In this wide-ranging interview, Tanvi Kachan, Head – NRI Business & Strategy at Anand Rathi Shares and Stock Brokers, shares her deep insights on how NRIs are navigating the Indian investment landscape, their evolving money mindset, and the rise of new platforms like GIFT City and fractional real estate. She also decodes the tax advantages enjoyed by NRIs in hubs like Dubai and Singapore, highlights the sectors and asset classes drawing the most attention, and explains why real estate-heavy portfolios could be hurting long-term wealth creation.
Whether you’re an NRI investor or a financial advisor working with global clients, this conversation is packed with practical perspectives and data-backed trends shaping the future of cross-border wealth management.
Tanvi Kachan, Head – NRI Business & Strategy, Anand Rathi Shares and Stock Brokers.
Q) Thanks for taking the time out. How are NRIs looking at India as a long term investment destination? And, what are the other hot countries which they invest in?
A) NRIs increasingly view India as a compelling long-term investment destination due to several fundamental factors. The country’s robust economic growth trajectory (projected to remain among the world’s fastest-growing major economies) creates substantial wealth-building opportunities across multiple sectors. Many NRIs recognize that India’s demographic dividend—with a large young working population—will continue driving consumption and economic expansion for decades.
The significant improvements in regulatory frameworks, digital infrastructure, and ease of doing business have strengthened investor confidence. The introduction of investor-friendly policies like RERA in real estate and streamlined KYC processes for financial investments has made the investment landscape more transparent and accessible for those residing abroad.
Beyond financial returns, emotional and cultural connections play a meaningful role, with many NRIs viewing investments in their homeland as maintaining ties while potentially planning for eventual return or retirement.
Other Popular Investment Destinations for NRIs
Outside India, NRIs commonly diversify their portfolios across:
1. United States – Attracts investment for its stable political environment, robust financial markets, and diverse investment options including REITs and ETFs
2. UAE – Popular for its tax advantages, strategic location, and growing real estate sector, particularly in Dubai and Abu Dhabi
3. Singapore – Valued for its economic stability, strong regulatory framework, and position as Asia’s financial hub
4. UK – Offers stable real estate markets, particularly in London, and established financial infrastructure
5. Australia – Gaining attention for its resource-based economy, transparent property market, and quality education sector
The investment strategy of most sophisticated NRIs involves geographical diversification across these markets, balancing growth opportunities in India with stability and different risk profiles in developed economies.
If you look at the trade-off between risk and returns, the Indian markets have delivered an alpha with a far lower standard deviation on a long term portfolio.
Q)There is big debate on social media about taxation. Help us understand why NRIs In Dubai, Singapore & Mauritius have to pay zero tax on mutual fund gains?
A) The zero taxation on mutual fund gains for NRIs in Dubai, Singapore, and Mauritius stems from a combination of these countries’ tax regimes and their Double Taxation Avoidance Agreements (DTAAs) with India. In India’s tax structure, capital gains from mutual funds are typically taxable for residents. However, for NRIs from certain jurisdictions, these gains can effectively become tax-free due to:
1. Residence-based taxation principles: Dubai (UAE), Singapore, and Mauritius operate on tax systems where:
o UAE imposes no personal income tax whatsoever
o Singapore doesn’t tax foreign-sourced income not remitted to Singapore
o Mauritius offers very favourable tax treatment on investment income
2. DTAA provisions: India’s agreements with these countries include specific clauses that determine which country has the taxation right on capital gains. The agreements with these particular countries have historically been structured to avoid double taxation by allowing taxation primarily in the country of residence.
Country-Specific Advantages
Dubai/UAE: As a zero-tax jurisdiction with no personal income tax, capital gains tax, or wealth tax, NRIs residing in the UAE automatically benefit from not having to pay taxes on their worldwide income, including Indian mutual fund gains*.
Singapore: While Singapore taxes income generated within its borders, it generally doesn’t tax foreign-sourced investment income if certain conditions are met. The India-Singapore DTAA further clarifies taxation rights.
Mauritius: Long considered a preferred investment gateway to India, Mauritius offers a generous tax regime with effective tax rates that can be near zero on certain investment incomes.
For example –
Mr. ABC is an NRI resident in UAE and investing in MFs in India
Total Investment Value – Rs. 1 crore
Total Current Value – Rs. 2 crore
Capital Gains – Rs. 1 crore
Capital Gains Tax for NRI in UAE** – Rs. ZERO
Explanation –
1. India – UAE DTAA has residual clause that allows MFs to be taxed in resident country.
2. UAE doesn’t tax capital gains on MFs.
3. NRI must be eligible for applying for residency in UAE.
4. Tax Residency Certificate (TRC) of UAE must be submitted**
Q) How much money is moving in real estate/REIT/fractional investment? Is this the right way?
A) India’s real estate market has increasingly attracted Non-Resident Indians (NRIs), establishing itself as a reliable and rewarding investment destination. Amid global economic uncertainties, India has proven to be a beacon of stability and growth for real estate investments.
Looking at the data points, NRI investment in Indian real estate continues its robust trajectory, reaching $14.9 billion in 2024 with projections of $16.3 billion for 2025, growing at 9.2% annually. This capital primarily flows into Mumbai (31%), Bangalore (23%), and Delhi-NCR (19%), with traditional direct property investments capturing the largest share at $9.7 billion (65% of total investment). Commercial properties have emerged as the preferred asset class, delivering superior returns of 7.9-10.2% in rental yields versus 3.8-5.2% for residential properties. The investment landscape has diversified significantly with REITs gaining substantial traction.
