Why are Indians Investing Overseas?

There is something about Indians and their growing fondness for international real estate investments. Emerging Indian footprints in residential and commercial neighbourhoods abroad have been a matter of immense interest and curiosity for the various stakeholders in International Property markets.

An exploratory Buying behaviour, investments returns, personal preferences are some of the key drivers pushing resident Indians to acquire residential property on foreign soil and with time this trend is moving on an upward curve.

What is Making Indians Invest Outside India?

There are several factors, which make an overseas property acquisition more attractive than investing in the domestic markets. The most common reason is sluggish realty market in recent time, the various changes implemented by the govt, and high overall pricing in the major metros, which offer little or no growth potential, poor infrastructure and poorer rental returns.

If one has to make an apple to apple comparison as an example, at the cost of Rs 45 lakhs, a property investor can get a fully-furnished condo unit in a premium location in Malaysia or Thailand, which not only offers an excellent lifestyle but also a chance to earn 10 per cent net rentals. As opposed to this, the same investor will perhaps be able to purchase a small, unfurnished 1 BHK apartment in the suburb of Dahisar on the outskirts of Mumbai, offering no lifestyle and practically no rental income.

A Whole World to Explore

Moreover, instead of buying a holiday home in the hills or near seashore, high net worth individuals are getting attracted at better options overseas. A premier property in an upcoming tourist destination, for example, may cost anybody close to the average cost of buying a 2-BHK apartment in Mumbai, Pune or Gurgaon. Whereas, the slowdown in many foreign economies, especially in the US and the UK, over the last few years has made real estate prices more affordable. The local second home also relies on the owner for maintenance and often is cumbersome and expensive to maintain.

This has opened an option for High Net Worth Individuals to buy property overseas for both investments as well as personal consumption. Other than lifestyle and rental returns, the other most important reason for Indians to invest overseas is their children studying abroad. Besides owning a second home overseas, is a seamless fully managed proposition, wherein one can handover the property to expert professionals to maintain and rent.

Some markets have a higher attraction for buyers than others. For example, London has always been a strong real estate market, but the current economic slowdown now means one can get properties at a lower valuation making it an attractive market. Malaysia is another hotspot in Asia where Indians are investing in real estate. The large Indian population with attractive ambience is striking.

Additionally, the raised outward remittance limit under the Liberalised Remittance Scheme for Indian individuals by the Reserve Bank of India has allowed many Indian investors to buy properties abroad. Also, with remittance limit applicable individually, buying properties jointly with family member widens the net of options available to Indian investors.

Many foreign real estate markets work and operate in a much more transparent manner. There are no delays or another red tape due to bureaucratic processes or paperwork thereby increasingly grabbing the attention of Indian investors.

Countries ready to Give Citizenship to Investors

While all these reasons are making people look beyond the Indian real estate market, some countries offer residency and citizenship benefits if anybody owns a property in that country. So, if someone plan to migrate at some point in the future to that country, investing in real estate can be a good way to attain an easy access to residency.

Unlike Indian real estate markets, where there is a higher capital appreciation year on year, foreign markets demonstrate better rental appreciation. So, hoping to make a purchase and expecting the prices to escalate overnight within a year or two is highly an unlikely scenario. Most overseas markets are mature and hence would enjoy a stable capital appreciation. Having said that, if one has the vision to be a long-term player, one can not only enjoy the benefits of a steady rental income but also look forward to a reasonable and sometimes excellent capital appreciation in the 5-year horizon.