Aside from a 40-basis-point increase in an off-cycle monetary policy in May of this year, the repo rate has increased by 50 basis points in each of the previous three monetary policy reviews by India's central bank, the Reserve Bank of India. Even though the inflation rate for India's consumer price index eased to a three-month low of 6.77% in October, it is still higher than the Reserve Bank of India's target level of 4%. The RBI may therefore decide to raise the repo rate once more.
The repeated repo rate increases this year have raised the cost of borrowing for home purchasers, but they will have little to no effect on non-resident Indians (NRIs). On the other hand, NRIs might profit from rising fixed deposit interest rates. It is because the rates on deposits are also directly impacted by repo rates. Commercial banks can borrow funds from the central bank at a lower cost when the repo rate declines, allowing them to lower the interest rate on deposits and offer customers a lower price.
The interest rate on deposits, including fixed deposits, will rise, which is a benefit. Fixed deposit interest rates are no longer offered at low levels. The interest rate on fixed deposits under Rs 2 crore has increased at significant banks. NRO and NRE fixed deposit returns will increase when interest rates rise. Following the Reserve Bank of India's decision to loosen regulations to improve the country's forex inflows, banks have also begun raising interest rates on foreign currency deposits. Leading financial institutions have increased interest rates on foreign currency non-resident (FCNR) deposits, including SBI, ICICI Bank, and HDFC Bank.
Due to the devaluation of the rupee versus the dollar and other currencies, NRIs are more robust than their Indian counterparts in purchasing power. As a result, NRIs now have more money available to them, and many have expressed interest in purchasing luxurious and ultra-luxury properties. Similarly, NRIs are investing in real estate in the cities and villages where they were born. Additionally, they have demonstrated a penchant for planned developments, which has prompted other developers to enter this market.
Another recent development among NRIs is a desire for vacation properties like homestays and resort investments. NRI homebuyers are investing in resort suite ownership, which consists of resort apartments that are a component of sizable resort complexes at well-known holiday spots. When not in use as a holiday home, the owners can add the apartment to the resort's inventory so that it can be rented to visitors when available. This business concept enables NRIs to obtain a monthly rental payment that covers the cost of purchasing the resort. Additionally, since the resort's management is in charge of maintaining the property, it relieves NRI home buyers of that duty.
Among the top locations for NRIs to invest in real estate are the leading real estate hubs of Delhi, Gurgaon, Hyderabad, Bengaluru, and Pune. According to research by the real estate consulting firm Anarock, NRIs now have more confidence in the Indian real estate market than before the COVID epidemic. The percentage of NRIs who think investing in the Indian real estate market is one of the best investments has increased from 55 percent in the pre-Covid edition to over 71 percent now. Indian real estate has proven to be resilient, and its recovery has persuaded homebuyers that it is a secure investment.
Technology has been crucial in assisting NRIs to purchase the homes of their dreams in India. Real estate developers are showcasing homes to NRIs using technologies such as virtual reality and augmented reality so that they may do it from the comfort of their homes. Builders are doing online launches to serve their NRI customers, interacting with potential homeowners through video conferencing software. The real estate industry has also begun holding webinars to draw in new investors about their impending launches. NRIs can now sign a purchase deed electronically without visiting India.
NRI purchasers have demonstrated a clear preference for real estate over other asset classes like gold and stocks. Amid the current political and economic unrest worldwide, real estate is regarded as the most stable asset class. A worldwide commodity, gold's price has risen in comparison to underperforming debt securities. As the world struggles with a war and a worldwide recession, the equities market has also experienced many erratic fluctuations. Real estate is a secure investment that will generate positive returns over the long term for NRIs.
Despite the Gulf area accounting for over half of all foreign investments in India, NRIs worldwide have been investing in the country's real estate market. NRIs from other nations have also expressed interest in the Indian real estate market, including those from the US, Singapore, Canada, the UK, Germany, South Africa, and Kenya. For NRI home buyers, nothing has changed despite interest rate increases and a declining rupee being terrible news for Indian home buyers. Instead, NRIs have taken advantage of the weaker rupee to improve their purchasing power and invest in the Indian real estate market. NRIs investing their money in Indian real estate have more trust now, thanks to the market's stability over the past few years.
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