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

Hindustan Times (Chandigarh) - Estates - - NEWS - David Gun­der­son n ht­spe­cial­pro­jects@htlive.com The au­thor is chief in­vest­ment of­fi­cer at the United States Free­dom Cap­i­tal, an in­vest­ment ad­vi­sory.

It is com­mon knowl­edge that In­di­ans are in­clined to­wards in­vest­ing in­land. With the prop­erty sec­tor ex­pe­ri­enc­ing as lowdown 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 INTHEUS The US Com­mer­cial Real Es­tate (C RE) 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 C RE 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: Landown­er­ship 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( RE IT) pro­vide sta­ble ex­its. Cash-flow gen­er­a­tion guides prop­erty eval­u­a­tion: Credit qual­ity of build­ing ten­ants, along with long-term leases, pro­vide sta­ble val­u­a­tion.

The ad­van­tage soft he USC RE 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 C RE 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 and­pub­licly 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.

In­di­anCRE 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 tobe a real re­turn in the range of 6% and 10%.

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