The Union Budget 2019 announced on July 5 brings in a mixed bag of emotions for the NRI investment community. While positives like better tenancy regulations and an enhanced NRI portfolio route back to India provide the much-needed stimulus to their confidence, some policies like the extension of taxation towards gifts received by NRIs could be worrisome for Non-Resident Indians.
The benefits, however, outweigh the negatives as NRI investors can now unlock the full potential of the Indian real estate and capital markets. The following announcements of Union Budget 2019-20 provide a much-needed fillip to the NRI investors:
Merging NRI portfolio route with FPI route to increase more NRI portfolio flows into India
This move provides NRIs with seamless access to the Indian equity and bonds market, in line with the Foreign Portfolio Investment (FPI) route. While this move is expected to bring in more foreign funds into the Indian market, it simultaneously better equips NRIs to make informed investment decisions with a much better bouquet of products to choose from. The easing of KYC norms for foreign investors makes investing all the more transparent.
Post-Budget announcement of the Draft Model Tenancy Act 2019
The finance minister had hinted at a new rental act in the recent budget, and soon thereafter an announcement was made regarding the Model Tenancy Act 2019. If implemented by various states in the spirit which the centre intends, this Act will bring progressive changes to India's archaic rental laws and protect the interests of both landlords and tenants. Once formalised and duly adopted by the states, it can be a major demand booster for rental housing in India. The Draft Model Tenancy Act 2019 can, if properly adopted, boost the sentiment of NRIs who were keen to invest in Indian residential properties to rent them out but were hesitant because of the lack of legislation to protect their interests.
Foreign investors can now buy the debt of listed real estate investment trusts (REITs)
Foreign investors will be allowed to subscribe to listed debt securities issued by REITs and infrastructure investment trusts (InVITs). This paves the way for NRIs to benefit fully from the real estate boom that India is expected to witness over the next few years.
All in all, NRI property investors have been given more than a fair shake in Union Budget 2019-20 – and this will doubtlessly help funnel more foreign investment in India.
