Best Cities For NRIs To Invest In Real Estate

NRIs often hear stories about investors hitting jackpot by buying and selling properties back home. Very often, they also hear about someone who has lost money in a project that never materialized or in which issues crept up, rendering the property impossible to sell.

Eager to bag a slice of the pie, the NRI begins researching how to invest in the Indian market from abroad and which city, to begin with, only to get lost in contradictory sources.

It is a fact that the Indian economy is expanding rapidly; in fact, the World Bank projects that India will surpass China as the world’s fastest growing large economy by 2017. For those looking to become real estate investors who wish to participate in India’s growth, choosing which part of the country to buy-in can be a challenge. After all, the economy may be making great strides at the national level, but what forces at work at the local level? Put another way, which city or cities can promise the greatest returns?

We have compiled a list of the best cities for real estate investment. Some of these are large metros, known to be the hubs of many industries. Others are smaller, upcoming cities which show a lot of promise in their growth rates in population and per capita income amongst other factors. Read on to identify which city may be the best for you to invest in real estate.

1. Bangalore

Thanks to its combination of rapidly growing population, well-paying jobs, and low real estate prices, the hub of India’s IT industry has become the hub of its property investment as well. JLL recently published its annual ranking of the world’s most dynamic cities, in their City Momentum Index, affirming that Bangalore is the fastest-changing city on the planet.

By some estimates, 40 percent of India’s IT industry is based in this one metropolis. These changes have made it the most attractive place in India for real estate investment. A recent survey pegged Bangalore as the top real estate opportunity across Asia-Pacific.

All of this makes Bangalore the most desirable place for real estate investment in India.

2. Pune

Pune has displayed rapid population growth over the past decade with a growth rate over 30% during this period. The average white collar salary in this city is second only to Bangalore. Currently, property in this city is affordable as compared to other cities, which shows that it’s a good time to invest.

The city also benefits from being close to Mumbai. It also holds opportunities in the education, IT, automobile, and engineering sectors. This is yet another example of a formerly slow city that has experienced rapid recent growth and change.

The good weather all year round is an added benefit for NRI investors here. A new international airport and increased metro connectivity will bring even more growth and positive change to the city in coming years.

3. Chennai

Head over to the capital of Tamil Nadu for yet more real estate investment opportunities. Chennai is also in the leading pack, with a high growth rate in population (30%) and reasonably high average white collared salaries. This industrial city also has many companies that do IT and financial services.

The government has made road connectivity a priority here in recent years. This has helped the city and the surrounding area develop faster and attract new business opportunities.

A coming monorail and elevated railway line are sure to further help with this connectivity.

4. Visakhapatnam

As far as population and area, Visakhapatnam (Vizag) is one of the biggest harbors in India. Because of this, it is considered the commercial hub of Andhra Pradesh.

A quickly growing IT industry coupled with good infrastructure makes this city a desirable place for real estate investments.

With the first phase of the Vizag Metro Rail slated to be completed in December 2018, transportation options will also soon open up in this city.

5. Mumbai

As a growing city with modern urban development, Mumbai is a good real estate investment choice for a non-resident Indian who cares about lifestyle.

Considered the financial capital of India, this city is hard to beat when you compare the level of infrastructure with other cities. Target a premium property in an upscale neighborhood for the best return on your investment. There are several luxury hotspots in Mumbai that place you near high-end retail stores and restaurants.

As India’s financial hub, Mumbai also attracts many investors and corporate firms, providing plenty of work opportunities. If you want an internationally competitive work culture, this is the city.

Mumbai has great education facilities, including international schools. Political stability and easy resale options are added incentives to make Mumbai your investment realty location.

6. Bhiwadi

As the third-largest industrial hub in India, Bhiwadi is a manufacturing hub for some major firms. Companies like Gillette and Honda ensure plenty of local work opportunities.

Real estate projects are also cheaper here than in other cities. The affordability right now makes this a great investment realty choice for the long term.

The Indian government has proposed projects in Bhiwadi including new high-speed public transportation. This will make this city even more desirable in the years to come.

7. Kochi

Kochi, the commercial hub of Kerala, has seen new real estate prospects thanks to recent changes.

An upgrade of the sea port and privatization of the local international airport brought in new business prospects.

Many NRIs are already investing in Kochi. In fact, only some 30% of investors in real estate in Kochi are locals.

Part of what makes this city so appealing is its recent developments in infrastructure. New planned developments include the Vallarpadam International Container Trans-shipment Terminal, which will expand investment opportunities for this port city.

