Owning a home is a dream for most of us and thanks to the diverse home loan schemes available to make that dream a reality. Every Indian staying abroad aspires to own a home back in his homeland, India. How is this different in case of Non- Resident Indians (NRI)? Is it equally easy for them to obtain a home loan and own the property of their choice? NRI home loans are now easily available in India, subject to fulfilment of certain conditions.
NRI Home Loans can be availed for the following purposes:
To purchase a new home To purchase a ready built house on resale To construct your own house To extend your house To renovate your house To purchase a plot of land in your preferred city or town To purchase a plot of land in your preferred city or town and construct your house on it
NRI is defined by the Reserve Bank of India (RBI) i.e., "An Indian citizen who holds a valid Indian passport and stays abroad for employment or carrying out business or vocation under circumstances indicating an intention for an uncertain duration of stay abroad is an NRI. So those eligible for home loans under this category would be those employed or carrying out business outside India, those posted abroad by the Indian government or companies or those Indians serving in international agencies like the IMF, UN, World Bank etc.
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.
Owning a home isn’t just a keystone of wealth, it’s what gives us and our families, stability and emotional security. If you’re hesitant about buying a home because you feel that getting a home loan is a daunting task. Don’t worry! Applying for a home loan, is an incredibly simple process.
Finalize the Property:-
The first step involved in the process is to find your property. Once the property is finalized and the property papers are verified you can start searching the home loan lenders who can give you the best home loan deal. There are scenarios when you want to be sure of your home loan eligibility before finalizing the property. Use Care2Earn Home Loan eligibility calculator to assess your loan eligibility. This would help you take the informed decision.
Lenders reserve their best rates for immediate disbursement customers and hence customers who have finalised property get the best possible home loan offers. Also if they have any issues with your property it will get highlighted before you incur too much effort and costs. Some lenders may not be comfortable with you buying a plot and self constructing on it. Some lenders will not fund under construction property unless the developer is pre-approved with them. A lot of lenders can have issues if the property you are buying is more than 15-20 years old.
Know the Home Loan Financial Eligibility: -
The lender will offer the home loan on the basis the information provided by you to determine your financial eligibility. The financial eligibility is based on your income, age, existing loans and their repayment track. Our advanced algorithms and experienced team strives to give you adequate information about eligibility and different loan products available to you..
Select the Best Home Loan after evaluation: - Comparing home loan interest rates is the primary feature in the home loan selection, however other fees & charges like Application fees, processing fees, legal charges should not be neglected when comparing various loan offers. To check the interest rates & other charges incurred by various banks, Care2Earn provides a comprehensive comparison across different banks and assist you in choosing the best product suited for you.
Applying for the Loan: - After you have selected your lender, you have to fill in the application form wherein the lender requires complete information about your financial assets & liabilities; other personal & professional details together with the property details & its costs.
Documentation & Verification Process: - You are required to submit the necessary documents to the bank which will be verified together with the details in the application..
Bank sanctions Loan & Offer letter to the borrower: - After the credit appraisal of the borrower bank decides the final amount & sanctions the loan, the bank further sends an offer letter to the borrower which constitutes the details like rate of interest, loan tenure & repayment options etc.
Acceptance Copy to the Bank: - The borrower needs to send an acceptance copy to the bank after the borrower agrees with the terms & conditions in the offer letter
Legal and Technical Valuation: - The bank further asks the legal documents of property from the borrower to check its authenticity so as to keep them as a security for the loan amount given. The lender would carry out Legal verification to ensure your property is clear from any legal encumbrances The next step involved is the technical valuation of the property by the bank which determines the total value of the property and loan amount which can be given to you on the basis of property value. The Loan to Value (LTV) is pre determined and is regulated.
Signing of agreement & the loan disbursal: - You are now ready to sign the home loan agreement. All that’s left is for you to submit your original property documents, a few postdated cheques, and the loan agreement. That’s it! Lender will issue a cheque in the favor of seller/builder and your dream home is a reality now. Your EMI commences from the day of disbursement
Generally the documents required to processing your loan against property application are almost similar across all the banks; however they may differ with various banks depending upon specific requirement etc.
Below listed are the documents that is required to process the loan faster. The copies of all the documents need to be Self Attested.
Power of Attorney
Power of Attorney is a document where the NRI authorizes a person resident in India to complete all formalities such as registration, possession, execution of agreement of sale etc. A power of attorney can be given to execution to execute all contracts, deeds, mortgagees, lease, sell and all matters related to managing the property. For an NRI to apply for a home loan in India, it is necessary for him/her to have a blood relative who is willing to become his general power of attorney (GPA). However, there are banks who take deviations on it.
