Who's got too much RE in India ??. Time to cash out??

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toomuchRE
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Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Mon Oct 23, 2017 1:24 pm

Anybody this situation. General advise ??.
Last edited by toomuchRE on Fri May 25, 2018 11:11 am, edited 1 time in total.

bloom2708
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Re: Who's got too much RE in India ??. Time to cash out??

Post by bloom2708 » Tue Oct 24, 2017 12:13 pm

Your wealth is heavily concentrated in real estate in India.

Could you diversify and buy other assets in India? Stocks fund, bond funds, etc

If repatriating to the US is a big hurdle, that would not prevent me from selling some real estate and diversifying to more passive investments.

Not maybe what you asked, but there must not be anybody who bumped into your post in a similar dilemma.
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FrostyTheSnowman
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Re: Who's got too much RE in India ??. Time to cash out??

Post by FrostyTheSnowman » Tue Oct 24, 2017 12:42 pm

Have you thought about tax consequences of selling your RE holdings in India? You're expected to declare the gains on your US tax forms, in addition to anything you'll owe in India.

Plus, with demonitization, you'll show parity in the on-paper and at-hand sell prices for RE holdings in India.

toomuchRE
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Re: Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Tue Oct 24, 2017 1:01 pm

Thanks guys.. I think I should go ahead and liquidate some assets from RE to other means and then worry about repatriation..

My major frustration is, I really need to buy a house and don't have enough cash for significant down payment.. I'm not comfortable with just 20%..
I just feel the US housing market is becoming un-affordable again.. So i have assets i can;t tap into when I really need to..

I don't think many are in my situation.. But posted to see what type of feedback I get as I want to come out of my bubble and see other's perspective of my situation..

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eye.surgeon
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Re: Who's got too much RE in India ??. Time to cash out??

Post by eye.surgeon » Tue Oct 24, 2017 1:09 pm

Best to hold the majority of your assets in your country of residence if that country is the US. Recent events have shown that assets in India are highly illiquid and non-transportable. Doesn't help to be wealthy in a country that you don't live in if that wealth is not transportable.
Last edited by eye.surgeon on Tue Oct 24, 2017 1:17 pm, edited 3 times in total.
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SlowMovingInvestor
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Re: Who's got too much RE in India ??. Time to cash out??

Post by SlowMovingInvestor » Tue Oct 24, 2017 1:13 pm

FrostyTheSnowman wrote:
Tue Oct 24, 2017 12:42 pm
Have you thought about tax consequences of selling your RE holdings in India? You're expected to declare the gains on your US tax forms, in addition to anything you'll owe in India.

Plus, with demonitization, you'll show parity in the on-paper and at-hand sell prices for RE holdings in India.
You can get a tax credit in the US for any amount you pay to a foreign country (in this case India). Note too that the 'gain' on the US tax form wouldn't be the same as on the Indian form. Instead, you'll need to use the $$ as your 'functional' currency, and assume all transactions (purchases,improvements, sales) were denominated based on the $/Rs rate at that time. It doesn't matter whether you repatraiate the currency or not, or even if you used currency held locally in India for sales or improvements. That may work to your benefit on US taxes since Indian currency has fallen against the dollar in the last 20 years.

Final point is that RE is highly illiquid, especially after a major economic event like a demonetization. So you should prepare yourself for a possibly long time to sell (unless you reduce prices).
Last edited by SlowMovingInvestor on Tue Oct 24, 2017 1:45 pm, edited 1 time in total.

SlowMovingInvestor
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Re: Who's got too much RE in India ??. Time to cash out??

Post by SlowMovingInvestor » Tue Oct 24, 2017 1:17 pm

eye.surgeon wrote:
Tue Oct 24, 2017 1:09 pm
I have Indian friends living here in the US who are wealthy in terms of assets in India, but it does them little good unless they move back to India given the current currency issues.
My understanding is that residential RE in many parts of India has very high prices and very low rental yields. Demonetization last year was a big shock to the RE economy, so the price of RE on paper may be much lower than the actual amount one can get from a buyer.

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hand
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Re: Who's got too much RE in India ??. Time to cash out??

Post by hand » Tue Oct 24, 2017 1:19 pm

Perhaps take a breath and separate the thoughts of:
1) your long term goals and ideal asset allocation (RE vs. Stock vs. Bond) and location (US vs. India) from
2) Indian RE future returns and US housing future prices and affordability, relative currency valuations (all of which I believe are largely unknowable or are already priced in)
3) Your short / medium term housing desires in the US.

