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Simply Save | Why are Indians buying properties abroad?

According to the Reserve Bank of India (RBI), Indians bought property worth $113 million abroad in 2021-22. Akash Puri, director, International Business, India Sotheby's International Realty, says that the trend will continue.

October 19, 2022 / 11:42 AM IST

Under the Indian government’s Liberalised Remittance Scheme (LRS), all Indian nationals can send a sum of $250,000 abroad per financial year. When the scheme was started in 2004, it was just $25,000. Over time, the RBI has increased the limit.

So, where do Indians send their money?

You to send money for travel, holidays, medical treatment, gifts, donations, funding foreign studies and even buying property. In fact, in financial year 2021-22, investment in international property has been one of the most popular reasons for sending money abroad. According to the Reserve Bank of India (RBI), Indians bought property worth $113 million in 2021-22.

But why do Indians invest in property internationally in the first place, when they could very well buy a home or a plot of land or a commercial space right here in India?

Multiple reasons

Akash Puri, director, International Business, India Sotheby's International Realty, says there are many reasons behind Indians buying property abroad. Diversification of investment portfolios across asset classes and geographies, a currency hedge, investing in mature markets with less volatility and higher returns are among the major factors, he says.

Puri says ease of living, residency, quality of life, infrastructure, a stable economy and medical facilities as other dominant reasons why many rich Indians are increasingly setting up a second base on foreign shores. Besides, he adds, many Indians send their children abroad for studies and eventually consider buying a property there.

Puri was the guest on our Simply Save, Moneycontrol’s personal finance podcast. Puri, a founding team member of India Sotheby’s International Realty, leads the company’s international business. He specialises in finding properties suitable for those who wish to invest abroad. Sotheby’s International Realty boasts of being present in 81 countries and has 1,000 offices worldwide.

Below are key soundbytes, edited for clarity, from the podcast. Listen to the full podcast here to get some terrific insights into international property investing.

“Buying a property overseas is no longer wishful thinking. It has become a necessity. It is now considered prudent to buy a second home overseas.”

“Firstly, you are able to diversify your wealth portfolio across asset classes and geographies. If you are doing it in terms of an investment, you get higher rental yields than you would get in prime locations in India. Rental yields overseas, in prime locations across central London and New York (Upper Eastside, Manhattan), could be 3-4 percent. In Dubai, central locations can fetch you rental yields of as high as 5 percent. Not only has the capital value of your investment gone up, you also gain in terms of currency movements.”

“Real-estate returns can be in double digits if you invest in properties overseas. Take 5 percent capital appreciation, add about 3 percent as rental yields, and then about 3 percent more by way of currency depreciation. You are looking at, anywhere between, 10-12 percent returns on a yearly basis.”

“Covid-19 has changed things. Due to the pandemic, there has been a rethinking of what is a home, what does freedom of movement mean. You can, now, work out of your home — you don't have to be inside your office premises. That being the case, you can now work from any part of the world. Instead of having the view of another office building in front of you, you could be working in the hills.”

“Quality of life, proper infrastructure, good medical facilities, a desire to retire in safer destinations… people have all sorts of reasons to move abroad.”

“Is it an emotional decision or a deeper reason to buy property abroad? That depends on a person’s lifecycle. If I'm looking at it in terms of a second home, like an investment, then it is grey matter. I am making a calculated decision. But if I'm looking at quality of life, property I foresee using myself, visiting it often and not renting it out, then there is a softer reason behind my decision to buy a home abroad.”

“Look at your moneybox and ask yourself if you can afford to buy a home abroad. Can you pay for it up front or do you want to pay in instalments? Search for a good developer. Consider your locations well. Are there any risks in the country where I wish to buy a home? For instance, is the country likely to be engaged in a war?”

“Indians are very fond of buying properties in gateway cities; Miami, London, Dubai, Lisbon... These are great cultural hubs, they’re open and friendly locations, and boast of a global environment.”

“Make sure the title deed of the property is in place. Pick up locations that have a resale value. This is why you should buy homes that are as close to central areas as possible.”

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Kayezad E Adajania heads the personal finance bureau at Moneycontrol. He has been covering mutual funds and personal finance for the past two decades, having worked in Mint and Outlook Money magazine. Kayezad was the founding member of Mint’s personal finance team when it was set up in 2009.
first published: Oct 19, 2022 11:41 am