Indian spends on overseas homes swell manifolds

10 Oct 2017 CW Staff

Buying international homes cheaper today vis-à-vis 2016.
Residential property in 4 out of the 5 most-preferred international markets earned positive returns over five years.
Almost 1 out of 4 resident Indians prefer to spend more than US$ 1 million for a house overseas.
63 per cent Indian buyers picked compact apartments of less than 1,500 sq ft – the most preferred property size.
Children’s education and use of property as a second home are the primary reasons why resident Indians buy a property in the UK.
More than two-third resident Indians prefer apartments followed by villas for overseas homes.

Emerging Indian footprints in residential neighbourhoods abroad have been a matter of immense interest and curiosity. ‘Looking beyond Borders’, the latest report jointly brought out by Knight Frank India and the International Real Estate Expo (IREX) takes a closer look at the buying behaviour, investments returns, preferences and key drivers pushing resident Indians to acquire residential property on foreign soil.

Key findings:

Overview

Overall findings based on 10 countries: Australia, Sri Lanka, UAE, Malaysia, Cyprus, Mauritius, Thailand, the US, Philippines and the UK.

Detailed analysis of the six most-preferred markets: Australia, Sri Lanka (except return on investments), UAE, Malaysia, Cyprus and the UK.

The share of funds spent on buying homes aboard through the Liberated Remittances Scheme dwindled from 8 per cent in FY2006 to 1 per cent in FY2017. But the quantum of investments rose by almost 59-folds from US$ 1.9 million in 2005-06 to US$ 111.9 million in 2016-17.

Investments in overseas property five years back
Resident Indians buying overseas homes at the end of Q2 2012 and selling the property five years later gained from the investments in 4 out of the 5.
Resident Indian investing in homes in Cyprus lost money owing to the decline in property prices coupled with appreciation of the Indian Rupee, making it the only international market where it did not gain on investments.

At 51.6 per cent, Australia witnessed the highest property appreciation followed by Malaysia (43.8 per cent) between Q2 2012 and Q2 2017.

Residential property buyers in Dubai have benefitted the highest with an overall return of 49.3 per cent followed by Australia at 38.7 per cent.

Dubai offered dual returns as the Indian Rupee depreciated versus the local UAE currency and property prices in the Gulf destination appreciated between Q2 2012 and Q2 2017.

Despite the strengthening of the Indian Rupee against the currencies of Australia, Malaysia and the UK, the impact of appreciation of property prices outweighed the impact of currency appreciation.

Investment rationale for an investor investing today

Strengthening of the Indian Rupee against several global currencies has made investments in overseas homes more affordable than a year ago.

Resident Indian buying homes in UK, Cyprus, Malaysia and Dubai today (as of end of Q2, 2017) would find cheaper as compared to a year ago. This is despite property appreciation in residential markets across Cyprus, the UK and Malaysia.

Buying a house in Malaysia is the cheapest followed by Dubai.

Acquiring a residential property in Australia would be 11 per cent steeper now over (as of end of Q2, 2017) over the same period last year as property appreciation has outweighed the advantage of the strengthened Indian Rupee.

Investments and tax costs

At 32.9 per cent, Australia had the highest tax incidence and overall cost among the countries that we have considered.

Dubai offered the lowest incidence of tax but the overall costs (including tax and non-tax cost) for property investments are the lowest in Malaysia while investing in a property.

Home preferences
Queries from resident Indian buyers increased marginally from 11 per cent in 2015 to 15 per cent in 2016 and held steady around that mark this year.

Similarly, sales volumes rose from 6 per cent in 2015 to 8 per cent in the subsequent year and sustained at 7 per cent this year.

Most resident Indian buyers intend to purchase property abroad for investment purposes followed by the aspiration of having a second home.

Sixty-three per cent of the resident Indian buyers preferred compact apartments of less than 1,500 sq ft.

About one-fifth of the resident Indians showed a preference for a villa since countries such as Cyprus and Sri Lanka are perceived as second home options and holiday destinations.

Approximately 77 per cent of the Indian buyers prefer a property that is less than US$ 1 million.

Almost 1 out 4 resident Indians prefer to spend more than US$ 1 million for a house overseas.

Country-wise break-up

Australia
The Australian education system is one of the best in the world. Children’s education has been cited as the most prominent reason for buying a house in Australia.

50 per cent resident Indians showed preference for a property size exceeding 2,000 sq ft in contrast to overall penchant for compact homes

37 per cent resident Indians are keen to pay more than US$ 1 million for buying a property in Australia.
Sri Lanka

Investment purpose is the highest ranked reason for buying a property in Sri Lanka closely followed by the property being bought as a second home and for self-consumption.

66 per cent of the resident Indians prefer property sizes up to 2,000 sq ft in Sri Lanka.

64 per cent of the respondents Indians are willing to pay less than US$ 1 million in Sri Lanka.
UAE
67 per cent of the resident Indians prefer an apartment size of less than 1,500 sq ft in Dubai.

