The World this Week June 18 - June 22 2012

The World this Week June 18 - June 22 2012

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Tips for buying properties in foreign countries

The current economic turmoil in US and European nations have led to a sharp fall in property prices there making them extremely lucrative for non-resident Indians as well as resident Indians to invest in. More and more Indians are opting for offshore properties as a second home in exotic locations. However the process of purchasing a property in foreign countries has its own share of complexities, which need to be addressed before committing the money.

 Properties owned by banks as a result of foreclosure or as non performing assets are the most sought after while there are a few places, which advertise their real estate as means of secure investments for foreigners. Indians are increasingly acquiring properties across the globe but the leading destinations for offshore properties remain London, New York, Singapore and Dubai. Exotic holiday destinations such as Thailand, Malaysia, Southern France, Florida and Mauritius are also gaining rapid popularity among those looking to invest abroad in real estate.

 London is popular due to its assured returns over a long horizon while resort locales are being used as a second home for the rich and famous. The sea side resort of Pattaya is offering three bed room independent houses at prices as little as Rs 60 to 70 lakh (Rs 607 million) which are pretty competitive compared to such houses in Tier 1 cities of India. US is, usually, preferred by Indians who have either studied there or have worked for some time.

 Despite the high prices of real estate in Dubai, it is still popular due to its proximity to India and the presence of large Indian diasporas in the city. Before even thinking of buying a property offshore one needs to be absolutely clear regarding property laws in India and other countries. Indians are permitted to buy property in foreign nations by making an annual remittance of up to $ 2000000 in a financial year. The Foreign Exchange Management Act also permits Indians to acquire property abroad as gifts or through inheritance. Additionally resident Indians can own property elsewhere in case it was acquired while they were not residents of India. However one must consult trusted legal experts in the country where they want to buy the property in regarding local taxation policies, citizenship laws and ownerships provisions.

Many nations mandate foreigners to pay a huge property transaction fees while making the purchase. Extra stamp duty costs are often levied on foreigners acquiring property in certain countries which may add up to the total cost significantly.

Here are a few practical guidelines that will come handy while setting out to buy yourself a house in some exotic location abroad or a simple investment in foreign countries.

•  Make sufficient number of visits to that place during different parts of the year to get a broad overview of the locale. 
• Remember there is adequate scope of bargaining at all places around the world and do not swayed by the quoted price. 
• Get a consolidated list of all transaction charges, stamp duties and associated fees for buying the property beforehand. 
• Always negotiate through a reputed property brokerage firm of that country. 
• Additionally hire an independent legal advisor to give detailed inputs. 
• Time your purchase when the exchange rates of that country's currency are in your favor. 
• Understand the legal implications of your purchase and rules that govern your access to that country. 

Owning a grand property in foreign nations is no more the domain of the super-rich. However there is a definite need for detailed analysis and planned approach in order to get a good deal and avoid legal complications subsequently.

Diluted Insurance Bill coming up

The government appears to have buckled under political pressure, as the finance ministry is set to take a diluted version of the Insurance Bill to the Cabinet in the coming week. The revised Insurance Laws (Amendment) Bill proposes to retain the foreign direct investment (FDI) cap in the sector at 26 per cent, against 49 per cent proposed earlier. This comes barely two weeks after the Cabinet cleared a toned-down version of the Banking Laws (Amendment) Bill.

A higher FDI cap in insurance was expected to give a push to financial sector reforms that Finance Minister Pranab Mukherjee had been talking about.

But, a foreign investment ceiling status quo will take much of the sting out of the legislation, particularly at a time when the country desperately needs foreign inflows in the wake of a widening current account deficit and a weakening rupee.

The Bill will make some incremental changes to fine-tune the existing legislation. The ministry has broadly followed the recommendations of Parliament's standing committee on finance headed by BJP leader Yashwant Sinha. The panel had said instead of seeking foreign capital, companies should tap the domestic market to meet their needs.

