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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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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