Checklist for buying a property abroad
Real estate is the most sought after property by Indians, besides gold and fixed deposits. Option of fractional real estate has also made it affordable to buy overseas property.
May 2023
3 mins read
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Aside from the security of investing in the real estate, owning a property abroad is perceived to have several benefits for high net-worth individuals (HNIs). The property may serve as a vacation home, an accommodation for children studying abroad, and in some cases, a potential retirement destination.
Diversification
When you buy a property in another country, your investment is not restricted to a single country or city. In today's market, investors have more chances to diversify their portfolios by investing in real estate abroad via foreign bank accounts, offshore credit unions, or international trusts that facilitate money transfers from one country to another. In addition, international real estate investments are less connected with domestic markets than stocks or bonds.
Choosing a destination
Indians have made significant investments in countries such as the United Kingdom, United States, Netherlands, Germany, United Arab Emirates, and Australia, among others. These countries feature an established real estate investment industry, accessible remote management choices, and well-defined ownership rules. This gives them a more secure investment option than underdeveloped countries.
When choosing a location, consider factors such as capital appreciation, rental income, convenience of purchase and maintenance, and expenses such as stamp duty on entry and exit.
Know the risks
Indians purchasing property in a foreign nation should be aware of the investment and liability risks they may face. Land rules for investing in immovable assets can be opaque and confusing in some nations. It is not wise to invest in any project announced by a company or vendor that does not have a physical presence in India. Second, keep in mind that most overseas property markets have their own regulatory and permission systems.
Liberalised Remittance Scheme
A resident individual can send remittances under the Liberalised Remittance Scheme (LRS) for purchasing immovable property outside India. If members of a family pool their remittances to purchase a property, then the property should be in the name of all the members who make the remittances. (Source:RBI) A resident individual can transfer $ 2.50 lakh abroad in a financial year. According to Budget 2023, an upfront tax of 20% will be deducted at source for any investment or spending other than medical or education. (Source: ET) Real estate investments would thus attract this tax.
Real Estate Investment Trust (REITs)
Instead of investing in physical assets directly, you can consider investing in REITs. REITs are similar to mutual funds. They pool money from people to invest in income-producing resident and commercial real estate properties. One can buy units of REITs through exchanges like BSE and NSE. Brookfield India, Mindspace Business, and Embassy Office are the listed REITs in India. Investors also have the option of investing in Real Estate Fund of Fund options through the mutual fund route.
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This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
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All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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