With proper planning, timely execution and informed stock market purchases, your dream to own a home in the US is within reach.
Having a plush home in cities like New York City is everyone’s dream. In fact, who won’t want to own a piece of property in America and that too from the gains made from the stock market? Yes, it’s very much possible! With proper planning, timely execution and informed stock market purchases, your dream to own a home in the US is within reach.
Owning a real estate property abroad has always been on the buying list of several high net-worth individuals (HNIs). And, even Indian HNIs have an eye on buying the best of locations at competitive prices especially in countries like America. According to the Knight Frank Wealth Report 2019, 21 per cent of Indian ultra high net-worth individuals (HNIs) showed an affinity towards purchasing homes outside India.
Indians owning property abroad
Be it Indian celebrities, businessmen or HNIs, being the landlord of a property abroad has always been a mark of the wealthy generation. “Purchasing property abroad offers the option of elevating the quality of life with an attractive array of lifestyle benefits while also advancing one’s status symbol,” says Akash Puri, Director International, India Sotheby’s International Realty. According to the report released by Knight Frank, the outbound foreign capital in real estate jumped from $0.37 billion to $0.7 billion over 12 months to Q1 2019.
As a buyer, one may have different reasons to buy property abroad. While buying for investment purpose could be one of the prime reasons, using it as a second home or for children’s stay during their education abroad has also emerged as a popular factor among the Indians. “There are various reasons which influence Indian investors who are looking to buy property abroad. The most common factor usually relies on their having set up business overseas. In many countries abroad these investors have access to suitable tax benefits and a diverse range of options in terms of currency and investment portfolio. These act as crucial components when choosing property abroad,” says Puri.
Return on investment
If one takes the capital appreciation over the long term, rental yields and the currency factor into consideration, one can end up turning the property purchase abroad into a decent investment. “With regard to real estate investment abroad there is approximately a 5 per cent cap appreciation, 2-3 per cent currency appreciation (sometimes more) and a rental yield of 3-5 per cent depending on the asset,” informs Puri.
COVID-19 impact on prices
The Coronavirus is expected to have an impact on the real estate prices in the US. That may very well open up new opportunities for the bargain-hunters. “The impact from COVID-19 has created an opportunity for Indian buyers to purchase assets overseas at a more attractive price than before,” informs Puri. While it looks that demand may remain weak keeping the prices also low, forecasting the medium-term trend may even go for a toss.
According to a recent CoreLogic HPI Forecast ( a prominent firm in US forecasting home prices), home prices will see a decline of 1.3 per cent on a year-over-year basic from April 2020 to April 2021.
Funding real estate from stocks
This means, you still got time to build that wealth required to own a home is the US. As an Indian, under the Liberalised Remittance Scheme (LRS) of the RBI, one can remit a maximum of $ 2.5 lakh (approximately Rs 1.9 crore) in a year abroad and that’s a huge amount of money if the individual limit of family members is also included in it.
But wait! You can make use of the LRS route and buy the property outright, but here’s a smarter approach. Rather than buying a home with the available funds, you can create wealth from stocks over the long term and buy that home.
Here’s how: Use the LRS route to buy the US stocks and then purchase the real estate property from the stock market gains. In this strategy, you end up owning two assets – your equity stock portfolio and the real estate.
US market for home equity
Your stock portfolio can fund your home abroad. The US stock markets make available diverse list of blue-chip global companies. The growth of US companies has always been on the back of the growing worldwide demand for goods and services. Some of the best technology, pharmaceuticals and manufacturing firms are US-based and are all set to deliver the next level of growth in the post-COVID-19 world.
US Stocks and Returns
Over the long term, the US market has generated a huge amount of wealth for investors. No matter, when an investor starts investing, the gains come big time.
NASDAQ and S&P 500 are the two prime indexes representing the US stocks. While NASDAQ has delivered nearly 14 per cent and 15.50 per cent on a compounded annualised basis over the last 5 years and 10-years basis respectively, the 5 years and 10-years compounded annualised return of S&P 500 has been nearly 8 per cent and 10.65 per cent.
Even numerous companies have a decent track record of dividend payouts. There’s big money to be made in the hub of global stock markets – the US indexes.
As a buyer, make sure you fully understand the impact of currency fluctuations and also take proper legal and taxation aspects into account before doing the wire transfer abroad. Making a start is important and what’s better than getting hold of your home keys in the US from the gains you have made in the US stocks? America is beckoning and it’s time to cherish your long-awaited dream!