Property in India

qwertyasdf

I was looking through the property section in the Sunday Independent yesterday and there was an article about buying an apartment in either Goa or Bombay. With prices starting from €24,500 it caught my attention.

The article can be found here: http://www.unison.ie/irish_independent/stories.php3?ca=303&si=1812640&issue_id=15510

I’m interested in people’s opinions on this property deal as posters within this forum are quite clued in when it comes to the pro’s / con’s of property investment and the various pitfalls that one might encounter.

The company in question can be found here: http://www.larionovo.com/india.htm

I did a search on boards for other threads regarding Larionovo, however there were only a few replies to the original post when another user was inquiring about them.

Now the article states that the developments come with the option of a guaranteed rental income contract worth 7pc per annum for five years.

I’m Interested in people’s take on these rental contracts. I assume the company will be taking a slice of the action which is fair enough. Also I say it would be very tricky trying to let it yourself when you’re on the other side of the world, so for removing the hassle maybe it wouldn’t be a bad thing. (I’ll google “guaranteed rental contract” and see what it throws up)

So even if the rental income drops to €0 after the five years (worst case scenario, let me know if you think of more) , I’d be hoping that the capital appreciation after five years would make up for this and it wouldn’t be too much of an issue on a small investment. I know I’m assuming the property will appreciate in value and the only indication I have to this is a small paragraph within the article detailing the projected value of the Indian market ($12bn to $90bn by 2015)

The property starts at €24,500, this excludes taxes and legal costs. No mention of a management fee or whether the apartments come furnished, so the costs could escalate.
I read on another thread that I could lose my FTB grant in Ireland if I bought abroad so I should factor that in as well.

Like most people these days I’m slightly concerned about the need to get onto the property ladder. We all doom and gloom surrounding the Irish market maybe looking further afield is a good idea. At the point I should state I’m a complete novice when it comes to these matters so feel free to correct me on anything I’ve written. I’ll detail my situation now.
• Single, 25 years old and living with parents (Only child no real need to move out anytime soon.
• Salary €32,000 or thereabouts after tax.
• Savings, €19,000 (6K from parents) €3500 in credit union so getting a loan for more money won’t be an issue. Recently paid off €10,000 car loan ahead of time with no defaults on repayments so credit history should be good. (Never got into difficulty with credit card either)

So as you can see from my salary I haven’t a hope in getting a property in Dublin and I’d have to look at a place in the midlands for say €150,000. With interest rates going up slowly but surely and market forecasters saying that our property is overvalued I’d be worried about speculating on a rental property here. I want to go travelling next year and work so I would be leaving as much money in the bank for when I come back. Then again it could be a good idea to take a calculated risk and invest the money in the Indian market.

Anyway I’m rambling on at this stage so I’ll summarise my main queries.
• Peoples opinion’s on this foreign investment.
• Do I lose my FTB’s grant.
• Guaranteed rental contract’s.

Any feedback will be greatly appreciated.

SkepticOne

I would find out independently what the current rents are in those parts of india you are considering. Also I believe there are restrictions on foreigners of non-Indian origin buying property in India.

Your goal seems to be the eventual purchase of a home in Ireland which, like many, you can't afford to do at present. What you need therefore is somewhere to put your money so that it will make a good return until such time as you can afford to by your home in Ireland. It doesn't need to be property which is risky if you don't know the market in detail.

Victor

You will lose you first time buyer status in Ireland.

You are exposed to currency flucuations.

How do you know what its actually worth?

"I know I’m assuming the property will appreciate in value and the only indication I have to this is a small paragraph within the article detailing the projected value of the Indian market ($12bn to $90bn by 2015)" only suggests a growing market, not necessarily an appreciating market.

Guaranteed rental contracts have been brought into disrepute by places like Bulgaria.

The_Conductor

7%- while it may sound good to you from Irish property, is *not* a good return for Indian property at the moment. Average 5 year rates are now between 8.22 and 8.6%- with a further interest rate rise expected when the Indian central bank next meet on the 24th of April. Asset prices in India have plateau'ed- property, gold (Indian is a massive domestic consumer of gold) and precious stones are all falling in price. Overnight interest rates hit 80% at one stage about 3 months ago and the Indian government is determined to use interest rates as a means to try to rein in inflation and bring development back down to sustainable levels.

