The RBI has relaxed provisions relating to investments abroad by resident individuals under the liberalised remittance scheme. The scheme provides for investments abroad in capital assets, such as stocks and real estate, up to $200,000 per annum. There has been a growing demand among Indian HNIs (high net worth individuals) to make investments in overseas markets to take advantage of the low-property prices there. But we need to consider the following aspects carefully before making use of the relaxed RBI provisions to buy properties abroad: whether the investor is buying the property abroad to emigrate or just as an investment. If price appreciation or capital gain is the sole objective of the investor, it makes better sense to invest in our domestic real estate sector as prices have corrected significantly over the last year.

The costs of maintenance of properties abroad, the distance barrier that reduces the scope for frequent surveillance/monitoring of the property local laws and regulations governing property acquisitions by non-residents are factors to be considered by the investor before buying a property abroad.

Currency risk and tax incidence are important decision-making drivers. It would be a good decision to invest abroad when the rupee is appreciating against the dollar. However, given the bleak future outlook for dollar as a currency, realisation in rupee from sale of property abroad might be significantly lower due to continuous dollar depreciation. India has a double taxation avoidance agreement with the US and any taxes paid on foreign property can be claimed as deduction. Considering all the above factors, it makes better sense to wait for domestic real estate prices to bottom out and make fresh investments in property, as investing in a foreign property might not be worth the trouble. Those families who want to emigrate or those who have children working or studying in the US (which is a sizeable community) may consider buying property abroad as prices have become more affordable now.

K. M. Shravan Dharmaraj, email

The US sub-prime crisis has led to nearly two million Americans losing their homes to foreclosure in 2007 and sizeable US home loans are still in arrears. This has caused a huge surplus of homes in the market besides reducing liquidity and slowing down its absorption. In places such as Detroit, Michigan, Jackson, Mississippi, Cleveland, Ohio, etc, apartments with one bedroom and bathroom are being advertised for $1,500-3,000 (approximately Rs 69,000-1,38,000). IT professionals on short-term deputation to such places can invest their house allowances in such homes. Students can also purchase them, avoiding high rentals. As per FEMA regulations, an Indian can invest up to $200,000 (Rs 93 lakh) in US real estate. This is a very good investment and would fetch good returns in the coming years.

T.S. Sundareswaran, email