Real Estate AIF: A wealth generation opportunity for NRIs

financialexpress.com:

Earlier this year, Prime Minister Narendra Modi extolled the role of NRIs (Non-Resident Indians) in India’s progress and emphasized that this is the ideal time to invest in the country’s growth.

However, one look at the wealth distribution preferences of this cohort reveals that most NRIs are increasingly remitting money to India. In fact, in the last fiscal year India clocked the highest growth in inward foreign remittance with the transaction value surging 26 percent to $112.5 billion. The remaining savings are then used for real estate investments, especially in India. It is no surprise that NRIs investments in India real estate have doubled in the past year with their search traffic for purchasing property in India rising by 117.7 percent year-on-year.

Yet, many NRI forums have messages around stalled real estate projects and the limited liquidity in real estate portfolios. This poses a bigger question – can there be a wealth generation opportunity in real estate given the multiple uncertainties? Alternative Investment Funds (AIFs) seem to have presented an interesting option amidst this conundrum.

Over the past few years AIFs have emerged as a popular investment vehicle, especially for NRIs. Add to it the recent regulatory developments, which are rendering them as an investor-friendly option. Though the fundamental drivers of real estate AIFs are underscored by India’s economic growth and the stability of its market, the most attractive aspect is the outsized alpha opportunity that commercial real estate presents in comparison to other global markets.

Such alpha opportunities exist across India’s urbanizing landscape and offer a steady stream of earnings that range between 18 and 20 percent, making real estate a