If you have a look on any number of property related websites (for example)
the advice in general is "wait and watch". Prices are expected to soften, but not crash..... then again thats economists.......

Raskolnikov

I heard that you can get good returns in the Ukraine here.

Can anyone advise?

babytooth

Raskolnikov wrote:

I heard that you can get good returns in the Ukraine here.

Can anyone advise?

great potental for earnings here...

the outer herbides and easter ireland...
2 bed duplexs are only 2k euro.

3 beds on 8 mile detroit can be had for 1.5k dollar.

check them out
www.ireallylovebeingrippedoffbecasueiamirish.com

babytooth

babytooth wrote:

check them out
www.ireallylovebeingrippedoffbecasueiamirish.com

This is better - plus you can buy in Ireland


ww.makemillionsontheirishpropertygetrichquickgovernmentssponsoredcheme.com

Raskolnikov

In all seriousness though, I'll give some reasons why this is a terrible idea.

1. If you buy this property, are you prepared to spend €1,000+ to go to India in the event of any problems?
2. The only properties being sold here are holiday homes. Is there even a culture in India for owning holiday homes? I'll actually warrant that you can buy a villa next to the coast in India for the price these cowboys are charging for a shoebox.
3. Unlike Bulgaria, there'll be almost zero demand from Europeans for renting holiday homes in India. Is there even a culture in India for holidaying in a resort?
4. Are you familar with property ownership/inheritance/capital gains laws in India? You could end up getting stung badly on this.

My advice would be to take the your little nest egg and invest risk-free in some of the schemes that the Irish banks are running. See here. It's not exactly fun or risky, but there's potential to make a little bit of cash for yourself. Most importantly, it's risk free (unless the bank goes belly up)!

A Random Walk

Ukraine - government is in a severe constitutional crisis which could lead to civil war, ex Soviet state, feck all property laws, high crime rates and mafia influence, terrible economy, poisoned by Chernobyl, impossible to get there without difficulty and the food is awful. What possesses you to even think of investing there?

mickoneill30

A Random Walk wrote:

What possesses you to even think of investing there?

Click the link. It talks about Chernobyl etc.

jdivision

qwertyasdf wrote:

Like most people these days I’m slightly concerned about the need to get onto the property ladder. We all doom and gloom surrounding the Irish market maybe looking further afield is a good idea. At the point I should state I’m a complete novice when it comes to these matters so feel free to correct me on anything I’ve written. I’ll detail my situation now.
• Single, 25 years old and living with parents (Only child no real need to move out anytime soon.
• Salary €32,000 or thereabouts after tax.
• Savings, €19,000 (6K from parents) €3500 in credit union so getting a loan for more money won’t be an issue. Recently paid off €10,000 car loan ahead of time with no defaults on repayments so credit history should be good. (Never got into difficulty with credit card either)

.

Why don't you look at the affordable housing list if your salary is that after tax?? You'd be able to pay the deposit and furnish it and possibly have a little left over with your savings

gibo_ie

Victor wrote:

You will lose you first time buyer status in Ireland.

You will not loose your FTB grant if you buy the house commercially, as in buy it to let, not to live in. I done this with two properties before i bought my own "Primary Personal Residence" and was then classed as a FTB, this is a fact so just be careful and take advice from professionals like banks and solicitors or tax advisors before doing it.

In regards to guaranteed rental, this is included in the price in most cases and you can buy the property for much less in a lot of cases if you request a price without the guaranteed rental. For example i choose to go with a guaranteed rental return of 8% NETT in Dubai on my most recent venture as it is extremely good in relation to most 4.5-6% returns GROSS. My guarantee includes management fees and all other ancillary fees for three years also. So 24% back after three years and a property which has already increased in value by about 15% since i bought it over a year ago, not bad. So there are some good returns, just keep an eye on the small print.
Good luck and dont be put off by some people saying not to take a chance, if you have 35k to invest and not too worried if you may loose a grand or to in the long run then go for it.

The_Conductor

gibo_ie wrote:

You will not loose your FTB grant if you buy the house commercially, as in buy it to let, not to live in. I done this with two properties before i bought my own "Primary Personal Residence" and was then classed as a FTB, this is a fact so just be careful and take advice from professionals like banks and solicitors or tax advisors before doing it.

