A Checklist For Expats Seeking Home Loan In India
India’s real estate market has always been a lucrative one for non-resident Indians (NRIs) to invest in. The number of expatriates putting their money in the country’s real estate has gone up in the past few years. Besides, some of the investment-friendly initiatives taken by the present Narendra Modi-led central government have raised the optimism among investors.
However, in the absence of a well-defined regulator at present, NRIs are sometimes faced with a lack of transparency and credibility here. Also, they are not always used to the various rules and regulations for home loans, eligibility, applicability, etc.
The documents required while applying for a home loan include passport and visa forms as part of the Know Your Customer (KYC) exercise; details of your permanent address in India; and deputation or appointment letter, work experience certificate, work permit and contract of employment. Also, salary certificates and statements of Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts supporting these are also required. You need to give a foreign land address proof, verified by your employer (i.e. over mail), along with the tax return statements from the foreign land. To ensure loan eligibility, you will have to present a qualification certificate. Also, General Power of Authority (GPA) in the bank’s format should be duly notarised.
A co-applicant and GPA is compulsory for NRIs applying for home loan in India. A GPA holder either has to be a co-applicant or guarantor to the loan, with certain exceptions. The guarantor to the loan is a must when a local resident is not available as a co-applicant.
Your level of income and educational qualification play a critical role in deciding the loan eligibility. Graduation is the minimum qualification you must hold to apply for an NRI home loan. The basis of eligibility is to know if you are on deputation or have been employed permanently in the foreign land. Also, the income for eligibility can include both repatriate income and that earned in India. Banks here take into account the net income (i.e. income left after paying taxes abroad) when deciding on eligibility.
Minimum income norms
These norms differ from bank to bank. For instance, in many banks $24,000 a year is considered the minimum income level for US-based NRIs.
The tenure of an NRI home loan is shorter than that of a regular home loan. The reason is that the repaying capacity of NRIs is supposed to be stronger than that of an Indian resident. Mostly, banks give home loan to NRIs for a period of 15 years.
Loan-to-value ratio (LTV) is the mortgage amount to the appraised value of the property. Banks allow 80-85 per cent of LTV to NRIs, subject to your monthly income. Another ratio that is important when applying for home loan is fixed-obligation-to-income ratio (Foir). This is the ratio of fixed monthly instalments payable to monthly income. Banks push the Foir up to 60 per cent for NRIs, depending on your income.
Interest rates for NRI home loans is the same as regular home loans.
Repayment & disbursement
The repayment of the loan has to be done in Indian currency and can be paid only through NRE or NRO accounts with remittance from abroad. The probability of bad loans is not high in case of NRIs, as the property is in the native land and can be seize by the bank anytime.
What many NRIs do not know is that the GPA holder has to be present in person, in the bank premises, at the time of disbursement of the loan. His signature is required on disbursement documents, as the main applicant is not physically present in India.
The loan appraisal for NRIs is done over their official email address. Every detail relevant for evaluating the loan is discussed and confirmed over email. The employment of the applicant abroad is double-checked with his/her employer. You should inform your human resource department beforehand to avoid any delay in the loan appraisal. The department can also receive a call to verify employee code, purpose of transfer, designation, etc.
There are no tax benefits for NRI customers taking home loan, unless they file returns and become eligible to avail of tax rebates available for such loans.