- Posted September 14, 2013 by
This iReport is part of an assignment:
Real estate is the new victim of the rapid rupee downfall.
As we all know that, real estate is the new prey of the speedily declining rupee. The declining rupee also impacts the real estate sector. This is a good prospect for IT firms to spread out their campuses as a good bet on appreciation. The rupee fall led to an increase in construction costs and the liquidity crunch has forced developers to cut prices.
The main reason causing the rupee to go down is the huge power of the Dollar Index, which has touched its 3 years high level of 84.30.Non-resident Indians (NRIs) who grasp premium properties are getting tense and some have pressed the sell button. Property rates in prime areas have been mounting without fail, the problem is that after the fall in the rupee, their profits have collapsed to 10-15% or less.
As per real estate consultants at Realty Minister , the rupee depreciation is a prospect for new investors in property. But is also a trouble for those NRIs who already invested in Indian real estate. Apart from this, as per realty experts, the falling value of the Indian realty rupee has an effect on the number of investors in the Dubai realty market.
A depreciation in the value of the rupee has a broad blow which is not limited just to the exporters and importers. Over time, the fall will hit the ordinary man in a number of ways. However, the depreciation in rupee may be a good thing in some parts of the society like exporters. They have been capable to sell their goods cheaper in a foreign country markets.
They are pleased due to lower rupee value for dollar will allow them to compete with China as well as South East Asia.In fact, still since the rupee started to slide, the export presentation happening to get better vividly. A low rupee will also stop dumping of products from neighboring countries that has been generating troubles for some main domestic industries. Others who will be pleased with the rupee’s fall are those getting money from relatives abroad. Each dollar will provide them more rupees.
To rein in the depreciating rupee the Reserve Bank of India (RBI) has banned resident Indians from buying real estate overseas abroad on August 14. It also reduced the amount that could be taken out of the country from $200,000 to $75,000 for individuals Experts say with this the RBI has closed the doors on an attractive investment option. Where as the NRIs have started selling properties to cash in on the depreciating rupee.T
he depreciating rupee may have helped improve property sales to NRI buyers, but it isn't helping the saviour of real estate developers — private equity firms — which are not only stuck with their earlier investments, but can't raise fresh funds either.
Indian currency's record depreciation against the greenback and weak property market have restricted realty private equity offshore funds' fresh fund raising efforts as well as trapped their earlier investments since FDI gates were opened in 2005.
The rupee has depreciated nearly 27 per cent since April 1 to touch a record low of Rs 68.63 against the dollar on August 28. Over the past two years, when most of these exits were being planned, the currency has slipped 46 per cent to touch this level.
It has almost wiped out foreign private equity funds' meager returns from real estate, and any exit now will lead to at least 25-30 per cent loss in dollar terms. "The environment for raising fund from overseas investors is not very conducive.
Offshore funds that have invested during the last few years when the US dollar was quoting at Rs 42-52 will find it challenging to offer good returns now because of the fall of the rupee and weak underlying market," says S Srinivasan, CEO at Kotak Realty Fund.
Investments made in Indian real estate sector are cumulatively estimated to be around $15 billion since foreign direct investments were allowed in the sector. Around 20 per cent of this was expected to get an exit in the past two years, but seems a distinct possibility now.
Private equity firms with offshore funds are in a state of flux not only because of their stuck investments and delay in project completions, but are also concerned about not being able to raise fresh funds in the current scenario.
Several such investors are holding back their investment plans in hopes that the Indian rupee will continue on its downward trajectory. Bangalore has emerged as the most favored city for real estate investment by NRIs based on number of enquiries made followed by Chennai, Mumbai, Ahmedabad and even Dehradun. A study conducted by the Assocham said that the most enquiries are coming from the community settled in the UAE and other Gulf countries. Investors in US, Singapore, Australia, UK, Canada and South Africa too are eying the property market in India.
Earlier yesterday, rupee witnessed it lowest ever close against the dollar at 68.80/81 With domestic real estate demand remaining sluggish, the NRIs are expecting a great bargain in some of the most sought after cities in India.
Residential property prices in prime areas of Mumbai have been rising consistently. Data from Residex, the residential index of National Housing Bank, shows prices in Cuffe Parade and Malabar Hill had risen 17 per cent between March 2012 and March 2013.
Akshaya Kumar, CEO, Parklane Property Advisors, said one of the main problems for NRIs is that the rupee fall had been dramatic. “One of my clients wanted to sell the property when the rupee was at Rs 55 to a dollar but by the time buyers could be found, the rupee had fallen to Rs 62-63 to a dollar. He has postponed the decision to sell,” said Kumar.
There is a title certificate that has to attained. Most of the times it is seen that NRIs have ensured this transfer and has taken place from the parents where they have inherited this property and that transfer is good enough to take care of title. If there is a transfer missing, a process has to be followed. It is a little longer process which can be completed in 90-120 days.