80 per cent of the respondents prefer a compact property priced less than US$ 1 million.

A two-bedroom apartment across prime locations such as Dubai Marina, Business Bay and Palm Jumeraiah command a ticket size of approximately US$ 0.5-1.3 million, an unthinkable price for a similar property in India.

Malaysia

Kuala Lumpur is the most preferred city in Malaysia for Indian buyers.

Smaller houses are increasingly becoming preferred domestic and expat real estate buyers.

Cyprus
67 per cent of the Indian home buyers prefer a property size less than 1,500 sq ft, in Cyprus.

Cities in Cyprus attracting Indian buyers: Limassol, Paphos, Larnaca, Paralimni and Nicosia.

56 per cent of the respondents are willing to pay less than US$ 0.5 million to buy a property in Cyprus.

UK

Children’s education and use of property as a second home are the primary reasons why resident Indians buy a property in the UK.
79 per cent of the Indians prefer compact homes in the 1,500 sq ft category.

89 per cent Indians prefer properties in the ticket size of less than US$ 1 million.

Speaking about the report, Shishir Baijal, Chairman and Managing Director, Knight Frank India, says, “Our ideas of homes have clearly travelled beyond the native frontiers of imagination synonymous with the concept. Today, resident Indians investing in residential properties overseas are mostly sound investment decisions. Buyers must be well informed about price trends, taxations and duty structure of respective international markets, repatriation of funds, currency movement etc. to make informed decisions. This Knight Frank India report is the inaugural step towards s a series of annual reports in which we try to give enough information to prospective buyers to make informed decisions.”

According to Dr Samantak Das, Chief Economist & National Director-Research, Knight Frank India “Our perceptions on buying international property have been largely confined to high net worth individuals buying luxury housing at picturesque foreign locations. At the onset, this report looks beyond that stereotype and throws light on mainstream residential property purchased by resident Indians from other income groups. It further delves into buyers’ preferences over size of homes, budgets and most importantly the key drivers pushing resident Indians to acquire homes abroad. The report findings also reflect healthy returns on investments for such buyers, which augurs well for the real estate sector as a whole.”

Vimal Anand, Director, Global Media Network, says, “Resident Indians are increasingly investing in properties abroad. This report focuses on the investment trends, buyer profile and factors that influence their decisions besides analysing the major investment destinations. While, this report will help Indian investors in identifying the best locations for property investment, it will also immensely help international developers and property marketing companies in understanding the Indian market and help them take marketing decisions.”

