NRI Home Loans – Seven Things To Know About

Owning a house in their homeland is a dream for all Non- Resident Indians (NRIs). As home loans are easily available now a days, many would prefer to avail home loans for their property purchases. But many NRIs are confronted with a number of questions about availing home loans as they will have to coordinate the things with Indian banks while being abroad. So here’s a quick note for NRIs to know about availing home loans in India.

Types of Home Loans:

• Home loans can be availed for outright purchase of any housing property which is ready for occupying or under construction.

• Home construction loans are loans for construction of a house in a self owned plot.

• Home improvement loans are intended for renovation of an existing house. Besides this loan facilities are available for purchasing flats and plots.

Are you eligible?

The definition of a NRI, by the Reserve Bank of India is: “An Indian citizen who holds a valid Indian passport and stays abroad for employment or carrying out business or vocation under circumstances indicating an intention for an uncertain duration of stay abroad”. You are eligible for home loans under NRI status if you are employed or carrying out business outside India, or posted abroad by Indian government or companies. If you are serving in international agencies like the IMF, UN, World Bank etc, also you are eligible to avail loan under NRI status.

Conditions for loan availing:

Your regular income, its source and educational qualifications play an important role in deciding the amount of loan you can avail. Banks provide loans up to 80-85% of the estimated value of the residential property and 50% of the value of land, subject to the gross monthly income of the applicant. Banks usually go by the ratio of Equated Monthly Installment to Net Monthly Income (EMI/NMI) subjected EMIs not exceeding 40-50% of the NMI. Various banks have slightly different criteria for this.

It is to be noted that you need atleast a graduate degree to avail a home loan.

Loan tenure and interest rate:

While resident Indians can avail home loan for maximum 30 years tenure, NRI home loans are restricted to 10-15 years. Extension of this is not applicable in most cases.

Interest rate for NRI home loans will be almost same as that of resident Indians. However some banks charge a 0.25% to 0.5% higher interest rate to cover the higher risk involved.

Documents required:

The documents required to be submitted by NRIs for applying for a home loan are copy of passport and valid visa, copy of work permit or employment contract, salary certificate or pay slips, statements of both overseas accounts and Non Resident External or Non Resident Ordinary (NRE/NRO) accounts and details of other loans if any. For those residing in the Middle East, copy of employment card is also required. Salary certificate should be attested from the embassy if the salary is not getting credited to bank.

How to apply:

You can courier these documents to the bank in which you have Non Resident External or Non Resident Ordinary (NRE /NRO) account or contact the overseas branches of banks, as many private banks now have the same. However, you need to execute a General Power of Attorney (format provided by the bank) in favor of an immediate relative residing in India who would act on your behalf with the bank. This POA needs to be signed attested from the Indian embassy.

Loan repayment:

The repayment of NRI loans can be made only through a Non Resident External or Non Resident Ordinary (NRE /NRO) account. No other funds can be used for repayment. If you change your status from NRI to resident Indian during the loan tenure, it needs to be informed to the bank and the bank shall revise the interest rates and tenure accordingly from time to time if applicable and requested.