Overseas, Own House is Still a Distant Dream..!

by Ms. Ishani Duttagupta, ET

Ms. Nisha Iyer (name changed on request), is a 32 year - old IT professional in London, working on a tier II work permit for skilled workers. When she was transferred to the UK by her employer 8 years ago from Mumbai, she had no idea that she would stay on. But, now she has settled in very well and has decided to make London her home. Iyer, a single woman, lives in central London and pays a monthly rent of over  £ 1,500 for a small studio apartment.

“It would be really good for me to invest in a similar apartment with a mortgage that would work out to around £ 5,00,000,“ she says.

But, the problem is the down payment. If Iyer could sell her apartment in Mumbai and another property that her parents had acquired for her in Bangalore, she could easily afford the down payment on a mortgage.

 

Ishani Duttagupta, ET

However, under the Reserve Bank of India's (RBIs) liberalised remittance scheme (LRS), under which Indians can remit up to only $ 1,25,000 per financial year (April to March) overseas for any permissible current or / capital account transaction or / a combination of both, she will not be able to move the money out of India.

And even though the cap on the remittance was raised from $ 75,000 to $1,25,000 in July 2014, for Iyer and others like her who are looking at acquiring property overseas, it's still too low.

“Even factoring in the enhancement, the current investment limit is not high enough to incite a great deal of activity in property investment overseas. What it will do is provide a small opportunity to Indians where none existed when real estate was completely withdrawn from the LRS scheme and its prescribed limits.

With the en hanced investment limits under the liberalised remittance scheme, it, for instance, becomes possible for a husband and wife to make a combined investment into a small-sized home abroad,“ says Mr. Anuj Puri, Chairman & Country head of real estate consultancy JLL India.

“Ultra high net worth individuals are scouting for investment opportunities in overseas properties & now with many new developments coming up around Dubai & redevelopments in and around London, there is a revival of activity in the market. Besides investment reasons, many families like to buy flats in cities that they visit often so that they don't have to live in hotels. Some also buy apartments for their children who have joined overseas campuses to study ,“ says Mr. Mudassir Zaidi, national director residential of property consultant Knight Frank India.

“Countries like the UK & US are seen as safe havens where property investments cannot go wrong,“ he adds. But the problem in funding the investments remains for Indians in view of the LRS rules.

“In central London, the cost of suitable properties now range between £ 20 lakh and £ 5 cr, thus making it very tough for Indians to make such investments“ says Mr. Mudassir Zaidi.

A dull global real estate outlook along with the LRS limits certainly hits activity on the overseas home buying front for Indian HNIs, but there are property agents in the US and UK who are, reportedly, offering houses to Indians that can be paid for in installments under the LRS limit.

“Families can also consider pooling in i.e. each family member remits his or her annual entitlement and pools in the individual amounts to form a larger corpus,“ says Delhi-based tax consultant Mr. Amitabh Singh.

And though the investment outlook in India has recently brightened with more domestic avenues opening up, Singh adds that in some cases parents are also building up a corpus overseas to fund their children's education.

 About the author..

Ms. Duttagupta, Ishani is a journalist with The Economic Times where she specialises in immigration and the Indian diaspora.

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