Non-resident Indians (NRIs) have always shown deep concern in Indian real estate. Similarly, be it luxury properties or affordable housing, real estate developers have always acknowledged NRIs as an essential target segment for their pitching their project. However, the home loan remains a pain point for NRIs as the formalities and documentation associated with the process is complicated.
Eligibility Criteria to get Home Loan
- Candidate should be least 18 years of age (might vary from bank to bank) with regular sources of income. The complete income can be calculated by clubbing income of guarantors, co-borrowers, and expected rental income on the proposed property is permitted.
- The candidate should have a valid passport.
- The candidate should have been employed abroad for at least 2 years or should be serving a valid job contract for the least period of 2 years abroad. A candidate who has served for six months government agencies overseas can also apply for a loan.
- The candidate should be an existing NRE/NRO (non-resident rupee and non-resident ordinary) account holder with the lender.
- Some banks have a smallest-income clause for granting an NRI home loan.
The Documents Required
Apart from what is needed for a regular home loan, NRIs require submitting the following documents to the bank to prepare their home loan:
- Copy of related pages of passport
- Copy of visa and work permit
- A power of attorney (POA). POA is needed because the borrower is not based in India
- Utility bills (electricity, telephone, gas connection, etc.)
- Driving license issued abroad
- Government-issued national identity card or labour card or social card at the nation of residence
- Original copy of the latest overseas bank account revealing overseas address
- Appointment letter/Employment contract/offer letter or any other document or agreement, showing current terms of employment
- Salary certificate or slip for last three months
- Bank account statement, showing salary credit for last six months
- Duly approved copy of last year individual tax return (NRIs/PIOs located in the West Asian countries are not needed to submit this document.)
The Processing Fee
Private Banks usually charge 0.5 percent of the loan amount and applicable good and service tax along with a surcharge. Government banks charge 0.25 percent of the loan amount as processing fee.
Some other charges would also be fit if your loan gets approved, but the amount has yet to be sanctioned. These involve:
- Due diligence charges which involve advocate’s fee and the title investigation report
- Valuation report charges
- Stamp duty payable for loan agreement and mortgage
- Property insurance premium
Modes of Repayment
Under the Reserve Bank of India regulations, the repayment of home loans by NRIs should be done using the local currency. The candidate can also repay the loan using the rental income obtained from the proposed property.
NRIs can claim income tax profit in India on income from home property. A standard deduction of 30 percent, property taxes, interest paid on home loan is allowed for NRIs. The NRI is also permitted a deduction for principal repayment, registration charges and stamp duty under Section 80C of the Income Tax Act. Nevertheless, a tenant who pays rent to an NRI landlord should deduct TDS at 30 percent.