One lot who should be happy about the rupee’s crash against the dollar is non-resident Indians. But are they really celebrating the current sharp decline in the Indian currency? Probably not, at least when it comes to real estate.
Non-resident Indians (NRI) enquiries for buying Indian property have risen 15 percent in a month and is likely to go higher if the rupee touches 60 to the dollar as the currency plunge and subdued sales in India have made property prices cheaper by at least 20 percent for these overseas buyers.
The number of calls from NRIs have gone up to 800 per month from 200 earlier at Investors Clinic, a real estate portal. Similarly, another portal, Commonfloor.com is receiving around 1 million visits a month, which is double the number compared with few months before.
Ideally, this should be happening, because a weak rupee will encourage NRIs to park their surplus funds in India.
However, experts INN spoke to said such enquiries are unlikely to materialise as sales because Indian real estate has lost its credibility. Moreover, given that general elections are around the corner, real estate is in doldrums as all the black money that has been pumped into realty, is slowly being drained out to fund elections.
“Each MLA requires at least Rs 5 crore. Multiply this with the number of Lok Sabha seats and you have absolutely no liquidity left in real estate. And investors are very much aware of this, which is why they are all waiting for political stability before parking those remittances in real estate,” said an industry observer on the condition of anonymity. “Prices tend to stagnate or fall whenever Congress goes out of power at the centre. So that may be another reason to wait for the election result,” another property broker in Hyderabad told INN.
Little wonder that developers are hardselling their properties by offering several freebies, discounts and gifts. For instance, Bangalore’s Sobha Developers is hardselling its properties to NRIs with promos like ‘Invest in homes now and save Rs 34 lakhs,’ on account of rupee depreciation while others like Nitesh Estates, Amrapali Group, Supertech and Unitech are looking to participate in home exhibitions in Dubai and the UK next month, said an Economic Times report. Builders in Mumbai are all offering 80:20 schemes to lure buyers but investors are all in a wait-and-watch zone until tpoliticians pull out their black money to fund their election extravaganza.
In other words, the rupee gains is being offset by the bearish sentiment on Indian realty. Mumbai and the National Capital Region have been regarded as investor darlings and this waning demand is now more than evident with piled up inventory and an exodus f new supply. Even prime properties in South Mumbai and Delhi are not finding buyers with areas such as Panscheel, Vasant Vihar in Delhi and Cuffe Parade and Nariman Point in Mumbai seeing at least a 20 percent fall in prices.
“The investment cycle is over. It is an end-users market now. Sales will now only take place if there is a correction, either in the form of discount schemes or actual correction in prices. The real estate boom was only until 2008. From there on, Indian real estate has been on a declining curve,” says Pankaj Kapoor, MD at real estate firm Liasas Foras.
Clearly, investors are no fools. They prefer predictable outcomes, not hurdles. Real estate is in dire needs of reforms and accountability, without which more investment may just remain a distant dream.
This erosion of faith is now seen among Indian investors too. Rather than parking money in Indian realty, they are going abroad. Indians were among the top five foreign nationals buying real estate in the United States, according to the “2013 Profile of International Home Buying Activity” for the 12 months period ended March 2013. This despite a declining trend witnessed in foreigners’ acquiring properties there.
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