A Complete Home Loan Guide for NRI
A Complete Home Loan Guide for NRI’s
Buying a home for an NRI has always been the biggest challenge, especially identifying the right property sitting thousands of miles away. In addition to that the availability of the right information has almost been impossible, unless she/he is visiting India and have enough time to investigate, identify and shortlist during their short stay.
Traditionally, NRI’s have relied mostly on friends, family & relatives to get information in identifying the right property. But, with time property advising has evolved beyond the brokers and numerous online companies with huge investments have started realizing the potential of NRI market. They have developed processes which guide the prospective buyers from the scratch by asking relevant questions, like the purpose of buying a property, budget, how they plan to finance it.
Financing a property purchase through loans has its own challenges and involves lot of paperwork which delays the whole process.
Though NRIs can avail loans by mortgaging an existing a residential property; however there are certain conditions that the NRIs need to fulfil in order to avail the home loans.
- Age– The minimum age for a loan applicant is 18-21 years age. And maximum age limit is 60 years or retirement age (whichever is earlier) at the time of loan maturity.
- Qualification– The minimum qualification of the loan seeker has to be that of a graduate.
- Income– The loan applicant has to have a minimum monthly income of $2,000 (This criterion may differ across HFCs). Moreover, the eligibility is also determined by the stability and continuity of your business or employment.
- Payment options– There are the Equated Monthly Instalments which the NRI needs to route through cheques or his NRE/NRO account. Making payments from another source say, his savings account in India is not allowed.
- Number of dependents – Another aspect for NRI Home Loans is that the eligibility of the applicant is also determined by the number of dependents, assets and liabilities.
General guidelines for availing Home Loan
- Based on the repayment capacity and the cost of the property, an NRI applicant is eligible to receive a home loan that ranges from a minimum of Rs 3-5 lakhs to a maximum of Rs 1 crore, this again is subject to variables depending on the priorities of the home loan.
- A loan applicant can be eligible for a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land, based on the repayment capacity of the borrower.
- Besides, the Home Loan Tenure for NRIs is different from Resident Indians.
- A NRI can also enhance his loan eligibility by applying for home loans with a co-applicant who has a separate source of income. Also, the rate of interest for home loans to NRIs is higher than those offered to Resident Indians. There is a difference which varies from 0.25%-0.50%. Some HFCs also have an internally marked ‘negative criterion’ for NRI home loans. As such, the NRIs who hail from locations that are marked as being ‘negative’ in the books of HFCs, find it difficult to procure a home loan.
- The cost of dwelling unit which is own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.
- However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.
- The repayment option for NRIs as they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time. As most of the home loan provider companies consider the economic stability of the applicant, home loans for NRIs are quite feasible, because they are well in economic resource.
Now comes the most crucial part of the entire process that is the documents required for a Home Loan. NRIs need to submit the following documents and these are different from those of Indian residents.
- Passport and Visa
- Bank Statements for the last six months
- The labor card/identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East Salary certificate (in English) specifying name, date of joining, designation and salary details.
- Valid work permit
- A copy of the appointment letter and contract from the company employing the applicant
- Another document of vital importance that is required while processing an NRI home loan is the power of attorney (POA). The POA is important because, since the borrower is not based in India; the HFC would need a ‘representative’ ‘in lieu of’ the NRI to deal with and if needed. Although not obligatory, the POA is usually drawn on the NRI’s parents/wife/children.
An important point to be noted here is that documentation is different for Salaried NRI Applicants and Self-Employed
Salaried NRI applicants need to provide
- Overseas bank account for the last three months showing salary credits.
- Copy of valid visa/ work permit/ equivalent document supporting the NRI status of the proposed account holder.
- Copy of valid passport showing Visa stamps.
- Latest contract cope evidence salary/ salary certificate/ wage slips.
Self-employed NRI applicants need to provide
- Six months overseas bank account statement and NRE/ NRO account.
- Brief profile of the applicant and business/ trade license or equivalent document.
- Passport copy with valid visa stamp.
- Computation of income, P&L account and B/Sheet for the last three years certified by the CA/ CPA or any equivalent authority as the case may be (or equivalent company accounts).
Property Documents that need to be arranged
- Original title deeds tracing the title of the property for a minimum period of the last 13 years
- Encumbrance Certificate for the last 13 years
- Agreement of sale /construction, if any
- Receipts for payments made for purchase of the dwelling unit
- Approved plan / license
- ULC clearance /conversion order etc.
- Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and / or the Non-Resident (Ordinary) account in India
- Latest tax paid receipt
- Allotment letter from the co-operative society / association of apartment owners
- Agreement for sale / sale deed /detailed cost estimate from Architect / Engineer for property to be purchased / constructed /extended / improved
- Copy of approved drawings of proposed construction/purchase/extension
However if the PIO card is not available, photocopies of the below documents will work
- The current passport, with birthplace as ‘INDIA’
- The Indian passport, if held by the individual earlier
- Parents/grandparents Indian passport/birth certificate/marriage certificate substantiating the individuals claim as a person of Indian origin
Lastly one basic query that every NRI have in mind is that whether NRI/PIO avail of loan from an authorized dealer for acquiring flat/house in India for his own residential use against the security of funds held in his NRE Fixed Deposit account/ FCNR (B) account. So the answer for the query is yes. Such loans are subject to the terms and conditions as laid down in Schedules 1 and 2 to Notification No. FEMA 5/2000-RB dated May 3, 2000 as amended from time to time.
However, banks cannot grant fresh loans or renew existing loans in excess of Rupees 20 lakh against NRE and FCNR (B) deposits either to the depositors or to third parties [cf. A.P. (DIR Series) Circular No. 29 dated January 31, 2007].
Such loans can be re-paid
(a) by way of inward remittance through normal banking channel or
(b) by debit to his NRE / FCNR (B) / NRO account or
(c) out of rental income from such property.
(d) By the borrower’s close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower’s loan account.
If anyone says the process is easy, it’s not. But with right advice, the whole process can be made lot less cumbersome and if the above points are kept in mind, one will be able to ask the right questions while moving through the whole process.
This is where companies like IndiaHomes are taking a lead and going beyond just selling, they are helping & guiding the customer through the whole process.
About the Author: Naveen Kumar Jain, VP & Head of Business Operations & Customer Services, Indiahomes.com, is an MBA & LLB with 16 years of experience in operations and customer services. At IndiaHomes.com, he is responsible to ensure that all processes, policies and practices followed by the organisation are customer centric and should result in an optimal solution for the end user. Naveen has held senior leadership roles in ING Vysya Bank, HDFC Bank & Stock Holding Corporation of India. Being a certified six sigma black belt & ISO 9001: 2008 lead auditor, the implementation of quality management systems and standards for operational excellence have been Naveen’s key strengths and areas of focus.
A Complete Home Loan Guide for NRI
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