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Legal Guidelines

While buying a property in India, NRI’s need to know the basic legal information required for buying property in India. Please read the following points or contact us if you have any more queries.

1. Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring immovable property for bonafide residential purposes.
2. Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO/NRE/FCNR accounts.

Get a copy of the title report by the solicitor of the property. Make sure that there are no conditions written in fine print and that there are no specific reservations by the state government. Look for specific clearance reports. For instance, if the construction is near a seafront, you will need to check for a Coastal Regulation Zone (CRZ) clearance. If the project is being constructed over or in the close vicinity of a heritage building, you must check for any heritage reservations for the premises. The idea is to ensure that you do not get stuck with a property that is or may get caught in any sort of disputes. Lack of clearance of titles also means that you will not be able to avail home loans.

Home Loan For NRI

Home Loan Guidelines for NRI

If you are a NRI, acquiring a home loan in India can be a complicated and confusing process. Go through the following information to understand the process of receiving a home loan. NRI’s Qualifying for NRI Housing Loans are:

  • Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad;
  • Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources;
  • Government servants deputed abroad on assignments with foreign Governments or regional/international agencies like the World Bank, International Monetary Fund, World health Organization, Economic & Social Commission for Asia and the Pacific;
  • Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

Documentation required for Resident Indians as well as for NRI’s for getting Home Loans are different in some respect. Home Loans for NRI’s are available for construction of new house/flats, purchase of old house/flat addition/ alteration to an existing house & repairs/renovations etc. NRI’s can avail of loans by mortgaging an existing residential property. However, for availing home loans, NRI’s have to fulfil certain conditions according to provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more. The FDI Policy that permits FDI upto 100% from foreign NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRI’s. From the stables of HFC’s NRI housing finance plans with suitable repayment options are available. Last but not the least, NRI’s should take due care while selecting their home loan provider companies or HFC’s. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.

Age

The loan applicant has to be 21 years of age.

Qualification

The NRI loan seeker has to be a graduate.

Income

The loan applicant has to have a minimum monthly income of $ 2,000 (although, this criterion may differ across HFCs). The eligibility is also determined by the stability and continuity of your employment or business.

Payment Options

The NRI also has to route his EMI (Equated Monthly Instalments) cheques through his NRE/NRO account. He cannot make payments from another source say, his savings account in India.

Number Of Dependants

The eligibility of the applicant is also determined by the number of dependents, assets and liabilities.

An NRI applicant is eligible to get a home loan ranging from a minimum of Rs. 5 lakhs to a maximum of Rs. 1 crore, based on the repayment capacity and the cost of the property, which although is variable by the priorities of the home loan provider. Also, Home Loan Tenure for NRI’s is different from Resident Indians. An applicant will 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. However, a NRI can 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 NRI’s is highest than those offered to resident Indians. The difference is to the extent of 0.25%-0.50%. Some HFCs also have an internally earmarked negative criterion for NRI home loans. As such, the NRI’s who hail from locations that are marked as being negative in the books of HFCs. Find it difficult to get home loan.

RBI Directive Loans:
The Reserve Bank Of India (RBI) has clarified that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO), purchasing immovable property in India should pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country.
The NRIs & Resident Indian can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued certain directive for sanctioning home loans to Non-Resident Indians. The guidelines provided are:

  • The home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining amount that is 15% needs to be provided an own contribution towards the cost of unit financed.
  • 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-residential 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.

Documentation Required For Loan:
The documentation required to be submitted by the NRIs are different from the Resident Indians as they are required to submit additional documents, like a copy of the passport, a copy of the works contract, etc. And of course NRIs have to follow certain eligibility criteria to get Home Loans in India.
Another vital document 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.

The documents needed for obtaining NRI home loans are:

  • Passport & Visa
  • A copy of the appointment letter and contract from the company employing the applicant
  • The labour 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
  • Bank Statements for the last six months

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