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    The Benefits of Investing in Alternative Assets for Indian Investors

    • 5 min read
    • Last Modified Date: January 19, 2024
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    In the fast-paced world of finance, investors are constantly looking for new ways to diversify their portfolios and maximise returns. The time has come for Indian investors to explore the vast potential of alternative investments as the Indian economy continues to grow at a remarkable rate. These unconventional investment options, which were once only available to institutional investors, are now becoming more accessible to individual investors looking to expand their financial horizons.

    In this blog, we delve into the enthralling world of alternative investments and highlight the numerous advantages they provide to Indian investors. 

    Exploring the Range of Alternative Investments Available to Indian Investors

    Indian investors who venture beyond traditional investment avenues are met with a diverse and enticing world of alternative investments. These unconventional investment options provide one-of-a-kind opportunities as well as the potential for attractive returns. 

    Let’s look at some of the alternative asset classes that are gaining traction with Indian investors.

    Private Equity and Venture Capital

    Private equity and venture capital investments have made waves in the Indian investment landscape. These asset classes entail investing in private companies, either established companies (private equity) or early-stage startups (venture capital). Indian investors can gain access to promising companies with high growth potential by participating in private equity or venture capital funds. 

    These investments frequently have longer lock-in periods, but if successful, can yield substantial returns. Furthermore, these investments allow you to interact with the company’s management and contribute to its growth.

    Cryptocurrencies and Digital Assets

    Cryptocurrencies have transformed the financial world and piqued the interest of Indian investors. While the regulatory environment for cryptocurrencies in India is changing, investors are becoming more interested in digital assets such as Bitcoin, Ethereum, and other cryptocurrencies. The decentralised nature of cryptocurrencies and their potential for significant price appreciation have made them an appealing alternative asset class. 

    However, investors must be aware of the risks associated with cryptocurrencies, such as price volatility and regulatory uncertainty.

    Art and Collectibles

    Investing in art and collectibles has grown in popularity among Indian investors as an alternative asset class. India, with its rich cultural heritage and thriving art market, provides a variety of investment opportunities in paintings, sculptures, rare artefacts, and vintage collectibles. Investing in art not only provides the possibility of capital appreciation, but also allows investors to appreciate the aesthetic and cultural value of their purchases. 

    However, investing in art necessitates a thorough understanding of the market, careful research, and the advice of art experts in order to make sound investment decisions.

    Real Estate

    Real estate has long been a popular investment option among Indians. Alternative real estate investments, such as real estate investment trusts (REITs) and crowd-funded real estate, provide investors with new ways to diversify their portfolios. REITs give investors access to a diverse portfolio of real estate assets, including commercial properties, without the hassle of property management. 

    Crowd-funded real estate platforms enable investors to pool their resources and invest in specific real estate projects, potentially yielding higher returns than traditional real estate investments.

    Fixed-Income Products Backed By Real Estate

    Fixed-income products backed by real estate provide investors with a secure and predictable way to earn stable returns. These products, such as real estate-backed bonds or structured debts, offer regular interest payments and the return of principal. They allow investors to benefit from the stability and potential appreciation of real estate assets without the burdens of property ownership. 

    With predetermined terms and collateral in the form of real estate, these investments offer a reliable income stream and help diversify investment portfolios. Whether you’re a risk-averse investor or seeking consistent cash flows, fixed-income products backed by real estate offer an attractive option to achieve financial goals.

    These are just a few examples of the alternative investments available to Indian investors. Other options include peer-to-peer lending, commodities, and even wine and whiskey collections. It is important for investors to thoroughly research and understand the characteristics, risks, and potential returns of each asset class before making investment decisions.

    Understanding the Potential Returns of Alternative Investments in India

    One of the key factors that attracts Indian investors when considering alternative investments is the potential for attractive returns. While alternative assets can provide appealing investment opportunities, it is critical to understand the potential returns. 

    Let’s look at some statistics and insights to get a better understanding of how alternative investments perform. 