Strategically, if you plan to stay in the US, it would seem like over-weighting in Indian RE makes little sense (or is at best a high risk, high variability of return approach). Once you've determined your strategic goals, you can start building a tactical plan taking into account taxes, repatriation concerns to get to the right end point over time.

Specific to your comments regarding desire to buy US property with <20% mortgage - is it possible to borrow against your Indian RE holdings and bring money to US to buy house until such time you can sell of part of Indian RE portfolio? (I know little about Indian equity loans or moving money across international borders.)

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Pajamas
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Re: Who's got too much RE in India ??. Time to cash out??

Post by Pajamas » Tue Oct 24, 2017 1:22 pm

toomuchRE wrote:
Tue Oct 24, 2017 1:01 pm
I really need to buy a house and don't have enough cash for significant down payment.. I'm not comfortable with just 20%..
Looks to me like being uncomfortable with a 20% downpayment is just one of several problems you have that are somewhat interrelated, but it is one that has to do with your thoughts and feelings more than with any practical or actual financial issues, and you are conflating this problem with the other ones unnecessarily.

Maybe you could get a handle on all of the financial problems and then figure out how to solve them by writing them down on paper. That could solve the down payment problem by freeing up cash, but it might also directly affect your hesitance to put down only 20% as a down payment.

toomuchRE
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Re: Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Tue Oct 24, 2017 2:31 pm

20% down payment will make me end up with less than enough emergency cash on hand... I'm pretty conservative when it comes to taking loans but maybe I should revisit and not pay it safe all the time.

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Re: Who's got too much RE in India ??. Time to cash out??

Post by bloom2708 » Tue Oct 24, 2017 2:38 pm

toomuchRE wrote:
Tue Oct 24, 2017 2:31 pm
20% down payment will make me end up with less than enough emergency cash on hand... I'm pretty conservative when it comes to taking loans but maybe I should revisit and not pay it safe all the time.
Or be patient and save up a larger down payment. That is always an option.
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niceguy7376
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Re: Who's got too much RE in India ??. Time to cash out??

Post by niceguy7376 » Tue Oct 24, 2017 2:59 pm

have you been notifying the IRS about your foreign investments and bank accounts?

The main issue with investing in India is that it is easy and official to move money there but difficult to get it back.

toomuchRE
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Re: Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Tue Oct 24, 2017 3:40 pm

Yes.. I file taxes on interest earned in FD and file FBAR and stuff.. But not sure if I need to declare RE which doesn't generate any income..

SlowMovingInvestor
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Re: Who's got too much RE in India ??. Time to cash out??

Post by SlowMovingInvestor » Tue Oct 24, 2017 3:48 pm

toomuchRE wrote:
Tue Oct 24, 2017 3:40 pm
Yes.. I file taxes on interest earned in FD and file FBAR and stuff.. But not sure if I need to declare RE which doesn't generate any income..
No, you don't.

skor99
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Re: Who's got too much RE in India ??. Time to cash out??

Post by skor99 » Tue Oct 24, 2017 6:23 pm

I work in a large company and have many colleagues originally from India as colleagues. Some of them own RE in India and they talk about some of the same issues that you mention. It is hard to handle RE remotely even in the US, let alone a country 12 time zones away. A couple of them say that they have lost whole plots of lands to encroachers and are struggling to fight them in courts over there. Others have mentioned the difficulty of moving money due to a lack of knowledgeable accountants. Some said that they bought in some of the money by converting it to gold coins or jewellery to avoid currency issues, although even that would need to be disclosed to the IRS. They ultimately decided to leave a bulk of it in India and use it for their retirement purposes by spending time in India after retirement.
None of them have anything close to what you have ( $2 MM ), so generally speaking you should be much more careful about disclosures of foreign assets etc. as it bound to raise red flags if you bring in such a big amount of $ from a foreign country, without any prior disclosures of any such assets.

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giacomo_bogle
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Re: Who's got too much RE in India ??. Time to cash out??

Post by giacomo_bogle » Tue Oct 24, 2017 7:08 pm

Few Q/?
Do you have rental income abroad? if not you are good with FBAR taxes etc.
What are you looking at in terms of down-payment on your home in the US?
Do you anticipate that this place in south India will lose out on valuations due to government policies? - I understand that metros like Bangalore and Chennai have an "exploding" RE market; it's unlikely you will be short of buyers!

frugaltigris
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Re: Who's got too much RE in India ??. Time to cash out??