The Bill proposes opening up the sector for branch office operations by foreign re-insurers "on terms and conditions of the standing committee". It also proposes to increase the time period beyond which a policy cannot be questioned on ground of misstatement from two to five years.

"Consumer policy protection remains the prime focus of the Bill. It will be easier to increase insurance penetration in the country... Allowing branches of foreign re-insurers would reduce the exposure of Indian re-insurer (GIC)," an official said in defence of the new version.

Under attack from various quarters for not being able to push reforms, the government recently started moving ahead on key financial sector Bills, stalled for years. The movement, however, has come at the cost of dilutions in some of their key proposals. Last month, the Banking Bill met a similar fate when the Cabinet approved a proposal to raise the cap on shareholders' voting rights in private banks from 10 per cent at present to 26 per cent, irrespective of their total holding. The original plan was to raise rights in proportion to an entity's shareholding.

"An understanding has been arrived at between the government and the Opposition that if the standing committee's recommendations are accepted, the Bills would be allowed to sail through smoothly in Parliament," a senior government functionary told Business Standard.

The government had also conceded to the standing committee's suggestion to fix a 26 per cent FDI ceiling in the Pension Fund Regulatory and Development Authority Bill, but it did not pass muster with Trinamool Congress [ Images ] supremo Mamata Banerjee. The Bill has been pending with the Cabinet since December 2011. The proposals may be diluted further, to Banerjee's satisfaction.

Other Bills such as the Constitution amendment for the Goods & Services Tax and the Direct Taxes Code may also be tweaked so that they can see the light of day before the elections in 2014. Similarly, the decision on allowing up to 51 per cent FDI in multi-brand retail may be altered. 

Youngest Indian CEO in US shares his amazing story

When Sahil Lavingia, 19, a computer science student decided to drop off the University of Southern California to join Pinterest he went first with the news to his mother. "I felt like my life would be better if I left school and joined Pinterest, and that's what I told them," said Sahil, a designer, founder and CEO of Gumroad, a tool that democratizes the ability to sell stuff online.

"Gumroad's goal is to making selling as easy as sharing," Sahil told India Abroad. He added: "Over the last several years, sharing has become easier and easier but selling has remained just as hard as it was in 2001."

Gumroad sells things online that you've made and includes songs, albums, videos, photos, and other things. You can price a link for as little as $1, and as much as $1,000.

However, Gumroad has its cut in online selling. It takes five per cent + 25¢ of each transaction. For example: If you sell a digital video for $10, it gets $0.75 and $9.25 is deposited into your account.

There are no setup fees, monthly fees, bandwidth fees, or withdrawal fees. It directly connects you to your client.

Born to Indian parents in New York and raised in London, Hong Kong and Singapore the youngest entrepreneur among the Asian Indian community do not think living in various country was a gift in disguise but he loved living in so many different places in such a short period of time though he said, "It definitely helped me learn a lot about the world and about myself".

Talking about Gumroad he said: "We're trying to make it easy and accessible for everyone. We think anyone that creates content (anyone who writes, creates music, makes videos, takes photos) should have the ability to sell directly to the people that want their stuff. Those are the people that can benefit. We are just three for now, and growing quickly."

He said: "We have launched a bunch of new features, including the ability to remember your credit card so you can repeat-buy very frequently. We're working hard on making the product better, and building a team that will scale along with it."

Before venturing into Gumroad, he was with Pinterest, as a designer head and made Turntable.fm for iPhone. Not only this, by the age 16 he had already created dozen of apps (applications) though not all were successful. But some of his favourites have been applied in iPhone.

He says out of 20 products his favourites are: Dayta, that's a data tracking application for iPhone, and Rmmbr, a note-taking web app that doesn't require registration and Color Stream app, helps to create and store colour palettes for iPhone.

