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Loan For NRIs

Non-resident Indians (NRIs) constitute an essential segment of the Indian economy, contributing significantly to India’s development through remittances, a key driver of economic growth. Indian banks have long offered loan facilities to NRI clients, and NRIs are recognized under the Foreign Exchange Regulation Act of 1973.

Every bank and housing finance company adheres to RBI guidelines to define an NRI as follows: “An Indian citizen holding a valid document such as an Indian passport, residing abroad for employment, business, vocation, or with intentions of an uncertain duration abroad.”

Eligibility for NRI Housing Loans

Broadly, NRIs qualifying for NRI housing loans include:

  1. Indian citizens residing abroad for employment, business, or any purpose, indicating an indefinite stay abroad.
  2. Government servants posted abroad with Indian missions or similar agencies funded by the Indian government.
  3. Government servants assigned to foreign governments, regional/international agencies (e.g., World Bank, IMF, WHO, ESCAP).
  4. State government and public sector officials on temporary or overseas assignments.

NRIs can secure loans for constructing new houses/flats, purchasing old properties, additions/alterations, and repairs/renovations. NRIs can also obtain loans by mortgaging existing residential properties. However, they must meet specific conditions outlined in the Income Tax Act, such as residing in India for 182 days or more within an assessment year or a total of one year or more.

The FDI policy, allowing up to 100% FDI from foreign/NRI investors under the automatic route, has increased NRI confidence. Banks offer attractive NRI housing schemes, while housing finance companies provide suitable repayment options.

Choosing a Home Loan Provider

NRIs should carefully select their home loan providers or HFCs due to geographical distances. It is crucial to associate with proactive and responsive HFCs.

Eligibility for NRIs

To qualify for NRI home loans:

  • Age: The applicant must be at least 21 years old.
  • Qualification: NRI loan seekers must be graduates.
  • Income: A minimum monthly income of $2,000 is required (though criteria may vary among HFCs). Eligibility depends on employment/business stability and continuity.
  • Payment Options: EMIs must be routed through the NRE/NRO account, not from other sources like Indian savings accounts.

Number of Dependents

NRI home loans typically range from INR 5 lakhs to INR 1 crore, based on property cost and repayment capacity. The maximum loan amount is 85% of the property cost or construction cost and 75% of the land cost for land purchases. Co-applicants with separate income sources can enhance eligibility. Interest rates for NRIs are slightly higher than those for resident Indians, varying between 0.25% to 0.50%. Some HFCs have location-based restrictions on NRI home loans.

RBI Directives on Loans

The Reserve Bank of India (RBI) mandates that NRIs and Persons of Indian Origin (PIO) buying immovable property in India must use funds received in India via normal banking channels through inward remittances from abroad. NRIs and resident Indians can acquire immovable property in India, excluding agricultural land, plantations, or farmhouses. RBI has provided directives for sanctioning home loans to NRIs:

  • The home loan amount should not exceed 85% of the dwelling unit cost, with the remaining 15% contributed by the borrower.
  • The cost difference can be covered through direct remittances from abroad via the Non-Resident (External) [NR(E)] Account and/or Non-Resident (Ordinary) [NR (O)] account in India.
  • Repayment of the loan (principal, interest, and charges) should be remitted to the HFC from abroad via normal banking channels or the NR(E)/NR(O) accounts.

Documents Required for Loan

In addition to the following documents, a Power of Attorney (POA) is vital for processing NRI home loans, allowing HFCs to deal with a representative on behalf of the NRI if necessary:

  • Passport and Visa.
  • Copy of the employment appointment letter and contract.
  • Labor card/identity card (translated in English and consular-signed 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.

List of Classified Documents for Salaried and Self-Employed NRI Applicants:

Salaried NRI Applicants:

  • Copy of a valid passport with visa stamps.
  • Copy of a valid visa/work permit or equivalent document proving NRI status. Overseas bank account statements for the last 3 months showing salary credits.
  • Latest contract copy validating salary or salary certificate/wage slips.

Self-Employed NRI Applicants:

  • Passport copy with valid visa stamps.
  • Brief profile of the applicant and business/trade license or equivalent documentation.
  • Six months of overseas bank account statements and NRE/NRO account.
  • Computation of income, P&L account, and balance sheet for the last 3 years, certified by a Chartered Accountant (CA), Certified Public Accountant (CPA), or relevant authority.

Property Documents:

  • Original title deeds covering the property’s title for at least the past 13 years.
  • Encumbrance Certificate for the last 13 years.
  • Agreement of sale/construction, if applicable.
  • Receipts for property purchase payments.
  • Approved plan/license.
  • ULC clearance/conversion order, etc.
  • Receipts for margin money investment from the Non-Resident (External) and/or Non-Resident (Ordinary) accounts in India.
  • Latest tax payment receipt.
  • Allotment letter from the co-operative society/association of apartment owners.
  • Agreement for sale/sale deed/detailed cost estimate from the Architect/Engineer for property purchase/construction/extension.
  • Copies of approved drawings for proposed construction/purchase/extension.

Additional Documents for Persons of Indian Origin (PIO):

  • Photocopy of PIO Card, or if not available, photocopies of any of the following documents:
  • Current passport with birthplace as ‘INDIA’.
  • Previous Indian passport (if held).
  • Parent’s/Grandparent’s Indian passport/birth certificate/marriage certificate proving Indian origin.

Permissions and Approvals

Builders must seek several permissions and approvals from relevant bodies before starting construction to avoid litigation.

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