Tips To Buy Property Outside India
A compelling argument has been made for buying international real estate by the stagnating domestic market, simple financing choices abroad, tolerant government policies, and great rental returns.
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Real estate is the first investment that springs to mind for an Indian investor when asked to choose an alternative to stocks. However, the real estate industry in India has seen its own difficulties over the previous 10 years. Investors have turned to alternative investments like fixed income, commodities, and gold in quest of higher yields and more variety. But have you ever thought about buying real estate abroad? Indeed, a lot of Indians are starting to really contemplate it. The volume of cross-border investments is expanding, according to recent trends.
Even though more and more Indians are buying real estate abroad, London, New York, Singapore, and Dubai continue to be the top locations. Exotic vacation spots like Thailand, Malaysia, Southern France, Florida, and Mauritius are rapidly gaining favor with people wishing to invest in real estate abroad. While vacation destinations are being used as second homes by the wealthy and famous, London is appealing because of its guaranteed returns over a long horizon.
In comparison to comparable homes in Tier 1 Indian cities, the seaside resort of Pattaya offers three-bedroom independent properties for less than 60 to 70 lakhs. Indians who have either studied or worked in the US for a while appreciate the locations there. Due to its proximity to India and the sizeable Indian population in the city, Dubai remains attractive despite having expensive real estate.
Grand properties in other countries are no longer just for the very wealthy to own. However, in order to secure a decent price and prevent ensuing legal issues, a thorough study and organized strategy are definitely required.
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Factors To Consider When Buying Real Estate Abroad
- Make a thorough analysis of the rental growth in the recent past and what industry experts believe the growth to be if you're on the lookout for a possibility to invest.
- You can obtain assistance with anything from property identification and evaluation to property leasing, property upkeep, rent collection, and other asset-related issues with the aid of an experienced consultant.
- Choose a reputable real estate agent that is based in your country of residence so that they can help you through the process and you can hold them accountable if necessary.
- Make wise investing choices, such as closing the deal when the exchange rates are in your favor to receive the finest terms.
- You can buy houses that are still being developed in several nations and pay for them over a few years. Check out these properties if you're looking to park a little amount of money abroad and benefit from deferred payments. UAE, Malaysia, and Australia are a few examples.
- Visit the location both during the ideal season and during the off-season. After choosing the ideal location during a windy fall month, you don't want to be shocked by snowfall in the winter!
- Last but certainly the most vital, take feedback from those who have already bought a home in the area.
Notable Points To Ponder Before Investing in International Real Estate Outside India
Location
Indians have invested actively in countries like the US, UAE, and Australia among other destinations. These countries have a mature property investment market and provide easy remote management options and clear ownership laws. This makes them a safer investment choice compared to developing countries and even the domestic property market.
You should take factors like rental yield, simplicity of purchase and maintenance, and costs like stamp duty on entry and exit into account when choosing a location. You might want to take into account additional goals. When choosing, keep in mind that these could be a retirement house or a holiday property.
Capital Exchange
A citizen of India may invest in real estate abroad through the Reserve Bank of India's Liberalised Remittance Scheme (LRS). The LRS allows free transfers up to $250,000 per person per fiscal year. The property in question should, however, be in the names of all the people who have contributed to the remittance if more than one person pools their money to buy it. Additionally, you are permitted to send money in the names of minors and children.
An overseas bank account
For a foreign real estate investment, it is usually advisable to have a foreign bank account. For proof of funds, transferring the deposit and buying amounts, paying applicable duties, and paying handover charges, you will require a bank account. Having a foreign account after the acquisition facilitates collecting rent and covering maintenance costs. You will once more require an account if you ever decide to sell the property in order to receive the revenues and cover the costs associated with doing so. India finds it challenging and expensive to purchase and maintain property outside India.
Money and Mortgage
Most banks are hesitant to grant loan requests for foreign real estate Investment. It becomes challenging for Indian lenders to seize the property in the event that the borrower misses a payment. Foreign banks similarly do not offer mortgages to non-residents.
