Smart investing: Mastering the overseas property play

Cross-border assets require careful planning and a balance of high-yield and stable markets

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Lalit Mukhi, 38, a programme manager in Dubai, is among Indian investors buying overseas real estate. He purchased a property for 850,000 dirhams (2.04 crore), financing 80% -680,000 dirhams (1.63 crore)-at 4% interest. He has been personally managing the property.

For wealthy Indians, overseas property is both a status symbol and investment. Dubai offers high rental yields and tax-free income; London gives prestige but lower returns; Singapore provides stability and quality of life.

Overseas investments are subject to India's Liberalized Remittance Scheme (LRS) and tax rules. Legal complexities and tenant management add risk, making careful planning essential for longterm financial goals. Mint examines how Indian regulations compare with global property markets.

Upfront costs Under the LRS, remittances above ₹7 lakh for overseas property trigger 20% tax collected at source (TCS). A 5 crore remittance, for example, incurs 198.6 lakh TCS, adjustable against overall tax liability but affecting cash flow. Taxes vary by country. Dubai has no upfront taxes, only registration and agent fees. London imposes stamp duty land tax (SDLT) of 0-12%, plus 2% foreign buyer surcharge, making the total up to 14%. In Singapore, foreigners pay standard buyer's stamp duty plus 60% additional buyer's stamp duty (ABSD), making entry costs among the world's highest.

Tax on rental income Rental income from foreign properties is taxable in India under "income from house property" and added to the total income, taxed at applicable slab.