NRI Loans

Both the RBI and the Income Tax Act define NRIs differently but HFIs go with the RBI definition of an NRI as far as Home Loans are concerned.

According to the RBI, an NRI is an Indian citizen holding a valid Indian passport and who

• Is staying abroad for employment, business or vocational purposes.
• Is staying abroad for an uncertain duration due to certain circumstances.

The main difference between an NRI loan and a normal Home Loan is the person to whom the loan is available. An NRI loan is a loan applicable for Non-Resident Indians only when any of the following are undertaken in India.

• Constructing a property on a plot of land.
• Purchase of an under construction or resale house.
• Purchase of a plot sold by a society / development authority.
• Renovation or improvement of an existing property.

Apart from the usual documents needed while submitting the application form, NRIs also need the following.

• A copy of your passport and visa.
• Salary certificate in English, specifying name, date of joining, designation and salary details.
• Both domestic (NRE/NRO/FCNR) and international bank statements for the last six months.
• If you are not available in India when the application form is submitted, then a General Power of Attorney duly attested by the Indian consulate in your resident country needs to be submitted. If you will be in India then the Power of Attorney can be locally notarized..
• A copy of your appointment letter as well as contract.
• In case you are employed in the Middle East, you need to submit a copy of your labour card/identity card that is translated in English and countersigned by the respective consulate.
• In case you are employed in the merchant navy, you need to submit a copy of your CDC as well as your contract slip with Income details.

Unless returns are filed in India, NRIs cannot avail of the tax benefits as mentioned under Home Loans.

Apart from the usual Home Loan terms & conditions, the terms and conditions of NRI Loans are:

1.Your loan tenure normally does not exceed 10 years even though some HFIs will sanction a loan for 15 years.

2.Your own contribution for the house is made upfront at the beginning.

3.Repayment of the loan is done via EMIs which will begin only after the entire disbursement, in case of a part disbursement. During disbursement PEMI is paid at the applicable rate.

4.Repayment for the entire tenure of the loan is through PDCs from the NRE account or any other account as per RBI rules and regulations. Some HFIs also allow you to pay from your NRE account.

5.LTV Ratio and Eligibility calculations are the same for resident Indians and NRIs though for the eligibility, more weight age is put on the following criteria.

-Qualifications
- Current job profile
-Past experience
-Probability of continuing abroad for the loan tenure
-Probability of servicing the loan with an extended tenure in case you have to return to India

6.If you decide to rent out your house/flat, and the rented income is

More than your EM I : the money needs to be adjusted towards loan repayment. .

Less than EM I : the difference must be paid out of your NRE/ FCNR/ NRO account in India or the amount must be remitted to the extent of the shortfall from abroad .