Buying the history of India
Even up until the turn of the millennium, NRI 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 exclusive NRI blocks in their building plans. Overseas Indians want to buy in their home country not just for parents and annual leave, 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 provider of real estate services. “You have to go with the offers.” “A lot of interest has developed,” adds Rajesh Goenka, Managing Director, who spearheaded the company’s original push among UK Indians. “Five years ago, the early news said 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 the 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 more of an investment destination and prefer international attractions like Goa. The US has a higher proportion of first-generation expatriates, who are either open to the idea of ​​returning to India or have parents living here. The traditional metros, Bangalore and Hyderabad are their preferred destinations. Gulf Indians generally plan to return and therefore seek 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 interest cost.
There have been many factors fueling the demand for NRIs. India’s story now deserves regular features in major newspapers like The Times, Wall Street Journal or New York Times, encouraging everyone to get a piece of the action. The relaxation of repatriation rules has made it easier to obtain returns on investment. The developers have become more professional. Banks are more willing to finish. In recent months, the strengthening of the rupee and the weakening of the US housing market have made India even more attractive. Perhaps the most important reason is that the Indian real estate boom is considered to be led by genuine end-user demand and therefore sustainable in the long term, making investment safe.
Real estate marketing is also becoming more organized, facilitating the buying process. Whereas previously developers would look to do their own marketing, today they largely rely on companies like Axiom Estates, which is headquartered 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 overseas Indians are extremely tech-savvy,” says Aloke Banerjee. “They do a lot of research online. But then analysis paralysis hits, so they need someone to guide them. This is where Axiom Estates comes in. Although we generate a lot of inquiries through our website, we are not a virtual office or portal, but rather have a physical presence in your country. We have people who take them by the hand and guide them through the entire value chain. This includes buying, property management, renting, furnishing, mortgage and in some cases resale of the property”.
In addition to amenities, Axiom offers the NRI buyer a host of ownership 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 deals in advance, that is, property deals at a price that is normally only available to the local community. High net worth individuals also have opportunities to block book or develop projects through Axiom for higher investment returns. Many real estate investors also seek the company’s portfolio management services, where investment is spread across multiple properties and cities, ensuring an optimal mix of security and profitability.
To market properties, Axiom uses various techniques, including managing an extensive database to accommodate need and availability. The company organizes real estate shows in the US, Canada, UK and now in the Gulf, in partnership with developers. These are advertised through local television campaigns and newspaper articles over several weeks. Paper property catalogs are mailed to prospective buyers well in advance. At the fairs there are Q&A sessions with developers, seminars with experts, and the sharing of quotes and articles. 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 roadshows, with several thousand visitors being the norm.
Currently, the NRI market accounts for 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, since titles are not always clear and there is no title insurance. When buying built real estate, the documentation is usually unilateral, loading the legal dice in favor of the promoters. Delays in construction and quality of service continue to be a concern for many developers. If India were to catch up with developed countries on issues of title, transparency, service and contract integrity, the floodgates would open. There’s a lot of money waiting in the wings.