NRIs do a realty check before investing

Non-resident Indians (NRIs) and people of Indian origin (PIO) investing in premium real estate projects have become cautious and are doing a thorough check before investing, say senior executives in real estate firms.

"The mood is to verify and ensure it is a good property, land and approvals are in place, the location is good, and the project conforms to the master plan," said Kunal Banerji, president, M3M India, after a road show in Abu Dhabi last week.

"Gone are the days of euphoric buying. Today, people are doing calculated buying. They are doing thorough due diligence, checking out the location," said Banerji, who met over 150 prospective investors in Dubai and Abu Dhabi over the weekend.

M3M, which is selling 3-bedroom and 4-bedroom apartments and penthouses at its Golf Estate project, Gurgaon, for Rs 3.6-10 crore (Rs 36 – 100 million) each, plans to sell a quarter of these homes to NRIs and PIOs.

Niranjan Hiranandani, chairman, Hiranandani Group, says there's a resurgence of NRI investment in India as opportunities have dried up in West Asia. "NRIs are more interested today; enquiries and conversions from them have gone up," he said.

But there's a difference. "Earlier, the NRI investor was euphoric – they would cut a cheque, thinking how much one would earn in three months. That exuberance is gone. Today, the NRI investor is taking a medium to long-term call on the property,'' said Ashish Jerath, vice-president (sales), Emaar MGF.

Today, the NRI investor has a two-three year investment horizon, not less. Hence, he's more concerned about the record of the builder, the location, and the project, realising only a good property would survive a shock, say experts.

"They realise property prices can quickly go up or down, so it is important to own a good property and not invest in just any. Investors have become cautious. They want to invest in a project which will always have a demand (for resale)," said Jerath.

Abhishek Kiran Gupta, head of research at real estate consultancy Jones Lang Lesalle, feels investors have become cautious because real estate valuations abroad are attractive and real estate prices in India have moved up sharply in a short span of time.

They've gone up by 15 per cent (NCR) to 40-50 per cent (Mumbai's suburbs) in many markets.

"Prices have shot up not just in Mumbai or Delhi, but in Bangalore as well. The prices have moved up so quickly - people still remember prices a year back - they are a little uncomfortable," said Gupta.

Hiranandani feels investors don't have an issue if the builder and projects are good. Emaar MGF, Hiranandanis and Lodha Group are builders which have a significant presence abroad.