The NRI dream home in India!

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. 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 fulfillment of certain conditions.

NRI Status:
When it comes to defining a NRI, all banks and financial institutions go by the definition specified 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.

Properties eligible for loan: 
Home loans can be availed for any property ready for possession or under construction, construction of property on an owned plot or for alterations to the existing property. Buying of a plot also qualifies for a home loan.

Maximum amount of loan allowed and other conditions:
Income and educational qualifications play an important role in deciding the maximum amount of loan available to an NRI.  Banks allow an advance of 80-85% 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 E.g.: State Bank of India puts a limit of 40% of NMI against EMI for NRIs with annual income up to Rs 2 L.  For those earning between Rs. 2-5 L, it is 50% of NMI; and for individuals earning more than Rs. 5 L annually, it is 55% of NMI.

Few other banks set different criteria depending on educational qualifications, place of residence etc. For E.g.: 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.
It is important to note that only graduate NRIs can avail home loans in India.

Tenure of loans:
While a resident can avail loans with a maximum tenure of 30 years with some banks, tenure for NRI home loans is restricted. It is available within the range of 5-15 years. Extension beyond the term of 15 years is solely at the discretion of the bank and in exceptional cases only.

Rate of Interest:
There is a higher rate of interest charged on NRI home loans to cover the higher risk involved. There is generally a margin of 0.25% -0.50% charged.

Documents required:
The documentation required for NRI home loans is different from resident home loans. Documents normally required are copies of the passport, valid visa and work permit, contract of employment, work experience certificate, salary certificate and statements of NRE\NRO accounts. For those residing in the Middle East, copy of employment card is also required. Salary certificate should be attested from the embassy if the salary is not getting credited to a bank.

Submission of documents: You need not wait for your next trip to India to apply for a home loan. Many of the banks have branches in places like Dubai, Singapore, London etc. where you can apply for home loans. Few banks like ICICI, HDFC and Axis also extend the facility of online submission and status updating.

However, you would require executing a General Power of Attorney in favor of a resident Indian who would act on your behalf with the bank. If POA is issuing while you are abroad, it needs to be signed in front of the embassy official.

Repayment of loan: The repayment of these loans can only be through Non-resident External (NRE) or Non-resident Ordinary (NRO) accounts with remittance from abroad. No other funds can be used for repayment of these loans. The repayment needs to be made in Indian Rupees only.

Change in status from NRI to Resident: When there is a change in status from NRI to resident the loan is reworked according to the revised income and interest applicable is charged and the tenure is also revised.