A diversified property portfolio appeals to Indians because of lower capital values and higher rental income in popular markets abroad. Extra benefits are sometimes on offer in terms of citizenship via investment. Indian rules, however, frown on overseas property trading.
This crimps property-holding structures and deferred payment plans, but is in line with RBI’s conservative regulatory stance. With increased information being shared among countries to counter money laundering, it makes sense for prospective property buyers abroad to be compliant in both host and destination jurisdictions.
India’s pace of liberalising foreign investments will be determined by the economy’s vulnerability to external shocks and de-globalisation. The current account will have to move consistently into surplus before further relaxations on capital account. Emphasis will be on strict vigilance of permissible overseas investments.
On their part, countries like Britain have decided to plug gaps in inheritance tax, which isn’t imposed in India. This makes owning a second home in some countries less desirable for Indians.
Countries are also becoming more sensitive to foreign ownership, driving up property prices. This could contribute to tamping down demand by Indian HNIs.Yet, a significant part of wealthy Indian families has become mobile in the pursuit of a higher standard of living. Supply response from destination markets will be a bigger constraint going forward than Indian capital controls. Fiscal considerations and rising housing prices will determine how lawmakers deal with foreigners owning property. Beyond conserving forex, the Indian policy response will aim to curb speculative real estate flows from the country.