33.40 Should you consider Investing in Real Estate Abroad?

The Real Estate market is currently seeing an up-run.
Property values have increased by a lot in the last 1-2 years. Moreover, this is not just the case in India. It’s happening globally.
So is it smart to start considering Real Estate Abroad?

This could:

Better opportunities? How so?

Let’s take a look at how the Dubai Real Estate Market differ from Indian Markets.

Dubai government has put its entire Real Estate data on a Blockchain. This basically means that:

[1] You can see which Real Estate unit got sold for what EXACT price.
[2] What date. When was the project started/delivered?
[3] You can in-fact check the apartment/villa/townhouse number which got sold at what specific price.

This is a fairly transparent Real Estate market (not saying it does not have problems)

Bayut is one such property-classified real estate listing website in the UAE.
This is what it looks like:

You can check this here: 

There is complete transparency in all listings.

However In India:
[1] People are still figuring out: how much is the tax saving component while doing RE transactions
[2] What is the standard rate for brokerage? (Brokers charge anywhere between 1-10%; jacking up of prices by brokers)
[3] There is no escrow system: you pay the buyer (let's say 10%) before the deal is executed in good faith.

They can take your money and run away.

Is it possible for this type of transparency to come to India?

I don't think it should be difficult to put everything on a blockchain. 
But it will not happen anytime in the near future.

On top of that, the Long Term Capital gains tax for Real Estate in India is 20%.

This is a high number.

Short Term Capital Gains for Real Estate are as per your Income Tax Slab.

In countries like UAE,

All of this makes India a hard market to make good Real Estate purchases and returns.
What are some other Markets to consider?

It is much easier to buy a house in Singapore than in India. 
Let me explain:

[1] Most of the Real Estate is purchased on loans.

If someone needs to buy a 1 Crore house,
Then you don't really need that 1 Crore to begin with. 
What you need is a sensible EMI payment option.

[2] So let's do the math for Indian Citizens in (India) vs Singaporean Citizens in Singapore.

In Singapore:

In India:

Why am I taking 2.56 Crore? 
PPP data tells us that 1Mn SGD= 2.56 Crore in India

In India, not only your initial outlay of money is higher (due to high taxation), 
We also pay higher EMIs.

The bottom line is:
Opaqueness in Indian markets leads to over-paying on properties.

The reason why people don’t consider investments outside India is a lack of clear information


Thoughts 🤔 by Soumendra Kumar Sahoo is licensed under CC BY 4.0