Best Cities for Real Estate Investment in India

India is not only one of the fastest-growing countries in terms of population but also boasts robust economic indicators. In 2023, the World Bank projects India's GDP to grow by 6.5%. Its metropolitan cities are bustling hubs, with a thriving IT outsourcing industry and an influx of tourists to its coasts each year. Consequently, investing in Indian real estate can yield substantial returns. Continue reading to discover the most promising regions for investors in India.

• Is It Worth Buying Real Estate in India?
• Can a Foreigner Buy Real Estate in India?
• Selecting the Ideal Region for Real Estate Investment in India
• Mumbai
• Navi Mumbai
• Pune
• Bangalore
• Chennai
• Hyderabad
• Noida
• Ahmedabad
• Kolkata
• New Delhi
• Agra
  
• Surat
• Goa

Is It Worth Buying Real Estate in India?

India's real estate sector is experiencing growth parallel to other economic segments. Analysts predict that by 2028, the market will multiply in size, with an anticipated average annual growth rate of 25.6%, reaching a valuation of $550.8 billion. Construction stands as the third dominant sector in India's economy. The country consistently witnesses a strong demand for housing, particularly in the budget segment. Additionally, there's a burgeoning growth in the construction of data centres. Cities hosting global IT and automotive brand offices are seeing a notable surge in housing and office prices. As outsourcing hubs draw an increasing number of specialists, India continues to climb the ranks in investment interest, attracting both domestic and international investors.

In September 2023, the advancement of the sector was further bolstered with the establishment of the Indian Association of REITs (Real Estate Investment Trusts). The initiation of these globally recognized trusts broadens the horizons for foreign investors and enhances the safety of the investment process.

The demand for real estate in India is anticipated to remain robust in the foreseeable future. Despite rapid construction, the country still grapples with a housing shortage. Additionally, Indian resorts continue to gain traction due to the growing emphasis on healthy living. In 2023, top destinations for foreign investment include Bangalore, Goa, Delhi, Ahmedabad, Pune, Chennai, and Mumbai.

Can a Foreigner Buy Real Estate in India?

There are several ways for foreigners to invest in real estate in India.

• Only foreigners with resident status can directly purchase property. This includes those with a residence permit, who've stayed in India for over 182 days annually and are either employed or running a business.
• Properties can be acquired on a leasehold basis for up to five years.
• Commercial real estate can be purchased by a legal entity registered in India, provided a co-owner is an Indian citizen.
• Instead of direct ownership, foreign investors can benefit from REITs (Real Estate Investment Trusts), especially for those interested in data centre or IT real estate development.

While there are alternative methods for foreigners to acquire real estate in India, these come with substantial risks. One such approach is 'ownership by proxy,' where a foreigner utilises the property, but the official title remains with an Indian citizen. In this arrangement, the legal owner retains the right to claim the property at any time. Additionally, foreigners should exercise caution and refrain from entering sales contracts with unfamiliar legal entities in which they don't have joint ownership.

Purchasing real estate in India does not come with specific benefits like obtaining a residence permit. The Indian 'Golden Visa' is reserved for those who invest a minimum of 100,000,000 rupees ($1,200,000) in businesses within 18 months.

Selecting the Ideal Region for Real Estate Investment in India 

When deciding on a region for investment in India, it's crucial to outline your strategy. While housing is in high demand across the country, profitability varies by region, often contingent on the local population's purchasing power. Cities that host renowned IT companies tend to attract well-paid professionals looking for rental apartments.

Data centres predominantly reside in major metropolitan cities in India. Investors can channel funds into their development through REITs (Real Estate Investment Trusts). These trusts acquire and manage diverse real estate properties, from housing and hotels to shopping malls and agricultural lands. By purchasing shares in a REIT, an investor can yield profits from these properties without direct ownership. Although REITs, which originated in the USA, may not provide enormous returns, they generally offer a steady profit. While REITs were introduced in India in 2019, it's only recently that they've gained traction and are now seen as a promising investment avenue.

When selecting real estate in India's resort regions, consider the property's layout, amenities, and proximity to essential urban infrastructure. Some properties in India might lack amenities or might be situated away from populated areas. Moreover, properties constructed within 500 metres of the ocean may not comply with legal regulations.

India boasts an abundance of luxury properties, including mansions and villas. However, foreigners may face challenges when attempting to acquire such assets, especially through a legal entity's balance sheet. Moreover, foreigners cannot purchase the land on which a house stands in India. Commercial properties or those related to an investor's business are often more accessible and advisable for foreign buyers.

Let's take a closer look at the cities of India that are the best for real estate investment in 2023.

Mumbai

Mumbai, India's most populous city, spans across seven islands, which were artificially connected to the mainland over time. Its strategic location along the Arabian Sea has established it as a pivotal transport hub and the nation's economic epicentre. In Mumbai, upscale neighbourhoods stand in stark contrast to densely populated slums.

