Burgess Baria does not consider himself an expert when it comes to financial matters. But he does strive to save half of his income every month.
“Fixed deposits in India are the quickest and easiest of options,” says Mr Baria, 42, a public relations professional from Mumbai who has lived in Dubai for seven years. “I get a fixed deposit interest rate of 9 per cent as opposed to 2 or 3 per cent in the UAE, so India is a more attractive destination for me to park my funds – at least for the moment.”
Like many non-resident Indians, Mr Baria places great value on putting aside a healthy chunk of his earnings, a savings habit from which UAE expats of other nationalities can learn valuable lessons, according to a recent report commissioned by Friends Provident International.
Research shows that NRIs set aside 70 per cent of their disposable income for savings and investment, according to the study, which was published by The Economist Intelligence Unit.
“Much has been said about the UAE’s many spending temptations and the fact expats are not saving enough for their retirement, or for other important events in their lives,” says Marcus Gent, the managing director, Middle East and rest of the world at Friends Provident International.
“We see that non-resident Indians, be they high or low-income earners, have incredible financial discipline and their culture of saving makes them a great case study, highlighting the value of careful financial planning. The personal finance behaviour of the UAE’s non-resident Indians seems to be quite uniform: they are frugal and money-conscious, resisting many of the spending temptations that bedevil some western expatriates, even when they have similar financial resources.”
Indians make up the largest group of foreigners by nationality in the UAE and consequently the largest remittance market from the Emirates, according to UAE Exchange.
For the company, which is headquartered in Abu Dhabi, global remittance flows into India reached US$7.18 billion in 2013, up 6.44 per cent on the previous year. Its remittances out of the UAE totalled $14bn in 2013, with the majority of this money going to India.
Promoth Manghat, the deputy chief executive of UAE Exchange, says there are cultural reasons whys NRIs are so financially cautious. “Indians tend to have stronger ties with their families back home and hence send money more frequently,” he says. “They also believe in the concept of saving for the future. Due to these factors, Indians tend to save and invest better than a few other expatriate groups, whose value system is slightly different.”
Mr Manghat also points out that NRIs are earning more money in the UAE these days.
“More Indians are entering the UAE as skilled professionals than in the past, when most of the migrants came in as unskilled workers,” he says. “These new migrants are earning better. The frequency of remittance might be low but the average ticket size might go up. Also [while] they tend to spend more on the lifestyle here, they are keen on investing back in India.”
A weak Indian rupee has also helped NRIs grow their savings back home and is encouraging them to save even more.
The rupee has been trading at about 62 against the dollar this month compared to much weaker levels two years ago, when each US dollar would fetch only 55 rupees. With the UAE dirham pegged to the dollar, this means that each dirham buys more rupees at the moment. The exchange rate is currently close to 17 rupees per dirham.
“A lot of white-collared NRIs make use of the weakening rupee to remit large sums to India, as they get better value for the money they are sending,” says Sudhesh Giriyan, the chief operating officer of Xpress Money.
“We are seeing a jump of 15 to 20 per cent in the high-value remittance volumes. It is the big-ticket customers with money saved in banks or other assets who take advantage of such opportunities to remit high value remittances to India to cash in on the pricing difference.”
Niranjan Gidwani, 55, is the deputy chief executive of Eros Group, a consumer electronics distributor and retailer in the UAE. He came to Dubai from Pune 24 years ago and says his current investments include shares, property and mutual funds.
However, he plans to remit even more money to his native country this year to boost his investments.
“The markets will start looking upwards after the budget by the new government is announced,” he explains. “In 2015, the Indian market will get better.”
When it comes to the type of investments made, Indians consider education and weddings as highly important aspects of their financial planning, according to the Friends Provident report.
“Some 90 per cent invest heavily in their children’s education in the expectation that, in turn, their children will be able to support them when they reach old age,” according to the report.
“Much of the money remitted is used for family support. India’s less developed pension system, compared with Europe or North America, for example, drives expatriates towards supporting their parents and children rather than starting a retirement plan for themselves.”
More than 80 per cent of Indians in the UAE have between two and five dependents to support financially, many of whom live in India, it added.
“For investment opportunities, India is an attractive prospect for the savvy, better-off white-collar Indian investor – and remittance and investment flows from the UAE to India clearly confirm a continued and increasing appetite,” says Mr Gent.
But he warns that NRIs, along with all expats, should think carefully about how they invest their hard-earned savings.
“Earning in dirhams could translate favourably into a comfortable retirement, especially given the current weakness of the Indian rupee. However, NRIs should consider carefully their strong home country bias when it comes to planning their savings and investments – in particular the preference for investing in gold and property,” he adds. “It is important that any portfolio is balanced and diversified, both geographically and by asset class. That way it is more likely to generate a less volatile return.”
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