Yes, there may be no place like home, but when it comes to investing in real estate, more and more Indians are looking beyond the shores of their motherland.

Malaysia, Dubai and Singapore are the current hotspots, and several other countries in South-east Asia are also seeing increasing interest. Of late, there has been growing demand for property in New York and London. “It’s not a significant trend yet but definitely a market is opening up,” says Anuj Puri of JLL Meghraj.

Realising the potential in selling real estate to Indians, the governments of several countries have launched attractive schemes to woo buyers. For instance, Dubai allows freehold property purchase by foreigners. Mauritius gives work permits to property owners, while Malaysia hands out 10-year visas without working rights.

“The majority [of buyers] are expats who have established themselves in the UAE and are either looking for a home for their family or for a good longterm investment,” says Manal Shaheen, director, Nakheel Group, a real estate firm in Dubai. In terms of affordability, too, it makes sense to look overseas. A house in Mumbai or Bengaluru can cost around Rs 4 crore. For that, you can buy a new property near London.

“Many are buying property in Dubai because it has no taxes. Even if you rent out your property, the income is tax-free,” adds Raja Kaushal, CEO (India), Better Homes, a realty firm in Dubai.

COUNTRY	PREFERRED LOCATIONS	PROPERTY PRICE Currency is US dollar	COMMENTS
Malaysia	Kuala Lumpur, Port Dickson, Penang	$75,000-200,000 for 2BHK	Can purchase property with a minimum value of MYR 250,000
Mauritius	South-west Mauritius	$500,000-750,000 for villas	Land area for villas cannot exceed 1.3 acres
Singapore	Districts 9, 10, 11 & 15, East Coast, Bishan, River Valley	$100,000-1 million for condominiums	Need approval from Singapore Land Authority for buying land
Thailand	Bangkok, Pattaya, Samui, Phuket	$60,000-250,000 for condominiums	Approval needed for property outside Bangkok and Pattaya
UAE	Dubai, Abu Dhabi, Ajman, Ras al-Khaimah	$85,000 (1BHK)- 400,000 (2BHK) with sea view	Can buy property only in designated “freehold” areas
UK	Glasgow, Birmingham, Manchester, London, county of Surrey	$150,000-500,000 in suburbs and outside London	No special incentive with purchase of property;you need to get a workers visa or a tourist visa

 

How do you begin? In the right situation and taking the right steps, investing abroad can be profitable. First, gather some general information on potential destinations. Study the rules and regulations regarding foreign ownership. “Indians intending to invest in property abroad must be aware of certain investment and liability risks they expose themselves to,” says Puri.

Once you have decided on a location, hire a licensed real estate agent who has experience with foreign investors. This will help you avoid costly mistakes or illegal transactions. Also, consult a notary.

“Foreign acquirers of real estate cannot let themselves be guided by their native feeling for what is right, but must first inform themselves in an unprejudiced way about the circumstances prevailing locally,” says Christian H Kalin, an international real estate expert. Money matters. Before you decide to invest in property abroad, ask yourself why you want to buy.

Do you intend to use the property? Or are you only looking at the investment potential? That's important to your initial outlay and your long- and short-term returns. Then see if you can afford property abroad. Remember that the cost will include the land price, as well as legal fees, taxes and visits to negotiate the deal.

HOW ADEQUATE IS $200,000 A YEAR LIMIT

$200,000 can get you a onebedroom flat or a condominium in a not-soprime location in most countries

But keep in mind the additional costs (like taxes and legal fees) involved in buying a property abroad

An option could be joint-ownership of property. Countries like the UK and the US permit joint ownership

You can club the investments with others and look for a bigger property for more than $200,000

But don’t overlook the tax and legal issues before making any purchase decision

As a foreigner you may not find mortgage firms offering you loans, so you will have to find the money elsewhere. Even if paying fully in cash is not mandatory, a deposit of at least 40% may be required. “For investments in the UK, companies like Savills have started offering loans to foreigners on a down payment of 30% of the cost of the property,” says Kaushal.

Know your risk tolerance because you may not be able to get out of an overseas market in a hurry. Taxing times. In a recent judgement, the Income Tax Tribunal ruled that the exemption offered by Section 54 of the Income Tax Act can be extended to property bought abroad.

So, to avoid paying capital gains tax on sale of such property, the profits can be invested in a residential house within two years after the sale. The limit is extended to three years in case of constructing a house.

In case of land, tax will be applicable in the country where you are investing and in India. So, if you buy a house in the US and hold it for less than a year, you are charged shortterm capital gains tax; holdings above one year are long term. As in India, long-term gains are relatively leniently taxed in the US.

Assume you buy a house in New York, which you sell after two years and make capital gains of $50,000. Under US law, you must pay 15% tax or $7,500. In India, this is a short-term gain, taxed at 33.99%; your tax liability will be $16,995 here.

The government will give you a tax credit of $7,500 that you have paid in the US, and you will have to pay $9,495; the benefits of long-term capital gains can be had only if you hold the property for more than three years.