Home loans to Non-resident Indians

Many of us may not be aware of the terms and conditions applicable to such loans

Generally, almost all of us are aware that banks and other Financial Institutions do grant loans for investing in properties to Indian Nationals staying abroad. But many of us may not be aware of the terms and conditions applicable to such loans.

Let us have an in depth look into the subject.
Who is an NRI or PIO?

The Foreign Exchange Regulation Act (FERA), 1973, defines an NRI as:

an Indian citizen -

a) who stays abroad for employment

b) who is carrying on a business abroad

c)a Govt servant who is posted abroad on duty and drawing salary out of Govt resources

or Govt servant who is deputed abroad on assignments with Foreign Govts or Regional / International Agencies like, World Bank, International Monetary Fund, World Health Organisation, Economic and Social Commission For Asia and the Pacific.and the like,or. d)Employees of State Govts and Public Sector Undertakings in similar manner..

There is no time limit prescribed for the foreign assignment, though one has to be away from India for a minimum of 181 days to be treated as NRI..
Purpose of the loan

The home loans are normally extended for-

purchase of a site

Building a house

Extension and improvement of the existing house, and

Renovation

Other than the above, if the request is for investment in property as a saving plan, even that is not barred , but it should not involve any speculative activity.

RBI Guidelines

The guidelines of Reserve Bank of India lays down a maximum loan of 85% of the cost of dwelling house. The applicant’s contribution is required to be brought in by direct remittance or through the NRE (external) account or NRE (Ordinary) account of the applicant. Repayment of the loan instalment also should be by direct remittance or through NRE accounts.
How to apply?

All the Banks/Institutions have their websites and one can access it, download an application form and apply ‘on line’ for the loan. In case a foreign branch of the institution is located near by to your place of stay, that branch can be approached for assistance.

Application form

A look at the application form prescribed by most of the lending Institutions may be elaborate the form is.

In addition to the various routine information/particulars, a resident has to fill in and provide, the NRIs will have to provide the following additional particulars-

Details of occupation or business abroad

Details of employer

Particulars of salary/ income

Credit history

Bank accounts

Details of properties in India

References in India, including that of a relative

Passport no and date of expiry, along with an attested copy of specified pages

Copy of driving licence (international) Credit card information, etc The declaration at the foot of the application also includes a certificate regarding cheque return history, and authorization to make references to listed agencies/people..

Some additional questions such as, the length of stay abroad, who will occupy the house built/purchased , special reasons for going in for the proposed investment in the place proposed,

area specific details like, carpet, bult up, super built etc which are India specific

Cost break up like, site cost, building cost, agency commission etc, will also need to be answered.

Consultancy services

Some lending institutions in India offer consultancy services like, ‘location selection’, engaging of architect/designer, etc. free of cost, which may be useful as they are of vital importance to the decision to buy the property.

Critical aspects relating to lending to NRIs

In many cases, the NRI goes by the web site data, which may need to be cross verified by ground level realities as, often the web site data may not be quite up to date.

The banks may do its own verification, which will be in the interest of the NRI.

The lending institutions have massive experience in the field and this may be of good use to the NRI borrower.