Non-Resident Indians (NRIs) often look for investment opportunities in India to diversify their portfolios and stay connected to the Indian economy. One such option is Real Estate Investment Trusts (REITs), which allow investors to earn income from real estate without directly owning property. But can NRIs invest in REITs in India? The answer is yes, and this guide will explain everything NRIs need to know about investing in REITs.
What are REITs?
REITs are companies that own, operate, or finance income-generating real estate properties. They pool money from multiple investors to purchase and manage properties like office spaces, malls, and warehouses. In return, investors earn rental income and capital appreciation.
In India, REITs are regulated by the Securities and Exchange Board of India (SEBI) and are listed on stock exchanges. Examples include Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust.
Can NRIs Invest in REITs in India?
Yes, NRIs are allowed to invest in REITs in India, subject to certain regulations and guidelines set by SEBI and the Reserve Bank of India (RBI). Here’s how NRIs can invest in REITs:
Steps for NRIs to Invest in REITs
1. Open a Portfolio Investment Scheme (PIS) Account
NRIs must open a PIS account with an authorized bank in India. This account is mandatory for NRIs to buy and sell securities, including REITs, on Indian stock exchanges.
2. Open a Demat and Trading Account
Since REITs are listed on stock exchanges, NRIs need a Demat account to hold REIT units and a trading account to buy and sell them. Most major brokers in India, like Zerodha, ICICI Direct, and HDFC Securities, offer these services to NRIs.
3. Complete KYC Requirements
NRIs must complete the Know Your Customer (KYC) process, which includes submitting documents like:
- Passport copy
- PAN card
- Overseas address proof
- Visa and work permit (if applicable)
4. Fund Your Account
Transfer funds from your NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account to your PIS account. These funds will be used to purchase REIT units.
5. Start Investing
Once your accounts are set up and funded, you can start investing in REITs through your trading account. Simply search for the REIT you want to invest in (e.g., Embassy Office Parks REIT) and place an order.
Key Points for NRIs Investing in REITs
1. Taxation on REIT Investments
- Dividends: Dividends from REITs are taxed at the applicable income tax rate for NRIs.
- Capital Gains:
- Short-Term Capital Gains (STCG): If REIT units are sold within 36 months of purchase, gains are taxed at 30% (plus applicable surcharge and cess).
- Long-Term Capital Gains (LTCG): If REIT units are held for more than 36 months, gains are taxed at 20% (with indexation benefits).
2. Repatriation of Funds
- NRE Account: Funds invested through an NRE account can be repatriated (sent back to your overseas account) without any restrictions.
- NRO Account: Funds invested through an NRO account can be repatriated up to $1 million per financial year, subject to RBI guidelines.
3. Currency for Investment
NRIs can invest in REITs using Indian Rupees (INR). The funds must be transferred from your NRE or NRO account.
4. Regulatory Compliance
NRIs must comply with SEBI and RBI regulations while investing in REITs. It’s advisable to consult a financial advisor or tax expert to ensure compliance.
Benefits of REITs for NRIs
1. Diversification
REITs allow NRIs to diversify their portfolios by adding real estate exposure without the need to physically own property.
2. Passive Income
REITs provide regular income through dividends, making them an excellent option for NRIs seeking passive income.
3. Low Entry Barrier
With a minimum investment of ₹10,000–₹15,000, REITs are accessible to NRIs with varying budgets.
4. Professional Management
REITs are managed by experienced professionals who handle property acquisition, maintenance, and tenant management, reducing the burden on investors.
Risks of Investing in REITs for NRIs
1. Market Dependency
REITs are sensitive to real estate market conditions. A slowdown in the commercial real estate sector can impact rental income and property values.
2. Currency Risk
Since NRIs invest in INR, fluctuations in exchange rates can affect the value of their investments when converted to foreign currency.
3. Regulatory Changes
Changes in SEBI or RBI regulations can impact the performance of REITs and the ease of investing for NRIs.
Conclusion
NRIs can indeed invest in REITs in India, offering them a unique opportunity to earn passive income and diversify their portfolios. With proper guidance and compliance with SEBI and RBI regulations, NRIs can seamlessly invest in REITs and benefit from the growing Indian real estate market.
If you’re an NRI considering REIT investments, consult a financial advisor to understand the tax implications and ensure compliance with all regulations. Happy investing!
FAQs for NRIs Investing in REITs
Can NRIs invest in REITs through mutual funds?
No, REITs are directly listed on stock exchanges and cannot be invested in through mutual funds.
Are REITs a good investment for NRIs?
Yes, REITs are a good investment for NRIs seeking stable income, diversification, and exposure to the Indian real estate market.
Can NRIs invest in REITs from abroad?
Yes, NRIs can invest in REITs from abroad by opening a PIS account, Demat account, and trading account with an Indian broker.
What is the minimum investment required for NRIs in REITs?
The minimum investment in REITs is typically around ₹10,000–₹15,000, making it accessible to NRIs.
Are REIT dividends taxable for NRIs?
Yes, dividends from REITs are taxable at the applicable income tax rate for NRIs.
