There is no doubt that both Indians and NRI’s have in recent years shown a marked interested in NRI overseas property investment. NRI’s arguably have an added advantage that, they are able to understand the nuances of investments abroad, and also tend to have more funds available to diversify their investments internationally.

However, resident Indians are now also showing a much greater interest in buying property abroad. This article will look into the reasons for the huge interest in overseas property from Indians, who is buying, why there are buying, where they are buying, the advantages and potential pitfalls in buying property overseas, and tips for Indians wishing to take the plunge and invest in real estate overseas.

Even for NRIs settled in India, the stable Rupee and stagnant growth of Indian Real Estate, have prompted them to look overseas for better investment options for better growth. With the Reserve Bank of India (RBI) increasing the overseas remittance limit to 250,000 USD, the path for diversifying your investments abroad, across various asset categories, has become wider.

Among all the asset classes, real estate still remains the favorite asset class for both NRIs and settled Indians, and overseas property investment has become more and more common in India and the wider NRI community globally. The reasons for NRIs to invest in real estate abroad, may be due to frequent travel abroad, kids studying abroad or may have business interests abroad.

Another major factor for NRIs to tilt their real estate investments overseas, is that the properties in Indian metros are becoming increasingly expensive. Also, the real estate sector in India is plagued by a lack of transparency, delay in completion of projects, average construction quality and poor consumer protection laws. On the contrary, real estate markets in Europe, UK and US are highly transparent and the investors are able to make a fair and profitable deal faster, and avoid any scams or fraudulent transactions.

In the last few years, Indian investors and residents have been keen on overseas property investment. Places like London in the U.K., Dubai and Singapore have traditionally received most of their attention.  But, as of late, new opportunities have sprung up in Europe and elsewhere. Countries like Portugal and Spain have become more attractive for resident and non-resident Indians looking to invest in foreign real estate. And an another interesting pattern, as we will see below, is that even in countries such as the UK, Indian buyers are looking beyond London, and seeking out better investment opportunities in cities such as Manchester, Leeds, Birmingham and Liverpool.

Outside of Europe, places like Thailand are quickly becoming places of interest, offering lower price entry points than the Asian locations traditionally popular with Indians and NRIs, such as Singapore or Hong Kong.

Given all of that, it can be tough to know where to invest, or even if buying property abroad is worth your effort. That’s especially true if you’re new to the world of property investment.

Below, we will look at the benefits and potential pitfalls and drawbacks for Indians considering an overseas property investment.

Also, we will cover a few of the most popular places for buying property abroad and the legal and tax considerations you must know before investing.

Is an overseas property investment a good idea in 2023?

With how much fanfare the media has drummed up in the past few years surrounding overseas property investment for Indians, it’s fair if you ask yourself “Is buying property abroad actually worth it?” In other words, is the buzz warranted, or not?

The answer to that question isn’t simple, but we will try and puzzle out this topic by looking at a few of the benefits, as well as a few of the drawbacks of overseas real estate investment for Indians.

First of all, let’s talk about why so many Indians are now investing in real estate overseas. There are a lot of reasons, but the most important ones are: rising property prices in India, more transparent property markets overseas and, in the UK Europe, lower property prices as a result of economic troubles and incertainty over Brexit, as well as a strong Rupee compared to the British Pound and Euro.

Property investors aren’t the only people with an interest in overseas real estate, however. Business owners, company managers and individuals with high net worth from India have also taken an interest in overseas property investment. Parents whose children study abroad are another significant portion of buyers.

Let’s take a closer look at the reasons why Indians are investing more in overseas property today.

Rising property prices in India

Whether you’re a property investor, or just a resident of one of India’s metro areas, you’ve likely noticed that property prices have risen considerably in the past few years. An apartment in a prime location in Mumbai can cost you somewhere in the range of Rs. 29,000 to 75,000 per square foot. In Delhi, such a property can cost you in the range of Rs. 24,000 to 60,000 per square foot.

And while prices in Ahmedabad and Bengaluru are lower than in Delhi and Mumbai, an apartment in Bengaluru can still cost you anywhere between Rs. 19,000 and 27,000 per square foot. Moreover, prices in Ahmedabad rose by a stunning 8.8% last year.

Let’s compare this with one of the most popular places for Indians who’re interested in overseas property investment, Dubai. In Dubai, a downtown property can start at Dhs. 1,480 (Rs. 25,000) per square foot. When you consider that most such apartments in Dubai are furnished as well, it’s not hard to see why Indians are buying property in Dubai in their droves.

