Indians are investing in international markets, in prime real estate, for a variety of reasons. In the UK, they have become the leading investors.
The current period of geopolitical instability and economic volatility has spurred an increased interest in wealthy Indians to seek out alternative residency opportunities through investment in real estate or obtaining a second passport. This provides them with greater global mobility and a degree of protection against the risks associated with geopolitical changes. The pandemic has led many Ultra High Net Worth Individuals (UHNIs) to rethink their life choices and ponder upon the concept of ‘where is home’ as well as ‘what is freedom of movement’. In recent times, factors such as access to superior medical facilities, welfare benefits to citizens in times of uncertainty, attractive tax incentives, strong infrastructure and a resilient economy have become increasingly important for individuals looking for an ideal place to live or move have been the key factors defining the search for a citizenship by investment. In addition to the previously known benefits of international relocation, such as visa free travel, improved lifestyle and better educational and employment opportunities for children’s future, more people are now relocating abroad for a variety of other reasons. These may include access to better healthcare facilities, the ability to pursue their dreams, or even the potential to earn more money or build wealth.
The unprecedented global pandemic has had a significant impact on the Ultra High Net Worth Individuals (UHNIs) and their investment habits, with many opting to purchase high-end luxury real estate in domestic markets. However, as the world slowly recovers from the crisis, UHNIs have started to look beyond their homeland borders and have begun exploring international gateway cities for potential investments in 2021. New York, Miami, Toronto, London, Lisbon, Dubai, Singapore and Sydney are becoming increasingly popular destinations for Ultra High Net Worth Individuals (UHNIs) due to the unique attributes each of these cities possess. From exciting investment opportunities to luxurious lifestyle choices that these cities offer something special which makes them appealing to UHNIs. Whether it is the vibrant nightlife in New York or the sunny beaches of Miami or the multiculturalism of Toronto or the ancient history of London or the stunning architecture of Lisbon or breathtaking desert vistas of Dubai or world-famous shopping in Singapore and luxury lifestyle in Sydney – all these cities hope to gain from in 2021.
This highly-focused attention on real estate investments is not just limited to wealthy international individuals, and in the past twelve months, India’s ultra-high-net-worth citizens have exercised their considerable resources to purchase properties around the world. According to reports, India experienced an impressive 12% increase in total wealth when compared to the same period last year according to Credit Suisse.
According to the recent data released by the Reserve Bank of India, outward remittances under the Liberalised Remittance Scheme (LRS) have seen an impressive rise and are close to reaching $2 billion till November 2022. This money is primarily being utilised for travel, real estate investments and student education, thus making it a valuable source of foreign exchange for the Indian economy.
According to data gathered by the Ministry of External Affairs, approximately 600,000 citizens have renounced their Indian citizenship within the last five years, with a huge chunk of 40% leaving for the United States. This is a remarkable display of how much people are willing to forego their native land and embrace a new culture in order to start a new life.
Citizenship/Residency by investment in Real Estate too has become very popular in the last few years. Portugal, Spain and Greece are top favourite EU countries for such. Dubai too has gained popularity over the last year as UAE introduced a 10 year residency visa on investments of 2 mil AED in real estate. Indians are 43.5% of the UAE opulation according to estimates. The dubai real estate testimated sales of INR 35,500 crores to Indians last year which is almost double of the sales madein 2021. Majority of the home buyers were from Delhi NCR, Gujrat, Hyderabad and Punjab.
Indians are amongst the most prolific property owners in the capital of the United Kingdom, London, even outstripping native English citizens in terms of ownership. Indians – from those living and working in the UK for generations to Non-Resident Indians (NRIs), investors from other countries, students and families relocating to the United Kingdom for educational purposes – have become an integral part of the property market, becoming the biggest group of property owners in London.
The rise of the Global and financially conscious Indian has seen an increase in the popularity of property investment in recent years, not just as a second home but as a sensible and secure way to enhance their wealth portfolio. Factors that are taken into consideration when making these investments include:
Diversification is an important aspect of any successful wealth portfolio, and allocating assets across different classes and geographies can be a great way to optimize returns while mitigating risk. Rental returns in overseas markets have been known to outperform domestic markets, while established markets such as the US and the UK are typically more stable with less volatility.
On average, investors can expect to see returns of between 10-12% on their investments (capital value appreciation of 5%, rental return of 3-4%, and potential currency appreciation in a foreign asset of 2-3%). These returns are quite impressive and demonstrate the potential for significant long-term growth. One bedroom in Upper East Side, Manhattan or Prime Central London costs about 1 mil USD/GBP and it is important to plan a purchase keeping the LRS limits in mind to pay towards buying a property overseas. Usually family members combine their limits to buy a property overseas and spread prefer to buy an off plan property that completes between 1-3 years to maximise the usage of the LRS quotas.
Other reasons that you should consider when looking to purchase a property overseas include the ease of living and residency, the quality of life, infrastructure, tax benefits and a stable economy. All these factors come together to create an attractive environment for foreign investors and make it a great option for those looking for long-term growth or simply an escape from their home country.
ABOUT THE AUTHOR
Amit Goyal is CEO at Sotheby’s International Realty India & Sri Lanka.