BUSINESS

Europe on sale -- now, buy that

By Rrishi Raote in New Delhi
September 13, 2008

For decades Britons and Americans of every class have been crossing the Channel or the "pond" to sample the delights of old Europe. Many of them have chosen to stay on and make their homes, or second homes, in parts of Europe perhaps more sunny and salubrious than their native turf.

Now that Indians are surfing a decade-old wave of prosperity, will some of us wash up on European shores? There are several reasons to think so. First, there are more Indian millionaires and 'high net-worth individuals' than ever before, with more money and less conservative tastes than their parents.

Second, the RBI is sitting on a mountain of foreign exchange -- $300 billion -- and doesn't want all of it. So it has raised the limit on how much money an individual Indian can legally send out of the country for investment, from $25,000 per year in 1994 to $200,000 per year in 2007.

That's just over Rs 90 lakh (Rs 9 million), and you can use it to buy anything from shares to bonds to property.

But what kind of dream property can you get for that kind of money in Europe? A flat in south Mumbai costs more. Well: consider a modern farmhouse on 6,000 sq m of land in the town of Castiglione del Lago, near Lake Trasimeno in central Italy, for 90,000 euros (Rs 57 lakh).

Or a considerably more remote medieval farmhouse in the French Pyrenees, with access 'via ancient paved pedestrian pathway' -- not quite a steal at 143,000 euros (Rs 90 lakh).

No, no, you want a chic urban pad. Well, for the same amount you can have a "charmant" studio in the artsy district of Montmartre in Paris — really a poky garret. More idyllic is an equally tiny but "delizioso" flat on the outskirts of Rome, with a handkerchief-size garden, an AC and a flowering shrub near the door, for 135,000 euros. Modest and restful?

But modesty is hardly a motivating factor for the well off. You can set your sights higher by joining forces. For instance, a couple can spend $400,000, and if you buy at the cusp of the financial year, in March-April, then two years' limits can be combined for a grand total of $800,000 —which will buy you something quite grand. Add family members and the number goes up accordingly.

At this price level, your choices are many, from brand-new villas with pools in Provence to very little castles. In Italy, you can explore prestigious territory like Tuscany, home to thousands of north-European and American expats. Here is a picturesque ruin on a hectare of hillside with sea views and fresh spring water, yours for 600,000 euros.

The problem is, Indians are not romantic buyers. "India-based HNIs show a preference for newly-built properties," says Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj (JLLM), an international property consultancy, not romantic ruins.

Unlike many British and American buyers, Indians are not making the kind of lifestyle choice that involves loving and exhausting regeneration of a rundown farmhouse with superb views. They will not buy a chateau to refurbish as a bed-and-breakfast, as dozens of British families have done. That is an emotional rather than a financial investment.

Children are our chief investment, and many well-off Indians buy homes abroad either for their children who work or study there, or so that they can spend time near them. "My daughters were studying in London," says Kavita Malani, a Mumbai-based property developer, "and I thought they might want to stay back there."

So she bought a house near London, with the help of a friend's brother. "It was a very good deal," she says, even though to meet RBI guidelines "you have to put it in four different names". The house is one of four in a compound, all Indian-owned. "We feel much safer and mentally calmer if we have people of our own kind around us."

Even if she decides to sell, Malani says, "That money I'm not going to bring back to India." She's aware of various other property offerings in "England, Dubai, Malaysia" — areas which have already attracted a great deal of Indian money and attention. "They are very easy to buy because they do everything and give you," she says. "They even pay your ticket to see the place." Last month JLLM published research showing that the UK residential market is ripe for Indian buyers.

Malani has a point about convenience, because buying in continental Europe involves a number of taxes and fees and careful scrutiny by solicitors. In France, notarial charges alone can be 3-10 per cent on top of the purchase price. A buyer must also understand tax agreements between those countries and India, designed to prevent double taxation of capital gains, for example, or protect inheritance rights. Perhaps for this reason, agent after European agent that we spoke to said they have never had Indian clients. One even said "We don't do the lower end."

Perhaps India's HNIs are satisfied with suburban farmhouses, hill-station homes, a villa in Goa or Mauritius, a flat in London or Dubai for work or play. But this will not last, especially as the wealth gap that separates us from Europe shrinks, and as Europeans begin to look for more congenial neighbours than the Russians who are currently buying up their continent.

Rrishi Raote in New Delhi
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