It’s important that NRIs should first look at their goal and risk profile before making a decision. Similarly, investment instruments like MFs, equity markets, NRE deposits, and more have their restrictions.
Bhatt has been in the global real estate investment business for over 25 years. Initially, building up his own portfolio to 150+ units globally he has focused on consulting global clients over the past decade.NRIs often invest in real estate across the world, this is a well-known fact as it is believed to create a long-term value and act as a base to set up business in that region. But there are a lot of other avenues to invest to create a higher alpha, which is normally ignored for legal, processes, or other reasons. Let’s take a look at some.
It’s important that NRIs should first look at their goal and risk profile before making a decision. Similarly, investment instruments like MFs, equity markets, NRE deposits, and more have their restrictions. Their rules and regulations are constantly evolving, hence a close check is required to avoid losses in terms of excess taxes, lock-in period, etc.
The real estate sector has witnessed a constant boom; however, there are some rules that should be kept in mind to make it a profitable investment. Investing in real estate is profitable only if invested with a long-term horizon. There are certain rules for NRIs investing in real estate that differ from country to country. For example in India, a buyer is supposed to deduct TDS while buying an immovable asset from an NRI and deposit it with the government.
Investors looking to take exposure to the real estate sector but do not want to lock in a huge amount of funds can invest in Real Estate Investment Trust (REITs) it offers part ownership of a rent-yielding quality commercial property. There is easy liquidity, no commitment of minimum investment amount or tenure. REITs are mandated to pay 90% of their income to investors via dividends. The dividend acts as a stable income for investors.
This is an ideal vehicle for investors because of several reasons; for instance it helps build a well-diversified portfolio, tracking the value of the investment is easy and above all it provides liquidity. Depending on the investment objective, expected returns and the risk profile, an NRI can invest in equity, balanced, debt, or liquid funds. An investor also have the option of investing in MFs via SIP.
The equity market of a given country mirrors its current economic growth and future growth potential. Investing in equities can be a great way of creating long-term wealth. NRIs looking for investment opportunities can invest in emerging companies in the equity market. There are many companies that pay a high amount of dividend (taxable). One should remember that income generated from short-term investment in equities (up to 1 year) is taxable as short-term capital gains – taxable at 15%. Income generated above INR 1 lakh per year for equities held more than 12 months is chargeable as per Long term capital gains (LTCG) taxable at 10%.
Indian-origin people residing in another country can invest in NRE deposits, earning a higher rate of interest. However, this is possible only if they maintain a bank account in India; while there are certain rules and regulations under the Foreign Exchange Management Act (FEMA).
Till a few years back property was one of the best-considered investment options for NRIs; but investment in India now has seriously started considering financial investments like mutual funds, direct equity, and many other options.