Place of Execution of POA:
If NRI applicant is present in India at the time of application:
The POA format can be printed on Rs.100 stamp paper, both applicant and POA holder needs to sign on each page and the same can be duly notarized Application form needs to be personally signed by all NRI applicants All documentation mentioned above needs to be self-attested by respective NRI applicant
If NRI applicant is not present in India at the time of application:
The POA format needs to be printed on plain sheets and NRI applicant needs to sign on each page. The same needs to be attested by the local Indian Consulate / Embassy in the country of residence Passport copy needs to be attested by the Indian Consulate/Notary Public/Bank Manager at the place of residence of the NRI applicant The NRI applicant can send the attested POA format, passport copy and all other documents mentioned above self-attested to India for home loan processing Personal Documents 1 passport size latest photograph of each applicant Valid passport copies for all the applicants showing India Entry / exit stamp, if applicable PAN card copy for all the applicants, if available PIO / OCI card, if applicable Valid work VISA copies for all the applicants Foreign location residential address proof Processing Fee cheque from your NRE / NRO Bank A/c in India Salaried Individuals Copy of current appointment letter OR Copy of salary certificate clearly mentioning the date of joining, current salary earned and designation held in the company Copy of previous appointment letters showing last 3 years job continuity Last 3 months salary slip for Fixed salary and last 6 months for Variable salary Last 6 months bank statements clearly mentioning salary credits in the account Last 6 months bank statements of NRE / NRO A/c in India Self employed Individual/ Proprietorship Proof of incorporation of business viz. Partnership Deed, MOA of company Business Profile and Office address proof Last 3 years Income tax returns filed in the country of residence Last 3 years Audited financials – Profit & Loss A/c and Balance Sheet Last 6 months bank statements of Current A/c and Savings A/c Last 6 months bank statements of NRE / NRO A/c in India Working in Merchant Navy Latest contract copy. If on ‘home port’ for more than 6 months this year, future contract copy is required Latest Continuous Discharge Certificate (CDC) for 3 years’ employment proof Copy of passport for proof of identity Primary bank account statements for last 3 months Local bureau report of the country where customer is based (applicable if country of residence is other than India) Property Documents Occupancy Certificate Approved Plan of building Chain of deeds in case of resale property Nil Encumbrance Certificate- EC ( if applicable) Copy of Sale Agreement / Draft Sale Agreement Copy of Stamp Duty Receipt Copy of Registration Receipt Copy of Building Sanction Plans Copy of Chain of Agreements (if any) Copy of Share Certificate (if Society formed) Copy of Payments Receipts made towards the Property Copy of Allotment Letter from Builder (if allotted)
Income and educational qualifications play an important role in deciding the maximum amount of loan available to an NRI. The eligibility of the loan amount is based on factors such as:
Applicant should have a NRI/PIO status and must be working abroad with valid documents namely passport and visa or OCI card, as per RBI guidelines Repayment capacity Age Educational qualifications Stability and continuity of income Number of dependents Co-applicant’s income Assets and liabilities, saving habits, and more
The amount is disbursed in Indian Rupees. The repayments are usually made in Equated Monthly Installments (EMIs), which are a mixture of the principal and interest amounts. EMIs get deducted from the month following the month in which the loan gets disbursed and can be made through post-dated checks from the NRE/NRNR account held by the NRI in India.
Profile Category –
Salaried Individuals: Any individual who is in service can be financed. Minimum work experience of 6 months, overseas is required Self Employed Professionals (SEP): Doctors, Engineers, Scientists & Chartered Accountants are classified as Professionals only. Minimum professional work experience of 2 years, overseas is required. Self-employed Non-professionals (Businessman): Only NRI Businessmen based in UAE, USA or UK are covered under this scheme. Minimum business continuity of 3 years, overseas is required.
The applicant in all the cases should be above 21 years of age at the time of loan commencement and up to the age of 60 Years (65 years in case of Self-employed), whichever is earlier at the time of loan maturity.
The NRI applicant needs at least a graduate degree to apply for a home loan.
Salaried individuals should be abroad for a minimum period of 1 year and Self Employed for 3 years Professionally Qualified Individuals have to be employed abroad for minimum 1 year and others or 3 years
Banks allow an advance of 75%-85% of the value of the property, subject to the Gross Monthly Income (GMI) of an individual. Maximum amount of loan granted, is in the range of 36-40 times GMI. Some banks also go by the ratio of Equated Monthly Installment to Net Monthly Income (EMI/NMI).
For example: State Bank of India (SBI) has a limit of 40% of Net Monthly Income (NMI) against EMI for NRIs with annual income up to Rs 2 Lacs. For NRIs earning between Rs. 2lac -5 Lacs, it is 50% of NMI; and for NRIs earning more than Rs. 5 Lacs, it is 55% of NMI.
Few other banks set different criteria depending on educational qualifications, place of residence etc. For example.: With ICICI Bank, for those residing in the Middle East, the minimum annual salary required is 36000 Dhms if the tenure is within 5 years and for tenures between 6-10 years the income requirement is set at 48000 Dhms. While for those residing in the USA and others the respective limits are 30000 USD and 42000 USD. The criteria differs for self-employed, depending on the educational qualifications.
However, a NRI can enhance his loan eligibility 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 to the extent of 0.25%-0.50%.
Just like CIBIL scores are the prerequisite to get loans in India, for NRI-s there is credit scoring requirement too. As far as the income is concerned your income abroad plus any source of income in India is taken into consideration to determine your ability to pay.
Country of Stay
Banks and Financial Institutes 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 banks, find it difficult to get a home loan.
The NRI also has to route his EMI (Equated Monthly Installments) cheques through his NRE/NRO account. He cannot make payments from another source say, his savings account in India.
Tenure of Loan
The tenure for which an NRI gets a loan is generally less or restricted as compared to an Indian citizen. This is primarily because of the assumed ability of an NRI to close the loan sooner; also since the person is residing on a foreign soil then the risk factor is higher. Therefore unlike an Indian resident who can avail a loan for 30 years, an NRI can get the same for the 15-25 years, basis bank to bank.
For those who intend to buy a house, opting for a home loan is one of the meticulous ways of securing a home. The procedure to avail a home loan remains more or less the same as applicable to any resident Indian. However, there are certain conditions to be kept in mind.