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Some unconventional yet popular avenues for NRI investments in India
Key Takeaways
NRIs can explore unconventional investment options in India such as art, music royalties, alternative investment funds and fractional commercial real estate ownership.
- Real estate remains a strong choice for NRIs offering asset creation, tax benefits under certain conditions and rental income, though it requires significant capital and has lower liquidity.
- Investments in gold, precious metals and infrastructure investment trusts (InvITs) provide alternative ways to diversify and hedge against inflation.
- Each opportunity comes with its own risks—liquidity, regulatory limits and market cycles—so align your investment with your risk tolerance and investment horizon.
The investment scenario in India is full of optimism, fueling aspirations and offering a wide range of investment opportunities for NRIs (Non-Resident Indians). Some of the reasons why NRIs look for investments in India are:
· Portfolio diversification
· Save their tax liability in India
· Create assets back home if they plan to return to India in the future
· Get affordable yet attractive investment avenues
When it comes to NRI investment options in India, the choices include fixed deposits, mutual funds, shares, etc. and several different and offbeat avenues. Read on to explore a few of them.
Unconventional NRI investment opportunities in India
· Art
The international art market is quite developed, with Indian art not far behind. Data suggests that the Indian art auction market grew to Rs 1034 crores in 2021-22 compared to Rs 7 crores in 2000.
For many NRIs, art constitutes more of a pride of possession. It is considered a status symbol and fulfils their love for the finer things in life. For others, art can be an investment avenue that they can resell to make a profit when the item’s value increases.
Many banks and financial institutions have also launched specified art funds. Such funds pool money from interested investors and invest the corpus in art pieces by well-known Indian artists.
Moreover, with the introduction of Non-Fungible Tokens, art has gone digital. NFT Art is a digital art tokenised on the blockchain. Each art piece is unique and holds a unique value. NRIs can buy and sell or trade such digital art to make profits.
Also read - TDS deductions for NRIs – everything you should know
· Real estate
Real estate is another popular investment opportunity for NRIs. In 2021, NRIs invested about $13 billion in Indian real estate. The numbers are expected to grow.
Real estate investment has its set of benefits and drawbacks for NRIs. Have a look –
Benefits |
Risks/drawbacks |
· They can create an asset in India · Real estate in India is comparatively cheaper than abroad · It helps in saving taxes under Section 80C and 24(b) · Higher resale value · They can make a profit by selling the property. Alternatively, a regular income source can be created by letting out the property |
· Not easily liquid · Requires a considerable amount of investment · Repayment of the home loan becomes a recurring expense · It might not be relevant if the NRI does not plan on returning |
Note: Under the new tax regime the above benefits are not applicable
Moreover, easy NRI home loans are available to facilitate NRIs to own property in India. The loans are affordable, have a high quantum, and can be repaid easily.
For instance, IDFC FIRST Bank Home Loan allows loans up to Rs 10 crores for NRIs, with repayment tenures going up to 30 years.
· Farmland or agricultural property
Per FEMA (Foreign Exchange Management Act), NRIs cannot invest in farmlands or agricultural properties in India. However, they can seek permission from the Reserve Bank of India (RBI) if they want to do so. If permitted, they can invest in such property.
Farmland or agricultural property can be a feasible NRI investment in India because of its appreciation. Per reports, agricultural land appreciates around 10% to 12% annually, faster than other properties.
So, eligible NRIs can invest in these types of properties for attractive yields.
· Startups
In a country with a booming startup ecosystem, there are investment opportunities for NRIs too. They can become angel investors and invest in a potential startup. Per RBI regulations, NRIs can invest up to 5% of the company’s paid-up capital and can have equity ownership in the business and claim a share of the company’s profits.
Moreover, if the startup becomes successful and listed on the stock exchange, NRIs can cash out through an Offer For Sale in the Initial Public Offering (OFS) or keep their stake for future returns. After listing, their stake can give them capital appreciation and regular dividend incomes.
· Music royalties
Another unconventional NRI investment in India is music. Yes, you heard it right!
NRIs can invest in a song and earn royalties through it. Music NFTs are slowly gaining popularity, wherein you can invest in a new artist. The artist makes the song and publishes it. You become entitled to royalty income as the song plays on different platforms.
Though in its nascent stage, music royalties can create a long-term source of income. The revenue can also increase if the song becomes popular. On the other hand, you face the risk of losing out on the investment if the song fails to capture mass attention.
· Gold and other precious metal
Gold, silver, platinum, and other precious metals also hold attraction for NRIs. Whether for their ornamental uses or investment, NRIs prefer investing in precious metals, especially gold.
Precious metals can hedge against inflation and volatility and give stable returns. Moreover, investing has become easier with different modes of investment available, like Exchange-Traded Funds (ETFs), digital gold/silver, etc.
· Alternative Investment Funds (AIF)
AIFs are pooled investment vehicles targeting ultra-rich and sophisticated investors, NRIs included. NRIs benefit from a diversified portfolio, expert fund management, and attractive returns. However, such investment funds require a considerable corpus and can be close-ended, restricting liquidity.
· Fractional CRE ownership
NRIs can invest in Grade-A Commercial Real Estate (CRE) partially. This is called fractional ownership of CRE. They invest in a proportion of the aggregate value of the CRE and get regular rental income. Capital appreciation is also available when they redeem their ownership.
There are, however, risks of reduction in the property’s value, loss of rental income when the property is not occupied, liquidity, etc. Moreover, a high amount of investment is needed for the same.
· Infrastructure Investment Trusts (InvITs)
Another pooled investment opportunity is the InvITs. They collect money from high net-worth investors, including NRIs, and invest the pooled corpus into infrastructure projects. NRIs can earn regular income from the infrastructure investment fund and make capital gains upon redemption.
Also read - Make the most of NRI Fixed Deposits by avoiding these mistakes
The bottom line
If you are looking for offbeat NRI investment opportunities in India, you can take your pick from the above choices. Differentiate from other investors and diversify your portfolio with unique and unconventional investment choices. Some might give you regular returns, while others might offer capital appreciation.
Know the pros and cons of each NRI investment option in India. Choose those avenues that align with your needs and investment strategy. Review your investments regularly and get the best out of them.
And you can always rely on IDFC FIRST Bank's NRI Banking services to streamline investments and make money management easier.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.
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