Hi Friends,
Just inviting your views on the idea of borrowing money aginst hse equity in here and buying property in India for investment purposes.

The whole idea of borrowing in here is to pay a lower interest rate here against the higher rates back home, assuming the exchange rate fluctation in currency shall be very well taken care by the property appreciation in India?

Pls share your views and or your real life experiences of similar deals.

Thanks for your time and views

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mor

Whenever you experience joy, peace, security, equanimity or purity, it is only because you are aligned with ALMIGHTY.

I have invested in India before 2.5 years and growth is almost double now.
Also, not much difference in currency conversion but it is not necessary that future will be same. I have few suggestion....

1) Invest only if you can trust on some one who can take care of your investment (In this case, I trust only on my parent)
2) Do not invest the money which you might need in Canada. (i.e. if you loose your job, you should have backup plan to survive in Canada)
3) Keep in mind that investing is easy but selling property and retrieving money back is not easy especially when you are in Canada. Also, you need to consider tax on capital gain.

If you don't mind, can I ask what kind of investment you are thinking? (Home/Office/Land or something else)
When do you expect to bring money back and how much return you are expecting?
Did you compare with other investment in Canada? (i.e. second home)

Thanks

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Success is Never Ending and Failure is Never Final.

Thanks friends for your replies,
God willing, I plan to go back in the coming 5 yrs, hence the inv I intend to make is in a commercial property, which can generate income by rent or by operating a business in partnership, as regards the set up back home I have whole bunch of people I can trust, including my closest friends .

I actually do not intend to bring that money back, paying the mortgage here as long as I am here is all what I have to worry about and manage it .

As regards returns on investments, real estate investments has by and large paid off in the longer run.

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mor

Whenever you experience joy, peace, security, equanimity or purity, it is only because you are aligned with ALMIGHTY.

Looking at the currency trend from the last 5 years.
E.g If you had invested in a property in India 5 years back for 1 lac rupees. given the rate of 1=40 you would have paid $2500. Assuming that the property value appreciated 3 times including the rental income, today it became 3 lacs rupees i.e. you would be expecting $7500. But because current rate of conversion including the exchange fees you will get 3lacs/48 (46 current rate and 2 rupees exchange). i.e. 6250. The capital gain tax that you will be paying is on 3750. approx 40% of 1875 = 750. So net gain is of $3000. In other words your money is doubled in 5 years if the value of property triples in India.
If the value of property doubles in 5 years in India then the gains will be as follows.
2 lacs/48 = 4166, Capital gain tax on (4166-2500)/2 *43% = 358.
So net gain is 1666-358= 1308

Now lets say if you invest $2500 to buy a property here by taking the loan. The properties appreciated half times more..so the value of the property is about 1250. Assuming that the annually the net rent collected is $100 for 5 years it comes to 500..so the gain is of 1750. Now you will pay capital gain on 825 i.e. 376. So total gain is of 1750-376=1374.

Ok I am not accountant or RE agent and have a very limited knowledge. There could be other benefits and pros and cons. the calculation also does not seem neat and clean. But just gave it a shot. Other can correct/criticize.

Bottom line, if you live here and planned to stay here..invest here only as you are in control. Not only the issue of trust but why to trouble your parents or keens even though they are ready. It is a hassle to maintain properties offshore. May be invest in India in retirement home where the property is locked for ages.

Good luck!

oops replied little late...but hope that it could be educational!

I agree with bhootnath to invest in canada if you have plan to stay in canada even if we are making less but it will be in our control.

Still you need to think about the risk of borrowing money from bank. If you have $25000 on hand, you might need $25000 more from canadian bank to invest in India but to invest in real estate of Canada, you need $225000 from the bank. You have to generate enough income from canadian real estate market to pay mortgage. It should not be the problem if you have tenant but if you can't find tenant for few months, Hard to pay mortgage of investment property. It is a big risk in compare of investing in India. I believe the business and investment is the risk and risk is the money but it is up to individual to decide how much risk he can take.

Check calc below. http://www.goodmortgage.com/Calculators/Investment_Property.html

At the end of term, you need to subtract selling expense (including required renovation) and capital gain from your profit.

Anyone know about how to calculate "Capital Cost Allowance" (OR depriciation) on rental property for tax purpose?

It will be great if someone can calculate and explain to me throughe easy steps for an example of brand new rental home of $265000 and barnd new appliances of $5000.

Thanks,

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Success is Never Ending and Failure is Never Final.

Hi friends,
Thanks for your concerns and possible pitfalls along the way, I am yet nowhere near to the investing point.

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mor

Whenever you experience joy, peace, security, equanimity or purity, it is only because you are aligned with ALMIGHTY.