduced risks. Moreover, many MNCs are exploring India as an alternative to their global offices in countries like China. Cities like Gurugram, Bengaluru, Mumbai and Hyderabad are attracting most of the companies, he said. This growing trend is driving demand for high-quality Grade ‘A’ office spaces within the country. These factors are compelling NRIs to seriously consider investments in the commercial real estate segment, which holds the potential to yield double-digit annual returns.

The SBNRI report reveals that NRIs investing in CRE are from Singapore (nine per cent) and UK (eight per cent) outperforming the investments made in the residential sector with six per cent of NRI investments. On the contrary, the survey report showcases a contrasting trend in UAE-based NRI investments with seven per cent of investment being made in the CRE while nine per cent are opting for residential property segment.

Apart from this, other countries like the US and Australia have gradually picked up the trend with four per cent of NRI investments made in the commercial realty segment as compared to 3.40 per cent and 5.18 per cent of investments in residential. Canada-based NRIs are less keen as evidenced by a mere three per cent of investments going into the real estate sector.

The exponential boom in NRI investments in the sector is driven by a myriad of factors. Previously, there was a lack of accessibility for NRIs. However, technology integration and standardization of certain frameworks have cleared the way for NRIs to enter the segment.

The Indian real estate sector remains a critical component in the diversification of investment portfolios. It can provide a multitude of advantages along with passive income like capital appreciation, inflation protection and diversification.

According to the survey report, around 18 per cent of NRIs are strongly inclined towards investing in the commercial realty segment while nine per cent prefer to invest in the residential segment for a diversified investment portfolio.

As a result, CRE is projected to continue gaining traction among NRIs from different countries, making it a major asset class in their Indian investment portfolio.