Indian realty trends turn favourable for NRIs

 December 18, 2013

Weak rupee and domestic demand makes Indian developers pay attention to expat.

Dubai: Expat Indians looking to acquire property back home will do well to negotiate hard with developers. The real estate cycle, for now, is certainly rolling in their favor.

India’s property market is going through a downturn as domestic demand has dried up and interest rate spikes have made acquisitions that much costlier. So far, there has been no marked drop in values in prime cities, but developers with new projects on their hands and units to sell will have more “realistic” expectations with their pricing.

“Certain developers in select micro-markets with a high inventory level may need to rationalise prices in the short term to facilitate sales of unsold units,” said Anshuman Magazine, chairman and managing director at CBRE South Asia. “Prominent development firms with projects in preferred locations, however, will continue to attract interest from home buyers.

“It is a buyers’ market in India at present; the current economic uncertainty together with rising inflation, decreasing levels of affordability, high price points and rising borrowing rates have kept off home buyers from making purchase decisions.”

This is where expat Indians can try and extract deals that could be favourable to them. After a few weeks of steady recovery, the rupee is once more starting to slide and could hit 17 to a dirham soon enough. (It was 16.80 when the currency market opened Wednesday and immediately fell to 16.86 after the Indian central bank decided to hold rates steady.)

“The silver lining has been the increased interest in India’s housing from overseas and NRI buyers, largely due to the devaluating rupee,” said Magazine.

International lenders

According to Om Ahuja, CEO for residential services, Jones Lang LaSalle India, “NRIs may find international borrowing attractive both in terms of interest rate and currency fluctuations. But managing collateral and property valuation in India may become challenging with international lenders.” At the same time, an expat investor should keep in mind that “Mortgage in India is available at attractive rates when compared to normal lending; the discount available when compared to normal borrowing rates cannot be ignored,” Ahuja added.

While the exchange rate is in their favour, can expat Indians expect some levelling off on property values, especially with new projects? The reactions, not surprisingly, are sharply divergent.

“All projects in Bangalore and Chennai have been launched at more than the price it was expected to be,” said Casilda Cordeiro, manager for strategies and brand management at Dubai-based consultancy Auric Acres. “For instance, a Disney-themed project in Whitefield Bangalore was expected to be launched between Rs3,800-3,950 (Dh225-234); however, it was pre-launched at Rs4,770 in October and in December has gone up to Rs4,860.

“Demand for Indian metros are steady. When buying, a property exchange rate is just one factor which helps decide the purchase. In our conversations with buyers, there is never a discussion on exchange rate, perhaps everyone is updated on a daily basis.”

It is now the expat Indians’ turn to make full use of the favorable confluence of factors.