Home loans for NRIs

Indians living abroad are equally eligible for housing loans from banks in India, but with some riders.

Christmas and New Year see an influx of Indians based abroad. This year is no different. This time, though, the non-resident Indians (NRIs) are taking a closer look at real estate here. The correction in property prices has induced many, who aim to return to India in the near future.

But can NRIs buy property in India and can they avail a home loan from an Indian bank? The simple answer is yes but there are some riders when it comes to home loans for NRIs.

An NRI is an Indian citizen, holding a valid Indian passport and staying abroad for employment, business or vocational purposes. According to the Reserve Bank of India and the Income Tax Act, an NRI can buy real estate in India and avail housing loans on residential properties from banks. They are only denied purchase of agricultural land, farm house or plantation property in the country.

Calculation of eligibility and interest rate for NRI loans is not very different from that of the Indian residents.

However, there are some pre-requisites for an NRI loan: checking of the qualifications, their current job profile, past experience, the probability of continuing abroad for the loan tenure, the probability of servicing the loan with an extended tenure in case of return to India, and so on. The loan-to-value (LTV) ratio for NRIs varies from one bank to another, though the calculation is same as in case of a regular home loan.

The down-payment for NRI home loan is permitted through direct remittances from abroad through normal banking channels or from deposit accounts in India, including a non-resident ordinary rupee (NRO) account. The income taken into account for calculating the home loan eligibility is the repatriable income, plus any income in India.

There are some additional documents that they need to submit with the application form. These include a copy of the passport and visa and general Power of Attorney (PoA) in favour of a local person as drafted by the bank and duly attested by the Indian consulate at the place of residence. Most banks require the PoA to ease the process of dealing with the borrower.

A copy of the appointment letter and contract, salary certificate (in English) specifying name, date of joining, designation and salary details and bank statements for the last six months, both domestic (NRE/NRO/FCNR) and international, and a copy of local income tax returns filed in the country of residence will be needed.

As an NRI, one can enhance loan eligibility by taking a joint loan with a relative. However, for credit reasons, banks allow only a select list of relatives to become joint owners of the property.

Repayment of home loans for NRIs is permissible through specific sources, such as remittances from abroad through recognised banking channels or from any deposit accounts maintained validly in India or through a specified close relative.

Tax deduction benefits on home loan repayments cannot be availed unless the returns are filed in India.

The writer is chief editor, apnapaisa.com