Thursday, November 08, 2007

Real Estate Globalization

With the housing market bust spreading across the US, it may be a good idea to sell property to Indian residents. India has a growing middle class with the rupee growing stronger vis a vis the dollar.In addition, recent policy changes have allowed individual Indians to remit up to $200,000 overseas -- double the previous limit -- from September 25 this year. The move is aimed at increasing outflows in an attempt to balance huge foreign exchange inflows into India that could impact inflation.

Let us analyze the numbers here and see what we find. Lets assume that a property in California is on sale for $600,000. If this property was on sale when the $/Rupee conversion rate was 45 in year 2005 the cost in rupees would be about 2.7 crores. Given the current exchange rate the same buyer a few years later would have to pay only 2.34 crores , a savings of 36 lakhs!

So, a combination of cheaper US asset prices, the higher purchasing power of the rupee overseas, the increasing affluence of Indians and the freedom to invest more money overseas are factors that could work in favor of this transaction.

So for a $600000 transaction at least three Indians may need to pool in the money to purchase this property. But there are plenty of properties available below $200000 which can be purchased by an individual.

1 comment:

Joshua Alexander said...

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