US realty turns hot property; Indians snapping up big housing deals
US realty turns hot property; Indians snapping up big housing deals
Ravi Teja Sharma & Mahima Puri May 23, 2011, 10.53pm IST
NEW DELHI: India-born American realtor Jaswant Lalwani hasn’t been this busy since the housing crisis in the US in 2008. “I have closed 10 deals with Indian buyers in the last three months. And I am working on another 30,” he says. The Manhattan-based realtor deals with all kinds of buyers, but of late, he has got more business from Indian clients. ( Latest news on NRIs )
Rohit Prakash, based in Austin, Texas, has for long been doing brisk business helping Americans and foreigners buy and sell property in the capital of one of America’s biggest states.
Recently, he set up American Full House to cater to Indians looking to buy homes in locations that have seen a huge price drop. An Indian buyer who contacted him sometime ago is close to doing two deals in a suburb of Los Angeles at $82,000 and $85,000 each for a three-bedroom condominium. At the peak of the housing boom, these properties were selling at close to $250,000.
Flush with cash and keen to diversify their portfolio, Indians are busy snapping up property in the US. Buyers include rich families whose children are either working or studying there, and rich individuals in India looking for good returns. “These individuals have a minimum net worth of $1 million and are looking for properties in the $1-10 million price range,” says Lalwani of Corcoran Real Estate.
Indian buyers are mostly exploring cities such as Los Angeles, Las Vegas and other parts of southern California and Phoenix, and Miami, where prices are still 60% lower than the peak.
According to the US National Association of Realtors, Indians contributed 7% of total international home sales of $82 billion in the US during the year ended March 2011, only behind the Canadians (23%) and the Chinese (9%). The year saw the highest home sales in America after the meltdown, and the largest purchase in value terms by the Indian community in three years.
“The US is a mature market and very transparent. Unlike in India, it is easier to manage property there,” explains Santhosh Kumar, chief executive officer of operations at global property firm Jones Lang LaSalle, which has closed about 5-6 such transactions in the last 12 months.
The subprime crisis in the US in late 2008 was followed by a sharp drop in home prices. Even after two-and-a-half years, the country’s real estate market has not recovered. Property prices have been declining for 57 consecutive months now.
Today, prices of homes in US cities, especially New York, are among the cheapest in the world, even compared with Delhi and Mumbai. The average price of homes in New York is about $1,300 (or Rs 58,500) a sq ft while apartments in Mumbai’s Cuff Parade could come for a steep Rs 80,000 a sq ft.
“This is a good time to buy,” says Yashas Upadhyay, who quit a telecom company job in Ahmedabad recently to start his own business. “My friends and I are planning to float a company, which will scout for investment opportunities in the (US) realty market,” he adds.
In Ahmedabad, the city known for sending a large number of Indians to the US, entrepreneurs like Upadhyay are dime a dozen. Another group of small businessmen are pooling in Rs 100 crore to invest in the US property market this year, both in downtown and suburban locations. The leader of the group, who requested not to be named, bought a three-bedroom home in New Jersey for a throwaway price after the meltdown began, and he has been earning a rent of $2,000 a month since. His example has now inspired his friends.
According to the National Association of Realtors report, international and domestic sales of houses in the US were $1.07 trillion in the year ended March 2011, up from $907 billion in the previous year. Indians made up 5% of the international sales in 2010 alone. “Indians mostly buy outside the country for lifestyle, leisure and utilitarian purposes,” says Anand Narayanan, national director (residential agency) at Knight Frank, a global property firm.
What has helped is the Reserve Bank of India’s relaxation of foreign exchange rules in 2007. “RBI now allows Indians to remit up to $200,000 a year, up from $100,000 earlier,” says Kumar. That means a group of five has the opportunity to invest $1 million in a year.
Prakash of American Full House points out that rentals in most American markets are still high as people who have foreclosed their homes are looking to rent out property. “One could easily get a return of 6-10% in many markets here,” he says.
A spokesperson of the National Association of Realtors attributed the international appetite to the fact that properties in the US are less expensive compared with foreign properties. Homes in the US are viewed as a secure investment. The average price paid by an international buyer in the US was $315,000 and the states with the heaviest concentration of such buyers are Texas, Florida, California and Arizona. With more and more Indians likely to join the rush, the list is only likely to expand.
