Because German is a ***n hard language and I feel sorry for everyone who has to learn it. But let me try to explain. Here it's they because it's plural. If you talk about people in pluras it's always sie. Of course in English there is no gender it's just they. Crazy Germans have for everything a gender and sometimes it's completely confusing for you not natives. So for you sie would mean she right? Not in german. It has two meanings. She and they. So you can figure out which one is meant by the verb. Haben is plural. So it's they. Would it be she it would have to be: sie HAT wasser. I know it's hard and I'm kinda happy I'm native
In English the progressive form is used for, you guessed it, an action in progress! The act of having water is not an action that takes time, that is in progress or in the course of being completed. It refers to a state of fact, not to a process (they are reading >> in the process of reading). The progressive form answers the question "What are you doing? (now)"
To make it easier, if it does not refer to "What are you doing?", it probably isn't continuous! In our case the focus is on what the subject has, not what he is doing.
However, in some cases "I am having water" may have the meaning of "I am drinking water" as in the expression "I am having lunch".
They should allow it as a reply since it is irrelevant to your knowledge of German, but it is incorrect in English!
I hope it helped!
The German verb "haben" denotes possession, not the act of doing something (having dinner, having fun, etc.). Example, if you are having dinner you would say "Ich esse mein Abendessen" (I'm eating my dinner), but if you had just brought home a chicken and fixins for dinner, and you might say "Ich habe Abendessen!" (I have dinner!).
It's not a special one. I think there is a slight difference but I don't know which one and it makes absolutely perfect sense what you're suggesting. Though in this term I wouldn't use "are having". I don't know why, it sounds lil bit weird but you can use it. No one would correct you except a teacher
It's special because of the difference between the two in English. I'm eating is the progressive form of I eat. I'm having can mean I'm eating/drinking/using, while I have just means I possess/am holding. This makes having a wrong translation for haben, it only means have in the perfect form.
"You have water" (formal) is correct. The difference between that and "they have water", is that in "you have water", the Sie is capitalised, whereas for "they have water", the sie is lower case. But, in this example, the sie is capitalised anyway because its at the beginning of the sentence. Hope this helps.