India

Plummeting INR has NRIs pumping cash into realty

With the rupee plumbing new lows against the dollar, one man's loss is another's gain — if they reside abroad and invest in realty here.

With the INR sinking to a historic low of 72.69 against the US dollar last week, real estate markets in Mumbai and Delhi are seeing a spurt in inquiries and purchases by non-resident Indians (NRIs).

According to global and local real estate observers, NRIs are mostly interested in buying properties in metropolitan cities such as Mumbai, Pune and Delhi.

"Currently, the property market is already down by almost 10-15% in the city, and a weak rupee has given the NRIs a further 10-15% leverage. So they are straightaway getting an average profit of 25% on bookings while entering Indian property market," said Prateek Shroff, a Mumbai-based international property consultant.

Most of the demand for customised properties is coming from Hong Kong, the US and UK, he said.

"NRIs there are coming together as consortia and opting to buy properties in bulk, in deals worth Rs 100-150 crore. They are not buying individual flats but entire wings and even buildings. This way, they can immediately start putting them up for rent," Shroff said.

Niranjan Hiranandani, managing director at Hiranandani Group, confirmed that investors overseas are back to pump money into the Indian real estate sector.

"Investor sentiment has improved in a positive indication that NRIs and foreign consortia are looking for opportunities to invest in the country. They are also pitching for commercial spaces," Hiranandani said. 

Information technology multinationals which do well in the country are also looking for space, especially in Bengaluru and Pune. "The drop in the rupee has helped us significantly. It is sort of a windfall gain for us," he said.

Another international broker who did not wish to be identified said that the weakening Indian National Rupee and an appreciating dollar have come as a blessing in disguise to boost the slumping realty sector. 

"Most of our NRI clients are consulting lawyers, approaching banks and sorting out the technicalities to finalise the deal. Most the deals are in process. We are positive we will finalise these crucial deals," he said. The agent refused to reveal particulars of any deals that are being struck.

Pankaj Kapoor, managing director at Liases Foras, an independent realty research firm, said that enquiries and purchases from NRIs have swelled but haven't breached any of their previous investment sprees.

According to Kapoor, NRIs own about 8-10% per cent of the total real estate market in the country, particularly in Mumbai. "If the current NRI slice expands beyond its earlier record, only then can we say that NRI investment has altered the property market in metro cities," Kapoor said. He further cited that in 2012, share of investments by NRIs had spiked to 20-25%, but plummeted in the following years.

Now, investor sentiment is sunny again. "The NRIs are able to buy a property for fewer dollars now. This trend is likely to continue. Besides, developers are also offering 15-20% discount to upfront buyers. This is a win-win situation for buyers and builders," Kapoor concluded.

The rupee is he latest currency to be dragged down by fears that an escalating trade war could hurt global growth and severely affect Asian economies.

Some political uncertainty over the outcome of the 2019 general elections is also acting as a dampener on forex market sentiments, dealers have said. According to provisional data, foreign investors withdrew close to Rs 2,300 crore from capital markets since last Monday.

TENTH OF THE PIE

8-10% of realty market owned by NRIs, as per Liases Foras

25 Average profits NRIs are looking at, due to weak rupee, property discounts

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