Truly Cheap Places to Invest

Saturday, Nov. 10, 2007

Learn more about international real estate in International Living Postcards--Saturday Edition

“Why do you keep talking about Paris? No one in their right mind would want to stay in Paris more than a few days. Why don't you talk about truly cheap places to live, like small towns in India, Thailand, or Malaysia? Live with the truly poor and humble peasant folks. Get your mind off these artsy fartsy places like Paris or the French Riviera.”

Thus advised one of your fellow readers in response to last weekend’s Saturday Edition. I wrote, perhaps you’ll recall, dear reader, to share insights into managing rental properties in different markets…including Paris. Alas, as your fellow reader pointed out, I didn’t cite any examples in Thailand, Malaysia, or India.

Indeed, from an investment perspective, Thailand and Malaysia can make sense. Developer opportunities in Thailand are probably your best bet, though you could make money buying an apartment and renting it out in Pattaya, say, or maybe Phuket. Kuala Lumpur could make sense for rental properties, as well. India, though, doesn’t make any sense as a place to invest directly in real estate. Your investment must be really big to overcome the foreign ownership restrictions. And I’d caution that you’re likely to be taken to the cleaners, whatever you do, unless you are in country full-time and paying close attention to the people you’re invested with.

Furthermore, transaction costs in India can run as high as 17% of the purchase price, which is a serious deterrent not only for would-be foreign investors, but also for locals who might otherwise think about owning.

Mumbai, India’s financial capital, is one of the most expensive places in the world to buy a condominium. Average prices are more than $9,000 per square meter, which is three times the average price in Shanghai. Mumbai, the hub of wealth in India, also boasts the biggest urban slum in Asia, Dharavi, home to more than a million people.

Indeed, it’s hard to find a “small” town in India with its population of more than 1.2 billion. On the other hand, most of these people are poor, one of the two criteria cited by the reader who wrote in last week. Whether they are humble, I couldn’t say.

The poverty in India is the kind that most North Americans think about when they think about the Third-World. I wouldn’t imagine, though, that it makes for particularly appealing retirement haven options. Most people aren’t likely to want to live in the “truly cheap” places in India, unless maybe on assignment with the Red Cross.

And investing in a rental in a small town in this country would be impossible…not to mention a really bad idea.

India is full of opportunities, but they should be left to the big fish for now. After a research trip to three major cities in India last year, I concluded that the smartest way to invest in the country would be to buy into a mutual fund focused on India (which I did). Every real estate professional I met with began the meeting by asking how much money I intended to invest with him and when the money would arrive. This before I had asked a single question about their business or potential opportunities for cooperation. So much money was and is being thrown into India that most of the real estate people don’t want to waste their time with you unless you’re carrying a briefcase containing $10 million. (Ten-million dollars is the minimum investment required for a foreigner to be able to buy real estate directly.)

Lief Simon

For International Living

P.S. Again, and as we remind you often, Thailand and Malaysia can make sense. If you’re interested in real estate opportunities in Thailand, I’d recommend you get in touch with Cyrille Hareux (cyrille.hareux@companyvauban.com) at Vauban in Bangkok. For Malaysia, the group I met with when I visited most recently was Carey Real Estate, http://www.carey.com.my/.

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