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Dubai, Singapore, London are the top overseas markets for Indians
There is something about Indians and real estate investment. The growth of the Indian real estate sector has been testimony for this unexplained ardour. However, with sluggish realty markets in recent times and high overall pricing, many HNI Indians are investing in real estate overseas.
The growing interest in overseas real estate investment by Indians can be gauged from the fact that the total remittance for property purchase overseas in 2014-15 has been over $45 million.
Exploring real estate options overseas: A good idea?
One of the main reasons why overseas real estate investments are on the rise is the sluggish domestic market. High net worth individuals are buying property overseas for both investment purposes and personal consumption. Instead of buying a holiday home in the hills or in Goa, celebrities or high net worth individuals are looking at better options overseas.
Low and affordable prices: A premier property in an upcoming tourist destination for example may cost you close to the average cost of buying a 3-BHK apartment in Gurgaon. The slowdown in many foreign economies, especially in the US and the UK, over the last few years has also made real estate prices more affordable.
Higher upside in the coming years: Unlike Indian real estate market where prices have escalated to such high levels that a plateau of sorts has developed, prices in many overseas markets are likely to revive soon. The upside for real estate investments in the medium- to long-term is a big possibility for those countries that are making efforts to come out of the global economic slowdown. Countries like Thailand and Sri Lanka that are placing thrust on tourism are also likely to witness an appreciation in property prices in the medium term.
Transparency: Many foreign real estate markets work and operate in a much more transparent manner as compared to the Indian real estate sector. There are no delays or other red tape due to bureaucratic processes or paperwork.
Residency benefits: Some countries offer residency and citizenship benefits if you own a property in that country. So, if you plan to migrate at some point in the future to that country, investing in real estate can be a good way to attain an easy access to residency.
Overseas Hotspots of Indians
Some markets have a higher attraction for buyers than others.Top overseas markets are:
Dubai: Indians have been the highest contributors to Dubai’s real estate market. Dubai’s close proximity to India, its geopolitical position as the gateway to Europe and US, and fast appreciating rates make Dubai a prime overseas real estate investment hub.
Singapore: Singapore is another hotspot in Asia where Indians are investing in real estate. The large Indian population with attractive ambience is attractive.
London: London has always been a strong real estate market, but the current economic slowdown now means you can get properties at lower valuation making it an attractive market.
Things to know before investing in property overseas
Limit on investment amount: All your foreign real estate purchase comes under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India. Under the scheme, you can invest up to $250,000 (nearly Rs 1.6 crore) annually as an individual to purchase property overseas (revised in Feb 2015). So, if you are looking at a property higher than the threshold limit, you will have to bring a partner on board to make that purchase.
Higher rentals than capital appreciation: Unlike Indian real estate markets, where there is a higher capital appreciation year on year, foreign markets demonstrate better rental appreciation. So, do not hope to make a purchase and expect the prices to escalate overnight within a year or two. Be a long term player and seek rental income.
Invest in upcoming market: Dubai for example is a saturated market. Unless you have some specific motives, investing in Dubai real estate is very expensive. However, those who can afford it can make use of short-term capital appreciation. Singapore real estate market is also similar to Dubai’s when it comes to viability of real estate investments.
Taxation on overseas property: As an Indian citizen, you will be taxed in India on your global income. If you buy a property overseas and rent it out, your income will be added to the ‘Income from house property’ section in your ITR.
You will be required to pay local taxes in the country where you hold the property, depending upon the prevailing rules there. For that, you can avail a tax deduction of 30 per cent on your rental income.
If you sell your overseas real estate property, you will be liable for capital gains tax. For any property you hold more than 36 months, you will be taxed at the rate of 20 per cent of your income from sale after the indexation benefits.
The tax implications are also determined by your citizenship status as well as the duration of your stay in that foreign country.
Precautions before you invest in real estate overseas
You will have to consider all applicable taxation aspects and cost of property maintenance.
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