Non Resident Indians (NRIs) have strong and extensive ties in the home country. Many of them would like to retain these links in the form of property which comes in useful when they travel back for a vacation, special event or festival. Many NRIs in South India make it a point to arrive during the annual music season, or to celebrate a wedding or milestone birthday with family and friends. You may also plan to return to your home country after you retire. Purchasing a residential property in India is a long-cherished dream of many of the diaspora who live in distant lands.
As an NRI you may be on the look-out for a residential property, and may want to know more about NRI home loan options. The realty market in India is very attractive to non residents, since most of them earn in a much stronger currency than the Indian rupee. It is quite easy to avail of a home loan to purchase property here, and you can easily purchase the home of your dreams with supplemental funds from the loan.
Typically, NRIs purchase apartments in metros, while they prefer individual bungalows in smaller cities and semi-urban areas.
Apart from purchase, you can also avail of a home loan to renovate or refurbish your existing home in India.
Definition of NRI
Under the Foreign Exchange Management Act (FEMA) 1999, an individual who stays in India for less than 182 days during the preceding financial year is considered to be an NRI. This person resides outside the country for purposes of employment, business or vocation for an indefinite period.
Property Purchase Regulations
There are certain regulations and caveats that govern property purchase by NRIs in India:
- Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Bhutan, Iran or Nepal need special permission from the Reserve Bank of India to purchase property in India
- You can avail of any number of home loans, but it has to be one loan for one property
- You cannot purchase agricultural land in the form of plantations, farms, farm-houses
- There is no restriction on purchase of commercial or industrial properties
- NRI purchasers are protected by the RERA Act (2016)
- You can opt for either fixed or floating interest rate. Interest rates are slightly higher for NRIs compared to resident Indian citizens
To be eligible to avail of a home loan from a bank or housing finance companies, the NRI has to fulfill certain eligibility criteria.
- Age: You should be more than 18 years and less than 60 years of age
- Resident type: Either NRI or PIO (Person of Indian Origin) or OCI (Overseas Citizen of India) status
- Co-Applicants: You may apply for the loan along with a co-applicant who also becomes a co-owner of the property
- Loan Tenure: may differ across banks and housing finance companies. In general it is between 11 and 15-20 years
- Bank Account: You have to open an NRE or NRO bank account. The debit towards your EMI should flow from these accounts or by direct remittance from overseas. The amounts have to be in Indian rupees only
Each bank or housing finance company sets out its own requirements regarding documentation. These are in general almost the same for NRIs as for Indian borrowers, with some crucial differences.
- Duly filled loan application form with photographs and signatures of all applicants
- Copies of valid visa, passport, proof of age, PAN card, proof of income and employment history, name and address of employer, overseas and Indian address proof (you must appoint a local Power of Attorney holder to correspond with the bank, and this is mandatory), income details and copies of your foreign bank statements
- Depending on the lender’s policies, additional documents may be called for such as attestation from the embassy. Some lenders may demand the physical presence of the borrower at the time of application. Others may require you to be at least a graduate, or insist that you have a co-applicant for your loan to be sanctioned.
Other Important Points
An NRI borrower’s loan application may take around 20-25 working days, whereas the resident Indian’s application gets processed within 10-15 working days. The minimum salary required for an NRI borrower’s loan to be sanctioned is at least Rs 150,000 per month, whereas the Indian borrower can apply for a loan with a minimum salary of Rs 20,000 per month.
Generally, the NRI borrower’s loan eligibility doesn’t get enhanced by other products such as salary multiplier, express loan etc.
It’s important to do your own research before you consider applying for an NRI home loan. There are some differences across lenders mainly in the eligibility criteria. If you have a good working relationship with the bank or housing finance company you plan to borrow from, you could certainly negotiate a more customized package for yourself.