Dubai: When it comes to buying property in India, the Gulf’s Indian expats don’t seem to be suffering from any hesitation. The continued weakness of the Indian rupee vis-a-vis the dollar/dirham continues to place them in a highly advantageous position.
Any further slip in the rupee’s value in the second-half of this month will only confirm further that an Indian realty exposure is the ideal asset to buy and hold on to in the current market environment. And with domestic property buying still slack, India’s developers are going all out to capture the NRI (non-resident Indian) attention. Property prices too are in the buyer’s favour.
“Prices in [India’s] Tier 1 and Tier 2 cities have remained more or less stable, with only some increases seen in pockets where there is more demand,” said Anuj Puri, Chairman and Country Head at JLL India, the consultancy. “Overall, there has been little justification for adventurous ‘price discovery’. Developers are content with selling at rates perceived as affordable.
“At the same time, the anticipated price corrections did not happen either, leading to genuine stability on the market.”
It does seem all factors are in favour of the overseas Indian. At today’s exchange rates, Dh1 will take out Rs18.13 (or $1 bringing in Rs66.61), and further softening is on the cards. (The US Federal Reserve looks all set to raise interest rates for the first time in 10 years and that will only help push the dollar higher.) “The dollar has appreciated by a significant margin against the rupee,” said Raghavan, President for Sales and CRM (customer relationship management) at Ozone Group. “Add to this, the reduction in interest rates by RBI (Reserve Bank of India) is an icing on the cake (for potential buyers).”
Global exporting hub
There could also be the home comfort factor at work here — “Apart from the currency fluctuation, the slowdown of the UAE’s property market” is prompting Indian expat investors to seek opportunities at home,” said Sushil Kumar of Dubai-based Auric Acres Real Estate. “The rupee becoming weaker not only gives incremental gains for NRIs, but encourages them towards fund repatriation.”
According to Manish Jaisinghani of Mokanro Realty (P) Ltd, “As per the recent statement given by its governor, RBI is comfortable with INR/USD of 65 to 66 levels. Also, the government has clarified on various occasions that they want to make India a global exporting hub, which requires rupee to remain at current levels to maintain competitive edge.
“The NRIs have adjusted to this rate — they do not have a fear that it will come down and I think this certainly is a good reason for investments into real estate.”
NRI investors can also take favourable cues from the state of the Indian property market itself. Despite quite generous cuts on bank lending rates, the expected pick up is yet to be seen in a marked improvement in real estate transactions. Even this week, the RBI decided to maintain rates at the existing level.
Domestic buyers still seem to be fighting shy of commitments. “There are two questions that arise after these rate cuts — one, to what extent are banks reciprocating by lowering their lending rates and, two, how effective will even broader interest rate cuts be when a lot of the supply in Tier 1 cities is anyway not perceived as rational,” said Puri.
“I would say prices need to come down in cities where they are proving to be a firm stumbling block to revival. In markets where buyers perceive properties to be affordable, sales have already started picking up — largely because developers are now offering discounts and also using innovative ways of offering reduced costs by ways of waiving the usual statutory add-on charges such as VAT, floor rise premium, stamp duty and registration, service tax, etc”
Such add-on incentives sound far more meaningful than the gold bars and helicopter rides to the project site that some Indian developers used to advertise.
“Since southern India — such as Chennai and Bengaluru — are mainly end-users; market, the slashing of bank rates have had a positive impact, whereas North India isn’t much affected,” said Jaisinghani. “India is not one market — the property dynamics in the north, south, east and west are different from each other.”
The Indian realty trends investors should keep an eye on:
• The “long-pending” Real Estate Regulatory Bill has not been able to get through the deadlock in the Indian Parliament. “The [real estate] industry has been assuming that it will be passed sooner or later,” said Anuj Puri of JLL India. “Given the many times it has undergone revision, the only constant on the Rera front has been change … and it is now high time that it be kicked into real gear. There will be no point in time when the government will not face any more resistance to this very important piece of legislation, so the need to evolve consensus is of utmost importance to enable passage of the Bill into law.”
• With few exceptions, India’s developers are intent on project delivery than new launches. “A generally moderated supply pipeline is definitely part of the new strategy,” said Puri. “Though demand exists, it definitely does not warrant a very exuberant supply scenario.”
• Many developers have reduced apartment sizes to be able to bring down their rates in the costlier cities. This has in many cases led to the disappearance of balconies and other features that used to be a norm, according to JLL. This has led to a reduction in usable all-round floor spaces.
• Realty focused investments into India from the UAE is essentially driven by expatriates. But, this year, two UAE based ventures launched India-specific funds targeted at institutional/high networth investors.
• The current NDA’s government ambitious land acquisition bill, will mainly affect the farmers, since it’s for their protection. It will not have any impact on the property development sector.
• They may not be offering gold bars and BMWs, but India’s developers are still in a generous mood. “Most of the reputed pan-Indian developers are still using discounts/offers/schemes etc as it used to be 9-10 months ago,” said Manish Jaisinghani, Mokanro Realty. “One reason could be the large number of unsold stock available with them, which has mounted enormous pressure towards repayment of their bank/private loans. To get rid of that, many developers have cut down profit margins and releasing units with investor-friendly offers.”
• The repo rate — the benchmark used for lending — is currently 9.5 per cent against the 10.1 per cent in June. “It remains a positive note for the realty sector,” said Sushil Kumar, Auric Acres Real Estate.
• From a macroeconomic perspective, India is growing at a faster clip, far better compared to most BRIC countries,” said Raghavan of Ozone Group. “The long troubling issue of inflation has been brought under control. These two alone are adequate to impart necessary momentum to a lacklustre real estate industry.”