Mumbai is a magnet for tourists eager to explore its landmarks and immerse themselves in its rich local traditions. As a hub for economic opportunities, people from across India flock to Mumbai, bolstering its real estate market. Despite the challenges of 2020, property transactions witnessed a 3% year-on-year growth, marking the best performance in seven years. By September 2023, the city recorded over 10,000 real estate deals, representing a 24% increase from September 2022 and setting a decade-long record.

Mumbai's real estate demand stems not only from its steady influx of tourists but also from its robust transport infrastructure. While 14 metro lines are planned for the city, only three are currently fully operational. Additionally, Mumbai boasts an extensive bus network, urban train lines, and a port offering ferry services to various islands. As a pivotal international transport hub, the metropolis holds significant importance for major businesses.

Real estate in Mumbai commands a premium. In the city centre, the average price per square metre for housing stands at a minimum of $7,000, while office spaces go for $2,000 or higher per square metre. These prices are on an upward trajectory, increasing by an average of 5% annually, positioning Mumbai among the world's priciest cities. However, the market displays vast disparities in pricing, influenced by factors such as location, proximity to business hubs, and tourist attractions. For a successful investment in Mumbai, it's crucial for an investor to have in-depth knowledge of at least one of its micromarkets.

Several areas in Mumbai pique the interest of both local and foreign investors. Noteworthy regions include the business-centric Adheri, the coastal charm of Juhu, the rapidly evolving Wadala, and the well-connected yet distant Virar, among others. For those seeking more affordable housing and office options, Navi Mumbai, the city's satellite counterpart, is worth exploring.

Navi Mumbai

Navi Mumbai, the world's largest planned artificial city, was conceived by officials in 1971 to alleviate Mumbai's burgeoning population. The establishment of a railway and a wholesale agricultural market in 1990-1991 provided a foundation for its swift growth.

Today, Navi Mumbai seamlessly integrates with the nation's financial hub. The Mumbai Trans Harbour Link, India's longest bridge, connects it directly to Mumbai. With the initial phase of an international airport slated for completion by 2024, the region's transport connectivity will enhance, likely boosting housing demand. Investing in property here offers promising returns.

In Navi Mumbai, the average housing price stands at $1,500 per square metre, while office spaces are available around $100,000. Panvel, with its robust infrastructure, educational institutions, and healthcare facilities, is seen as the prime area for investment.

Pune

Pune, a major city in Maharashtra, boasts a robust industry, efficient transport, and advanced communication systems. It's a significant IT export hub, ranking third in India, and contributes a notable 13% to the national GDP.

Pune's infrastructure is rapidly advancing. By the close of 2023, the city anticipates the completion of a new international airport spanning 2,400 hectares. Significant investments have poured into Pune for the establishment of an industrial park, the opening of a metro line, and the modernization of the expressway linking it to Mumbai.

Pune ranks alongside Bangalore as one of India's most desirable cities to reside in—and for good reason. Housing costs in Pune are more affordable compared to other major cities, with prices starting at $1,000 per square metre. Similarly, office spaces begin at this rate. Notable areas include Wakad, adjacent to the IT park; Wadgaon Sheri, a commercial hub; and Kothrud, considered the city's heart.

Bangalore

Bangalore tops the list of India's most desirable cities to live in, leading to high demand for real estate. The surge in local housing interest stems from the rapid growth of the IT sector, drawing expats and specialists nationwide. Major international IT companies have established their offices in Bangalore. In the early 2000s, the term "to bangalore" emerged in English, signifying the outsourcing of technical tasks to India. By the 2020s, Bangalore ranked as India's third-most populous city, hosting a significant portion of the country's IT startups. Beyond IT, the region sees robust growth in the automotive, pharmaceutical, and biotech sectors.

Bangalore stands out from many other Indian cities due to its heightened security, superior healthcare and educational facilities, and a plethora of recreational spots available both day and night.

The city boasts an efficient transportation system. A four-lane expressway links it to other key cities in the region, and there are plans to extend a metro line to Kempegowda International Airport Bengaluru.

In Bangalore, the real estate landscape is diverse, offering everything from studios and apartments to townhouses, bungalows, and cottages. While property remains relatively affordable, prices are on the rise due to the city's growing appeal. Residential properties start at $1,500 per square metre, while office spaces begin at $1,000 per square metre. 

The Bangalore authorities intend to extend the city's boundaries in the upcoming years. They plan to establish five new communities on the periphery and construct over 1,000 villas in upscale neighbourhoods. This expansion is a response to the city's burgeoning population, presenting ample opportunities for investors.

