Indians investing abroad prefer sticking to realty
Operational bottlenecks', including taxes and lack of clarity on procedures, dissuades fund managers from offering other global investment products. Copycat investing
By Priti Patnaik, TNN |
NEW DELHI: Indians investing overseas prefer putting their money in real estate rather than exotic investment products.
With eyes firmly on the India growth story, most investors are, in fact, not looking at other investment options abroad. The government allows remittance of $2,00,000 by resident Indians and real estate is the top investment choice under this window so far.
Operational bottlenecks, including taxes and lack of clarity on procedures, dissuades fund managers from offering other exotic global investment products here.
“Most of the investment overseas by individuals is in real estate,” said ICICI Bank senior general manager Anup Bagchi. Analysts say the trend of Indians investing in real estate overseas is driven by the fact that demand for housing in those countries is drying up. The subprime crisis and falling property prices overseas have contributed to this.
Punjab National Bank general manager Ranjan Dhawan, who oversees the capital markets branch in the Capital, said: “The trend has been towards investing in property.”
Outflows such as remittances are geared to balance the relentless capital inflows into the country. However, the limit of $2,00,000 per individual is far from being used. Prior to September 25, this limit was half the current amount. Apart from real estate, investment options available to Indians include equities, currency and commodity derivatives.
High net-worth individuals (HNIs) in the country, however, are taken in by the India growth story. They are not willing to look beyond the country. Demand is clearly not an issue. “There is a market that wants access to exotic products offered overseas,” a fund manager said.
But procedural hassles remain, with unclear taxation policies. Fund managers complain there are no clear guidelines on the way the money has to be invested. Though many banks and service providers have relationships with brokers overseas, there could be problems in remitting money.
Public sector banks are not allowed to offer portfolio management services. A separate subsidiary is needed to offer these services. Punjab National Bank is expected to begin offering these services soon, Mr Dhawan said.
Proceeds from the investments can be parked in an account outside the country. RBI has put a ban on transactions where remittances are used for margin trading in overseas exchanges or overseas counter-parties.
“It is not clear whether all types of products can be distributed in India. Who are the parties distributing these products also remains a grey area,” said an official with a bank’s private banking division.
According to the first Asia-Pacific Wealth Report published by Merrill Lynch and Capgemini, there were around 83,000 HNIs in India at the end of 2005, up 19.3% from the previous year. This growth rate was the second highest among all countries and markets globally, the report said.
HNIs are defined as individuals with net financial assets of at least $1 million, excluding their primary residence and consumables.
With eyes firmly on the India growth story, most investors are, in fact, not looking at other investment options abroad. The government allows remittance of $2,00,000 by resident Indians and real estate is the top investment choice under this window so far.
Operational bottlenecks, including taxes and lack of clarity on procedures, dissuades fund managers from offering other exotic global investment products here.
“Most of the investment overseas by individuals is in real estate,” said ICICI Bank senior general manager Anup Bagchi. Analysts say the trend of Indians investing in real estate overseas is driven by the fact that demand for housing in those countries is drying up. The subprime crisis and falling property prices overseas have contributed to this.
Punjab National Bank general manager Ranjan Dhawan, who oversees the capital markets branch in the Capital, said: “The trend has been towards investing in property.”
Outflows such as remittances are geared to balance the relentless capital inflows into the country. However, the limit of $2,00,000 per individual is far from being used. Prior to September 25, this limit was half the current amount. Apart from real estate, investment options available to Indians include equities, currency and commodity derivatives.
High net-worth individuals (HNIs) in the country, however, are taken in by the India growth story. They are not willing to look beyond the country. Demand is clearly not an issue. “There is a market that wants access to exotic products offered overseas,” a fund manager said.
But procedural hassles remain, with unclear taxation policies. Fund managers complain there are no clear guidelines on the way the money has to be invested. Though many banks and service providers have relationships with brokers overseas, there could be problems in remitting money.
Public sector banks are not allowed to offer portfolio management services. A separate subsidiary is needed to offer these services. Punjab National Bank is expected to begin offering these services soon, Mr Dhawan said.
Proceeds from the investments can be parked in an account outside the country. RBI has put a ban on transactions where remittances are used for margin trading in overseas exchanges or overseas counter-parties.
“It is not clear whether all types of products can be distributed in India. Who are the parties distributing these products also remains a grey area,” said an official with a bank’s private banking division.
According to the first Asia-Pacific Wealth Report published by Merrill Lynch and Capgemini, there were around 83,000 HNIs in India at the end of 2005, up 19.3% from the previous year. This growth rate was the second highest among all countries and markets globally, the report said.
HNIs are defined as individuals with net financial assets of at least $1 million, excluding their primary residence and consumables.
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