Limits on the amount of money Indian residents can move out of the country means that to buy a home in the United States, they may have to pay in installments over several years, says JLL India boss, Anuj Puri
Indian investment in the United States real estate market is growing, but due to money-moving limits, some buyers may need to purchase in installments over several years, says a top agency chief.
Indian buyers spent an estimated US$5.8billion in the year to March 2014, up 6% year-on-year, according to data from the US National Association of Realtors.
They spent an average of US$459,028 (Rs2.81crore) on each property in popular destinations including Los Angeles, Las Vegas, Chicago, Dallas, and New York.
Anuj Puri, Chairman & Country Head of JLL India, says, “This is definitely an interesting finding. Indian HNIs who have obtained American citizenship and are settled there have several reasons for investing in properties in the US. Apart from India’s long-standing love affair with America and all things American, many Indians who have become naturalized US citizens have business interests as well as families in major American cities.
“Also, investment into the US property market is once again very favourable. After the steep post-Lehman downturn, countless investors had been able to snap up properties in American cities at unbelievably low prices, and these investments are seeing handsome returns now that the US real estate market is reviving.”
The Reserve Bank of India earlier capped outward remittances, making investment into foreign properties impossible, but recently the annual investment ceiling for individuals to buy overseas property under the Liberalized Remittances Scheme was increased from US$75,000 (Rs 45lakhs)-US$125,000 (Rs75lakhs).
“This enhanced investment limit is a small but important window. For example, a married couple can now together buy a small property in a US suburb if they have the inclination to do so. Previously, real estate as an option was entirely withdrawn from the LRS scheme and the limit purview.”
If an Indian resident wants to buy a house in the US worth US$460,000, he/she can do so in three or four installments, with a gap of one year between every two payments, he says.
However, since quite a few apartments in the US are currently held by institutional investors who had bought them as distressed properties during the global financial crisis, it is easy for a foreign buyer to make such deals with such institutions rather than with individual US house owners.
“The NAR report also mentions that of the total worth of apartments bought by Indians, close to 23% had a component of cash, which could either be held by Indians in their US bank accounts. This is particularly applicable to businessmen and exporters. Therefore, it is not necessary for these Indian buyers to bypass the RBI limit on asset purchases for big deals abroad.”
By Adrian Bishop, Editor, OPP Connect