The changes announced to the EB-5 Immigrant Investor Program - under which entrepreneurs may apply for a green card or permanent residence - has come into effect now.

The changes in EB-5, under a new rule published by the United States (US) Department of Homeland Security, include a rise in the standard minimum investment amount from $1 million to $1.8 million as well as an increase in the minimum investment in a targeted employment area (TEA) to $900,000 from $500,000. 

This marks the first time, since 1993, that the rules have been altered significantly. BusinessLine had reported in August that the announcement of these changes had led to a surge in Indian applicants for the EB-5 Visa, ahead of the fee hike. This fee hike came into effect yesterday.

Read: Rise in Indian applicants for EB-5 visa ahead of November fee hike

The US Citizenship and Immigration Services (USCIS) in its site explains the other changes that the EB-5 program will now incorporate:

  • Providing priority date retention to certain EB-5 investors
  • Increasing the required minimum investment amounts to account for inflation
  • Reforming certain targeted employment area (TEA) designations
  • Clarifying USCIS procedures for the removal of conditions on permanent residence
  • Making other technical and conforming revisions

The EB-5 Immigrant Investor Program, administered by the USCIS, is a program under which entrepreneurs - and their spouses and unmarried children under 21 - are eligible to apply for a green card (permanent residence) if they make the necessary investment in a commercial enterprise in the US and if they plan to create or preserve 10  permanent full-time jobs for qualified US workers. This program is known as EB-5 for the name of the employment-based fifth preference visa that participants receive, the USCIS website states.

Better education and career prospects for children is an important reason why Indians have traditionally opted for the EB-5 visa. An EB-5 visa holder, who gets a green card, can choose any kind of work in the US.

India had reached retrogression for EB-5 in June 2019, with the country having utilised the existing cap of 700 visas offered by the US government to every country for the US fiscal year 2018 (October-September). This had happened amidst tight scrutiny over H-1B and H4 (dependent visa) and the ongoing trade war between the two countries then. Visa retrogression occurs when the demand for a particular immigrant visa for a nation exceeds its availability.

EB-5 players in the market shared their opinion on the implications of these changes.

Varied opinions

Despite hike in prices and high risk for investors, the new rules may not drive investments home, partially as a bulk of E-B 5 demand comes from Indians already residing in the US, Vivek Tandon Founder and CEO of EB5 BRICS, an EB-5 advisory firm had said in August. “There may be a dip in the short-term but the program will continue to remain very popular with Indians. Considering the current chaotic H-1B setup and the long waiting periods for EB-1 to EB-3 category green cards, the EB-5 visa, despite the increased investment threshold, remains the most stable and most transparent route to the US green card. Further, the bulk of Indian EB-5 demand comes for those already in the US on work permits or with pending green card applications. For them, the benefits of a US green card far outweigh the costs, even after this recent increase in investments,” he explained.

That TEAs will now be authorised by the Department of Homeland Security (DHS) rather than the State based on ‘revised requirements in the regulation’ was also identified by Tandon as a very significant change, may be even more significant than the investment hike.

“Post November 21, TEAs shall be designated solely by the DHS based on a uniform criteria for the entire country. Further, the new rules clarify that there cannot be any TEAs in Metropolitan Statistical Areas with a population in excess of 20,000. Going ahead, Indians will either have to invest in rural areas or high-unemployment areas outside cities or skip the $900,000 option and invest $1.8 million for the EB-5 visa. This change actually increases the risk for Indian investors because risks involved in setting up a viable project in non-urban areas will be significantly higher,” he had said.

With the EB-5 visa category facing longer waiting times and increased costs, its Indian clients are now looking at the E-2 via, said Mark Davies, Global Chairman, Davies & Associates LLC. “Although Indians are not directly eligible for the E-2 Visa, we have successfully managed to help clients obtain an E-2 Visa by first taking Citizenship by Investment of an E2-eligible country like Grenada in the West Indies,” he said.

He further stated that the E-2 visa is highly complementary to the EB-5 application, as it allows a person to live and work in the United States while facing retrogression delays. “If the underlying E-2 business becomes large enough, it is possible to transition it to a Green Card under the EB-5 route,” he said. 

Brennen McConnell, Partner, Paragon Partners Asia, said that even with the price increase, the EB-5 program is still a more affordable option than many of the comparable programs in Europe, the United Kingdom, Australia, Canada and elsewhere. “There is also additional positive news for Indian EB-5 investors as the US government admitted its worst-case wait time estimates for Indians are actually two years less than what had been originally projected earlier in 2019,” he said.

The other major change to the EB-5 program is the tightening of the definition of what constitutes a TEA, pointed out Matt Hogan, VP Project Development, CMB Regional Centers. “This is an integrity move designed to ensure that EB-5 money is being directed at areas of higher unemployment. It is vital for EB-5 investors to check that their chosen regional center project complies with the new TEA regulations,” he said.

Rogelio Caceres, Chief Commercial Officer and Co-Founder, LCR Capital Partners, said that a price increase to reflect inflation is long overdue and one that LCR and the EB-5 industry should welcome enthusiastically. “Given the increase in amount, LCR fully expects a large number of EB-5 Regional Centers to exit the industry, especially ones that are not set up to attract a globally diversified investor base into institutional-grade, secure US opportunities,” said Caceres.

LCR Capital Partners also views the price increase as a classic win-win scenario, he said. “It's a win to American businesses and communities who will now benefit from a larger investment amount to strengthen and accelerate job creation across the country.  According to II-USA, the industry's association, capital investments from EB-5 investors fueled over 4 per cent of new job growth across the entire country,” said Caceres.

"The price increase is also a win for investors," he said.

Since the job requirement clause remains 10 new American jobs, the increase makes meeting this important requirement much less difficult to demonstrate, he pointed out.

“Given the increase in amount, sophisticated investors will insist that these new investment offerings are structured with a focus on capital preservation and timely return on principal,” he said.

Meanwhile, Qendrese Sadriu, Managing Director, American Immigration Group, pointed out that the changes to the regulations are part of an ongoing process and investors interested in EB-5 should maintain a watchful eye on the program. “This could be far from the last word,” she said.