There is a large
contingent of “Hindustan Leavers” in the West, in places like the
US, Canada, and the UK. In the US, there are probably over a million NRI Dollar-millionaires, in terms of liquid assets. Let us take the case of one such NRI with exactly a million US in liquid savings under his belt.
Such an NRI is
either a well-paid salaried professional or a businessman. Either way, these
days, the economic environment in the US has turned hostile for both these
groups. Business climate has deteriorated significantly in most business sectors; and those still in jobs are facing long periods of zero pay increases, and near-zero lateral shift options.
Property, debt and
equity (including through mutual funds) are no longer attractive
investment options in the US, with positive returns by no means guaranteed. For
many NRIs, their home loans are “underwater”, meaning that the loan
outstanding is higher than the value the home will fetch if sold.
Even if it is not, home prices are so low that most cannot
countenance selling the homes they live in. Those approaching
retirement age, say those around 60 years of age, are facing the grim
prospect of living on their capital post-retirement, because, the
years since 9/11 have been “the lost decade”, with their savings
dwindling to half or less what it was worth before that watershed
event. So, even if he has unencumbered savings and investments of
US $1 Mn or its equivalent, with current earnings of around the same
sum, assuming interest earning @3% on savings, they are looking at a
net pre-tax annual investment income of no more than
$30,000 per annum or $2,500 per month, which is close to the minimum
wage in some places in the US. So much for the attractiveness of
being a dollar millionaire!
Now assume that the
same person chucks up everything and brings his $1Mn to India. He
gets Rs.5.6 crores. For Rs.0.6 crores, he can buy a comfortable,
lavish home of his choice in any place other than in Greater Mumbai
(Mumbai-Navi Mumbai-Thane) and NCR (Delhi-Rohtak-Gurgaon-Noida). If
he wants to avoid traffic jams, pollution and bad roads, he needs to
give a few other cities, like Bangalore and Chennai a miss. (Think Mysore, Surat, Coimbatore, Chandigarh) The
remaining Rs.5 crores, he can invest in nearly risk-free securities
at no less than 8.5% per annum. Even allowing for average rate of tax
@28%, he will be able to earn after-tax income of over Rs.250,000 per
month – a princely sum that takes him into the wealthiest 1% of
India's population! At a cost of not much more than Rs.10,000 per
month, a mere 4% of his monthly after-tax income, he can get all the
domestic help he needs, to live a cosy, pampered life. For a few
Lakhs more, they can get entry into the most exclusive clubs in any
town – a passport to a genteel life of leisure. He has the chance of investing almost all his spare cash in gold (taking Nouriel Roubini's advice to heart) and thereby reduce his tax bill (capital gains for gold held for over 3 years is taxed at concessional rate).
Indeed, he will
find that while, in the US, he can look forward to only bad news, and
being able to barely make ends meet financially, in India, he is
positively rich – and concomitantly, has a risk appetite and margin
for losses that allows him to earn superior returns through judicious
investment in equity shares.
So then, what is
stopping a reverse India-bound exodus of rich NRIs?
- First and probably foremost, inertia and resistance to change. They have become telephonically mobile but geographically immobile! But there is evidence that many are moving when they see the light, rather than waiting to feel the heat of a receding economy.
- Second, many of them think that India means Mumbai or Delhi; the rest of India does not exist.
- Third, many cite unwillingness of children to move to India. That should not be a problem for the "empty nest" stage NRIs.
- Fourth, they simply haven't realised how cheap the Indian rupee has become; and how this changes the scenario materially. This, juxtaposed with the fact that India is among the few countries where business sentiment continues to be buoyant, with several attractive investment options, offers a compelling proposition: choose India as a retirement destination!
- Indeed, some who are reluctant to move lock, stock and barrel, can simply use India as a waiting room to wait out the recession – and then return to their locked up homes when the US economy looks up again. There is no need to give up US citizenship or green card. All you need is a PIO card!
Good idea, don't
you think?
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