If you’re earning in a currency that trumps the Indian Rupee, then buying a home in India becomes a little easier. On top of this, recent alterations to the Foreign Exchange Management Act (FEMA) make it all the more easier for you to invest in Indian property.
You can avail an NRI loan for both residential and commercial property. You can even own a number of properties in India as there no restrictions as to how many properties you can own. However, as an NRI you cannot buy a farm house, plantation property or agricultural land. These can only be inherited or gifted to you.
Let’s discuss some key pointers before we move on to any other particulars. Firstly, the repayment cannot be made in currency other than Indian Rupee. Also, as per RBI guidelines, the funds will have to be maintained in an NRE account. Lastly, the funds sanctioned under the home loan will be deposited directly in the sellers account.
After knowing these important pointers, the first thing you should ask yourself is, are you eligible? Most banks & non-banking financial institutes will have the same eligibility criteria, only they will prescribe different a minimum and maximum capping. For instance some banks will have a minimum eligibility age of 18, whereas some will have a minimum age of 21. Most banks will also require you to be a graduate and have a minimum amount of work experience & salary or income. Another important factor is your credit score; it helps to maintain a score higher than 700 and closer to 900.
Now let’s discuss where you can avail an NRI loan. Firstly, you can look for a bank that operates a branch in the country you reside in currently. You can have the entire loan process from approval, disbursement right up to the repayment and collection of your property documents carried out from one of these branches without the need to visit India.
If there isn’t a branch near you or you are looking for a better lender, you can look online. There are number of aggregator sites that will help you compare between the various lenders and their home loans.
You should compare interest rates, which are generally in the range of 8.35 to 10 percent. You can also look at the tenure; most companies offer a tenure ranging between 5 and 20 years. Also factor in other cost such as processing fees, pre-payment charges, switching fees, etc. as these can increase the overall cost of the home loan considerably. Next you should compare the loan amount provided; most lenders will provide you 70 to 90 percent of the property’s value as the loan amount.
Once you’ve chosen a lender, you will have to submit a heap of documents. Some of the common documents required include a copy of passport and visa, proof of residence in foreign country, a letter or copy of contract from the employer, salary certificate with details, bank statement for the last six months, documents of guarantor, etc. It’s important to remember that each lender will have a different set of documents required and if you miss out even a single document, you will start the whole application process again. So ensure you ask for a list of document required for the NRI loan so as to avoid forgetting any documents.
Once the loan is approved you will have to figure out how you will make the payments. You can do this through outward remittance, post-dated cheques, NRO or NRE accounts and you can even appoint a power of attorney who can make the payments on your behalf.
Armed with this knowledge you can go about applying for an NRI loan. Remember to consult a financial expert as he or she would be able to guide with all aspects of your loan.