‘Need help with taxes, rules to invest in the US’

It is common knowledge that Indians are inclined towards investing in land. With the property sector experiencing a slowdown in India over the last couple of years, a growing number of Indians are looking towards the West for stable investments in the US real-estate market.

Indians love to own real-estate, which is capital intensive and can be liquified easily.

The same capital can be invested in liquid, credible and mature investment opportunities in the US at attractive yields.

COMMERCIAL REAL-ESTATE IN THE US

The US Commercial Real Estate (CRE) industry is worth $6.75 trillion, approximately. This works out to be more than 25% of global commercial real-state industry, which is approximately $26.6 trillion (not including Africa).

India emerged as the fifth-largest investor in US real-estate, by purchasing property worth $ 7.8 billion in the period between April 2016 and March 2017.

The US CRE industry differs from the Indian CRE Industry in the following ways:

Defined entitlement and permits: This is a require-

ment from project lenders before construction. It has helped to ensure that there is no delay in project delivery.

No title dispute: Land ownership in the US is only 300 years old and can be protected by title insurance.

Known exit strategy: A broad and efficient CRE market with large institutional players and publicly traded real-esatate investment trusts (REIT) provide stable exits. Cash-flow generation guides property evaluation:

Credit quality of building tenants, along with long-term leases, provide stable valuation.

The advantages of the US CRE market vis-à-vis ownershipdriven private transactions in India are as follows:

1. REITs primarily scout for stable cash-flowing real-estate transactions which generate yields for their investors.

This ensures liquidity for a developer completing quality cash-flowing CRE projects in US, vis-à-vis exits dependent on an Ultra High Net Worth Individual’s liquidity (UNHI) real-estate investor in India ( prevalent in secondary sale).

2. Since most REITS are listed entities and publicly traded, buying and selling from them and to them adds a layer of authenticity.

This also reduces instances of fraudulent transactions, which are rare in the US.

Indian CRE investments offer yields in the range of 8% to 11% per annum in Indian rupees, which works out to roughly 3-6% per annum, inflation-adjusted real returns.

On the other hand, US CRE investments offer yields between 8% and 12% per annum, in US dollars, which works out to be a real return in the range of 6% and 10%. The author is chief investment officer at the United States Freedom Capital, an investment advisory.