Unlocking the Potential of Luxury Real Estate: Why NRIs are investing in Mumbai

Bhavik Bhandari, CSMO, Ashwin Sheth Group

The luxury real estate landscape in India is in the midst of a remarkable transformation. With an estimated Compound Annual Growth Rate (CAGR) exceeding 5 per cent expected in 2023-2028, it’s evident that the demand for high-end residential properties is on the rise. The allure of opulent living spaces, cutting-edge amenities, and prime locations has attracted the attention of investors, both domestic and international. India is not just witnessing a change in aspirations among its populace; it’s also becoming a global hotspot for upscale real estate investments.

The luxury real estate landscape in India is in the midst of a remarkable transformation. With an estimated Compound Annual Growth Rate (CAGR) exceeding 5 per cent expected in 2023-2028, it’s evident that the demand for high-end residential properties is on the rise. The allure of opulent living spaces, cutting-edge amenities, and prime locations has attracted the attention of investors, both domestic and international. India is not just witnessing a change in aspirations among its populace; it’s also becoming a global hotspot for upscale real estate investments.
Narrowing it down to regional preferences, 24% of NRI investors are inclined towards Mumbai’s realty sector, showcasing it as a “preferred destination” for high-end property investments . This underscores the influential role that NRIs play in steering the industry’s trajectory, with implications extending to area-based choices as well.

So, what’s behind this growing trend of NRIs investing in luxury real estate in India?

1. Economic Growth and Stability: India’s consistent economic growth and stability are key drivers behind the surging interest of NRIs in the country’s real estate market. Its rapidly expanding economy, coupled with robust infrastructure development, offers an optimal environment for real estate investments. NRIs are enticed by the promise of attractive returns in a thriving economy, boosting their confidence in the security of their investments. This economic growth is reflected in reports, which forecast NRI investments to make up 20 per cent of India’s real estate sector by 2025, with Bengaluru and Mumbai emerging as top investment destinations.

2. Favorable Government Policies: The Indian Government has introduced several policies to encourage foreign investments in the real estate sector, making it more accessible for NRIs. Initiatives like the Real Estate Regulatory Authority (RERA), Goods and Services Tax (GST), and relaxed Foreign Direct Investment (FDI) regulations have brought transparency and accountability to the sector. NRIs can now invest with confidence, knowing that their investments adhere to international standards.

3. Diversification of Investment Portfolio: For NRIs, investing in luxury real estate in India is a strategic move to diversify their investment portfolios. Real estate assets provide a hedge against market volatility, and high-end properties in prime locations offer prestige and long-term value appreciation. By allocating funds to luxury properties in India, NRIs can balance their investment portfolios and mitigate risks associated with fluctuations in other asset classes.

4. Property Value and Price Appreciation: India’s luxury real estate market, particularly in key cities like Mumbai, maintains competitive pricing without compromising on quality or amenities. This affordability factor creates a lucrative opportunity for NRIs to invest in premium properties at relatively lower costs than comparable offerings abroad. Additionally, increasing rental yields and the potential for property appreciation over time have enhanced the appeal for NRIs seeking long-term investment gains and capital appreciation in India. Earlier this year, luxury home sales in Mumbai surged by nearly 50%, positioning it as a prime investment option. Overall, attractive pricing, the potential for value appreciation and high rental yields place luxury Indian real estate as an enticing option for NRIs considering investment.

5. Upscale Offerings: Renowned developers in India are raising the bar in luxury real estate by providing upscale amenities that cater to the refined global lifestyle of NRIs. Cutting-edge features, such as state-of-the-art security systems, smart home technologies, wellness centres, and premium concierge services, align perfectly with the discerning preferences of non-resident individuals. This collaboration between top-tier developers and the evolving needs of NRIs highlights the increasing sophistication and international appeal, emphasizing the growing demand for luxury real estate in India.

6. Emotions, Culture & Retirement Aspirations: Many NRIs maintain deep emotional and cultural ties to their home country. Investing in luxury real estate in India often stems from a desire to maintain a connection to one’s roots, create a familial legacy, or establish a retreat for personal use during visits. These investments are driven not only by financial considerations but also by deeply personal and meaningful motives.

For NRIs contemplating a return to India, luxury homes offer an enticing prospect for retirement. Luxury properties provide the opportunity to retire within an intricately designed community, featuring amenities and services tailored to various age groups. These communities ensure a comfortable and secure lifestyle post-retirement.
However, while the prospects of investing in luxury real estate in India are enticing, NRIs must also navigate certain challenges such as currency fluctuations, regulatory complexities, and the need for reliable property management. Engaging with reputable real estate advisors, legal experts, and property management services can help NRIs make informed investment decisions.