The rich home in on properties abroad

Meera Siva BL Research Bureau | Updated on June 15, 2013

If owning a home in India is a struggle, buying one abroad is a dream for most Indians. But for some, the dream has come true, as they buy property in places such as Dubai, Sri Lanka, and the United Kingdom (UK).

What started as a trickle in 2005 has turned into a flood now. In the last eight years, investments by Indians in overseas properties have grown a whopping 40 times from a mere $1.9 million in 2005 to $77.7 million in 2012. RBI data show that this March, $16.6 million was remitted for property purchases, double the $8.1 million transferred in the same month last year.

A growing number of Indian businessmen and professionals has been investing in property outside India in recent years thanks to the Liberalised Remittance Scheme (LRS) that allows resident Indians to send funds abroad. The Government increased the amount that can be transferred from $25,000 in 2004 to $200,000 in 2007, in three stages.

A key draw is the decline of the property market after the 2008 crash. In contrast, there has been no let up in the rising prices of realty in India. Little wonder then that Indians were among the top property buyers in Dubai in 2012, when the market showed early signs of a pick-up.

Price gain, good rents

“More than ever before we see wealthy Indians looking to buy a second home outside the country,” says P. N. C. Menon, Chairman of Dubai-based Sobha Group. He says Indians were the main customers for Sobha’s premium villa projects in Dubai.

Currently, homes in Detroit (US) or Colombo are available at bargain prices. With the economies of these countries showing signs of revival, investors are heading to these markets for their perceived value.

The depreciation of the rupee has not reduced the affordability of these homes. “Prime beachside property in Colombo sold for around Rs 8,000 a square foot 18 months ago, (making it) more affordable than properties in Chennai,” says Om Ahuja, CEO of Residential Services at Jones Lang LaSalle India.

Indeed, investors can get amplified returns if the rupee continues to depreciate.

Most overseas markets also offer higher rental incomes compared to the average of 2 per cent in India now. In the UK, Dubai and Singapore, rental yields are over 5 per cent, adding to the investor’s cash flow.

Other Benefits

A liquid market and transparent transactions are the icing on the cake. Dubai, Singapore, Mauritius and Cyprus do not charge capital gains tax on property sales. Cyprus, Portugal, Ireland, Malaysia and Bahamas offer work and extended stay visa to attract investments.

Some High Net-worth Individuals, who travel frequently to a country for business or pleasure, are choosing to buy a property there for personal use instead of staying in hotels.

There is also the trend of parents buying an apartment in university towns in the US or the UK, first for their children and then to earn rental incomes after they graduate.

According to Jones Lang LaSalle’s Ahuja, professionals have increasingly been buying property in London over the last two years.


Published on June 14, 2013

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