Popular searches
Growing up, everyone has their own hopes and dreams, and one of those is to own their own home. However, as amazing as it sounds, buying your own home is no easy task. There are multiple requirements that need to be fulfilled and criteria that need to be met.
The topmost criterion is being able to finance your dream home. And, when we talk about NRIs getting a home loan to own a house in their motherland, the requirements are pretty different. So, if you, too, are trying to buy your dream house, back in your homeland, we will help you understand the nitty-gritty of an NRI home loan and how you can procure one without any hassles.
Categories of Non-Residents Eligible for Home Loans
Before you understand how to apply for a home loan as a non-resident, the first step is to understand the category you may fall into:
Non-resident Indians (NRIs)
According to India's Foreign Exchange Management Act (FEMA) 1999, a non-resident Indian (NRI) is an Indian citizen or a foreign national of Indian ancestry who resides outside of India for employment, business, or any other vocation and intends to do so indefinitely. If an Indian spent fewer than 182 days in India during the previous fiscal year, they are also referred to as an NRI.
Person of Indian Origin (PIO)
A Person of Indian Origin (PIO) is an individual with an Indian passport who is not a citizen of China, Iran, Nepal, Bangladesh, Pakistan, Sri Lanka, or Bhutan but has ever held an Indian passport. Or one who, in accordance with the Indian Constitution or the Citizenship Act of 1955, had either/both of their parents or grandparents who were Indian citizens.
Overseas Citizen of India (OCI)
Foreign nationals who are residents of India and hold an Overseas Citizen of India (OCI) Card are eligible to buy immovable property, including homes, businesses, farms, and plantations, but only after completing the necessary paperwork and receiving the necessary clearances. Once they have an OCI card, they can keep holding that property without the Reserve Bank's permission. Even they have the ability to give away residential or commercial property in India to someone who lives there, someone who lives abroad but is an Indian citizen, or someone who has an OCI card and lives outside of India.
Documents Required for Home Loans for Non-Residents
Once you have figured out the non-resident category you may fall into; the next step would be to gather all the necessary documents required for the application process. Some of these include:
- Copy of relevant pages of passport
- Copy of visa/work permit
- The power of attorney (POA). POA is required because the borrower is not based in India
- Utility bills (electricity, telephone, gas connection, etc.)
- Driving license issued abroad (optional)
- Government-issued national identity card or labour card, or social card in the country of residence
- Original copy of the latest overseas bank account showing overseas address
- Employment contract/ appointment letter/offer letter or any other document/agreement showing current terms of employment
- Salary certificate/slip for last three months
- A bank account statement showing salary credit for the last six months
- Duly acknowledged copy of last year's individual tax return (NRIs/PIOs located in West Asian countries are not required to submit this document.)
Tax Benefits for NRIs on Home Loans in India
NRIs can avail of tax benefits on home loans by filing the income tax return in India under Section 139 (1) of the Income Tax Act, 1961. A tax deduction is offered on the principal component under Section 80C up of the Income Tax Act, 1961 to a maximum limit of Rs. 1,50,000 per annum and the interest component of the loan under Section 24 of the Income Tax Act, 1961 up to a maximum limit of Rs. 2,00,000 per annum.
If the home for which the home loan has been procured is left vacant in India, one can avail of the tax benefits under Section 80C and 24 of the Income Tax Act, 1961 on their home loans.
*The above tax benefit for the Section 80C of the Income Tax Act, 1961 will only be applicable if the assessee has taxable income in India and files the ‘Income tax return’ in India within the due date specified under the income tax act of India.
On the other hand, if the home is on rent, one can claim the complete interest payable component as a tax deduction on their home loan.
Home Loan Period
The tenure for which the resident of India can take home loans differs from that of an NRI. For example, a resident of India can take up to 30 years to return the amount lent, while an NRI may take up to 20 years. (All these are general information which can vary from bank to bank as per their discretion)
Interest Rate for NRI Home Loans
The home loan interest rate for NRIs varies with the financial institution from which it is taken. Interest rates for NRIs are generally higher than those for Indian residents due to the higher risk factor.
Income Requirements
NRIs must have a minimum salary of INR 2,00,000 per annum to benefit from a home loan.
Points to Remember While Buying Property in India
- Sale of Property
- The sale of up to two properties may be repatriated, but only if the acquisition was made using an NRE account and not in any other circumstance.
- The amount repatriated must match the amount paid for the immovable property in foreign currency received through traditional banking methods, from money kept in FCNR or NRE Accounts, or both.
- Property Type - Non-residents are eligible for home loans for the following:
- A flat, apartment, plot, or villa
- For building a home on a piece of land by oneself
- To buy a site that was given by a society or development authority
- To update or enhance a current property in India
- Mode of Payment
- For the duration of the loan, the housing loan must be paid in full upfront through direct remittances from abroad, either through regular banking channels or from other financial accounts that the RBI may approve.
- Payments are often made through NRO, NRE, NRNR, and FCNR accounts. These permitted accounts could alter in accordance with RBI rules.
Applying for a home loan can be a long process. However, to make things easier, it is advised to do thorough research, compare interest rates, and understand all the processes before you start with your applications.
