This is a member perspective and the views of the author are their own and do not necessarily reflect the views or position of IIUSA.
by Abbas Hashmi, Hongkun USA
After announcing upcoming changes to the EB-5 requirements in July, the USCIS stated that any applications submitted before November 21 would be subject to current regulations. The changes include the increase of investment amounts for TEA and non-TEA investments.
This resulted in a wave of affluent foreigners rushing to apply under current requirements. As November draws closer, immigration professionals and attorneys are expecting a drastic shift in the EB-5 landscape once the new regulations come into effect. Here are a few predictions.
1) Greater Focus on Investment Marketing
A major prediction is that since EB-5 requirements are changing, it will pinch the number of foreigners applying for a visa. To adapt to the lower numbers of applications, EB-5 Regional Centers will now have to develop their marketing strategy. Instead of employing an immigration marketing tactic, they’ll need to rely on investment marketing.
Considering the upcoming developments, regional centers can no longer sell the prospect of immigration to candidates. The pool of applicants is expected to include more sophisticated investors who are looking for lucrative real estate investment opportunities to funnel their capital.
2) Tax Implications and Other Considerations
Now that the route to a permanent residency visa will come with a hefty price tag, foreign investors will need to consider their moves carefully. The Targeted Employment Area (TEA) investment has increased from $500,000 to $900,000; that’s almost double. Because the EB-5 visa is conditional upon the requirement that the investment should create a set number of jobs, applicants have to analyze the projects they’re looking to fund.
These investments will come with a number of tax considerations. To navigate through them carefully, applicants will need to involve chartered accountants and private bankers in a distribution alliance rather than agents.
3) More Family Office Experts and Private Bankers Will be Involved
As the investment requirement increases to account for inflation, the pool of potential applicants for the EB-5 visa will grow smaller to include a demographic of sophisticated investors. These are most likely to come from affluent families. To make sure that they’re making the right investment decisions, it’s likely that they’ll involve family office experts.
This will occur as a result of the heavy price tags on the EB-5 visa, i.e. $900,000 for TEA investment and $1.8 million for non-TEA investments. Regional centers will have a hard time ‘selling’ the EB-5 as an investment solution or even as a pathway to permanent residency. A better approach involves discussing it with family office experts and framing it as a part of a strategy to expand the family business legacy or wealth management plan. After all, the new market for the EB-5 will remain for people who can deliver better value when investing in commercial real estate. For them, immigration is simply a side benefit and not vice versa.
