On November 8, 2016, Indian Prime Minister Narendra Modi announced a crackdown on so called ‘black money’ or untaxed cash incomes/monies being hoarded in the Indian economy and hours later the results of the U.S. elections with Donald Trump winning came to light. My phone started ringing off the hook. Nervous current and potential clients wanted to know how these two events would shape the transfer of funds from India under RBI and future of the EB-5 U. S. Investor Visa Program. While these two events are somewhat related in terms of the demand for EB-5 visa in India, I’ll share my personal thoughts on these two events separately:
President-elect Donald Trump and the EB-5 program:
The EB-5 regional center program is set to expire once again on December 9, 2016. Given that the U.S. just went through a historic election cycle and President-elect Donald Trump is just getting started on forming his cabinet and transition team, EB-5 may not get as much attention from lawmakers. Thus, I believe EB-5 will once again get either a short-term extension for a few months until the new govt. takes charge or a longer-term extension ’till Sept. 30, 2017, so that the new administration and Congress has time to settle in.
Further, in so far as the impact of President-elect Donald Trump on this investor immigration program is concerned, I believe if anything Mr. Trump might turn out to be a champion of EB-5 as his election platform clearly stated he wants to create jobs in the U.S. which EB-5 certainly does, and he wants entrepreneurs and professionals coming to U.S. to start businesses. His election rhetoric was more against ‘illegal’ immigration not legal ways such as EB-5 to immigrate to the U.S.
In addition, Mr. Trump’s name is associated with a couple of current EB-5 projects.
Indian Prime Minister Narendra Modi’s ‘demonetisation’ efforts and the EB-5 program:
At 8:00 p.m. IST on November 8, 2016, Indian PM Modi announced that from midnight of November 8, 2016, Rs. 500 and Rs.1000 would cease to be legal tender as they are notes are mostly used in black money and they could be exchanged for a new series of Rs. 500 currency notes and Rs. 2000 currency notes that would be brought into circulation.
From an EB-5 perspective, although we’ve had plenty of inquires as to whether ‘cash’ can be used to fund an EB-5 investment, we’ve obviously always stated no it can’t as every dollar that goes into an EB-5 investment needs to be accounted for i.e. source of funds. Also, the ‘transfer of funds’ needs to be clearly documented and generally the transfer takes place between two bank accounts so the issue of ‘cash’ never comes into play. I think where this ‘demonetisation’ drive may come into play is when investors in India try to get a bank loan against their real estate or property holdings as its unclear right now whether the banks will give a loan against the ‘Fair Market Value’ of the property or the ‘circle rate’ (generally much lower than FMV) which is the official ‘registrable’ value in a particular area. So in essence Indian investors may not be able to borrow as much and hence may not be able to fund their EB-5 minimum investment of $500,000. Further, because often times properties are purchased in mostly cash – and with cash being stripped off of people through this anti-black money drive – the value of real estate may come down considerably in India and again an investor may not be able to realise enough gains to be able to fund their EB-5 regional center investment.
I am waiting for the dust to settle after these two recent events and I think we will very soon have clarity on the impact of these two events on the growth of EB-5 US investor visa program in India.
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DISCLAIMER
The information within this post represents my opinions only. This information does not reflect the opinions and/or policies of NMS Capital Advisors, its affiliates or any other firm I am contractually employed.