Home Loans for NRIs>>> Know it all before taking the plunge!
Loading ...My friend Dheeraj Panchal, a Dubai based NRI, working as Advertising professional from last 10 years, expressed his desire to buy a flat in Mumbai so that his family can shift to Mumbai. Knowing well that I work for Apnapaisa, he was confident that I will be of good help to him particularly for getting him a home loan in India. Helping any resident Indian with Home loan…no problem but an NRI as was the case of Dheeraj, I started scratching my head. First and foremost, who can be termed as NRI? Can a NRI get home loan in India? Are terms & conditions any different from that of resident Indians? What are the documents required? What percentage of the property is funded by lenders? All such questions crossed my mind in a jiffy.
Thus began my preparation to advice Dheeraj on his home buying journey.
First, who is an NRI? NRI is an Indian citizen, holding a valid Indian passport and is staying abroad for employment, business or vocational purposes and has spent less than 182 days in a year in India. According FEMA definition of this term, it also includes Indian citizens staying abroad for an uncertain duration due to certain circumstances.
As we know real estate is a hot item amidst NRIs not only as an investment avenue but also for the stay of their families. So yes, NRIs can buy properties in India and avail housing loans too in respect of residential properties from banks.
They can purchase a residential house either under-construction or on resale, can even take loan for self-construction of a residential property on a plot of residential land in India. Not only this, they can get finance for the purchase of a plot of land allotted by a society / development authority or even to renovate / improve an existing residential property in India.
Like resident Indians, NRIs too can avail up to 80- 85 per cent (depending on the flat value) of the cost of residential property as a home loan . But the down payment should be done from direct remittances from abroad through normal banking channels or from non – resident external ( NRE) account and /or Non resident (ordinary) (NRO) account in India. Even the EMI payment should be remitted to the lending bank or HFC from any of these accounts.
However, in case of an NRI, there is a stress on certain pre-requisite for the loan sanction like qualifications, current job profile, past experience, probability of continuing abroad for the loan tenure and probability of servicing the loan with an extended tenure in case of return to India. The Loan To Value (LTV) ratio for NRI customers varies from one bank to another, though the manner of calculation is the same in case of a regular home loan.
The income taken into account for calculating the home loan eligibility is the repatriable income plus any income in India. For NRIs working in countries that restrict repatriation such as African countries, only the repatriable portion of the income is considered for calculating loan eligibility.
Though the regular home loan tenures can be up to 25 years (as in case of current times due to increase in interest rates), loan tenure for NRIs is normally 10 to 15 years due to their better affordability. Along with documents required for a home loan, some additional documents are required to be submitted along with the application form for a NRI home loan.
The list of additional documents comprises:
A copy of your passport and visa.
A copy of the appointment letter and contract.
A copy of the labour card/identity card (translated in English duly countersigned by the consulate) if employed in the Middle East.
Salary certificate (in English) specifying name, date of joining, designation and salary details.
Bank statements for the last six months-both domestic (NRE/NRO/FCNR) and international Contract slip with income details in case employed in the merchant navy.
Copy of local income tax returns filed in the country of residence
Loan eligibility can be enhanced by taking a joint loan with relatives. However, for credit reasons banks allow only a select list of relatives to be joint owners of the property.
Repayment of home loans for NRIs is permissible through specific sources:
By remittance from abroad through recognised banking channels
From any deposit accounts maintained validly in India including Non-resident (Ordinary accounts)
From rental income derived from the property by specified close relatives
It is important that NRI provides General Power of Attorney (POA) in favour of a local and trustworthy relative as per the draft of the Bank which should be duly attested by the Indian consulate in the country of his residence. In case the loan borrower is in India, the POA can be locally notarized. Most banks require the POA to ease the process of dealing with the NRI lender. The POA holder only gets the powers that you give and does not have the power of dealing with the property.
Like resident Indians there are certain tax benefits too for NRIs on interest payments which can be useful if they have any income chargeable to tax in India.
Finally there are other similarities like if as an NRI you want to pre-close the home loan due to availability of surplus funds or due to switching lenders, loan pre-payment penalty will be charged by the bank, though most banks and all home finance companies have stopped charging pre-payment on floating rate loans.
Now I am equipped to take questions on home loan from my friend Dheeraj, probably you too in case any of your NRI friend has some.
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