India and China are expected to have the biggest outflows of rich residents this year after only Russia.
A US visa program that attracted $37 billion in foreign investments since 2008 for projects including New York's Hudson Yards and Trump Bay Street in Jersey City is making a comeback - and the queue of wealthy applicants from China to India is growing.
The revived EB-5 program is poised to fund undertakings from a golf resort in the Utah mountains to condos in rural Florida - while allowing some new overseas investors to cut years-long lines. The controversial initiative, which offers a green card in return for putting large sums toward a US business and creating at least 10 permanent jobs, had a backlog that extended almost a decade before it was suspended in June 2021 when Congress failed to reauthorize it.
A settlement last month of lawsuits involving so-called regional centers that allow foreign investors to pool their funds has put the program back on track for new filings. Earlier this year, the Biden administration signed a law that steps up audits and site visits to deter fraud, while also creating a path for some to skip the backlog of cases if they're willing to invest in rural areas or places with high unemployment. Roughly 100,000 EB-5 visa applicants with some $15 billion in committed investments had been in limbo since the program lapsed, trade group Invest in the USA estimates.
Meanwhile, US law firms are preparing thousands of new applications.
"It's like people lining up for tickets at a movie," said Sam Silverman, founder of EB5AN, an affiliate network that operates more than a dozen projects with presence in 20 states. "There's a giant line with a limited number of tickets with a long wait, but then they just opened up two new showings with literally no one in line."
China, India
The program's restart comes as more wealthy Chinese are attempting to leave their home country or are looking for a backup plan. About 10,000 high-net-worth residents are seeking to pull $48 billion from China this year, investment migration consultant Henley & Partners estimates, while another 8,000 Indians are looking to leave. The two Asian nations are expected to have the biggest outflows of rich residents this year after only Russia.
High demand for the visas means cases of more Indian and Chinese investors who applied previously may not advance due to shifting cutoff dates, according to a Department of State bulletin earlier this month.
In an effort to address this demand, EB5investors.com organized its first event in three years in Vietnam last week, drawing hundreds of investors, migration agents, lawyers and capital seekers who set up booths advertising investment projects from Montana to Florida, said Ali Jahangiri, the group's founder and chief executive officer.
"The attendance was probably better than we've ever had in the past," Jahangiri said. "This thing had kind of been on hold, but the line has shortened."
The program's revival will be a boon for the US economy because, unlike investment visa programs in other countries, it's focused on targeting job creation, particularly in less-developed areas outside of cities, said Miami attorney Ronald Fieldstone, who has handled EB-5 projects worth billions. "A lot of the interesting things are going on in rural areas," he said. "It's not just building skyscrapers."
Still, the program, which began in 1990, has had its share of problems. EB-5 investors unsuccessfully sought arbitration in 2020 after Related Cos. told them that payments from their Hudson Yards project on Manhattan's west side would be halted because of pandemic-related losses, one of several legal challenges coming from groups of Chinese investors. Other haven't materialized at all, such as the $600 million Staten Island Ferris wheel. Last month, two New York State residents were charged in a $27 million fraud in which they allegedly promised visas, big returns and access to then-President Donald Trump. Earlier this year, three defendants were sentenced in connection with a fraud scheme that misled immigrants who invested in a biotechnology project in Vermont.
The program "is a complete and unmitigated disaster,'' that has largely failed to create jobs in vulnerable areas, said Doug Litowitz, a lawyer who has represented a group of China-based investors who put millions into constructing a condominium and hotel project in Chicago that was never built.
Such critiques have added to concerns of government failure to target development in low-income areas, such as an opportunity zones law signed by Trump in 2017. Aimed at helping impoverished communities, it instead ended up largely being a boon for wealthy investors, critics say. In many cases, EB-5 projects are in opportunity zones, Jahangiri said.
A spokesperson for US Citizenship and Immigration Services, which administers EB-5 visas, said the legislation passed by Congress in March "made significant changes to the program, including a requirement for the agency to directly review and determine the designation of high-unemployment'' areas.
"USCIS will continue to ensure that each request for an EB-5-related immigration benefit complies with the statutory and regulatory framework," the spokesperson said in a statement.
Alternative Destinations
Eleanor Hui, founder of Hong Kong-based Global Life Immigration, said she'll advise wealthy Chinese clients against applying for EB-5 visas given the backlogs, requirements for residents to report worldwide income to US tax authorities and restrictions on mobility while waiting for permanent residence. Alternative destinations such as Portugal, Greece and Ireland don't have such drawbacks, she said.
The new law requires EB-5 investors to put up at least $1,050,000 - or $800,000 in economically depressed areas - and create at least 10 jobs to secure permanent residency. The most popular EB-5 pathway lets investors pool resources in regional centers and count indirect job creation, with the caveat that such centers must be re-approved regularly by Congress.
Even so, the fresh rules are unleashing pent-up demand. Bernie Wolfsdorf, a former president of the American Immigration Lawyers Association, said his firm has been working overtime and hiring new staff to adjust to demand from countries like India, which has eclipsed the number of petitions filed from China. Drawing such investors could help prevent a brain drain, since many wealthy emigrants' children study at top US schools, he said.
One Indian-born finance executive based in Hong Kong, who asked not to be identified so as not to jeopardize his EB-5 petition, said he wants his daughter to have access to the American university system. He was drawn by the new regulations aimed at cleaning up the program, but is weighing the option against other alternatives in Asia. To meet the minimum investment threshold, he'll have to cash out on real estate investments in India or some of his stock holdings, which he said he's willing to do if it helps to secure his daughter's future.