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When the stars are aligned

27th January 2018

There has been a lot of interest in regards to UK property investment from some investors from India.  Some I have recently met have already invested in London.  Primarily their decision to invest in London was driven by wealth preservation, rather than wealth creation.

Money can be made in India, but not without complications.  Unfortunately, anyone with any sort of power or position often tend to abuse it.  The information I was given by some prominent industrialists was that even if one tries to be straight and pay his taxes, the tax inspector will suggest ways to reduce it in return for a fee. If you choose not to oblige him, he will open an investigation and look thread bear into your books.  The idea being either way you lose, you’re stuck between a rock and a hard place.  Relative to this environment, it is easy to see the attractiveness of investing in London.

Investors see the need to diversify their wealth, and there has been some talk of even staying out of the country for more than 180 days, which apparently allows one to declare residency, and therefore pay tax, in another jurisdiction.  This way they circumvent any need to even declare tax in India.  Antigua was mentioned as a strong contender to reside, due to the strength of its passport and of course the low level of taxation.

The typical investment, of the investors that I have recently met, has been new build properties which have had a slight discount to them, typically 10-15%.  One must bear in mind, new builds generally have a premium to them in the first place; in the same way as when you purchase a new car there’s always a premium. Therefore, the discount in one sense may be illusory.

Nonetheless, they are satisfying the primary need, which is to place wealth in a more stable environment.  However, there are some hoops to jump through.  The correct vehicles need to be set up, bank accounts need to be opened, lending needs to be applied for (which needs to be non-recourse, in other words no personal guarantees). To top this all off, you have the anti-money laundering requirements (AML), which will need to be satisfied according to the requirements of every institution you deal with, depending on how they have interpreted the AML rules.  This is the new environment we are in. Although there are no restrictions to investing in London, there is a lot of paperwork required; none of which is insurmountable however.

There are a number of factors which have aligned, this is leading to this great exodus of money.  First, the market in India has dampened especially in the top end, much the same which has gone on in London over the last few years. Second, the Pound has dampened relative to the Rupee, and third, we have a damp property market in London which means good deals are now floating to the surface, which, in a stronger market would not see the light of day.  The conjunction of these three factors provides the impetus to move money across continents, and ensures there is a heavily discounted property market in UK for it to land in.

Our angle is that we can provide deals which can be worked on to add further value, and which are also discounted from inception.  The focus will be on the bottom end of the market, the bread and butter, staying well away from the top end, which over the last few years has taken a beating.

Suresh Vagjiani

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