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Jul
11

Depreciating Rupee Helps Developers Boost Sales

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This blogs brings to light one silver lining in the otherwise depressing scenario of the weakening rupee vis-a-vis the dollar — renewed NRI interest in buying a home in India

The depreciating value of the rupee to almost 61 against the dollar, has most people down in the dumps; however, real estate developers are one lot that is quite happy about the situation. If developers are to be believed, there has been a spurt in the number of enquiries for properties from expatriates.

According to experts, they have witnessed a 25 to 30 per cent hike in the number of inquiries from NRI customers in the last few weeks. The real estate sector is again witnessing a lot of enquiries, especially from NRIs and people of Indian origin based abroad, who want to cash in on the drop in the value of rupee

Many have even booked properties, expecting the rupee to appreciate in the near future. There is a strong possibility that the rupee may go up again. So, customers who were waiting to buy a house in India but were unable to do so because of the rise in property prices, feel that this is a good opportunity. The depreciated rupee gives them a discount of around 20 to 25 per cent directly.

NRIs form a sizeable chunk of investors in the property market in India. Most Indians who work abroad, always dream of coming back to India after they have saved enough money. So, the first thing they do once they start saving money is invest in property back home. If such investment opportunities come up, many Indians do try and make the best of the situation

The real estate sector was facing a huge drop in demand in the last few months due to a rise in property prices and a slowdown in the economy. Developers were coming out with special schemes like 20:80 and doling out incentives to push up the demand in the sector. The depreciating rupee has again given the developers a reason to cheer’

Monsoon is another season during which many potential buyers refrain from buying a house; so developers pay special attention to any buyer who intends to make a purchase, by extending offers made in festive periods like Akshay Tritiya and Gudi Padwa. The rupee broke the barrier of 60 per dollar to slump at a record low on June 26, 2013. The drop in the value of the rupee could be attributed to high demand for dollars from public sector oil companies, which usually pay their import bills at the month-end. The rupee has dropped by around 10.36 per cent since the month of April till date.

It is commonly felt that with each depreciation cycle, the NRIs will find it cheaper to invest in real estate in India as they will have more money to put in. However, this does not happen immediately. The primary reasons are the logistical constraints for hunting for a property in India. There are logistical constraints such as identifying the right property, negotiating a deal, being able to repatriate large sums of money in outright purchases, completing all the necessary documentation and formalities, etc., during the transaction lifecycle.

A typical purchase transaction may take an NRI buyer a period of one to three months. During this period, the rupee may strengthen and the notional advantages that could accrue due to the rupee’s depreciation, could be lost. This could get further compounded if the purchase is not outright, and the NRI buyer needs to either pay in installments or he is booking an underconstruction property, as again, there is no guarantee that he will continue to enjoy the benefits of a depreciated rupee during the payment lifecycle. In the short-term, the depreciation of the rupee may mainly benefit those buyers who are already in the process of finalising an existing transaction, where they have still not converted their foreign exchange into rupees to pay for their purchase.

In the past few months, developers were coming out with special schemes like 20:80 and doling out incentives to push up the demand in the sector. the depreciating rupee has given the developers a reason to cheer again.

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Category : Flatons Advisors Blog

 

 

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