News Point: The demographic profile of the Non Resident Indians (NRIs) may not do justice to conclude why Mumbai is always on top of the wish list of the expat Indians.
The major demographic profile of the NRIs is from the states of Gujarat, Kerala, Punjab and other parts of North and South India. Going by what the traditional investment pattern of the Indians, the cities that should draw the maximum NRI investment should be Kochi, Ahmedabad and Chandigarh. But then it is the Mumbai city that has over the years commanded the maximum premium from the NRIs.
The slowdown of the Indian economy and the resultant effect on the property pyramid where the high-end investors started scaling down their portfolio size gave the impression that the NRIs who were fuelling the luxury property of Mumbai would be skeptical with the dream city. However, this proved to be an outside view as the NRIs who have travelled in developed cities of the world still find opportunity cost of Mumbai pretty high. In their cost & benefit analysis, Mumbai continues to be an investment magnet.
Critics who pointed out that the NRIs are exiting the luxury properties probably failed to differentiate between the NRI investors and the NRI end users. It is true that the investors are wary of ultra luxury projects across the country and Mumbai is no exception. But equally true is the fact that the kind of business opportunities, lifestyle and livability index that the NRIs looking to settle down in India want, no other city can match their aspiration level as Mumbai.
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Satish Dwivedi, and NRI from Western Uttar Pradesh now working in Yemen is coming back to India. The financial consultant was advised by the broker that Noida is a better option for settling down in India and exploring his business. The ticket size of the Noida market is not even 30 per cent of the Mumbai real estate and hence the advice prima facie looked very convincing. In terms of the cost of doing business per square feet, Noida was peanuts compared to Mumbai.
“With the impression that I was given I was pretty much convinced in favour of Noida since it is very close to my home town in Moradabad. The physical infrastructure of the place also is far superior. But then I soon realized that it could only be my retirement destination. In terms of conducting my professional and social life, no city can match Mumbai,” says Dwivedi.
The built environment of Mumbai real estate that deals with the NRI buyers do understand this wish list of the expat Indians. “The first consideration for any home-buyer is how will he conduct his professional life. Then after he has to look for conducting for social life. Then comes the question of budget and affordability which is very relative. For the NRIs since there is no budget constraint like an average salaried class in India, they would go for a city where they get the lifestyle choices along with professional opportunities,” says Arvind Nandan, Director – South Asia with Colliers International.
Ravi Gurav, Member of MCHI points out that Mumbai real estate market has been getting some good support from NRI sales since the last two years. The share of enquiries by NRIs on real estate portals are over 30 per cent in today’s times. Whereas the local buyers are still considering the property prices as high, at the same time NRIs are buying the best deals available from Mumbai market. From the month of August 2016 we are witnessing a lot of new launches along with existing launched properties offering better deals with relaxed payment schedule or free biz such as furniture and home appliances.
“NRIs are especially bullish in Mumbai real estate market due to two reasons. First is that they understand the gradual correction that taken place in Mumbai real estate market. Even if we consider the inflation from 2013 to 2016 at the rate of 5 per cent per annum then overall inflation is 15 per cent in last three years. But if we get the property in 2016 at the price of 2013 means it is at 15 per cent correction. Secondly, Indian Rupees against US Dollar depreciated almost 20 per cent from 2013 to 2016. The Indian Rupee against US Dollar was 55 in April 2013 where as in April 2016 India Rupee was 66 against US Dollar. Which is like the 20 per cent depreciation of Indian Rupee against US Dollar,” says Ravi.
As per this calculation, if we consider the consolidated effect of 15 per cent gradual correction and appreciation of US Dollar up to 20 per cent in last three years, it is as good as Mumbai real estate market poised at 35 per cent corrected price for NRIs and hence they are bullish.
Devang Trivedi, Managing Director of Progresive Group finds a sound financial rationale in the Mumbai property investment of NRIs. He points to the fact that the NRIs are used to low returns on investment in their country. So, in Mumbai rental income is equal to the appreciation in their country and whatever appreciation in property price rise they are getting is a bonus. Moreover, they have a long term option of returning to Mumbai and have a self use option.
“Among all the different investment classes that is gold, silver, diamond & stock market, property investment is the most tangible & common sensible investment. Long term perspective in Mumbai remains a safe market because of limited supply and ever increasing population. Ten times growth in Mumbai between 2003 and 2008 is giving encouragement to all the NRIs to invest in Mumbai, as back in their own country the property is the same with only 2 to 5 percent maximum growth,” says Trivedi.
Beyond all the cost & benefit analysis, the fact lies that Mumbai still offers the high livability index and the reasonable cost of doing business to NRIs. So, any NRI who is returning back to the country and wants to continue the professional life prefers Mumbai for investment. Despite the slowdown of the last few years, which has hit the property markets across the country, everyone understands that in terms of the ROI no city can match Mumbai. Add to it, the quality of life and the business opportunities, and Mumbai acts as a magnet to the NRIs. Last, but not the least, the kind of connectivity that Mumbai offers to all the major international cities is a magnet for NRI professionals returning back to India to set up business here.
By: Ravi Sinha
