Global cities like London, Dubai and Singapore seem to be the popular destinations for most wealthy Indians, who’re opting to invest in homes abroad.
If you’re living in India, especially Mumbai, one popular topic of conversation is the ‘realty prices’. Everyone agrees that its too high but are not sure why.
And we are not even taking about South Mumbai (reserved for the big businessmen & industrialists) or even Juhu (reserved for Bollywood film-stars).
Residential real estate prices in Mumbai are now on par with those in cities such as Dubai, Los Angeles, Miami, Rome and Tokyo. Yes, that’s correct!
But the infrastructure, cleaner environment, playgrounds, parks are missing. Also, it seems that the population growth in cities such as New Delhi and Mumbai would never end.
No wonder then that the ultra-rich Indians are buying abroad!
More Reasons for Buying
There are also a few more reasons why Indians are looking abroad to invest in properties.
Indian real estate buyers are looking for either a second home, or want a place to holiday in, or some buy because their children are studying abroad.
Education and business-related interests are the major drivers behind such acquisitions.
Then there are people who are working outside India and for whom buying a home in the country they are employed in makes more sense than buying one in India.
The lifestyle benefits such as a clean environment, better managed public infrastructure, entertainment facilities, health and sanitation that you get in cities such as London and New York, and the safe haven status that some of these cities offer because of their ability to better withstand global financial and economic turmoil, makes them even more attractive.
Increasing globalization, comparable valuations overseas and investment considerations, are few factors that are driving them to buy.
Does It Offer Good Appreciation?
The global financial crisis and recession that followed the collapse of Wall Street investment bank Lehman Brothers Holdings Inc. in September 2008 opened up the foreign real estate market to Indian buyers.
As European and American home owners struggled to repay their mortgages, the property prices plunged. It was then that those Indians who had access to spare cash pounced on the opportunity. And it definitely seemed to be the right moment to buy, as the investments of those who had bought then definitely seemed to have increased in value.
Besides, prime residential and commercial property in relatively risk-free locations has always attracted investors in times of economic and political turbulence. Once good thing about tangible assets is that, barring natural disaster, they usually retain their inherent value over time, even if prices may dip somewhat in the short term.
No Emotional Decisions Here
Its not that Indian consumer’s are buying just because they have the money to splurge. Their investment in properties abroad is backed by solid reasoning.
For example, for tax-free investments Indians are looking at Dubai, whereas Singapore is a favorite because of its booming economy and its its proximity to India. For those looking for good rentals, the current favorite is London.
Familiarity with the markets is the biggest ‘make or break’ factor for all Indian consumers. Despite the many attractive options available widely, Indians still gravitate towards tried-and-tested markets mostly.
Besides, consumer knowledge has grown tremendously and the Indians buying abroad are doing so with more information than ever. Understanding of the markets has changed with more information available about the various markets. That’s why more Indians are buying property outside the country today as compared to five years back.
Where Are They Buying?
Indian ultra high networth individuals (HNIs) are owning luxury residential properties abroad with London, Singapore, Australia, Middle East – including Dubai, Abu Dhabi & Muscat, and even the US being the more popular destinations.
And even there, most are looking at some of the fanciest districts in the world, such as Kensington, Belgravia or Holland Park in London or prestigious locations such as the Burj in Dubai and Nassim Road in Singapore, which are among the most popular global locations.
Each of these locations offer their own unique advantages to the Indian buyer.
- Dubai, UAE is attractive because of its proximity, easy access, tax benefits, liquidity. (Most of our Bollywood stars already own properties in Dubai)
- London, UK. is attractive because of English language, large Indian diaspora, high quality builds, recovering market.
- Singapore is attractive because of its proximity, easy access, tax benefits, vibrant lifestyle, connectivity.
- Australia is attractive because of its education standards, vibrant lifestyle, connectivity.
What Are They Buying?
The size, scale, location & prices of the property bought differs based on the needs and resources of the individuals.
London and Singapore are the most popular and also some of the most expensive markets.
- Usually, a good starting price for a decent property in these places is around $1 million.
- Dubai presents opportunities to grab early-stage investments (i.e. bargains) and a good price there would be around $300,000.
- Malaysia would be similar to Dubai in terms of prices
For some it can also be a status symbol! For instance, would you spend £2-3 million for a house in India or would you rather increase your budget & spend around £10 million to buy a property in a prime location in London?
Some of the properties in central London, which is one of the most popular destinations, would cost anywhere between £3 million and £15 million. There are many Indians who see the benefit of spending more and opting for those prime properties in London.
Depending on the way the Rupee fluctuates against the global currencies, the Reserve Bank of India (RBI) may occasionally bring in rules governing the outflow of dollars to stem the rupee’s decline against the dollar.
Though such moves by RBI are temporary, it does make the buyers more cautious. A recent change made by RBI has made investing in properties abroad a less viable proposition (as per a consultant working with a global property consultancy).
However, it may be too early to say how this is going to impact the buying behavior of Indians.
Do Indians Have So Much Money?
According to the Forbes Billionaires List, the number of Indian billionaires increased 12 percent compared to last year (55 as compared to 48 last year).
As per Knight Frank’s, despite the recent economic concerns, the number of HNIs in India is expected to more than double over the next 10 years, rising 137% in Mumbai alone.
Most investment banks define an ultra HNI household as one having a minimum average net worth of Rs.25 crore, essentially accumulated over the past 10 years. The latest report pegs the number of such households in the country at more than 100,900, which is poised to more than triple to over 329,000 by 2017-18.
Indians Have Arrived
Though most would believe that tax is one of the major reasons that the rich Indians buy properties abroad. However that’s only a part of the picture, the fact is that they also value the lifestyle that comes with an open, cosmopolitan environment and the security that it provides (personal as well as to the property) besides providing a long-term safe haven for capital. For some, its also a status symbol if you own properties abroad. Irrespective, for the new rich Indians (HNIs) of today, it seems no place is too far to go and no price is too high to pay!