New investments in the US EB-5 visa program have plummeted to their lowest levels in the last decade.
In 2018, investment inflows through the program fell by an estimated 2.58 billion, according to US Citizenship and Immigration Services.
That follows falls of $892 million in 2017 and $102 million in 2016, while increases of $2.06 billion and $1.55 billion were seen in 2014 and 2015 respectively.
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The 2018 financial year marked the point when the waiting period for Chinese investors exceeded ten years for the first time. Meanwhile, Vietnamese applicants were hit by visa retrogression for the first time last year.
Backlogs are only going to increase with India also joining the list of countries facing EB-5 visa retrogression.
The number of new investors has also dropped sharply to lowest levels in the past seven years.
About the EB-5 Visa
The EB-5 program allows foreign investors to qualify for the US green card within, under ideal circumstances, five to six years by investing $500,000 in Targeted Employment Areas or $1 million in a commercial enterprise in the US and, additionally, creating at least ten jobs in the country.
With the reform process initiated in 2017 nearing completion, minimum investment levels are expected to rise to $1.3 million for TEAs and $1.8 million for all other projects.
Multiple Reasons for Fewer New EB-5 Investments
The drop in number of new investors and volume of new EB-5 investments is primarily due to the China factor. Facing waiting periods in excess of 10 years just to qualify for the two-year conditional green card, Chinese interest in the EB-5 program has tapered off in recent years.
US lawmakers have not helped by refusing to grant a long-term extension to the Regional Centre Pilot program, which allows investors to pool funds for execution of EB-5 projects.
The Regional Centre route accounts for a significant chunk of all EB-5 investments, which means repeated short-term extensions serves to increase fears of future program changes.
With new rules mandating significantly higher investment requirements set to come into force shortly, investors may soon have to pay more money to qualify for the EB-5 visa.
Developers and Regional Centres Respond
Despite the fall in recent years, EB-5 capital remains a vital source of inexpensive funding for real-estate project developers.
Instead of competing for a share in dwindling flows from China, Regional Centres and project developers have begun exploring alternative markets like Vietnam, India, and South Korea.
Filings from these countries have surged in the past two years, with Indian EB-5 applications rising by more than four times in just one year.
India is a particularly attractive market considering there are a large number of professionals already living in the US. The recent spate of adverse rule changes for the H-1B visa has compelled them to seek alternate routes to the US green card.
Developers have responded to the challenging environment by structuring EB-5 funding as mezzanine debt or a secondary source of funding after bank loans.