Incorrect.
The Revenue Commissioners have a strict definition of a First Time Buyer.

A first time buyer is a person, (or, where there is more than one buyer, each of such persons):

* who has not on any previous occasion, either individually or jointly, purchased or built on his/her own behalf a house (in Ireland or abroad) and

* where the property purchased is occupied by the purchaser, or a person on his behalf, as his/her only or principal place of residence and

* where no rent, other than rent under the rent-a-room-scheme, is derived from the property for five years after the date of the current purchase.

Purchase of a property in Ireland or abroad, irrespective of whether it is for personal accommodation or as a rental property, immediately negates the favourable stamp duty terms on offer to First Time Buyers in Ireland. If you claim FTB status when purchasing a property for residential purposes in Ireland, post the purchase of property for commercial (or other) purposes, and claim entitlement to favourable stamp duty terms, you are evading tax and may, if caught, be subjected to the full rigors of the law. Any solicitor specialising in property will be able to explain the requirements to you.

It is known that there are a sizeable number of people doing exactly as you describe- i.e. buying rental properties abroad and subsequently claiming FTB status to the Revenue Commissioners here. There is a unit specifically investigating these claims in Dublin Castle.

This link goes into detail.

The only case where one could legitimately own rental properties abroad and still be entitled to claim FTB status in Ireland would be if the property(ies) were inherited (as opposed to purchased) prior to 22/06/2000

You may get away with claiming the FTB status, then again you may get caught. Either way its tax evasion.

macshadow

1 bed apt in goa,india on daft.ie from 8k.

qwertyasdf

Thanks for all the friendly and helpful advice on this matter....

I seen those properties on daft yesterday so seeing as though I don't know diddly squat about buying property yet, I'll sit back, get my facts and figures and make a informed decision down the line.

qwertyasdf

Thanks for all the friendly and helpful advice on this matter....

I seen those properties on daft yesterday so seeing as though I don't know diddly squat about buying property yet, I'll sit back, get my facts and figures and make a informed decision down the line.

latenia

I was in Goa before Christmas and out of curiosity looked in the papers and estate agents' windows at prices. For about 40k you can get a colonial villa with land. Given the state of the infrastructure, the bureauocracy, a general mistrust/predjudice against foreigners and the difficulty of getting there I wouldn't bother with it.

ronbyrne2005

For those wishing to invest in overseas property while not losing your FTB status in Ireland invest in a leveraged property fund that borrows money as well as using your investment to buy propety in upcoming market and manages the investment etc. They would be able to get best deals and would be more diversified than a small individual investor could be, they can also avail of economies of scale/reduced transaction costs and would have expertise in investing in these countries.

Heres an example of a fund set up by AIB recently

These funds can be either private(sold to you by an insurance/investment company) or traded publicly on stock exchanges as REITs

The_Conductor

I was in Goa last September. I have to post a few pics here to give you an idea of what the place is like. Even the tourist areas are about 3 hours drive through jungle from the international airport. I booked a local cab to take me out one day- and because I didn't use one of the locals who charge tourists extortionate amounts they beat the guy to a pulp. I rented a motorcycle (without any licence) and drove around for a few days which was good fun. I was warned to stay off the main roads so the police wouldn't stop me- I got stopped by the army anyway. A 500 ruppee bribe later and I was on my way. Foreigners aren't allowed to own property there- so you hold property in trust with a local person the nominal head of the trust (Polish people are allowed to own property- they are the only EU citizens allowed to, it dates back to an agreement the Indians made with the Polish government in exile during the second world war).

Goa is the most corrupt place I have ever visited, and the I think decadent decay is the most accurate way of describing it. When the Portuguese were in charge they had a law which made it mandatory to conduct repairs and repaint all buildings after the monsoon. When they eventually turfed the Portuguese out, as a sign of their new found independence they repealled these laws, so most of the buildings have not been painted in 30 years. Rising damp is a doddle in comparison- any building over about 4 years of age has strange fungal growth on its exteriors and older buildings often have serious problems with rot. I took a picture of a palatial manor built in the 1920s with the roof all fallen in, but still fully inhabited with electricity and running water. Its almost bizzare looking at it.