Tax Implications
The tax laws are subject to change depending on your location. So it is mandatory to understand these in detail prior to making any purchase of real estate or taking in a lease abroad.
Consider the scenario where a person from India buys a property abroad. In that instance, India will tax the rent that results from the property. However, if you paid taxes abroad, you can (for the majority of nations) claim a foreign tax credit in India.
The capital gains resulting from the sale of an overseas investment property in which you achieved sizable gains will likewise be taxable in India. Similar tax regulations apply to income, rentals, and capital gains from properties owned abroad as well as those in India.
How To Purchase A Home Abroad
We advise following these steps if you already have a chosen location for your new home abroad—
Build a Practical Budget
You don't need to go house hunting physically at this point; you may determine the market price for the type of property you wish to buy through independent online searches. Establish a budget range that you can realistically work with first. Make sure you first become prequalified if you intend to use a mortgage to pay for the buy. The parameters of what you should take into account when determining the price of your ideal new home will be given to you in this phase.
Hire a real estate agent
You may find the contact information for many estate agents by conducting a fast online search for real estate in your area of interest. It makes sense that the temptation to call or email these people can be strong.
However, hiring a property agent who is knowledgeable about the nation or region is the ideal way to go about purchasing real estate abroad. Make dealing with agents who have live listings or recent transactions in the nation a priority.
Individual Tax Identification Number
If you want to buy property outside India in countries like the US, then Individual Taxpayer Identification Number (ITIN) is a must.
Real Estate Audit
You can arrange inspections with the seller once the real estate agent compiles a list of suitable homes based on your criteria. Buying of real estate contracts in the United States, and Canada, may stipulate that a licensed house inspector must evaluate the property on the buyer's behalf before the transaction may be closed.
A real estate inspector will look over the property you want to buy and write up a report on its condition. You have the choice to cancel the sale or renegotiate the price in light of the inspection's results if the purchase agreement contains a clause mandating a home inspection.
Propose a Proposal
You cannot Buy a home without submitting an offer. There are currently two basic strategies to take into account. Before the inspection is completed, the first strategy is to make the offer, often known as a letter of intent to buy or buy an offer. In order to leave yourself leeway for negotiation depending on the inspection findings, you must include a home inspection contingency if you choose this course of action.
The second strategy is to arrange the inspection before making an offer to the seller. This strategy can give you more confidence if you are short on time or money. Once you have seen how the house is actually built, your offer will be more in line with the property's genuine value. The lack of a home inspection contingency will make the offer more appealing to the seller.
Buying Deal Restrictions
The buying offer is typically regarded as a legally binding document. However, a number of things that are often outlined in the contract must occur before the contract can be carried out.
Read the Agreement.
You may sign the contract if every provision has been agreed to and your lawyer is satisfied that it accurately captures everything. If the language being spoken is not your native tongue, you can ask for a translation into it. Make sure you comprehend every clause, especially the small print before you sign the sales deal. It could be difficult to withdraw from a contract after it has been signed.
Financing for the overseas home
Every real estate transaction is most important at this point. You won't have to worry about the manner of payment if you're using a mortgage to pay the entire price of the acquisition. You must determine how to transmit the funds to the seller whether you have a mortgage or are paying the complete buying price in cash.
Prominent International Markets For Indian Homebuyers
Rich Indians are investing abroad at record levels, according to the latest figures. Indians spent over $1.7 billion in stocks, bonds, foreign bank accounts, and real estate abroad in the fiscal year 2021–2022, according to the Reserve Bank of India (RBI). From the estimates for FY 2020–21, this amount implies an increase of nearly 40%.
Additionally, this amount was only $292 million in FY 2014–15. The COVID-19 outbreak and the uncertainty it has caused at home appear to have increased the tendency of rich Indians to invest abroad. Dubai, Toronto, London, and Sydney are just a few of the global places where Indians are permitted to purchase real estate.
Many affluent and upper-class Indians prefer to invest abroad due to stable currency values, higher returns on investments, attractive real estate legislation, residential options, and good living standards.
