Millennials go beyond London, New York for luxury realty shopping

Young HNIs are buying properties in foreign locations like Malta, Madrid, and Budapest

Luxury real estate developers may have seen a slowdown in recent years, but that doesn’t mean big spenders aren’t shelling out for prime property — except that they are doing it overseas. According to reports, while the usual suspects such as London remain the top choice for billionaire buyers like Flock CEO Bhavin Turakhia or actress Alia Bhatt, a newer crop of millennials prefers assets in markets that offer higher rental yields. Such locations include Spain, Portugal, and Malta, among others.

Amit Goyal, CEO of Sotheby’s International Realty in India, says, “Millennials are much more mobile than their parents and grandparents and thus they would rather own properties across different geographies around the world where their family members may also be living.”

“The fundamental driver,” he adds, “is practicality that it’s easier to maintain four apartments in Italy, London, Barcelona, and Lisbon as opposed to one Rs 200-crore property in Walkeshwar, Mumbai. It’s also about building international social networks.” 

Real estate experts estimate that there are approximately 30,000 high net-worth millennials in the country. Of these, at least a third are women. A high net-worth individual (HNI) is defined as someone with $5 million of investible surplus besides his or her first house and business assets. 

Goyal says the Sindhi community is keen on Miami, Spain, and Hong Kong. Big business houses with global operations prefer Malta and Cyprus to set up their holding companies for legitimate tax benefits.  Miami sees huge interest because of the kind of lifestyle it offers, weather, and pricing compared to New York. Sotheby’s transactions driven by millennials doubled last year compared to the year before. Other popular choices include Budapest and Moscow.

Anuj Puri, chairman, Anarock Property Consultants, says many investors choose to buy a property in a certain country if its market sees a downturn and prices become attractive. “We had seen this happening during the US subprime crisis, and more lately during the Brexit angst in the UK. The slow-moving Indian real estate market has also pushed a not-inconsiderable number of Indians to consider property investment outside the country.”

While Anarock doesn’t have access to property purchase registrations abroad, the numbers will be fairly steady, with at least some increase year-on-year, Puri says. “The relaxed RBI norms for outward remittances also lure Indians to consider investing in properties abroad. In 2015, the RBI doubled the Liberalised Remittance Scheme (LRS) for resident individuals to $250,000 annually.”  

While the average rental yield for residential properties in India rarely exceeds 3-3.5 per cent even in the prime areas, and London, Dubai, Singapore, and Australia have been more or less perennial favourites for Indians interested in buying real estate in foreign countries.

Puri says “there is also evidence of increasing interest in Sri Lanka – specifically in Colombo – and some other west Asian countries.”

While major American cities like New York are counted among the favourite destinations, they don’t really qualify anymore, except for those who can invest at least $1 million, generate a certain number of jobs there, and thereby qualify for permanent green cards.  As a pure investment, it can be a risky proposition for resident Indians. Much depends on how well the market there works for absentee landlords in general and foreign absentee landlords in particular. Again, changing immigration and property ownership laws in a country can impact the overall viability of the investment. To illustrate, one cannot predict with any degree of certainty how such matters will swing in the US or the UK.

Finally, it boils down to purchasing power. Housing rates in London, New York or central Singapore are comparable to ultra-luxury housing prices in South Mumbai or central Delhi 

(priced beyond Rs 15-25 crore). Of late, some residential projects in Dubai and Abu Dhabi offer more or less the same price range as those prevailing for mid- and upper-mid-income projects in Pune, Bengaluru, and the suburbs of Mumbai and Navi Mumbai.

Owning a property abroad is highly aspirational and can also yield good returns on investment and makes complete sense for those who already have family or business interests in a certain country. “However, end-users can only really benefit from a property abroad if they stand a good chance of obtaining citizenship or at the very least residential status there,” Puri cautions.