An “oceanarium,” or marine research facility that also doubles as a tourist attraction, is another proposed project that’s sure to attract even more opportunities to the area.

8. Bhubaneswar and Cuttack

These twin cities in east India are growing education and IT hubs. This boosts real estate development in the area.

The real estate market is well-regulated here since most of the available land is still owned by the government.

Plans for new commercial projects, a wider highway, and the new Kalinga Nagar Industrial Complex add to the reasons to target Bhubaneswar and Cuttack for real estate investment.

9. Coimbatore

The second largest city in Tamil Nadu boasts a stable industry that revolves around textiles and spinning.

Engineering, IT, and manufacturing have added to the industry in Coimbatore in recent years, providing economic growth and increased work opportunities.

A planned airport expansion will increase the ease with which travelers and business opportunities can flow into the city. And a proposed bus rapid transit system provides added options for transport on the ground.

Conclusion

There is a long list of cities in India that are great opportunities for real estate investments.

You may choose an established, major hub like Bangalore, or a newer and growing location like Kochi. It all depends on exactly what your future plans are for your investment.

With so many cities undergoing rapid developments and offering new opportunities, it’s hard to go wrong if you consider the key factors to select cities of choice for real estate investments.

Don’t be intimidated by the process of investing in real estate. Instead, reap the benefits the coming years will have for real estate investments in India and ride India’s economic growth wave.

The Rise in Popularity of the Serviced Apartment

Serviced apartments are a relatively recent phenomenon. They are fully furnished flats that have similar amenities to hotel rooms and can be used for either short-term or longer-term stays, offering a more home-from-home type experience. Some of the main benefits of staying in a serviced apartment as opposed to a hotel room are that they offer on average 30% more space, more privacy, and are more cost-effective in terms of there being no extra hidden costs and fully equipped kitchens reduces meal expenses. According to The Apartment Service, serviced apartments are around 15 – 30% cheaper than hotel rooms, adding to their appeal to businesses and the discerning tourist alike.

In recent years, the serviced apartment – a subsector of the hospitality industry – has grown more than any other temporary accommodation class in Europe. This can in part be attributed to globalisation and the needs for workers to travel more frequently to offices located out of town, and companies looking for less expensive ways to accommodate them. Also, families may have a preference to stay together and require a different set up to what hotels offer, in terms of wanting to keep an elderly relative close, having an office space to catch up on work tasks, or to allow older children more privacy.

The evidence of their popularity lies in occupancy rates. Serviced apartments in the UK averaged an 81% occupancy rate in 2016, and outperformed hotel rooms which stood at 77.2%. Amongst businesses, their usage is also increasing. According to a recent survey carried out by the Business Travel Show in November 2016, four in ten corporate buyers have reported that they would have used serviced apartments more by the end of 2016 than they did in 2015.

As we have mentioned above, serviced apartments are outperforming hotel rooms in terms of occupancy rates. Due to their cost-effective nature, they are becoming popular with companies sending employees on business trips, and those travelling for leisure who require more flexibility in their accommodation than what a hotel can offer.

Serviced apartment companies are relishing their success and are subsequently expanding at a fast pace. SACO are currently one of the largest operators of serviced apartments and over the past few years have made several acquisitions. Since the start of the year SACO have secured additional developments in London, Cambridge and Dublin, and a fourth is in the pipeline in Manchester. This demonstrates a confidence in the market, and indeed, a 2016/17 report by Savills predicted that 2017 would be “record growth” in terms of new developments in the UK.
The distinction between serviced apartments and Airbnb.

Governments have been cracking down on Airbnb rentals, which in part allows for success in the serviced apartment market. Berlin has banned tourists from renting entire flats from Airbnb to protect affordable housing, and Airbnb are banned from listing short term rentals in New York. Serviced apartments differ in that they are not flats owned by individuals looking to achieve a supplementary income, but rather they are owned by a company with the sole purpose of renting them out on either a short-term or long-term basis to individuals who need somewhere to stay. Unlike Airbnb, the apartments are not someone else’s permanent residence.

