The Non-Resident Indians (NRIs) are recognized under the Foreign Exchange Regulation Act, 1973. Every bank and housing finance company follows the RBI guidelines to define an NRI - "An Indian citizen who holds a valid document like an Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is an NRI."
Broadly categorized, Non-Resident Indians qualifying for NRI housing loans are:
- Indian citizens who stay abroad for employment or for carrying on business or vocation 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 the Indian missions 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 deputed abroad on temporary assignments or posted to their branches or offices abroad
Documents required for Resident Indians and NRIs for getting home loans are different in some respects. Home loans for NRIs are available for construction of new houses/ flats, purchase of old house/ flat addition/ alteration to an existing house and repairs/ renovation etc. NRIs can avail of loans by mortgaging an existing residential property. However, for availing home loans, NRIs have to fulfill certain conditions, according to the provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more.
The FDI policy that permits FDI up to 100% from a foreign/ NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available.
Last but not the least, NRIs should take due care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.
ELIGIBILITY FOR NRI
The eligibility criterias for NRIs differ from Resident Indians based on a few parameters. The parameters include:
Home loans for an NRI applicant ranges from a minimum of INR. 5 lakhs to a maximum of INR. 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. An applicant will be eligible for a maximum of 85% 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, the eligibility can be enhanced 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 somewhere between 0.25%-0.50%. 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.
RBI DIRECTIVE LOANS
The Reserve Bank of India (RBI) has clarified that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO), purchasing immovable property in India must pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country.
The NRIs and Resident Indians can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued certain directives for sanctioning home loans to Non-Resident Indians.
The guidelines provided are:
- The home loan amount should not exceed 85% of the cost of the dwelling unit, As the remaining 15% needs to be provided by one's own contribution towards the cost of unit financed
- The cost of dwelling unit which is by own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and/ or Non-Resident (Ordinary) [NR (O)] account in India
- However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India
The repayment option for NRIs is that they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time.
DOCUMENTS REQUIRED FOR LOAN
Apart from the documents mentioned below, a vital document required while processing any NRI home loan is the ‘Power of Attorney’ (POA). Since the borrower is not based in India, the POA is important because HFCs would need a 'representative' 'in lieu of' the NRI to deal with if necessary. Although not obligatory, the POA is usually drawn on the NRI's parents/ wife/ children.
The documents needed for obtaining NRI home loans are:
- Passport and Visa
- A copy of the appointment letter and contract from the company employing the applicant
- The labor card/ identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East Salary certificate (in English) specifying name, date of joining, designation and salary details
- Bank Statements for the last six months
List of Classified documents for Salaried and Self Employed NRI Applicants:
- Original title deeds tracing the title of the property for at least a period of last 13 years
- Encumbrance Certificate for the last 13 years
- Agreement of sale/ construction, if any
- Receipts for payments made for purchase of the dwelling unit
- Approved plan/ license
- ULC clearance/ conversion order, etc.
- Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and/ or the Non-Resident (Ordinary) account in India
- Latest tax paid receipt
- Allotment letter from the co-operative society/ association of apartment owners
- Agreement for sale/ sale deed/ detailed cost estimate from the Architect/ Engineer for property to be purchased/ constructed/ extended/ improved
- Copy of approved drawings of proposed construction/ purchase/ extension
ADDITIONAL DOCUMENTS TO BE SUBMITTED BY PERSON OF INDIAN ORIGIN
Photocopy of PIO Card
If the PIO card is not available, photocopies of any of the following documents:
- The current passport with birthplace as 'INDIA'
- The Indian passport, if held by the individual earlier
- Parent’s/Grandparent’s Indian passport/ Birth Certificate/ Marriage Certificate substantiating the individuals claim as a person of Indian origin
PERMISSIONS AND APPROVALS
Before construction on a project can begin, the builder must seek several permissions and approvals from relevant bodies. Without these clearances, the construction attract litigation.