Post by frugaltigris » Tue Oct 24, 2017 7:26 pm

As a fellow NRI, I feel the pain. I don't buy the growth story of India any more. If we go in details, numbers are fake and pumped up by the present government. And with all the stupid ideas of the present government things are only going down.

To my understanding, it is not easy to just sell RE in India and reinvest in stocks. For US NRIs that is complicated option which comes under Portfolia Investment Scheme through Reserve Bank of India. There is lot of paperwork.

Other problems with RE in India are that the transcations are unclean. A large percentage of the deal is often unreported to tax authorities. I was thinking to get RE in India some time back and once I knew this, I backed off. I wanted 100% clean transparent transactions and found no sellers! This is bound to cause problems once you sell RE. How will you repatriate all the money in such a case?

On top of it, there are large commissions in the exchange process. 1 USD is trading for 66 INR now. Ideally you should get a rate close to it. Banks have a selling rate which is 68 INR, and then comes the correspondence bank which will take off undeclared monies. I did a wire recently and I got an effective rate of 70 INR even though my US bank and its correspondence bank did not charge any fee. The correspondence bank used by the biggest private Indian
bank skimmed me.

I have concluded that for NRIs, the wisest thing is to stay away from investments in India. I am regretting even having some FDs there, now worth $15K.
Last edited by frugaltigris on Tue Oct 24, 2017 7:29 pm, edited 1 time in total.

toomuchRE
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Re: Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Tue Oct 24, 2017 7:29 pm

No rental.. All properties are plots.. Not brave enough to build and rent it out. Not worth the hassle or headache.. These are in a major metro, but no more seller's market these days.. So not easy to sell. But I have to...

frugaltigris
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Re: Who's got too much RE in India ??. Time to cash out??

Post by frugaltigris » Tue Oct 24, 2017 7:30 pm

In this case, the unclean transactions are more probable. Probably try to wait for the market to reverse.

toomuchRE
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Re: Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Tue Oct 24, 2017 7:45 pm

The more I wait, I think the risk of issues will increase.. Im not worried about for selling low because my cost of acquiring them was pretty low.

Forget about this FD stuff. I put 100K in FD in 2013 only to end up with 20K in balance now.. Even with a FD interest rate of 10%.
Family commitments, people asking for loans, wife wanting to buy gold, TDS, bla bla. Heck I had to pay tax in USD from my paycheck here to file taxes on interest earned abroad... So I'm never sending a single $$ to India anymore.. Forget any more investments.

I'm pretty sure i cant even bring the remaining $$ here without some bank official giving me a headache... I will just use the debit card here :D :D :D

Tal-
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Re: Who's got too much RE in India ??. Time to cash out??

Post by Tal- » Tue Oct 24, 2017 7:50 pm

Yes - you need to sell a bunch of this.

I'll admit that I don't understand fees, taxes, or the RE market in India. I don't understand IRS reporting of current assets or how selling those assets would impact future taxes. I don't understand options of what to do with the cash once sold. These are all factors that you'll need to manage, but let's not lose sight of the forest through the trees.

With $2M in Indian RE and a total net worth of 2.6M at age 48 with a 200K income, you should diversify at least a large chunk of that money. If you ran into compelling reasons to do so, I would support you keeping $1M invested in Indian RE - but keeping $2M in this is way under diversified.
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frugaltigris
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Re: Who's got too much RE in India ??. Time to cash out??

Post by frugaltigris » Tue Oct 24, 2017 7:50 pm

I agree with your plan then. If there is overall profit, then sell it.

My FDs faced the same fate. I am debating whether to cut losses or keep them there forever.

Using debit card will charge you about 3.5% here, and on top of it there will ATM fee. You will still come out ahead with a wire.

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unclescrooge
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Re: Who's got too much RE in India ??. Time to cash out??

Post by unclescrooge » Wed Oct 25, 2017 12:39 am

It seems strange to own all your assets in a country that you left 20 years ago.

I would try to repatriate as much as possible and buy a home in the U.S. I understand this might be very tough, but if something happens to you will your kids be able to get their hands on the money?

toomuchRE
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Re: Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Wed Oct 25, 2017 6:57 am

It is strange but my idea was to retire at 50 and I heavily risked most of my early saving $$ in Indian real estate during the boom.. No other way for me to turn that 300K into a 2 MM in 15- 20 years. Guess the 50 year retirement is off, hopefully by 55 if I'm lucky.. if I continue to work and earn like I do now, I should be OK by 60 but can't imagine working past 55 for sure..

