An Indian immigration attorney with more than 20 years of experience points to a common mistake investment migration firms make when courting Indian clients, and explains what to do instead.
Since the Indian government recently opened the doors that allow Indian investors to go out and invest abroad, many Indian businessmen are now exploring international avenues for expanding and securing their financial future.
Residency and citizenship by investment (RCBI) is one lucrative option that offers Indian HNWIs (High Net Worth Individuals) a multi-faceted solution for their long- and short term goals. Not only can such programs ensure the safety and security of their investment, but also allows the HNWIs to obtain residency/citizenship of another country.
India is perhaps the last economic powerhouse in the world whose HNWIs have yet to take full advantage of the opportunities and options available to invest abroad and truly become global citizens.
The graph below demonstrates the untapped potential of the Indian market. Despite having nearly half a million HNWIs (according to Knight Frank), Indians show up on the radar of only a handful of residence program destinations.
This is because most Indians still hold the perception that investing abroad is for the purpose of wealth generation only. They’re thinking goes: If we can easily generate wealth in India, then why invest abroad? However, it is important for them to know that investing abroad can help to achieve not only financial but other personal and professional goals as well.
Over the past few years, curiosity about RCBI programs has grown sharply in India, but there is a lack of professional advice regarding the various benefits of these programs, especially the non-financial ones.
But investment migration firms are making one crucial mistake:
Selling their projects before selling their countries
Service providers who wish to establish a presence in India need to attune themselves to the Indian mindset. It is not enough to promote their program aggressively in the Indian market. It is important that they also sell their respective countries and educate their clients about the non-monetary returns offered by these programs. In short, they don’t have to just sell their product but also sell their country and its uniqueness.
Service providers coming to India to market their product must keep in mind the following facts:
- For starters, it is important to remember that Indian businesspeople are not, inherently, risk takers. They always prioritize the security of their investment and substantial returns in any kind of investment.
- Second, there is the ‘trust’ issue. Indians will not invest until trust is established with a service provider. Businesses in India mostly operate through references and mutual acquaintances. They are more comfortable when business has to be given or taken from someone who is known, even vaguely.
- Most service providers who come to India are only focused on selling their product/service. For example, they will explain everything about the investment program and its pros and cons. Indians, however, are savvy investors and are not only looking for financial gains (though that may be their primary motivation) but other non-financial matters as well, such as –
- Is the place welcoming and business friendly?
- Is there a well-established Indian community there?
- Is it going to benefit the family, especially the children?
- Can the children obtain a good education and have bright career prospects there?
- Can they settle there and still maintain their personal and professional ties to India?
Service providers should focus on the following motivating factors when dealing with Indian clients:
Several surveys show that Asian parents give top priority to their children’s education and are particularly keen that they study abroad. This is probably due to the fact that the approach and attitude towards education in Western countries is very different compared to that in Asian countries.
The number of Indian students studying abroad has increased many-fold in the past five years. Members of India’s upper- and upper middle class can plan their children’s study in foreign countries by making investments in nearly risk-free but unconventional products in many countries. There are excellent opportunities available for investing in countries like the US, Canada, the UK, and the Caribbean islands that guarantee subsidized education for the children of these investors.
In most countries offering RCBI schemes, permanent residency or citizenship status is accorded to the investor and his/her family. As such, the investor’s children can have a head start in their career when they finish their education.
The most important advantage that service providers can stress is that, by obtaining residency and citizenship by investment, the investor’s children can enjoy reduced tuition fees at most universities and colleges. Tuition fees for permanent residents and citizens are significantly lower in most foreign universities as compared to those paid by international students. In many cases, the amount to be invested by an investor in a particular country is just a little higher than the tuition fees that have to be paid, especially if the investor has two or more children.
In other words, the investor can often recover the capital invested in citizenship or residency through the savings garnered from paying in-state – rather than international – tuition fees.
