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Movement of RE prices due to Rupee devaluation

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Movement of RE prices due to Rupee devaluation

Last updated: December 19 2011
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  • Movement of RE prices due to Rupee devaluation

    As we can see that the Indian Rupee has been devalued heavily in last couple of months, yesterday it crossed Rupees 54 for 1 US$

    What can be the impact of this on the RE prices in general, specifically in NCR?

    On the on hand, suddenly the properties became cheap in terms of Dollar for NRIs, so the demand can come from them and prices can firm up further!

    Are there many NRIs investing here?

    On the other hand, this may lead to inflation and hence savings for general Indians will reduce and may result in less demand for properties!

    As a small investor cum end user, would like to understand from the forum and plan about the future strategy on my investment as well as for end use property.

    Appreciate the thoughts on this matter for the benefit of me and other participants on this forum.

    Disclaimer: At present I have booked flat in Panache Island and Krescent Homes.
  • #2

    #2

    Re : Movement of RE prices due to Rupee devaluation

    nice discussion starter

    views from economic gurus and real estate veterans like Venkytalks are welcome

    Comment

    • #3

      #3

      Re : Movement of RE prices due to Rupee devaluation

      Originally posted by ShailP View Post
      As we can see that the Indian Rupee has been devalued heavily in last couple of months, yesterday it crossed Rupees 54 for 1 US$


      On the on hand, suddenly the properties became cheap in terms of Dollar for NRIs, so the demand can come from them and prices can firm up further!

      Are there many NRIs investing here?

      On the other hand, this may lead to inflation and hence savings for general Indians will reduce and may result in less demand for properties!


      Disclaimer: At present I have booked flat in Panache Island and Krescent Homes.

      The value of rupee has depreciated by 20% so property prices have already corrected by 20% in global terms. Private equity funds who have invested by bringing dollars and want to take out their dollars are the biggest hit. Further they will be fear in bringing more dollars fearing further depreciation. So projects funded by these type of investors needs to be watched. If there is a delay in completion of projects, I see RTM properties demanding more premium in future.

      Comment

      • #4

        #4

        Re : Movement of RE prices due to Rupee devaluation

        Not many views!

        All seniors and economic gurus are requested to enlighten the forum on this!

        Comment

        • #5

          #5

          Re : Movement of RE prices due to Rupee devaluation

          Depends on what India's politicians decide to do with their black money that is propping up real estate market!

          Comment

          • #6

            #6

            Re : Movement of RE prices due to Rupee devaluation

            Originally posted by ShailP View Post
            All seniors and economic gurus are requested to enlighten the forum on this!
            If we take out the speculative/investor part from RE, the impact of Rs depreciation on RE is simply: Higher cost of contruction.
            This is due to higher import of energy cost that stokes general inflation and cost of cement/steel/bricks production (power,coal) and transportation.
            However, the cost of basic construction (excluding plot value) is about Rs1000-1500 psf and therefore impact of 20% rs depreciation should not be about Rs200-300 psf on flat cost. However, we have already seen the prices of flats going up by about Rs600-1000 in last 6 months so it could already be priced in.
            With land acquisition bill hanging in the air and high real inflation, the cost of flats can only go higher in future keeping pace with inflation..
            India is unlike US and Dubai where prices can fall and remain at those levels for very long, we have all seen how Mumbai/Delhi/Gurgaon prices remained a bit subdued during 2008 recession and simply jumped when recession clouds went away. Indian demographics and inflation is quite different and we are at the start line of the big development in next 20 years. I firmly believe in India story.

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            • #7

              #7

              Re : Movement of RE prices due to Rupee devaluation

              I am certainly not an expert but, I can share my personal thoughts.

              I have more of a contrarian theory. Though the recent weakness in the rupee has increased the purchasing power for some investors, many might want to take advantage of this and just resort to more secure investments than RE.

              The macro environment isn't so great right now (e.g. depressed wages, layoffs, reduced FDI, euro impact, high interest rates/inflation, corrupt and stupid politicians etc). The next few years appear to be bit rocky for i Indian economy, therefore an investor might be better off by simply parking his/her money somewhere safe and getting 8-10% returns for the next ~5 yrs. I doubt that RE is going to give this kind of return in the next 5-6 yrs.

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              • #8

                #8

                Re : Movement of RE prices due to Rupee devaluation

                Originally posted by khalnayak View Post
                I an investor might be better off by simply parking his/her money somewhere safe and getting 8-10% returns for the next ~5 yrs. I doubt that RE is going to give this kind of return in the next 5-6 yrs.
                I respect your contra views.
                Investment in FDs is fine (vis-a-vis RE) if the actual inflation is lower than Bank interest rate. In this era of negative real rate of interest, only real assets could give the protection . Just today, read that Food Security Bill of madamji would bleed the country equal of diesel/kero/LPG subsidy of ~2 lac crore by conservative estimates.

                With NAREGA giving another 1 lac crore wasteful expense, inflation is difficult to be tamed. There are already stories why some of east-UP/Bihar migrant workers in construction industry not returning to work as they get paid higher under NAREGA while doing less work and be in their own villages. We have to play this inflation right to survive.

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                • #9

                  #9

                  Re : Movement of RE prices due to Rupee devaluation

                  Originally posted by vicky6 View Post
                  I respect your contra views.
                  Investment in FDs is fine (vis-a-vis RE) if the actual inflation is lower than Bank interest rate. In this era of negative real rate of interest, only real assets could give the protection . Just today, read that Food Security Bill of madamji would bleed the country equal of diesel/kero/LPG subsidy of ~2 lac crore by conservative estimates.

                  With NAREGA giving another 1 lac crore wasteful expense, inflation is difficult to be tamed. There are already stories why some of east-UP/Bihar migrant workers in construction industry not returning to work as they get paid higher under NAREGA while doing less work and be in their own villages. We have to play this inflation right to survive.
                  I quite agree with you. Further, wish to add that I have been an NRI till recently and can say from that stand point that many of the NRIs would be looking to go for RE only as a comparatively safer bet to make investments at this time when Rupee value of their Dollars is giving them 20 % extra as compared to few months' ago. It is a known fact that in the long run RE does not disappoint you. FD returns can merely or hardly beat inflation and kind of keep you indifferent.
                  Do unto others as if you were the others.

                  Comment

                  • #10

                    #10

                    Re : Movement of RE prices due to Rupee devaluation

                    Rupee devaluation will keep the RE prices inflated for a while. There are always some kind of buyers, be it NRI, people with black money, local businessmen etc,

                    Comment

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