Living and working abroad has its own set of perks. The US offers the strongest economy, Canada has friendly immigration rules and government policies, the UK is fast becoming the new face of fintech and Australia’s ties with India are on great terms. The reason why I mentioned these countries is simple – the earning standards for most professions are rather high. As a Non-Resident Indian, saving and investing with a higher income is always better. While investing in the country that you are currently residing in is always a choice, there are compelling reasons why you should be looking at India as your next investment destination.
India has leapfrogged its way to become the 5th largest economy in the world as per the IMF. Even in the face of the COVID-19 pandemic, India is one of the countries that is estimated to have a stable or even a positive growth rate in its GDP in the coming years.
Reasons for Investing
- Wealth Creation - Savings can only get you so far. Investing happens over a longer period and on substantial assets. If investing in real estate, you can gain income through the rentals. Owning a property can also be used as collateral when you want to apply for loans. Secured loans are easier to avail than unsecured ones and come with lower interest rates.
- Retirement Planning – Standard of living is hard to let go of. When retiring, if you need the same standard of living, you need to plan out your investment portfolio wisely. A diverse portfolio cushions your money from risks and helps you ensure a better standard of living.
- Building a Separate Income Source – The income you make overseas is not taxable in India. However, if you want your family In India to have a stable source of passive legal income, it can be made possible through investment.
Investment Options in India
Quite a few people might be under the misconception that NRIs can have it hard when trying to invest in India. But that is not at all true. Let us look at the available options for investment for NRIs.
National Pension Scheme - If you are an Indian citizen, this saving scheme from the government allows anyone between the age of 18-60 years to start a virtually zero-risk investment plan.
Government Securities - You can look at short term and long-term options in these. Treasury bills have maturity terms from 3 months to 12 months. For long-term prospects, the following can be considered –
- Fixed-rate government bonds – Fixed interest rate.
- Floating rate government bonds – Variable interest rates as per the market conditions.
- Capital index bonds (CPI bonds) – Featuring coupon payment rates adjusted as per the inflation rates in the Indian market.
Fixed Deposit Bank Accounts – The most common form of investment that is the simplest as well. However, the interest rates in these make them efficient only when holding them for a very long term.
Mutual Funds – If trading on the stock market is not your cup of tea, mutual funds are the option you can look at. They are large pools of money for investors and are managed by fund managers. You can choose the ratio of your investment profile based on how you want your equity vs. debt mix. Based on that, your money is invested into companies, organizations, metals, oil, et al. You will need an NRE, NRO, or FCNR account to be able to invest in mutual funds. Mutual funds offer better returns than fixed deposits, but they also come with increased risk.
Direct Equity – If you have the knowledge of stocks or can hire a fund manager for yourself and want to have even better returns but can take a sizeable amount of risk, you can invest in stocks on the National Stock Exchange of India. You can be a part of the Portfolio Investment Scheme of the Reserve Bank of India and will need the following to trade in stocks –
- NRE/NRO savings account meant only for PIS
- A dematerialized account holding shares in an electronic format
- A SEBI trading account with a registered broker
Real Estate – You can go with commercial or residential property for your investment purposes. While in the residential sector, you will need to have a caretaker and draft agreements that are airtight on your own. In the commercial real estate sector, you can opt to invest through REITs or through fractional ownership. REITs operate much like mutual funds. The only aspects you own in a REIT portfolio are the investment money and the returns you receive. You cannot choose which CRE you want to invest in and which you want to avoid. Fractional ownership, on the other hand, gives you complete freedom on your investment choice, gives you actual ownership over a portion of the asset, and is much more transparent in terms of returns.
Why Now? Future of Investments
The Make In India drive is gaining a lot of traction and coupled with large-scale policy changes that are giving a boost to new businesses, commercial real estate is going to appreciate in value and newer companies are going to join in the fray for getting the competitive advantage that is being offered by the government.
With the dollar value being on a positive trend compared to the rupee, there can be no better time to invest in India through an NRO/NRE account. Investments made in India during the time when most countries are still struggling to come to terms with the COVID recession will bear huge positive returns.
If we are speaking of investments, no matter what you choose, the growth prospects of all avenues are going to drastically increase. The first and most direct impact of this economic revolution is going to happen in the commercial real estate sector. So, if you can, the time is ripe to consider investing in India.
As per JLL, India is reviewing its Foreign Direct Investment (FDI) policy for the real estate sector to see if 100% of overseas investment can be allowed in completed projects. If implemented, this will allow real estate companies to monetize completed projects amid the ongoing liquidity crisis aggravated by the COVID-19 pandemic, thus helping to revive an economically critical sector. Even in the face of the COVID-19 pandemic, office leasing has picked up, warehousing has seen an increase and residential launches are also on the upside in the major cities of India.
If you are thinking of how to start, the best way would be to open an NRE/NRO account first. Check with us at strataprop.com to know how investment in CRE can work on a fractional ownership model.