Express hot tips: Realty hotspots abroad
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According to the Foreign Exchange Management Act (FEMA) a person resident in India can acquire property abroad by way of gift or inheritance from a person residing outside India. The Indian resident can also buy immovable property outside India during the duration of his employment in that country.
FEMA also allows the Indian resident the liberty to remit up to $200,000 per financial year, which also helps the person with cash much needed to buy the dream property outside India. That means a couple can invest $400,000 abroad. Let us examine three popular cities where Indians are buying property: Dubai, London and Singapore.
Dubai is an all-time favourite with Indians, owing to its proximity to India, as it is inflation-resistant, and the ease of buying property across all income levels. According to the Real Estate Investment Promotion and Management Centre at the Dubai Land Department, Indian investors have bought a total of 2,153 properties valued at Rs 5,670 crore (3.751 billion dirhams).
Areas like Jumeirah, Downtown Dubai and Marina are among the country's most popular and upscale locations. A 1,500-sq ft apartment in Downtown Dubai costs Rs 3-4 crore.
You need four main documents: a copy of your passport, proof of income for six months, bank statement for six months and credit history for 36 months. A buyer has to pay 1 per cent of the property price as registration charge. Loans are also available, but only for properties that have been constructed. The interest rates are higher at around 10-11 per cent, but are being lowered. The Real Estate Regulatory Authority of the United Arab Emirates keeps a very strict check on the quality of construction, design and material, and the physical and social infrastructure, which is why the buyer also has complete confidence in real estate here.
London has different rules for different boroughs. The prime central residential property prices average around £1.2 million. Though the demand properties is soaring, the supply is not keeping pace. According to the UK Office for National Statistics, the average price of a property in London is now £392,000. The UK is clearly an attractive location for international buyers from a business, education and property investment point of view.
However, you need to be very careful and do extra research, as the demand is on all time high and houses are scarce, so you might end up paying more for something that does not match your expectations. However, the good news is that there is a pipeline of upmarket housing projects in planning, or already under construction with 15,500 units slated for delivery by 2021. Stamp duty, transfer duty and registration charges are the important indirect costs.
To cash in on this situation, the State Bank of India is entering Britain's residential mortgage market, and will start to sell home loans through its 11-strong branch network and then through mortgage brokers from next year.
Singapore is a popular destination for professionals, especially those from the IT sector. However, property prices here have now slowed for eight consecutive quarters, as government measures to cool down the market have been effective.
Since 1973, the Singapore government has imposed restrictions on foreign ownership of all private residential property, governed by the Residential Property Act. This act was amended in 2005 allowing foreigners to purchase apartments in non-condominium developments of less than six levels without the need to obtain prior approval. A foreign national needs prior approval of the Minister of Law before purchasing restricted residential property. Its best to engage the services of a realtor.
In Singapore, properties are sold on either a freehold or leasehold tenure. You either can buy from the Housing Development Board (HDB), condominiums or landed property. A foreigner or Singapore Permanent Resident buying the first residential property including HDB flat would have to pay additional buyer's stamp duty (ABSD) at 5 per cent. If he owns an HDB flat and wants to upgrade to a private condominium unit, he will have to pay ABSD of 10 per cent as it will be his second property. Financing options too are available for foreigners.
Points to remember
Research the property laws, legal issues in that country, the particular city, especially concerning non-residents and non-citizens. Do factor in the frequency of travel to the city and check the residential formalities and regulations that will be effective once the property is yours. Go through a well-known and recognised property dealer/ firm which has offices in India, the location in question, as well as other places abroad. Research exchange rates, viable discounts, bargains and modalities of fund transfers and tax implications in that country.
Be it for the purpose of a second home or for children during studies abroad or even a holiday getaway, buying property abroad is no longer a distant dream. All you have to do is choose carefully and explore well before taking the final decision.
— The author is MD, Chintels India
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