Real Estate Investment in India, UAE or Canada?

    TORONTO, ON, February 02, 2014 /24-7PressRelease/ -- Real estate investment in Canada is increasingly attracting foreign investors, especially from South Asia, China and U.S.A. As more and more condos and high rise apartments spring up across the GTA (Greater Toronto Area), investment opportunities are increasingly on the rise as well. But with downtown Toronto getting increasingly cramped and expensive, all eyes are on Mississauga as the next best city for real estate investment in Canada.

Initially developed as a suburb of Toronto, Mississauga now has come into its own, leading the race as the fastest growing city in Canada. Mississauga's pristine beauty and location on the shores of Lake Ontario makes it not just scenic but also convenient, thanks to its well-planned infrastructure, MiWay bus route network, GO Train and easily available cabs. Now with a spate of modern condominiums springing up at the Square One Area around the Square One Mall, Mississauga is set to steal the limelight for real estate investors in Canada.

Globally, real estate investment is all about diversification. Seasoned investors tend to invest in both local and international markets. But in general, home buyers feel more secure investing in places where they have either lived earlier or have close ties with.

So says a real estate broker in Mississauga, Amit Kalia, who recently explored and analysed the real estate investment market trend in Canada in his blog about Mississauga real estate after a trip to Dubai and India (Delhi and its adjoining suburb, Gurgaon). The findings are worth a read.

Amit explains that real estate is all about local expertise where professionals help buyers not just to save money but also offer insight and information.

In a comparative study on the top builders in Gurgaon Real Estate versus Mississauga (Square One) Real Estate, Amit states that apart from DLF who is the market leader, few builders match up to the quality found in Canada. He also believes that the traffic and tough road conditions in India provide further challenges.

In comparison, Dubai offers quality construction, sound infrastructure and disciplined traffic which easily rate it as one of the best cities for real estate investment.

Regarding price per square foot of Mississauga condos versus Dubai or Delhi, Amit says that "both in Delhi and Dubai, builders include a large portion of common area including the balcony into their square footage. The builders in India and Dubai charge buyers a rate that includes the balcony. In Canada, on the other hand, builders exclude the balcony when calculating square footage of apartments."

He explains that condo fees are only 0.06 cents p.s.f. (price per square foot) in India, 0.60 cents in Dubai and 0.50 cents p.s.f. in Canada. However, property tax in both Delhi and Mississauga are at par with approx. 0.9% of CVA (current value assessment) of the property.

What makes investment in Dubai appealing is that there is no property tax. There is 5% of rent tax paid by the tenant which gives landlords in Dubai the edge in cash flow.

Rent to buy ratio is lesser in India, totaling to approx. 2.5% of property's price. On the other hand, rent in Dubai sits at 7.5% compared to Canada at 5.5% to 6.5% in Downtown Mississauga, Square One area.

Where Delhi and Dubai score over Mississauga is undoubtedly in their growth aspects. The market in Dubai grew 100% (50% per year) from December 2011 rates when the market crashed in 2008. The market in Gurgaon has increased approx. 25% per year since 2009 after which it has been stagnant since 2011.

"In comparison, the GTA market average price growth registered just 20% increase in a five year period from Dec 2008 to Dec 2013," Amit says.

However, going by the rate Mississauga is developing over the last few years, coupled with its proximity to Toronto, well planned neighbourhoods, shopping convenience, educational institutions, safety, stability, green woods and splendid waterfront area, the city offers a veritable haven for investment in the long run to both local and international investors alike.

The appreciation of the Canadian Dollar to approx. 65% against the Indian Rupee from Dec 2008 to Dec 2013 is also an attraction.

However, Amit feels that investing in India might suit Canadians who are planning to settle down in India, especially those who plan not to repatriate their money from IRS to CAD. The government rules on investment by foreigners are said to be friendly and risk - free.

The Canadian Dollar also appreciated approx. 10% against the UAE Dirham, from Dec 2008 to Dec 2013. He explains from his own personal experience that at the time of the real estate boom in Dubai, anyone could buy a property with a small down payment. Builders went on a rampage and reinvested in more and more projects. With no real users, Dubai real estate market was unable to sustain the assigned transactions.

Today, things have turned. Real estate is more regulated with the introduction of RERA equivalent to the CREA (Canadian Real Estate Association).

These days banks in the UAE are not allowed to give mortgage loans for pre-construction projects. Residents cannot buy with less than 25% down payment and non-residents need to come up with minimum 50% down payment.

By 2020, the real estate market in Dubai is expected to shine bright. The only risk lies in the government rules that can change without warning, any time.

In hindsight, one can conclude from Amit's analysis that investing in one's own country is always beneficial. For a first time investor in Canada, the GTA, most especially Mississauga, Brampton, Oakville, Milton, Burlington and Toronto are the top scorers!

Editor's Note: Information has been gathered from a real estate agent and condopundit.com

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