India is home to the fourth-largest population of millionaires after Japan, China and Australia in the Asia-Pacific region — high net worth individuals (HNIs) with net assets of more than $1 million, according to Asia Pacific Wealth Report 2016. The onset of globalisation, increase in foreign spending limit and comparable valuations have paved the path for investments in foreign real estate by almost 50 per cent of the Indian HNIs, which is the highest in the world. London, Dubai, New York, Washington, San Francisco, Australia and Singapore are some of the red-hot locations for direct cross-border real estate acquisitions by global Indians. These destinations top for their proximity to India and offer lifestyle benefits, a booming economy, and tax-free investments.
According to the Sotheby’s International Realty Wealth X report, turbulence in emerging markets has pushed investors to consider investing in western luxury real estate markets. About 12 per cent of second homes purchased by emerging market ultra-high net worth (UHNW) individuals (those who reside in BRICS nations) are located outside their country of residence. Apart from HNIs, business owners, professional property investors, mid- to top-level company management and people whose children study abroad are the main investors in properties abroad.
One of the major reasons why investors are attracted to assets in foreign lands is because they offer a safe investment diversification, economic and political stability, potential for capital appreciation. UHNW individuals may also have non-traditional reasons such as global citizenship advantages of purchasing properties in these locations. For these buyers, homes are seen as ‘opportunity gateways’ and buying decisions are made based on what opportunities will become available as a result of owning the home.
According to the Sotheby’s International Realty WealthX report, in London residential real estate prices in central neighbourhoods have risen 42 per cent between June 2010 and June 2015. The increase in price has slowed considerably in 2015, rising by only 2 per cent year on year, but the overall outlook remains positive. UHNIs from India are expected to spend £1 billion every year over the next five years.
An estimated 3,000 wealthy Indian families own luxury properties in famous London districts. Mayfair, Belgravia, South Kensington, Knightsbridge, Chelsea, Baker Street, St. James, Portman Square are some of the top preferred locations by Indians. Indian buyers are well ahead of Asian and continental European buyers (19 per cent of all purchasers) and Russians and Middle Eastern buyers, who now comprise just 13 per cent each of all buyers. With Brexit, the pound has became cheaper and created another reason for Indians to invest in London real estate.
According to the Dubai Land Data, last year Indians topped the list of expatriate real estate buyers with an investment of Dh20 billion compared to Dh18.12 billion in 2014. Factors like Dubai’s rising status as a tourism hub and world-class infrastructure have created ample opportunities for the consumer. Indians are the largest expat community in the UAE constituting 30 per cent of the total population. The favourite localities for Indian investors are Jumerah Lake Towers, Dubai Marina, Business Bay, Downtown Dubai and International City.
Indians were among the top five international real estate buyers in the year ended March 2016, according to a report by the US National Association of Realtors. On an average, an Indian HNI spends about $1-1.5 million in a property abroad. In the US, Indians are keen on investing in locations like New York, New Jersey, California, Dallas and Chicago. New York has witnessed a striking rise in property prices in the past five years. Growth has been particularly prominent at the top end of the market — property listings of over $30 million. In June 2015, the number of homes listed for sale grew from 73 to 114.
With mounting per capita income, globalisation and less restrictive foreign investment laws, the ultra-rich, well travelled investor will continue to influence the real estate market on foreign shores.
Credits Business World