When an NRI opts to buy a property in India, there are many regulations that govern how such an investment can be financed through a home loan.

Sources, for funding a real estate investment in India, for NRIs

In India, the fund for buying a property has to come through banking channels only. Therefore, the payment cannot be tendered in the form of a foreign currency or traveller’s cheque. An NRI can also utilize the money in his or her credit, in non-resident external (NRE) account or non-resident ordinary (NRO) account or foreign currency non-resident (FCNR) bank account, maintained in India.

NRIs are allowed to buy a property in India, by availing home loans in Indian rupees, from various banks or housing finance companies. The loan can also be granted by the Indian employer of the NRI representative, for the purpose of funding of the property.

How can NRIs obtain a home loan?

Almost all Indian banks offer home loans to NRIs for buying a property (residential or commercial) or constructing one. One can also take a loan, for purchasing the land (non-agricultural) and for constructing a house in India.

The application form for the home loan can be made online, as well as offline. The nature of documents that are required to be submitted will depend on whether the NRI is a salaried employee or whether he or she is self-employed. The documents lists will also change, depending on the NRI’s country of residence. Passport-sized photographs, copies of one’s passport and visa and proof of residence in the foreign country will be needed in all the cases.

Depending on whether the NRI is self-employed or salaried, he or she has to fulfil a minimum period of stay in the nation of present residence, to get the home loan. Banks may also insist on suitable co-applicant or an NRI guarantor person. The NRI guarantor also has to submit documents of identity proof, income proof and address proof.

How can NRIs service the home loan?

Equated Monthly Instalments (EMI) on the home loan can be paid by remittances from outside India, through proper banking channels, or by debiting the NRO or NRE or FCNR account. In case the land or property is let-out, the rental yields can be used for servicing the NRI home loan. Money transferred to the NRO bank account from close relatives can also be used for maintaining the home loans. In case the property is purchased for the self-occupancy, the NRI can avail of a loan against the NRE or FCNR account deposits, of up to Rs 1 crore, for servicing the home loan.

Remittances out of India

An NRI is entitled to repatriate some of the funds, in case the property so acquired is sold. However, the number of properties (whether inherited or purchased), for which he or she can remit or send funds to India, is restricted to two. Also, the money repatriated cannot exceed the amount (denominated in foreign currency) received as remittances from outside India, either for buying or servicing of the NRI home loan. Under regular circumstances, an NRI is allowed to remit an amount of USD 1 million in a year, out of India, from his NRO account or NRE account or FCNR account, which includes the funds remitted for sale of a house property.