A customer counts Indian rupee banknotes at a jewellery store in Mumbai. Image Credit: Bloomberg

Dubai: The weak Indian rupee — which continues to remain under intense pressure — is certainly not proving a problem for the country’s property market.

Expat Indians have been committing significant funds into India’s property sector, residential and commercial alike, and making use of the rupee’s drop from Rs63.5 to a dollar in January to Rs71.52 as of December 13. (It had been Rs74.2 in October.) Estimates suggest that NRI participation as averaging 5-7 per cent of overall property sales transactions each quarter. But in the current quarter, this could well shoot up to 12-15 per cent, according to Anarock Property Consultants, the real estate services firm.

“The Indian realty market is currently very attractive for NRIs because of the depreciating rupee and the lucrative offers that leading developers are trotting out across cities to clear their unsold stock,” said Anuj Puri, chairman of Anarock. “Builders are offering substantial freebies, discounts or payment plans to lure buyers, including NRIs.”

Some of these offers will show up at the latest Indian Property Show, which opened Thursday (December 13) in Dubai. Nearly all of the major cities are represented by developers showcasing their projects.

There was an impression that NRI fund flows from the Gulf into Indian property had slowed down this year because of job losses, the repatriation of families back home to bring about cost savings, and even the floods that rocked the southern state of Kerala in August.

But based on Anarock data, it does seem that having a weak rupee was too good an opportunity to miss out.

For India’s developers, this year has turned out to be a bonanza. In all of the major cities, they were able to bring down their unsold property stock significantly. Bengaluru saw the best take-up rates, and even Delhi’s National Capital Region (NCR) returned one of its best performances in recent years.

Some developers had enough gumption to come up with new launches, which are up by 32 per cent over 2017. But that wasn’t enough to compensate for the sharp 70 per cent decline in such launches during 2017, when the property sector was spooked by demonetisation and then the introduction of the Goods and Service Tax (GST).

According to Anarock, 1.78 million homes being sold in the first three quarters of 2018 across the top seven cities. “Even if we assume that sales in the fourth quarter were to remain same as the preceding one, there would be a 15 per cent increase in overall housing sales in 2018 as against 2017,” said Puri. “Unsold stock has declined by 8 per cent in a year — the decline is slow, but discernible.

“Due to the teething troubles of reforms like DeMo (demonetisation), RERA (Real Estate Regulation Act) and GST, housing sales saw a decline of 13 per cent in 2017 as against 2016. Sales in 2018 may not have seen their historic peaks, but are gradually picking up.”

Thankfully, for the buyers, property values in all of the major cities have not been pushing higher. On average, across India, the increase has been pegged at about 1 per cent.

“At the city-level too, average property prices hovered mostly around the same levels versus last year,” said Puri. “The secondary sales market, which investors were keen to exit, did see price corrections in several micro-markets by as much as 15-18 per cent in certain markets.

“However, in the primary market, builders with sound financial capabilities gave only minuscule discounts not exceeding 5 per cent to genuine buyers. Instead, they resorted to freebies or payment deals.

“Some Grade 2 and 3 developers did offer hefty discounts up to 10 per cent on the overall property cost.”

Affordable housing could be in for more incentives

The next general elections are just a few months away — May 2019 to be precise — and that should be more than enough to see major incentives being announced around affordable housing.

“Developers definitely are expecting more incentives,” said Azaz Motiwala, managing director of Ikon Marketing Consultants. “The FSI (floor space index) has already been increased from 1.875 to 2.7 and any further hike won’t be lucrative for developers.

“Property prices in the cities have already bottomed out. The market’s not expecting any price hikes in the near future. Indian real estate has entered into consolidation phase and this may continue for a year.”

According to available data, around 41 per cent of new housing supply was in the affordable category.