As the final rule introduces stricter regulations governing the determination and designation of Targeted Employment Areas, a surge in EB5 visa program applications are expected.
Prospective aspirants are now looking to beat the November 21st, 2019 deadline following which the minimum qualifying investment requirements for this program will almost double.
The standard minimum investment requirement rises from $1 million to $1.8 million in areas outside TEAs.
And the cheaper option to secure an EB5 visa via investment in TEAs has been raised from $500,000 to $900,000.
“The standard minimum investment requirement rises from $1 million to $1.8 million in areas outside the Targeted Employment Areas.”
This increase in investment requirements will likely reduce the size of the investor pool since investors will need to bring in that much more cash.
Further, increased vigilance and stricter financial norms will have increased hurdles for exporting funds across the border.
Over the next three months, foreign investors, developers, and EB 5 advisors are likely to keep busy. With the final rule, the Department of Homeland Security seeks to provide investments in regions with high unemployment and rural areas. To this result, DHS will be directly responsible for designating TEAs from November.
USCIS made this move to address “gerrymandering”(manipulating the boundaries to favor one party or class) of high unemployment areas.
According to some immigration experts, the move to centralize designation of TEAs will help the EB 5 projects to push attractive investments from wealthy and developed hubs into rural and genuinely distressed regions.
These changes will impact many developers involved in the construction of high-end condos and investor-friendly projects.
In correspondence between Senator Charles Grassley, Senator Mitch McConnell, and others dated April 6th, 2017, they identified rural and distressed urban areas as “the very communities this program was originally intended to benefit” from this program.
Further, according to discussions from the Federal Register, Senator Simon remarked that the lower the investment level for TEAs, the more encouragement there would be for investments in those areas.
Accordingly, the DHS modified the rules in the Federal Register to include “only cities and towns with a minimum population of 20,000 outside of MSAs as a specific and separate area that may qualify as a TEA based on high unemployment.”
Hence the final EB 5 visa rule has widened the scope of TEAs to include areas located outside the metropolitan statistical areas (MSAs).
The above TEA provision may disqualify specific projects and investments since they may be located in dense urban regions. However, it will assist developers in raising funds for EB 5 projects in rural areas or regions with high unemployment.
According to a 2015 Government Accountability Office Study, only 3 percent of the EB5 investment pool was actually invested in rural areas. Foreign investors were keen to invest in luxury properties and affluent projects located in urban centers with high unemployment.
By centralizing the appointment of TEAs, the DHS will be better positioned to stimulate job growth in regions where unemployment rates are consistently the highest.
“The new TEA provision will assist developers in raising funds for EB 5 projects in rural areas or regions with high unemployment.”
The DHS believes this will help the EB 5 projects to better adhere to the congressional intent to incentivize investments in actual high unemployment areas.
As investors countdown the days towards November 21st, there will be an absolute rush to get in the application before the sunset of the existing rules.
Prospective EB 5 investors will want to make qualifying investments and file their petitions to save up to $400,000 and $800,000 for projects in TEA and non-TEA, respectively.
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EB 5 Program to Provide Attractive Investments in High Unemployment and Rural Areas | Houston EB5 – Houston, TX