For those who intend to buy a house, opting for a home loan is one of the meticulous ways of securing a home
Every Indian staying abroad aspires to own a home back in his homeland—India. Home buying can be a tedious process especially if one is living miles away from one’s aspired house.
According to the definition of the Foreign Exchange Management Act, 1999 (FEMA), an NRI (non resident Indian) is someone who resides outside India for “employment, carrying on business or vocation in circumstances as would indicate an intention to stay outside India for an indefinite period. It also mentions that an individual will also be considered NRI if his stay in India is less than 182 days during the preceding financial year.
NRIs can usually avail home loans for purchase of flat, row house and bungalow from developers. NRIs can also avail home loan for home improvement or extension, purchase of plot and home furnishings & consumer durables.
For those who intend to buy a house, opting for a home loan is one of the meticulous ways of securing a home. The procedure to avail a home loan remains more or less the same as applicable to any resident Indian. However, there are certain conditions to be kept in mind.
Check for foreign bank
You need to check if the Indian bank has a foreign branch in your current country of residence. This will help you to apply for the loan and avail the same without having to come to India. Some banks have branches in foreign countries. These branches usually coordinate for the entire loan process in India from approval, disbursement right up to the repayment and collection of your property documents.
Generally, banks offer home loans to NRI for up to 15. The tenor for NRI home loans is lesser than that of a normal home loan as it is generally seen that their repayment capacity of an NRI is more than resident Indians. Hence, NRIs do not take home loans of longer tenors.
You need to have copies of valid passport, salary certificate and statements of non-resident external (NRE) or non-resident ordinary (NRO) accounts, work experience certificate, bank account statement / passbook for the last six months and a valid job contract or work permit. An individual should be employed abroad for at least two years. Proof of income is required in case of self employed professionals / businessmen.
The salary certificate should be attested from the embassy if the salary is not credited to a bank. You also need to give a local address proof and a power of attorney (PoA) to someone in India. Details of permanent address in India are also required. This is a mandatory requirement.
You also need to have a completed home loan application form. An English translation of the contract duly attested by employer, consulate, Indian bank’s foreign branches, or Embassy in case the contract is available in any other language.
You need to provide sale deed / agreement for sale, copy of approved building plans / approvals in respect of proposed construction, purchase or extension. You also need to have original NOC (no objection certificate).
In case of purchase / construction of house, the documents needed are original title deed, non-encumbrance certificate on the property (for 13 years), possession certificate and land tax receipt. Remember, a notarised power of attorney is required, if you want to authorise a third party to execute the documents, complete the mortgage formalities or avail the loan installments.
Amount of loan
Typically, banks offer up to 80% of the landed price of the property plus costs towards registration and stamp duty, if you can arrange remaining 20% money. For example, if the home that you plan to buy costs Rs.1 crore, you can take a loan of Rs. 80 lakh-Rs. 85 lakh.
Banks sanction the home loan only if they are convinced of your ability to repay the loan. Home loans can be applied for either individually or jointly. Proposed owners of the property will have to be co-applicants. The co-applicant has to be your immediate family member—spouse, parents or children. However, the co-applicants need not be co-owners.
The interest rate on NRI home loans is normally the same as that for a resident Indian. You also need to check with the bank if there are any hidden charges, provision to reduce EMI when interest rates get reduced, provision to add expected rent accruals, if you rent your house. Please note processing fee has to be paid only if the loan is sanctioned and availed.
Post-sanction of the loan, you also need to pay stamp duty payable for loan agreement & mortgage and property insurance premium.
Disbursement of home loan
Your loan will be disbursed after you have selected your property, applied for home loan, submitted the requisite income and property documents, the property is technically and legally sound and you have paid your own contribution towards the purchase of the property. The cheque for the loan amount is drawn in favour of the developer or the seller (resale property) as the case may be. In case of an under-construction project, the bank disburses the loan amounts proportionate to the stage of construction.
Repayment of loan
Repayment capacity takes into consideration factors such as income, age, qualifications, number of dependants, spouse's income, credit history, assets, liabilities, stability and continuity of occupation and savings history.
The instalment of loan, interest and other charges (if any), will be paid by the borrower by remittances from outside India through normal banking channels or out of funds in his NRE, NRO, Foreign Currency Non-resident (FCNR), Non-resident Non-Repatriable (NRNR), Non-Resident Special Rupee (NRSR) account in India or out of rental income derived from renting out the property acquired by utilisation of the loan.
The repayment or the EMI of these loans can only be paid through NRE or NRO accounts with remittance from abroad. The repayment needs to be made in Indian rupees only. The downpayment should also be done through normal banking channels or NRE or NRO account in India.
A note of the above factors can lessen your hassles and prepare you for the formalities involved in buying a house in India. At the end of the day, it is not a question of being an NRI or Indian; it is a question of faith and reassurance that guides individuals and institutions in realising each other’s goals.