Allure of Singapore property alive and kicking among NRIs

Singapore is a favourite real estate investment destination for Non-Resident Indians (NRIs). Thanks to the country's political stability and government policies that regulate property ownership and prices in such a way that economic troubles globally have a minimal impact on investments.

Though prices of private residential properties in the city-state decreased by 0.7% in the first quarter of 2019, landed property prices increased by 1.1%, according to data from the Urban Redevelopment Authority.

In July last year, the Singapore government introduced a spate of measures to regulate the housing market. Singapore has emerged as the second most expensive place in the world to buy a house. Photo: Connected to India.

The same data showed that developers launched 2,989 uncompleted private residential units for sale in the first quarter compared with just 1,657 units in the previous quarter. They also sold 1,838 private residential units in the first quarter or slightly more than the 1,836 units in the previous quarter.

Resales were lower but steady at 1,858 in the first quarter compared to 1,971 units in the previous quarter.

The demand for private residential property is inching up with the vacancy rate of completed private residential units dipping to 6.3 percent at the end of the first quarter of this year, down slightly from 6.4 percent in the previous quarter.

Full recovery in prices is still a long way away but after quarters of decline, there is some sense of stability which could trigger interest among new home buyers.

Prices overall though are still depressed and that is line with expectations as it is seen as an impact of the Singapore government’s July 2018 cooling measures working their way through the market.

In July last year, the Singapore government introduced a spate of measures noting a sharp increase in prices then “if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply.”

The stamp duty to be paid to purchase property was increased and the amount that can be borrowed against that property’s valuations was brought down. Foreign buyers were the most impacted with their stamp duty going up to 20% while for institutional entities buying property it was as much as 25%.

Buying interest and consequently real estate price growth may continue to be tepid for now but the allure of owning a piece of real estate in a city-state, which is constantly evolving - as the recently released Land Transport Master Plan 2040 showed - will continue to attract investments.

Most NRIs are probably waiting for a more prolonged phase of price stability but signs seem to indicate they might be starting to show some interest.

Singapore-based investors pumped USD1.15 billion (SGD1.56 billion) into Indian real estate in 2015 and 2016, and nearly USD3.5 billion (SGD4.73 billion) in 2017 and 2018. Photo courtesy: Wikimedia.

India Effect

For now, though NRIs are also distracted by what has been a healthy bounce in the Indian real estate prices.

According to data released by the Reserve Bank of India in February, the all-India house price index grew by 5.7% in the second quarter of a fiscal 2018-2019 year (April-March). This was better than the 5.3% growth in the previous quarter but slower than the 7.4% rise a year ago.

Except the city of Kanpur, all other cities in the country recorded a rise in housing prices on an annual basis, the data showed.

There is optimism about more NRI investments into India.

“The Indian real estate sector evokes a lot of interest from NRI investors,” said Anuj Puri, chairman of Anarock Property Consultants. “The interest graph from expatriate investors has veered towards commercial properties in recent times. However, interest from NRIs seeking to own homes for themselves and their families back in India is still robust, especially given that property prices have bottomed out, interest rates are their lowest in a decade, and developers are making very attractive offers to entice buyers.”

Investments into Indian real estate is led by NRIs from Singapore, UAE, USA, and Saudi Arabia, said Puri. The market is still in a recovery mode after a slowdown in 2015 due to a slew of reforms and policy changes such as demonetisation and imposition of a goods and service tax (GST) that adversely affected the operations of Indian brokers and real estate developers, he added.

Ashraf Jamal, connectedtoindia.com

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