India has always been a lucrative option for Non-Resident Indians (NRI) who wish to invest their hard-earned money as part of their financial planning process. India is a fast-growing economy and investing here yields higher returns. Lately, the volatility of Indian Rupee has also led to more than expected returns in foreign investments. Here is an article on changes to the Indian budget that will affect NRI investments.
The key question, however, is where should an NRI invest. It is easy to get confused about the right instrument when there are multitudes of investment options available in the market.
In this article, we are going to look at some of the most beneficial NRI investments in India.
As an NRI, you can directly invest in the Indian stock market through the Portfolio Investment Scheme (PIS) and more recently the Foreign Portfolio Investment (FPI) routes. The FPI move will make equity investments for NRIs more conducive.
The current political scenario and the rise of US-China trade wars have made the Indian equity market an attractive investment option. [Source: MoneyControl]. ROI from equity is high sometimes going upwards of 20%. However, the risk involved is also higher.
If you are looking for long term investment options, then mutual funds are your best bet. Both debt and equity mutual funds that offer good returns are available. Historically, equity funds in India have yielded between 15-20% and debt funds have given 8-10%. Investing in mutual funds does not require very close monitoring either.
Bonds and Government Securities
As an NRI, you can invest in government bonds and securities. These are debt investments and do not offer an equity stake. But you get a fixed rate of return on these investments. Returns can be easily repatriated if the investments are done through NRE and FCNR accounts.
National Pension Scheme
The National Pension Scheme (NPS) is another attractive option for NRIs. However, this is valid only if you are an Indian citizen. Returns on NPS can range anywhere between 5% to more than 10% depending on your portfolio. You can choose between a range of investment options such as government securities and fixed deposits. Returns from NPS are also tax-effective. Plus, this helps you to plan for your retirement and build a retirement fund.
Real estate is often a favourite investment option among NRIs who wish to come back to India at some point in time. This provides a sense of security to people away from home. Additionally, investing in real estate is highly remunerative because of the fact that India is a growing economy and property prices are bound to rise.
Restrictions in the real estate sector are fewer. You can purchase and own both residential and commercial properties with no limit on the number of properties.
Buying property in India? You may need a Power of Attorney, for someone who can act on your behalf for all your monetary transactions. Here is an article with more information on the Power of Attorney
Bank deposit accounts are one of the most common modes of investments by NRIs mainly because they involve a lot less hassle than the other options. As an NRI, you can open and operate three different types of accounts - NRE, NRO, and FCNR each with their own set of benefits. Returns on bank deposits are secure and can range between 2-3% for FCNR and 6.7% for NRE accounts.
Thus, we have, here, six different avenues where NRIs can invest in India. Each has its pros and cons and may suit people with different requirements. You need to carefully evaluate before deciding on your perfect fit.