Is there anything different when NRIs apply for home loans? Here is a brief snapshot of what you need to know.
Indian properties are always more attractive for NRI investors based in various countries. Along with sentiments and overwhelming desires to own real estate or second homes in their home nation or cities, NRIs also benefit from stronger currencies when they pay in Indian rupees. This naturally makes it easier for them to buy real estate, especially at the upper-middle and higher end of the market. They can also get loans easily from Indian banks to buy real estate in India. NRIs are clearly defined under FEMA (Foreign Exchange Management Act) 1999 and those under the same can take home loans in India.
They are defined as people staying outside the country for employment or business or vocational purposes, indicating intentions to stay in another country for indefinite periods. Those staying for lower than 182 days in the earlier financial year will also be perceived as NRIs as per FEMA guidelines. There are no restrictions on the number of residential and commercial properties that NRIs can purchase although they cannot buy agricultural land. NRI home loans can otherwise be taken for buying, building, or renovating any existing or new home, or even a residential plot.
Home Loan Criteria & Vital Aspects
- Age Criteria-18-60 years
- Eligibility- Income and qualifications
- LTV- 80-85% of property value
- Tenure- 5-15 years in most cases
- Rate of interest- Similar to regular home loans
- Documents- Valid work permit and visa, passport, employment contract, overall work experience, NRE/NRO account statements and salary certificate
- Payment should be made in Indian rupees to NRE/NRO accounts for repaying the home loan
This is just basic criteria with many financial institutions possessing their own specific guidelines. Many require graduate degrees and other qualifications while some banks need at least 3-4 years of employment. Some are okay with a year of foreign employment while some have minimum salary thresholds as well. Along with all other documents, NRI borrowers have to provide PoA (power of attorney) to an individual in India along with proof of local address. Details of Indian permanent address are also needed.
Many banks have branches in foreign locations like Singapore, Dubai, London and even other places in the USA. NRIs can apply and submit documents online or at foreign branches of Indian banks. The loan amount usually varies between INR 5 lakh and INR 5 crore on average. The tenure for NRI home loan is smaller than regular borrowers. This is because their repayment abilities are exponentially higher than domestic borrowers. Repayment of home loan is only possible with funds in the NRO/NRE account with foreign remittance. No other funds may be used for loan repayment. The down payment should be executed via NRO/NRE accounts and regular banking avenues.
A Few Things Worth Noting
- Keep the smaller home loan tenure in mind and assess your repayment ability accordingly.
- Get the loan pre-approval before deciding on the property value and have ample savings for covering the down payment and other related costs.
- The property age does not matter much if the property has been maintained well. Banks fund properties with age up to 12-15 years on average.
- Interest rates are the same for NRI and domestic borrowers alike so you can take advantage of lower interest rate periods and regimes.
- Two NRIs may take a joint home loan if they are related by blood and stay in the same property.
- Make sure that you appoint the PoA (power of attorney) in India since it is a mandatory requirement.
- Make sure that your documents and NRE/NRO account papers are updated and ready for submission.
These are some small but vital differences when it comes to NRI home loans that you should keep a lookout for.
