Search for a command to run...
You Asked, We Answered!
I am a millennial centric (and now maybe Gen Z too) content creator who simplifies the world of personal finance, so that your hard earned money doesn’t end up hardly working for you. After working in this field for over 7 years, my priority remains the same-to make personal finance less boring and more jargon free through my unbiased and well-researched content!
No comments yet. Be the first to comment.
Many of you might have invested in Reliance Industries, TCS, HDFC Bank, SBI, or Infosys. After all, these are amongst the biggest companies in India which are listed on the stock market, so you can co
Real estate has traditionally been a “high-ticket” asset class. Either having lakhs (or even crores) of Rupees in your bank account or taking a huge home loan were the only two prominent ways to buy property. But that is changing now with fractional ...
India’s Finance Minister Nirmala Sitharaman is set to present the Union Budget this week on February 1st, 11 am. This will be her ninth consecutive Budget presentation, which brings her closer to former Finance Minister Morarji Desai’s record of pres...
Imagine you are an absolute equity lover. Stocks are your thrill ride, while debt funds are just a sleepy side note in your portfolio. But what if I told you there were years when those ‘boring’ debt funds left the stock market in the dust? And not j...
Can I ask you a question? Don’t worry, it's not a complex mathematical problem. Just a simple one- Whenever the stock market feels noisy and makes your portfolio bleed red, what’s the one thing you secretly wish for? I am sure it must be about having...
ALT Investor, launched in June 2023, is India's first and largest community for alternative investments.
The article answers the FAQs (frequently asked questions) from the ALT Investor community, aiming to clarify doubts about alternative investments like bonds, crypto, and invoice discounting.
It explains queries like the role of Online Bond Platform Providers (OBPPs) in facilitating bond investments, SEBI’s regulatory framework, and much more
The article also discusses the regulation of unlisted bonds, securitized debt instruments (SDIs), and the taxation of REITs (Real Estate Investment Trusts) returns.
Insights into various alternative investment products, including P2P lending, invoice discounting, and cryptocurrencies are also given through answers.
It's been more than 1.5 years since we kickstarted the journey of ALT Investor in June 2023, with the aim to educate retail investors about the alternative investment market in India. And throughout this journey in which we have become India’s first and largest community for alternative investments, our community members have been the heartbeat of our entire initiative. They have been instrumental in motivating us to continue on the mission that we have set upon.
Now, unlike traditional investment options like FDs and mutual funds, a lot of aspects around the alternative investment industry are still unknown and unpopular among retail investors, which is why questions keep on cropping up in investors’ minds.
That is exactly why in this first-of-its-kind blog, we are answering a bunch of FAQs that have been asked by our ALT Investor community members. We hope this article helps in clarifying most of your doubts around the world of alternative investments. If you have any other question in mind that might have remained unanswered, please feel free to post it in the comments section below.
OBPPs (Online Bond Platform Providers) are SEBI-registered platforms that facilitate the buying and selling of bonds and other debt securities in the Indian market. Such platforms leverage technology to simplify the bond investment process and make it more accessible for retail investors. OBPPs help investors buy and sell bonds by providing a variety of debt securities to choose from and making the process more accessible. Some of the prominent OBPPs in India include Grip Invest, Aspero, Wint Wealth, IndiaBonds, and many more.
You can check out SEBI’s complete list of OBPPs registered with NSE and BSE here -https://www.sebi.gov.in/online-bond-platform-providers.html
Firstly, you should understand what is the need for alternative investments, such as bonds, invoice discounting, crypto, etc. If you are someone who sticks to investing only in traditional instruments such as Bank FD, stocks or mutual funds, its likely that your portfolio is highly skewed to two ends-first is the boring, safe and low return FDs, second is the option of ‘high risk, high return’ stocks. But if you want to balance your investment portfolio’s overall risk by adding a layer of diversification, you can probably explore bonds as an asset class. If you want even higher returns than public equity markets, you can checkout crypto.
After SEBI’s introduction for regulations for OBPPs in November 2022, the bond market has become more regulated, as SEBI-registered OBPPs can only offer listed and regulated alternative investment products.
Unlisted bonds are unregulated under both SEBI and RBI. On the other hand, listed bonds (i.e. those traded on an exchange like the NSE or BSE), are regulated by SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
As far as SDIs are concerned, their regulation is primarily overseen by SEBI, which had introduced the regulatory framework in 2008, which has undergone several amendments to adapt to changing market conditions and investor needs.
Additionally, the RBI also plays a crucial role in this regulatory landscape. The RBI established guidelines for securitization in 2006, which laid the groundwork for the securitization process that SEBI later regulated.
