Brexit lends lucrative opportunity for Indians, in UK property

[] The impact of UK’s decision to leave the EU, can be two-pronged for India. While the falling pound creates opportunities for Indian HNIs to buy property in Britain, it could also adversely affect Indian real estate if our EU-dependent IT sector slows down, and impacts office and residential property uptake

“There is high opportunity cost for Indians to invest in the UK property market after Brexit. Not only will the property prices come down with immediate effect, but the pound conversion rate has also come down quite low,” says Jaswinder Singh (name changed on request), a Chandigarh-based HNI with business interests across Europe.

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Singh believes the nose-diving shares of property developers in Britain, after the European Union exit, suggests that the prolonged spell of the house price boom is over in that part of the world. This expected sharp fall in property prices (FTSE fell record low), added with the weakening of the pound (it fell by 10 per cent as an immediate setback of Brexit) makes UK properties quite attractive for high-end investors like Singh. If the Bank of England cuts down the interest rate as expected widely, it will make investment in the UK more lucrative.

Anuj Puri, chairman and country head, JLL India adds to this point as he explains that when the economic recession had hit the US, Indians took up a leading position among investors keen to take advantage of the falling property prices there. The British pound is currently at a 31-year low, which itself provides an attractive rationale for foreign investors with an appetite to do so to acquire properties in the UK.

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“There is no doubt that the UK – particularly cities like London, has always held a special attraction for Indians, particularly HNIs with business interests or families there. Such individuals will certainly keep a close watch on the effect of Brexit on UK’s property prices, and it is very likely that many more Indians will seek to invest there,” says Puri.

However, this opportunity for HNIs and NRIs in the UK property market is not necessarily good news for the Indian property market. It may affect the PE and FDI inflows into the Indian property market as the investors are risk averse and would take a wait and watch approach for the time being.

Moreover, several major IT firms such as Infosys, TCS and HCL Tech, earn a third of their revenues from the EU. A possibility of the EU slowing down, will have an adverse impact on their revenues. The IT sector is a leading occupier of office space in India every year. India’s office market, which is the biggest trigger point for the growth of the sector, is largely dependent on the European companies to set up base in India. For the last 18 months, many European retailers entering India as part of their expansion strategy to new markets, may now prefer to wait for more clarity in the financial market.

Vineet Relia, managing director of SARE Homes, however, maintains that it is too early to comment on the impact of Brexit on the Indian real estate sector. “I believe that Indian real estate sector will continue to progress on the path of recovery in the wake of policy reforms taken by the government and resilient economy,” states Relia.

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In this cost and benefit analysis, while the sector may have to weather an adverse impact in the short-term for the NRIs and HNIs like Singh, it is time to make the best of opportunities available in the UK market. The only catch here is the fact that the Reserve Bank of India (RBI) has a cap over the annual overseas remittance. The RBI has capped the overseas property investment at $200,000 per person per year.

Analysts still feel this remittance cap would not deter the investment into the UK property, keeping in mind the average cost of apartments across the major cities of Britain.

(The writer is CEO, Track2Realty)


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Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

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