Last Reviewed/Updated: 12/2023
What does “Rural” mean in the EB-5 Program?
A Rural project is a sub-category of TEA projects – projects which are located in Targeted Employment Areas.
In total, there are 3 subcategories that are covered by TEA:
- Rural Projects,
- Projects located in high-unemployment areas
- Infrastructure projects.
These are the 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 infrastructure visas. As we can see, the number of reserved visas is highest for Rural Projects.
It is worth mentioning here that historically the majority of projects are based in High Unemployment Areas, which means that this type of reserved visa is the fastest to be used up.
This incentive allows foreign investors to receive their visas faster once the I-526 has been approved. This point actually has limited use, as priority processing only benefits investors from China and India. Only these countries experience additional delays with visa availability due to the high demand at their consulates.
Priority processing
The EB-5 RIA 2022 also has a line that states: ‘Secretary of Homeland Security (I) shall prioritize the processing and adjudication of petitions for rural areas’.
This benefit is quite hard to estimate as processing times have been a huge mess in the last year.
The Same RIA legislation, states that USCIS shall complete a study of fees charged to reach a processing time of 120 days for TEA projects. The new fees have been already announced but their implementation was postponed until 2024.
The current estimated processing times published on the USCIS website is 55,5 months, and the historical average time for petitions approved in 2023 was 50 months.
Taking into consideration the aforementioned facts, we can see that the promised processing time of 120 days for TEA projects remains only a promise.
However, as multiple sources have advised there have been a number of examples where EB-5 applicants in Rural projects actually received their approval in less than a year – which means that USCIS does seem to follow the RIA with the resources they have.
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.
For Regional Centers that make the interests of their investors first priority, it’s not an easy task to find projects which have good economics to support a return of capital within 5-7 years.
This is why we do not see that many Rural Projects where we would anticipate taking into consideration any incentives that they might have to offer.
In the case that a Regional Center does not have any track record on their previous projects, investors need to accept multiplied risks, as in addition to the risks of location, they 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.
So, in the current environment, with petition processing times being so long, an investor may be faced with the choice of having a chance to get an I-526 petition approved in 11-12 months, instead of the 50 official months, while raising the possibility of not getting their investment back. Or alternatively, increase their chances of a return of capital, but have greater patience and wait a longer time for their petition’s approval.
Honestly, 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 made a collection of such projects here.
The entire EB-5 industry is now focused on shortening petition processing times, so the chances are that in the next 1-2 years, those daunting 50-month timelines will be shortened very quickly
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.
Last Reviewed/Updated: 12/2023
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