Chennai

Chennai serves as the gateway to South India. It was once home to the fort of the East India Company, which now houses a museum. The city boasts significant religious landmarks that draw thousands of tourists. Furthermore, Chennai is a hub for global automotive and IT brands, including Renault, Nissan, Michelin, and Flextronics.

Chennai's economic growth has spurred an increase in its population, drawing IT professionals, workers, and students alike. The city provides a range of housing options, from affordable residences in outlying areas to premium accommodations.

A railway line featuring 18 stations is slated for launch in the state soon, with completion expected within three years. Additionally, the construction of the Chennai-Bangalore highway is anticipated to boost investor interest in local real estate. This highway will shorten the distance between the two major cities by 50-60 km, further strengthening their economic ties.

In 2023, Chennai's property prices have surged in tandem with demand. The average housing price stands at $800 per square metre, with office spaces similarly priced. While more economical options are available in outlying areas, locations such as Perumbakkam, Pallikaranai, and Thiruporur, with their robust infrastructure and proximity to IT parks or universities, present intriguing investment opportunities.

Hyderabad

Hyderabad, often dubbed the capital of IT firms, holds the distinction of being India's second-largest in terms of IT export revenues. Home to the offices of global behemoths like Google, Amazon, Apple, Microsoft, and Ikea, the city has a surging demand for commercial real estate.

Compared to other major cities in the country, Hyderabad boasts a relatively lower cost of living, robust infrastructure, and excellent transportation links. This combination lures both expats and professionals from across India. The state benefits from an extensive network of expressways, railways, and the presence of Rajiv Gandhi International Airport.

Hyderabad boasts 56 registered special economic zones, showcasing the country's highest profitability rates. The regional authorities have fostered a conducive environment for thriving businesses, offering entrepreneurs preferential tax rates and streamlined company registration processes.

In Hyderabad, housing costs vary based on proximity to business hubs. Peripheral areas average around $720 per square metre, while properties closer to the centre go for about $1,200 per square metre. Office spaces hover within this price range. Key areas for real estate investment include Western Hyderabad, home to numerous IT firms; Central Hyderabad, known for its university campuses; and Eastern Hyderabad, characterised by its comprehensive family-friendly infrastructure. 

Noida

Noida, part of the National Capital Territory of Delhi, is situated just 20 kilometres from India's capital. Its strategic location has piqued the interest of foreign investors in its real estate. The city has seen growth in sectors like automotive, television, IT, and commerce. In recent years, there's been a concerted effort by the authorities to enhance the hospitality sector, leading to the emergence of luxury hotels, nightclubs, cafes, and various recreational spots.

The nearby international airport in Jewar boosts real estate demand in the area. The upcoming Yamuna Expressway, linking Noida with Greater Noida, promises positive development for the more distant regions. Along this expressway, plans are in place to establish six new sectors, featuring a mix of residential, industrial, and educational facilities.

Noida is home to over five thousand businesses spanning diverse industries, ensuring employment opportunities for both locals and expatriates. Real estate investments in Noida hold promising potential for good returns in the future. Currently, property prices remain reasonable, with flats starting at $500 per square metre.

Ahmedabad 

Ahmedabad, Gujarat's largest city, is a blend of ancient traditions and modern conveniences, though marked by stark contrasts between wealth and poverty. The city is bisected by the Sabarmati river: the eastern bank is home to historic temples, intricate neighbourhoods, slums, palaces, museums, and markets. The western side, developed predominantly in the last 50 years, features modern residential zones with tall buildings and broad streets.

Efforts are underway to modernise the eastern part with the construction of new properties. This includes developments in commercial and residential real estate, industrial complexes, and projects tailored for IT companies, among others.

Today, Ahmedabad draws a plethora of tourists and pilgrims, many of whom visit Gandhi's ashram, a testament to the renowned Indian freedom fighter. Moreover, several international corporations have established their representative offices in the city.

While Ahmedabad's industry may not be as developed as other major cities, investing in its real estate can be lucrative. The steady influx of tourists ensures consistent rental income. On average, residential properties in Ahmedabad are priced at $1,000 per square metre, while office spaces go for $600 per square metre.

Kolkata

Commonly recognized by its former name, Calcutta, this city is the fourth most populous in India, presenting a stark contrast between affluence and poverty. While some areas consist of slums, others boast towering skyscrapers and shopping centres, with a vibrant nightlife. As the cultural heart of the nation, it once served as the capital of British India.

Members of the English elite frequently visit Kolkata to experience its historical gentlemen's clubs and the ambiance of the colonial era. The city offers luxury hotels, a racetrack, fine-dining restaurants, and golf courses catering to affluent tourists. This tourism infrastructure has generated numerous job opportunities for both locals and expatriates.

In Kolkata, a majority of the population is engaged in diverse sectors of the economy. The city has a strong presence in the petrochemical, steel, chemical, mining, and food industries. Additionally, numerous IT firms and retailers operate in the area. The city's real estate market is witnessing significant growth, with major developments primarily emerging in the northern and southern regions of the metropolis.

