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NRI investment options in India

Indian Diaspora including NRIs and PIOs at a glance:
From 493.954 billion US$ in 2001 to 2.049 trillion US$ in 2014, India’s GDP at market prices (measured in current US$) has boomed and is expected to grow much further in coming years and decades. During the same period of 2001 to 2014, the leading stock market index namely BSE Index has moved from 3519.16 levels to 22417.80 levels. Real estate prices have appreciated considerably during the same period. And many other investment classes have yielded substantial returns on investment.

In 2015, India’s GDP rate overtook Chinese GDP rate to register the fastest GDP growth rate of 7.3% as compared to 6.8% GDP growth registered by China. In 2015, Government of India took many Policy reforms such as Make in India, Digital India, ease of doing business, natural resources auctioning, streamlining of power sector, strengthening of Country’s telecommunication and internet networks. This resulted in substantial amount of Foreign Direct Investment into India. Along with FDI inflows, NRI remittances into India continue to grow year after year.

During the period of 2001 to 2015, Indian Diaspora (NRIs and PIOs) remittances into India have increased from 14.229 billion US$ in 2001 to 72.178 billion US$ in 2015. To better understand the NRI and PIO remittances and investments pattern, one needs to have the general overview of Indian Diaspora spread across the world. Below is a detailed info-graphics about NRI & PIO population in different countries across the globe, annual remittances, NRI – PIO remittances into India segregated by source countries and continents, and NRI millionaires.

Investments by NRIs:
Indian economy offers various asset classes to Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) to invest their money and maximize the returns on investment. From equity markets to risk free bonds, NRI investing in real estate to venture capital funds, there are all kinds of asset classes that are available to Non Resident Indians. However NRIs need to plan well as far as investing in India is concerned.


Where are NRIs primarily investing?:
As per records by Ministry of Overseas affairs, Government of India, NRIs and PIOs tend to mostly remit money to support their family back home in India. Some fraction of overall remittances goes into the property, land, and securities. However, as Indian economy grows further and many other sectors open up, one may witness diversification of NRIs investment in India. Going forward, NRIs are likely to invest more in real estate and healthcare sectors.

A case Study – When it comes to investing in India, NRIs need to plan well:
Sumit Garg is working in a Multinational company in UAE. He is 46 years old. And over a period of time Sumit has been able to accumulate wealth. Sumit still has good 10-12 years of working life in front of him. However, Sumit intends to return to India once he retires. Sumit has not planned yet for second career post his retirement from the current job. He is also unsure in utilizing his wealth optimally. What are the various ways in which Sumit can use his wealth optimally?

  • Do not put all your wealth in real estate
    As the saying goes, “do not put all your eggs in one basket”. And it holds true for NRIs who are looking to invest in India. Returning NRIs must ensure that they invest in a property that is able to generate good rental income. This rental income can be used to cover household expenses while the returning NRI can focus on finding a new work or starting a new venture in India. However, one must not invest all his/her money into real estate. There are always liquidity risks in real estate and it could be difficult to sell off the real estate during the economic downturns.

  • Do no invest heavily in gold
    Many NRIs especially who are living in Middle East and gulf countries have the tendency to invest heavily in gold. This proves to be detrimental when they return home. In the guise of ‘making charges’ and ‘damages’, Jewelers tend to undermine the value of gold. And returning NRIs have no other option but to sell the gold at lower value.

  • Plan well if you are keen to start a new business in India
    Returning NRIs must focus on 3 things if they are keen to start a new business in India. And those are ‘Plan’, ‘Market Size’, and ‘Motivation levels’. India offers tremendous opportunity to start a new business. However, one must plan in advance before even returning to India. During the planning phase, the idea can be tested and iterated, and services or solutions can be streamlined. And when plan is ready, one must assess his motivation levels to implement the plan. Because make no mistake, implementation will require tremendous efforts and energy.

  • Do not mix personal and professional relationships
    This is where most NRIs feel letdown. When you are overseas everything looks good including the relationships with friends and family members in India. However, the situation takes a 180 degree turn as soon as you land in India. Therefore, do not mix personal and professional lives. While you may expect your friend to introduce you to a key customer, however, it may not turn out to be the case. Therefore, do not depend on friends and relatives to help you out in your new business or work.

  • Build a large basket of highly liquid assets
    As an NRI, when you return to India, you may need access to your liquid assets to support your monthly expenses and the new business. Therefore, as long as you are overseas, accumulate a large basket of highly liquid assets such as mutual funds, stocks, bonds, deposits, etc.

In conclusion, if you plan to return to India in 10-12 years, make sure to accumulate a diverse investment portfolio. 60% of it could have liquid financial assets, 20-30% in real estate, and rest in gold.