Home loan procedure for NRIs buying property in India
Are you an NRI who needs a home loan in India? There are certain legal requirements that you must know and follow before applying for a home loan, says our legal expert, Siddhartha Shahin his first column on home loans.
- Indian citizens who stay abroad for employment or for carrying on business or vacation 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 an Indian mission 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 (IMF), World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP)
- Officials of the State Government and Public Sector Undertakings (PSUs) deputed abroad on temporary assignments or posted to their branches or offices abroad.
Apart from this, there is an eligibility criteria and necessary checklist for NRIs applying for housing loans:
- The loan applicant has to be 21 years of age
- NRI loan seeker has to be a graduate
- The loan applicant has to have a minimum monthly income of US $2,000. The eligibility is also determined by the stability and continuity of your employment or business.
- The NRI also has to route his EMI (Equated Monthly Installments) cheques through his NRE/NRO account. He cannot make payments from another source, say, his savings account in India.
- 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 lakh 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 NRIs is different from Resident Indians. An applicant will be eligible for a maximum of 85 per cent 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 NRIs is higher than those offered to Resident Indians. The difference is to the extent of 0.25 per cent-0.50 per cent. Some HFCs also have an internally earmarked ‘negative criterion’ for NRI home loans. As such, the NRIs who hail from locations that are marked as being ‘negative’ in the books of HFCs, find it difficult to get a home loan.
Please note that one needs to check with the recent NRI regulations from time to time as there are always possibilities of new additions and /or modifications.