Most notably, fractional ownership platforms have experienced explosive growth of 71% in 2024, with NRIs contributing $2.5 billion (52% of this segment) and generating projected returns of 8.9-13.2%.
Regulatory developments, including RERA implementation and new SEBI guidelines for fractional ownership established in March 2024, have bolstered investor confidence, creating a more transparent and accessible market for global Indian capital.
Q) What are the big mistakes which NRIs should avoid when making investment in India?
A) When investing in the Indian market, NRIs frequently encounter several pitfalls that can significantly impact returns. Here are the most critical mistakes to avoid:
– Regulatory and Compliance Blind Spots: Many NRIs overlook crucial regulatory requirements, leading to complications. Nearly 38% of NRI investments face compliance challenges due to insufficient understanding of FEMA regulations, tax treaties, and repatriation rules. The RBI’s annual repatriation limit and DTAA provisions between India and resident countries require careful navigation.
– Real Estate Investment Errors: Real estate attracts substantial NRI investment but comes with specific challenges:
• Over-reliance on distant family members: property disputes involving NRIs stem from mismanagement by relatives given power of attorney
• Ignoring location fundamentals: Research shows properties purchased based solely on emotional attachment underperform market averages
• Neglecting maintenance costs: Vacant properties face higher depreciation rates due to inadequate maintenance
• Poor tenant verification: Improper tenant screening leads to higher eviction rates in NRI-owned properties
• Financial Planning Missteps: The interconnected nature of international finances creates particular complexities:
• Inadequate tax planning: NRIs pay excess taxes due to insufficient coordination between Indian and overseas tax strategies
• Inadequate estate planning: NRI investments lack proper nomination and succession planning, creating potential inheritance complications
• Overlooking inflation impact
• Investment Diversification Failures: Portfolio construction errors commonly include:
• Over-concentration in physical assets: NRI portfolios are overly weighted in physical real estate, limiting liquidity
• Ignoring Indian equity markets: NRIs who diversify into Indian equities have outperformed real estate-only portfolios annually over the past decade
• Poor due diligence on financial intermediaries: NRI investment complaints involve unauthorized transactions or misrepresentation by financial advisors
• Optimizing Repatriation and Currency Flows: Currency timing and conversion strategies significantly impact NRI investment returns. Rather than reactive approaches, implementing structured conversion plans that align with market conditions can enhance overall portfolio performance.
• GIFT City Advantage: GIFT City framework offers NRIs a compelling investment channel with distinct benefits:
• Streamlined Global Market Access: GIFT City’s regulatory structure enables direct investment in international equities, bonds, and alternative assets through specialized funds
• Tax Efficiency: Investments through GIFT City vehicles benefit from preferential capital gains treatment and TDS exemptions, improving net returns by approximately 7-12% compared to traditional channels
• Simplified Repatriation: The unified regulatory framework eliminates many of the procedural complexities typically associated with cross-border investments, reducing transaction costs by an average of 2.3%
• Comprehensive Financial Solutions: The ecosystem accommodates various investment vehicles including Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS) customized for global investors
These structural advantages position GIFT City as an increasingly central hub for NRIs seeking efficient management of their international investment portfolios.
Addressing these common mistakes can significantly improve investment outcomes for NRIs engaging with Indian markets.
Q) What is the money mindset which NRIs follow. Are there any common attributes?
A) Most of the attributes are as stated above – over diversification in Real estate, most of the NRI’s have a Real Estate heavy portfolio which impact the return generating capabilities by a huge margin. There is also a huge biases towards investing in safer asset classes like FD’s which may not yield the best return for them in terms of alpha generation.
Q) Which investment options or asset classes are hot favourites of NRIs and why?
A) NRIs typically gravitate toward specific investments for their unique advantages. Real estate in growing Indian metros remains popular due to long-term appreciation potential and rental income opportunities. Many NRIs maintain strong emotional connections to their homeland through property ownership.
Indian equities attract significant NRI capital through PIS accounts, offering growth potential in one of the world’s fastest-developing economies. The relatively high returns compared to developed markets make this appealing for those with higher risk tolerance.
For safety-conscious investors, NRE/FCNR deposits stand out with their complete tax exemption and repatriation benefits. The attractive interest rates (often 6-8%) significantly outperform typical rates in Western countries.
Government securities and RBI bonds provide stable returns with sovereign backing, while mutual funds offer professionally managed diversification across various market segments.
Tax planning remains crucial, with DTAAs helping NRIs avoid double taxation between India and their country of residence. Those seeking expert assistance often engage wealth advisors specializing in cross-border investment management.
Q) Which sectors are more preferred when NRIs look to invest in India?
A) Sectors like fintech, artificial intelligence, and biotechnology are emerging as key investment areas, bolstered by government incentives. Additionally, high-growth opportunities in IT, BFSI, and healthcare continue to attract attention.
Q) What about luxury items – art, cars, watches which of the themes are hot favourites?
A) Art has gained traction as an alternative investment, particularly among UHNIs. However, it’s still at a nascent stage in India in comparison to the developed nations. Several UHNIs have opted for this asset class as it offers diversification, emotional value, and potential long-term appreciation. There are certain aspects that investors need to understand and be careful with, such as authenticity, illiquidity, high entry costs, and reliance on expert valuation.
While art investments are niche, they are growing in popularity as part of a balanced portfolio. According to a report by Knight Frank, Indian ultra-high net worth individuals (UHNWI) allocated 11% of their investable wealth towards luxury items like art, jewellery, classic cars, watches, and handbags, compared to the global average of 16%.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
