HNIs to benefit from RBI policy

Frequent travellers will benefit. Re-allowing property buying abroad will help

High networth individuals (HNIs) will feel better after the Reserve Bank of India (RBI)'s bi-monthly monetary policy statement. Reason: The RBI has increased the limit of investment from $75,000 to $125,000 per head (or Rs 75 lakh at the rate of Rs 60/$). This means ones travelling abroad frequently will be able to take advantage of this.

Also, people who want to invest in direct stocks abroad will benefit from this move as they can buy shares from the secondary market through this enhanced limit. The head of a brokerage house says, "This is good news for HNIs who want to invest in direct equities abroad. Some HNIs enquire if they can invest in foreign stocks. But one has to do the buying or selling in reasonable quantities else the brokerage won't entertain you."    

While the detailed operating guidelines will be issued at a later date, property consultants say if this is extended to property purchases abroad, it would help revive the interest of HNIs further. Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj India, says, "HNIs will wait and watch initially, even if the Reserve Bank of India (RBI) allows property purchase abroad, because of the sudden change in policy last year."

Puri feels since property commitments are long term, one would have to make payments every year, specially if they are purchasing an under-construction property.  Muddasar Zaidi, regional director, Knight Frank, says, "Freeing real estate investment would improve investment sentiment. While there is no heavy outflow because of this, there are enough people who wish to buy property if they have children studying or working abroad."  

The $200,000 limit under the LRS was set in 2007. But when the rupee went into a free fall in 2013, the RBI was forced to reduce the limit of $75,000 and imposed several strictures including banning purchase of property in 2013. While in its latest policy the RBI has not restored the entire limit of $200,000, it still makes for a decent amount.

Property experts say a family of four can send $500,000 ($125,000 a head) a year. Also, if it is an under-construction property, they will be able to raise $2 million. In this price, one can easily buy properties in Dubai, Greater London, suburban Hong Kong and Singapore. Puri adds, "Developers will start doing roadshows more aggressively in India and target HNIs if the stricture is removed."