Quality of life:
Members of Indias upper- and upper middle classes now have considerable assets and disposable income, a relatively recent phenomenon. Hence, foreign travel and pleasure trips abroad have become a frequent occurrence. Having traveled abroad, these individuals have new-found aspirations to achieve the quality of life enjoyed by their peers in developed countries.
This is another attraction that service providers can leverage; tempting investors by showcasing the quality of life and high standard of living in their countries. They need to assure investors that not only will they enjoy high-quality living, but also continue to maintain their business operations and family ties in India. The newly liberalized foreign exchange policies allow well-heeled Indians to purchase real estate in countries in which they wish to live or to which they want to travel frequently.
Expansion of business, tax planning and wealth management:
Even though India is an economic powerhouse with which Western countries are keen to develop trading ties, many Indian businessmen are still hesitant to venture outside domestic markets to expand their business.
The Indian government has opened up doors for investing abroad since it believes that joint ventures (JVs) promote economic co-operation between India and other countries. Since the globalization of trade is a two-way process, integration of the Indian economy with the rest of the world – with all its attendant benefits – is achieved through overseas investment. It is the reverse of Foreign Direct Investment (FDI); Indians directing investment abroad.
Thanks to this new liberalized vision of the Indian government, subcontinental entrepreneurs can now expand their business to the US, Canada, Australia, the UK, and many other countries through RCBI. Many HNWIs will be taking advantage of the new foreign remittance policy to make investments in businesses abroad and diversifying their business or bringing in new technology to India. Service providers can explain how this can be a win-win situation for Indian businessmen who wish to establish a global presence.
Indian exporters, in particular, have been quite reticent or unforthcoming in investing through RCBI. Service providers can accentuate the benefits of RCBI to Indian exporters by expounding on how exporters from China, Taiwan, Korea, and even Pakistan have used these programs to their advantage.
Individual exporters and export companies in these countries have realized that having a presence in the importer’s country is the most efficient and effective way to sell their goods. Through these programs, they obtain permanent residency/citizenship of the respective country. This then allows them to conduct business in their adopted country as local businessmen. Additionally, the confidence level of the buyers/importers is greater when doing business with a local exporter rather than with an exclusively India-based exporter with whom they’ve never interacted.
Indian businesspeople face hindrances when traveling in and out of India to their preferred destinations for business or pleasure due to visa restrictions. Obtaining the necessary visas is a time-consuming process in India, and the number of countries to which they can travel visa-free is very limited. Additionally, the fear of visa application rejection always looms.
Quite often, these businessmen and women have to cancel their trips because of visa application rejections or delays. Visa-free and hassle-free travel ensures mobility and networking opportunities. Investment through RCBI can help investors obtain passports or resident permits of countries whose residents and citizens enjoy the freedom of visa-free travel to many countries around the world.
Non Resident Indian (NRI) status and benefits:
Investing in foreign countries can also facilitate the acquisition of Non-Resident Indian (NRI) status and the tax exempted benefits associated with it. As we already know, many Indian celebrities, politicians, and sports personalities have obtained residencies of different jurisdictions around the world for tax planning purposes.
In fact, as NRIs, individuals can invest abroad as well as in India. This makes tax planning easier because it enables the creation of legitimate international trusts. The Double Taxation Avoidance Agreements (DATTs) signed between India and many countries around the world help NRIs with estate planning and the reduction of personal and corporate taxes.
Investing in developed and developing economies could be a good option for savvy investors and HNWIs when it comes to wealth management and portfolio diversification. Investments can be made in stocks, real estate, mutual funds, and government bonds. These can come with financial and/or non-financial rewards.
In conclusion, because India is a new market for RCBI, foreign developers and service providers should not merely copy the marketing strategy that worked for them in other countries, but rather tailor their approach to local tastes. The first step, in that respect, is to primarily market the destination rather than the program.
More from Prashant Ajmera:
- Basic Dos and Don’ts for Entering the Indian Investment Migration Market – By Prashant Ajmera
- 10 Reasons Indian HNWIs Have Been Slow to Embrace Investment Migration