NRIs who want to invest in their home country are often perplexed by the variety of options available. The erroneous and incorrect advice they receive from bank relationship managers adds to their bewilderment. As a result, they frequently spend their hard-earned money on investments that benefit distributors rather than investors.
Any investment selection should, in general, take into account the investor’s requirements and objectives. The investment should fit within the individual’s overall financial strategy. Long-term investment has various benefits, and even tiny amounts spent regularly may build into a sizable portfolio over time. Before we look into NRIs, let’s look at long-term investment choices.
Fractional ownership investment in India for NRIs
NRIs, HNIs, and C-suite executives are increasingly interested in holding a percentage of rent-earning Grade-A office space. In addition, due to Covid-19’s unparalleled economic issues for real estate, investors were compelled to look into new and alternative investment classes such as fractional ownership, which is gaining steam, particularly in office space leasing and industrial storage.
Individuals or retail investors can buy a piece of a high-value tangible asset through fractional ownership. Currently, office space is the most popular investment in India, but post-Covid, industrial warehouses, and luxury vacation properties are increasingly becoming popular. These platforms impose an annual asset management fee and a performance-based fee in most cases.
According to a major property consultancy, an investor may expect a constant rental return of roughly 8%-9% in commercial real estate, as well as capital appreciation if the market is robust. Individual purchasers will be encouraged as a result of this. One advantage is investing in a Grade A commercial property with better rental returns than a residential home. Second, investors may rest confident that due diligence will be performed. They also don’t have to bother about managing renters, and they have the option to leave at any moment.
Through fractional ownership is still a new idea in India, it has a lot of potential compared to economies like the United States or Singapore. Around 2.6 lakh flats are expected to be sold by 2020. Fifty-five percent is for end-use, and 45 percent is for investment. So you’re talking about 1.2 lakh units bought for investment purposes. On average, a one-bedroom flat costs Rs 50 lakh. So, for a 2-3 percent return, a Rs 60,000 crore investment was made in residential.
Client confidence, according to a prominent platform member, is critical. There is a significant trust gap in real estate, which we are working to address. We can’t take money out of one property and put it into another. A fractional ownership platform provides total transparency to its investors. There are no completion hazards because properties are completed with tenants.
According to a poll, about 30% of total investors interested in fractional ownership of commercial real estate are NRIs looking for a way to provide an alternate income stream for their families in India. A study of over 1,500 high-ticket registered customers and investors was done by a Mumbai-based company, supporting investors in fractional ownership of the commercial real estate.
According to the survey’s findings, chartered accountants and financial professionals are most interested in investing in fractional ownership of commercial real estate (30 percent of total respondents), followed by attorneys (21%), physicians (15%), and tech-IT executives (15 percent) (13 percent).
These investors prefer fixed income choices with a physical asset as collateral, and they’ve begun to appreciate fractional CRE’s favorable risk-return profile and end-to-end management provided by fractional ownership platforms.
According to the poll, 72% of investors are from India, while 28% are non-resident Indians (NRIs) from the United States, the United Arab Emirates, the United Kingdom, Denmark, Nigeria, and Australia. If you invest through platforms such as Assetmonk, you need not worry about your investment as they provide the best investment opportunities with an IRR of 14-21%.
Best investment option for NRIs in India
Some of the top investing choices for NRIs are listed below. First, however, let’s take a deeper look at each of them to comprehend their distinct advantages better.
Purchasing Real Estate
Because of the emotional value linked to owning property in India, real estate is one of the most pleasing financial possibilities for NRIs. You have the option of investing in either residential or commercial real estate. Investing in real estate has two advantages: you will generate a consistent income from rent and profit from capital gain.
According to the RBI’s House Price Index, the average yearly return from June 2010 to June 2020 was 11.6 percent. You can use your NRO, NRE, or FCNR account to pay for your property purchase.
Fixed Deposit
Fixed Deposits, often known as FDs, are popular among residents and non-resident Indians. FDs are a wonderful NRI investing choice if you want a generally risk-free investment option with average returns. You can begin investing in FDs through NRE, NRO, or FCNR accounts. The interest rate is determined by the bank, the amount of the deposit, and the duration of the deposit.
Direct Equity
In the past, direct equity returns in the stock market have outperformed fixed-income products. As a result, NRI investment strategies benefit from strong equity holdings. The Indian stock market is open to any NRI with a Portfolio Investment Scheme (PIS) account, NRE/NRO account, Demat, and trading. On the other hand, equity markets may be volatile, so you should do your homework or get professional advice before investing.
Mutual Funds
You can invest directly in mutual fund schemes as an NRI. Therefore, mutual funds (MFs) can be a significant element of their NRI investing strategy. Mutual funds provide a diverse range of investing possibilities, ranging from debt to equities, and well-chosen schemes can produce positive results.
You’ll need an NRE or NRO account to invest because you can only invest in Indian rupees. The rate of return varies depending on whether you invested in debt, equity, or hybrid fund. The earnings you make from mutual funds are subject to capital gains taxes.
ULIP
The acronym ULIP stands for Unit-Linked Insurance Plan, and it combines investing and insurance advantages. A part of your premium is allocated to providing you with life insurance, while the balance is invested in a range of financial products. A 5-year lock-in term is standard for ULIPs. In addition, section 80C of the Income Tax Act allows you to claim tax advantages.
Securities issued by the government
G-Secs, or Government Securities, is a low-risk investment option sponsored by the Indian government. Treasury bills or bonds, with maturities ranging from a few days to several years, are used to issue them. These bonds may have fixed or variable interest rates influenced by market fluctuations.
If you hold them to maturity, there is no chance of default because the Indian government backs them. But on the other hand, G-Secs are tradable securities, and their market values are subject to fluctuation due to external variables.
Beautiful climatic conditions, plentiful flora and fauna, an endless amount of places to explore, and a wonderful South Indian culinary culture can all be found in South Indian metropolises such as Bangalore, Chennai, and Hyderabad. As a result, thousands of students and professionals migrate to the city each year to take advantage of the favorable living circumstances, making it a desirable place to call home.
In one of the fastest-growing urban areas, housing demand is rising. If you’re a non-resident Indian wanting to invest in real estate, whether residential or commercial, these are the best options since they offer the best profits. So whether you decide to live in your new home for the rest of your life or rent it out for a profit, you are in a win-win position.