NRIs literally have a crush on properties in India. You want to own a piece of it. And, best becomes when you have plans to return back & live in the property that you have acquired. NRIs can avail home loans & all credible Housing Finance Companies have a Home Loan for NRI in India. Home loans for NRIs are available with tax benefits. Here is what you need to know before availing a home loan.
Non-Resident Indians (NRIs) can own property in India subject to the fulfillment of stipulated conditions. Hence, in case of a shortfall, Home Loan for NRI can help you bridge the gap.
First, you need to check your residential status as per FEMA and the Income-tax Act. Once sure of the category you can apply for home loans under the NRI category.
Remember Before Applying for Home Loan for NRI
- NRIs can avail of a home loan for purchasing a new home, resale home, constructing your home on a plot owned by you, for purchase of a plot, home improvement, and home extension. Details
- It is desirable to appoint a Power of Attorney in India to act on your behalf in your absence
- You need an NRE/NRO account in India to make EMI payments.
- You may be a salaried person or self-employed to avail of a home loan.
- You can apply for a home loan either individually or with co-applicants who may or may not be co-owners of the property. However, all co-owners need to be co-applicants in the loan.
- You get tax benefits on repayment of your home loan for NRI in the same way as residents get.
NRIs and OCIs are allowed to acquire and own immovable property (other than agricultural land, plantation property or farmhouse) in India.
However, if you are a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Nepal or Bhutan (and such other countries as may be notified from time to time), you need prior permission from the Reserve Bank of India to acquire property in India.
The basic conditions and restrictions on property ownership by NRIs / OCIs are laid down by the Foreign Exchange Management Act 1999 (FEMA).
Age Limit for NRI Home Loans
The applicant must be in age bracket 24 to 60 years or retirement age (whichever is earlier) at the time of loan maturity of age. Above 60 can be accommodated with a joint holder with less age (son, daughter or spouse).
Income Required
NRI Home LOAN
A wide choice of home loans is available to NRIs to purchase their home. Each financial institution has its own set of rules and norms for home loan for NRI.
NRI HOME LOAN PROCESS
To apply for a home loan, you need to start the process by submitting the duly filled home loan application form. The form should accompany the documents mentioned below & processing fees.
Processing Fee: 0.5% of the loan amount + applicable GST & Surcharge
The form can be submitted with the necessary documents to the lender either directly or through a POA holder.
On due diligence of the documents & physical verification of property, the loan will be accepted (or declined). On acceptance, the customer will receive a sanction letter with details of due fees, documents & stamp duty to be paid on disbursement.
POWER OF ATTORNEY
In case you are not present in India, it is better to appoint any of your relatives as the Power of Attorney (POA) holder in India. The POA holder would be entitled to act on behalf of you as per the authority provided under the POA agreement and your physical presence need not be required at all times for processing/facilitating your home loan.
MAXIMUM LOAN AMOUNT
Generally between 75% and 90% of the property cost is given as a loan. The balance would be your own contribution.
TENURE
You can avail a maximum term of up to 30 years depending on your profile like your age at maturity of the loan, age of property at loan maturity and other terms.
INTEREST RATE
Home Loans are available as Floating Rate Loan or Fixed Rate Loan. In fixed-rate loans, the interest rate is fixed for 2 or 3 years. After this period the loan will automatically convert to an adjustable-rate.
In Floating Rate Loans the interest rate for the loan is reset at the beginning of every quarter, i.e. January 1, April 1, July 1 and October 1. The rate is reset with reference to the MCLR Rate prevailing on the dates of the respective resets.
Currently, rates are between 8.30% to 11%.
DOCUMENTS REQUIRED FOR HOME LOAN
Following are the key documents needed to apply for a home loan:
- Proof of identity, residence, and income
- Photocopy of a valid passport and visa
- Copy of property allotment letter/buyer agreement or agreement to sell, if the property is already shortlisted
- Passport size photographs of all applicants
- Cheque towards processing fees
- Power of Attorney if applicable
EMI REPAYMENT OF HOUSING LOAN
If you plan to buy an under-construction property, you need to pay only the interest till its completion after which you can start your EMIs.
However, if you wish to start repaying your principal too, you may opt to tranche the loan and start paying the full EMIs.
While purchasing a fully constructed property, your EMIs would commence immediately.
EMI payments will happen through your NRE/NRO bank account in India.
REPAYMENT OF NRI HOUSING LOAN
After 6 months, there is no penalty for pre-payment of the partial or full value of the outstanding loan amount. Some may also waive 6 month period clause.
However, your home loan may attract prepayment charges in case you are refinancing (balance transfer) it to another financial institution in India.
CHANGE IN STATUS FROM NRI TO RESIDENT INDIAN
In case you return to India permanently, which changes your status from Non-Resident Indian to Resident Indian, the lender may reassess your loan eligibility and repayment capacity and work out a revised repayment schedule.
A minor change in the tax benefit would be the possibility if you treat this home as self-occupied.
Your EMI accounts will be changed to RFC or Savings as required.
Owning a home for most of us is a matter of comfort, pride, and status. And for NRIs, buying a home in India is about staying connected to their roots.
So reach out that comfort for yourself & family.
