Home Loan Checklist for NRI – A Complete Guide
Many NRIs nurture a dream to return to their roots after completing their professional journey. It is indeed a significant achievement to own one’s property, and there are many avenues through which one can avail of a house loan. While the majority of the conditions put forth by banks for NRI housing loans are the same as for Indian residents, there are some salient differences that one needs to know. Factors such as period of residence, age, income, etc., are considered. In this article, we provide a complete checklist for NRIs who wish to avail of a loan to purchase a house in India.
1) Credibility Check:
Issuing a housing loan is a matter of risk for a reputed bank. Therefore thorough inspections are required. Any good financial institution will conduct a credit check before disbursing a loan, and the same goes for loans given to NRIs. The bank officials will check the financial stability of the individual. They would want to know whether they are self-employed or occupied with an organization. The NRI borrower should be ready with all the requisite documents to acquire a home loan successfully. When everything is streamlined, there is no reason for anything to stop you from getting your dream home.
2) Period of Residence Abroad and Age Criteria:
There are definite stipulations on what period of stay within India and outside qualifies one to be able to be defined as an NRI. Some banks require at least six months of continuous work experience abroad, while the stipulations for other banks vary. Typically, the age limit of the NRI applicant is between 24 to 60 years. For some banks, the lower age limit is kept at 25 years. It is usually thought that a younger person has a better loan repaying capacity, so it is advisable to apply for a home loan in one’s prime years rather than later in life.
3) Proof of Income and other documents:
One must provide documents to prove proof of income, which can come in various formats. This can come in the form of a salary slip or bank statement in which the salary is received. In the case of a self-employed NRI, one needs a financial statement that meets the bank’s requirements. Other documents required can be proof of residence in India, passport, aadhar card, or voter’s ID. All these proofs should establish the NRI’s connection to India and make for a seamless loan reimbursement process when you apply for a housing loan.
4) Type of Property to be Invested In and Maximum Loan Amount:
It is everyone’s dream to return to their homeland and spend a comfortable life back home. There are several types of properties that one can invest in. An NRI can invest in commercial as well as residential properties in India. They can also hold multiple properties. The only restriction for NRIs when purchasing property in India is that they cannot get loans to buy agricultural land. The maximum loan amount varies between 75-90% of the total property value. The borrower must pay the remaining amount, also known as a margin or down payment. The loan repayment has to be done in Indian Rupees only.
5) Selecting a pre-approved property:
Being an NRI, managing the logistics of scouting for a good property can be difficult. There is no way of verifying the legalities of the situation from afar, and this makes the process of property selection cumbersome. In this situation, we suggest you consider purchasing a pre-approved property. For such properties, the bank officials have done the necessary checks in advance, and the home loan transaction becomes easier than ever. Moreover, most pre-approved properties are constructed by reputed builders who have prior collaborations with banks. Therefore, if you desire a hassle-free and prompt process, then definitely consider seeing pre-approved properties.
6) Type of Interest:
There are two types of interest when it comes to an instant home loan:
1) Fixed interest and
2) Floating interest.
In a majority of cases, the loan starts at fixed interest for a predetermined period and then shifts to floating interest, at which point the interest rates fluctuate marginally according to the bank’s decisions. The rate of interest also varies highly from bank to bank, so it makes sense to gather input from varied sources about the rates of interest and the best possible policies available to you. Importantly, how approachable the banker is can be a game changer when you are based out of India.
7) Tax Deduction Benefits:
You can avail of tax benefits under Section 80C of the Income-Tax Act for both interest and the principal portions of the best home loan you have chosen. For the interest component, you can avail of a deduction of up to Rs.2 lakh on the interest amount repayments. On the other hand, for the principal component, you can avail of a deduction of up to Rs.1.5 lakh on the principal amount repayments. In case you have put the house on rent, you can claim the entire interest payable as a tax deduction on your home loan.
8) Home Loan Repayment:
There are specific channels through which an NRI can repay the housing loan. One can use standard banking mechanisms. Alternatively, one can also use an NRE account/NRO account. A clever means of repayment is to use the rental income received from the property. However, do remember that the loan can be repaid in Indian Rupees only.
Moreover, the repayment tenure varies from bank to bank. Generally, the loan repayment period is between 20-30 years. Different factors, such as one’s credit-paying capacity, professional standing, educational qualifications, or age, are considered when it comes to stipulating the loan repayment period.
In conclusion, there are indeed great benefits of getting a house loan for NRIs. The process is simple, and one has to provide many documents to the bank. Documents such as a passport, aadhar card, voting ID, driving license, salary certificate, and bank statement, among others, may be required according to the specific bank’s rules and regulations. The loan repayment period varies from bank to bank, but it is generally between 20-30 years. That said, we wish you a happy new home soon!