In 2015, when Sotheby’s International Wealth Report guesstimated that, in the coming five years, India’s High Net-worth Individuals (HNIs) and the ultra-rich would pump in about one billion pounds annually in the UK real estate, it was received with scepticism. But remittance under the Liberalized Remittance Scheme (LRS) rose exponentially, with the outflow touching an all-time high last year. What is more heartening is the fact that “purchase of property” remittances ranked quite high in the list. And with more Indians wanting to invest in properties abroad in a post-pandemic world, the figure is expected to grow further in 2021-22.
More Indians using LRS to close deals faster
And now, it’s March end and that time of the year once again – where Indian buyers wanting to invest in real estate make a beeline to avail the LRS benefits. Since the RBI caps the free remittance to $2,50,000 per individual per financial year, doing so towards the end of March means you don’t have to wait for another full year for the next remittance tranche as April will bring in another financial year, helping investors close deals within a month. It is expected that FY2021-2022 will see a huge jump in the LRS remittance as an offshoot of a new set of lifestyle changes the pandemic has brought about. For, despite the COVID-19 pandemic, HNIs/investors have shopped for new countries to base themselves in, either as residents or citizens with passports. In fact, as per reports, 2020 saw a 63 percent increase in wealthy Indians enquiring about citizenship by investment.
Popular destinations for buying properties abroad
When it comes to real estate in particular, the top destinations attracting Indians are the United Kingdom, The Netherlands, Germany, USA and Australia topping the charts. According to a 2019 report, over 3,000 Indian families own some of the most luxurious properties in London’s most affluential addresses. With its glitz and glam, Dubai is a great location, too!
Residency options providing visa-free access along with a host of other advantages are also becoming popular amongst HNIs, with the base investment being real estate. Some of the most popular and competitively priced residency programmes are offered by Portugal, Canada, and Austria – in that order. The Portugal Golden Residence Permit Program is the most popular one in Europe. It is a five-year residency-by-investment program for non-EU nationals, and permits the investor to work, study and live in Portugal, along with free passage to the entire Schengen passport region. The other sought-after passports were those of Austria, Malta and Turkey.
We have already seen an uptick on queries and purchases for international real estate. In fact, travel restrictions are in no way deterring Indian HNIs from making their international purchases owing to technology-enabled platforms. Some of these platforms allow potential buyers to see homes, virtually.
Why are HNIs buying property abroad?
The major reasons driving Indians to overseas destinations are diversification of assets, children’s education, better quality of life and a promising business environment. Buying commercial/residential property for investment purposes is emerging as another big factor.
Indian residential real estate has not appreciated much over the last several years. With the dollar and pound appreciating against the rupee, plus higher rental yields, foreign real estate options appear quite lucrative in the long run. A survey on Indians investing in residential properties overseas done some time back (an analysis of the markets of around 10 most-preferred countries), showed apartments in Dubai or an old villa in Europe that came at a cheaper price than, say, buying a bungalow in Delhi or an apartment in Mumbai.
As aspirations grow, we have noticed that the income brackets that can afford a piece of real estate abroad has also widened over the last five years. As per an Asia-Pacific Wealth Report, Indians were the highest investors in foreign real estate, with a 50 percent market share.
As economies around the world open up…
With more Indians getting vaccinated every passing day, we’re getting close to international travel. Businesses are opening up, the recruitment sector is picking up, and the summer of 2021 is almost upon us. The LRS route could be a boon for many Indian investors who are looking to own real estate assets abroad as a means to diversifying risk and getting higher returns.
Ashwin Chadha, Founder & President, India Sotheby's International Realty