04/10/2019
Reasons why NRI's should invest in India?
Should you be investing your money in the country where you are residing or in India? Does it make sense to earn and stay in US or Middle East, but invest all that money in India? Many NRI's are confused on this, so I will just give you 4 small points which you should be aware about.
Reason #1 - India is one the fastest growing and a stable Economy
Note that India is one of the fastest major economy and quite stable country compared to many others where NRI's live. It’s important to make sure that your money is invested in the country which is stable enough. On top of that, you also help in growing the foreign exchange of your country.
Reason #2 - High Interest Rates
Compared to many developed economies, the interest rates or "returns" you can get in India is quite good. Japan has negative interest rates and US has not more than 2-3%. Many NRI investors make the mistake of keeping too much money in the bank accounts outside India and earn very little interest rates.
Reason #3 - Because you understand the investments in India
There is high probability that you already understand various Indian investments options and financial products. Also, you will never fear what happens to your money because there is a sense of familiarity with India markets and financial ecosystem.
Reason #4 - Mostly you will be back to India
A vast majority of NRI's return back to India after working for few years outside and finally use all their investments back in India. That's one strong reason why you should invest major part of your money in India itself.
What options do NRI have for investments in India
Quickly, let’s see what various options are where NRI's can put their money for short - long term. This is not a guide which will give you very detailed information, but a quick commentary of what the option is all about.
#1 - Bank NRE Deposits
Bank NRE deposits are one of the wonderful choices an NRI can make. The interest you earn on NRE deposits are tax free and it’s a simple product which gives you decent risk free returns. You can choose the NRE deposits for some part of your investments if you don't want to complicate things and are investing for less than 5 yrs.
Many NRI's take a loan from the local banks at low interest rates and invest in NRE deposits and earn the margin. See if this is a profitable thing to do in your case of not.
#2 - Real Estate
One the hot favorite for NRI's is real estate in India. Real estate investments require big ticket investments and many NRI's have that. Even if you are buying a flat or land on installments, it works well for NRI's are they have a big disposable income per month. One of my close friends also invested in Hiranandani project in Bangalore by making a down payment because they knew that the installments to be paid will be easy on pocket with NRI income.
The only negative side is that many NRI's choose real estate just based on the limited information sitting outside India or in the hurried manner. So make sure you take your time in researching the property and take decision slowly. As it’s a high ticket transactions, its highly recommended to hire a real estate lawyer, pay them fees and get all the work done like title search, property enquiry. If needed go with a real estate broker who can manage everything for you!.
One more thing NRI should know is that they are allowed to only buy residential or commercial real estate, but not agricultural properties.
#3 - Insurance Policies
There are many Insurance policies (which are actually investments polices) which are marketed well for NRI's . These in my opinion are to be carefully chosen as many traditional products can turn out to be dud investments and very bad choice of long term investments. Some ULIP's in market have got reintroduced with lower charges and much better structure - so please choose them after a lot of study and only for long term.
I would strictly advice against traditional investment option which does not have exposure of equity in them, because they are not better than normal NRE deposits.
NRI's can and should buy the pure insurance policy (term insurance) if they require it. Call 91 9745834880
4 - Mutual Funds
Mutual funds are quite hot these days among NRI's and its surely is one of the best choices for investments, provided you have proper guidance about it.
In Mutual funds, you have two choices - Equity mutual funds and Debt Mutual funds.
Equity mutual funds are long term financial products which can deliver extremely good returns if managed well. Those who are ok with volatility in their portfolio and want very tax optimized inflation beating returns for their long term goals, for those NRI's mutual funds are very good choice.
Even Debt mutual funds are very good choice for those NRI's who do not want to get into equity risk and want alternatives of bank deposits and bonds. Debt mutual funds are quite good option even taxation wise if you are ready to invest for more than 3 yrs.
Taxation Equity Mutual funds Debt Mutual funds Short Term Capital Gain (STCG) (Before 1 yr) Taxable @ 15% Taxable as per Income tax slab rate Long Term Capital Gain (LTCG) (After 1 yr) Taxable @ 10% where LTCG>1 lakh (No indexation benefit) Taxable @ 10% without indexation or 20% with indexation
NRI's from USA and Canada can also invest in mutual funds, but only with some limited mutual fund houses due to FATCA compliance. Here is a detailed guide on NRI's investments in mutual funds.Call 919745834880
5 - Bonds and NCD
NRI's can also invest in various bonds and NCD's which are issued from time to time. These instruments have fixed interest which you can get every year credited in bank account and you get your principle on maturity. The liquidity has to be compromised in these instruments as getting out of these before maturity becomes very tough even if these are tradable in secondary market.Call 919745834880
#6 - NPS
NPS is another choice for your long term investments if one wants equity exposure in their portfolio, and pension benefits embedded into the product itself. Only NRI's who are Indian citizens can invest in NPS. PIO and OCI are not eligible for opening NPS account. In NPS, you get choices between equity investments, govt securities and other fixed income instruments. Call 919745834880
