India’s booming economy makes it a home to many multi-millionaires. It’s not surprising that Asia-Pacific Wealth Report statistics point to Indians being the highest investors in foreign real estate, with a 50 per cent market share. While during the initial days it was a rare phenomenon with celebrities and NRIs having homes abroad, today the demographic of people investing in real estate overseas — for business or leisure — has seen a sharp increase. Indians have chosen to invest in their second homes abroad.
Capital appreciation abroad
Attractive investment destinations include countries like Thailand, Dubai, Toronto, Sydney, Netherlands, Germany, New York, and Australia. These are places where they can get good capital appreciation and a stable rental yield. “London, Dubai, Singapore and Australia have been perennial favourites for Indians interested in buying real estate in foreign countries. There is also evidence of increasing interest in some other Middle-eastern countries,” shared Anuj Puri, Chairman, of Anarock Group, a property consultancy. Shravan Gupta, Co-Founder and CEO of YOURS Second Homes shared, “Dubai, Portugal and the UK are popular because real estate investments in these places also give the investors access to a golden visa or permanent residency permit. These destinations also attract investments from Indians who want to have some overseas assets in their portfolio. In addition, these are all popular tourist destinations that Indians visit frequently.”
“The trend of Indians buying properties abroad is more than a couple of decades old, but the interest in such acquisitions keeps fluctuating in tandem with the Indian economy (which has a fairly direct correlation to their purchasing power), job prospects and family presence in the target country, and the changing immigration laws in that country,” further adds Mr Puri. According to a 2019 report, over 3,000 Indian families own some of the most luxurious properties in London’s most affluential addresses. However, a driving force for property in London according to Knight Frank is a drop in property prices in the city. The report stated, “An effective discount of about 20%, taking into account the currency and price movements in prime central London in the period between the European Union referendum and October 2019 has benefitted Indian buyers.” Despite that places that offer residency options providing visa-free access are also becoming popular amongst HNIs, with the base investment being real estate.
But given India’s economy and the interest from international investors, the spending power of the nation is drastically increasing. It was back in 2015 that a report by Sotheby’s International Wealth Report predicted that by 2020 India’s High Net-worth Individuals (HNIs) and the ultra-rich would pump in about one billion pounds annually in the UK real estate. And that is exactly what happened, and today more Indians want to invest in properties abroad in a post-pandemic world. With many Indians looking to invest overseas — as residents or citizens with passports — in 2020 there was a 63% increase in Indians looking to invest abroad. Knight Frank’s Wealth Report 2019 stated that 21% of Indian ultra-high net-worth individuals (HNIs) showed interest in purchasing homes overseas. Pointing out an interesting fact, Anuj Puri shared, “Depending on their purchasing power and exact purposes and plans in the target country, Indians may opt for affordable housing in the outskirts of main cities, compact office-cum-residences closer to the city centres or – in the case of the very wealthy – townhouses in the most aspirational neighbourhoods.”
Larger margins attract HNIs
Over the years the Indian rupee has seen a depreciation and the dollar is getting stronger against the rupee even today. According to Indian Wealth Report, 2019, the long-term average shows that INR has depreciated against the US dollar by about 4% per annum over the last 40 years. With the dollar appreciating, investing in overseas real estate offers large margins for rental income. “It is primarily HNI and UHNIs who are interested in investing overseas. HNIs and millennials have emerged as one of the biggest investors in luxury real estate, and the discernible reason for this is the desire to escape ordinary life. The rise of the elite working population in metro cities such as Delhi-NCR, Mumbai, Bangalore etc. has also motivated developers to come up with high-budgeted, grand-scale luxury buildings,” said the duo at YOURS Second Homes.
But another interesting aspect is the skyrocketing prices of properties – especially bungalows – in India that today go to three-figure crore price tags, however smaller apartments in different parts of the world often come at a cheaper price.
Giving us an industry insight, Anuj Puri said, “The key reason for Indians looking beyond boundaries and buying a property is investment, followed closely by the aspiration of having a second home there and for self-consumption due to business interests. With many opting to send their children abroad for studies nowadays, they prefer to buy a property in the concerned city.” Anuj further adds, “The numbers would be fairly steady with decent increase year-on-year. Further, the relaxed RBI norms also lures Indians to consider property buying abroad. For instance, in 2015 RBI doubled the Liberalised Remittance Scheme (LRS) for resident individuals to $2,50,000 annually. Many investors will elect to buy a property in a certain country if its property market sees a downturn and prices become attractive. We had seen this happening during the US subprime crisis, and more lately during the Brexit angst in the UK.”
Some of the other major reasons driving Indians to overseas destinations is a slowdown in the Indian real estate market and better business opportunities a better quality of life, along with children’s education. Hence buying commercial/residential property for investment purposes is emerging as key factor — be it holiday homes or apartments. But with Indians more exposed and large-scale liberalization and globalization aspirations have grown hence allowing Indian from different strata of society to invest in real estate abroad. Giving a clearer indication of the demographic Anuj Puri shared, “As of today, a considerable number of young Indians from the entrepreneurial set, the nouveau riche, those with settled families abroad and those with expected or existing business interests in a target country will consider buying a property abroad. Those ultra-rich Indians, say even celebrities and film stars whose children go out to study or otherwise as well are also buying properties outside in the respective country/city.”
Post the pandemic experts have seen a change in preference for cities with Dubai and New York gaining a lot of attention. Dubai was not only the hub for travel during the pandemic but the ease of carrying business and relaxed covid guidelines caught the interest of many Indians looking to get a residency visa on the purchase of a 1 million DH property. Further the short flight duration and ease of accessibility make it more attractive.
