The savvy Indian investor is no longer content with restricting his investment horizon to the equity or property markets at home. A growing number of Indians are now buying property abroad and also taking an exposure to stocks of foreign firms and debt products. Hard numbers are a testimony to this fact.
From a mere $9.6 million in FY05, when the Reserve Bank of India (RBI) eased the norms for investing abroad by individuals, overseas remittances topped $440.5 million in FY08, according to recent data released by RBI. And there are signs that the momentum on outbound flows could well be carried forward. In April alone, individuals remitted $50 million abroad.
Wealthy Indians have been buying property in Dubai, a favorite location. Malaysia is another hot spot fascinating Indian investors. Those flush with funds are diversifying their portfolio to include either shares of global blue-chip firms or units of MF schemes, which have an exposure to several emerging markets. A host of firms now offer structured products to high net worth investors here.
Besides, more Indians are gifting to their relatives abroad and loosening their purse strings to see the world or to educate their kids overseas. Much of this has to do with increasing liberalization and economic well-being. For years, RBI and the government had followed a tight policy on overseas remittances, given the weakness in the external sector. But over the past five years, the pile up of forex reserves has prompted an easing of norms.
Used to close monitoring of outflows, RBI has since 2004 progressively encouraged outflows to neutralize the impact of the torrent of capital inflows. The annual limit for remittances by individuals was raised from $25,000 three years ago to $2,00,000 with leeway for investing in stocks, property and other assets.
The RBI data shows that of remittances, the amount spent in acquiring property abroad, rose from $0.5 million in FY05 to $39.5 million in FY08. Investment in overseas debt and equity went up seven-fold from $20.7 million in FY07 to $144.7 in FY08. Remittances in the form of gifts to relatives increased almost 10-fold to $70.3 million in FY08 from $7.4 million in FY07.
However, the outbound remittance figure pales in comparison with inward remittances, which is now over $30 billion, reckoned to be the highest in the world. But going by the current trend, outbound investments by individuals is gathering steam. The higher outward remittances figure may also be because of the fact that investing abroad is now a legitimate activity. It also helps that a new generation of economically well-off Indians are not hesitant to display their wealth unlike their parents.
One Comment
Want to invest in real estate? Has the recent crisis put you off? Don’t worry, the sector is still swinging. Real estate will always be in demand, and now there are more ways than one to make it pay.Your elders always drilled it into you that you’ve got it made when you can buy or build your own home. This is one injunction kids all over the world are given, regardless of culture. The solidity that a piece of land gives is a great comfort. Despite the jitters the market gave you after the ‘sub-prime contagion,’ real estate is still hot. All the world’s a village now, and if you would rather avoid U.S. real estate for whatever reason, invest in international real estate, by all means. Do it through real estate stocks.The first way to do this is invest in property development companies. These guys issue IPOs, and then are traded on the secondary market. You can pick them up from either place.The second way is through Exchange Traded Funds or ETFs.If your country has recognized real estate investment trusts (REITs), these are safer than either of the previous two options. Real estate stocks are not exactly property, but give you market beating returns that are real enough. Do you agree? What have you invested in?For more view- realtydigest.blogspot.com