We Indians have an affinity towards real estate investments. NRIs and resident Indians keep a lookout for real estate deals abroad. Indians are quite active in the property market in Singapore, Dubai, Australia, the US, UK, Canada, etc.
NRI Real Estate Investments Outside India
I received a message from a wiseNRI reader & decided to write this post
“I am living in Europe for the last 6 years and plan to do so for at least the next 5 to 10 years. As there is a 100% loan available and no need for a down payment, I thought it would be a good opportunity for a house. However, I need to chip money for the legal and property fees of up to 10,000 euros. With low interest and, paying the same amount as I pay now as rent for my current room but for an entire house, I see it as not only a good investment but also as a mark of personal freedom. It’s not just me, many in Europe, many among the NRI group that I am in have the same question. An expert opinion would be helpful.”
It is not difficult to buy property abroad as long as you comply with the relevant rules. These rules relate to laws regarding the type of property to be acquired, visa requirements, transfer of money overseas, residency status, and tax implications. Before you buy a property abroad, be sure to research diligently on these aspects. Let us look at the requirements of buying property overseas –
If you want to buy landed property such as bungalows or terraced houses, you need approval from the Singapore government. On the other hand, if you want to buy condo units or apartments, no such approval is required. But do remember, you cannot buy flats in subsidized housing complexes unless you are a permanent resident. The price of real estate in Singapore is very high compared to other Southeast Asian countries but the system is entirely transparent. You can also get a loan to buy a property.
US and UK
In the US, as long as you have an Individual Taxpayer Identification Number or a Social Security Number, you can buy a property. The mortgage rates are also very attractive. But the US is a vast country and so it is important to choose the right location.
Read – Personal Finance in the US
In the UK, the process of buying a property is pretty straightforward both for Indians and NRIs. It is easier to buy in a cash-deal. The mortgage application process is more stringent for a foreigner in terms of documentation, higher interest rates, etc. Here is a graph on the movement in property price in the UK for the last 10 years. The price now is down considering Brexit and the COVID-19 situation.
Source: Land Registry UK
From a financial perspective, resident Indians can remit up to $250,000 per financial year overseas under the LRS scheme for investment in house property. NRIs can remit amounts abroad from NRO, NRE and FCNR accounts subject to rules and requisite documentation –
- NRIs can remit up to US$ 10,00,000 from an NRO account
- There are no restrictions on remittance from an NRE or FCNR account
Benefits of investing in property abroad
- Indians who have enough wealth and liquidity like to invest in overseas markets as it provides a hedge against the domestic economy and market risk.
- INR has depreciated against the US dollar. Investors benefit from the depreciation when they are selling capital investments and converting the money to INR.
- Real estate deals in India are not always transparent. But in countries like Singapore and the US, regulations are highly evolved. They are transparent. You can de-risk yourself from issues typical to the Indian real estate market such as –
- Changing rules and regulations
- Lack of accurate information related to the market
- Old and unresolved property related issues
- Macroeconomic risks
- Stronghold of real estate developers
- Usually, real estate transactions are timely in developed countries. Costs are fixed.
- Rental yields in most developed countries are higher than in India and provide a significant positive difference over the mortgage rate.
- Many countries offer citizenship, allow a longer stay to immigrants, or offer special schemes to foreigners who invest or buy properties there. These can be advantageous for NRIs who want to settle abroad or want their future generations to stay abroad. Some people have their children studying abroad, family members living abroad and want to have a home for them in that country.
- In some cases, people can get tax-breaks on investments made in a foreign country that can be used as an advantage.
Drawbacks of Investing in Real Estate Abroad
- It is not easy for foreigners to obtain mortgages. Banks are reluctant to offer loans to people who are on work visas. For example, in the Philippines, many banks refuse to offer loans to foreigners.
- Paperwork and loan process is more extensive and stringent as compared to the same for locals.
- There are income tax implications on the returns and investments made in the global market. You will have to abide by the taxation rules in the country of the real estate transaction and India. This can result in higher tax outgo and documentation.
- If you are not living in the same country where you invest in real estate, maintenance and management can become difficult. You may not be able to address issues immediately. Traveling quickly to manage housing and mortgage issues will not always be a feasible option. You may have to enlist the services of a property manager which increases your cost.
- Interest rates across the globe are almost the lowest in the last 100 years – what will happen when interest rates will start moving upwards?
Contrary Side – Is it a good time to buy property in India for NRIs?
Buying property abroad could be a good idea if you or your family plan to settle in that country or you want to diversify your portfolio. Remember to conduct thorough research on the various aspects of the real estate market and the transaction before you buy a house.
If you are an NRI – please share your experience of Real Estate Investment Outside India that will help other readers.