Homing in on a foreign deal

When it comes to investing in real estate, most buyers do not venture beyond the cities they live in. However, there has been a gradual change in attitudes in the past few years and, today, Indian investors are not only looking for investing opportunities outside their cities, but beyond the country as well. While investing in the overseas market has always been an attractive option for high net worth individuals (HNIs), the trend has picked up now. A lot more Indians are ready to tap the global real estate market, be it for a second home, a retirement abode, a holiday hideout or simply as an investment.

From Arabesque-style houses and golf resort developments to luxury apartments and contemporary villas, there is a range of property options on offer globally. While countries such as the UK and those in South Asia are particularly attractive for the Indian buyers, the former is currently a good market to explore due to several reasons. To begin with, the pound-rupee exchange rate is down by about 15 per cent compared with that nearly an year ago. What adds to the charm is that in the UK, unlike in India, investors have to pay only a 10 per cent initial deposit till the completion of the project, resulting in an appreciation of the investment during the period. It's no surprise then that several UK property developers are keen to organise property-related promotional events in India.

Apart from the UK, Indians can also invest in the US, Europe and South Asian markets, with some emerging markets gaining in popularity. The prices start at Rs 1 crore and can go up to Rs 10 crore. According to the RBI guidelines, individuals can invest up to $200,000 (Rs 89 lakh) per year, which means a family of four can invest up to $800,000 (about Rs 3.5 crore) in a financial year. However, there is no monetary limit if the investment is by a company.

Though global investment is currently a niche segment, higher awareness will be created once active selling begins in India. This will result in a larger customer base for companies like Hamptons.

What is also facilitating transactions is that the agencies setting up base in India not only provide property options but help clients with mortgages and solicitors, and explain the legal intricacies of such investments. For instance, Hamptons offers its clients a range of services, including buying of properties, availing of bank loans through tie-ups with financial institutions and securing tenants for the property abroad so that they can repay the loan with the rent.

However, investors must exercise due caution and diligence before they consider investments in real estate abroad. Since property laws and the approach to buying and selling are different in various countries, it is advisable to deal with established and trusted property broking firms. The companies that have a good experience and global presence in the sector are likely to handle the complexities of investing in a more professional manner. It is also not advisable to invest in projects by companies or agencies that have no physical representation in India. Also, bear in mind that most foreign property markets have distinct regulatory mechanisms and, hence, it is important to have knowledge of local markets before investing. The other factors to consider include ensuring that the location offers sufficient appreciation potential, is free of litigation, has a clear title and is in a suitable neighbourhood.

As for financing, banks offer ready loans to overseas investors, but the down payment and interest rates are higher. These, however, are not big enough deterrents to let go of the global investing opportunities staring Indian investors in the face.

Chhavi Jagtiani is India Head, Hamptons International