Investment Options for NRIs in India

As an NRI, you may be considering investing in India for two reasons. One, you have an emotional bond with the country and would like to come back after few years. Hence you would like your future to be secure when you decide to give up a high-paying job abroad and come back to settle down. The other reason could be that you want to invest your savings in high-yielding avenues available around the globe and India offers the best options in terms of return potential and comfort level with regulations concerned.

Before you choose to invest in any of the options available to you, carefully ask yourself what is the purpose, emotional security or financial well-being?

If you want to invest in India for an emotional reason, then no doubt real-estate is the only option that not only gives you ownership of a property in India but also gives you a reason to come back. However, investing in real estate in India has its own challenges. It is a very illiquid investment because you’ll have a tough time selling it off in case you wish to book the gain on your property or wish to sell it off for investing the money somewhere else. Apart from illiquidity, it has additional cost like maintenance, ensuring safety of the property, dealing with legal issues, managing lease through brokers etc.

The alternate option for you is to invest your savings in long-term equity mutual funds that create wealth over time and you can use the proceeds to buy a house in future when you really need it i.e closer to the time when you plan to return to India.

If your objective is for the financial well-being of your family and hence you are looking for NRI investment options in India that can offer better return than the options available in the country of your residence, then look no further. Over the years India has made it extremely easy for NRIs to invest here on repatriable basis. The advantage of such investments is that they are far more liquid compared to real-estate, offer you full control as you can access and operate them from anywhere in the world and these options are fairly regulated thus giving you peace of mind and comfort.

If you wish to park your surplus money for a short term before deploying it for a bigger purpose later, you can consider bank FDs or liquid/ultra short-term mutual funds. While both options will give you single digit percentage returns, these are much higher than what you can expect in most of the developed economies of the west and the ones in Asia like Singapore. If you are looking at investing for the medium term (3-7yrs), you can invest in both equity and debt oriented or hybrid mutual funds with higher allocation to debt schemes. You can increase your allocation to equity mutual funds if you are looking to finance certain life goals that may become due over the next 8-15 yrs. However, if you want to invest for very longer term (above 15 yrs) you should invest in pure equity funds to finance such future goals. These days, you can manage all your mutual fund investments with a click at one place. You can invest in mutual funds online, redeem your units or switch your investments from the comfort of your home or office across the globe.

You can also invest in the India stock market if you want to experience the India growth story. However, you can’t do intraday trading and must hold a trading account with a SEBI registered broker apart from a Demat account to hold the shares. To experience the Indian growth story, you need to remain invested for long and equity mutual funds are a better option in this regard. Your money is professionally managed by fund managers who study the macro and micro economic factors before choosing to invest in the right sectors and companies.

Similarly, you can invest in the India debt market by buying bonds issued by corporates, the Government and its agencies or money market instruments like Certificates of Deposits that offer higher rate of interest compared to bank FDs. But instead of investing in individual bond and money market securities, it makes more sense to choose an appropriate debt oriented mutual fund that gives exposure to all such options thus providing you diversification and potential for better returns.

For investing in mutual funds and stocks you need to have a NRE/NRO account with any of the banks in India. For bank FDs or investing in bonds you need to have a NRE/FCNR account. Before choosing an investment options, you need to carefully look at tax implications for the options and whether proceeds are fully repatriable or not. Evaluate each option with respect to tax implications, repatriation, liquidity, future return potential and above all if it meets your individual financial planning requirements.