Under what conditions do NRIs get a home loan in India?
The non-resident Indians have always shown some deep interest in the Indian real estate market. Similarly, be it the affordable homes or the luxury properties, the realty developers have considered the non-resident Indians as an integral target segment for the pitching the project. The home loan, however, remains the pain point for the non-resident Indians as the formalities as well as documentation which is involved in the process is pretty complicated.
• The applicant should be minimum of 18 years of age (this might differ from one bank to another) with some regular income source. The complete income can actually be calculated by clubbing the income of the co-borrowers or guarantors and the expected rental income on the proposed property is actually permitted.
• Passport should be valid for the applicant.
• Applicant should have actually been employed abroad for minimum 2 years or should be serving the valid job contract for a minimum period of 2 years abroad. The applicant who has served for the month's government agencies abroad can apply for the loan.
• Some banks do have minimum income clause for granting the non-resident Indian home loan.
• The applicant should also be an existing NRO/NRE account holder with the lender.
Apart from what is required for the regular home loan, the non-resident Indians require submitting the following mentioned documents to the bank to process the home loan-
• Copy of work permit/visa
• Copy of relevant pages of the passport
• Power of attorney. It is required as the borrower isn’t based in India
• A driving license that is issued abroad
• Utility bills such as telephone, electricity, gas connection, etc.
• Original copy of fresh overseas bank account that shows the overseas address
• National identity card of the labor card or social card issued by the government at the country of residence
• Bank account statement that shows salary credit for the last 6 months
• Salary slip/certificate for last 3 months
• Duly acknowledged copy of the previous year individual tax returns
• Appointment letter/employment contract/ offer letter or any other document/ agreement that shows the present term of employment
The processing fee
Generally, private banks charge 0.5% of the loan amount and the applicable good and service tax with the surcharge. The government banks charge 0.25% of the amount of the loan as the processing fee.
There are other charges that would be applicable as well if the loan gets approved but the amount has to be sanctioned yet. These would include
• Valuation report charges
• Property insurance premium
• Stamp duty payable for loan agreement as well as mortgage
• Due diligence charges include a fee of advocate and title investigation report
As per the RBI regulations, the repayment of the home loan by non-resident Indian should be done by making use of the local currency. Also, the applicant can repay the loan by making use of the rental income that is derived from the property proposed.
The non-resident Indians can claim the income tax benefit in India on the income from the house property. A standard deduction of 30%, interest paid on the home loan, property taxes, on the home loan is allowed for non-resident Indians. Also, the NRIs are allowed a deduction for stamp duty, principal repayment, and registration charges under Section 80C of the Income Tax Act. A tenant, however, pays rent to the NRI landlord should actually deduct the TDS at 30%.