India’s declining EB-5 visa growth: Lessons in real estate investments from East Asia
15 Dec 2024, By Theja Ram - Content Director & Senior Manager Servicing
15 Dec 2024, By Theja Ram - Content Director & Senior Manager Servicing
The US EB-5 program, a popular investment choice for obtaining permanent residency in the United States, has long seen interest among Indian investors. However, the number of EB-5 visas issued to Indians is on the decline. According to the US state department, 440 EB-5 visas were issued to Indian applicants via consular processing during the first half of 2024, representing a 25% decline year over year. Considering a vast number of Indian EB-5 investors obtain their green card by investing in regional centers in the US, growth is slow. In contrast, China and Vietnam witnessed a 75% and 530% growth YoY, in 2024. According to Henly & Partners, China ranks number one among investment migration programs focused on FDI in return for residential rights.
The wealth from East Asia, migrating to the US real estate market, speaks for the interest in diversifying investments. In India, the challenge lies in the minimal awareness and access to the US real estate market, the hemispherical distance between the two countries, and navigating the complex legal systems and processes.
China’s rise in EB-5 applications was seen after the United States Congress passed the EB-5 Reform and Integrity Act of 2022 (the RIA). Chinese and Vietnamese investors have utilized the reforms to their benefits, circumventing long wait times in visa processing. The reforms allow for easy visa approval for investors focused on addressing rural, high unemployment, and infrastructure challenges in the US. With 81% share, foreign investors drove and dominated US real estate investments in 2024. This favorable investment climate presents opportunities for Indian investors to diversify their portfolios.
The EB5 Visa, established by the U.S. government, enables foreign nationals to obtain a green card by investing in job-creating projects in the United States. The law stipulates that investors contribute between $900,000 to $1.8 million and create a minimum of 10 American jobs, to obtain permanent residency. Investors with large capital often choose the direct investment route, where they need to maintain continuous influence over the business. Direct investors are required to actively participate in the management of their business.
In comparison, real estate makes for a lucrative investment, for investors seeking flexibility in living in any place of their choice. They don’t have to bear the cost of regulatory compliance like direct investors, as Regional Centers manage those tasks by themselves. A major challenge in the process for direct investors is USCIS approvals and filings. In contrast, real estate investors can have Regional Centers manage the due diligence process, simplifying the visa application process.
For example, a multifamily real estate development project is a great investment route for the EB-5 visa program. Let’s consider a project focused on constructing a collection of residential units ranging from studios to three-bedroom apartments. Often spread over a large area, they are designed to have fitness centers, swimming pools, and landscaped green spaces, enhancing the living experience and attracting potential residents. With a mix of unit sizes, these cater to a diverse demographic, from single people to families, addressing various housing needs.
Such projects have greater potential for high occupancy rates and steady rental income, and also align with the EB-5 visa program’s job creation mandate. Construction, management, and maintenance of the residential layout, generate employment, thereby fulfilling the employment criteria. China exhibits a case in point. A recent report showed that China’s global investment shrank modestly in the first half of 2024. However, Chinese investment in US real estate amounted to $7.5 billion in US homes. The strong dollar and rising property prices in the US make it an attractive option for foreign investors.
While there are both advantages and disadvantages of direct investments and real estate, investors in India must comprehend a step-by-step guide on how to simplify the EB-5 visa process.
Choose the right real-estate project: Investors in India must choose projects that not only promise good returns but also fulfill the EB-5 program’s requirement of creating jobs. Real estate projects range from commercial developments to residential complexes.
Conditional Permanent Residency: Once investors narrow down on a project, they must make the minimum capital investment prescribed, depending on the project’s location. Following this investment, investors must file the I-526 petition, demonstrating the legality of the investment funds and due diligence.
Unconditional Permanent Residency: Once the I-526 petition is approved, investors and their immediate families are granted a two-year conditional permanent residency. The USCIS uses this period to determine whether the investment is sustainable and has created adequate jobs. At the end of two years, investors must file the I-829 petition to mitigate the conditions for permanent residency. Once the petition is approved, investors and their families will be eligible for unconditional permanent residency.
Real estate investments for the EB-5 program require investors to consider certain key factors. Returns on investment stand between 2%-6%, depending on the investment organization. It is essential for investors to ensure the real estate project’s duration aligns with the timelines of the EB-5 immigration process.
The market trends for EB-5 real estate investments are particularly favorable in regions with rising populations and employment rates. Real estate projects in such areas are in higher demand, with the potential for substantial rental income and property appreciation. Choosing real estate as a vehicle for the EB-5 visa process is not only a lucrative path to U.S. residency but also a strategic investment opportunity that leverages the strength of the U.S. property market.
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