Property market not to gain from curbs on overseas investments

Recently, the Reserve Bank of India reduced the permitted amount of annual remittances through the Liberalised Remittance Scheme (LRS) to $75,000 from $200,000 and also prohibited overseas property investments. Data from RBI show that there was an outflow of $1.2 billion in fiscal 2012-13 under LRS and only six per cent ($78 million) was used for property purchase.

While this may not seem like a large amount, outflows have shot up 100 times, from around $10 million when the scheme was introduced in FY05. So where is this Rs 533 crore that went towards home purchases abroad likely to flow now? Given that the Indian real estate market beat most overseas markets in the last few years, it may seem that the local market will benefit from this, but experts disagree.

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