Monsoon is something else- we don't have rain like it here in Ireland. The rain comes down in sheets, you can barely see ahead of you. It can be like this for weeks. Humidity gets over 130%- so its impossible to dry clothing when you wash it. Most houses have dehumidifiers running fulltime to keep their furnishings in order.

Different parts of the state have awarded mobile phone contracts to different companies- so you will be charged roaming rates even on local phones after going a couple of miles up the road.

When exiting your house in a tourist compound, you're advised to stamp your feet to warn any snakes of your impending approach- the snakes are fine, providing you don't surprise them.

The biggest mistake I made before visiting was forgetting to check when the Monsoon season ended.........

I'll try to upload links to some of my albums I took while there.

Shane

yellow123

Hi Shane,
You don't paint a very pretty picture of Goa. I'd be interested in seeing some pictures though!

The_Conductor

Maybe I painted a slightly overly pessimistic picture.
The locals, in general, do view westerners as rich people who are to be milked for whatever money can be extracted from them. The climate is not conducive to the preservation of buildings- the very first thing you notice driving from the airport is the mould on all the exterior walls (and the peeling paint everywhere). There are tourist beaches (which its illegal for the locals to visit) and there are tourist developments (ala Costa del sol etc) but is it worth going to the other side of the world for the sake of a cheaper Costa del Sol? Curiously enough- even the most remote villages had their telephone shops where you could make cheap international calls (peak rate to Ireland is only about 20cent a minute)- and for the most part even in the middle of rice fields- you'll find somewhere with broadband internet access (rather strangely).

If you take a wrong turn you'll often find bodies rotting on the side of the road, awaiting collection by the street sweepers- or if you go to a tourist attraction you risk being swarmed by people suffering terribly from leprosy or other ailments (hotels normally give you a lot of small change so you can throw it at them and keep them occuppied and away from you).

For all its splendor and wonder (Agra and the golden triangle), India is a third world country and an extremely poor one at that. The abject poverty cannot be imagined- it has to be experienced. People with nowhere to live lying sleeping along with their children and their grandparents on traffic islands in Delhi. Street children swarming you when you stop at a traffic light (the locals tend to ignore traffic lights and all other rules of the road- leading to horrific fatalities). You'd see a mother washing her children- and look slightly puzzled at the children's blond'ish hair only to be told by a doctor that its a sign of extreme malnutrition. Then you'd go to your own hotel and sip a beer in the airconditioned bar, munching on bread sticks while contemplating where to go for dinner......

I used a taxi in Jaipur to visit an area where I thought there was a shoe factory. Unfortunately I pronounced the name of the suburb wrong- and ended up in a run down area. Coming to the nearest road junction a hip with a leg still attached to it was on the well kept footpath.....

When you actually get to see a country- you have to ask yourself whether tourism is good or bad in situations like that. Tourists in many regards, perpetuate horrific conditions and provide an air of legitimacy to situations that you would be too sickened to watch on the TV at home.....

India is famous for its elephants- and tourists pay large sums of money for rides. Elephant handlers though control them with large iron spikes which they use to tear at the elephants ears and stick in their shoulders. Its hard to enjoy them when the poor elephant is covered in blood, barely concealed by the handfulls of dust hastily scattered on the elephant to hide the sticky redness as tourists approach.

The worst thing of all is coming to a realisation that in many cases, human life has such little value. Seeing little children chained to stalls in the market. Seeing an old woman minding her two malnourished grandchildren on the side of the street after her own daughter has died from Aids. Reading the newspapers about religious Hindi festivals coming up- where wealthy Indians traditionally give alms to the poor, and reading of the riot police being drafted in to maintain order.

Bribery is an every day activity. Having a local police officer on a weekly retainer while you're there is useful, if a highly dubious thing to do. Given their official salaries are insufficient to feed a family of 4, much less allow for the many things we consider everyplace objects, such as a refrigerator, bribery is almost officially sanctioned.

And.... India is a command economy- so it produces unreal amounts of things that often are not needed or wanted, even while they go horribly short of basic necessities.

I have an Indian sister-in-law, so thanks to her advice we got to see a lot of things that are a little more off the usual tourist trail.

patrickolee

powerfull stuff. Ever been to Madras? I have an ex-colleague living there which I've always meant to visit, but given your description of Goa...