When the whole country is worried about the repercussions that a depreciating currency can have, a section of the Indian economy is in high spirits. The Indian real estate sector is still keeping its neck high courtesy the positive sentiments amongst NRI investors that the falling rupee has generated.
When all other sectors of the Indian economy are struggling against the falling value of rupee, Indian property market is suddenly abuzz with activity. While it is hard to take away anything good from the depreciating value of rupee, builders and real estate developers in major markets like Mumbai and Chennai are making the most of the situation by targeting NRIs. The real estate market is also experiencing a renewed interest in properties by NRIs, the reason being lower effective costs. A city flat which would have cost USD 1 million two months back will now cost USD 900,000 as rupee depreciated by 12% to its lowest point in the past two months.
What’s behind the falling rupee?
Indian rupee has had a reputation of being highly volatile and the recent swing it had cemented the same. The fundamental reasons behind the falling value of money include the inflow of money in the country in excess of what is leaving. The second reason is the country’s decreasing forex reserve which is now a bigger problem in its own sense. Lesser forex limits the country’s capability to import goods severely. The grand plans of governments that rested on FDI reforms haven’t clearly been good enough to bridge the gap between trade deficit, as evident by the decline in the country’s foreign exchange reserve by USD 3.1 billion in the last week of May. Besides, a weak investor sentiment triggered by the possible ending of Federal Reserve sponsored bond-buying program is also playing an important role in the rupee’s accelerating slide.
Depreciating currency brings investors to Mumbai realty market
Prompted by the substantial savings that an NRI can make while investing in real estate right now, the interest levels are much higher than before. It is still too early to say anything conclusive, but analysts hope that in a month’s time or so, this interest will see high conversion rates. Major developers like Lodha, Kalpatru and other that have been the traditional favorites of NRIs have witnessed good traction in the Mumbai-Pune markets ever since the dollar touched INR 60.
Property in Juhu that is in the range of INR 1 crore and 3 crore has become the hot favorite with investors. With their natural affinity towards their motherland, fuelled by the sliding rupee value, Non Resident Indians are leaving out traditional favorites like Dubai in favor of Indian realty markets like Mumbai and Chennai. Besides, NRIs are better informed about how and what works in their country, and hence are more confident of investing money in India than in any other overseas destination like Dubai.
Residential real estate preferred
India has increasingly become an expensive destination for investment in real estate lately. This has reflected in the reduced real estate appetite of low income population of the country. However, people earning abroad or belonging to the affluent class find the current scenario apt for investing their cash in brick and mortar. The positive sentiment is particularly strong for residential real estate as traditionally residential assets has provided maximum capital appreciation and it is less susceptible to volatile economic conditions. There is more flexibility, choice and a lot more options in residential market as compared to buying office or retail real estate.