Kolkata's affordable cost of living, robust industry, and well-established infrastructure draw expatriates from various countries, making investments in the city's real estate promising. Housing prices in Kolkata are among the most competitive in India, with an average rate of $800 per square metre. Additionally, the city boasts upscale residential areas. Key investment locations include Salt Lake City, known for its low-rise structures; Jadavpur, a hub for students; and Rajarhat, home to IT professionals and entrepreneurs.

New Delhi

While New Delhi is technically a district within India's capital, it's often regarded as a distinct city and is among the nation's wealthiest. It's home to the Indian government and boasts a plethora of architectural landmarks, restaurants, markets, boutiques, galleries, hotels, and museums.

Each year, New Delhi welcomes hundreds of thousands of international visitors, making tourism a major economic driver for the metropolis. Concurrently, sectors like finance, telecommunications, healthcare, and education are also flourishing.

In New Delhi, upscale properties such as cottages, mansions, apartments, and entire hotels are particularly appealing for investment. Compared to other major cities in India, the price per square metre here ranges from $2,000 to $20,000.

Agra 

Agra ranks among India's most captivating cities. While it lacks sandy beaches and a seaside, it draws millions of tourists, primarily because of the iconic Taj Mahal. Beyond this world wonder, Agra entices visitors with its grand palaces, unique architectural landmarks, and museums that date back to the era of the Mongol emperors.

Agra is renowned for its skilled jewellers and leather artisans who craft exceptional pieces. The Kinari bazaar is a popular destination for jewellery, while visitors head to nearby villages for exquisite leather creations. While these handcrafted items come at a premium, their quality justifies the price.

Agra's primary economic drivers are tourism and the hospitality sector. Accompanying their growth, the city's real estate market and infrastructure are also rapidly expanding. The property market predominantly offers luxury villas, spacious apartments, and studios. Prestigious properties fetch an average of $1,200 per square metre.

Surat 

Surat stands out as an ideal city to live in within India, primarily because of its cleanliness – a trait not always common in many of India's megacities. Recognized as one of the world's fastest-growing cities, Surat seamlessly blends modern skyscrapers with historical architectural marvels. The juxtaposition of upscale boutiques and eateries alongside street stalls adds to its unique charm.

Situated in Gujarat, one of India's largest states, Surat is often referred to as the "diamond capital of the world" due to its status as the premier gemstone processing hub. The city holds significance for many pilgrims journeying to the sacred sites of Mecca and Medina. Visitors are drawn to Surat for its historic temples and mosques, serene parks, and vibrant festivals.

In Surat, renting properties to students and expatriates can yield substantial returns. Real estate in the city is reasonably priced, starting at $550 per square metre.

Goa

Goa, the country's premier resort destination, is also its smallest state, with its capital bearing the same name. Distinct from other Indian regions, Goa is often referred to as a haven of freedom. This reputation stems from its lenient regulations on alcohol purchase and more relaxed norms for public behaviour, in contrast to the stricter rules observed in many other parts of India.

Goa has gained global attention multiple times: first during the hippie era and later during the rise of trance, an electronic music genre. Nowadays, it attracts retirees and enthusiasts of yoga and spiritual practices seeking a serene lifestyle. Goa boasts 40 sandy beaches spanning 110 kilometres, with some of the world's warmest ocean waters. The coastline is dotted with spas, bars, restaurants, and hotels featuring pools.

Goa is typically split into the northern and southern regions. The southern part attracts those seeking tranquillity, while the northern areas are livelier and more populated. Real estate prices vary significantly between these regions. Additionally, potential buyers should closely examine property layouts. Although Goa is a popular destination for foreign tourists, many properties, particularly in the north, lack modern amenities. Such properties may pose challenges when trying to rent them out to international visitors.

Beyond tourism, Goa is diversifying its economic sectors. Currently, coastal properties are the prime investment attractions, especially those along the beaches of Baga, Anjuna, Calangute, and Candolim. Prices in these tourist-centric locations begin at $1,500 per square metre.

In a Nutshell

India's rapid economic expansion positions it as a prime destination for foreign investments, with real estate emerging as a particularly lucrative sector. For optimal returns from rental properties or offices, it's advisable to focus on major tourist destinations and IT hubs. Cities like New Delhi, Mumbai, Pune, Chennai, Goa, Hyderabad, and Bangalore stand out as top choices for investors.

India enforces stringent regulations on real estate investments by foreigners. To purchase property, one must either obtain residency in the country or establish a joint venture with Indian nationals. Outside of these parameters, foreigners can primarily invest through investment funds.

Cover photo: Taj Mahal. Sylwia Bartyzel/Unsplash