Important guidelines for buying a property outside India

With this slowdown within the Indian land market affecting the event of projects, it's going to be an honest time for wealthy buyers to think about the overseas property markets as well

The general consensus among many experts today, is that there's limited choice for brand spanking new land investments in India’s metropolitan regions, given the spiralling prices of land and the lack of confidence in Indian developers, due to their lack of transparency, poor construction quality and delays in completion of projects. Moreover, the economic slowdown in parts of Europe, has also contributed towards making properties abroad affordable. These factors have created opportunities for Indians, to have properties abroad.

Apart from the safety of investing within the land asset class, owning a property abroad is gave the impression to have several advantages for top net-worth individuals (HNIs) – the property may function a vacation home, an accommodation for kids who study abroad, and in some cases, it should even be a possible retirement destination.

How can one buy property outside India?

“The procedure to buy a property varies by region. For example, Singapore permits foreigners to get apartments (condominiums) but not land; while Thailand will allow foreigners only a leasehold title to the land for a renewable, but ultimately limited period of time; and in Dubai, apartments are sold as leasehold properties. For each country and property type, the due diligence requirements and buying procedures are different elaborates Rohan Bulchandani, co-founder and president, Real Estate Management Institute (REMI) and The Annet Group.

Bulchandani has several recommendations for those who wish to buy a property outside India:

  • Negotiate the acquisition price, after considering all the associated fees (legal, taxes, insurance, maintenance, brokerage, etc.).

  • Liaise with an area property broker/firm of repute, to know and assist you through the method.

  • Appoint an area lawyer, to help with the legal due diligence.

  • Enlist the services of tax consultants to suits tax regulations. In some cases, a firm may have offices in both countries.

  • Consider hiring a property management firm, which could lookout of leasing the property, collecting rent, payment of charges, maintenance, etc., after the property is purchased.

Make arrangements to remit funds overseas, for the acquisition. Under the liberalised remittance scheme (LRS), all resident (Indian) individuals, including minors, are allowed to remit USD 2, 50,000 per fiscal year. Thus, a family of 4 could remit up to USD 1,000,000 per annum. A resident Indian can use the LRS to acquire property.

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“While investing abroad, investors should scrutinise the credentials of the developer, the location of the project and the amenities it provides for residents. They should also evaluate the available home finance options and consider the community management aspects of the project, which can be crucial in determining the long-term value of the investment. According to him, Indians looking for realty abroad, could consider investing in a second home in Dubai. “Indians can check out property in Dubai, for long-term investments with good returns and for the rental yields that still be healthy,” he says.

Tax compliance

  • The tax implications of investing during a property abroad, are often quite complex. Income from property investments abroad, generally invites tax in India, also because the country during which the property is situated. One should also consider the stamp tax and estate duty implications, and other prevalent property taxes under the laws of the country, where the property is being purchased.

The investor should evaluate these costs and the manner in which they would be funded from India, before making the decision.

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