The crackdown of Airbnb rentals in some locations is allowing serviced apartments the opportunity to accommodate those who would have used Airbnb, further boosting demand for the units.
Serviced apartments as an investment

Investors looking to invest in the serviced apartment sector will be enthused by its fundamentals. In terms of the specific investment, individuals will be looking for buildings with high quality facilities in good, central locations. Keeping in mind that the people who will use the apartments will be either business travellers or leisure travellers (or a combination of both), they will require easy access to transport links and the area’s attractions and amenities. Due to stays being generally longer (research has shown that 91% of stays are of 14 nights+), residents will be reassured of a more stable income as their apartment will be occupied for a more definite period. The longer than average duration of stay, coupled with lower running costs, means that serviced apartments generally achieve higher net operating incomes compared to regular hotels. This helps to allay the worries of individuals considering hotel room investments but are concerned about the possibility of gaps in occupancy.

Sir Thomas House is an excellent example of an attractive investment in Liverpool. It occupies a city centre location close to Liverpool’s bars and restaurants, attractions and transport links. Liverpool itself boasts not only a booming tourism industry but also a growing economy – home to the largest proportion of fast growing new businesses in the country. A report on the hotel industry in 2017 by PwC also identified Liverpool as a place that will experience growth in terms of revenue achieved per room, indicating an increased demand and willingness to spend more in the city. These factors ensure that there will be a sustained requirement for the apartments from tourists and business travelers alike.

Zillow Takes Aim at Small Investors

This is a little different type of article than I typically write but I found this interesting and wanted to share. A few months ago, Zillow announced its Instant Offers program, which basically allows sellers to get offers on their homes within two days from institutional investors. These investors are highly qualified buyers and close with all cash within a week. At this time, Zillow claims that it is not offering this service to broker deals and charge commissions; it is doing it to fill a need in the industry. They claim that it is actually encouraging sellers to use agents, not vise versa.

Many agents are upset. In fact, according to a recent survey, 87 percent of Realtors think that Zillow is trying to become a broker and eliminate agents. Some agents, however, are excited about this shift and want to work more closely with Zillow.

If you have not heard, this is how the Instant Offers program is working in two test markets. A home seller completes an online questionnaire. From there, Zillow passes this information onto a small group of institutional investors who are buying houses in that market and to a qualified Realtor. The Realtor is tasked with providing a detailed comparable market analysis while the investors are tasked with submitting offers. Within just a few days, the sellers should have multiple cash offers and a CMA to compare the offers to. They then decide to go ahead and accept one of the offers where they can work with an agent to help with the transaction, or they can close the transaction without the help of an agent, or they can choose not to accept the offer and sell the house in a more traditional manner. This could include listing with an agent.

There have been several agents that claim to have received a large amount of seller leads under the new program. They submit the CMA and then are encouraged to follow up to try to get the listing.

I don’t see this as a bad thing for agents. Zillow is not charging any fees to the borrowers or the investors for this service, and claims that it is not interested in creating a brokerage or charging commissions. They generate revenue from ads and selling leads, not houses. Although many agents feel this could change because Zillow is not a profitable company. Entering the brokerage business could be a new profit center. I don’t see it that way, at least not yet. I see this more as a marketing ploy to attract seller leads for agents.

Although I am not concerned Zillow will take over the agent’s job, nor do I see this as a big threat to investors, I could see how one could view it that way. Zillow’s mission with the Instant Offers program is to capture every lead from distressed sellers it can and turn them over to cash buyers or their “pay to play” agents, virtually eliminating the small rehab investor. It is our job to be aware of what is going on and to maneuver our business to benefit.

Here is why I am not worried. First, the cash buyers are going to need steep discounts and the agents that just want a listing are going to be offering inflated CMAs. Those two could be so far apart it is going to hurt Zillow and the Zestimate it is so proud of. (Zillow’s opinion of value) This alone could make the program crash before it even gets going. That is not what I think is going to happen however. My guess is most sellers will end up listing the house with the agents providing the inflated CMAs. The agent will likely have trouble selling it because they will be listing it too high. This could be a great thing for a small rehab investor. Here are two ideas that you can implement to take advantage, assuming the Instant Offers program comes to your market.

You can network with the “pay to play” agents. If you can prove you close on your contracts and build a relationship with them, they too will be bringing a cash offer to the table. There are ways to make your offer more attractive than the institutional investor’s offers. This could be a great way to get noticed by sellers before the distressed houses ever go in the MLS.
You can track listings that appear to be too high in the MLS. Once they have been listed for a while, you can start to market to the seller and/or listing agents. Be careful though. You may not be able to market directly to the homeowner of a listed house unless you are unlicensed. Cash offers on distressed houses are attractive after the motivated seller has their house listed for a while with no traction.