Why Invest in UK Real Estate from India?
Typically, UK property has always been a relatively safe investment vehicle that relies on a good investment location and proactive due diligence by the investor. Working with the right partner can also help overseas investors discover the investment locations for themselves, without having to visit the site first-hand.
While investing from overseas comes with its own challenges, there’s no doubt that the market remains a viable alternative for investors that want consistent returns and stability. Investment from India has only increased over the last few years, a trend that doesn’t look set to slow down entering the new year.
As forecasts suggest property prices could rise by 21.5% over the next four years and demand continues to increase, the popularity of buy-to-let investment will no doubt continue for international investors.
Stunning Off-Plan Investment Opportunity
- Off-plan apartments – estimated completion 2023
- City-centre location just 3 minutes from Brindleyplace
- Unique waterfront living in Birmingham
- 24.5% price growth expected by 2026 (JLL)
- Top location for London leavers – forecasting yields above 5%
Comparing Indian and UK property markets
When comparing the UK and Indian property sectors, it’s no surprise that Indian investors are looking overseas.
Since August 2018, the rupee has gained around 2%, bringing down asset costs for Indian investors, while favourable currency exchange rates have supported property buyers over the past six months. Brexit also presents an opportunity to find deals within the UK property market – prompting a 15 – 20% increase in the number of property investors from India.
Overall, the UK property market remains a stable, high-performing alternative to the Indian market. While both sectors have experienced a slowdown, the yield security and potential for a ‘deal’ afforded by the UK is a tempting offer, especially with forecasts showing rising prices through natural market growth.
Common FAQs for International Investors
Can international investors buy property in the UK?
UK property has long been a safe haven for overseas investors, and in recent months, the number of overseas landlords in the market has reached an all-time high.
According to research, there are around 184,000 international landlords with UK properties, which has increased 19% in the past five years alone.
While the process of purchasing UK property from overseas is generally a longer process and comes with more considerations, the returns often compensate for these. For overseas landlords purchasing additional property in the UK, a 3% charge will need to be paid.
This 3% will also be stacked with the 2% Stamp Duty Land Tax surcharge that applies to overseas investors.
How does buying UK property as an overseas investor work?
The UK is unique in that overseas investors must conduct their due diligence before they enter into any form of a binding contract. Typically this will involve:
- Checking the title of the property
- Obtaining a survey
- Carrying out searches of local authorities
- Obtaining information from the buyer
- Agreeing a terms of contract
All of this is usually done through a solicitor, which should be appointed locally in the UK. If the property is being financed through a mortgage, then an offer from the lender is also needed.
When both parties are ready to proceed, each then signs a separate but identical contract. Your solicitor will then agree with the vendor that contracts are binding, a process called ‘exchange of contracts’. At this stage, the buyer pays a deposit of between 5 and 10%.
Completion can take place on the same day as exchange, but usually there is a relatively short intervening period for legal and practical matters (usually no longer than 28 days). On completion, the balance of the price is paid, the title is transferred to the buyer and you can then take full possession of the property.
Working closely with a property investment company is one way to take some of the hassle out of the buying process. At Joseph Mews, for example, we work with investors buying off-plan property to guide them through the entire process, helping with mortgage applications, appointing advisers and maximising returns.
Can I attain residency through buying a UK property investment?
No, buying a house in the UK (to live or for buy-to-let) as a non-resident does not give you the right to live in the UK.
You will not receive any immigration permissions for buying a UK property and if you are interested in acquiring permanent residency, there are other routes you should take.
You can, however, apply for an Investor Visa which is one way of gaining residency in the UK.
Can overseas buyers get a UK buy-to-let mortgage?
The most common ways for an international investor to buy a property is either through cash or by using a specialist buy-to-let product.
In the current market, there’s plenty of mortgage products available including specialist products for non-residents and expats. The most important thing? It pays to shop around as speaking with an expert can usually result in you finding the ideal product to suit your needs.
Whatever option you go for, you’ll be expected to produce several instances of paperwork for the application, these include:
- Proof of creditworthiness
- Mortgage affordability
You’ll also need a deposit (upwards of 25%) and demonstrate that you’ll be generating enough rental income from the tenant to cover the mortgage interest.
The amount you can borrow depends on how much rent the property can generate. Lenders will typically need your rental income to meet 125% of the monthly interest payments on the loan.
How many UK taxes are there?
In the UK, there are several taxes to consider. From Income Tax to Inheritance Tax and Capital Gains Tax, living – or investing – in the UK comes with a variety of different responsibilities.
For property investors, the key taxes to be aware of are: Income Tax, Stamp Duty Land Tax, Inheritance Tax and Capital Gains Tax. For those who have plans of staying in the market for a long period of time, it’s crucial to be prepared for every one of these taxes.
While Stamp Duty Land Tax will need to be paid when purchasing the property, any rental income will be subject to Income Tax. Additionally, Capital Gains Tax will need to be paid on the sale of the property and estates worth over £325,000 will be subject to Inheritance Tax.