UAE
Due to its proximity to India (only a 3.5-hour flight away), Dubai, United Arab Emirates, is one of the most popular real estate investment locations for High Net Worth Individuals (HNIs).
The DTAA is a tax agreement signed by India and other nations to prevent double taxation on income received in both the source and the dwelling countries. Following the pandemic, Dubai's real estate trend has gained greater momentum.
Indians have been drawn to Dubai for a variety of reasons, but the ease of doing business, first-rate infrastructure, tax advantages, and resident visa choices have been the most widely cited ones. In addition, the region's demand for residential real estate has been boosted by the new Golden Visa rules.
USA
The USA allows non-citizens to Buy real estate using an "Individual Taxpayer Identification Number". Indians frequently invest in the United States. Indians are among the top five countries in the world for real estate investment, according to various estimations. Real estate prices in the aforementioned American cities start at roughly Rs 3 crore for a three-bedroom layout.
Canada
Indians are permitted to buy property in Canada, where many individuals relocate for higher education. Homes in these localities like Ontario or Melbourne typically cost between Rs 4 crore and Rs 7 crore.
Australia
Research found that over 35% of Indian citizens in cities like Melbourne are willing to spend more than Rs 4 crore on a home.
Portugal
You can obtain a Golden Visa under Portugal's resident visa scheme if you make a real estate investment of at least EUR 5,00,000. A person may also submit an application for a permanent residency program if the investment is made for a duration greater than five years. A Portuguese visa has benefits, including rapid and simple entry into the Schengen area and other EU member states. A two-bedroom house normally costs roughly Rs 2.2 crore in Portugal. Apartments and villas are often the most common housing options in Portugal.
Thailand
Land can only be yours in Thailand for a maximum lease of 90 years. The maximum lease term is typically 30 years, however, it can be extended for an additional two decades. The nation's beautiful beaches and tourist sector are well-known. In the well-known seaside city of Pattaya, a three-bedroom property costs roughly Rs 70 lakh. A three-bedroom house in Bangkok's capital may cost around Rs 80 lakh. Rules for real estate investing are, however, different for individuals and foreign-owned businesses.
Precautions To Take When Purchasing A Home Overseas
● Always remember to conduct due diligence during the process by consulting legal professionals.
● Do your own study or hire a reputable market specialist. Never follow what you have been instructed completely.
● After taking into account all the connected costs like taxes, maintenance, insurance, legal, and brokerage, don't forget to bargain the purchase price.
● Follow monitoring on the political and economic risks involved with making investments in the nation. Despite the fact that several European nations are among the most sought-after for real estate investment, it is challenging to place a bet on them at this point in the ongoing financial crisis.
● When buying a house abroad, be mindful of the tax ramifications as they can be rather complicated.
● One more thing that needs to be mentioned is that anyone making an investment overseas should make sure the property has a clear title deed and may be sold. The land should be officially cleared of any liens and disputes.
Final Takeaway
Investing in real estate outside of India can be satisfying and profitable if done with care and comprehensive research. The advice provided in this manual is useful for navigating the complicated world of foreign real estate investment.
Having a good grasp of your financial capabilities and goals is crucial. You will be able to make decisions that are in line with your investing strategy if you set a budget, take currency swings into account, and evaluate your long-term goals.
Furthermore, careful due diligence is crucial. This entails doing extensive study on the area's real estate market, governing laws, and tax ramifications. Engaging local professionals, such as estate agents and solicitors, can offer priceless insights and guarantee a simple buying process.
Risk management and diversification ought to be other important factors. Spreading the risk among several regions or asset types might improve return prospects. Making educated decisions also requires keeping up with geopolitical and economic changes in both India and the target international market.
In the end, buying real estate outside of India is a substantial commitment that demands careful planning and wise judgment. Investors can start a successful foreign property investment journey and possibly reap the rewards of capital growth, rental income, and worldwide diversification by following these recommendations and getting professional advice when necessary.
