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Abhinav Kaul (00:00:13)
Hi, I am Abhinav Kaul, and welcome to this edition of Why Not Mint Money podcast. The next generation of rich Indian families are becoming more globalized, with many young members of the family pursuing foreign degrees and choosing to live abroad. Experts say that rich Indian families have started focusing on residency or citizenship-by-investment option as an investment asset. Today, we have with us Shilpa Menon, senior director India at LCR Capital Partners, a US-based investment and advisory services firm. She’ll help you understand what alternative residency programs are, why Indians are opting for them, and what are the benefits. Let’s listen in.
Podcast automated voice (00:00:53)
Hi, welcome to Why Not Mint Money, a personal finance podcast where we help you understand basic money concepts and share strategies for you to build your wealth. So let’s get started on your money journey.
Abhinav Kaul (00:01:05)
Hello, Shilpa, welcome to Why Not Mint Money podcast.
Shilpa Menon (00:01:07)
Thank you for having me here, Abhinav.
Abhinav Kaul (00:01:09)
So, first of all, if you can explain what does “investment-based immigration programs” mean?
Shilpa Menon (00:01:14)
Right, so these are actually called alternative residency offerings, you know, essentially, it is about creating optionality for high-net-worth families. Today, families, they’re not just looking at securing a great financial return in terms of investments, they’re also looking to understand how they can secure the future for their next generation, for example, right, they want options, they want global options for their family. And alternative residency, or basically, using investments to secure immigration in another country, is seen as a very important part of the legacy plan. So essentially, these immigration-by-investment programs, they will enable families to get hold of either a permanent residency or a citizenship in a different country by making an investment in that country, so it becomes a win-win for both the country as well as the investor.
Abhinav Kaul (00:02:07)
So, when we talk about Indians, what are the prime driving force[s] behind going for these investment-based immigrant programs?
Shilpa Menon (00:02:15)
Right, so in a lot of different countries, you will see people try to move because of, you know, some security or safety issues, etc. In India, it’s not so. You know, typically [clients] are doing this more for the next generation. Most of the clients that we work with do this as a way of securing, say, academic or career opportunities for their kids. Few of them are also working in multinational corporations, so they already have a chance to live abroad, they just want to make the entire process a little bit seamless by having, you know, their visa or other residency situation completely ironed out. They don’t want surprises. So that’s another way they do it. Business families, also, they’re looking to expand overseas, they do want to diversify. And then there is another set of families who are just taking this as an option, in the case that in the future, they happen to need it. And they cannot see far out in the future, but they really want to plan it out. Because, you know, there are various things at play, right, there is currency risk, there is what if the programs are not there in the future, you know, so might as well make use of these programs when they are around.
Abhinav Kaul (00:03:21)
So these alternative residency programs are essentially investments. So when we talk about investments, where the money is invested, in which venues, and what kind of returns or benefits one can expect?
Shilpa Menon (00:03:34)
Right, so typically, these investments are geared towards providing you a different kind of a lifestyle. So if you see the return, it’s not really financial return, like, for example, you would put money in your stock market or, you know, in some debt fund, and you have X return that is expected out of that fund, right. That’s not the case, usually within investments which are made for the purpose of obtaining permanent residency or citizenship. The ultimate benefit is actually getting to live, work, and study in that country and be treated on par with those citizens over there, the residents over there. So that’s the actual return you’re getting. Investments are, you know, depending on different programs in different countries, investments will vary. For example, in the US, you have this investment, which actually needs to be made in the economy, and you need to create 10 jobs there, per application. So that is the whole goal of the government to get international money to come in and create jobs in the economy. There are some other locations like Portugal, for example, where you can directly invest in real estate. Okay, so you can also invest in private equity funds. In fact, in Portugal [too]. So, various different countries will have different modes of investments and so therefore you need to analyze what route is good for you and how much risk you want to take. Typically, in terms of financial returns, they don’t usually pay out a lot of return. Because these are seen as cheap capital by the developers or whoever’s accepting this money from you overseas. For them, it’s a street capital. So typically, there’s not a lot of return that comes your way in terms of financial returns, but the way our clients look at it, this is basically providing them a gateway to a different kind of a future which they would not have been able to [have] with just their Indian passport.
Abhinav Kaul (00:05:24)
Right, right. So are there any prominent alternative residency programs globally, and which programs would be more in demand among Indians?
