Fewer hurdles for Indian diaspora investors, but more needed to sweeten the deal: Analysts

NEW DELHI – Mr Ujjwal Prasad, who works in the telecoms sector in Australia, is hoping that it will become easier to sell an apartment in India for non-resident Indians (NRIs) like himself.

In the 2026 budget announcement, Finance Minister Nirmala Sitharaman removed the requirement for an apartment buyer to obtain a Tax Deduction and Collection Account Number (TAN), a unique 10-digit alphanumeric number issued by the Indian Income Tax Department for tax deductions.

The requirement had been an extra step for those buying property from non-resident Indians or foreign sellers of Indian origin.

The move is part of measures easing tax and procedural hurdles to make it easier for NRIs and those of Indian origin with Overseas Citizenship of India (OCI) privileges to invest in India.

“I do feel that... if they are removing this TAN, it is a good sign. It used to be a bit of an impediment,” Mr Prasad said, recalling the sale of his apartment in Gurgaon, a satellite city to the south-west of the Indian capital of New Delhi, in March 2024.

“When I was in India to sell my flat, the plan was to have a 10-day stay. It turned out to be a 22-day stay” due to delays in generating the number, he said. “It is not easy in India to handle things.”

While he has property in India, Mr Prasad said his investments were not large-scale. “It’s not that I have been investing in infrastructure in any major way,” he added.

It is NRIs like Mr Prasad whom the government is trying to woo to make deeper investments in India.

Prime Minister Narendra Modi is counting on the Indian diaspora to shore up foreign direct investment in his bid for India to become a developed economy by 2047.

However, red tape and cumbersome regulatory processes are often deterrents to more investments by Indians or those of Indian origin living overseas.

“Overall, diaspora outreach is an asset for India’s economy and global standing, but it still underperforms its potential, particularly because investment flows could be considerably larger if lingering bureaucratic hurdles and regulatory uncertainties were addressed,” said Associate Professor Rajesh Rai, who heads the South Asian Studies Programme at the National University of Singapore.

There are an estimated 35 million people of Indian origin or Indian nationals working in more than 200 countries. Many are also among the most economically successful migrants in advanced economies such as the United States and Germany.

As part of the measures announced on Feb 1, NRIs may now own up to 10 per cent of a public company, up from 5 per cent. The total holding for all NRIs in a single company has also been raised to 24 per cent, up from 10 per cent.

‘Equity participation’

“By expanding avenues for equity participation, ownership and property investment, the reforms recognise the evolving role of the diaspora as long-term partners in India’s development,” said Mr Neil Parekh, chairman of the Singapore Indian Chamber of Commerce and Industry.

Analysts noted that the changes will address diaspora needs to some extent, though more is needed for a smoother regulatory experience.

Mr Mudit Vijayvergiya, founder and chief executive of SBNRI, a financial institution that facilitates NRI investments into India, suggested “a unified digital NRI investment identity that is reusable across banks, brokers, AMCs (asset management companies) and property registries”.

He noted that there is “operational complexity compared with investing in markets like the US, Singapore or the UK, where investments can often be made in just a few clicks”.

The effectiveness of the new measures, the analysts noted, will depend on the clarity of the rules.

It also hinges on whether they are followed up with further reforms to make it easier for Indians and the Indian diaspora to invest, whether in property or publicly listed companies in India.

“Procedural simplifications, alongside sustained infrastructure and urban development, reinforce India’s positioning as a stable and maturing real-asset market,” noted Mr Aakash Ohri, managing director of DLF Home Developers.

Previously, banks processed tax deductions only when the TAN was issued to the buyers.

Cutting the requirement alone reduces the perceived “India friction premium” – the time and effort spent navigating rules and regulations – that members of the Indian diaspora factor into their property decisions, said Mr Vijayvergiya.

“The TAN requirement had turned many property transactions into multi-week coordination exercises across banks, tax portals and advisers,” he added.

Overseas investment in Indian real estate has been growing, with overseas buyers projected to account for around 20 per cent of the market by 2025-2026, up from 10 to 15 per cent in previous years.

Real estate developers, particularly in the luxury segment, have been increasingly wooing the Indian diaspora.

India’s largest real estate developer, DLF, reported NRI sales of US$409 million (S$517 million) in the 2024 financial year, which jumped to US$683 million in FY2025 – with demand coming in from the US, the Middle East, South-east Asia and Europe for luxury and super-luxury projects.

The government hopes that beyond property, the influential Indian diaspora will also invest more in the equity market.

Providing stability during volatility

By raising the investment cap from 5 per cent to 10 per cent, the government hopes Indians overseas can help provide stability at a time of geopolitical volatility.

“India now actively wants to attract diaspora capital through equity participation,” said Mr Rohit Jain, managing partner of law firm Singhania and Co.

He added that the change allowed high-net-worth individuals from overseas to “take significant, strategic minority positions directly through the stock exchange with far less friction”.

The timing of the announcement is also noteworthy. In 2025, foreign investors registered net outflows of US$18.9 billion amid geopolitical uncertainties such as trade tensions and shifting US monetary policy.

The analysts noted that the government has been seeking a far more stable counterbalance, one that prevents capital flight from being triggered by every geopolitical event.

For over a decade, Mr Modi has put the Indian diaspora at the heart of diplomatic outreach.

He has urged overseas Indians to invest during rallies and community events on foreign visits, even on his most recent visit to Malaysia.

India has also strengthened links with overseas Indians in other ways.

In July 2025, during a visit to Trinidad and Tobago, Mr Modi extended the eligibility for OCI to include the sixth generation of the Indian diaspora. The OCI grants lifelong visa-free travel to India.

For now, the budget measures are seen as a step in the right direction.

“Whatever changes they have recently made in the budget are still sinking in,” said Mr Prasad.

“We are still working out what are the best possible things that can be done. It gives the person living outside a welcome note that someone who is (in India) is thinking about them.”