Home Loans for NRIs – Top Benefits

NRI home loan interest rates are competitive, so it taking a home loan to buy a home in India is a good option for NRIs

Nitin, who currently resides in the United States, wants to buy a home in his home town Chennai. Like many other NRIs, Nitin has plans to come back to India after his retirement. Nitin can avail an NRI home loan to buy a house in India. What’s more NRI housing loan interest rates are at par with that of a resident. Going for an NRI housing loan is thus a good idea for Nitin to fulfil his dream of buying a property in his home town.

NRIs can thus apply to an Indian bank for NRI home loan. However, there are several things one needs to keep in mind before going for an NRI home loan. We take a look.

Assess the residential status: To qualify as an NRI, one needs to fulfil certain conditions. A person is deemed as a resident if he or she is in India for 182 days or more during the previous year. Or the person has to stay 60 days or more in India in the last year and 365 days or more during four years immediately preceding the past year. For those who have recently moved out of India, it is essential to assess their residential status to see whether they qualify as NRIs.

Kind of properties NRIs can own: NRIs can own any immovable property in India apart from agricultural land. However, citizens of certain countries like Pakistan, Bangladesh, Sri- Lanka, and so on need special permission from the RBI to own a property in India.

NRI housing loan: We will now take a look at the various things you need to know regarding an NRI home loan.

Eligibility criteria: Both a salaried or a self employed person can avail an NRI home loan. An NRI can apply for a home loan either as an individual or as co-applicants who may or may not be co-owners of the property. However, co-owners must be co-applicants as well.

Documents required: Documents required would include proof of identity, residence and income. You also need a photocopy of a valid passport and visa. Other documents required are a copy of property allotment letter, buyer agreement or an agreement to sell the property in case of shortlisted properties, passport size photos of all applicants, a cheque for the processing fees and power of attorney, as the case may be.

The home loan process: To apply to an Indian bank for a home loan, you need to submit the filled home loan application form to the lender. You can do it directly or through a Power of Attorney (POA) holder. It is recommended that you appoint any one of your relatives in India as the POA holder. The POA gives this person the right to act on your behalf. So he or she can do all the necessary work that is required for processing the home loan, and your presence is not required in person.

NRI Home loan features

Now, we will look at some features of the home loan.

Maximum loan amount: Mostly, 75-90 per cent of the property cost is given as a loan. The remaining amount has to be contributed by the home buyer. This amount is also known as the down payment.

Tenure: Normally, a home loan is given for up to 20 years. However, factors like how old you will be when the loan matures will also be taken into consideration.

NRI home loan interest rates: Now we will look at NRI housing loans interest rates. NRO home loan rates are an essential thing to consider before going for a home loan. NRI housing loans interest rate can either be fixed or floating. For a fixed-rate mortgage, the NRI housing loan interest rate is fixed for a certain period after which it automatically converts into a floating rate. NRI home loan rates vary from 8.6 to 10 percent. The NRI home loan interest rates are applicable on a monthly reducing basis.

Repayment of the home loan: NRI home loan repayment will depend on certain factors. In case of an under-construction property, you need to pay only the interest till completion. After this the regular EMIs start. However, you also have the option to tranche your loan and pay the full EMI. When you purchase an entirely constructed property, your EMIs begin immediately. They are to be done through your NRO or NRE bank account in India. Usually, there are no prepayment charges if it is paid from its own sources. However, refinancing the home loan with another institution may attract a penalty.

Tax deduction for home loans: You are eligible for tax deductions on a home loan. Both the principal component and the interest paid are eligible for deduction. Under section 80C, you can claim the principal paid for up to Rs 1.5 lakh in a financial year. The interest can also be claimed as a deduction of up to Rs 2 lakh in a financial year for a self-occupied property. If the property is let out you can claim the entire interest as deduction.

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