Shilpa Menon (00:05:33)
In India, we’ve seen, we’ve actually analyzed quite a bit of these things. The US program has always been very, very popular. It has always been. In the last few, five years, it’s become even more popular among Indians. In fact, it used to be dominated by Chinese investors way back, but now Indians are really catching up. And I don’t see any change in the demand levels even now, despite the amount having gone up to $800,000, right. So there is still steady demand for this, mainly from parents who are looking for options for their children, well, anyway, decided to study abroad or are looking for jobs in the US. Another very popular program is the Portugal Golden Visa, for example, because there’s the ease of actually getting a Golden Visa and then converting it into a citizenship after five years. You don’t really need to emigrate to start staying there, you can just be in Portugal for seven days in a year on an average, and still get it. So it’s one of the easiest ways to get a European passport. I mean, having said that, anybody who aspires for a foreign passport needs to know that they will need to surrender their Indian passport, because India does not allow dual citizenship.
Abhinav Kaul (00:06:41)
And there are some direct citizenship programs as well, in demand by Indians.
Shilpa Menon (00:06:47)
So there are a few there. Very sporadically, we’ve seen people wanting direct citizenship. Like I said, in India people are not looking at immediate moving, they just want optionality for the future. So typically, people know investors who look for this direct citizenship program where you directly get a passport, usually from countries where there is say, for example, civil unrest— that’s in our opinion, but that’s what we’ve seen in our experience—or where they are there is some personal family urgency where they need to migrate to another country immediately. That’s when they look for it. There is also another program in the Caribbean called the Grenadian citizenship-by-investment program, which actually provides you an E-2 visa in the US if you have the Grenadian passport. So there are some investors who want to get to the US in using that route, and then they would go for it. But overall in our client base, we do not see that much traction for direct citizenship programs. People are more interested in residency, and then they want to take the time to decide if they want to convert it into citizenship or not.
Abhinav Kaul (00:07:51)
Right. But recently, there were some, there was an Indian government data, which said four lakh Indians gave up their citizenship in the recent years. So how should one read this data, then?
Shilpa Menon (00:08:01)
Also, this is actually a mix of everything, they don’t really break down. This is not directly proportional to anybody who’s applying for immigrant investor programs. This is across, right. So even if my friends who would have passed out with me around, say, 18 years or 16 years ago, they would have now converted their H1-B to green cards, for example, they would and then they would apply for the citizenship…even those folks wouldn’t be coming under this. So they are, you know, this is not necessarily people who are investing their way to get the citizenship. This is all sorts of people. And as you know, there is so much of Indian diaspora in every country. So there’s all kinds of naturalization, right.
Abhinav Kaul (00:08:39)
So you talked about US visa program, EB-5, which costs around $800,000. You also mentioned Portugal and some countries in Europe. So what kind of investment one requires in these programs?
Shilpa Menon (00:08:54)
So like I said, in the US, it’s a investment that you need to make to create jobs. So typically, there is something called as a regional center in the US and LCR, the firm that I’ve worked for, is actually a regional center and fund manager. We take on investments from different investors and pull it into qualified projects, which are actually government qualified and can take this money in and they will create jobs on the behalf of investors. After a period of, say, five or six years, and once the investor has finished ij8;8,their entire process—there’s a whole process of first getting a conditional green card and then converting it into a permanent green card. At the end of that period, they then can get their money back from the project. So of course, there are no guarantees because your money is supposed to be at risk. But essentially, that’s how it works. And that’s why working with someone like us, we can be very, very careful with your money and make sure that it’s invested in the correct projects, the right kind of project, safe projects. So that’s how it works in terms of other project programs. For example, Portugal, you have two or three different routes of investing. You can start at as little as 280,000 euros; there’s a 350,000 euros option, there is a 500,000 euros option. Depending on your risk profile and what you want to invest in, you could directly buy a house, you could invest in a property, partly own a property, or you could also invest in a private equity fund or a private real estate fund. So it all depends on what option really suits you at that point. And we are here to explain all of these typically, that’s what we guide investors with,
Abhinav Kaul (00:10:29)
Right. But under the liberalized dividend scheme, or the RBI, there is a cap of $250,000 on overseas investments by Indians in a year. But these programs usually cost more. So what is the way around?
Shilpa Menon (00:10:42)
So, it’s, there’s no way around. So typically, every investor, I mean, typically most of these applications are done by more than one family members. So there are multiple remittance limits, there’s also people also use, try to use two different fiscal years to make sure that they come up with the entire amount, right, which is in a compliant way. So there are ways to do it in full compliance with the regulations and people that therefore need to start planning early. Because if they do not start planning early and set aside, you know, start diversifying into a different currency, then again, they’re going to be hit with these kinds of issues going forward.
