We examine the depreciation of the Indian rupee against the US dollar and the present interest rate cycle, to ascertain whether this is a good time for NRIs to put their money in Indian real estate
The significant fall in the value of the Indian rupee in the last six months may be a cause for considerable concern, especially for the realty sector in India. A weak rupee against the US dollar makes it difficult for developers in the sector to import essential construction machinery and increases other input costs. Moreover, at its last monetary policy meet, on October 5, 2018, the Reserve Bank of India (RBI) had refrained from hiking key rates but indicated that it may have to take a tough stance soon. So, interest rates are expected to remain in the upward trajectory. However, amidst the negative sentiments in the realty sector, opportunities are cropping for non-resident Indian (NRI) investors.
“A depreciating rupee creates an ideal environment to invest in Indian real estate, as the cost of acquisition of property will now be lesser for NRIs. The Indian market currently offers a range of world-class developments that appeal to the lifestyle and tastes of NRIs,” says Gaurav Sawhney, president – sales and marketing, India, Piramal Realty. Experts point out that the Indian economy is among the best-performing emerging markets.
India’s competitive advantage in services, along with government investment in infrastructure, will continue to generate domestic demand and create opportunities for real estate investment across asset classes – from residential and commercial to logistics and hospitality.
Indian real estate market on a recovery path
Housing sales have started showing signs of recovery in most markets and office vacancy levels are at record lows, indicating that this is probably one of the best opportunities to invest in India’s real estate market. “With the Real Estate (Regulation and Development) Act (RERA) in place, the government has addressed the sector’s biggest concerns – transparency and protection of investors. Most investors are aware of the stress in the sector and the developers’ need for cash flows. Savvy investors have also been keeping track of the institutionalization of commercial space in the country, reflecting the confidence in occupier demand and long-term growth,” explains Aashish Agarwal, senior director (head, consulting) at Colliers International India.
Stable economic and political outlook, make Indian realty attractive to NRIs
Rohit Poddar, managing director, Poddar Housing and Development Ltd, adds that “India is the largest democracy, with the largest English-speaking population. The economy is growing at over seven percent and hence, is a significant contributor to the world aggregate GDP growth figures. India is neither aligned with the US or NATO or China and given India’s inherent attractiveness and stability as a market, it makes immense sense for the NRI community to not only trade with India but also actively invest in the Indian markets.”
Key investment indicators for NRIs looking to invest in Indian properties
Depreciation of the Indian rupee against the dollar: NRIs can get Indian properties, by spending less money in terms of dollars.
High GDP growth: High GDP growth numbers come from the underlying economic growth across several sectors, thereby, translating into opportunities for investors to make superior returns.
Relatively stable Indian economy, in comparison to other emerging nations: Democracy in India is vibrant and flourishing. India is least impacted by the ongoing trade war between the US and China.
Favorable regulatory support: The government has instituted major regulatory reforms, such as RERA, the Goods and Services Tax (GST), etc., which are expected to lead to robust long-term economic growth.
Experts add that while the rupee has weakened, NRIs should remember that it is not a volatile currency and is well regulated, by a strong central bank. India has adequate forex reserves and the government has also been keeping the fiscal deficit under control. While real estate markets may demonstrate volatility, due to the forthcoming elections, given the current pricing levels in most markets, property prices are unlikely to fall any further.
Source: housing.com
