A Guide to NRI Home Loans
Many NRIs invest in buying a real estate property in India, and the majority of them rely on home loans to get the necessary funds. So, if you are an NRI looking to buy a home, the following guide will help you get the required funds easily.
For many Indians, owning a home is a matter of pride and status. And for the Non-Resident Indians (NRIs), buying a home in India is a means of staying connected with their family members and their native land. Today, many NRIs invest in a property in India, and their endeavours are aptly supported by the NRI home loans offered by banks and non-banking financial companies (NBFCs). If you are an NRI, you must be aware of the home loan process, eligibility, documents required, and other details.
The following guide will help you know more about the NRI home loan process.
The eligibility requirements for an NRI home loan is different from the home loan for resident Indians. Also, the criteria may be different from lender to lender. But most lenders have the following requirements:
- You must be a salaried employee or a self-employed professional with a steady source of income.
- You can apply for a home loan individually or apply for a joint loan with one or more than one co-applicants. While all co-applicants need not be co-owners of the property, all co-owners must sign as co-applicants.
- You can avail of an NRI home loan only for purchasing a ready-to-move-in new home, a resale property, or construction of a house on the plot of land that you own.
- You can also apply for an NRI home loan to purchase land on which you want to build a residential property.
Documents required for NRI home loan
- Proof of identity
- Proof of residence
- Income proof
- Copy of property allotment letter/buyer agreement
- Copy of valid passport and visa
- Passport-size photographs
- A cheque for paying the processing fees
- Power of attorney (if applicable)
What is the maximum loan amount you can avail?
Generally, the lenders in India finance about 75% to 90% of the property’s value as a home loan. The remaining amount must be paid from your pocket. The amount you pay is called down payment, and it is an integral part of the loan application process.
What is the maximum home loan duration?
As an NRI, you can avail a home loan for a maximum term of up to 20 years. The lenders reserve the right to determine the maximum loan tenure based on your profile, income, age at the time of maturity, the property age, etc.
The interest rate for NRI home loan
Most lenders in India give the NRI home loan borrowers the flexibility to avail a loan at a fixed interest rate or an adjustable-rate. If you opt for a fixed interest rate loan, the interest will be fixed for the initial few years, after which the loan will automatically be converted into an adjustable-rate loan. In adjustable interest rate loans, the interest varies based on the various external factors. But, many experts recommend going for an adjustable interest rate as it tends to be cheaper than the fixed interest rate in the long run.
Can NRIs avail tax benefit on a home loan?
Yes, suppose you qualify as an NRI as per the income tax definition and file your tax returns in India. In that case, you are entitled to get tax benefit on the repayment of the principal amount and the interest component of the loan. You can get a maximum deduction of Rs. 1.5 lakhs on repayment of the principal amount under Section 80C of the Indian Income Tax Act and up to Rs. 2 lakhs on interest payments on the house that is lying vacant. If you have rented out your home, you can claim tax benefit on the full interest amount.
Today, with the easy availability of NRI home loans, buying a home has become easier than before. But, before you apply for a loan, do your due diligence and make an informed borrowing decision.