Lower prices of property overseas

In the past few years, property prices in countries like France, Italy and Spain have dropped markedly, and even in the UK, prices in some cities have dropped. That is the result of recent economic troubles across Europe and, to a lesser extent, the effect on Brexit on house prices in the UK.   Lower prices of real estate in Europe, coupled with over-inflated prices for real estate in India has led to a boom in interest in Indians looking to buy invest in property overseas.

Overseas Property Investments offer Indians currency diversification

It is an often overlooked advantage for Indians who are considering  an overseas property investment, that their purchasing power is significantly greater today than it was 4 or 5 years ago, as a result of a strong Rupee.  In recent years, the Indian currency has appreciated significantly compared to the Euro and the British Pound (and to a lesser extent, the US Dollar).

The Euro crisis, which greatly affected Greece (and more recently Italy), also had significant negative repercussions on the Eurozone currency, which fell sharply in relation the Indian Rupee, which during this time experienced huge economic expansion, and economic and political stability as a result, in part, of the leadership and government policies of the Modi administration.  And of course, in the UK, the British Pound has suffered as a result of the turmoil and political uncertainty surrounding Brexit.

Therefore, investing in European real estate now, offers a dual advantage – the benefit of currency diversification, as both GBP and Euro are stable currencies, and benefit of investing at lower prices. This is coupled by the fact that the rupee has traditionally been a fairly volatile currency.

With the European economy set for recovery, property investments made now are more likely to fetch solid returns in the future.

Overseas jurisdictions offer more transparent property markets

Another bugbear of the Indian real estate market is its transparency issues. As of this year, India’s real estate market is still considered “semi-transparent” by realty consultant JLL. While the situation has improved and will likely continue to do so, it is still fairly poor.

On the other hand, the United Kingdom currently leads the world in real estate market transparency.  Spain, Germany, Dubai and Singapore rank highly as well.

In Dubai, the situation is still markedly better than in India. A recent law has made it so that, in order to advertise property in Dubai, you must first submit documents to prove that you have the owner’s approval to do so. Indian investors can expect better standards and strict, but fair regulations in overseas markets. That cuts down on red tape and reduces fraud and shady practices.

It should be no surprise then that the United Kingdom, Spain, Germany, Dubai and Singapore are some of the most popular destinations for Indian investors.

Buying property abroad can offer residency to Indian nationals

Another key advantage of an overseas property investment is that the purchase may also offer the right of residency to the purchaser and his family.  For example, Spain offers a ‘Golden Visa’ programme whereby if a non-EU citizen purchases a property of at least €500,000, then they will receive full family residency.

This is a very flexible arrangement, in that there is no requirement to reside in these countries if the purchaser does not wish to, nor is there any requirement to stay in the country for a minimum period of time. Other countries offer similar programmes, such as Greece and Portugal.

For those Indians with bigger overseas property budgets, it is also possible to obtain citizenship by investment, whereby if the person invests more than a pre-requisite amount (usually more than €1,000,000), then they and their family can obtain citizenship in that country. Cyprus and Malta offer such programmes, although the drawbacks are that the process to obtain citizenship is a lengthy one, and in some cases can take 18 months or longer.

Who is Buying Property Overseas?

Traditionally, it was high net worth individuals in India who would buy real estate overseas. This group of people would generally tend to buy high end, luxury properties in the best locations, such as Belgravia and Knightsbridge in London, Manhattan in New York or Paris, France. These purchases were more ‘trophy’ purchases, status symbols like expensive cars, watches or luxury yachts.  Very little thought was given to potential capital appreciation, to rental yields, and so forth.

However, today this is not the case. Buyers come from a wide variety of backgrounds, professions, and are not solely comprised of wealthy HNI Indians.

The international property consultancy, Knight Frank, recently published it’s survey on Indians who purchased overseas real estate, in conjunction with International Real Estate Expo (IREX), who organize an annual international real estate expo.

Indeed, many buyer of overseas properties are middle class professionals, who instead of buying some land, or a property in India as an investment for the future, are now looking further afield for higher yields and capital appreciation.

As Samantak Das, head of research at Knight Frank in India noted, 68% of buyers who invest in overseas properties were businessmen, and a further 21% were self-employed or classified as traders.

Why are Indians buying property overseas?

Today, Indians are buying property for a variety of reasons. As mentioned above, Indian buyers of overseas real estate were traditionally very wealthy HNIs, who bought exclusive propeties in exclusive locations – however, the picture today is very different.

