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Thousands of rich Indians are looking overseas for business, and also to pursue a better quality of life

Thousands of rich Indians are looking overseas for business, and also to pursue a better quality of life

Thousands of high net-worth individuals are increasingly dipping their toes in foreign waters to diversify their wealth, set up alternative residencies, conduct business or just pursue a better quality of life. It could be a sign of things to come

Investment visas or golden visas—where a couple of  million dollars of investment in another country buys you  a permanent residency—is increasingly the pick among  high net-worth individuals Investment visas or golden visas—where a couple of million dollars of investment in another country buys you a permanent residency—is increasingly the pick among high net-worth individuals

The grass is always greener on the other side. But what if you could get yourself a piece of that green grass from several pastures to hedge against a rainy day?

That seems to be the thought process across the spectrum of business owners, new-age entrepreneurs, corporate executives and skilled professionals, especially after the pandemic rudely awoke them to the risks of putting all their eggs in one basket. Those with the means to open up avenues abroad for themselves, be they for wealth diversification, expanding business operations, setting up alternative residencies, or just pursuing a better life, are gravitating towards a transnational existence. But this in no way means India is no longer an attractive destination. The country continues to be one, especially given the tag of being one of the fastest growing major economies in the world. However, scratch the surface and you’ll find that different sections have opened up channels for themselves to at least step out and be back in case of exigencies. Their reasons, routes and the destinations differ, but a backup plan sure doesn’t seem to hurt.

Investment visas or golden visas—where a couple of million dollars of investment in another country buys you a permanent residency—is increasingly the pick among high net-worth individuals (HNIs) and other wealthy Indians. “One of the biggest reasons for business people to go for it is to have a backup to feel secure. Tomorrow, if there’s another pandemic or anything else happens, they’d like to have a permanent residency overseas,” says Clint Khan, Director, Y-Axis Middle East DMCC, an immigration and visa consultant services company.

Nirbhay Handa, who is the Group Head of Business Development at the residence and citizenship planning company Henley & Partners, agrees. “Maybe there will be another crisis, be it a war as we have seen in Russia or a political crisis, or invasive fiscal policies hindering wealth preservation as we see in the US,” he says. Echoing Handa, wealth management service Julius Baer India’s head of Wealth Planning Sonali Pradhan points out that 70-80 per cent of such individuals have created an alternative residency option for themselves and are ready to move if a major disruption occurs. There are other interrelated factors at play as well that feed into the interest among Indians to create a Plan B. To begin with, Indian businesses wanting to expand overseas is a common phenomenon these days. And business owners increasingly find merit in supervising them by being close to these newer markets. This opens up alternative residency routes, which becomes an advantage when seen in the light of current geopolitical and macroeconomic instabilities.

For instance, Apollo Tyres Vice Chairman and MD Neeraj Kanwar relocated to London in 2013 when the company wanted to acquire the American firm Cooper Tires. Overseeing global strategic operations from there has helped de-risk the business and worked out also as an alternative residency for Kanwar. “If I had stayed in India, I would have been only an Indian company looking at only the Indian market. Today, when India is facing challenges on inflation and oil prices, Europe is also facing challenges, but has been a larger profit pool for the company,” says the 51-year-old Kanwar.

Similarly, Eicher Motors MD and CEO Siddhartha Lal relocated to London in 2015 to be close to Royal Enfield’s new R&D centre in Leicestershire. Hero Cycles Chairman and MD Pankaj Munjal also spends nine months a year in London to focus on the European e-bike market. Serum Institute of India CEO Adar Poonawalla shuttles between London and Pune, while Mahindra Group Chairman Anand Mahindra is also known to spend much of his time abroad. Business Today’s queries to them about their preference to stay abroad went unanswered.

As Y-Axis’ Khan points out, the number of businesses in India that are looking for bigger markets abroad has risen. “When we ask the business professionals whether they want a permanent residency (PR) or to run a business in that country, almost 90 per cent say both. Gone are the days when people wanted to expand operations because they just want to do a business; most of the business professionals now want a residency as well,” he says.

