According to UN estimates, the Indian diaspora comprises a whopping 17.5 million people. In fact, the report (The International Migrant Stock 2019) goes on to say that as of 2019, India had the largest number of international migrants.
Now the interesting metric that goes with this large statistic is that India is also the world's top recipient of remittances.NRIs sent USD 80 billion back home in 2018, according to the World Bank. That’s around 15% of the amount the country earned through exports in FY2019!
According to the RBI, around half of NRI remittances go towards maintenance of their families in India. However, beyond that, the next biggest chunks go into bank deposits and real estate, respectively.
A consumer sentiment survey by a real estate consultancy firm Anarock for H1 2019 reveals that 63% of NRIs prefer real estate over any other investment avenue in India.
That’s completely understandable if the investment is for self-consumption. Investing in a home or commercial space in your motherland is an emotional decision – irrespective of whether the NRI wishes to use it in future or merely facilitate a loved one with a home or place of work.
However, if the purpose of investing in real estate is for investment per se, experts caution that this asset suffers from high transaction costs, illiquidity, delayed construction and the chances of default by the developer (a concern may have become less relevant in the light of the Real Estate Regulation and Development Act, 2016).
That being said, NRI’s today are spoiled for choice with a host of interesting investment options within the country. Here’s a look at the leading amongst these…
Pooled vehicles: As per the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, NRIs can invest their remittances in a host of instruments under this category. These include
1. Mutual Funds which invest more than fifty percent in equity governed by Sebi (Mutual Funds) Regulations, 1996
2. Real Estate Investment Trusts (REITs) governed by Sebi (REITs) Regulations, 2014
3. Infrastructure Investment Trusts (InvIts) governed by Sebi (InvIts) Regulations, 2014
4. Alternative Investment Funds (AIFs) governed by Sebi (AIFs) Regulations, 2012
National Pension Scheme: Very recently, at end-October 2019, The Pension Fund Regulatory and Development Authority (PFRDA) has allowed Overseas Citizens of India (OCI) to invest in NPS tier-1 accounts, a facility that NRIs already enjoy, subject to certain conditions.
Beyond the opportunity to contribute to a long-term saving opportunity in India, this scheme offers tax benefits too. Further, repatriation of the accumulated savings/annuity from the NPS Tier-I account to a bank account outside India is governed by the Foreign Exchange Management Act.
At a time when the rate of interest on dollar-denominated investments across the world is declining, NRIs could benefit from the comparatively vibrant ‘India opportunity’ through these investment vehicles.
To know more, get in touch with us at nricell@ventura1.com or call Keyur/ Pooja at +91 22 6622 7356 /7359
Disclaimer:
We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.
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