Luxembourg’s healthy real estate sector, tax relaxations, leverages, and strong financial importance within the region draw the attention of a multitude of Indians to invest in property. Officially known as the Grand Duchy of Luxembourg is a leading financial hub of Europe that attracts large corporations and individuals alike.
There are no restrictions, for Indians and other third-country nationals, on buying property in Luxembourg; however, one needs to be aware of the market dynamics and tax laws of the country before investing. The real estate trade policies are extremely regularized and before concluding the sale, the buyer has to follow a process involving various steps.
Buying off-plan property
Properties that are not yet developed but sold as prospects are called off-plan properties; e.g., sites under-construction or just the groundbreaking has been performed. Buyers must emphasize a preliminary contract that provides as much detail about the completed project as possible. This is to empower the buyer to void the contract in case the finished property is not as mentioned in the preliminary contract.
The preliminary contract does not replace the need for a down payment, at most only a fraction of the total amount can be consigned to a bank account maintained by the buyer. Off-plan purchases are risky, hence offering high yields. However, the buyers must safeguard their interests by careful documentation, and familiarize themselves with regulations and regular inspections at each step.
Share deals
Another way of investing in property in Luxembourg is through share deals. Share deals, if conducted with a reputable company, are less risky and subject to lesser taxes. Under the share deal, the buyers do not invest in the property directly, instead, they buy shares in the company. Investing in company shares allows the buyer to avoid registration tax on the property value of up to 11%, subject to any change in policy or legislation.
For Indian nationals and companies who are looking for a mid-term investment opportunity (4 to 6 years), a share deal is a low-risk-high yield prospect.
Calculating return on investment (ROI)
While calculating ROI the buyer must factor in many things besides the value of the property. Taxes, registration fees, transaction costs, commissions, etc., should be considered well before making a purchase decision. For instance, a commercial property planned to generate rental income is subject to income tax. Or if sold in the future, the investor will be subject to a capital gain tax; depending on whether the seller is a Luxembourg resident, in which case the investor may be entitled to the tax credit.
Choosing property
The best ways to search for a property are through newspapers and online advertisements. Finding a ‘for sale sign outside properties is extremely rare. Only the realtors that are registered with either the Ministere des Classes Moyennes or the Chambre Immobiliere du Grand-Duche de Luxembourg are allowed to engage in property trading.
Once properties are earmarked, each one must be visited personally if possible; buyers can also hire the services of an agent for nominal fees to conduct surveys and present a report. In any case, the buyer must have clarity of purpose before choosing a property to buy. The purpose will highly influence the type of property and the terms of the deal you settle for.
Building your own home in Luxembourg
The benefits of building your own house certainly have more benefits than buying what is available in the market. Firstly, a self-constructed house will be according to the specific needs of the owner, may cost cheaper, and the quality of the material can be maintained by the owner to get the required finishing. However, finding the right contractors, arranging the right vendors and suppliers, handling the paperwork by the owners themselves, and most of all allowing the time, are some of the augmented drawbacks.
The process for building a home is similar to acquiring a ready-made house as far as pre-sales are concerned. After acquiring the land, paperwork regarding design, layout, engineering details, and acquiring approvals from concerned authorities are a few steps that involve the pre-construction process.
