How the NRI Real Estate Investment will Change Post Election

With the bugle of the general elections blown and the formation of the new government a little less than two months away, the real estate sector is bracing itself for positive sentiments in the coming future. The real estate sector witnessed a sluggish 2013 with a decline in absorption for both domestic and Non Resident Indian (NRI) buyers. The new government is likely to bring with it new monetary and sector oriented policies that can inject a fresh lease of life to boost transactions and lift the buyer sentiment as a whole.

Let us take a look at how the general elections can impact the real estate sector in the coming months with a special emphasis on the Non Resident Indian (NRI) sector.

Real Estate Sector and Political Uncertainty:

“With general elections a just a few days away, we prefer to have a wait and watch before making any real estate related decisions” says Mr. Aravind Nair, a Bancassurance professional based in Doha. While there is a general perception that real estate prices usually consolidate after general elections, the trends can only be correlated in case India gets a stable government which has a real estate sector oriented policy.

There are three cases which can happen in the Indian general election.

First and the least likely case is the return of the present government. In case the present United Progressive Alliance (UPA) government gets back to power, the real estate sector will have the advantage of knowing the short and long term policy of the government with respect to real estate. The focus on special economic zones can increase market sentiment in the commercial space.

The second least likely result is a fractured mandate with neither United Progressive Alliance (UPA) nor National Democratic Alliance (NDA) getting a majority. Most experts feel that such a scenario can lead to stagnation of prices which need a sector specific policy trigger.

The third case which is most anticipated as per the election opinion polls is the likelihood of formation of a National Democratic Alliance (NDA) government. Industry experts and real estate bigwigs have high hopes from the new alliance as they have already announced their willingness to offer Foreign Direct Investment (FDI) in the real estate sector thereby boosting both supply and demand economics.

Financial Impact and New Government Policies:

The impact of positive sentiment or reigniting of Non Resident Indian (NRI) interest in the Indian real estate market is directly related to the financial impact and policies of the new government. “We believe that the new government is likely to bring in a positive developmental role in enhancing various regulatory frameworks” says Mr. Mohammed Mansoor, a Dubai based business man. In such a case, the Foreign Direct Investment (FDI) in the realty sector is likely to improve significantly. “The new government is likely to create investor friendly policies allowing Non Resident Indians (NRIs) to invest in the Indian real estate market as possible retirement avenues” hopes Mr. Sujay Nath, a Singapore based IT professional. The talk of development of 100 new cities across the length and breadth of India also offer tremendous upside for real estate developers as well as Non Resident Indian (NRI) buyers.

Dollar vs. Rupee Sentiment:

Currency fluctuation has been one of the main reasons for the lack of Non Resident Indian (NRI) investment in the real estate sector in the past. There have been reports that the Indian currency could soar if the popular National Democratic Alliance (NDA) government replaces the current government after the election. The robust Rupee is unlikely to dent Non Resident Indian (NRI) interest in the Indian market as the government is likely to compensate it by streamlining investment routes by offering transparent rules with a stern real estate sector watchdog.

A recent survey by Standard Life, a long term savings and investments company headquartered in Edinburgh has revealed that almost two-thirds of UAE based Non Resident Indians (NRIs) feel that new government is likely to create better economic and investor friendly environment to consider retirement planning in India. The Reserve Bank of India (RBI) will also play a key role in the post-election scenario, clear policies are certainly going to help attract Non Resident Indians (NRIs) consider India as an investment opportunity in the real estate market.