Are you an NRI (Non-Resident Indian) looking to invest in property back home? If the answer is yes or you know an NRI who wants to buy real estate in India, there are quite a few things to be aware of. NRIs can easily invest in real estate in their home country and can also get home loans for the same. Now, taking a loan is what most NRIs look to do since most of them wish to keep more money accumulated for retirement and other purposes.
There are no limits on the number of properties for which an NRI can apply for a home loan although repayment ability and eligibility are always taken into account. Here are some of the things that should be kept in mind by NRIs while investing in property back home by applying for a home loan.
Key aspects of the home loan
When it comes to home loan interest rates, you may be enthused looking at news of the RBI cutting repo rates and the swifter transmission of rate cut benefits to home loan borrowers. However, you should know that rates of interest are higher for NRIs as compared to residents. The home loan tenor for NRIs usually varies between 5-20 years on an average.
It can also increase to 30 years in select scenarios in case of salaried professionals. The eligibility based loan amount for NRIs is worked out by most financial institutions on the basis of factors like credit history and income among others. A minimum amount should be earned in order to be eligible for a home loan along with fulfilling basic criteria such as number of years employed and the minimum age along with qualifications. The compulsory age limit also varies across banks and depends on the country being resided in as well. For example, $24,000 annually is perceived as the minimum income level for NRIs who are based in the United States. The loan amount can be anything from a smaller amount and go up to a few crores based on eligibility factors.
Some banks may permit NRIs to fuse the income of their spouse/sibling with their own in order to scale up eligibility levels while some banks will only take into account the income of the primary borrower. One should always have a good credit history and good credit score overall. This will naturally be checked by banks, both for India and the country of residence of the NRI.
Home loan eligibility aspects
NRIs can readily apply for home loans in India but they have to meet the eligibility criteria as laid down by banks and other financial institutions. Although these can vary, here are some of the basics which are applicable in most cases.
- Age of applicant- The minimum age of the home loan applicant should be 18 years and the maximum age should be 60 years. The age limit may vary depending on the bank or financial institution in question.
- Tenor of employment- The home loan applicant should have ideally been employed abroad for a minimum period of 2 years or should have a job contract that is valid for a minimum period of 2 years.
- Account type- The applicant will have to open an NRO/NRE account for repaying the home loan.
The documents required will usually include the following:
- A valid passport
- Visa documents
- Other KYC (know your customer) documents
- Permanent address proof in India
- Appointment letter and work experience certificate
- Work permit, contract of employment from present employer in the country of residence
- Pay-slips or salary slips along with supporting bank statements of NRE/NRO accounts
- Proof of address from the current country of residence that is verified by the present employer
- Income tax return statements from the country of residence
- Valid qualification certificate for meeting the eligibility criteria
- Notarised GPA (General Power of Authority)
Paying back the home loan
Repayment is a procedure that can be done in several ways by NRI home loan customers. The home loan EMIs have to be paid compulsorily in Indian rupees through the NRO/NRE bank account.
NRIs can consider money transfers from foreign bank accounts via normal banking procedures or may issue post-dated cheques or ECS (Electronic Clearance Service) mandates from NRO, NRE or FCNR (Foreign Currency Non-Repatriable) accounts. They can also pay from rental income which is generated from the property in India. EMI cheques may also be issued from the bank account of a local relative if it is more convenient. The GPA holder should be there personally whenever the home loan is being disbursed since the bank will need his/her signature in the main home loan borrower’s absence.
Is a power of attorney required?
Most banks will want a power of attorney or PoA while offering home loans to NRIs. This will be a document which states that another individual has the authority vested in him/her by the NRI for taking decisions on the NRI’s behalf. The rationale behind requiring a power of attorney is that the NRI lives abroad and the lender will have someone in India to communicate with.
The power of attorney enables a contact person in India for the bank for anything related to the loan or the property in question. Most banks emphasize on NRI home loan applicants giving power of attorney to their children, friends or parents in India. Apart from the above mentioned aspects, NRIs applying for home loans in India should always do their own homework about interest rates, tenors, eligibility guidelines and documents required. Online research and comparison of home loan products is a must in order to determine the best possible option.