The great Indian plot craze abroad
Indians' investment there rises as top destinations like Singapore and Dubai head the list, writes Sushmita Bose.india Updated: Sep 23, 2006 02:42 IST
The reserve Bank of India does not allow Indian citizens to invest more than $25,000 per person a year in real estate abroad. That works out to Rs 11.5 lakh; one would not get even a decent apartment in a Tier II city in India with that kind of money. But Indians are still buying property abroad — often at top -end prices.
“Indians are next only to Malaysians among foreigners who buy real estate in Singapore,” says David Neubronner, executive director, Savills Residential-Singapore. Property rates range between 1,000 Singapore dollar (about Rs 30,000) per sq ft and 3,000 Singapore dollar.
The other top destinations? Dubai, London and New York. “The kind of Indian who wants to invest in property abroad is extremely affluent, has business interests at a particular place or visits that place often because of family or sentimental reasons,” says Pankaj Ranjan, regional director of global realtors Trammell Crow Meghraj.
Actor Shah Rukh Khan has purchased property in Dubai, which earlier did not allow foreigners to buy real estate. In 2002, it announced free zones for property holdings.
Most real-estate dealers shy away from discussing transaction details because there is a cloud over the purchase procedure. Kaviraj Singh, partner, Trustman & Co, a law firm specialising in real estate, says, "The RBI regulation basically means that if the valuation is below the cap, the approval is automatic; when the value is more, you may prepare a project report and make a case to the government — which may or may not be passed."
But usually, "people form companies in tax havens like Mauritius or the Isle of Man, and invest in personal properties under the company name," says a real-estate consultant. A favoured route, she says, is to purchase property through the hawala network, investing cash from real-estate sales in India in property abroad. The other option is to buy property in the name of friends or relatives — but there is a risk involved there.
Yet another option is the one devised by companies like UK Land Investments that offers land in the UK for less than the permitted $25,000. Many in the trade, however, feel that this is a highly suspect procedure as the land offered is usually farmland, not residential land.