Most NRIs See Commercial Real Estate In India As New Asset Class: Survey

The report based on the survey said that the real estate in India is demonstrating an upward trajectory with a projected growth rate of 9.2 per cent compound annual growth rate (CAGR) during 2023-2028

Traditionally, the residential sector was the only real estate alternative preferred for investment.

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A survey among the NRIs has revealed that around 52 per cent are considering investing in commercial real estate (CRE) to diversify their portfolio in the Indian real estate segment. The report based on the survey also said that the real estate segment in India is demonstrating an upward trajectory with a projected growth rate of 9.2 per cent compound annual growth rate (CAGR) during 2023-2028.

The survey by SB NRI, a company that provides investment and advisory services to NRIs, showed that there is an elevated real estate investment demand among NRIs. 

The report said that around 52 per cent of NRIs consider investing in commercial real estate (CRE) to diversify their portfolio in the Indian real estate sector, which shows that commercial real estate has become one of the most preferred asset classes for NRIs. 

According to the survey report, around 18 per cent of NRIs are strongly inclined towards investing in the commercial realty segment while 9 per cent prefer to invest in the residential segment for a diversified investment portfolio. 

Traditionally, the residential sector was the only real estate alternative preferred for investment. However, with fractional ownership emerging in India, CRE investments have become most sought after as NRIs no longer have to inject Rs 5-10 crores to purchase a commercial property, the report said.  

“Instead, a set of investors can pool their funds as minimum as Rs 25 Lakh to purchase a Grade A commercial property and enjoy higher returns,” it added. 

The demand for investing in CRE is largely driven by acquiring better returns as 34 per cent of NRIs see this as a big reason to invest in CRE. In addition, around 48 per cent of NRIs believe high convenience including the seamless process to invest, and finding the right properties when they invest in CRE, the survey showed. 

Furthermore, it said that 18 per cent of NRIs consider property management facilities like finding tenants, upkeep of the property, etc. as the biggest reason to invest in commercial real estate than the residential segment. 

The SB NRI report also revealed that NRIs from top countries invest in commercial real estate. It showed that Singapore (9 per cent) and the UK (8 per cent) based NRIs outperformed the investments made in the residential sector with 6 per cent of NRI investments. 

On contrary, the survey showed a contrasting trend in UAE-based NRI investments with 7 per cent of investment being made in commercial real estate and 9 per cent in the residential property segment.  

Apart from this, other countries like US and Australia have gradually picked up the trend with 4 per cent of NRI investments made in the commercial realty segment as compared to 3.40 per cent and 5.18 per cent of investments in the residential segment. The survey highlights Canada based NRIs show lesser interest with 3 per cent of investments in the Indian real estate sector.

“The exponential boom in NRI investments in the sector is driven by a myriad of factors. Previously, there was a lack of accessibility to investment opportunities for NRIs in India. However, technology integration and standardization of certain frameworks have cleared the way for NRIs to enter the segment,” the report said.