Indians and NRIs who are buying property abroad are generally not purchasing ‘trophy’ assets, such as luxury apartments and villas in Belgravia or Paris, but are generally buying apartments and more moderately priced properties – and are conducting comprehensive research to ensure their purchase offers maximum scope for capital appreciation as well as high rental yield.

As the Knight Frank report noted, 79% of Indians purchased property less than 1,500 square feet, and 89% of Indian purchasers spent less than $1 million (approx €860,000, or £770,000).

Indian buyers are also searching for better investment yields and potential for capital appreciation.  Indians looking to purchase property in the UK, for example, are therefore starting to shun the prime areas of London, which are seen to be over-priced, and very little in the way of investment yields, in favour of cities further afield, such as Manchester, Liverpool and Leeds. These cities offer much better investment yields and potential for capital appreciation.

In addition to buying property overseas for investment, more and more Indians are buying with a view to permanently locating overseas, and see an overseas property as a first step in that process. The reasons for moving overseas are varied – from working, studying, or the aspirational status symbol of having a second home overseas, to take extended holidays.

Ease of Buying Property Overseas

Another reason for the increase in Indians looking to invest in property overseas is that technological changes in recent years has made it so much easier to research suitable.  Of course, the internet has been with us for more than 20 years, but it is only in recent years that

This, coupled with the fact the international property companies and developers are taking a much keener interest in marketing their products to the Indian market, means that there is much more information available to potential buyers in India

In addition

Conclusion: Should I look into overseas property investment?

As stated above, the answer to that question isn’t simple. However, there are a few things that you must consider first.

Real estate markets abroad are different from India’s market. If you’re an investor, you must realise that a high risk approach and a long investment horizon are key to determining the success of an overseas property investment from India. Also, as an resident Indian or NRI investor, you should ideally only invest in locations that you’re familiar with.

Tax, remittance and inheritance rules are also factors that you must consider before buying property abroad. We will cover that in more detail in a later section. In any case, as a foreign investor, you must both be mindful of India’s laws, as well as the laws of your destination country.

Buying Property Overseas: A word of caution

You have to exercise utmost caution before embarking on an overseas property investment. Though the RBI allows remittance of $200,000 annually, you have to determine what is the limit for foreign investment, allowed in the country of your choice.  Many countries have restrictions on foreign investments in Real Estate. For e.g., Singapore allows foreigners to own apartments, but not land.

So, before you make a move to buy a property abroad, you should consider the laws in India as well as the law of the land of your chosen property, regarding foreign investment policies. You should also check succession and inheritance laws. You should consider the cost of stamp duty and other prevalent property taxes of the country, in which the property is being purchased.

As a foreign investor, you might also be required to pay higher charges for your overseas property investment, as well as the property registration. Also, due diligence is a must for the property titles and records. It is best to hire a local agent and legal consultant to ensure the cost of purchase and the process of selling-buying is accurate.

As an NRI interested in overseas property investment, it makes sense to hire a property consultant who is well aware of the property purchase formalities in the destination country. You should also consult a tax specialist who is aware if the tax laws of both India and the destination country.

Another major factor to consider is the tax laws in India for gains/income from overseas investments and tax laws in the destination country for the same. Unless, there is a Double Taxation Avoidance Agreement (DTSS) between India and the destination country, you would be paying a hefty sum as taxes on any gains made by sale or any income generated as rent. Fortunately, India has DTAA with a lot of countries and you may be able to take benefit of the DTAA. We will dive deeper into the tax issues of buying a property abroad later on in this article.

What are the best places to look for an overseas property investment?

United Kingdom

In 2012, UK property buyers from India contributed a paltry 5% of the foreign investment in central London’s prime real estate. By mid-2017, Indians contributed 22% of foreign real estate investment in the City of Westminster and Kensington-Chelsea.

However, in the last couple of years, a surplus of luxury flats have forced sellers to drop prices by as much as 20% or 25%.  Alongside buyers from the Middle East, Russia and Nigeria, Indians have traditionally taken to buying property in affluent neighborhoods like Mayfair, South Kensington and Belgravia.

However, as noted above, in recent years, Indian investors have spread their wings beyond London, and have found much more profitable investments in cities such as Manchester, Liverpool and Leeds.  These cities in the North of England have in recent years received a lot of government funding, to enhance transport infrastructure and regenerate once run down areas.

The attractions of investing in property in the UK are clear: a well established and transparent purchasing process, a fair and transparent legal system based on common law, in the case of any legal disputes.  The UK, despite Brexit, is a politically stable democracy, with a strong economy.

