In my capacity as Managing Director of Nysa EB-5, the American Immigration Investment program, I am often asked about the security of investing in real estate based projects in the United States where returns do not nearly measure up to traditional Indian nominal rates. For example, in the United States typical bank deposits typically earn less than 1% per annum as compared to 9-10% often seen at the best Indian banks. However, particularly in the area of wealth preservation one must analyze return in the context of real return as opposed to nominal return.

The Indian Rupee (INR), which was at par with the dollar at its independence in 1947, depreciated by almost 69 times since then at its all-time low in late August 2013. Currently hovering around Rs. 60 per USD, the currency is still considered highly volatile. According to an HSBC release in early 2014, “while the INR may have passed the worst…it will remain sensitive to sudden changes in broad risk dynamics.” Even a fixed deposit account giving 9% annual interest amounts to just 1% in real returns when accounting for inflation, currently at 8.1% y-o- y.

This phenomena carries over to real estate in a big way. Coupling the currency volatility with the on going inflation hovering near the double digits, everything else equal, the value of a real estate asset can decrease by as much as 20% in a matter of one quarter. So prices can go up even as consumer demand is being weakened by the same factors. What many investors don’t realize is that Indian returns have traditionally been mitigated by this currency devaluation coupled with much higher relative inflation. The double whammy of currency decline coupled with high inflation actually brings Indian returns in terms of real value at or below historical and current U. S. returns.

Once returns are adjusted for currency and inflation, one then must look to the stability of individual markets per se. The American economy as well as its financial and political environments tend to be make for a relatively stable global safe haven as opposed to emerging markets like India. To be sure, the savvy investor if he times his investment just right can enjoy enormous upswings. The trick in such volatile conditions, is when to jump out. After all money is a commodity like any other and it tends to chase opportunity. But once the pendulum swings from wealth creation to wealth preservation, the prudent investor is best advised to seek more conservative ground with returns which may not be as exciting, but are far more secure. This is much like the difference in employment considerations between a worker starting his career as opposed to one getting ready for retirement.

In the immigration investment business this situation is further sensitized by the immigrant seeking to relocate to completely a new environment with associated aspirational pressures, lifestyle changes, and societal indoctrination. It is consistently our recommendation that this investor not move forward with a risk- ladened portfolio. Inasmuch as the immigrant investor will face risk and uncertainty in the non-financial aspects of life, it is prudent that they do their best to take financial risk out of the equation.

A Perspective on Real Estate Investment

While emerging real estate markets like India can provide immense wealth creation opportunities in a short period of time, with property prices doubling every few years, the U.S. still holds the crown for preservation of wealth. The returns may not be as gaudy as emerging markets in their best years but the consistency and guarantee of the principal is what the U.S. can offer over its fast growing and volatile peers like India. According to a survey by the Association of Investors in Foreign Real Estate, the U.S. leads international markets in countries providing the most stable and secure real estate investments.

Property Rights and Institutions

In many ways the cornerstone of the U.S. economy is its protection of property rights. The U.S. has strong property laws in place that protect the capital placed within its economy, and robust and transparent institutions that guarantee the implementation of said body of laws. Consequently the U.S. provides the ideal opportunity for investors interested in making investments in a safe and certain environment. In such an environment, an investor’s capital investment is exposed to the lowest level of appropriation risk from the government or any third parties, regardless of the investment horizon established by the investor.

Furthermore, property title insurance, fundamental to all U.S. real estate transactions, acts as a further safeguard to any potential unseen property related disputes, which may arise later. So the American system carries with it the inherent ability to store value and wealth in an environment that ensures its transferability to heirs and future generations, effectively creating a setting that is ideal for inter- generational wealth preservation.

The Indian real estate industry on the other hand is infamous for its constant plague of legal issues. Disputes in real estate take anywhere from 20 to 30 years to get resolved in the Indian judiciary system. Violent threats and intimidation are commonplace amongst the disputing parties. In the state of Punjab alone, 2,500 cases are filed for such matters on an annual basis.

In India, land records are incomplete, opaque, and stored in inaccessible places. This is a major reason leading up to such disputes and a lot of times these disputes are within the family. In the 2013 international property rights index, India was ranked 57 out of 130 and ranks 95 out of 174 in the Transparency International’s corruption perceptions index.

Investment Environment

Lastly, it is imperative to look at the current investment environment in the U.S. following the most recent financial crisis, and the opportunities it has created. The burst of the most recent housing bubble, dramatically reduced creditors willingness to lend, which in turn sharply reduced demand, creating a “buyers-market” environment. Today, the market has slowly recovered, but there is still tremendous opportunity for savvy investors. Real estate prices are increasing at healthy double- digit rates and will continue to do so in the coming few years. The residential market in the U.S. is currently 20.81% below its 2007 peaks and the commercial market is 13.19% below its peak.

The Indian market on the other hand is facing a slowdown after years of high growth. Key markets such as Delhi, Bangalore, and Hyderabad have specially felt the pinch in the last few months.

Conclusion

When it comes to capital preservation, the asset appreciation or depreciation is a secondary factor. One has to consider the present value of the cash flows generated by the property, which will not change significantly even when market conditions take dramatic swings. Capital appreciation is more of an icing on the cake with this strategy. It is important to note that U.S. properties offer rental yields of 6 to 12% while its Indian counterparts offer a significantly lower yield at 2-3% for residential and 6 to 8% for commercial properties.

In closing, compared to India, the U.S. remains the most optimum alternative for investors interested in wealth preservation and making safe investments. While rapidly rising demand in India may offer lucrative short-term returns, it comes with increasing levels of risks (property disputes, currency and inflation risks, and market volatility).

