“This decision, about banning purchase of property, is not even on the Indian community's radar, it is not even on their top ten priorities," Manan Gupta, an Indian-origin media commentator, from the Canadian city of Brampton told The Quint.
The decision Gupta mentions is a new Canadian law, that took effect on 1 January, which essentially bans some foreign buyers from purchasing residential properties for a period of two years, leading to mixed emotions on the ground, especially within the Indian diaspora.
The “temporary” measure was first proposed by Canadian Prime Minister Justin Trudeau during his election campaign in 2021.
“The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” his campaign website said.
“This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors," it added.
The ban, while exempting newcomers with residency status, comes at a time when Canada aims at aggressive new immigration targets, planning to fill close to one million vacant jobs across the nation.
Soaring Property Prices
The law stemmed from a boom in prices of Canadian homes since the start of the COVID-19 pandemic and also from a belief that foreign buyers were responsible for snapping up supply of such homes as investments.
A spokesperson for Canadian Finance Minister Chrystia Freeland tweeted, “Houses should be homes for Canadians to live in and not an investment asset for foreigners.”
Harmindar Dhillon, a lawyer based out of Ontario, resonated a similar sentiment and told The Quint:
“People (Non-Canadians) are buying real estate because it's a good way to protect your money. For the past 10 years, the market value has risen beyond inflation, giving them high returns.”
In the midst of sky-high property rates and a looming global recession, lawmakers and residents both are hoping for some sense of relief.
Expectations vs Exceptions
However, the “Prohibition on the Purchase of Residential Property by Non-Canadians Act” comes with its fair share of exceptions, and it is these exceptions that experts cite as a possible lynchpin for the act’s failure.
Not only does the law allow immigrants and non-citizen permanent residents (PRs) to purchase homes, it also does not apply to students and refugees.
Moreover, the prohibition is only applicable in “census metropolitan areas'' and “census agglomerations” - which are essentially cities which meet a certain population criteria.
But wait, there's more. The law further does not apply to vacation homes in “recreation areas.”
It also does not apply to homeowners with Canadian spouses or partners, and foreigners buying multi-family residences with more than three units.
These caveats have drawn criticism from many, including Manan Gupta, who say that it simply adds an extra step for foreign investors, trying to buy homes as investments.
“It is basically rerouting your investment,” Gupta said during a conversation with The Quint.
“What is going to happen unfortunately is that those investors who have a big chunk of money are now going to invest in these small recreational properties and vacation properties,” he adds.
How Are Indian Canadians Impacted?
A huge chunk of Indians live in Ontario, British Columbia, and Alberta. Indian-Canadians are one of the fastest growing communities in the county, making up the second largest non-European group, behind Chinese Canadians.
But the Indian community in Canada doesn't seem to be thrilled with the new ban, but that is not to say that they were disappointed. They simply could not pay attention to it. Here's why:
Firstly, even with multiple measures undertaken by the Trudeau government, prices within the Canadian property market are tough to budge. While rates have fallen to some extent, residential homes remain "too expensive" at the moment.
Secondly, the Indian diaspora in Canada is worried about their interest payments and sky-rocketing mortgages. They are worried about making ends meet, and according to Manan Gupta, “This so-called ban on Non-Canadians is not even a talking point.
"They (Indian community) are not even worried about it, or happy about it. For them, the main priority is how to meet their existing expenses and increasing mortgages,” the Road Today magazine founder told The Quint.
Meanwhile, the Bank of Canada has continued to raise interest rates, pushing mortgages even higher and trying to apply downward pressure on the housing market.
While Gupta expressed concern at the increasing mortgages, owed to high interest rates, he staunchly believes that “property rates are only going to reduce, if the Bank of Canada keeps on increasing interest rates.”
Moreover, Randhir Walia, a realtor from Ontario informed The Quint of the presence of a pre-existing 15 percent tax on all non-Canadians who want to buy land in certain provinces.
