How Rupee Depreciation Is Affecting Real Estate Market?

For the few past decades, you may notice everyone highlighting the point Rupee is falling against the dollar, it's performing bad, and many more. Did you ever consider, what effect it might have on particular sectors and how it will impact the real estate market, one of the crucial necessity for everyone?

Rupee depreciation is the breakdown of the currency value in a floating exchange system with other countries. Any variations in a country's currency price may have an impact on its real estate market. It may influence the costs corresponding to the real estate industry like its raw materials, human resources, transportation charges, equipment costs, and many more.

Although rupee performance is not that much commendable on the international market, its real estate market may hit the silver lining. This context is supported for many reasons, stating as the rupee is trading for less, it makes the Indian real estate market more affordable for foreign investors. But, what about the nationals who are residing in India, what consequences they need to face by investing in the real estate industry? Let's have a quick look at some of these crucial points:

Boosted NRI Investments

With the Rupee depreciation, NRIs find it more affordable to invest in Indian real estate industry as they get a good deal with less investment. The rupee's depreciation has opened a gateway for a common NRI as they can get luxurious and high-end flats and Villas for sale at a very less cost compared to other dollar countries costs.

But with this positive side also have hidden risks involved in it. Whereas the present rupee price can work incredible savings for NRI investors, it might be prudent on their half to encouragingly invest in Indian real estate market. But, it's better to wait for a little longer just in case the worth of the rupee was to drop anymore low. 

Additionally, NRIs will need to contemplate many logistic constraints such as the most effective property to suit their desires, negotiating a deal, finishing all necessary formalities, stamp and property registration documentation to conclude to a legalised real estate market deal.

Increased Projects Costs

As a major of the building materials or raw materials are not available in the Indian market, builders are needed to import these necessaries from the foreign exchange. At this stage, rupee depreciation plays a significant as the imported material and technologies are to be traded at a higher rate.

The overall impact of the rising in the building materials costs will increase the project cost as it escalates the cost of services, materials, outsourced services in the form of design consultancy, engineers, architects and all expenses associated with the construction. This, in turn, is causing a lot of pressure on developers and is causing timely delays of the project.

Apart from these, it also hits the builders by RBI through Cash Reserve Ratio (CRR). Any slight change in Cash Reserve Ratio (CRR) affect the lending rate of banks, causing a depreciation of funding of new and existing real estate market projects.

Puzzled Real Estate Investors

Increased in inflation rate and weak economic condition gives rise to an unfavourable environment for a real estate market investor and regular property buyer who hesitate to take a decision. In India after agriculture, the real estate sector is the second largest employment generator. 

But as the demands for properties are declining, it is not only affecting the overall economy and GDP, but hundreds of people are suffering their job. This attached burden dampens property buyers and investors from investing in the real estate industry at the moment. Moreover, with escalating interest rates, real estate market investors would favour staying away from paying higher EMIs. 

Looking on the bright side, to engage more home buyers, the real estate market is observing a lot of builders offering secure payment schemes, discounts on pre-bookings, and free instalments of smart home appliances. Best for an investor to not to sell his/her property and move the funds to another country as they may end up in losses as doing so.

Demand for Rentals

For a common man, rentals are one most significant impact they observe because of the rupee depreciation. With many NRIs and Foreign investments crowding up and buying real estate market stakes in existing and new ones. It causes a rare supply circumstance and real estate industry investors will be a demanding position.

With the EMIs and properties rates increasing, a shortage of properties, reduced in construction activities or delay in project delivery is observed. So this may put an impact on rental costs to rise as a comparatively. A tenant may agreeably pay a reasonable amount before investing in the real estate market during the tough times for the rupee to get normalised.

For a real estate sector investor, it is profitable to invest in a ready to move in the property when compared to under construction property to generates high rental income.  Cautious steps are required, as there are high chances of real estate industry investors suffering from losses if invested in a wrong property without research as the market might change when rupee stabilises.

Developers Encouraging NRI Investments

As NRIs notice Indian real estate market to be more affordable to take a position in assets, they're going to have extra money to take place within the native markets as inquiries go up. To make the best use of it, Developers concentrate their promoting efforts to draw in more NRIs to invest in their projects as in some instances, and they are ready to pay 100% upfront.

Also, due to rupee depreciation, the demand for Indian real estate market is seen less from the natives, for this reason, builders extend discounts to NRIs or local buyers to sell their project inventory. But for a real estate sector transaction to complete, it usually takes around one month to three months. At this period, anything can happen like the rupee may strengthen or may fall low. These factors can be reduced if the payment is made at a time instead of paying through EMIs.

To get benefited, its best for an NRI to not to covert their currency until the end of the entire real estate industry transaction. If the rupee perseveres its current levels, builders could notice added interest from NRI buyers until the capital value levels are also sustained and do not see a significant hike during the period.

In Brief

Although rupee depreciation is proved to be profitable for NRI and real estate sector investors, one needs to choose their decisions sensibly with in-depth research before committing to any investments for long-term growth as the costs may change drastically when rupee stabilises in the trading market.

Irrespective of you being a buyer, investor, broker or anyone related to real estate market, furnishes, all required accurate information on trending real estate trends to make informed decisions. Visit us today to know more about such exciting updates.

By Govi