ETMarkets NRI Talk | Why private credit, REITs and PMS are entering the NRI investment conversation, explains Sumegh Bhatia

As NRIs look to diversify their India exposure beyond traditional avenues such as real estate, bank deposits, direct equities and mutual funds, newer asset classes are increasingly entering the conversation.

Private credit, REITs, InvITs and PMS are gaining interest for their potential to provide differentiated return streams, contractual cash flows and exposure to India’s growth story.

In this edition of ETMarkets NRI Talk, Sumegh Bhatia, MD & CEO – India and Global Indian, Lighthouse Canton, explains why these products are finding favour among NRIs, how they can complement equity portfolios, and why GIFT City could further expand the investment opportunity set for overseas Indians. Edited Excerpts –


Q) India continues to attract significant interest from NRIs. What are the biggest hurdles NRIs still face when trying to invest in Indian equities and mutual funds, despite the process becoming increasingly digital?

A) It has been quite a fragmented experience till now given there are limited NRI enabled platforms and support. Financial and KYC platforms are fundamentally optimised for local Indian architecture, creating operational dead-ends during critical transactions or mandate renewals.

These frictions create siloed liquidity and complex repatriation tracking. NRIs face multiple challenges when it comes to mutual fund investments due to complex KYC regulations (FATCA/CRS), NRE/NRO account restrictions, TDS taxation, limited platform support, and operational inefficiencies.

However, we are witnessing sizeable headway in making this entire process seamless, and mainstreaming of GIFT City led architecture is a step in the right direction.

Q) With rupee hitting 96 per USD, has it impacted NRI investments into India? What is the general mood?

A) The general mood is cautiously opportunistic in our view. It’s the long-term conversion friction that essentially becomes a talking point.

It’s a mixed bag given that remittances become attractive while NRIs based in the US, Gulf, and Western regions view the weak rupee as an attractive entry discount, boosting acquisition appetite for prime properties.

It’s the financial assets in India where they feel the pinch, as domestic asset growth can be substantially offset when converted back to a strong home currency.

Q) For an NRI looking to invest in Indian stocks, how should one decide between an NRE and NRO account? What are the key differences from an investment and repatriation perspective?

A) One must focus on aspects like source of funds, taxation, repatriability, and suitable conditions for holding and managing earnings before deciding the NRE/NRO route.

While both these routes differ on many counts, there are some critical considerations for most NRIs that become the deciding factor.

An NRE account is used to park foreign earnings, offering tax-free interest and full repatriation. An NRO account is used to manage income earned inside India (like rent, dividends, pensions, or sale proceeds from Indian assets), with taxable interest and restricted repatriation up to USD 1 million per financial year.

Read more: ETMarkets Smart Talk | Have money in FDs? Why retail investors should consider 7-7.25% bond yields: Amit Somani

Q) Are NRIs under-allocated to Indian equities compared with their overall exposure to India? Which asset classes do you think they should consider beyond direct stocks and mutual funds?

A) At the outset, many NRIs are under-allocated to Indian equities relative to their overall economic exposure to India. They may already have sizeable exposure through family businesses, real estate and future liabilities in India, while their financial portfolios remain concentrated in the markets of their country of residence.

That said, we still view Indian equities as the core of an NRI's India financial allocation. India's structural growth drivers; rising consumption, formalisation, manufacturing, financialisation and increasing corporate profitability make a strategic allocation to Indian equities compelling over the long term.

The objective, further, should be to size it appropriately within the investor's overall global portfolio. Around Indian equities as a core, NRIs can consider Indian fixed income, private credit opportunities, the entire private market spectrum, REITs, InvITs and hedge fund landscape.

Q) Tax is often one of the biggest concerns for NRIs. How should they think about the tax treatment of equity, mutual funds, bonds, FDs and alternative investments in India?

A) For an NRI, the net-tax adjusted returns can vary significantly depending on the underlying structure as well as the investor's country of tax residence.

