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Investors from China Experience EB-5 Changes as India Application Numbers Rise

EB-5 Capital Redeployment: Now what?

When it comes to top destinations for Indian migrants, the United States is now the second most popular choice, and with good reason. Statistically speaking, Indian citizens tend to be better educated than both native and foreign-born U.S. residents. Additionally, they often boast higher income levels. As a result, Indian citizens are strong candidates for employment-based green cards, skilled occupation-based H-1B visas, and the EB-5 program.

With significant backlogs existing for employment-based green cards, it’s no surprise that an increasing number of Indian citizens are now turning to EB-5 visas as a viable alternative. In fact, there is currently no backlog for fifth-preference (EB-5) visas for Indian citizens. These trends contrast sharply with China, where the EB-5 boom seems to be experiencing a decline.

Why Chinese Investors Are Abandoning the EB-5 Program in Droves

Once upon a time, Chinese migrants flocked to the EB-5 program, bringing with them significant wealth and job opportunities. In fact, almost $20 billion of foreign direct investment funds entered the United States between 2010 and 2015 alone, much of it from China. This trend was due in part to the country’s financial success—a wealthier populace meant that more people could afford the $500,000 investment required by the immigrant investor program. Additionally, Chinese citizens were drawn to Western culture and educational opportunities.

However, Chinese applications have slowed in recent years due to both 10-year visa backlogs and legislative uncertainty. Chinese candidates who do choose the EB-5 program tend to target larger real estate projects featuring loan models with set maturity dates. Most investors take on a passive role rather than participating in the day-to-day management of ventures. Since 2016, Chinese filings have dropped each year, with India now leading the pack in applications.

India’s History with the EB-5 Program

A product of the Immigration Act of 1990, the EB-5 visa program provides Indian migrants and investors from other nations with a path to lawful permanent residency in the United States. To meet EB-5 visa obligations, investors must put $1 million (or $500,000 in the case of a regional center) into an American business venture that creates a minimum of 10 full-time jobs over a period of two years. If you’re working with a regional center, both direct and indirect jobs count toward the final job creation numbers.

As was the case in China, investors from India were drawn to America because of cultural factors and educational opportunities. However, while Chinese investors aren’t primarily focused on investment returns, Indian candidates do expect to see financial gains on their projects. Many Indian investors instead opt for smaller entrepreneurial projects that feature a preferred equity model.

Still, Indian citizens have historically made up only a small percentage of EB-5 candidates. In fact, as late as 2015, Indian investors accounted for just over 1 percent of the program’s market. The same year, Chinese candidates made up more than 83 percent of the market. These numbers are particularly surprising in light of India’s large population and the country’s impressive economic growth in recent years.

India’s hesitation to jump on the EB-5 bandwagon may have something to do with the country’s history. In the past, Indian migrants likely targeted Great Britain because of the country’s colonial heritage. This trend was supported by the British Nationality Act of 1948, which dictated that citizens of former British colonies could opt to remain in the United Kingdom. While the Immigration Act of 1971 put an end to this policy, many Indians had already emigrated to England by this point.

In the second half of the 20th century, a changing American immigration landscape made it possible for Indian citizens to come to the United States. The Immigration and Nationality Act of 1965 eliminated country-based quotas, while the Immigration Act of 1990 allowed for new categories of employment-based visas. In fact, 70 percent of H-1B visas currently go to Indian citizens. Still, EB-5 numbers remained low among Indian migrants.

Understanding the Discrepancy Between Indian and Chinese EB-5 Applications

The discrepancy in the number of Chinese and Indian EB-5 applicants may have something to do with the countries’ varied macroeconomic environments. While China enjoyed large amounts of foreign direct investment funds, the country’s citizens have relatively little economic freedom compared to India. Moreover, the government often restricts access to private capital and plays a significant role in the marketplace. In fact, 90 percent of companies on the Shanghai and Shenzhen stock exchanges are owned by the state.

On the other hand, India allows a wider range of options for its domestic investors. More favorable financial conditions, combined with a distaste for foreign investment, have led many Indian investors to keep their money at home. Additionally, opportunities in India are better for individuals with high net worths. The fact that India rewards its entrepreneurs may help explain why EB-5 visas have not been a historically popular option on the subcontinent.

British immigration data supports the notion that Indians are more likely to invest at home. In fact, in 2016 Indians comprised 55 percent of all Tier 2 (Skilled Worker Visa) applicants. However, they weren’t a significant factor in Tier 1 (Investor Visa) numbers. From 2014 to 2017, the United Kingdom received 135 Tier 1 applications from China and just eight applications from India.

The Future of Indian EB-5 Candidates

Despite past trends, the number of Indian EB-5 candidates is on the rise. In fact, over the last year, regional centers have started targeting India’s largest cities and financial hubs with the goal of finding a new EB-5 market. Similarly, India’s economic prosperity and positive geopolitical reputation are driving its EB-5 participation.

Even as India’s EB-5 numbers are increasing, the country’s applicants approach the program in very different ways. Emigration patterns are different in India and China. While a majority of Chinese applicants live in China and seek visas at the consulate through registered migration agents, priorities are different for Indian investors. In fact in 2016 and 2017, nearly 50 percent of the Indians who applied to the EB-5 program were already U.S. visa holders. Most were students or H-1B holders.

Still, opportunities are shifting for Indian citizens, with the traditional immigration channels drying up in recent years. The fact that Indians dominate employer-sponsored visas like the EB-2 and EB-3 in the United States means that the backlog for approval is significant. Additionally, Indian migrants have to wait until they can find an employer who is ready and willing to take them on when they go this route.

Understanding what the Future Holds for EB-5 Investors in India and China

While the future currently looks bright for Indian EB-5 candidates, it’s worth noting that the legislature is seeking to raise minimum investment costs for applicants. Consequently, some prospective migrants may be priced out of pursuing traditional visas. Individuals who possess the funding may opt to put their money into domestic ventures or target Indian-dominated projects. As a result, regional centers may not find as many investors as they desire.