You can understand SDIs in detail in the below blog.
There are many SEBI-registered OBPP players in India, with Grip Invest, Wint Wealth, Aspero and India Bonds being among the prominent ones.
You can check out this list of SEBI-regulated OBPP players (registered with BSE and NSE) here.
REITS can be traded via any stock broker. As of 17th December 2024, there are 6 SEBI-registered REITs in India. You can check out SEBI approved REITs here.
The taxation for REITs is as follows:
Dividend Income (Taxable) - This is the dividend that is distributed by the REITs that have chosen a newer tax regime.
Dividend Income (Tax exempt) - This is the dividend which is distributed by the REITs that have chosen a older tax regime
Interest Income (Taxable) - This component represents the interest on debt received by the REITs from SPVs. It is taxed as per the slab rate of the investor.
Rent from SPV or Direct Projects (Taxable) - Taxed as per the tax bracket of the receiver.
Principal Repayment - The principal repayment component is adjusted against the purchase price when booking capital gains during the sale of REIT units. For example, if you bought one unit of REIT for ₹400 and held it for 3 years, during which the principal repayment per unit is ₹100, and you sell that unit today for ₹800, your capital gains will be calculated as ₹400 - ₹100 = ₹300 per unit. You will then pay 10% tax on ₹800 - ₹300 = ₹500.
You can check out our detailed blog on REITs here
No, invoice discounting is an unregulated product. It is also an unsecured product, unless its bank guaranteed or trade credit insured, in which case it may become partially secured.
Yes. Cryptocurrency does fall under the alternative investments category. In India, crypto is not regulated, but it is also not illegal. The Finance Ministry has very well defined TDS and Tax rules when it comes to Crypto. But the regulatory risk and cybersecurity risk in crypto still remain.
Here’s the list of invoice discounting platforms in India.
Both P2P and Invoice Discounting are completely different products. P2P is regulated by the RBI, while ID isn't. But both are unsecured forms of lending. Overall, there are many more caveats, so investors should read about both the products separately and then compare.
You can understand P2P lending and ID through these separate blogs of ours.
https://blog.thealtinvestor.in/how-to-start-investing-in-peer-to-peer-lending-a-basic-guide
https://blog.thealtinvestor.in/exploring-invoice-discounting-alternative-investment-in-india
There's no way for investors to verify if the same invoice is being used for multiple funding, as there is no exclusivity generally when it comes to discounting invoices. A company may want to access capital from different sources so they can diversify their borrowing as well.
But on a broader level, if you see the same invoice being raised on 2-3 platforms then that's a red flag. Overall, you as an investor should be comfortable with that risk.
The 25% TDS on SDI’s interest payments is as per Section 194LBC of the Income Tax Act, 1961. You can get exempted from TDS if you submit 15G / 15H forms to the platform but from what we have gathered, its a lengthy process to get those forms certified.
While some investors may assume securitized and secured products are the same, they certainly are not.
When a product is secured, there is a specific collateral backing the instrument. If we use bonds as an example, a bond is usually secured by collateral such as loans, property or may be cash. The collateral acts as a guarantee for repayment, providing a safety net for investors in case the bond issuer defaults.
On the other hand, when a product is securitized, it gets covered in a financial structure for the creation of an investment instrument. So basically, securitized investments, such as SDIs, involve the pooling of various types of financial assets, such as loans, which are then converted into marketable securities. This process allows investors to purchase shares in these asset pools like loans, receiving income from the principal and interest payments generated by the underlying assets.
Alt Investor’s bond comparison tool pulls the data from various platforms, on a weekly basis. The tool, named BondScanner, mentions when the last data update was done, as you can see here.
When a listed bond defaults, the debenture trustee will act according to the information memorandum and will do everything in the investors favour, and their job will be to maximize recovery of the defaulted amount.
Hope this FAQs turned out to be useful, we will keep on adding more to this blog as and when we find some more repetitive questions which we get in our community. If you think some more FAQs should be added here, please reach out to us via our community. If you are not a member, you can join here.
Please note that this is an opinion blog and not an official research or investment advice. This blog aims to help retail investors make an informed decision when thinking of alternative investments. The blog neither encourages nor discourages you from investing in any particular platform or property or any asset class.
We plan to come up with more blogs discussing various aspects of the alternative investments space, such as regulations and guidelines, company profiles, different types of instruments available in the world of alternative investing, and much more. If you want to stay updated on the latest blogs, please subscribe to our newsletter so that you get notified automatically.
Thank you for your time. Hope this article turned out to be a good read for you. If yes, we would love it if you could join our spam free Whatsapp community!
