Navigating International Real Estate: Tips for Indian Investors Looking Abroad

India’s economic boom has helped Indian investors look at cross-border investment avenues. The Domestic Institutionalised Investors (DIIs) have increased their portfolios significantly in the last couple of years, and to everyone’s surprise, retail investors are also following suit. This bid to acquire overseas investment portfolios is driven by high net-worth individuals (HNIs), but the middle-class Indians are also opening up to the suggestion, particularly in the global real estate sectors.

Real estate has historically been perceived as a comparatively safer investment option for Indians, driven by cultural and societal aspirations. Owning lands, residential or commercial properties are embedded deep in the Indian value propositions, but the present push to foreign real estate sectors has received a boost from other aspects. Stability, supportive regulatory frameworks, significant returns and reduced risk exposures are attracting Indian investors to global real estate markets, rather than compared to a somewhat inflated domestic market. 

This notion is backed by statistics as well. While Indian real estate is in boom and has given multi-bagger returns in the last few years, it is also now comparable with premier global real estate destinations. For example, recent reports suggest that Mumbai currently features in the world's top 10 luxury real estate markets, while New Delhi and Bengaluru both make the cut in the top 50 and top 100 locations as well. This is driving the Indian investors for value-for-money propositions across borders, and here are a few tips for them to navigate the international market. 

Assessing Market Inflation

Buying at the deep has been one of the fundamental investment strategies for a long time, which can also be applied by Indian investors seeking to invest in the overseas real estate market. The USA, UK and UAE have been some of the preferred destinations for Indian investors interested in real estate, where interest rates have seen periodic climbs to 5% or more. However, authorities in these countries are known to maintain significantly lower interest rates near 0, which indicates the optimal time to invest in real estate assets with the highest possible discount.

Furthermore, REITs have been categorized by many investors as debt enablers, leading to a reduction of exposure amidst hiking interest rates. This is why many bluechip REITs are presently available for a significant discount up to 30%, which provides Indian investors to chip in their capital for a significant ROE. Prominent studies have revealed that REITs have often outperformed industry benchmarks and have registered up to 25% annual returns to its investors. With the added discounts, this enables Indian investors to achieve a successful investment journey in foreign real estate markets.

Identifying Potential 

Residential properties have always kept a hold on Indian investors, who have seldom preferred commercial real estate investments due to their complex and larger investment process. Similar to how fund houses operate in the equity sectors, Indian investors can take the help of REITs with good track records and future potential to invest in overseas properties.

By investing through REITs, Indian investors are empowered with expert advice, guidance, capital allocation and regulatory support. During various economic cycles, these REITs have adapted their strategies accordingly, thus proactively supporting their investors.

Alternative Business Structures

Choosing the right structure for your overseas property investment is key. While directly owning the property (Sole Proprietorship) might be suitable for low-risk scenarios, Limited Liability Companies (LLCs) offer better protection for your personal assets. For complex needs or tax optimization, consider a Special Purpose Vehicle (SPV). LLPs, though not ideal for direct ownership, can be valuable for managing investment funds, joint ventures, or specialized services within the real estate sector.

Understanding Market Trends

Overseas real estate market dynamics are being driven by sustainable development, technology-integration and affordable housing. These emerging trends are quickly aligning the focus with investors as well, promising substantial ROI to them. This offers a unique proposition to Indian investors to immerse themselves in innovative market trends, who can align their financial aspirations with domain-specific collaborations locally that provide benefits to both. Several foreign governments are also providing added support to investors who are infusing their capital in these innovative land development projects, giving Indian investors extra initiative to understand the market trends and make informed decisions.

Understanding Local & Overseas Regulations

Cross border investments are subject to maintaining both domestic and overseas regulations. Indian investors need to have a proper understanding of the Reserve Bank of India (RBI) guidelines regarding the Liberalised Remittance Scheme, which allows a yearly individual remittance of $250,000 for investments and related international expenditures. Similarly, Indian investors focusing on the US real estate market through the EB-5 visa must understand its regulations, allowing them to make informed decisions, licenses, permits, and timely paperwork. However, these can be done through leveraging productive collaborations with local partners like consultants, brokers and others at the targeted geographies, optimizing the investment process to a large extent.

Conclusion

The surge in cross-border real estate investments by Indian investors is driven by a combination of cultural values, attractive global market conditions, strategic investment opportunities, and supportive regulatory frameworks. By understanding market dynamics, utilizing REITs, selecting appropriate business structures, and complying with regulatory guidelines, investors can capitalize on the stability and potential high returns of international real estate markets. This trend not only reflects the growing financial acumen of Indian investors but also their ability to leverage global opportunities for substantial and diversified portfolios.

Authored By;

Ms. Sumi Rengaraj, Co- Founder, Ashton Gray. She is an accomplished entrepreneur and has made a name for herself in the construction and land development industries. She is currently involved in providing U.S. real estate investment opportunities to Indian investors. Over the years, her company grew to have a portfolio of over $600 million and an active and loyal investor base of over 700 investors globally.