A lot of non-resident Indians who go abroad for business often plan to comeback someday. For these NRIs, an NRI home loan provides an ideal opportunity to buy their dream home back in India and gives them the ability to settle when they come back to the country. These home loans are given out by all major banks and can be requested by anyone who fits the description of an NRI, which is in general; a person who is an Indian citizen, holding an Indian passport, who stays out of the country for the purposes of business or work for an uncertain period of time.
This includes those who work as government officials in international organisations such as the UN, individuals who work for private companies with postings abroad or anyone else who conducts or facilitates business outside the country. For these people, buying a house back in India makes sense as they are most likely planning to come back to India upon completion of their work. But it wouldn’t be practical if they had to come to India and then start searching for a home as we all know that the process of buying a home in our country is complicated and often long drawn out. It is for this reason that many banks have provided the facility of availing an NRI home loan, which allows the individual to find and set up their house in India while they’re still abroad making the process of settling convenient, quicker and easier. For those considering an NRI home loan, it is important to bear these five crucial points in mind.
What does an NRI home loan avail you?
Just like a normal home loan, an NRI home loan entails you with the ability to purchase or develop certain properties in India. In fact, an NRI home loan entails you the same properties that a resident Indian can purchase through their home loan. The properties that are covered by this scheme are of four types; properties that are already constructed, properties that are under construction, properties that are to be constructed on an owned area and existing properties to which changes are to be made. In each of these cases a home loan can be requested from a bank to purchase or develop the property except in the case of creating alterations to a pre-existing property; in which case there will be a variation in the type of loan that is provided. This is besides the fact that every bank will have different terms and conditions for the loan they provide.
How much can I request for as my loan amount?
There is no set lower and upper limits for the loan amount you can request for. Each bank sets its own terms and conditions on the amount of loan that you can avail from them. The amount you can avail usually depends on three main factors; your educational or professional qualifications, your place or country of residence and you gross monthly and net monthly income (GMI and NMI). In the case of educational qualifications, if you’re looking for a home loan in India, you will have to be a graduate or higher for a bank to even consider you for a loan. Apart from that, your level of qualification also affects the loan amount you can avail. The same goes for any professional qualification you may hold. The next factor is your place or country of residence. Most major banks have their offices in many countries and the economic status of the country you’re residing in plays a major role in deciding the amount of loan you can request for. Depending on the relative value of the currency, financial situation existing in the country and a host of other factors, banks set a minimum criterion for earnings based on which you can apply for a loan. As it differs for each country, you should do research for the country you live in before applying for a loan. The final factor is your income. In most cases, banks provide for an advance of around 80-85% on the value of the property based on your gross monthly income. Usually, the maximum amount of loan a bank is willing to grant is in the range of 36-40 times your gross monthly income. In some cases the banks may also look at the ratio between your equated monthly instalment (EMI) to your net monthly income (NMI).
What is the rate of interest and tenure of loans I can look forward to?
As an NRI is not working in India and it is uncertain for how long the person would be present abroad, there is a greater risk in the repayment of loans. It is for this reason that in the case of an NRI home loan the tenure and rate of interest differs from that of a residential home loan. While a person living in India can look forward to a tenure of thirty years for their home loan, an NRI is restricted to a tenure between five to fifteen years based on the bank and the loan amount. Also, it is usually found that an NRI will have to pay a further 0.25 – 0.50 % more on the base rate of interest as compared to a resident on a residential home loan.
What are the documents that I need?
The documentation required for an NRI home loan is different from a normal home loan. To apply for the loan you will need; copies of your passport, a valid visa and permit for your work, your employment contract, a work experience certificate showing the amount you’ve worked, your salary circulars, statements from the bank of your NRE or NRO accounts and if you are residing in the Middle East, you will have to provide your employment card as well. Although so many documents are required, submitting and having them verified isn’t difficult. Many banks have their branches present overseas and some of them even provide the facility of submitting your documents online. In case you would like a resident back home to do your submission, you will have to grant that person a Power Of Attorney so that they can complete the process for you.
How do I repay my loan and what happens if my status changes to reflect a resident?
In order to repay the loan, you will have to possess a non-resident external (NRE) or a non-resident ordinary (NRO) account. Payments will only be accepted from either of these types of accounts and payments can only be done in Indian rupees. If by any chance, during the process of repayment or anytime during this entire process you happen to become a resident of India and change your status from that of an NRI, the various aspects of the loan such as the loan amount, tenure and rate of interest will also be changed in order to reflect your new status.
Keep in mind that although the process is usually common across the different banks, every bank can have slight variations in their mode of operation. So it is best that you learn of these variations beforehand so that when you do apply for your loan, the process is streamlined.