You raise a good question about My kids and wife. I guess my wife can deal with this if needed but definitely Kids cannot.. In a hypothetical situation..
I really need to think about how I manage this situation..

This is the reason I posted here to get feedback from experts who have a different point of view.. Also to some young investors in here who can learn for this.

nariktic
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Re: Who's got too much RE in India ??. Time to cash out??

Post by nariktic » Wed Oct 25, 2017 7:18 am

I am not sure, but you can research a little bit into the fact that grandparents can contribute to kids 529 plan without too much hassle. This helps if some of the property is in grandparents name.

prettybogle
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Re: Who's got too much RE in India ??. Time to cash out??

Post by prettybogle » Wed Oct 25, 2017 7:40 am

We know few Indian families and some of them shared information with us that RE in India is very hot and investment doubles in less than 5 years. Also, they invest big chunk of their money in RE in india and Gold and indian bank deposits. In my not very knowledgeable opinion, it is a good idea provided it is done in moderation like with 20 - 30% of wealth. Not sure about indian bank deposits though as I do not know if you can bring money back here.

cu_
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Re: Who's got too much RE in India ??. Time to cash out??

Post by cu_ » Wed Oct 25, 2017 11:38 am

Part of demonitization is the rules against cash transactions. My guess is, this will be good for NRIs in your situation (who are already in profit in RE valuations, so wont mind a little dip in pricing). If you are able to sell them, you can demand that the transaction is cashless and so everything is trackable. It will be easier to repatriate these funds compared to loads of cash. This is just my guess. Anyone went through a sale of RE in India in recent months (after demonitization)?

doon
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Re: Who's got too much RE in India ??. Time to cash out??

Post by doon » Wed Oct 25, 2017 4:04 pm

OP - What is your plan after 55? Do you mind retiring in India? May be its too late to buy a house in US. Wait for kids to go to college (another 5-7 years) and with current US assets and RE in India should be a good retirement plan. Over time you can diversify out or RE.

If you plan to retire in US then you may need to work longer. Plus you may also need to consider if that 2MM real estate is truly 2MM or less after taxes/transaction cost/currency uncertainty.
"Goal - Win the game before the need to retire"

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giacomo_bogle
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Re: Who's got too much RE in India ??. Time to cash out??

Post by giacomo_bogle » Thu Oct 26, 2017 7:18 pm

Another issue - Not sure how easy it is to get big sums of money legally out of India!
This is not easy in many countries.

toomuchRE
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Re: Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Fri Oct 27, 2017 4:31 pm

doon wrote:
Wed Oct 25, 2017 4:04 pm
OP - What is your plan after 55? Do you mind retiring in India? May be its too late to buy a house in US. Wait for kids to go to college (another 5-7 years) and with current US assets and RE in India should be a good retirement plan. Over time you can diversify out or RE.

If you plan to retire in US then you may need to work longer. Plus you may also need to consider if that 2MM real estate is truly 2MM or less after taxes/transaction cost/currency uncertainty.
I don't think I will retire there.

The portfolio estimate could be lot less but Im not too worried as the cost basis was too low.. I don't think I would be in a position today to discuss 55-year retirement, if it was not for those investments...That is for sure.. So the risk was worth it but need to make it matter now.

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LiveSimple
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Re: Who's got too much RE in India ??. Time to cash out??

Post by LiveSimple » Fri Oct 27, 2017 4:46 pm

toomuchRE wrote:
Wed Oct 25, 2017 6:57 am
No other way for me to turn that 300K into a 2 MM in 15- 20 years.
Still this is virtual money estimate / paper money, unless you can convert the RE to $$$, and $$$ are in your account, touch and feel the money.

toomuchRE
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Re: Who's got too much RE in India ??. Time to cash out??

Post by toomuchRE » Fri Oct 27, 2017 5:29 pm

LiveSimple wrote:
Fri Oct 27, 2017 4:46 pm
toomuchRE wrote:
Wed Oct 25, 2017 6:57 am
No other way for me to turn that 300K into a 2 MM in 15- 20 years.
Still this is virtual money estimate / paper money, unless you can convert the RE to $$$, and $$$ are in your account, touch and feel the money.
Yes sir.. I will know for sure before I turn 55.. :oops: :oops: :oops: :oops:

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