    Private Equity and Venture Capital

    Historically, private equity and venture capital investments have produced impressive returns. According to a report by Venture Intelligence, the compound annual growth rate (CAGR) for venture capital investments in India between 2010 and 2020 was around 30%. Furthermore, according to a study conducted by the Indian Private Equity and Venture Capital Association (IVCA), private equity and venture capital funds in India outperformed the broader equity markets over the last decade. 

    Cryptocurrencies and Digital Assets 

    Cryptocurrencies have performed admirably, but it is important to note that they can be extremely volatile. Bitcoin, the most well-known cryptocurrency, has seen significant price fluctuations in recent years. For example, the price of Bitcoin increased from less than $1 to over $29,000 between 2010 and 2020. However, because of the inherent risks and the potential for rapid price fluctuations, cryptocurrency investments must be approached with caution.

    Art and Collectibles

    Investing in art and collectibles can produce attractive returns if done correctly and with care. According to the Knight Frank Luxury Investment Index, rare whisky experienced an impressive average annual growth rate of 11.3% between 2008 and 2020, outperforming traditional assets such as gold and wine. Similarly, the art market has demonstrated resilience and growth potential. In 2020, the Indian art market saw a 21% increase in sales, demonstrating its ability to generate favourable returns even in difficult times.

    Real Estate 

    Real estate investments have traditionally been known for providing consistent returns. The Indian residential real estate market grew at a 7.4% CAGR between 2010 and 2020, according to the National Housing Bank’s RESIDEX Index. Furthermore, real estate investment trusts (REITs) have gained popularity in India, providing a way to invest in income-generating commercial properties. According to a report by JLL, Indian REITs delivered an average annual return of around 15% between 2017 and 2020.

    While these statistics can help you understand the potential returns of alternative investments, keep in mind that past performance does not guarantee future results. Every alternative asset class has its own set of risks and considerations. Thorough research, due diligence, and professional guidance are essential for making informed investment decisions.

    Fixed-Income Products Backed By Real Estate

    Here’s Why Indian Investors Should Consider Alternative Investments

    Indian investors should consider alternative investments for several reasons.

    • For starters, alternative assets have the potential for higher returns than traditional asset classes. 
    • Second, investing in alternative assets can provide portfolio diversification while potentially lowering risk. 
    • Third, alternative investments can give you access to unique and uncorrelated investment opportunities. 
    • Finally, the Indian government has implemented a number of policies to encourage investment in alternative assets, including tax breaks and regulatory changes.

    To Summarise

    Alternative investments have the potential to provide higher returns, greater diversification, and access to uncorrelated investment opportunities. Furthermore, the Indian government has implemented a number of policies to encourage investment in alternative assets, including tax breaks and regulatory changes.

    Assetmonk is a leading platform that offers Indian investors a variety of alternative investment opportunities. Assetmonk’s user-friendly platform makes it possible for investors to invest in premium real estate assets with ease and convenience. Furthermore, Assetmonk provides thorough due diligence, professional guidance, and a variety of investment options to meet a variety of investment objectives and risk tolerance levels.

    Related articles: 

    Why Are Investors Moving From Stocks To Commercial Real Estate?

    Invest In Real Estate Without Buying A Property, Know-How?

    FAQs

    Q1. Why investment alternatives are the best avenue for investors? 

    A. Alternative investments are the best option for investors because they provide the potential for higher returns, diversification benefits, and exposure to unique and uncorrelated investment opportunities that are not available through traditional assets.

    Q2. What questions to ask when investing in commercial real estate? 

    A. When investing in commercial real estate, it is critical to inquire about the location, cash flow, tenant quality, occupancy rate, lease terms, maintenance costs, and potential risks and opportunities.

    Q3.What to consider when investing in commercial property? 

    A. When purchasing commercial real estate, it is critical to consider factors such as location, property type, tenant quality, lease terms, cash flow potential, maintenance costs, and capital appreciation potential.

    Q4. What is one advantage of investing in commercial real estate? 

    A. One advantage of investing in commercial real estate over residential properties is the potential for higher cash flows, as commercial properties typically generate higher rental income. Furthermore, commercial properties provide diversification benefits as well as the potential for long-term capital appreciation.

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