Under the new rules introduced by the EB-5 Refirm and Integrity Act of 2022 (the “RIA”), rural EB-5 projects offer unprecedented benefits to immigrant investors. Many in the EB-5 industry predict a sustained upturn in demand for EB-5 projects in rural areas.
While many new EB-5 investors are considering rural projects, they also need to be aware of the financial risks associated with this project category. In many cases, real estate developments in rural areas face a unique set of challenges that result in a higher risk profile.
Evaluating the common financial risks in rural EB-5 projects will help potential EB-5 investors safeguard their hard-earned capital while receiving the unique immigration benefits in granted by the RIA.
To incentivize investment in rural areas, the RIA now grants priority processing to investors in rural EB-5 projects. This means that a rural investor’s EB-5 petition can potentially be adjudicated years faster than otherwise possible. I recently saw a case where USCIS processed a rural investor’s initial EB-5 petition in only 11 months. In contrast, many petitions usually take several years to be adjudicated.
Under the RIA, rural project investors also qualify for set-aside visas. Twenty Percent of the yearly EB-5 visa supply is now reserved for rural investors. This allows applicants from backlogged countries to avoid years of additional processing delays by investing in a rural project. China and India have historically been the two largest EB-5 markets. We are already seeing a surge in demand from the Chinese market under the new rules.
These two new benefits have largely shifted the EB-5 industry’s attention toward rural project offerings.
EB-5 investors face two layers of risk: immigration and financial risk. Regarding immigration risk, EB-5 investors are not guaranteed to get permanent U.S. green cards. They will only qualify if their invested capital is used to create at least 10 jobs. I've found that in most cases, job creation is calculated based on an EB-5 project’s construction spending.
In addition, USCIS requires EB-5 investments to hold the potential for both financial loss and gain. This is known as the “at-risk” requirement. It creates a degree of financial risk for EB-5 applicants. Both of these factors make it essential for EB-5 investors to choose financially viable real estate projects.