By: Sourajit Aiyer
The author is a finance professional currently living in India. He has contributed to this blogsite and also to EUFAJ (forthcoming issue 3/2014). Views expressed are entirely personal.
For many who have not realized, India faces a unique business opportunity as a potential destination for affluent pensioners/retirees from across the globe. Whether India can grab this opportunity or not, it is imperative to appreciate why this is an opportunity for India in the first place.
Home-countries are expensive and inconvenient at old-age: Old-age living in most developed countries is expensive, and moreover, inconvenient. The social structure of extreme nuclear living means many pensioners go through the cycle of daily living by themselves. There are retirement homes and a social system that supports pensioners. However, daily living in the old-age remains expensive and inconvenient for many. To sound anecdotal from my own observations, a visit to any department store in UK or European cities on a typical Sunday morning would vouch this. In contrast, India is a comparatively cheaper place to live in. This is despite the fact that cost of living in India has also grown leaps and bounds in recent years than historical levels. The recent movement in the Indian Rupee also means that every US Dollar can fetch more in Rupee terms now.
Demand for premium, convenient and secure townships: Real estate townships have come up in Indian cities which feature every convenience and facilities that one can imagine. Living in such complexes is relatively secure since professional security agencies are appointed along with daily maintenance of people entering/exiting. Many of these townships are expensively priced and only the affluent fraction of India’s population can afford to pay that premium. Influx of foreign affluent retirees would help enlarge the demand pool for such developers, and help them avoid situations of unsold stock of apartments or condominiums. If demand actually swells, it may incentivize developers to initiate more projects, which would give a fill-up to ancillary industries like steel, cement, transport, materials–which are high employment generators in themselves.
Generics-pharma and Medical-tourism aspirations: India aspires to become a leading generics-pharma manufacturer, as many drugs are nearing the end of their patent periods in Western countries. This means India is competitively placed to cater to the pharmaceutical demands, as one assumes that generics would lower the cost of medication significantly. High cost of medicines is a challenge for the old-aged across the world, and local generics manufacturing might help bring down this cost for global retirees. In the context of medical tourism, India houses state-of-the-art specialty hospitals which offer the whole range of medical care. Indian doctors have made their mark globally. While India was a destination for patients from Asian and African countries historically, focus on medical tourism is now bringing in patients from Europe, USA and Japan as well. So why not get them to live here, so that taking care of their medical needs would become convenient for both the parties concerned.
Employment for professional care-givers: India has adequate manpower to cater to caring for such people. In Indian families, the family members themselves act as care-givers to old-aged ones as most professional care-giver agencies are expensive for Indians. However for foreign retirees, who have typically made their money at comparatively higher income levels in USA, UK, EU, Japan or Singapore might not face this affordability concern in India that Indian families face. Moreover, this serves a major employment opportunity for the country’s vast semi-skilled population.
Rationale for global affluent retirees: Foreigners who want to live relatively inexpensively and maximize the utilization of their corpus should look at relocation. They can stretch their local currencies further in Indian Rupee terms. India now has the infrastructure and facilities to cater to such a population, all of which is available relatively cheaper. With interest rates in developed countries are at lows, the yield earned on their risk-free financial assets is minimal. It makes financial prudence to spend in a relatively low-cost country, so that the earnings-expense equation is favourable. This is the basic rationale why global affluent retirees should look at India. Affluent retirees might be live in India only from the interest income they earn, without even touching their capital or reallocating it to riskier financial assets. Secondly, India is officially home to a number of religions including Christianity, Buddhism, Islam, which most global retirees from Europe, USA, Japan would belong to. One does not envisage issues arising in foreign tourists practicing their own religions. Thirdly, English is the main business language of India. Local media, road signs, information materials are in English, apart from vernacular languages. Even low-skilled workers can converse in broken English. Next, the advantages of care-givers, medical facilities and secure townships have been discussed in above sections. Lastly, India houses fascinating tourism destinations, which might attract foreign visitors. That would incentivize Indian tourism authorities to spruce up their destinations and infrastructure for foreign visitors.
Better quality for foreign visitors: Every country likes affluent tourists as they will spend more on local products and services, as compared to budget tourists. Visa policies of most developed countries are skewed towards this mind-set. But that is correct– since such affluent tourists bring in more foreign currency which supports the local tourism infrastructure. Extending preferential treatment for such long-term visitors within India’s visa policies would help bring in people who will address tourism, medical care, real estate and employment areas for the country. Such long-term visas are issued on showcasing a certain level of financial security, which also gives a level of comfort to the visa authorities on the genuineness of visitors. Competing countries like Malaysia, Thailand, etc have special visa plans to enable long-term stay for elderly retirees from Japan etc.
Addressing risk factors: The biggest risk that tourists face in India is of safety. The good news is that large-scale advocacy by common-Indians has shaken up the government to address this. Safety and security are risks even common-Indians face, not just foreigners. The new government has made the right noises to address women’s safety, etc. But still a lot is still needed. However, one might also add that like any smart traveler, one needs to know which places to avoid. The second risk is availability of information and literature. Tourism websites need to provide information on infrastructure, processes and facilities that global retirees can use to build their decisions, and make their transition smooth. India might team up with professional agencies that cater to people looking to live abroad. Lastly, the investment into local real estate poses a risk. Many retirees might not want to sell their houses in home countries as they may want to return after few years. Garnering the capital to buy units in India might involve liquidating some financial assets which may not be desirable either, despite the outlook on residential prices in India. In such a situation, taking units on rentals is the only way out. But that assumes there are enough affluent Indians available to buy the lot of premium units in the first place.
In conclusion, there is significant business case for India to pursue this opportunity, although a lot is needed yet. Affluent foreign retirees should also look at this option for their advantage. As an ending note, one might add that many global retirees have been business-owners. Being in a high-growth market in India might make them rethink about setting up a business again. India can also gain from the knowledge and insights of their business experiences. All that might sound far-fetched, but the 21st Century is the Knowledge-Century, after all.