By Pankaj Joshi Mar 11 2015

For affluent Indians, American real estate is a security blanket and many of them are joining the queue of investors

For many years, NRIs and those at home have looked to the US as a safe haven for real estate investment. For affluent Indians, Am­erican real estate is a security blanket. Faced with what some regard as a bubble in real estate prices in major Indian cities and a sometimes jittery Bombay Stock Exchange, they are joining a wave of buyers from other countries who see the recovering US real estate market as one of the best places to put their money these days. Factors influencing the decision to invest include a hedge against inflation and investing in the strength of the US dollar, which has doubled against the Indian rupee over the last two decades.

What most people don’t know is that real estate investment in the US can also be the most efficient mechanism toward gaining a green card, and ultimately US citizenship. It’s not about buying a condo and getting a green card. In fact, the investors/investments approved by the US government under this programme are heavily regulated and required to stimulate job creation and economic development. But if structured properly, the United

States Citizenship and Imm­igration Service (USCIS) Emp­loyment Based Fifth Preference (EB-5) programme can be a way to achieve benefits for the investor’s family that extend far beyond financial return. EB-5 is essentially an immigration visa category to the US that was conceived as a route to bring foreign capital to the US that was expected to stimulate economic activity and create or preserve American jobs. The foreign investor in turn received the opportunity to become a permanent resident (or green card).

The US Congress of 1990 created the USCIS EB-5 programme during the administration of President George H. W. Bush. In its infancy the programme was designed to facilitate setting up of small businesses in the US by foreigners. Over time it evolved and was modified to permit groups of investors to pool money together into a real estate project or other business that would meet the requirements of the programme.

In 2009, with the US financial markets in turmoil, real estate developers and others began to look at the EB-5 programme as an efficient alternative source of capital for developments facilitating high employment such as hotels, medical facilities, etc. Likewise, investors interested in immigration to the US, for a variety of reasons, saw EB-5 as a way to invest in US real estate and gain immigration rights.

With over $5 billion raised in 2014, creating and supporting more than 100,000 US jobs, the programme is fast gaining popularity both in the US as a tool for bringing foreign direct investment and for foreigners looking for the much sought after US green card.

Over 90 per cent of the applications currently come from China, but the programme is gaining popularity in other countries as well. India has climbed to No. 7 with 96 applications in 2014 (38 in 2013) and is expected to become the second largest market for EB-5 worldwide.

To be eligible, foreigners are required to invest $500,000 into an investment that has been approved for investment by USCIS. All investments must also meet the requirements and are overseen by the US Security and Exhange Commission (SEC). Selection hinges on evidence that each investment would create a minimum of 10 US jobs.

Foreigners select an EB-5 qualifying investment pooling their funds with other investors into the project. Generally EB-5 investments do not generate a financial return per se but they are most often heavily securitised. The projects generate the jobs that are then allocated to each investor to meet the job creation condition under the programme.

Individual applications are filed upon placement of the $500,000 investment.

The applications, which are filed by immigration attorneys, are adjudicated by the USCIS and usually take 8-12 months to approve. The applicant and all qualified family members are then issued conditional green cards and can move to the US as they choose. Investments are generally returnable in five years or less.

The foreign investor, along with spouse and all unmarried children under 21 at the time of application, are eligible to receive green cards under a single application. There are no skills, language or educational requirements. Most important, the investor needs to prove the legitimacy of the funds invested.

Once the investor and family are approved, they are free to live, work or study anywhere in the US and there is no requirement to be at the location of the investment.

EB-5 is most popular with parents who want their kids to attend college in the US and then seek a permanent life for them over there.

Knowledge of the EB-5 programme is extremely limited in India. Therefore, there are relatively few firms that specialize in these types of investment and immigration programmes. Financial advisers, attorneys and bankers can help lead the way. zz

(Pankaj Joshi is managing director of Gurgaon-based Nysa Capital, a specialised EB-5 firm)