Investing in Emerging Indian Cities – What It Holds for NRIs

Investing in Emerging Indian Cities - What It Holds for NRIs

Any investment done by a nonresident Indian is regarded as foreign investment. It comes in two forms – deposit and remittance. Deposits are considered to be investments made in financial institutions. An example of a deposit is creating a fixed deposit account.

On the other hand, remittances are money sent by NRIs to family members staying in India. India is ranked one of the world’s largest recipients of international remittances. The liberalization of foreign investment policies in recent years has made foreign remittance far easier.

Investment Instruments in India for NRIs

There are various investment instruments that a nonresident Indian can adopt. Depending on your risk appetite and liquidity requirement, you can choose to invest in:

  • Real estate
  • Equities, shares, bonds
  • Mutual funds
  • Fixed deposits
  • PPF and national pension scheme

Investing Options in Emerging Indian Cities

A sizable portion of NRI deposits is invested in banks, real estate, and stock markets. Major cities that account for foreign investment are New Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Ahmedabad, and Kolkata.

Fixed Deposits:

Indian fixed deposits offer better interest rates than most countries. Currently, interest rates range from 5% to 7% as compared to 2-3% offered by U.S. banks. This alone can be reason enough to invest in an Indian FD. However, you need to have an FCNR, NRO, or NRE account before making an FD.

Mutual Funds:

Mutual funds and SIPs offer moderately risky investment options. You can invest through your NRO or NRE accounts, and investment must be done only in Indian rupees. Short-term capital gains of equity mutual funds are taxed at the rate of 15%, while debt funds are taxed as per your tax slab. No tax is deducted for long-term capital gains on equity funds, while long-term gains on debt funds attract 20% tax.

PPF and NPS:

Investing in a Public Provident Fund can give an 8% interest per annum. PPFs have a lock-in period of 15 years, with a maximum investment of 1.5 lakhs per year. Investors can claim a tax rebate under sec 80c. The National Pension Scheme, on the other hand, offers an interest rate of 12%-14% annually. It also offers additional tax benefits. The maturity amount is exempt from tax deductions.


Indian stock markets have outperformed international markets with over 40% returns in recent years. NRIs can invest in stock markets through the Portfolio Investment Scheme (PINS) of RBI. You need to have an NRE/NRO account, a demat account, and a trading account. You can have just one PINS account, and invest only in the valid list of stocks as published by RBI. You are also not allowed to do short selling and intraday trading, as per RBI directives.

Real Estate:

Real estate is one of the few markets in India that has witnessed phenomenal growth over the years. There is a tremendous appetite for Indian real-estate globally. Compared to other sectors, it has seen a steady rise even during the worst economic downturn. RERA and demonetization policies have boosted transparency in the sector. As an NRI, you can invest in both residential and commercial lands. However, ownership of agricultural lands, plantations, and farmhouses is allowed only under gifts and inherited assets.

Things to Watch for Before Investing in Indian Cities

All investment comes with some inherent financial risks. Do your due diligence before investing in any sector. While some investment options are considered relatively safe, others might offer more liquidity. Analyze your requirements and risk profile before deciding to invest.

Real estate offers far less liquidity than other markets, but there is also the possibility of higher returns. Be sure to check for the financial health of the builder, pending legal issues, delayed construction, and chances of default by developers.

You must adhere to the global tax compliance systems for your offshore accounts. Compliance policies of countries like the U.S. are far stricter than others. Be aware of the compliance policy in your residential country before investing. There is a high rate of optimism on the Indian growth story among foreign investors. As such it is becoming a favored destination for foreign investment. Choose your instruments wisely and be part of the Indian success story.

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