The Non Resident Speculation Tax (NRST) is a stamp duty tax, also called the Foreign Buyer’s Tax, paid by foreign butters when closing a house anywhere in Ontario or in some British Columbia areas.
But here's the hook:
According to data from the British Columbia Ministry of Finance, foreign investment in real estate fell from a high of 9 percent in June 2016 to close to 1 percent in June last year.
Dhillon backed the law and claimed that the law is not “anti-foreigner.”
“It's not an anti-foreigner thing. Homes in your country should be the people who want to live there, raise their family and build communities. Your houses should not be like a gold bar, for people to store their money. It should not be a bank locker for someone in some other parts of the world to come and hide their money.”Harmindar Dhillon, Lawyer
Randhir Walia also explained the diaspora’s concern within the Canadian property market and told The Quint, “Last year, there were people lining up in front of certain areas like the Golden Horseshoe area - most Indian people were lining up trying to milk this cow. They were lining up to buy their homes.”
“This year, they are standing in the same rows, agitating against these builders, telling them to reduce the price, because they simply cannot afford their mortgage," he added.
Harminder Dhillon, who has a deep-rooted connection with the Indian diaspora in Mississauga, Ontario, told The Quint:
“People who want to make money can invest in stocks and other commercial activities, but don't buy houses to flip them around. People buy those houses to live there and raise their families.”
He believes that while the ban may not bring prices down substantially, it will help Indians looking to buy homes since “it will arrest them (prices) from going up.”
“It will change the psychology because until now the psychology has been - free for all. Anybody who has money from anywhere in the world, they come and buy homes. So it's difficult for a teacher in Brampton to compete in the market against some billionaire from Hong Kong when they're buying the same house?”Harminder Dhillon, Canada-Based Lawyer
But Manan Gupta, on the contrary, believes that the ban on foreign buyers, who account for less than five percent of homeowners in Canada, would have a less-than-significant effect on the housing and cost of living crisis.
What Do Realtors Say About the Ban?
If there's one section that feels unhappy with the ban on Non-Canadians purchasing property, it's the real estate lobby. The reason: A huge chunk of their business has been taken away.
Brendon Ogmundson, the chief economist at the British Columbia Real Estate Association, said in a statement that non-Canadians receive much unwarranted blame for the housing crisis.
“But the pandemic shut off nearly the entire segment of foreign buyers, and prices still hit an all-time high. That’s evidence that foreign buyers are not significant drivers of the market, and this ban will not affect anything,” Ogmundson said, defying the Liberal Party’s rationale behind the move.
Micheal Bourque, an Ottawa-based executive of the Canadian Real Estate Association, called the legislation an “affront to Canada’s brand as a welcoming, multicultural nation.”
However, realtor Randhir Walia, lauded the benefits that the law might bring and said that it will significantly bring down the competition in the Canadian property market.
Painting a rather dire image of the situation in the past, he told The Quint:
“When we put an offer on a given property (a few years ago) there would be 45 offers on the same property. Even if the market price was $1 million, for example, it was going for like 1.2 million or 1.3 million over asking price."
"Just because people want to bring the money into Canada, legal or illegal money, but they just want to pour it into Canada," he said.
Walia also mentioned the presence of businesses where most of the business would originate from foreign buyers, owed to their popularity in countries like China.
“If you go to the mainland, the papers are filled with real estate advertisements giving them opportunities to buy land and property in Canada and get a PR easily.”Randhir Walia, Realtor, Mississauga, Ontario.
According to the Canada Mortgage and Housing Corporation, nearly 19 million housing units would be needed by 2030, due to widespread immigration and expected future demand.
This amounts to nearly 5.8 million new homes that need to be built, almost 3.5 million more than the currently expected to be constructed.
A report by the group noted that domestic investors - who face no legislative restrictions - are an ever-increasing market force.
Reports have noted that the ban on foreign buyers, who account for less than 5 percent of Canadian home ownership, may not have the intended impact of making homes more affordable, and added that more housing stock would have to be constructed to meet demand.
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