By Shiv Parekh, Founder, hBits
There are various investment options available for Non Resident Indians (NRIs) in India, but it is not at all easy to find the best options for them. In such a scenario, it is important to find an ideal investment option that provides complete financial security and decent returns to the NRIs. While some NRIs invest to create a corpus for their family back home or prepare for their own move back to India someday; others want to earn better returns by investing in a fast-expanding economy.
There is a very common question as to what serves an NRI investor best? The answer to this completely depends on their investment goals, risk appetite and expectations of returns. There are several options from Mutual funds to real estate, which highlight the different investment options for NRIs.
Mutual Funds
Mutual funds are always suggested for those who are looking for long term investments. Mutual Funds offer a wide range of investment options, from debt to equity, and carefully chosen schemes can deliver good returns. To invest in a mutual fund an NRI needs an NRE or NRO account as he/ she can only invest in Indian rupees.
Unit Linked Insurance Plan (ULIP)
ULIP combines the benefits of investment and insurance with a typical lock-in period of five years. However, the premiums paid for ULIPs are deductible under Section 80C and 10(10D) of the Income Tax Act, 196.
National Pension System (NPS)
NPS is suggested as an investment only if one of the goals is to settle in India post-retirement. As far as government securities go, they are low risk investments backed by the government of India. Government bonds are tradable securities and their prices in the market are liable to fluctuate based on external factors.
Real Estate
Real estate has been an attractive and promising investment. The CRE sector has received an enormous fillip from more accessible instruments like REITs and Fractional ownership, which have made the market more accessible to retail investors. Moreover, the rental yield from CRE is higher than residential properties.
The rental yield of a commercial property, at around 8-10 per cent per annum, is higher than the yield from a residential property. So, an investment of Rs 25 lakh in fractional ownership has the potential to deliver Rs 2.25 lakh per year in rental income alone. This leads to a steady expansion of wealth and improvement in monthly liquidity.
Government Securities
Government Securities or G-Secs are low-risk investment options as they are backed by the government of India. They are issued in treasury bills or bonds, the maturity of which ranges from a few days to several years. These bonds may have fixed interest rates or floating rates, that are determined based on market-related changes.