Buying international homes cheaper today vis-à-vis 2016. Residential property in 4 out of the 5 most-preferred international markets earned positive returns over five years. Almost 1 out of 4 resident Indians prefer to spend more than US$ 1 million for a house overseas. 63 per cent Indian buyers picked compact apartments of less than 1,500 sq ft – the most preferred property size. Children’s education and use of property as a second home are the primary reasons why resident Indians buy a property in the UK. More than two-third resident Indians prefer apartments followed by villas for overseas homes. Emerging Indian footprints in residential neighbourhoods abroad have been a matter of immense interest and curiosity. ‘Looking beyond Borders’, the latest report jointly brought out by Knight Frank India and the International Real Estate Expo (IREX) takes a closer look at the buying behaviour, investments returns, preferences and key drivers pushing resident Indians to acquire residential property on foreign soil. Key findings: Overview Overall findings based on 10 countries: Australia, Sri Lanka, UAE, Malaysia, Cyprus, Mauritius, Thailand, the US, Philippines and the UK. Detailed analysis of the six most-preferred markets: Australia, Sri Lanka (except return on investments), UAE, Malaysia, Cyprus and the UK. The share of funds spent on buying homes aboard through the Liberated Remittances Scheme dwindled from 8 per cent in FY2006 to 1 per cent in FY2017. But the quantum of investments rose by almost 59-folds from US$ 1.9 million in 2005-06 to US$ 111.9 million in 2016-17. Investments in overseas property five years back Resident Indians buying overseas homes at the end of Q2 2012 and selling the property five years later gained from the investments in 4 out of the 5. Resident Indian investing in homes in Cyprus lost money owing to the decline in property prices coupled with appreciation of the Indian Rupee, making it the only international market where it did not gain on investments. At 51.6 per cent, Australia witnessed the highest property appreciation followed by Malaysia (43.8 per cent) between Q2 2012 and Q2 2017. Residential property buyers in Dubai have benefitted the highest with an overall return of 49.3 per cent followed by Australia at 38.7 per cent. Dubai offered dual returns as the Indian Rupee depreciated versus the local UAE currency and property prices in the Gulf destination appreciated between Q2 2012 and Q2 2017. Despite the strengthening of the Indian Rupee against the currencies of Australia, Malaysia and the UK, the impact of appreciation of property prices outweighed the impact of currency appreciation. Investment rationale for an investor investing today Strengthening of the Indian Rupee against several global currencies has made investments in overseas homes more affordable than a year ago. Resident Indian buying homes in UK, Cyprus, Malaysia and Dubai today (as of end of Q2, 2017) would find cheaper as compared to a year ago. This is despite property appreciation in residential markets across Cyprus, the UK and Malaysia. Buying a house in Malaysia is the cheapest followed by Dubai. Acquiring a residential property in Australia would be 11 per cent steeper now over (as of end of Q2, 2017) over the same period last year as property appreciation has outweighed the advantage of the strengthened Indian Rupee. Investments and tax costs At 32.9 per cent, Australia had the highest tax incidence and overall cost among the countries that we have considered. Dubai offered the lowest incidence of tax but the overall costs (including tax and non-tax cost) for property investments are the lowest in Malaysia while investing in a property. Home preferences Queries from resident Indian buyers increased marginally from 11 per cent in 2015 to 15 per cent in 2016 and held steady around that mark this year. Similarly, sales volumes rose from 6 per cent in 2015 to 8 per cent in the subsequent year and sustained at 7 per cent this year. Most resident Indian buyers intend to purchase property abroad for investment purposes followed by the aspiration of having a second home. Sixty-three per cent of the resident Indian buyers preferred compact apartments of less than 1,500 sq ft. About one-fifth of the resident Indians showed a preference for a villa since countries such as Cyprus and Sri Lanka are perceived as second home options and holiday destinations. Approximately 77 per cent of the Indian buyers prefer a property that is less than US$ 1 million. Almost 1 out 4 resident Indians prefer to spend more than US$ 1 million for a house overseas. Country-wise break-up Australia The Australian education system is one of the best in the world. Children’s education has been cited as the most prominent reason for buying a house in Australia. 50 per cent resident Indians showed preference for a property size exceeding 2,000 sq ft in contrast to overall penchant for compact homes 37 per cent resident Indians are keen to pay more than US$ 1 million for buying a property in Australia. Sri Lanka Investment purpose is the highest ranked reason for buying a property in Sri Lanka closely followed by the property being bought as a second home and for self-consumption. 66 per cent of the resident Indians prefer property sizes up to 2,000 sq ft in Sri Lanka. 64 per cent of the respondents Indians are willing to pay less than US$ 1 million in Sri Lanka. UAE 67 per cent of the resident Indians prefer an apartment size of less than 1,500 sq ft in Dubai. 80 per cent of the respondents prefer a compact property priced less than US$ 1 million. A two-bedroom apartment across prime locations such as Dubai Marina, Business Bay and Palm Jumeraiah command a ticket size of approximately US$ 0.5-1.3 million, an unthinkable price for a similar property in India. Malaysia Kuala Lumpur is the most preferred city in Malaysia for Indian buyers. Smaller houses are increasingly becoming preferred domestic and expat real estate buyers. Cyprus 67 per cent of the Indian home buyers prefer a property size less than 1,500 sq ft, in Cyprus. Cities in Cyprus attracting Indian buyers: Limassol, Paphos, Larnaca, Paralimni and Nicosia. 56 per cent of the respondents are willing to pay less than US$ 0.5 million to buy a property in Cyprus. UK Children’s education and use of property as a second home are the primary reasons why resident Indians buy a property in the UK. 79 per cent of the Indians prefer compact homes in the 1,500 sq ft category. 89 per cent Indians prefer properties in the ticket size of less than US$ 1 million. Speaking about the report, Shishir Baijal, Chairman and Managing Director, Knight Frank India, says, “Our ideas of homes have clearly travelled beyond the native frontiers of imagination synonymous with the concept. Today, resident Indians investing in residential properties overseas are mostly sound investment decisions. Buyers must be well informed about price trends, taxations and duty structure of respective international markets, repatriation of funds, currency movement etc. to make informed decisions. This Knight Frank India report is the inaugural step towards s a series of annual reports in which we try to give enough information to prospective buyers to make informed decisions.” According to Dr Samantak Das, Chief Economist & National Director-Research, Knight Frank India “Our perceptions on buying international property have been largely confined to high net worth individuals buying luxury housing at picturesque foreign locations. At the onset, this report looks beyond that stereotype and throws light on mainstream residential property purchased by resident Indians from other income groups. It further delves into buyers’ preferences over size of homes, budgets and most importantly the key drivers pushing resident Indians to acquire homes abroad. The report findings also reflect healthy returns on investments for such buyers, which augurs well for the real estate sector as a whole.” Vimal Anand, Director, Global Media Network, says, “Resident Indians are increasingly investing in properties abroad. This report focuses on the investment trends, buyer profile and factors that influence their decisions besides analysing the major investment destinations. While, this report will help Indian investors in identifying the best locations for property investment, it will also immensely help international developers and property marketing companies in understanding the Indian market and help them take marketing decisions.”