With the Indian markets witnessing a bumpy ride and the economy’s outlook somewhat grim, NRI investors are being advised to maintain a diversified portfolio with a little more weighting to property.
Global rating agency Moody’s Investor Service said the second wave of the pandemic is posing a credit-negative risk to India’s economic recovery.
The country reported a new daily record of nearly 170,000 covid-19 cases on Monday to take the total to 13.68 million. India now accounts for one in six of all new infections globally.
The resurgence in coronavirus cases presents a risk to India’s growth forecast as the reimposition of virus management measures would curb economic activity and could dampen market and consumer sentiment. However, the market discounted it when the benchmark stock index BSE Sensex gained 200 points returning to the 48,000-mark after falling over 1,700 points on Monday.
Yet, retail investors are cautious and NRIs are groping in the dark for a clear direction on investment options.
Though NRIs have traditionally always maintained a full spectrum portfolio across all asset classes; such as stocks, mutual funds, fixed deposits, real estate and gold – they are now being advised to look at property investments in a different light.
Reconsider property
Investment advisers say it is safe and lucrative to invest in property in India now, with options such as residential, commercial, retail and warehousing.
“NRIs tend to base their property investment decisions on secondary sources such as friends, relatives and media reports; rather than professional real estate advisers who offer service based on market research on financing options, payment plans, legal aspects, tax compliance, incentives, market trends,” said Rajagopal Ramesh, chief executive, Veracity Consulting, UAE,
A major segment of NRIs with sufficient allocable surplus for investments opted for property investments. Investment by non-residents in real estate in India is expected to rise 12% to $14.9bn (£10.83bn, €12.46bn) in financial year 2021-22.
The investment volume has risen 6.4% compared to the previous fiscal year despite overall market sentiments taking a beating due to the pandemic.
However, real estate investments are impacted by the vagaries of the market and the economy, as evidenced by a big fall immediately after the long lockdowns following the spread of the pandemic last year.
Property investments by the expatriate community fell 35% in the first quarter of the last fiscal when compared to the same quarter in the previous year.
The trend immediately reversed by the end of the second quarter when the market witnessed 18% growth in NRI investments in real estate, followed by 24% and 22% growth in the subsequent quarters, respectively.
Home loan rates at nadir
There was also a reduction of stamp duty in most states and many developers introduced attractive payment plans and innovative financing options after the home loan rates were reduced to record low – some banks offer rate as low as 7%.
The immediate trigger was the crash of the Indian rupee against major currencies, particularly the US dollar.
NRIs from the Arabian gulf countries account for around 41% of the total real estate investments in India. There was also incremental growth in average ticket size after remaining lacklustre for a long time. After the pandemic most buyers opt for larger spaces, which has made the ticket sizes larger.
The average ticket size of purchase from UAE-based NRIs has grown by 11.5% to $97,000 (£70,536, €81,171) , according to a market report.
Balanced portfolio
Most advisers still vouch for a well-balanced portfolio comprising shares, mutual funds, fixed deposits, bonds, gold, and property.
Gaurang H Shah, senior vice president, Geojit Financial Services, said India is better placed to handle the second wave of the pandemic and the impact on the economy to be broad-based.
Stability and normalcy will return as the vaccination process progresses and the economy will be put back on an even keel.
“Equity is a natural creator and if you keep invested smartly and wisely, it will create wealth for you,” he said.
