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THE
ORANGE
HUB

Blog
2 mins Read | 2 Years Ago

Planning to take an NRI Home Loan Keep in mind a few points.

NRI Home Loans can help the Non-Resident Indians (NRIs) to fund their plans to purchase house property in India. However, considering the cross-border remittance requirements, the process should also ensure compliance with the provisions of the Foreign Exchange Management Act, 1999 (FEMA) and relevant RBI regulations. As such, NRIs must keep the following points in mind, while applying for an NRI Home Loan in India:

  1. Properties eligible for an NRI Home Loan – Home Loans can generally be taken for all types of residential properties, whether under construction or ready-to-move properties. Further, a Home Loan can also be availed for funding the purchase of plot, construction activities and for renovation and improvement expenses as well. However, one must keep in mind that an NRI is not allowed to purchase agricultural land, plantations and farmhouses, etc. as per the prevailing FEMA regulations. As such, no loan can be availed towards such property, even if an NRI wants to be a co-borrower.
  2. Repayment proceeds to flow only from NRI Account or overseas – RBI regulations stipulate that an NRI Home Loan must be repaid only through the balances in NRI Accounts, including NRE and NRO Accounts. Apart from debits from an NRI Account, one can also directly credit the Home Loan with an international money transfer from overseas.
  3. Loan prepayment – Just like the prepayment options available to the residents, an NRI can also prepay their Home Loans. However, in line with the standard repayment requirements as discussed above, the credits into Home Loan account must flow from NRI Accounts of the borrower or international remittances from overseas.
  4. Interest rates – Banks generally charge slightly higher credit spreads from NRIs, considering the higher risk perception of the individual staying out of the country. As such, the interest rates are likely to be a little higher for NRIs, as compared to residents. In case the NRI gets back to India with an intention to settle back, one must get the loan account converted into Resident Home Loan and avail of lower interest rates.  
  5. Documentation requirements – NRI loans carry additional documentation requirements when compared against a regular Home Loan to Indian residents. You would be required to submit a copy of your Passport and valid Visa along with the application form. Further, one will be required to execute a General Power of Attorney (GPA) in favour of a Resident Indian with whom the bank will tend to communicate in India. 
  6. Eligible loan amount – While the loan amount is generally driven based on the property value, your existing income, permanency of income, educational qualifications will also play an essential role in determining the loan amount, which can be sanctioned to you.

 

Considering the strong statutory guidelines to monitor and control the funds flow across the countries, it is imperative that one stays informed of the regulations applicable to them. This ensures that they can stay in compliance with the prevailing laws and stay insulated from the penal provisions especially under the Anti Money Laundering (AML) laws.

 

Terms and Conditions apply.


The information provided in this article is for informational purposes only. You may consider consulting professionals for specific guidance for the applicable FEMA rules.

 

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The contents of this document are meant merely for information purposes. The information contained herein is subject to update, completion, revision, verification and amendment and the same may change materially. The information provided herein is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person‘s nationality, residence or otherwise) be contrary to law or regulation or would subject lClCl Bank or its affiliates to any licensing or registration requirements. This document is not an offer, invitation or solicitation of any kind to buy or sell any security and is not intended to create any rights or obligations. Nothing in this document is intended to constitute legal, tax, securities or investment advice, or opinion regarding the appropriateness of any investment, or a solicitation for any product or service. Please obtain professional legal, tax and other investment advice before making any investment or availing any product and services Any investment decisions that may be made by you or any decision to avail any product and services shall be at your sole discretion, independent analysis and at your own evaluation of the risks involved. The use of any information set out in this document is entirely at the recipient’s own risk. The information set out in this document has been prepared by ICICI Bank third party based upon projections which have been determined in good faith by lClCl Bank third party and from sources deemed reliable. There can be no assurance that such projections will prove to be accurate. lClCl Bank does not accept any responsibility for any errors whether caused by negligence or otherwise or for any loss or damage incurred by anyone in reliance on anything set out in this document. In preparing this document we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us or which was otherwise reviewed by us. Past performance cannot be a guide to future performance. ‘lClCl’ and the ‘I-man’ logo are the trademarks and property of lCICl Bank. Misuse of any intellectual property, or any other content displayed herein is strictly prohibited.”

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