Your Guide To Buying A Property Abroad
The trend of Indians buying properties abroad has seen an upward swing in the recent times. According to a report by United States National Association of Realtors, Indians bought properties in the country worth $5.8 billion in 2014. Most of the money was invested in Los Angeles, Las Vegas, Chicago, Dallas and New York. However, it is not only the United States real estate where Indians have shown some interest. Properties worth 13-billion dirham were bought by Indians in the oil-rich United Arab Emirates. Apart from this, the United Kingdom, Singapore and Malaysia are other popular destinations for Indian real estate buyers.
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Wide range of property appreciation The government gave much-needed fillip to property-purchasing abroad after certain rules were relaxed. The Reserve Bank of India (RBI) increased the purchasing limit to $1,25,000 annually from $75,000. With the new limit in place, which is over Rs 80 lakh, any Indian can buy a fairly decent property in three annual installments.
The biggest advantage of buying a property abroad is the ability to invest in growth markets. In the last decade or so, the Indian real estate has become pricier but the capital value appreciation has been very tardy—five per cent annually. For those who want to buy properties for investment purposes, the choices are limited to large cities in India. On the other hand, property business in the UK and Singapore are much more attractive in terms of pricing, thus allowing the rich to diversify their portfolio.
Yet another advantage is the distress sale of properties abroad. This is especially true in the US, where many homes are held by investors who are looking for exits. Indians, who are keen on buying them, will have to spend only a quarter of what they otherwise would have spent on a premium apartment in India. Such investments also allow the diversification of currency risk. If any rich Indian already has some commitments in terms of foreign currency, rent-bearing property investment can give much-needed bufffer.
Watch out for the taxBut here is a word of caution. As per the new rules, any Indian filing tax returns in India will have to disclose properties held abroad.
The Indian tax authorities treat income from properties held abroad on par with those in India. It is, hence, a subject of Indian tax laws. In addition, many countries have their own set of taxes abroad. It might happen so that the same income has been be taxed twice. To avoid such rules, check the tax laws of the country thoroughly before investing. Also, see if India has a double-tax avoidance treaty with that country. This will ensure that the forex you were hoping to earn stays with you, as opposed to flowing from your property into the kitties of various tax authorities.