This also serves as a tool for wealth diversification in the face of macro instabilities. A European PR, for instance, requires you to make one investment in an asset class, which garners some return on investment in addition to giving you a Schengen residency. “Clients do one investment which gets them the visa, but once that’s in the making or already done, they start to do more,” says Nysa Global Managing Director Pankaj Joshi. He advises clients on expanding their global footprints, most of who have `20-50 crore surplus investible amount and belong to the 45-55 years age group.

Then, there’s the factor of increased tax rates—such as the Indian government raising surcharge on taxpayers whose income exceeds `5 crore to up to 37 per cent—nudging wealthy Indians towards foreign shores. In some cases, it pushes people to change tax residencies and migrate abroad. A recent Henley & Partners report projects that India will lose a net 8,000 HNIs in 2022. The number is the third highest globally after Russia and China, accounting for about 2 per cent of India’s HNI count. Most of the world’s HNIs are flocking to UAE, Australia and Singapore, the report says.

“A certain segment feels the return on investment on the tax they pay is very poor in India… Besides, the wealthy are also wary that the government will go after them to increase its tax collection,” says Joshi. Factoring in direct and indirect taxes, the tax burden on Indians in the highest bracket works out to a little less than 50 per cent. Yet, medical benefits, children’s education and social security are not covered. One ends up paying about the same amount of taxes in some of the developed countries as well, but the overall facilities and social securities are also much better, the experts observe.

At this stage, as per government data, from 2015 to 2021, more than 900,000 out of India’s total population of 1.3 billion have surrendered their passports. Although it is a small percentage, the worrying factor is that the number is rising year-on-year. This data also comes with a five to six year lag because that’s how long it takes for a permanent residency to turn into a citizenship in any country.

Crucially, Henley & Partners’ Handa points out that this drive to cross shores is not limited to just legacy business owners. The latest entrant to this trend is the start-up community, who, keen on multiple residencies, are opting for the structured residency investment programmes in countries like Portugal or Malta or the business and talent-based visas offered by the UAE or Australia and Singapore, respectively. But, as the experts explain, they lean more towards the latter because they don’t want their capital locked in investment programmes.

For the start-ups, a friendlier business environment, easier access to cheaper capital and talent as well as an openness to emerging fields such as crypto, fintech and Web3, are the primary attractions abroad. As per Henley & Partners’ ranking, Singapore and UAE are the top choices at the moment for entrepreneurs.

One edtech start-up founder, who moved to Dubai in 2016 to expand operations, says on the condition of anonymity that he is definitely noticing more entrepreneurs leaving through these routes today than before, although he himself did not go by this route. “In India, valuation rules, approvals and the trouble you can get into if something is interpreted wrongly because of arbitrary tax rules are all threats,” he says. According to him, water-tight documentation between the investor and the founder are enough to keep such distractions at bay in Singapore or Dubai. Besides, their low-tax regimes for an individual are an added advantage.

Earlier this year, for example, the founders of the Indian cryptocurrency exchange WazirX, Nischal Shetty and Siddharth Menon, moved to Dubai after regulatory uncertainties in India around the virtual currency. Crypto start-up Polygon’s founder Sandeep Nailwal too reportedly relocated to the Middle Eastern country two years ago. In fact, in an interview to Bloomberg this March, the entrepreneur had complained about the “crazy” crypto brain drain presently playing out in India. BT’s attempts at contacting him for a comment were unsuccessful.

Given entrepreneurs’ power to create jobs, countries like Canada and the UK are also wooing them with easy start-up visas. “So many people in India are looking at the UK and Canada start-up visas, which just need an innovative idea that can be turned into a business,” says Khan. While India boasts of achievements like ease of doing business, there are many regulations that can be cumbersome, especially if one wants to scale up or diversify, experts point out. No wonder, therefore, that whether it is a legacy business owner, or an entrepreneur, offshore jurisdictions do prove to be much easier at times.

