NRIs are pouring money into real estate

This is one of the biggest ironies we have come across so far. The economic downturn in the US, Europe and the Dubai debacle - all had only one factor to blame. A bubble in real estate prices and mortgage loans! But it seems the trend is that of greed feeds greed. With NRIs from the West and the Gulf wanting to relocate to their home-country, the real estate market in India is seeing a never-before rally. The dollar-earning NRIs are willing to pay higher than market prices. Banks and mortgage lenders are all too willing to help their high ticket purchases with attractive interest rates. These funds are therefore feeding an asset bubble in Indian real estate, which was relatively less impacted by the global meltdown. A business daily reports that an estimated 25 m NRIs living in 130 countries have remitted US$ 52 bn to India so far this year. Most of it has directly come to real estate. Further, the current tight liquidity situation across US has enticed NRIs to mortgage loans in India. We do not see this as a very healthy sign as Indian real estate players and bankers have to be very careful about whether the high prices and risky loans are sustainable.