While the US, Western Europe and some of the BRIC economies experience drastic times of little or no growth, no demand and plenty of bankruptcies and job losses, some other countries keep building their assets in earnest.

China, one of the four BRIC nations and praised as the poster child of them all not so long ago is in the middle of their very own recession with many developers trying to cut costs in order to keep themselves in the black numbers.

According to Ignatius Chithelen, managing partner of New York investment firm Banyan Tree Capital, China offers a particular strong point to arm themselves for future growth; they stand apart from the other BRICs “as the world’s banker.”

Chithelen said “today, China is the best-situated country.”

This might well be true when we look at China’s $4 trillion in reserves, their trade and budget surpluses, and China’s ability to allocate huge resources to infrastructure projects.

Philip Mintz, managing director of Warburg Pincus Asia in Hong Kong offered even more optimism for China as a notable real estate market in the future by saying “China does have one thing that several participants viewed as critical for evaluating investments in emerging markets: its huge population of 1.4 billion people, which, long term, will fuel the demand for affordable housing and retail.”

But it isn’t China that is currently on fire and seems unaffected by the global credit crunch. In fact it is Brazil that currently takes the global spotlight, closely followed by Egypt and Mexico according to the Forum. While Egypt and Mexico share a common attribute, namely the demand of a growing and massive population that will eventually require more housing as the economy strengthens once again, Brazil is still going very strong.

New developments are selling faster than hot-cakes, often within hours or days of being on the market. Since brazil subsidises low-income mortgages, buyers access to financing options has been unaffected by the global events.

Companies such as Zell’s Equity International even reported a growth of 12% from the year previous in their malls, clearly indicating that people are still spending plenty of money. This is not so in the UK where many store owners declare themselves bankrupt after experiencing a six month period with little or no sales.

Another bonus for the Brazilian market is their low GDP in mortgages of only 2%. Compare this with the UK at 74% and the US at 65% and you know where opportunities exists right now.

However, despite the good news on Brazil a certain slowing period is still expected if and when the financial crisis reaches out further. According to Tom Shapiro, president and founder of GoldenTree InSite Partners, NY, the middle class market will most likely be affected most since they don’t receive government subsidies for mortgages.

Key issues with countries such as India and Russia is the widespread corruption. This puts a damper on their situation as many investors are being cautious. Plus the lack of lending in Russia isn’t helping either to those who want to buy but can’t.

The real winner of the real estate forum is indeed Brazil who seems to be favoured by most industry leaders in the forum. Given some time and a turn around in the economy, time will tell whether this growth is to be long term and if markets such as Mexico and Egypt are picking up the flack.

This Post is from: Overseas Property Mall, part of Fuzz One Media Group

Sizzling Hot Emerging Real Estate Markets

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The Mexican constitution has enjoyed a bad reputation amongst overseas investors so far because it prohibits foreign ownership of land within the country. To attract more foreign capital, Mexico has created the “fideicomiso”, which is a form of real estate trust. To legally execute the trust, a Mexican bank must be designated as the trustee and own the title to a property. This will see the bank being the actual owner on record for real estate bought by foreigners.

The investor itself will then become the beneficiary of the trust, keeping it all legal. As a country, Mexico has original ownership to all land and water including minerals, salts, ore deposits, natural gas and oil. Ownership may be assigned to individuals. By design, the Mexican Constitution prohibits direct ownership of real estate by any foreigners in what is known as the “restricted zone”.

Basically the restricted zone encompasses all land which is located within 100 kilometres of any Mexican border, and within 50 kilometres of any Mexican coastline.

With the “fideicomiso” the bank will act on behalf of the investor and has fiduciary obligation to follow instructions given to them by the foreigner who is the trust beneficiary.

This will enable to beneficiary of the trust to retain and enjoy all the rights of traditional ownership while the bank holds title to the property. Further to this, the foreigner is entitled to sell, renovate, use, enjoy and gift the property.

Before you can buy Mexican real estate as a foreigner you need to apply and obtain a permit from the Ministry of Foreign Affairs. The trustee bank will handle this application. This application carries time constraints.

Within 5 working days following the date of the presentation, the Ministry must grant any petition for a trust permit that complies with the stipulated requirements. If the application is submitted to a state office, it needs to be approved within 30 days. If the investor doesn’t get notified by the due date, the trust permit or registration is considered authorized.

If and when the trust expires, the right remains with the beneficiary according to the contract. Under the law, the bank must respect all rights of beneficiaries. If it is notified to sell or lease the property by the beneficiary, the bank has to act on this.

Mexican property owners also need to consider the various taxes applicable to their trust.

1. Property tax also called predial will be paid annually to the  municipality. This tax is to be paid annually. If the tax is not paid on time, it must be paid when the property sells including interest and penalties.
2. IVA tax is 15% in Jalisco and Nayarit. Commercial property owners owe IVA when it is sold. IVA is also collected on professional services and goods.
3. Acquisition tax is imposed by the State government. The rate is around 2% of the total value of the transaction. The buyer must pay this tax upon purchase of the property.
4. The fourth tax is the Capital Gains Tax, also called ISR. This tax is based on the profit once a property gets sold.

There are exemptions for both locals and foreigners to the capital gains tax, but these need to be proven to the Mexican government and the rules and regulations are very strict to protect against fraudulent claims.

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This Post is from: Overseas Property Mall, part of Fuzz One Media Group

Attention Mexico Investors!

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