New Passive Income Sources in India

New Passive Income Sources in India

We need to keep an eye on new passive income sources in India that come in the market just as it is important to update our knowledge on any of our favorite things such as cars, technology, applications etc. People today want to learn about how to make Passive income in India from different sources and are trying to increase their knowledge each day in order to reap maximum benefits from this. Passive income sources in India are still not that well explored and thus people who care about their financial health or want financial freedom should definitely be ever-curious about this domain and keep learning about it.

Here are some new passive income sources in India:-

  1. InvITs

Infrastructure Investment Trusts or InvITs is a new and not yet so popular avenue for putting your money. It is an instrument designed to incentivise infrastructure players to swap their operating assets onto a platform that enables capital to be raised, which is akin to equity at the cost of debt, and can be a solution to address liquidity-related requirements in the infrastructure space. India currently has two publicly listed InvITs, one is in roads, and one (1) each in power transmission, gas transmission and telecom towers. Here are some benefits of the same:-

a. Low risk and high-quality assets: InvITs has infrastructure assets with a low demand and price-related risks, i.e., assured annuity cash flows such as roads, power transmission, renewable, telecom towers and gas distribution. At least 80% of these assets should be operational. This would make the risk of a portfolio low. InvITs are required to distribute 90% of their cash earnings (on a semi-annual basis), and are ideal for long-term yield-seeking investors. 

b. Strong corporate governance: The SEBI has institutionalised strong corporate governance requirements for infrastructure investment trusts, such as an independent trustee, a minimum 50% of independent directors on the Board, independent valuers conducting yearly or half-yearly valuations and stringent disclosure norms to ensure transparency and prudent management norms. This makes it a very trusted Avenue.  

c. Attractive yields: The returns in InvITs go as high as even 20% and this attracts a lot of eyes making it one of the most suitable ones to invest in keeping long run in mind. Unit holders in InvITs benefit from assured cash flows on a quarter or semi-annual basis, and the credit quality of the assets is superior. Publicly listed InvITs offer a degree of liquidity which physical property investments dont.

In the long run, high-quality assets, reasonable yields, a degree of liquidity and an attractive tax regime make InvITs a very attractive asset for various types of investors such as long-term institutional investors. 

  1. REITs 

A Real Estate Investment Trust is a  company that owns and in most cases operates income producing real estate. The income from REITs can be considered as rental income. There are currently 2 REITs now trading on the stock exchange and more are soon going to follow. Reasons why this new asset should be considered are : 

  1. Steady dividend income and capital appreciation: Investing in REITs shall help in providing substantial dividend income and shall also allow steady capital appreciation over the long term.
  2. Optiontodiversify: Since most REITS are traded frequently on the stock exchanges, it provides investors with an opportunity to diversify their real estate.
  3. Transparency in dealing: Being regulated by the SEBI, REITs are required to file financial reports audited by professionals. It provides investors with an opportunity to avail information on aspects like taxation, ownership and zoning, hence making the entire process transparent.
  4. Liquidity: Most REITs trade on public stock exchanges and hence are easy to buy and sell, which adds on to their liquidity aspect.
  5. Accruesrisk-adjusted returns: It offers individuals risk-adjusted returns and helps generate steady cash flow. It enables them to have a steady source of income to rely on even when the rate of inflation is high.
  1. Perpetual Bonds

Perpetual Bond is a bond with no maturity date and is also a beautiful way to make Passive income for life. The Interest and principal default risk in perpetual bonds are somehow curtailed by GOI ownership. You may find comfort in Nationalised banks being guarded by the government of India. The recent capitalization announcement in Dec 2017, of 2.11 lakh crore in banks by the government is an example where the government may pitch in to support the banking system. Still, risks are risks. The high yields on the Perpetual bonds are definitely attractive, but you need to look at it from the taxation perspective too. Post-tax interest is what you actually enjoy.

Word of Caution:

Its not the instrument that can make you wealthy is the strategy and valuation at the time of buying. This simply means that you can still make a loss on a good investment product if you buy and sell it at the wrong time. Only when we buy at deep discounted prices are we able to be certain about its future being financially positive for us. Always consult an expert before putting your money down in any new financial instrument.

Although, not all of these options are completely new, however they are new to even avid investors. As shared before one should never stop the quest to find more innovative and smart ways to become free of money worries. Keep exploring new Passive Income Ideas in India. 

Happy learning, happy earning!

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