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What A Stronger Inr Means For Indian Property Investors? Blog
Those foreign institutions that have bought Indian properties 5/6 years ago have taken a hit – this is illustrated by the INR that used to trade at about 45 in 2011 and all and all has traded much weaker since then. Aside from a massive sell off in 2013 that brought the INR to nearly 69, then appreciated back to 6o in early 2014, we have seen a general decline up until now…. where in 2017, the time of writing this article, the INR has appreciated a significant amount where it has traded below 65. It’s hard to say where the INR will trade as currency rates are relative to other currencies (there is basically no inherit value of a rupee or dollar or yen etc.) and generally speaking the main driver of the INR is not India itself, but the US Dollar. With that said, more political uncertainty and in turn more foreign interest in Indian assets, debt, stocks and even Indian properties has led to this US dollar appreciation. The US dollar is the number one factor in terming where the INR trades – so for Indian property investors, watch it closely. With Trump in the White House, there is ongoing uncertainty regarding the US Dollar and with his push for manufacturing to come back to the United States would require a weaker US Dollar and with a weaker US Dollar would invariably mean a stronger INR. Now India wants to do the same thing with Modi’s push for Make in India — however even though the RBI has a record amount of reserves they are simply a drop in the bucket compared to whatever happens to the US dollar. Some are arguing that the RBI will intervene here at 65 levels, but given there is so much unpredictability in the United States these days, we think it’s more likely the RBI gets involved in an aggressive manner closer to 60. If the INR gets to 60, that would mean foreign Indian property investors would be paying over 10% more than before this appreciation. If there is such a big appreciation in the INR that could dampen Indian property investors demand in all Indian properties, let alone commercial properties in Mumbai. It’s difficult to forecast if 1) the INR will depreciate this much (to be fair very few think the INR will strengthen below 60) 2) how much of an impact a 10% move would have on having Indian property buyers from overseas in holding off their next property in Mumbai purchase — it certainly won’t help. When looking at commercial properties in Mumbai for sale, the INR’s appreciation is one factor we would have you take a look at as institutional foreign investors in Indian properties tend to prefer massive purchases which would lend itself to buying commercial buildings in Mumbai and other commercial property for sale in Mumbai and the other major cities. In short, don’t think changes in the INR won’t impact you as a local Indian property investors especially in commercial buildings and commercial properties for sale — an appreciating INR will anywhere from marginally to substantially reduce the appetite of foreign Indian property investors in specifically commercial properties in Mumbai.
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