Indian listed equities and equity-oriented mutual funds continue to have relatively favourable capital-gains treatment.

Interest from FDs and conventional bonds is less tax efficient. Alternatives require more structural overview given the tax outcome can vary across various components of returns such as interest, dividends, capital gains, redemption premiums or other distributions.

This is where GIFT City becomes particularly interesting for NRIs and clearly offers an edge. For qualifying IFSC structures, there are exemptions on specified categories of securities income and capital gains attributable to non-resident investors.

The result can be a materially more tax-efficient outcome - including a 10% rate on certain interest/dividend streams and exemption for specified securities income, including qualifying derivative income.

The precise treatment depends on the fund structure, underlying asset and the investor's status, so this needs to be evaluated on a case-by-case basis. The bigger point is that GIFT City is increasingly becoming a tax-efficient gateway to India, rather than simply another chosen domicile.

Q) Are you seeing greater interest from NRIs in newer products such as AIFs, PMS, private credit, REITs and InvITs? Which of these could see the biggest growth in NRI portfolios?

A) Certainly, yes. The entire discussion is moving beyond the conventional investing corridor, with keen interest in understanding the entire opportunity set.

Historically, portfolios were dominated by real estate exposure, conventional bank deposits, sporadic direct equities and mutual funds.

We are increasingly witnessing appetite for institutional-quality offerings that provide differentiated return streams and are complementary.

We continue to see strong potential in private credit and private-markets landscape. India's formalisation of credit, expansion of the middle-market economy and growing demand for structured capital are creating a deeper opportunity set.

Private credit can also complement equity exposure by providing contractual cash flows rather than relying purely on capital appreciation.

REITs and InvITs should also benefit as investors seek income-generating exposure to India's commercial real estate and infrastructure without the operational complexity of owning physical assets.

An exuberant primary market has led to widespread exploration of private market landscape with keen interest in mid to late-stage pre-IPO opportunities.

These discussions gathered further momentum given the prolonged time and price correction of Indian equities in listed space.

PMS and uncorrelated opportunities within pure play long/short and market neutral strategies continue to be favoured as differentiated play against traditional choices.

Read more: ETMarkets NRI Talk | Rupee at 96: Why NRIs should think twice before sending more money to India, says Sachin Sawrikar

Q) Could we see more India-focused global funds or India-domiciled products in GIFT City designed specifically for overseas Indians who want Indian exposure without navigating multiple investment accounts?

A) These opportunities and fund offerings are already being set up in GIFT City. GIFT City, today as an offshore jurisdiction within India, allows domestic and international entities to trade in foreign currencies, manage global investments and access favourable tax and regulatory frameworks.

As of March 2026, GIFT-IFSC had 1,147 IFSCA registrations/authorisations and more than US$39 billion of cumulative commitments raised by funds. More importantly, the investment avenues and universe are expanding.

The current IFSCA framework supports both retail and non-retail schemes, alongside venture-capital structures and PMS.

The framework specifically accommodates fund-of-funds structures, while non-retail schemes can pursue a broad range of strategies, including Category III strategies involving complex trading and derivatives.

We are already seeing the ecosystem developing an opportunity set across Indian equities, India-focused equity fund-of-funds targeting themes, sectors and market cap, venture and private equity landscape, hedge fund offerings, private credit and other alternatives.

The GIFT City corridor today provides holistic access to a larger part of the investing avenues available in India without associated complexities.

GIFT City continues to bridge the gap between global Indian wealth and India's capital markets backed by institutional architecture, governance, ease of execution and regulatory impetus.

Q) What new financial product is currently missing from the Indian market that could significantly improve the investment experience for NRIs?

A) While the financial assets and investment basket have expanded meaningfully for NRIs in India, we believe frictionless lending against domestic assets is one of the areas which must get due consideration.

Another avenue worth considering is leveraged investment products tied to India face which is a restricted landscape for now.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)