In addition, the UK mortgage market is one of the most developed and liquid in the world.  If you need a UK expat mortgage there are specialist brokers who will help you to find a very competitive mortage loan with favourable terms and conditions, and you will be able to get a loan of up to 75% of the value of the property. This makes the UK a very attractive proposition for those seeking a good overseas property investment.

United Arab Emirates

In the past few years, with rising property prices in cities like Delhi and Mumbai, Indians and NRIs have set their sights on Dubai. Today, Indians contribute an amazing 28% of foreign real estate investment in Dubai. In the first half of 2017 alone, Indians bought Dhs. 26.8 billion worth of real estate in Dubai. Indians still lead in foreign investments in Dubai, alongside the British, Chinese and Pakistanis.

Dubai’s tax-free environment, infrastructure growth, transparent market and geographical closeness to India are a few of the major reasons for why Indians and NRIs consider Dubai and UAE to be a solid destination for overseas property investment.

Thailand

With its growing tourism industry and stable economy, Thailand has become a place of interest for Indians and NRIs looking for a good overseas property investment. Bangkok, in particular, has caught the eye of investors. In 2017, Bangkok was the No. 1 most visited city in the world, beating out cities like London and Paris.

Thailand’s low tax rates on rental income is a major reason why investors are interested in this jurisdiction.

That said, investing in Thailand has its drawbacks. In Thailand, foreigners are only able to lease land. However, they are able to own condos, so long as they don’t own over 49% of the total area of the condo building.

As a result, Indian investors are mostly interested in the condo market in Thailand. In Pattaya, for example, a condo can be as low as Rs. 35 lakh.

United States

Did you know that by March 2017, Indians had become the fifth largest investors in U.S. real estate in the past year? In spite of new visa rules, the growth of the U.S. dollar and a recent protectionist streak, NRIs and Indian investors haven’t lost interest in the U.S. realty market.

Of the $153 billion invested in U.S. real estate by foreigners between April 2016 and March 2017, Indians contributed $7.8 billion. Most foreigners see the U.S. as a safe place to live, work and invest in. As well, the U.S. realty market is usually more stable than the Indian property market.

Portugal

With Portugal’s business-friendly environment, developed IT infrastructure and fair property value, it should be no surprise that Indian investors are paying close attention to Portugal.

In the past few years, Portugal has taken measures to simplify tax procedures for foreign investors. Its recently-launched Golden Visa program is another way the Portuguese government is hoping to attract foreign investors. This program is meant to make the process of obtaining a residency permit for foreigner investors quicker and less painful.

What’s more, Portugal’s own Prime Minister, António Costa, has promised that his country will advocate for India’s business interests in Europe. As a result of all of this, Portugal is a prime entryway for Indian investors into Europe.

France

After Brexit, the U.K. lost its position as India’s gateway to the European Union. In its place, countries like Portugal and France are in a race to catch India’s eye, and have become increasingly popular destinations for NRI overseas property investments.

The Paris real estate market is one of the world’s most appraised. And with only a paltry 57% of French citizens owning their own property, there is plenty of room for NRIs and Indians to invest in the property market there.

Investing in France has its drawbacks, however. Namely, high taxes and a few tricky laws. Property prices in Paris are also very unforgiving. Still, property in more rural areas remains quite affordable for somewhat higher net worth individuals. At the end of the day, France is a location for professional property investors to look into.

Singapore

Last, but certainly not least, we have Singapore. It’s no secret that India and Singapore share a deep connection, businesswise and in other ways. That connection stems from geographical closeness, but also culture. Singapore derives its name from the Sanskrit words “simha” and “pura”, meaning “lion” and “city” respectively. What’s more, nearly 10% of Singapore citizens are ethnically Indian or Sri Lankan. Indian cuisine is, of course, a staple in Singapore. And a number of Indian languages are taught in schools. This mas made the country an attractive proposition for overseas property investing for NRIs and Indians for many years.

In the early 1990s, as India liberalised its economy, Singapore took steps to turn India into an important trade and investment partner. And today, that bond is closer than ever.

Indeed, the Lion City has earned its name in every way. Singapore is close to overtaking Switzerland in its share of the world’s agricultural and commodity trade. Singapore’s robust financial markets now fund around 4 billion people in the region alone.

Given all of that, Indians are hardly the only ones to have taken interest in Singapore. However, Chinese investors, who traditionally went to Hong Kong or Singapore, have now begun to focus more on the U.S., Canada and Australia.

As a result, Indian investors have more room in Singapore than ever before.

