Adapted from E-Pao
My grandpa used to keep his money always hidden in the mattress he sleeps on. If I saw him pulling out handfuls of bank notes from inside the mattress I knew that he was in for some big purchases – a pair of oxen, a new bicycle or a piece of farmland. As a young boy, I always thought the old man was smart in managing money. He could be right for his time.
But, my grandpa’s method no longer works today when money grows in “investment”. From his mattress, grandpa could only pull the amount of money he had actually put five years ago. If grandpa’s mattress is replaced by “investment”, you can probably pull double the amount after five years.
Indians today are a little wiser than my grandpa fifty years ago. But, I wouldn’t say we are investment savvy as we should be. Personal finance management in the modern sense is still unknown to a large majority of the population, even among the educated. A small percentage of the moneyed people in Manipur may have tried investment in stock market as a recent phenomenon when almost everybody has done it for decades in Gujarat State.
When stock investment involves constant monitoring/portfolio managing and the risk of market crashes, real estate investment offers good opportunities of income to those who are new to investment business. Real estate investment is the choice for many people who want good profits from passive investment at relative ease of mind.
During the past two decades, people have started buying homes and flats in India’s metro cities for dwelling. It still helps in financial growth due to equity build-up and property value appreciation. However, true real estate investment income comes from investment properties (property for rental purposes). Buying and managing investment property in big Indian cities are still relatively complicated for Manipuris in the absence of reliable and trustworthy business transactions in buying/selling and third party property management.
Can an Indian buy property in Canada?
Absolutely yes! Rather in a much simpler and easier process than that of buying property in Indian cities. You can buy the property when you still live anywhere in India. Canadian government puts no restriction to non-resident buyers. Indians looking for safe buying of properties in foreign countries may look at the following basic Canadian real estate information for comparison to buying conditions in India.
1. Market: The market has been hot for the past two years with 12% year over year increase of property value. Annual retail sales increase is around 3%.
2. Indicative price: Rupees 2.0 Cr for 2 bed room (1200 sq. ft) high rise condo (flat) in Toronto downtown, 3 bed room detached houses (1800 sq. ft). Much cheaper properties are available in city suburbs.
3. Gross Rental Income: Rupees 1.2 lakh for condo or house per month.
4. Down payment: 35 % (Canadian bank will give you 65% mortgaged loan). It is 20% in India.
5. Amortization period: 25 years. It is 15 years in India.
6. Indicative Mortgage Interest rate: 3% per annum on 5 year fixed. The interest rate in India is around 14%.
7. Appreciation (5 year price change): 40% – 65%
8. Safe transaction: The real estate transaction with the builders or owners of resale homes are very transparent and fraud-proof with realtors, mortgage brokers and lender banks.
9. Property Management: There are a number of Property Management companies who will find screened tenants for you with tenant safety warranty. The same company will regularly inspect the property, collect rent from tenant, make applicable income tax payments to Revenue Canada on your behalf, give real time financial and property inspection reports to you on client portal online 24/7, file annual tax report for you, arrange property insurance provider, give full paralegal services and realtor services (when you sell the property). All these services are for a small monthly fee deducted from the rental income. What you get is the property guarded by concierge 24 hour on duty and your investment professionally managed completely your hands off but owner’s watch 24/7 online.
10. Mortgage pre-approval: The actual buying process can be safely started after a mortgage pre-approval process which is available free. The pre-approval by the lender bank lets you know the maximum price of the property you can afford and helps you in avoiding over-borrowing.
Canadian properties are available in Condominiums (flats in high rise multiple unit housing), townhomes (lease or freehold units combined in a row), Semi-detached homes (two houses under one roof) and detached homes (standalone houses on separate plots).
All you need to have is proof of legally earned income and asset sufficient to pay the down payment and the monthly mortgage. Indian buyers are allowed to send a maximum of $ 250000 (1.2 Cr INR)) in a year under the Liberalized Remittance Scheme of RBI to buy foreign properties. Once purchased, the monthly rental income takes care of the mortgage repayment, utility bills, property management fees and taxes etc.
Real estate investment in Canada by foreign real estate investors has been phenomenal during the past few years. Buying investment property in Canada makes sense considering the low interest rate, safe buying procedure, safe rental management services, high rental demands and readiness of Canadian banks to lend. India has Tax Treaty with Canada to help investors avoid double taxation on property income. Canada is the best country in the G-20 to do business, according to both Forbes and Bloomberg.