Are Real Estate Properties Abroad a Profitable Investment?

The real estate market in many countries offer very lucrative investment prospects with various offers and options.

Apart from that, Indians buying property (House /  Flat or /  plot of land) abroad can often avail of citizenship in the host country. This factor is of considerable aspirational value to many.

The aspiration factor aside, property in more and more locations within Indian metros has become enormously expensive. Moreover, interest rates for bank / Housing finance loans are already proving to be a stumbling block & may rise further with the future revision of the Reserve Bank of India (RBI) norms.

In comparison, an Indian wishing to buy a property in New York, London or / Singapore, can avail considerably lower interest rates of local banks in those countries. Also, many foreign property markets are more transparent than ours; 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.

The broad profile of Indians who are looking to buy properties abroad would include business owners, professional property investors, mid-to-top level company management & high net worth individuals (HNWIs). A large component of buyers comprise people whose children study in those countries.

Singapore, Malaysia, New York, Dubai & various cities in the UK - predominantly London, are the preferred destinations for Indian property buyers.

Due to the current ceiling on how much an Indian can invest abroad in one financial year, central city locations are out of reach for many aspiring Indians. This makes peripheral locations more attractive to such buyers.

The US or / the UK, are closest to the hearts of most Indians hoping to buy property abroad.

However, when these are out of reach, Dubai is among the most preferred property investment destinations for Indians.

The current limit for Indians investing abroad continues to be $ 2,00,000 per annum. This ceiling is not for investment in real estate alone but applies to any kind of investment in a foreign country.

The limit applies to individual buyers, so the investable amount doubles in the case of couples. The Indian government may consider relaxing the ceiling further if it perceives an increased interest by Indians in foreign property investment.

Indians have the option of entering into joint ventures with local operators in foreign countries like Mauritius, Bhutan & Sri Lanka.

The UAE also offers such a facility in some quarters.

Entering into a JV (Joint Venture) with a foreign entity on its home turf can lead to vastly increased investment scope (beyond the $ 2,00,000 ceiling prescribed by the RBI) and generate higher profitability.

Indians buying property in a foreign country should remember that there are investment &  liability risks they may be exposed to. In some countries, land laws for investment in immovable properties can lack transparency and be quite complicated. It is unadvisable to invest in any project announced by a company or / seller that has no physical representation on Indian soil.

Secondly, one must keep in mind that most foreign property markets have their individual regulatory & permission mechanisms. While the RBI does permit investment of upto $ 2,00,000 per annum, one must establish whether one is eligible to invest in the country of choice to begin with.

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