Strong Interest from NRI Investors Transforming India’s Commercial Real Estate Sector

The real estate industry in India is experiencing a noticeable change in the way non-resident Indians (NRIs) make investments. Although the primary focus has always been on residential assets, the year 2023 saw a sharp rise in NRI interest in commercial real estate, suggesting a substantial change in investing behaviour. 

With a predicted rise to USD 828.75 billion by 2028, the Indian real estate market has withstood economic volatility, reaching USD 265.18 billion in 2023. Notably, new home launches and residential sales both saw strong increases as the market recovered.

Following a decisive change in 2023, NRI investors shifted their attention from residential to Grade A commercial real estate, with a projected 9.2% compound annual growth rate (CAGR) from 2023 to 2028.

Overview of India’s commercial real estate sector

India’s commercial real estate sector is witnessing remarkable growth and transformation. With a rapidly expanding economy and favorable government policies, the sector has become increasingly attractive to both domestic and international investors.

According to a report by Mordor Intelligence, The size of the India commercial real estate market is projected to be USD 40.71 billion in 2024 and grow at a compound annual growth rate (CAGR) of 21.10% to reach USD 106.05 billion by 2029. 

The commercial real estate sector’s potential for high returns and long-term stability is creating favorable conditions for NRI investors to explore investment opportunities.

NRI investment in India’s commercial real estate

Recent data highlights a significant increase in NRI investments in India’s commercial real estate sector. The capital inflow has seen a substantial rise over the past years, reflecting the growing confidence of NRIs in the Indian market. These investments contribute to India’s foreign direct investment (FDI) and are a testament to the sector’s potential.

In terms of case studies, Some noteworthy NRI transactions from 2023 are the joint NRI investment in a state-of-the-art warehouse facility in Mumbai and the purchase of premium office space in Bangalore, which highlights the city’s status as a tech hub. These deals demonstrate how NRIs are consciously matching their investments to the dynamic changes occurring in India’s commercial real estate market.

According to proptech unicorn NoBroker, NRIs are expected to account for 20% of the nation’s real estate sector investments by 2025 as they continue to invest in the Indian real estate market and show an increasing interest in long-term investments.

Growth and trends in NRI investments

NRI investments in India’s commercial real estate are not only increasing in volume but also expanding in scope. While residential properties have been traditionally favored, there has been a noticeable shift towards commercial properties. NRIs are diversifying their portfolios and recognizing the lucrative opportunities available in the commercial segment. 

According to reports, NRI real estate investments in India are anticipated to rise by 20–25% by 2024. In addition, it is predicted that NRI investment will rise to a staggering $15 billion by 2025, demonstrating an unparalleled degree of growth.

Some notable trends are:

Sustainable real estate projects

In India, green real estate projects are attracting more and more attention from NRIs. Their commitment to ethical and progressive development is further demonstrated by their alignment with environmentally conscious investments. 

Alternate Investment platforms

Among NRIs, using digital platforms for commercial real estate investing is starting to become commonplace. Investments are becoming easier to make and more convenient thanks to platforms like fractional ownership options and online real estate portals. 

For instance, Assetmonk, an alternative investment platform, offers a fractional ownership model where investments are secured and starts as low as 25 lakhs.

Non-fungible tokens (NFTs) and blockchain-based marketplaces for real estate investments are examples of how NRI investors are becoming more tech-savvy.

Government Policies

Progressive policies have been put in place by the government to facilitate and promote investments by non-resident Indians (NRIs). One notable important initiative that improves accountability and transparency in the real estate industry is the Real Estate (Regulation and Development) Act, 2016 (RERA). 

These policies, when combined with the Foreign Exchange Management Act (FEMA) more straightforward guidelines, expedite the NRI investment process and promote transparency and confidence.

With the backing of the government and these new trends, NRI investment in Indian real estate is expected to grow significantly. It is a sign of the NRIs’ financial savvy as well as their dedication to making tech-driven, sustainable investments in India’s real estate industry going forward.

Fractional Ownership: An emerging investment option for NRIs

Real estate fractional ownership is becoming more and more popular among investors; according to a recent report by TruBoard Partners, a technology-enabled real asset management company, assets under management have reached Rs 4,000 crore.

For the following four to five years, TruBoard Partner has further forecasted a 25–30% compound annual growth rate (CAGR) in the fractional ownership market’s AUM.

Fractional ownership allows investors to own a slice of Grade A commercial real estate property through an alternate investment path. With a minimum investment of Rs. 25 lakh, individual investors can obtain a share in Grade-A commercial real estate that was previously accessible to the HNIs.

An investment portfolio’s stability and risk reduction are improved by distributing investments among a variety of assets. This strategy gives investors more diversified and well-balanced options, in line with modern investment strategies.

Investors can monitor their holdings with the help of online platforms like Assetmonk and technologically advanced solutions, which increase transparency and offer greater convenience. This degree of transparency eases investor anxiety and streamlines the investment procedure.

In particular, non-resident Indian (NRI) investors seeking stable, income-producing properties within their nation of origin find this professional management to be very appealing.

Outlook for the future growth of commercial real estate India

The Indian real estate market is expected to grow at a 9.2% Compound Annual Growth Rate (CAGR) in the near future.With the increasing interest of NRI investors, favorable government policy measures, and a growing economy, India’s commercial real estate sector is poised for significant growth.

NRI involvement will continue to shape the sector, driving innovation, creating employment, and contributing to the sustainable development of commercial spaces in the country. The future holds immense opportunities for NRI investors to play an integral role in shaping the dynamic landscape of India’s commercial real estate sector.

The projected $30 billion market size of India’s online housing market by 2025 highlights the growing importance of digital platforms in real estate transactions.

Bottom Line

Strong office markets, a thriving warehousing sector, and strong residential demand support the optimistic outlook for the Indian real estate industry in 2024. 

NRI investments have had a major impact on India’s commercial real estate market in 2023, making it a transformative year. By moving from residential to high-yield commercial properties, NRIs are taking advantage of the industry’s strong growth, which is being fueled by encouraging government policies and positive economic trends. In addition to yielding large returns, this calculated realignment towards a variety of commercial ventures is fostering the dynamic development of India’s real estate market. 

As the industry expands, non-resident investors (NRIs) are positioned to be key players in its future growth, representing a confluence of opportunity, innovation, and economic advancement.

Assetmonk is an ideal option if you’re looking for a way to earn passive income while diversifying your portfolio. The fractional ownership options offered by Assetmonk that are secured bySEBI, provide long-term retail investors wishing to increase their exposure to the CRE market with a high potential earning yield of 14 to 21% annually. Start investing today!