As experts say, for many successful corporate executives—especially those who are 45-50-year-olds—the need to shift base abroad is also driven by the thought about their children’s future, and the need to give them a career boost. “They say they’ve professionally grown as much as possible in India and cannot grow anymore and that they would like to look at getting residencies done for their children,” says Khan. As a resident, the child can bypass the work permit-related hassles that they would otherwise have to go through as a foreign student. For instance, Joshi has a lot of clients telling him that they want their child to go abroad for higher studies, but they don’t want him or her to go through the struggles of finding jobs which sponsor a work visa. “Once the children start to settle there, the families also want to go,” Joshi adds. Navnit Singh, who is the executive search firm Korn Ferry International’s Chairman & Regional Managing Director for India, too, affirms that a lot of senior executives, given a choice, would also like to get transferred to global locations, preferably the US, where their children are studying or settled.

For decades now, skilled Indian professionals have migrated abroad on work permits and PR visas in the prime of their career, which is when they are between 30-45-years-old. However, TeamLease Services Co-founder & Vice Chairman, Manish Sabharwal sees it as positive for the country even if the Indian diaspora doubles to 50 million. “It will take remittances from $80 billion to $150 billion. At some point, remittances will equal India’s software exports. What is wrong with that,” he asks. Besides, having remittances improves India’s current account deficit—the difference between the value of goods and services a country imports and exports—which is usually lopsided because we import a large part of our energy requirements, he adds. But, it does dent India’s talent attractiveness quotient. India holds the 88th spot in INSEAD and Portulans Institute’s 2021 Global Talent Competitiveness Index of 134 countries—the lowest among BRICS countries. Incidentally, some of the non-European countries within the top 25 spots—Australia (11), Canada and the UAE (25)—are the very places India loses talent to.

As per the Indian government’s data, the US, Australia and Canada are the top destinations for Indians embracing foreign citizenship, with the latter two countries being the most sought-after destinations for working Indian professionals. American analytics and advisory firm Gallup’s analyst Julie Ray says Indians’ desired destination used to be the US for many years. “That has changed over the last few years and it’s shifted more to Canada and Australia,” she adds.

As per Khan, even well-settled skilled Indians with good jobs are looking three to four years ahead and are planning a backup for possible disruptions. Some of them are happy to go through the much more expensive investment category if the PR route takes longer than expected. As per Handa, large populations of professional NRIs in London, Dubai, Hong Kong and Singapore are on an employment pass or work permit now. “But if they are unable to get permanent residency or citizenship, they’d like to consider an alternative residence or a citizenship through investment.”

However, hardly 10-20 per cent of the investment visa/golden visa holders actually migrate, choosing instead to keep it as a backup option at this stage. Pradhan says the small category that wants to physically migrate has emerged all of a sudden in the past three to four years. “Whether through merit, investment, setting up a business or any possible option, they want to physically migrate out of India.”

Moreover, under India’s Liberalised Remittance Scheme—which allows resident Indians to remit funds outside the country—there is a limit to foreign outgo per person per year, with the upper threshold being capped at $250,000. This impedes higher conversions because it takes time to build a half-a-million-dollar corpus abroad—roughly the minimum requirement for investment programmes. However, the government’s revamp of the overseas investment framework—which allows investors to acquire 10 per cent stake in foreign companies among a host of other changes—may enable the trend.

The frequency of queries, however, shows that people are considering them. “During the pandemic, enquiry levels for migration products were at their highest although conversion wasn’t that high because people had started to really think about it,” says Joshi. Julius Baer gets migration enquiries from 100+ large families a year, and the number has been rising steadily.

Noticing the demand, countries are also pushing their migration plans to attract wealth, jobs and skills. For instance, Henley & Partners, which was catering to the country from its Dubai and Singapore centres, opened an India office in 2020. Betting on an increasing adoption of alternative destinations, Handa encapsulates the trend best when he observes: “Indian HNWIs of the 21st century possess an appetite for and willingness to emigrate and invest abroad.”

@SaysVidya