Why are NRIs investing in Indian commercial realty?

With the reviving of the Indian economy, there has been an increase in the demand for office spaces, making it attractive for the NRIs to invest in the commercial real estate sector

The Covid-19 pandemic has disrupted economies the world over and India is no exception. With the decline in the Covid-19 cases, the real estate sector in India has started reviving and residential sales have once again gained momentum. Commercial real estate investments are also on the rise as the country has started to get back to business. Many sectors, especially IT and e-Commerce, are hiring at a rapid pace. With bulk recruitments, there has been a huge demand for office spaces, making it attractive for the NRIs (non-residential Indians) to invest in the Indian commercial real estate sector. The government is also taking active steps to promote industrial development in the country. Thus, the NRIs have begun to eye lucrative opportunities in commercial real estate in India.

Types of commercial real estate where the NRIs are investing

India has been developing and showing significant growth in various sectors. The commercial real estate sectors where the NRIs can invest are:

• Office spaces: There has been a huge development in the industrial, retail and IT sectors. Entrepreneurs are starting their businesses and looking for office spaces. Owning a property and renting it as office space is a great opportunity for the NRIs to invest in the commercial real estate industry and earn a good income.
• Industrial: The industrial real estate segment, especially warehousing and logistics, has shown good potential for growth and investment. Many NRIs are interested in investing in the warehousing and logistics sector.
• Retail and hospitality: Both sectors have seen a huge growth in recent years and investing in retail and hospitality real estate is an opportunity for the NRIs for earning a significant amount of returns.
• Data Centres: NRIs have also come forward to invest in data centres. Data centres have grown rapidly in the country owing to their strategic location. However, the industry is at a nascent stage with massive potential for expansion.
• Flex offices/co-working: Many NRIs are interested in setting up co-working centres in India. Co-working centres require smaller investments as compared to large Grade A offices. NRIs find it lucrative to run smaller co-working centres where the returns are handsome. Some of the major deals in the Indian co-working market in the last two years are as follows:

Why NRIs are eyeing commercial real estate in India?

NRIs have always kept an eye on investing in real estate in India and now they have started to show special interest in the commercial segment. NRIs prefer to invest in commercial real estate in India due to the following reasons:

• India is a developing country and there has been exponential growth in the real estate market. The commercial real estate business is booming in every sector. It is also estimated that the commercial sector would further develop due to heavy investments. The commercial real estate market is considered a platform that provides secured returns and with rapid development in the sector, the NRIs are ready to invest.
• The government of India has also taken active steps to reform the commercial sector and this is another reason why NRIs are investing in India. The implementation of the Real Estate (Regulation and Development) Act (RERA Act) and the GST (Goods and Services Tax) by the government, have helped boost the growth of this sector. These measures have, to some extent, eased some of the pain points and brought in transparency in real estate transactions. This has instilled confidence in the investor community. There is massive investment planned in the Indian infrastructure sector that will improve certain aspects of real estate like connectivity that will, in turn, make investment further attractive.
• India has been developing in all sectors. The IT, retail and e-commerce sectors are gaining new heights each day and India has become the hub of many products. It is also estimated that the net office absorption would grow significantly in the coming few years. India has been showing growth opportunities and better return on investment and, thus, the demand for real estate investment trusts will increase. With an all-around development in the real estate business, investing in the sector would turn out to be beneficial for the NRIs who want to invest in the commercial real estate business and secure their investments.
• There has been an increase in the demand for co-working spaces in India. Budding entrepreneurs are finding these coworking spaces quite attractive and cost-effective. IT companies are also preferring this model. It is estimated that the demand for shared spaces in India would increase, making it the best time for the NRIs to invest in the commercial real estate sector.
• Many international real estate companies, especially in the commercial real estate segment, are entering India. This has brought professionalism in the commercial real estate sector and encouraged NRIs to invest. There are a lot of international private equity (PE) funds that are investing in the Indian commercial real estate sector, which is also heralding professionalism and transparency.

Advantages of investing in the Indian commercial realty

Indian commercial real estate is a constantly growing market and one of the most solid assets for investment. Some of the major advantages of investing in the Indian commercial real estate sector are:

• When NRIs invest in the commercial real estate sector, they are ensured of a steady cash flow. NRIs are assured of income stability from this asset class, even when the financial market is volatile.
• India is booming in entrepreneurship and investing in the commercial estates helps the NRIs to build their equity quickly. With investments in commercial estates, NRIs can gain steady and high returns.
• Preleasing is at an all-time high in India and NRIs can easily lease their commercial real estate for a long tenure. The liberal FDI policies have made the NRIs invest in Indian commercial real estate.
• The leasing market for commercial real estate has evolved in recent years. Several Fortune 500 companies and other reputed corporate are taking up spaces in quality commercial buildings. These tenants offer decent rents, behave professionally and rarely falter on their commitments as set out in the lease agreement. Thus, it is easy and more lucrative to deal with such tenants and, hence, NRIs are more interested in investing in the Indian commercial real estate sector.