As our lifestyles become global, increasingly more Indians are looking to buy global real estate assets. These decisions could be triggered by global mobility, better lifestyle choices, buying second/holiday homes or as a pure investment. In this connected world, the choices are exciting but first time buyers need to take a holistic approach before signing the dotted line.

Buying your first global property is a significant investment and requires careful planning. Here are the key factors to consider when making this decision:

Purpose of Investment

A goal well defined is half the journey of buying your first global real estate. Several investors jump to a transaction without clearly articulating the purpose, time horizon and exit strategy. You need to be mindful that some objectives are mutually exclusive - An inordinate capital gain can only come when there is arbitrage in the market about property value for example early stage launch. In converse, good rentals come when the property is delivered or near delivery with an established social / commercial infrastructure around it. Defining your objective will help you shortlist the right property for you and your family. Connect with a qualified consultant to understand -

• Rental Potential: If you're considering renting out the property, research the demand for rentals in the area. Factors such as tourism, population density, and employment opportunities affect rental yields.

• Personal Use vs. Investment: Consider whether the property will be a vacation home, a long-term residence, or purely an investment property. This will influence your choice in terms of size, location, and amenities.

• Capital Appreciation: If your goal is capital appreciation, choose a location with long-term growth prospects in terms of infrastructure and demand.

Location

Each market is unique with its graduated macro and micro drivers. It is easy to fall prey to "shiny object syndrome" but smart investors need to do their due diligence starting at a country level and following through to a city, locales and particular project details. Asking pointed questions will help you de-risk your choices.

• Market Conditions: Research the property market in the country or city you are considering. Is it experiencing growth? Are property values expected to rise or decline?

• Economic Stability: Look for locations with strong economic fundamentals, such as stable currency, low inflation, and steady GDP growth.

• Infrastructure & Accessibility: Proximity to airports, major highways, public transport, and essential services like hospitals and schools can increase property value and rental demand.

Legal and Regulatory Environment

If the rules of the game change, your play cannot be the same! Review the legal and regulatory framework of your shortlisted destination. Each country has regulations governing ownership, buying process, regulatory KYC process and tax jurisdiction. You need to consider the following in the least.

• Foreign Ownership Rules: Some countries have restrictions on foreign ownership. Ensure you're allowed to buy property as a foreigner in the desired location.

• Taxes: Understand local taxes, such as property taxes, capital gains tax, inheritance tax, and any special taxes for foreign investors.

• Property Laws: Familiarize yourself with the local laws regarding property rights, zoning, and regulations around rental or resale.

• Title and Ownership Issues: Check the property’s legal status and ensure it has clear and uncontested title deeds.

Financing

As they say...Money makes the world go round! It is worthwhile researching how you will get your money around the world to buy your dream asset. Each country has a defined financial policy governing interest rates, access to capital and requisites for loans. Inadequate due diligence can break down the entire property buying journey. Therefore, get a qualified banker or property associate to assist you well in advance of closing a deal. Look at the following elements when it comes to property financing.

• Mortgage Availability: Many countries offer financing for foreign buyers, but terms can vary. Understand the requirements for securing a mortgage in a foreign country, including the interest rates, down payments, and loan terms.

• Currency Fluctuations: Be mindful of exchange rates if you're financing in a currency other than your own. Currency volatility can impact your payment amounts and overall costs.

• Initial Costs: Account for property registration fees, legal fees, notary fees, inspection costs, and possible renovations.

Total Costs of Ownership

Any investment ROI is defined not in the broad strokes but the fine print. In your calculations bake in all the cost heads and variables that affect your total cost of ownership. While real estate is heading towards transparency there is still a grey area during the sale process that can be missed if you are not paying attention.

• Property Buying Costs : Clearly understand the actual area - For example carpet vs super area can be a game changer when choosing the right developer. Look at all inclusive pricing including all handover or utility costs. Look at government or intermediary fees that can offset your gains. A good payment plan can augment your ROI but missed payment riders can quickly drown you in penalties and/or escalating interest cost.

• Ongoing Expenses: These may include property management fees, insurance, utilities, maintenance, and repairs. Research whether the location is prone to natural disasters (e.g., earthquakes, floods) that could add additional costs.

• Property Management: If you plan to rent the property out, you may need a local property manager to handle tenants, maintenance, and regulations. This can incur additional costs.

Exit Strategy

If Abhimanyu's story in Mahabharata has taught us anything it is that entry without an exit strategy is akin to playing with your hard earned money as well as your peace of mind. Any property transaction should have any adequate safeguards and resilience built-in to adapt to changing market dynamics. Plan for risks like Geo-Political tensions, money transfer costs, regulatory compliance and adverse actions, changing market dynamics and price fluctuations. Also, balance your portfolio risk in case you are over exposed to a particular market or asset type.

Professional Assistance

Self learning is great but sometimes the cost of self learning in a high value asset class like real estate can make the experience painful and at worse at a substantial financial cost causing value erosion. Choose the right partners to streamline your journey through market research, property selection, deal structuring, transaction and post sales support.

• Real Estate Agents: A local real estate agent can help you navigate the market, especially if you are unfamiliar with the region or country.

• Legal Advisors: Hire a local lawyer to help review contracts, verify ownership, and ensure that all legal requirements are met.

• Tax Advisors: It’s essential to have advice on how the purchase fits into your overall tax strategy, especially if your country of residence has international tax treaties or obligations.

Considering these factors carefully will help ensure that you make an informed and successful purchase when buying your first global property.

Author - Abhinav Chamoli, Director Earth International Real Estate

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