Want to invest in property abroad? Here are some tips
The real estate market in many countries offers lucrative investment prospects. Apart from that, Indians buying property abroad can often avail of citizenship in the host country. This factor makes for considerable aspirational value for many.
The aspiration factor aside, property in more and more locations in Indian metros has become enormously expensive. Moreover, interest rates for bank loans are already proving a stumbling block and may rise further with the future revision of RBI norms. In comparison, an Indian wishing to buy a property in New York, London or Singapore can avail of the considerably lower interest rates of local banks in those countries. Also, many foreign property markets are more transparent than our own, so investors can get 'clean' deals much faster and easier. Investment in property abroad makes sense for those who are employed or have business interests in the country of choice. Indians who have settled or are planning to settle abroad permanently are, of course, prime candidates.
Broadly, the Indians looking at properties abroad are business owners, professional investors, mid-to-top level executives and high net worth individuals. Several buyers are also those people whose children study abroad.
Singapore, Malaysia, New York, Dubai and cities in the UK are preferred destinations for Indians. Because of the ceiling on how much an Indian can invest abroad in a financial year, central city locations are out of reach for most buyers. This makes peripheral locations, which tend to be cheaper, attractive. The US and the UK are doubtlessly closest to the hearts of most Indians, but when these are out of reach, Dubai definitely comes next.
The present limit on Indians for investing abroad continues to be $200,000 per annum. This ceiling applies to not just real estate but to any investment in a foreign country. The limit applies to individual buyers, so the amount doubles in the case of couples. The government may consider relaxing the ceiling if it sees an increased interest from Indian investors. Indians can also enter into joint ventures with local agents in foreign countries such as Mauritius, Bhutan, Sri Lanka, and some parts of the UAE. A JV with a foreign entity can vastly increase the investment scope and generate higher profitability.
What to look out for
Remember first, there are investment and liability risks involved. In some countries, land laws can lack transparency and be quite complicated. It is inadvisable to invest in any project by a company or seller that has no physical representation on Indian soil.
Second, keep in mind that foreign markets have their regulatory mechanisms. The RBI sets an investment limit, but find out first if you are eligible at all to invest in the country of your choice. Apart from these, the general guidelines for any property investment apply here. Ensure that the location has sufficient appreciation potential. Find out if the neighbourhood is safe and suits you. And always ensure that the property is free of litigation and has a clear title.