Crate, an app, that lets you share multiple files at once to anyone you want. Tweader,similar to twitter. Trnsfr an app that lets you send pages your're looking at from your browser to your phone. Rmmbr, wrote on his Rmmbr says "it's my one-hour app".It is an easy way to create notes on the go. All you have to do is visit a Rmmbr URL and it'll create one for you if it doesn't exist.

Caltrainer, an iPhone app that gives Caltrain timetable in the San Francisco Bay Area. Recently Gumroad turned one-year-old Sahil's invention of pencil has been a hit online.

So what is this pencil craze? On this Sahil said: "Yes, my pencil has been seen hundreds of thousands of times by now, which is crazy. He's selling that iconic pencil on Gumroad for $1 and has found buyers too. The iconic pencil came into being after four hour of long work on Friday a year ago. Like any startup, Sahil too have mentors, whom he calls his friends. "Nope, it's not tough for a teenager going to Venture Capitalist. VC's are just like me and you. I don't think age matters in a discussion like seed investment."

So any business venture in India, he said while in college he visited India last in 2009 for an internship for a software company in Bangalore.

Young, vibrant and confident Sahil at this young age works around 80 hours a week.

"But it never feels like work," stated the young entrepreneur, who has never been to TiE (The Indus Entrepreneurs) Silicon Valley, a non-profit global network of entrepreneurs and professional conference. He said: "I was invited to speak at the next one and I think I will go." So does the computer geek, CEO of Gumroad, have time for friends and family?

Sahil said: "I have friends that I hang out with everyday, because I get to work with them. I also hang out with other friends on the weekends if I'm not too tired. I try to read before I sleep but that rarely happens. Normally I think about how lucky I've been so far."

A look at India's top performing states

Ihe speed at which political statements of doubtful veracity acquire the aura of gospel truth is astonishing. One such "truth" is: coalition compulsions impede economic reforms. Even Chief Economic Advisor Kaushik Basu believes in it. He recently said, "Thanks to coalitional democracy, there is some slowdown in economic reforms and decision-making."

A few weeks earlier, Finance Minister Pranab Mukherjee had expressed similar views: "With a fractured mandate, yes, you can rule. But you have to carry other people with you."

That's right, but post-liberalisation, India has never seen a solid mandate for any party; it has been the era of coalitions. In fact, liberalisation itself was carried out by a coalition government. But the then Prime Minister P V Narasimha Rao was keen to open up the economy; the same cannot be said about the ruling United Progressive Alliance (UPA). 

Worse, the Congress-led regime has taken a number of steps that militate against the spirit of economic reforms. Consider the case of food security legislation. Commission for Agricultural Costs and Prices Chairman and prominent agricultural economist Ashok Gulati believes that the proposed Bill, cleared by the Cabinet in December last year, has the potential of taking the economy to the "crisis levels of 1991".

The Prime Minister's Economic Advisory Committee, headed by former Reserve Bank Governor C Rangarajan, had serious differences with the Sonia Gandhi-led National Advisory Council (NAC) over the scale of the entitlement project.

Agriculture Minister Sharad Pawar, too, was worried over financial implications. The food security legislation is also feared to drive out private companies. The moral hazard is no less frightening; for the law, if executed, would give a fillip to the process of transforming free citizens into serfs, always looking at askance at the giant feudal lord, the Indian state -- for relief, poverty alleviation, employment (the rural jobs scheme), and now even for food.

Government size and scope will increase. The raison d'etre of economic reforms was the reversal of this transformation that began during over four decades of socialism; downsizing government and its role was part and parcel of the attempted reversal.

But NAC bleeding hearts have had their way. And there is a possibility that the fiscally ruinous and morally hazardous project would be implemented. By the way, no Congress ally is forcing the government to go for the Bill. The strains on the public exchequer are showing because of mindless populism. The fiscal responsibility law is practically dead; the deficit is assuming alarming proportions; and a desperate finance ministry is taking recourse to desperate measures, as evident in the Vodafone case.