Legal issues to Buying Property Abroad

Despite its many benefits, overseas property investment carries with it a host of legal issues that you must consider first. The Indian government has made strides in this regard and it is easier now than ever before for an Indian to invest outside the country. However, buying property abroad has a number of legal and tax implications.

Liberalised Remittance Scheme

In 1999, Parliament passed the Foreign Exchange Management Act (FEMA), which now regulates the purchase of property abroad for Indian residents. Residents of India can invest in overseas property with permission from the Reserve Bank of India (RBI).

However, Indian residents don’t need the RBI’s approval under certain circumstances, which FEMA defines. There are three main ways in which an Indian resident can buy property abroad without the RBI’s prior approval. They can purchase overseas property jointly with a non-resident relative, with funds from a Resident Foreign Currency (RFC) account and through the Liberalised Remittance Scheme (LRS).

However, for Indian residents who plan on buying property abroad jointly with a non-resident relative, the overseas property must be purchased with funds from outside the country.

Through the LRS, Indian residents can purchase property, acquire shares, debt and invest in mutual funds abroad. From 2015, Indian residents have been able to remit up to $250,000 in funds abroad, up from $200,000. The funds can be pooled together with family members, with whom you can jointly purchase property abroad.

LRS is available to all residents of India, including minors through their natural guardians.  However, it is not available to corporate entities, trusts or partnership firms.

The RBI permits Indian companies, limited-liability partnerships (LLPs) and other Indian entities to invest in or set up foreign companies. The foreign companies can then buy real estate overseas. Indian entities (any registered partnerships) can invest up to $1 billion a year into such companies.

Individuals and corporate entities can remit more money and purchase property abroad with the RBI’s approval.

Tax implications of investing in property abroad for Indians

Tax rules for overseas property investments are usually determined by your citizenship status and the length of your stay in whichever foreign country you plan to purchase property in.

For example, an Indian who decides to make an overseas property investment in the U.S. and is in the U.S. for a 30-day (one month) period will be considered an “ordinarily resident” in India. An ordinarily resident’s income is still taxable in India, thus any rent income will be taxable in both the U.S. and in India.

However, the U.S. and a number of other countries have a “Double Tax Avoidance Agreement” (DTAA) with India. The DTAA gives resident and ordinarily resident Indians who own property abroad two options to avoid the above scenario:

• Their income will be taxed in either India or the other country, but not both. That depends on the terms of the agreement with that country.

• India shall deduct from their tax an amount equivalent to their income tax in the other country.

Inheritance laws are another factor you must consider before settling on where to purchase property abroad.

Tips to buy real estate overseas for NRIs

As we conclude this article, here are some final tips to bear in mind if you choose to take the plunge and invest in property overseas:

• Never accept the quoted price immediately. Bargain Hard.
• If you can, visit the place multiple times, when the property looks the best and also, during the off-season (if you are purchasing a home in a holiday resort or destination).
• If you are buying an older property which requires refurbishment, get an estimate of the local cost of the repairs, before purchase.
• Hire an independent legal advisor, who can help you with due diligence and determine the process of the purchase transaction for your overseas property investment.
• Hire a tax consultant, who can help you with Indian tax laws as well as in the country in which you are buying the property.
• Make suitable arrangements through banks in India and abroad, to remit funds overseas as well as to receive income from abroad.
• Know beforehand, the intention of your purchase of your overseas property investment. If you plan to invest for growth, go for an apartment in a city which can fetch you rent as well appreciate in value. If you want to buy a holiday home, choose an area that you will feel comfortable in. However, also bear in mind that you may need to sell the property at short notice 9perhaps if thereis a family emergency, of if funds are needed urgently). Therefore, a buyer still needs to take in to consideration the potential ease of reselling the property quickly – with this is in mind, think about the local infrastructure, distance from airports, local amenities etc.

Final thoughts on NRI and Indian investments in property overseas

Overseas property investment isn’t for everyone. The process can be difficult and costly. And not all foreign investments are necessarily safe. That’s why you must consider where to invest and the property you want to purchase carefully. A country with a transparent real estate market and little red tape is where you ideally want to look.

The laws of real estate investment vary from one country to another. You must be diligent about learning and abiding by the law of the land, wherever it is you purchase real estate. And, you must be aware of the laws in India, including tax, remittance and inheritance rules.

Hopefully, our article has helped you better understand the benefits and drawbacks of overseas property investment. While it isn’t for the lighthearted, it can bring great returns and can be a socially desirable move to make.