NRIs Can Get A Home Loan But Conditions Apply

Non-resident Indians (NRIs) have always shown deep interest in Indian real estate. Similarly, be it luxury properties or affordable housing, real estate developers have always considered NRIs as an important target segment for their pitching their project. However, the home loan remains a pain point for NRIs as the formalities and documentation involved in the process is complicated.

Eligibility Criteria

• Applicant should be minimum 18 years of age (might differ from bank to bank) with regular sources of income. The total income can be calculated by clubbing income of co-borrowers, guarantors and expected rental income on proposed property are permitted.

• The applicant should have a valid passport.

• The applicant should have been employed abroad for at least two years or should be serving a valid job contract for a minimum period of two years abroad. An applicant who has served for six months government agencies abroad can also apply for a loan.

• The applicant should be an existing NRE/NRO (non-resident rupee and non-resident ordinary) account holder with the lender.

• Some banks have a minimum-income clause for granting an NRI home loan.

The Documents Required

Apart from what is needed for a regular home loan, NRIs need to submit the following documents to the bank to process their home loan:

• Copy of relevant pages of passport

• Copy of visa/work permit

• The power of attorney (POA). POA is required 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 country of residence

• Original copy of the latest overseas bank account showing overseas address

• Employment contract/ appointment letter/offer letter or any other document/agreement, showing current terms of employment

• Salary certificate/slip for last three months

• Bank account statement, showing salary credit for last six months

• Duly acknowledged copy of last year individual tax return (NRIs/PIOs located in the West Asian countries are not required to submit this document.)

The Processing Fee

Private banks usually charge 0.5 per cent of the loan amount and applicable good and service tax along with a surcharge. Government banks charge 0.25 per cent of the loan amount as processing fee.

There are some other charges that would also be applicable if your loan gets approved but the amount has yet to be sanctioned. These include:

• Due diligence charges which include advocate's fee and the title investigation report

• Valuation report charges

• Stamp duty payable for loan agreement & mortgage

• Property insurance premium

Modes of Repayment

According to the Reserve Bank of India regulations, the repayment of home loans by NRIs should be done using the local currency. The applicant can also repay the loan using the rental income derived from the proposed property.

Tax Benefits

NRIs can claim income tax benefit in India on income from house property. A standard deduction of 30 per cent, property taxes, interest paid on home loan is allowed for NRIs. The NRI is also allowed a deduction for principal repayment, stamp duty and registration charges under Section 80C of the Income Tax Act. However, a tenant who pays rent to an NRI landlord should deduct TDS at 30 per cent.