Most popular destinations to invest in abroad
Oftentimes investing in international real estate is considered to be the most viable form of investments given that there is much less volatility. It is much more stable in terms of investment profits compared to other financial markets such as the stock market where there is no guarantee of profits. Aside from this fact, what makes real estate investments a smart ordeal is the increase in demand for housing given the population growth and increased tourism in 2022 alone.
There are a number of reasons to invest in real estate abroad, however, rental investment is among the most popular reasons for individuals to invest in international real estate. While they do occasionally use the property as a holiday home, putting it up for rent when not in use, is the best way to earn back their investment, plus more. It is for this very reason that individuals who decide to invest in international properties, look at popular holiday destinations such as US, UK, UAE and other parts of Europe. UK and UAE alone have had some of the biggest investments over the years, with many international citizens, not just Indians buying properties here. Here are some of the top international destinations that Indians are investing in, and here’s why you should too.
London is one of the most popular cities in the world. In addition to being a great destination for work and study, it is also one of the top destinations for real estate. In fact, in 2018 London was voted the number 1 city in the world for real estate investment, according to Knight Frank’s London Report by William Beardmore-Gray, head of central London, Knight Frank. It did however take a turn in 2021 after Brexit, with London maintaining the number 4 rank which continues to date. Although Brexit had a significant effect on the property market in London, London continues to maintain a relatively steady market, according to Halo Financial, a U.K.-based foreign exchange service.
Another aspect that makes London a great investment is its steady economy. While several economies across the world suffered losses during the Covid pandemic, London maintained its economy, thanks to influx of international investors and workers, which keeps London as one of the most important financial centres in the world.
Aside from the technical facts, London is a vibrant metropolis with some of the best hotels, office spaces, and restaurants not to mention vibrant offerings of entertainment, art and culture adding to the traditional appeal of the city. This has led to London drawing in people from all across the world, making it one of the cities with the largest number of billionaires in the world not to mention a safe investment paradise for the world’s richest.
The US by itself is a green flag for internationals in terms of career opportunities. While New York was, for the longest time ranked as one of the best destinations to live in the world, it is no longer the only one. According to a survey conducted earlier this year by the Association of Foreign Investors in Real Estate, Los Angeles was voted one of the most desired destinations to live in. In fact, it is regarded as the top destination for foreign investors in the US real estate market. According to a report shared by Jones Lang LaSalle (JLL), international real estate investors bought over US $23 billion of value in LA real estate in 2017, while global real estate investors had a combined total of US $1.7 trillion.
Los Angeles has the best return on investment compared to any other city in the world. This is because of the sky rocketing prices of properties in LA. The Los Angeles real estate market forecast shows the property value growth going from a median home value of us $413,000 in August 2012 to a daunting US $1 million a decade later. And so, people in the city prefer to rent out apartments rather than buy a property. This gives homeowners an opportunity to rent out apartments or be a part of online marketplaces like Airbnb that caters to tourists or others looking for short term accommodation.
Finally, it is the picture-perfect neighbourhood that makes LA such a spirited city to live in. While most people think of Los Angeles as a superficial metropolitan area, it is much more than that. Sure, it has some of dizzying concentrations like the mellow brownstones, the soaring skyscrapers, not to mention some of the world’s best restaurants, galleries, museums and bars. But it also has some of the most soothing environments, picture-perfect beaches, parks and plenty of natural scapes that make you forget about the concrete jungle you’re in.
The city where more is more, Dubai has become the “post-pandemic investment destination” for citizens across the globe. In addition to being the quickest way to get a residency permit in UAE, Dubai tax-free lifestyle is what appeals to international citizens the most. Upon buying property in Dubai, owners need not worry about tax, as the Emirates has no annual property tax, income tax or capital gains tax, making it the best city to invest in real estate. The only payment owners will carry out will be the one-off property transactions and registration fees.
Buying and selling property in Dubai is a much easier process compared to any other city in the world thanks to the government of UAE government rolling out measures to make the process simple and convenient especially for emigrants. And although buying property in Dubai is seen as a better option, the rental-market continues to boom because of the rampant tourism. Like LA, Dubai is one of the top tourist destinations in the UAE. Annually, the city attracts as many as 17 million people, with a stable market despite the pandemic. According to Dubai Economy and Tourism (DET), there were as many as there were as many as US $5.5 million tourist visits despite the pandemic; during the first seven month of 2022, the DET reported 8.1 million international visitors. In such, renting out homes or providing Airbnb services is just as much a viable option in Dubai, helping homeowners earn great profits on their investments. With the advent of the short-term rentals market, property owners are now presented with the option to gain a good return on their property that exceeds a 6% net rental return.
The quality of life in Dubai is another promising trait of the city. Dubai excellent quality of life, world-class infrastructure, top-quality dining venues, beautiful natural locations, connectivity, and state-of-the-art entertainment and recreational facilities, are what make the city such an attractive spot for international buyers.
Factors to keep in mind while investing aboard
While investing overseas does seem attractive to many, it doesn’t come without a word of caution. If you do decide to invest overseas, it is imperative to follow the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India guidelines which state that $250,000 per person is the upper limit that you can invest in a year and your property price can’t exceed that. Another thing to keep in mind is the income tax implication on the returns and investments you make in the global market — it is a mandate to by the tax laws of both India and the country you are buying the property in. “Large township offerings, luxury condominiums, villas, second homes or holiday homes, and luxurious plotted developments are ranked as some of the most wanted luxury properties,” quoted Sudeep Chandran, Co-Founder and COO, YOURS Second Homes.