Last Reviewed/Updated: 08/2024
What does “Rural” mean in the EB-5 Program?
A Rural project is a sub-category of TEA project – a project that is located in a Targeted Employment Area.
In total, there are 2 subcategories that are covered by TEA:
- Rural Projects,
- Projects located in High-Unemployment Areas
These are areas where the Government wants to stimulate growth using different incentives for foreign investors.
RURAL AREA —The term ‘rural area’ means any area other than an area within a metropolitan statistical area (as designated by the Director of the Office of Management and Budget) or within the outer boundary of any city or town having a population of 20,000 or more (based on the most recent decennial census of the United States).
What are the incentives for Rural projects?
Investment amount
For all TEA projects, including Rural projects the amount of investment is lower and equal to $800,000, while for non-TEA projects the amount is $1,050,000.
Set aside visas
20% of EB-5 visas are reserved for Rural projects, 10% for projects in high unemployment areas, and 2% for the additional category of infrastructure projects. As can be seen, the number of reserved visas is highest for Rural Projects.
It is worth mentioning that historically, the majority of projects were based in High Unemployment Areas, which means that this type of reserved visa is used up the fastest.
This incentive enables foreign investors to receive their visas in a new priority line at the US embassy, or to apply for a change of status if based in the US – after their I-526 has been approved. This is related firstly to investors from China and India as these countries have historically high numbers of applicants and significantly more than their country limits, thus there is a backlog of people with approved petitions who are waiting for their turn to apply for an EB-5 visa. For example, at Nov 2023 there were 33,676* cases pending in the US consulate in China. The reserved category – set aside visas allows new applicants to move to the front of the line of waiting applicants.
For countries aside from China and India, set-aside visas do not make a significant difference.
Priority processing
The EB-5 RIA 2022 also states: ‘Secretary of Homeland Security (I) shall prioritize the processing and adjudication of petitions for rural areas’.
And we can see in practice that this is happening, although it is not fully consistent yet, but the trend is emerging. Normally, project forms (petition I-956F) for Rural projects are reviewed faster and once it has been approved, the I-526E petitions for Rural projects also have a faster review time.
So in mid-2024, the estimated average time for I-526E applications in Rural projects was between 8 – 14 months, while in the case of a project with an already approved I-956F petition, the processing time can be even shorter, somewhere between 1 – 8 months.
What are the disadvantages of investing in Rural projects?
Simply said, the main disadvantage of investing in a Rural project is the increased risk of losing your investment. The EB-5 program is structured in such a way that it does not guarantee the return of capital to EB-5 investors.
Investors will get their money back only if the project is successful enough to return their funds.
And it’s easy to see that projects located in Rural Areas would encounter higher risks.
It’s especially true for EB-5 real estate projects, as anyone with some experience in real estate knows the saying that success depends on LOCATION, LOCATION, LOCATION.
For Regional Centers that make the interests of their investors their first priority, it’s not an easy task to find projects that have good economics to support a return of capital within 5-7 years.
However, we can see more and more often that Rural projects, even from the bigger Regional Centers, provide a strong incentive for the historically large EB-5 markets such as China and India.
In the case that a Rural project is offered by a Regional Center with a track record of more than 10 projects, they are generally subscribed very quickly, in a matter of a few months.
Rural projects are even offered by newer and smaller Regional Centers. However, when a Regional Center does not have any previous project track record, investors need to accept multiplied risks. In addition to the risks of location, they also need to take on the additional risks connected with the lack of experience of the Regional Center.
Conclusion
Despite the number of advantages of investing in Rural projects, investors need to be extremely careful with such projects.
In the current environment, an investor may be faced with the choice of having a chance to get an I-526E petition approved in 11-12 months, instead of the 16 – 24 months for High Unemployment Areas, while raising the possibility of not getting their investment back. Or alternatively, increasing their chances of a return of capital, but having to wait a longer time for their petition’s approval.
It’s a tough choice. In any case, always choose a project that suits you best and has successful and experienced representatives in the form of Regional Centers. We believe that this is the main criterion for success in the EB-5 process. We have selected a collection of such projects here.
The entire EB-5 industry is now focused on shortening petition processing times, and we have seen tremendous improvements on the USCIS side on the number of petitions reviewed quarterly, so there are chances that in the next 1-2 years, processing times for all projects will be closer to the promised 120 days for TEA and Infrastructure projects and 270 days for the rest.
Second Wind is a third-party promoter operating outside of the USA. We provide EB-5 consultancy services and do not provide any legal or investment advice. Nothing contained herein is an offer to sell securities or the solicitation of an offer to purchase securities. Any offer to participate in any sponsored project may only be made pursuant to a written offering memorandum to qualified investors only as required by the Securities and Exchange Commission.
*According to the Annual Report of Immigrant Visa Applicants in the Family-sponsored and Employment-based preferences Registered at the National Visa Center as of November 1, 2023
Last Reviewed/Updated: 08/2024
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