Just as resident Indians can get home loans from Indian banks to build their homes, even non-resident Indians (NRIs) get that benefit. They can also secure home loans to build homes in India, although the procedures are slightly more elaborate and so is the KYC. It is not just the KYC, but also about cross border remittance of money and that is where the RBI gets involved from a regulatory perspective. Remember, all inflows and outflows of NRIs; to and from India are governed by the provisions of the Foreign Exchange Management Act, 1999 (FEMA). The gist of the story is that home loan for NRI in India are definitely available and they also can get a wide choice. However, to get an NRI home loan, there are elaborate set of formalities to be complied with.
NRIs are eligible for all, but some types of properties
In case of residential and commercial properties, there are no restrictions on NRIs. They can buy and sell properties like any resident Indian. For example, an NRI can get home loans for any type of residential properties. This includes under construction property, ready-to-move apartments, and even independent homes / gated community. Apart from home loans for the above, NRIs can also avail home loans for renovation, improvement, and repairs. However, NRIs are barred from buying agricultural land, plantations, and farmhouses in India. The NRI cannot even be a co-borrower for such loans.
How EMI payments must be made by NRIs
Under the extant RBI regulations, the payment of equated monthly instalment (EMIs) can only be routed through the NRI designated bank account. It can either be a designated NRE (non-resident external) account or it can be non-resident ordinary (NRO) account. The NRI must route all their EMI payments only through such NRO or NRE accounts. There is one more option that NRIs have in such cases. Instead of debiting to their NRE / NRO account, the NRIs can also directly credit the Home Loan with an international money transfer from a designated overseas bank account. One question that often comes up is whether NRIs can prepay home loans. There is no bar and the conditions of minimum lock-in are normally applicable to resident Indians and also to NRIs. However, any such prepayment must only be done through the designated NRE or NRO accounts.
Do NRIs have to pay higher rates of interest
Since the NRI is predominantly based abroad and the legal implications are slightly different, the banks normally charge a slightly higher rate of interest. In technical parlance, it is called a higher credit spread to compensate for the higher risk that the banks are exposed to due to the NRI being settled abroad. However, in case, the bank has enough assets in India like FDs or other designated bank assets, the bank may be willing to offer home loan at the same rates to NRIs as to resident Indians. This rule generally applies irrespective of whether the NRI account is a resident account (NRO) or a repatriable non-resident account (NRE).
Does the NRI have to submit more elaborate documents for home loans?
Obviously, due to the unique nature of the NRI availing home loans, the process is obviously going to be more elaborate than for resident Indians. As a result, the NRI loans carry additional documentation requirements. Apart from the routine documents for the home loans, the NRIs have to submit some additional documents. They must submit a copy of Passport and valid Visa along with the home loan application form. The NRI availing the home loan is also required to execute a General Power of Attorney (GPA) in favour of a Resident Indian with whom the bank will communicate in India for the home loan.
Apart from these, all the routine documents like identify card, employment letter, local PAN, social security number, domestic bank statement, international bank statement must be submitted. All such documents are self-attested. However, in addition, they must also be attested by the local office of a public sector bank or by the consulate senior official. This would be done after verify the photostat copies with the originals. In the case of NRIs, the professional education qualifications also make a difference to the loan sanctioned.
In addition, to the above statutory requirements, there are special provisions like the Anti Money Laundering Act that is applicable in case of NRIs bringing in money from abroad. That is meant to certify the colour and nature of the money that comes including the source of income with adequate documentary proof. To sum up, home loan for NRI in India is not only possible but also quite popular for NRIs who plan to come back and settle in India. Understanding the NRI home loan process can go a long way in simplifying the process.