According to ETMarkets reports, GIFT City AIFs could emerge as the next big investment destination for NRI capital, offering a more streamlined route to access India's equities, private markets, real estate and infrastructure opportunities in foreign currency. As reported by ETMarkets, Nikhil Advani, Managing Director and Head of International Business at LGT Wealth India, believes these funds provide a unified, transparent wrapper for every asset class and eliminate the need for multiple investment accounts. According to IFSC disclosures, GIFT City fund management entities had raised a cumulative $19.5 billion in global capital with another $39 billion in capital commitments as of March this year.
As reported by ETMarkets, India continues to attract significant interest from Non-Resident Indians, but investing directly involves hurdles around KYC requirements, PINS routing, taxation and multiple bank and investment accounts. The report states that NRIs need to be physically present in India for digital onboarding, making the process cumbersome compared to resident Indians who use a single unified bank-demat-trading link. SEBI has proposed easing the process by potentially allowing eligible NRIs from FATF-compliant countries to submit KYC digitally from abroad, addressing some of these barriers.
According to ETMarkets reports, NRIs are under-invested in Indian equities relative to their overall asset allocation, with most exposure typically in real estate and fixed deposits. The report suggests that a diversified portfolio for a growth investor would have up to 60% in equities, 20% fixed income, 15% in alternatives, and 5% gold for a ₹1 crore investment with a 5-7 year horizon. The recently launched FCNR deposit scheme has been a big hit with NRIs, with over $50 billion inflows reported by authorized dealer banks, as noted in the report.
As reported by ETMarkets, GIFT City funds are not subject to domestic capital gains taxes, making this route very tax efficient for NRIs. The report highlights that REITs and InvITs are gaining popularity as NRIs seek to rotate out of physical real estate into 'financialized' real estate. NRIs can leverage DTAA provisions between India and their country of residence to mitigate tax concerns across various asset classes including equities, mutual funds, bonds, and fixed deposits.
According to ETMarkets reports, the rupee hitting 96 per USD has not stopped investors from coming in, with India's underlying structural growth story remaining intact. The report suggests that what is currently missing is a GIFT City multi-asset fund that can give NRIs access to Indian equities, fixed income, private markets, REITs, and InvITs in a single investment. This would satisfy US tax reporting requirements at the fund level, addressing the challenges faced by US-based NRIs due to compliance burdens like FATCA and PFIC tax rules.
