Indian Investors Eyeing Windfall Gains in UK Property After BREXIT

UK’s earth-shaking decision to leave the EU presents a fortuitous opportunity for Indian investors keen to buy property in Britain. With the value of the pound showing a downward trend, the purchasing power of High Net-Worth Individuals (HNIs) increases significantly, presenting them with an opportunity to make windfall gains. However, there is also a flip side to the event. The heavily EU reliant Indian IT sector may face a slowdown leading to a tapering-off in demand for commercial offices and residential property. The consequences of the momentous decision have yet to manifest themselves but in the immediate future, property rates are expected to drop and with the value of the pound dipping, the opportunities this presents is significant.

The Opportunity

There has always been a keen interest evinced in UK properties especially in cities like London by Indian investors, who have business dealings in EU countries or families living there. It is expected that the recent revival in property demands in UK would now take a downturn amidst the confusion generated by this unprecedented event. The FTSE fell to a record low in the wake of the incident and the drop of about 10 percent in the value of the pound, are indications of a softening of investor sentiments in UK. It is anticipated that The Bank of England may move to cut interest rate to offset the impact of the event and arrest the declining enthusiasm of businesses in UK, thereby making UK properties even more attractive to high-end investors.

Anuj Puri, Chairman and country head, JLL India, draws attention to a similar occurrence in 2008, when the USA was hit by economic recession. Indians had then emerged as the leading group of investors eager to take advantage of a lucrative chance to profit from the situation. With the British pound valued at an all-time low for the first time in three decades, the lure that such a piquant situation holds for foreign investors cannot be discounted off-hand. For the present situation, he has this to say, “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.”

The Downside

As always, there is a downside to this event. The rare opportunity that Brexit presents to Indian property investors may, in fact have ominous portents for the Indian realty sector. The flow of investments in the Indian realty markets, through the route of FDI and PE, may be affected as investors may be wary of the impact that Brexit may have on other countries like India.

Another point of worry is, about the future of the finances and revenues of EU and the direction it will take. Indian IT firms, notable among them are TCS, Infosys, HCL Tech, generate nearly a third of their overseas revenue from the EU. A slowdown of business in this market will adversely impact the financial health of these companies. The IT and ITES sectors in India are major players in the property sector in India and occupy a substantial area of inventory, thereby imparting a boost to this segment. Growth in this segment is reliant on the propensity shown by EU companies to establish their business-base in India.

The recent interest shown by EU companies to participate in the growing Indian market may experience a hiatus, as these companies may want to wait and watch till the situation in international markets settles down. Despite the speculations of a fall out of Brexit on the Indian real estate market, not many expect any major impact on it. Vineet Relia, MD of SARE Homes is convinced that it is too early to form an opinion on the matter. He said, “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 the resilient economy.”

Going forward, the opportunities on offer in the UK realty market need to be pursued with caution and any positives coming out of it may be snapped up by patient buyers. Though there is a constraint to the enthusiasm of buyers due to the cap by RBI on annual overseas remittances up to a limit of $200,000 for a person, per annum, experts feel that this would hardly stall the acquisition of property as the average cost of property does not pose any hindrance to investors.