Recent years have witnessed an increasing trend of NRI investment in India. According to Liases Foras, a real estate research company, a major share of real estate investment in India comes from the UAE (20%), the US (18%), the UK (7%) and Canada (6%). This can be due to factors like chances of earning high rental income increased affordability given by their high-paying jobs, or a yearning for their place when they settle down in India.
The trend is further boosted by the ideal investment conditions in India. Depreciating rupee value against foreign currency increases buying capacity; in other words, it gets more square foot for its value. Moreover, implementation of RERA and GST have also fostered transparency and rekindled NRIs’ interest to explore property investment in India.
Under the Foreign Exchange Management Act (FEMA), NRIs cannot buy agricultural, farmhouse or plantation land in India. This has opened a huge market in the commercial and residential sectors, especially in cities. Cities also offer gated communities and independent villas with world-class amenities that NRIs prefer; they provide a better quality of life. Since cities also provide the necessary job opportunities, it’s only natural that NRIs show interest in buying a house in cities.
Till a decade ago, realty investors focused on major cities in the North and West of India. With the recent high prices in cities like Mumbai and Delhi, the focus has come further down. The booming IT sector also factored this shift. When it comes to South India, Chennai and Bangalore vie for the best city for real estate investment. Both the cities have made its way to Forbes’ ”Next Decade’s Fastest-Growing Cities”.
Both Bangalore and Chennai real estate are driven by the demands of end-users. Real estate investment in Bangalore has carved its place in the list of the best investment options with the city’s IT sector and job opportunities. However, Bangalore has a mature real estate market because the real estate boom happened at least a decade preceding that of Chennai. While Bangalore still ranks top in the absorption of commercial spaces, Chennai has a higher absorption of residential property units.
Real estate investment in Chennai is also in good shape as property rates are more realistic and affordable here than in Bangalore with high returns on investment. With more and more people relocating to this city of opportunities, demands increase in these affordable micro markets. When demand increases, rental rates are becoming higher. This is particularly beneficial for the NRIs who wish to rent out their houses. When they buy a property in Chennai, the value will appreciate multiple times in terms of rental incomes and from a selling perspective. According to Anarock research, 68% of people buy properties to resell after appreciation. Since properties in Chennai have high resale value, if NRIs do not wish to settle down in Chennai, they can sell off the property and enjoy high returns on investment. For the financial year 2018-19, the National Housing Bank studied the prices of under-construction properties. The numbers show that the Housing Price Index of under-construction properties in Chennai was growing at the rate of 3 percent followed by Bangalore (1%).
Though Bangalore is characterized by constant IT growth and steady job opportunities, Chennai has a mix of manufacturing and service sectors. These sectors witness rapid growth and also attract huge investments. Recently, the Chennai Metropolitan Development Authority (CMDA) has fixed the floor space index as 2.0 that promises 33% more vertical growth in the city. In the Second Master Plan for Chennai Metropolitan area, CMDA has allocated 33% of the land within the city for residential development. These changes promise a huge boom in the residential sector.
While housing prices in Bangalore are driven by amenities and the size of the house, location primarily determines housing prices in Chennai. Since there is more and more land made available in the suburbs, it’s easier to find houses than in Bangalore. The prices of apartments in Sholinganallur, Thalambur, Tambaram, Guduvanchery, Valasaravakkam and Sriperumbudur will grow exponentially in the coming years. Properties in these areas offer a perfect mix of luxury and affordable properties at cheaper prices. The proposed infrastructure upgrade in the transport corridor in OMR and the construction of the phase-2 project of Chennai metro will give a facelift to the real estate in these areas.
In the coming years, a large scale migration to the suburbs of Chennai and IT/ITeS corridor is imminent. With growing demand in these fast-growing suburbs, the residential market will boom. The upcoming infrastructural facilities proposed by the Government also signal a great growth potential making Chennai a smarter option to invest.
Chennai used to be considered a city of old money. Where inherited wealth was commonplace and self-made millionaires, a one-off statistic talked about over drinks at the Boat Club. Today, Chennai has evolved into a favoured destination for the wealthy with all its residential hotspots.
Chennai, the capital city of Tamil Nadu is considered one of the biggest cultural, educational, and economic centres in Southern India. The city was also ranked as the safest in India (105th place) as per Mercer's Quality of Living Survey 2019 which ensures a good living environment for the dwellers.