Weakening Rupee and Rising Interest Rates
Pavitra Shankar, Executive Director, Brigade Enterprises, “The weakening rupee by itself may not impact our business on its own. There are a few services and equipment we import so to that extent there will be an impact of increased cost. On the flip side, the weakening rupee makes Indian real estate investments cheaper for NRIs, especially if they observe this to be a short term effect. As seen in the past, there could be an influx in NRI demand when there is a rupee depreciation. On the interest rates front, there will be a marginal increase in our borrowing costs; however, we employ very little debt in our residential business, and most of our commercial portfolio debt is LRD which is lower than construction finance. We have a very stable balance sheet and are ICRA and CRISIL rated "A" so we can continue to expect the most competitive rates from financing institutions. For our customers, borrowing costs will increase but these are still very low rates historically. We also see the job market and wage growth doing well and can offset any increase in borrowing costs, so affordability for real estate investment should be minimally impacted. Volatility in the stock market also helps the sentiment for real estate investment.” Murali Malayappan, CMD, Shriram Properties Ltd, “This is one industry which is completely ‘Atmanirbhar', where most of the input materials is sourced locally, therefore the rupee depreciation will not have a direct impact. Inflation and cost increase is a matter of concern. I anticipate the coming financial year to be very turbulent in terms of cost for the real estate sector. We can expect at least 7-8% increase in costs across projects. The increasing rate of interest is an additional pain point for developers. With regard to customers as well, while plateauing over the last few years, with the Government stepping in to maintain good control so that customers can benefit, a rate hike has been on the cards for the last two years. Today, customers have more spend capacity and the demand for affordable housing and mid segment housing continues to remain high. Therefore, I do not foresee customers to rethink or postpone their buying decisions. Covid has had a huge aspirational impact on home buyers who want to own a home, such that they are willing to accept marginal incremental increases in home loan EMIs. Additionally, several housing finance companies are offering flexible options to buyers to structure their repayment according to their repayment capability. Therefore, I do not see any negative impact on purchaser sentiment.”
Tags : Weakening Rupee Rising Interest Rates Murali Malayappan CMD Shriram Properties Ltd Pavitra Shankar Executive Director Brigade Enterprises Real estate professionals various asset classes