Indians planning to buy international real estate at attractive valuations will now have to put their plans on the back-burner despite attractive valuations in the Gulf countries, especially the UAE.
The Wealth Report 2013, produced by Knight Frank, a global property company, has already revealed that prime luxury properties in Mumbai are almost double the prices of Dubai.
In addition, purchase costs associated with buying a new-build residential property in the emirate are far lower than India, where residents pay registration fee, VAT, etc.
It has been revealed by the Dubai Land Department that Indians bought properties worth over Dh8 billion in the first six months of 2013 - compared to Dh9 billion they had invested in the whole of 2012.
Over the years, Indians have topped the list of expatriate property investors in the emirate.
In an effort to support the rupee, the Reserve Bank of India recently cut the limit of remittances made by resident individuals from $200,000 to $75,000 per financial year under the Liberalised Remittance Scheme (LRS scheme).
In a notice, the apex bank also stated that residents cannot use the money from LRS to “acquire immovable property outside India directly or indirectly.”
“The new restrictions by RBI with regards to Indians investing in international real estate under the LRS have been introduced in an effort to stabilise the rupee.
“This move will have medium to long term implications,” Om Ahuja, Chief Executive Officer – Residential Services, Jones Lang LaSalle India, told Emirates 24|7.
“Individuals who were planning to buy international real estate at attractive valuations and planning for their kids’ education and housing aboard will now see such plans challenged.”
Currently, the variety of options available on the international property market offer very attractive rental yield and valuations, making the proposition of investing in property abroad a potentially lucrative one.
“However, the new restrictions will put a dampener on the sentiments of Indian investors who were considering this route,” asserts Ahuja.
Although cash transactions by Indians may come down, a few UAE local banks have started giving mortgages to non-UAE residents, though the loan-to-asset values are capped at 50 per cent of the property value.
This may assist sales to some extent, but no data is currently available as to how many non-residents have sought such home financing.
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