BANGALORE/MUMBAI: The weakness in the rupee hasn’t led to the usual surge of non-resident Indians buying property in the country, with many of them drawn to real estate markets in the US, UK, Singapore and Dubai where prices and borrowing costs are relatively subdued and returns are seen as being higher.
Going by data and anecdotal evidence, Indian expats are focusing largely on suburban property. Geeta Chadha, a software professional working in the US, has opted for a singlefamily home there. “We have invested about $75,000 in a house in California as this will help us save on rent. Additionally, when we plan to sell we can get decent value as opposed to the indian market where prices and borrowing costs are too high,” said Chadha, 37, who moved to the US in 2005.
There is a significant price differential involved. “Property in the US is cheaper than plush locations in metros like Mumbai and Delhi but slightly more expensive than Bangalore. One can easily get a two-bedroom apartment for around Rs2.5 crore in the US,” said Farook Mahmood, vice president, World Council of Brokers.
Raji Ravichandran, a US-based real estate broker, said she has seen a steady increase in the number of homes sold to Indians. “There are more buyers in the market than sellers, so any home that comes to the market has multiple offers.
Most of the home buyers are IT professionals with dual income of over $250,000 annually,” she said. Buyers are mainly mid-totop level company managers, high net worth individuals, property investors and business owners, besides Indians settled abroad or planning to do so. Another incentive is that property buying in the US and UK is less complicated, an added incentive when prices are down.
“Buying property in India is a cumbersome affair — be it clarity on title, property registration and time it usually takes, whereas in the US property market these things are easy to deal with.
Most importantly, Indian property market lacks transparency,” said Deepika Mehta Syal, an Indian-origin property broker operating in Chicago for the last 18 years. “These factors coupled with good value for money options that have emerged after recent correction is prompting NRIs to buy real estate here.”
It’s also easier to hand over the property to a management company that takes care of security, maintenance and rental. “In India, if some unscrupulous entity knows that the property owner is usually not in the country, you can kiss it goodbye,” she said.
Of the $68.5 billion that foreigners spent on buying homes in the US in the year ended March, Indians accounted for nearly $3.5 billion, according to data from National Association of Realtors (NAR). While home sales to foreign nationals in the US have declined overall, Indians ranked in the top five real estate buyers, said Zachary M Benjamin, manager, international market development, commercial and global services, NAR.
Residential property prices around the world rose 2.4% in the second quarter of 2013, the fastest since the same quarter in 2010, according to Knight Frank’s Global House Price Index. The US and UK housing markets recorded quarterly growth of 7.1% and 2.6%, respectively, in the second quarter.
“Prices in markets like US and London have not been moving sharply in the last few years after the economic troubles that led to a sharp fall in property prices there,” said Alistair Elliott, senior partner and group chairman, Knight Frank LLP.
“In India, real estate market witnesses significant challenges like lack of transparency, high debt and inventory piling up.” Higher rentals also prompt NRIs to buy properties overseas. Annual residential rental yields in London and New York are at 4.7% and 6.2% against 3.5% in Mumbai, according to a recent report by property consultant Jones Lang LaSalle.