Abhinav Kaul (00:11:24)
There are, like, for Indians or globally, European citizenship programs are quite in demand. But there are some non-EU countries like Montenegro which are also in demand. Why is that? And do these non-EU residency programs make sense?
Shilpa Menon (00:11:39)
So, typically what happens is when a program becomes very popular, the processing time typically for it goes up, as you can imagine, a lot of people going into the same program and the program authorities or immigration authorities sometimes do not have the bandwidth. And with the war, etc., things have exacerbated, right, so, but what happens is, there are some other programs, and they’re always going to be advised and they’re going to be coming out with their own programs, every country wants a piece of this. So there will always be new programs. Though what we’ve seen with our investors is that when we tell them that a program is right now, not in the European Union, for example, but it’s going to happen, you know, get into the European Union very soon. Investors are a little wary, because they want to be certain of things. Like, for example, if I say that it’s going to join the EU in three years’ time, investors become a little bit nervous, because ultimately, the whole benefit of trying to get something like the European passport or trying to get a European residency, which converts to a passport, is to actually get the benefit of the entire European region, right, to actually live, work, and study there. But if you are not able to do that, and if anything is a risk to that, if it’s uncertain, then the investment may not be as good. So why would someone want it—someone would say that I’d rather wait and use these, the programs that are available, and I know for sure that these will give me citizenship rather than go into a program that I’m not sure will give me the same benefits. So that’s [some] of the thinking that some investors have.
Abhinav Kaul (00:13:10)
All right, one question is, like, recent developments in case of Ukraine, Russia war, and COVID. Have you seen any impact of these debates on the alternative residency visas or on timelines or processing?
Shilpa Menon (00:13:24)
Timelines for sure, timelines for sure. In fact, the entire alternative residency industry has seen a lot of upheaval in recent times. Even with the US program, the last year they were negotiating a lot of terms, the regulations; they were coming up with new regulations, so for around eight months, the US EB-5 program, the regional center program, had come to a halt, and it was suspended. It was very frustrating for investors. But luckily, they’ve updated the regulations. And they have actually grandfathered, so anybody who comes in now will completely be protected. Similarly with the war, and because of so much demand, programs like the Portugal Golden Visa program first received a lot of demand, then there was COVID, and then there was also Ukraine war. So because of all of this, they had so much of, you know, there was a major bandwidth crunch. And they were also looking to actually update their technology system in the back end, that also did not help things. So overall, the processing timelines went for a toss in the Portugal program as well. So last year, when we were saying that you would get it within eight months or so, now we have people who’ve invested last year, but they’ve still not got their card. So yes, things have taken a toll on these programs. And I think, you know, it’s not something that is unusual in this industry. Unfortunately, we’ve seen most programs get hit by these snags.
Abhinav Kaul (00:14:51)
And there was also another impact like in the case of UK, which at the start of—they suspended their program because of the Ukraine/Russia war specifically, because of scrutiny and everything. So do you see that impact on other countries as well?
Shilpa Menon (00:15:06)
So there has been a furor. And in fact, this has been going on, this discussion has been going on for a few years where, you know, a lot of forces question or challenge the direct citizenship programs. There’s not so much of flags drawn by the residency-to-citizenship [programs], because you’re at least getting people in by way of residency. And over time, you are converting them to citizenship after testing out a few things. So that is still more acceptable to a lot of the nations. But a lot of them are not very happy that you’re providing citizenships to people based on investments directly, right, without any waiting period. So that has drawn flak. And it’s also drawn flak because there’s not enough scrutiny perhaps in the paperwork or the investor scrutiny. For example, the US program has always had very high levels of investor scrutiny and the paperwork, the source of funds, etc. That’s not the case, necessarily, with all different kinds of programs. So in our view, I think over time, people would just improve the, you know, paperwork, documentation, processing, and scrutiny if the programs have to stay and stay here for good. Slowly it will probably evolve to that level.
Abhinav Kaul (00:16:15)
Yeah, so that’s it for my questions, Shilpa. Thank you for talking to us.
Shilpa Menon (00:16:19)
Thank you, Abhinav. It was my pleasure to be hosted.
Abhinav Kaul (00:16:21)
That’s it for today. If you have any questions you can write to us at Mint Money at the redline mint.com. If you want me to cover any specific topic, DM me at address @Abhinavkaul at Twitter. To stay updated on this podcast, follow HT Smartcast podcast on Facebook, Instagram, Twitter, YouTube, and LinkedIn. To listen to more such podcasts, log on to htsmartcast.com.
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You can access the Podcast here.