Dear Friends,
Hope you all are well aware of the Indian Rupee Falling down big time in the Financial Market. The INR has seen the Worst Down trend in the last few weeks.
Indian rupee breached the 64-mark against dollar.In turn to stabilize the Rupee value. The Indian Govt is going to soon enforce the Interest rates. while we can expect a Increase in the Interest rates of Deposits to attract Investors in Indian market, also same time the Housing Loan Interest rates are also said to increase, also I have been reading several articles on this space, where it says India may see a huge down fall in the Real estate market down to 4 years. If people are looking for Long term investment. This may not be the good time.
MY QUESTION.
I am little concerned about the above statement made by Various Financial Articles. Is this really going to happen? Is this really not a good time for Investment into Real Estate? How about the investors who had invested in long term projects ( Like me 🙁 ).
Pls put in your geniune advice. lets discuss this.
Cheers
Swath
Hi All,
Hope this will be helpfull !
Link :http://timesofindia.indiatimes.com/tech/tech-news/software-services/Bangalore-IT-pros-finding-it-difficult-to-service-home-loans/articleshow/22322735.cms
The current fall in the value of Rupee over all will affect teh RE market.
People in this board are saying it is good for teh NRIs as they will be realizing more rupees and will invest more. I disagree with that for the following reasons.
1. NRIs who invested in real estate in the last 2/3 years using their $$ have already got a nice hair cut. Their investment in terms of $$ has gone down. Here are some facts- my numbers may be off by a + or minus Rs 1.00 in the numbers below.
In Jan 2008 – 1$ = Rs.40.00
In Oct 2012 – 1$ = Rs 52.00
In sep 2013 – 1$ = Rs 66.00 ( even thoug it touched 70).
For an NRI who invested in a property in 2008 – actual invetment in $$ loss = approx 40%. The assumption here is 1$ invested in 2008 for repatriation purposes is worth today only 60 cents at current exchange rate – So in other words the $ investd in 2008 in $$ terms today ids only 6o cents or a 40% loss. please note that in the above statement i am not taking into account th eproperty appreciation. Let us see how much the property should have appreciated since 2008 for the investor to break even.
To break even today ( at the exchange rate of 66) the property must have gone up in value from 40 to 66 or Rs 26 appreciation on rs 40 investment – which translates to a 65% appreciation.
Same way some one who invetsed in 2012 a property at 52 exch rate has to have seen an apprecaition 14 Rs in 1 year at today’s exch rate. which translates 14/52 = 27% appreciation.
Any one with a high school level math can figure out that the loss due to devalue of Rupee needs an appreciation of property by 65% from 2008 to now and by 27% in the last one year.
Rupee has staedily lost in value and the velocity of devalue has been much more steeper in the last couple of years and it will continue that trend in the years to come.
So in my opinion if an NRI thinks he is doing good – sadly he/he is mistaken.
On the other front – with a declining rupee, the cost of imports have to go up, and will result in increased expenses, inflation and….. The salaries can not be increased for ever because the s/ware indutry will earn LESS $$ for the services. So there will be a hair cut trim that is bound to happen in this high flying industry which is a big contributor to the housing sector growth.
The bottom line high inflation and cautiousness and frugality has to set in.
The GDP was a paltry 4.4% recently and is a sure sign of SLOWDOWN. Already Infosys is cutting back big time and this is a pointer of what is coming down the line.
All the current indicators are ponting to the downside of the highflying RE market. With no investors and NRI speculator money we will see some ugly shock.
All these promises by Govt to take stop gap measures to prop the rupee will be only as good as the Props.
NRIs have lost faith and even at overnight increases by RBI on CD rates for $$ deposits fron 0.2 to 2.8% to attract NRI inflow is not finding any excitement in the NRI community. me personaaly being an NRI well connected is hearing these sentiments and every one’s sad story on how much they are losing. Besides accepting all these $$ deposits if things go out of control the same thing that happened to foreign inverstors in Greece or Argentina will happen to the NRI – A CLEAN SHAVEN HAIR CUT on their hard earned savings.
So right now no NRI is too xcited about the increased Rupee for $$.
Commments welcome.
Sensible and relavent article in Economic Times on 2nd Sep.
http://economictimes.indiatimes.com/markets/real-estate/news/slowdown-in-real-estate-forces-builders-to-cut-prices-and-dole-out-freebies/articleshow/22216644.cms
KM,
Adding another link to the article on softening prices and slowdown in RE market. Some people here in this page think that Bangalore is immune to this softening. RE Sector asa whole across the country is getting ready for a nice clean head shave.
http://economictimes.indiatimes.com/markets/real-estate/news/housing-prices-dip-in-delhi-mumbai-bangalore-as-slowdown-takes-its-toll/articleshow/22117001.cms?intenttarget=no
The Govt and RBI have FAILED miserably to control th CAD. They have allowed the rupee to freefall because of their own actions, looting and stashing their loot in precious Foreign exchange in Swiss banks. Now they are going after the GOLD from temples, NRIs investment request in $$ etc. Why would any one throw their hard earned $$ into a failed govt and risk losing their LIFE’s Hard earned money. All this desperation attempt by govt is only to try to support a failing and a FAILED sysytem. India and its financial system will collapse i n another 2 yrs and will be worse than Greece and Argentina.