The headline of the 31 January 2018 article in the Economic Times proclaimed ‘Investment limits for US ‘Golden Visa’ likely to be hiked’. The article quoted Nysa Global’s Pankaj Joshi as predicting three new levels of EB-5 investment ranging from $800K to $1,300K. Though the recent U.S. budget passed in March by Congress did not effect this change for FY2018, legislation has been written and agreed upon by both Republicans and Democrats raising the minimum investment amount to $925,000 from the current $500,000 level. So now it’s no longer a matter of ‘what’ but ‘when’.

Frankly, politically the increase is long overdue as it hasn’t been changed since the program started in 1990 while other immigration investment programs worldwide far exceed the U.S. number in terms of minimum investment. Suffice it say that while complicated in process, the U.S. program is the best deal going. Especially considering the educational, employment, and lifestyle advantages vis-à- vis toher countries.

One aspect that was not addressed in the proposed legislation was the shortage of visas to be issued annually through the program. The program is currently limited to 10,000 visas per year and only 7% (700) from any one country. When a country exceeds its quota it must draw from a pool of those visas unused by other countries. Until date this criterion has only affected applicants from China where the waiting period is now predicted at 8-10 years due to a backlog of over 25,000 applicants and their families. However, it is anticipated that Vietnam will join the list in spring of 2018. India is not far behind having grown from 86 applicants in 2013 to 354 in 2016…an annual growth rate of 68%…from 2015 (239) to 2016 (354) alone the growth rate was 48%.

So the law of supply and demand is definitely at play here. As demand rises supply decreases and price goes up. If the American dream is in your plans, it’s vital to be on the front end of the curve.

Most Indian students, like any other non-U.S. citizens considering undergraduate collegiate programs in the United States are confronted both by the challenge of gaining admission to the college of their choice as well as the daunting task of securing immigration rights for attending as well as pursuing their post graduate plans.

To make a hassle –free process, the U.S. Congress has passed legislation allowing a limited number of foreigners the chance to gain green cards for themselves and their families by investing in U.S. enterprises creating American jobs. The program is known as EB-5 which stands for Employment Based 5 th Preference. It became popular with American business just a few years ago during the credit crunch. By investing US$500,000 in a U.S. enterprise, applicants obtain green cards for their entire family including unmarried children under 21 entitling permanent resident status in less than 12 months from application. Typically the investment is returned to the investor within 5 years. But the green cards are gained as soon as the money is invested.

The EB-5 program has a set-up of the foremost U.S. based immigration professionals in helping the investor and family get their green cards processed in the most efficient manner possible.

Most investors pursue the program for the sole purpose of advancing their pre- college age children’s opportunities for study and work in the U.S. As children of investors must be under the age of 21 at application, planning for this program needs to start early.

There are plenty of benefits. Students with green cards can come to the U.S. whenever they like while residing in their home country for college visits or any purpose. While in school, students can work off campus, accept internships, travel freely internationally, apply for all post graduate programs, and are much more valuable to American employers favoring foreigners eligible to stay in the U.S. during their employment.

– Pankaj Joshi is the Managing Director of Gurgaon based NYSA Global.

With over $5 billion raised in 2014 by numerous projects across the U.S. structured under the United States Citizenship & Immigration Services (U.S.C.I.S.) Investment-Immigration Program (EB-5 Program), the program is at an all time high.

NYSA Global specializes in EB5-structured project-financing. NYSA has adopted an investor-centric, compliance-oriented service delivery model founded on the following key principles:

Risk Mitigation/Project Quality

Our projects are thoroughly vetted and underwritten so that the risk to investor is greatly reduced. Our due- diligence methodology is rigorous and essentially ensures that any project we engage will be “otherwise bankable” regardless of the EB5 funding component. This is very unique because many projects today rely heavily on the EB5 money as they cannot qualify for more traditional sources of funds. The result and outcome of this systemic underwriting process is a significant risk reduction for the investor. Simply stated, the quality of our projects is unequalled in the EB5 market place today.

Transparency

NYSA has established a corporate culture of integrity and complete transparency in every aspect of our business. There are no hidden fees and no short cuts. Moreover, we are investing significant amounts in our internal systems, technology, and processes to ensure that reporting and compliance are adhered to with consistency and sustainability.

Institutional Approach

The EB5 market today is riddled with inefficiency and a lack of processes and professionalism. NYSA’s goal is to bring an institutional approach that is crafted to deliver the maximum value for our clients and investors.

Compliance

NYSA has uniquely embraced the rules and regulations promulgated by both USCIS and SEC/FINRA. More specifically, all of our projects are SEC/FINRA registered for the safety of the investor and all of our internal processes are deliberately aligned in this regard and have been incorporated as part of our brand and culture.

Independence/Autonomy

NYSA has carefully deliberated and chosen to be regional centre “agnostic”. This enables us the flexibility to select qualified regional centres with whom to associate our client projects. This is a considerable advantage in contrast to other project offerings.

Collaboration

NYSA has identified a group of “best of class” professional service firms with whom to affiliate to further underscore our institutional approach and to enhance our ability to safeguard the transactional integrity of each project.

Experience

The NYSA organization is comprised of industry experts from across multiple industries and professions. Our team experience is both broad and extremely deep in each discipline. We are experts in financial modeling, structures, and vehicles. We are also experts incompliance and regulatory matters in addition to having vast successful transactional experience registering in the billions of dollars with Fortune 500 companies.

Global Reach

NYSA has adopted a “boots on the ground” construct across the globe and has developed its own proprietary network of prospective investors, immigration agents, and financial advisors that work exclusively with NYSA because of the NYSA “brand” that delivers quality projects for investment opportunity.

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