Rupee Depreciation : NRI investors tread cautiously
* More than 45% depreciation in value of the rupee seen since August, 2011 against the US dollar. A US dollar which was fetching Rs.44 in August, 2011 will currently fetches around Rs. 64, which is a gain of Rs. 20 in two years.
* Rupee also weakens against other major foreign currencies like the Euro, British pound, Australian dollar, Canadian dollar, Emirati dirham, Swiss franc, Malaysian ringgit, Bahraini dinar and Kuwaiti dinar.
* Devaluation of rupee evinces positive response from NRIs planning to invest in realty in India. But constant fluctuations in the value of the rupee are making them tread cautiously in the short term.
* They are unlikely to have the confidence to invest unless there is a stability in the value of the rupee.
* Causes of concern are logistic issues related to identification of suitable property, difficulty to arrange downright and immediate finance, time involved to complete documentation work for the transaction at the appropriate time, physical presence during the transaction cycle that could take around 3 months etc.
* Strengthening of the rupee during a transaction cycle could have a negative bearing on the purpose for which the investment was meant to be.
* If the NRI investor is not intending to make an outright purchase and is planning to make payments in installments, there is a possibility that he may not enjoy the benefits of the depreciation in value of the rupee that is currently persuading him to make the investment during the entire payment cycle.
* Booking for a property under construction, where only the initial booking amount has to be paid immediatelycould also negatively impact the purpose of the investment. This is because he might have to pay the majority of the remaining amount at a time when the rupee would infact have appreciated.
* The depreciation of the rupee may actually be beneficial to NRI investors who are already in the process of finalising an investment transaction deal. In such a case, they would not actually have converted their foreign currency into rupee to make the purchase. This would enable them to make the conversion at an appropriate time when they feel that they would get maximum value for their money due to conversion.
* Due to the instability in the economy, it is expected that there may be further depreciation in the rupee in the immediate future due to which an influx of NRI investments in realty is likely to be seen.