Personally , i have not witnessed any sign of slowdowns..On ground level , prices are high only , and when i visit some builder , i see the less no of availability and also they do not look in hurry to sell.I did not get a call back from them, though this used to happen in 2009.
that time , they were reducing price on first visit , now they decrease like 50-100 rs psqft.
And with Cloud computing, Western clients wont need many services from Indian IT Services companies. And It services companies are going to slowly die
Who will do the programming behind cloud computing?
Cloud computing is only about placement of servers. Everything else remains the same.
In Indian stock markets all Indian IT companies are at an all time high. I reckon the market is seeing huge increase in revenue and profits of IT companies because of two reasons – rupee translation gain and increased business on account of developed economies improving. What this means is more employment in IT and increased salary to IT employees. We all know if IT Industry does good then people in Hyderabad, Madras and Bangalore stand to benefit the most. Due to telangana issue, I think most of the Hyderabad Money is getting diverted to Bangalore. Madras real estate prices have already appreciated considerably and there are hardly any projects coming within city. So Bangalore will benefit with more madrasis money chasing as well. Also Bangalore has better weather than madras and both have water problems. All in all, I see there is no reason for real estate prices in Bangalore to be affected.
I agree that demand may slow down. But that is likely to hit new projects as cost would increase due to inflation. Existing projects may see delays due to this. Bangalore may remain unaffected due to dollar, Telengana and weather. Rest of India may feel the pinch.
Food bill will make sure no one works, ensuring even higher project delays and making rupee as toilet paper due to inflation.
But if you see only real estate returns has an history of beating or meeting inflation. No other investment can beat inflation. So value to your money loses day be day if you do bank deposit or stocks!!
>> may remain unaffected due to dollar, Telengana and weather.
what about water issues? did a google search on water problems in Bangalore.
One of the links talks about : Will Bangalore have to be evacuated by 2023?
http://www.firstpost.com/india/will-bangalore-have-to-be-evacuated-by-2023-697649.html
As inflation and interest rates increase, local demand will decrease. So small builders who are dependant on local buyers will feel the heat. For high end units, it may act as reverse. NRIs may pump more money on high end properties. All in all I do not foresee something dramatic will happen as it did in 2008.
Yes ,Even i think the reason for pre-launch/launch is mainly due to the real estate bill . Once the bill is in place the pre-launch concept will go off . The builder will be able to launch the project only after all the approvals are in place . Builder will not be able to sell based on built-up area! They can only sell the carpet area , ofcouse eventually the price/sq ft might go up , but the customer can easily verify the carpet area by measuring the internal area within the flat …. there are many more clauses in the bill which can support the buyer..
On the rupee deprecitaion ! I think the local buyer will be more cautious .
Agree with Vickram
Soon money in hand will rule, UPA 2 has made next government an herculean task to recover. If there exists UPA 3, definitely India will be declared bankrupt. You get better deals then. Investment before elections either by local or NRI is going to be risky when Rupee has no security.
Will real estate be hit ? I feel it is booming with Indian RE falling.As more and more NRI
would like to invest here so demand will increase with this.I will it is tough time for common man who is planning to get one home fore end user , but current situation is win win for both builders and for them , who are earning in Dollars. rest all can suffer because of inflation .
Bangalore is the city where major number of SW Engineers are there , and people who are on site
would also be benefited with this.
Raj- I beg to disagree with your comment.
The NRI investor has been a LOSER in the RE market. When you say the NRI – the NRI is going to to look at his investment made and its current value like a stock that he /she owns in the stock market. What good is it to invest say 100K dollars for property worth 40 lakhs in 2008, when the investment (without factoring appreciation is only worth $60K for a 40% loss. To break even on the investment in todays exch rate the invested property of 40 lakhs should be selling at 66 Lakhs for an appreciation 26 Lakhs in 5 years or 65% appreciation.
NRIs who have been pumping money in t erecent years have lost out on their TRUE Value of teh $$ invested.
Open for any constructive discussion.
My opinion is the property prices may fall down for few months until end of this year in Bangalore atleast. Reasons
INR raise is good for NRI’s but not for local buyers because commodity price may go up so people may want to hold on to their money.
Banks have started raising the lending rates so again will affect local buyers and NRI’s as well to some extent.
Bangalore has too many projects approved, may be for the upcoming election, so supply may exceed the demand.
Cat A builders are charging exorbitant prices for surburbs in Bangalore so they may start facing some down slide
I would suggest everyone to keep looking and bargain hard because im sure builders are desperate to sell too !!
Agree to vikrams comments.
Just to add to the above..
You would have noticed that lots of per-launches are happening in Bangalore in-spite of slowdown..We should know why this is happening in India. Recently the cabinet has passed the real estate regulator bill. Now it is in the rajasabha. The bill will be passed soon after that all these mis-selling and one sided agreement is not going to work. The bill will be effective for all the new launches..so the builders has taken advantage of doing a pre-launch of the projects.
Now builders will sell only as per the super-built up area and there is no penalty clause..and you cannot withdraw the amount if they delay the project..So these things are not possible after the bill is passed..Hopefully. so would suggest all our folks in Bangalore not get into
the mode of buying atleast till the bill is passed.. Everyone is assured of hard earned money in case of default by the builder.. this is my honest opinion..