The taxmen lost the case against the telecom major in the Supreme Court. But the ministry is restless; it is trying all sorts of tricks; it wants to apply laws retrospectively and arm tax officials with discretionary powers. India Inc, the international business community, and even foreign governments are upset.

It needs to be mentioned that earlier, too, in 2005, the government had refused to respect the apex court's verdict in a Rs 800-crore (Rs 8-billion) tax case that had gone in favour of ITC; it had promulgated an ordinance and managed to extract Rs 350 crore (Rs 3.5 billion) from the company. A government cannot expect to disrespect the rule of law and (concomitantly) attract investors. The rule of law is the foundation of economic reforms. The government itself has shaken the foundation, and there is no coalition compulsion involved.

Nor is there any pressure from any allies to keep Air India (AI) running. One need not be an aviation expert or a financial wizard to say the national carrier is beyond redemption.

Yet, AI – which loses Rs 10 crore (Rs 100 million) every day, has debt worth Rs 43,000 crore (Rs 430 billion) and accumulated losses in the region of Rs 20,000 – recently got a Rs 30,000-crore (Rs 300 billion) revival package. The government sticks to the socialist dogma of "no privatisation," despite the UPA's dissociation with the Left.

Then there are green lobbyists who enjoy the patronage of the presiding deities of the ruling alliance. NAC members N C Saxena and Aruna Roy, for instance, are opposed to the $12-billion Posco project, the largest foreign direct investment in India.

And they have succeeded so far in frustrating the efforts of the Korean steel company, the Orissa government, and even of Prime Minister Manmohan Singh with whom Seoul has taken up the matter more than once. Worse, the greens' opposition to Posco is doctrinaire and not fact-based.

Electoral politics has also had its share of victims. Aiming to win over the local populace by demagoguery, Congress leader Rahul Gandhi torpedoed Vedanta's bid to mine bauxite in the Niyamgiri hills of Orissa. The grand old party may or may not gain in electoral terms, but the state and its people have certainly lost the benefits that might have come to them because of the project. 

Apart from ideological and electoral reasons, capricious and erratic governance has also harmed the cause of development. Years after work in Lavasa began, the government realised that the ambitious realty project was responsible for violations.

Yet another example of dirigiste mindset is the grant of first compulsory licence for a pharmaceutical product in March this year.

It needs to be mentioned that no Congress ally is involved in jeopardising industrialisation in the name of environment protection or affordable medication.

There are many more instances revealing the pro-Left leanings and anti-reforms biases of the UPA. Coalition compulsions have little to do with the big state imperative.

The world this week

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We are very POSITIVE on India: Piaggio chairman

The economic squeeze may be getting tighter in the euro zone -- and more so in Italy apart from Greece and Spain -- with every passing day. But that has in no way deterred group Chairman and CEO of Piaggio Roberto Colaninno or affected his investment plans for India.

Replying to a query from Rediff.com, Colaninno said that while 50 per cent of the company's total investment outlay is meant for Italy, the remaining 50 per cent will be invested in markets across Asia that includes India and China.

He, however, did not clarify the size of Piaggio's total investment outlay and more particularly the quantum of that share the Italian company will invest in India.

"During our internal discussions we have delved on what kind of strategy we should have (for India)," Colaninno said without divulging any more details.

He said, "We are very positive about our investments in India."

He further added that the company has already initiated steps to double the capacity at Piaggio, Baramati, from 150,000 units per year to 300,000 units per year by mid-2013.

"I am very optimistic about our growth prospects in India," he said, emphasising the company's plans to bring in at least 20 million euros this year as investments in the Piaggio's Baramati plant that will manufacture the Vespa LX 125.

According to a press release issued by the company, the Indian subsidiary of Piaggio has already invested Rs 10 billion (Rs 1,000 crore) in India as of December 2011.

"The investment in Baramati is part of our strategic plan, which sees India as a significant destination in our growth trajectory," said the press release issued by the company.