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Are you an NRI planning on returning to India soon? Manage your money better with these investment options especially suited for NRIs.
By Manika Premsingh
In the recent years, many Non-Resident Indians (NRIs) have been heading homeward as opportunities in India have expanded multi-fold and those in the developed world have shrunk as the recession took root.
Whether you are an NRI returning to India with family or as a single person, asking 4 questions related to your life back here from the financial perspective will hold you in good stead when you come back:
Real estate investment options for NRIs: As an NRI returning to India, chances are, you would like to get a place to stay. A prudent investment decision can then be that of investing in real estate. There are multiple reasons for this. One, rentals in India, particularly in metros have been on the rise overtime. As a result, it can be a better decision not just for you as an NRI but even otherwise to potentially invest in your place of stay if you can.
Two, even if you do not end up eventually living in a piece of property you have purchased back in India, chances are that you will get a neat return on investment. Three, there are few restrictions on NRI investment in real estate; in fact, you can invest in commercial property as well. This goes especially for those of you who would like to kick-start an entrepreneurial journey here and would require an office space to start with. The only commercial properties you are not allowed to invest in are agricultural or plantation lands, so be careful there.
Choose your NR bank account: If you as an NRI, even a returning one, would like to freely transfer your funds across countries, the NRE account is for you. It allows for conversion of international currencies in Indian rupees at the going exchange rate and vice versa. This could be suitable for you if you are not looking at moving back to India right away and would like to dip into the funds in the NRE account. This also gives flexibility in terms of access to your funds, in comparison with an NRO account.
The NRO account allows for one way transfer of funds, which is good if you would like your account to be out of bounds when you are travelling. So, if you would like to send money to India, or park Indian earnings, this is the account for you. You cannot however freely move funds from this account across countries.
Consider the exchange rate differential: As an NRI planning to move back to India, you will probably need to re-work your savings plan. The reason being that the cost of living in India is probably less than that in any of the developed countries you are returning from, even though inflation levels are higher. As an NRI you have the advantage of earning in a foreign currency, particularly in these days, when the Indian rupee has sharply depreciated. As a result, you get more bang for every buck earned internationally when you come to India. Since the currency is at depreciated levels, even if you are not looking to immediately come to India, converting some earnings into rupees is a prudent investment option for NRIs. If the rupee appreciates again, as it will with improving economic situation, you will get less on conversion.
Consider investing in gold: If you are a returning Indian, chances are that you will have to brace for higher inflation rates. Advanced countries tend to have lower average inflation rates that are also stable. India on the other hand can witness sharply fluctuating inflation rates that can eat into family earnings and even savings if not provided for. Gold is a traditional hedge against inflation and it is a sensible investment option for NRIs. With gold prices having crashed, now is a good time to invest in the yellow metal. Even though inflation rates have come off, this is a good time to build up on your gold reserves to hedge against runaway price increases in India.
There are a number of other aspects to be considered when you return as an NRI back to India like taxes on income and filing of returns, treatment of your assets abroad and taxes on your investments in India as well. However, for starters, these four pointers should help you in making a basic plan for handling finances upon your return.
*Photo credit: Teadrinker (Used under the Creative Commons Attribution License.)
Manika is an entrepreneur and the founder of Orbis Economics, a research and content organisation
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