With London as a global financial and educational hub, the UK has become a lucrative real estate investment destination for foreign nationals. You might wonder whether Indians can also invest in the UK property market.
An Indian can buy property in the UK regardless of their residency status. You can purchase freehold or leasehold properties in London or other cities. Investing in UK real estate is more accessible than many think. For example, you don’t have to travel to the country to close the transaction.
Owning a rental property in the UK can be an excellent long-term investment. In this guide, I’ll explain everything Indians back home and expats here need to know about purchasing a real estate asset in the UK.
Indian Expat’s Guide To Buying Property in the UK
English is the business language in both India and the UK, making communicating and navigating the investment space easy for Indians.
Moreover, Indians are among the largest foreign resident groups in the UK. It feels like a second home for overseas Indian investors here. Therefore, Indian beginner property investors can approach the UK market confidently.
Why Invest in a UK Property?
Some people buy UK homes for use by themselves or relatives, such as children studying or working abroad. Many, however, seek buy-to-let properties that generate rental income.
Considering the large numbers of foreign workers, students, and tourists in the UK, rental properties can be a lucrative investment. The country is seeing surging demand for rental homes and housing units.
The strong rental demand means a high occupancy rate and a steady rental income for landlords. Moreover, rents have been rising, allowing landlords to make more money from their investments.
Apart from the steady rental income stream, rising property values are another reason foreign investors flock to the UK property market. This presents an excellent opportunity to make a good profit when you decide to sell your property in the future.
Which Rental Properties Are Best for Indian Investors?
The ideal properties for rental income in the UK are one-bedroom and two-bedroom houses. They’re easier to rent out and produce better rental yields than most other property types.
While one-bedroom houses are popular with students and single people, two-bedroom units are a favourite of family tenants.
In a high-demand rental property market like the UK, one and two-bedroom houses can be more affordable to most tenants. As a result, these properties have a broad pool of potential tenants, which can lead to higher occupancy rates and ensure a more stable income.
What Are the Best Places To Be a Landlord in the UK?
In rental property investment, location is a crucial factor to consider. Occupancy rates and rent prices can vary sharply by geography.
Commuting and amenities such as shopping centres, schools, and hospitals are major considerations for many tenants. As a result, properties located far from metro areas may be cheaper to buy, but getting tenants may be a challenge. Moreover, properties near the city centre have higher rent prices.
These are some of the best areas for Indian investors seeking high rental yields on UK properties:
- London is home to some of the world’s top companies, universities, and tourist destinations. As a result, it attracts many workers, students, and visitors.
- Nottingham is a major sporting and entertainment centre. It’s also home to Queen’s Medical Centre, one of the largest teaching hospitals in Europe.
- Newcastle is a good place for landlords to own a rental property targeting student tenants. Moreover, Newcastle is one of the UK’s designated science cities.
- Manchester is known as the birthplace of the industrial revolution. It’s a major media, technology, and sports hub.
You can buy old, newly developed, or properties under development. The properties can be freehold or leasehold, with lease periods of up to 999 years.
How Difficult Is It To Buy a Property in the UK Compared to India?
The cost is usually a top concern when considering investing in overseas properties. You might be surprised to hear that property prices in upscale neighbourhoods in New Delhi and Mumbai are comparable to London. Some London properties can even be cheaper than those in Mumbai’s posh neighbourhoods.
Therefore, investing in UK real estate can be affordable to many Indian investors in overseas opportunities.
Another major concern to those considering investing in UK properties is the requirement to participate in the market. The legal requirements for purchasing real estate property in India and the UK are largely similar. You may be surprised to learn that it can be easier for Indians to buy a property in the UK than in India.
Here’s how the conditions for buying properties in the UK and India compare:
- Resident Indians can purchase any type of real estate property in India. However, Indian nationals living abroad are limited in the property types they can buy.
- Foreign nationals residing in India can only purchase a real estate asset in the country if they have lived in India for at least 183 days. Otherwise, they can only lease a property in the country.
- Expats in India interested in property purchases must obtain special permission to buy a house if they haven’t stayed in the country long enough.
- The UK doesn’t impose residency requirements to be eligible to purchase a property in the country. You don’t even require a UK visa to buy a real estate asset here.
Agricultural Land Purchase Restrictions
- India has even more stringent requirements for agricultural property purchases. For example, India doesn’t allow even its nationals staying overseas to buy farmland or farmhouses.
- It goes without saying that foreign investors are completely shut out of India’s agricultural properties. Only resident Indians can participate in India’s farm property market.
- The UK has no restriction on property types that foreigners can own in the country. The UK has seen an increase in farmland purchases by international investors in recent years.
- Foreign investors buying farmland or country estate in the UK make money in various ways. They can grow crops on the land or lease the property to farmers. They can also earn from hosting wind turbines.
Property Tax in the UK Explained
The UK and India have largely similar tax situations on properties. There’s a tax when you purchase a property and when you sell it. If the property generates rental income, there’s a tax on your earnings.
How much is the property tax in the UK? Here’s what you need to know if you’re considering investing in the UK property market:
Stamp Duty Tax
You pay the Stamp Duty tax when you purchase a residential property. The tax applies to properties valued at more than £250,000. The tax rate ranges from 5% to 12%.
You’ll pay an extra 3% on additional property purchases. Moreover, non-resident UK investors are subject to a 2% surcharge on Stamp Duty tax in England and Northern Ireland.
Rental Income Tax
For landlords, the tax rate on rental income is the same for residents and non-residents. The tax rate ranges from 20% to 45%. Rental earnings below £12,570 aren’t subject to this tax. Landlords can deduct various expenses to minimise their tax liability.
Indian landlords in the UK may be exempt from rental income tax or receive a tax credit if they have already been taxed back in India for the same income. This is because of the double taxation avoidance agreement between India and the UK.
Capital Gain Tax
You pay the capital gain tax when you sell your property for a profit. The tax rate ranges from 18% to 28% and is the same for resident and non-resident investors. You may reduce your tax liability by deducting costs tied to property improvements.
You can buy a UK property without stepping foot in the country. However, you’ll need to hire a UK lawyer to handle the legal process of the transaction. You should also take time to search for the right property in the ideal location.
Final Thoughts – Can an Indian Buy Property in the UK?
Indians can buy any type of property in the UK, from residential houses to farmland. The legal requirements and procedures for purchasing property in the UK are largely similar to those in India. Moreover, property tax regimes in the UK and India are comparable.
- XE: A Guide To Purchasing Property In India
- REIBC.ORG: Non-resident Ownership of Agricultural Property
- Guardian: Wealthy Foreigners Buy Up Swaths Of UK Farmland and Country Estates
- Business Culture: Indian Business Communication
- Hindustan Times: Indians Make Up Largest Number Of Non-UK Born Residents In England, Wales
- Guardian: Demand For Rental Homes in UK Up By 23% in a Year, As Rents Hit Record High
- CNN: London’s Rental Market Has Become A ‘Nightmare.’ Here’s Why
- Alamy: The Queen’s Medical Centre, Nottingham
- Benhams: Buying a UK Property
- VisitBritain: Top UK Science Destinations For Your Next Event
- Provestor: Best UK Rental Yield Hotspots for 2022
- Simply Business: Best Buy-To-Let Areas In the UK For 2023
- GOV.UK: How To Buy Property In India
- GOV.UK: Stamp Duty Land Tax