KOCHI: Global financial meltdown appears to have left the real estate sector in Kerala untouched thanks to sharp depreciation of the rupee against US dollar to which the Gulf currencies are pegged.
The greenback has appreciated nearly 30 percent against the Indian currency since last year, leaving huge surplus money in the hands of the state’s people.
An estimated two and a half million people from Kerala are settled abroad, with close to 90 percent of them working in the Gulf. The state received 245.25 billion rupees in remittances last year which is more than 20 percent of the state’s net domestic product. The money usually goes to stocks, real estate or gold.
Taking advantage of instability in stocks and gold, builders have announced several new projects and they are conducting a series of road shows in the GCC countries. Having burned their fingers in stocks, the builders hope the overseas investors would now prefer real estate.
“This is the best time to invest in housing since prices have stabilized and good options are available at reasonable valuations out there,” said Arun Kumar, managing director of Mir Realtors. “Quality and timely delivery are two things one should look at instead of freebies and such offers.”
Mir Group, which has diversified into infrastructure projects like seaports and cruise terminals and tourism, is also planning to invest 10 billion rupees in housing and hospitality projects over the next three years in Kerala.
Mir currently has two projects nearing completion-the 6-acre Green Metropolis in Kochi and 13-acre Greens in Thiruvananthapuram with most of the spaces already sold out.
India’s largest builder DLF Ltd has also announced plans to invest 40 billion rupees over a period of five years in various projects in Kerala. The company is also looking at commercial projects like hotels, shopping malls and office complexes, according to Lt. Gen.(Rtd.) MG Girish, vice president (Kerala), DLF Homes.
A mega residential project, New Town Heights, coming up on the Seaport-Airport Road at Kakkanad in the suburbs of Kochi, is also receiving good response, he said. The rates start from 2600 rupees a sq ft. Non-Resident Indians (NRI) are increasingly beginning to see India as a safe bet for parking their savings as the financial turmoil has hit the Western economies hard. Many take loans from the Gulf, where interest rates hover around 5 to 6 percent, and invest back home.
“Kerala stands to gain by a windfall due to rupee depreciation. As per the latest estimates, around $8 billion comes to Kerala by way of remittances from its workforce abroad, mostly in the Gulf. This was equivalent to only 320 billion rupees when rupee was around 40 to a dollar. Now it is 49 to 50 rupees to a dollar. That means a windfall this year of around 70 to 80 billion rupees,” said Dr. KP Kannan, member, National Commission for Enterprises in the Unorganized Sector.
“India’s total exports in 2007-08 were around 6000 billion rupees of which Kerala contributed only 1.8 percent. If 40 percent of this assumed to be from exports to US, then it means 50 billion rupees. If demand declines by half, then loss of export would be around 250 billion rupees,” he said while delivering a public lecture organised by the Asian School here.
He said there would be some impact on the export-oriented industries, but it could be taken care of if domestic market share was increased or export market diversified.
“The challenge is to harness the money flow and convert it to investment. Infrastructure is a top priority but investors need guarantee and a fair return,” he said adding that the state was unable to attract investments due to perceptions of labour militancy.
The bank deposits are expected to rise in the state due to rupee depreciation against the greenback.