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SBI Home Loan

FAQs

What is a home loan?

Home loan is the money borrowed from a bank or a housing finance institution on interest for buying / constructing / upgrading a residential real estate property.

Where can I avail SBI Housing loans?

We have a network that is unmatched in terms of reach. We have also designated special branches across the country to cater to the housing loan requirements of individual customers.

What are the types of Home loans available?

The banks usually offer the following types of loans on interest:

  • Home Purchase Loan: It is the most common type of loan taken for purchasing a new residential property or an old house from its previous owner.
  • Home Improvement Loan: Home improvement loans are given for executing repair and renovation work at home.
  • Home Construction Loan: These loans are sanctioned to construct a house on a piece of land you have already purchased. The loan approval and application process for these loans is somewhat different from the other commonly available home loans.
  • Home Extension Loan: Home extension loans are offered for expanding or extending an existing house. To cite a few examples, addition of an extra room, a floor etc.
  • Land Purchase Loan: This type of loan is granted for the purchase of a plot of land for both residential or investment purposes.
  • Home Conversion Loans: These loans are available for people who have already purchased a house by taking a home loan but would now want to buy and move to another house. With these loans, they can fund the purchase of the new house by transferring the current loan to the new house.
  • Balance Transfer Loan: These loans are availed to transfer one’s home loan from one bank to another. It is usually done to repay the remaining amount of loan at lower interest rates or when a customer is unhappy with the services provided by his existing home loan provider and wants to switch to a different bank.
  • NRI Home loans: These are specialized loans, structured to suit the requirements of NRI’s who wish to build or buy a home in India.
  • Loan against Property (LAP): These loans are given or disbursed against the mortgage of a property.

What is the average tenure of a home loan?

As home loans involve a large sum of money, the tenure generally varies between 3 to 30 years.

Does the tenure affect the loan cost?

Longer the tenure you have, the lesser will be your EMI but higher would be the interest outgo. In shorter tenures, you pay a greater EMI, but the loan gets repaid faster and you pay less by way of interest.

What is an EMI?

EMI or Equated Monthly Instalment is a fixed amount paid by you to the bank on a specific date every month. The EMI’s are fixed when you borrow money from the bank as a loan. EMI’s are used to pay both interest and principal amount of a loan in a way that over a specific number of years, the loan amount is repaid to the bank alongwith interest.

What is Pre-EMI?

Under the Pre-EMI option, the borrower is required to pay only the interest on the loan amount that will be disbursed as per the progress on the construction of the project. The actual EMI payment starts after the possession of the house.

Can a Home Loan be Pre-approved?

Yes. One can avail of a pre-approved loan from a housing financial institution or a bank.

What are the general eligibility conditions for availing a home loan?

The general eligibility conditions are as follows:

  • The borrower should be a resident of India or an NRI
  • He / she should be above 18years of age at the beginning of the loan
  • Repayment should be up to the age of 70 years.

How does my salary influence my home loan amount?

Apart from other criteria and norms of the lending bank, the home loan amount is generally calculated on the basis of your EMI and NMI ratio, where NMI is the take-home pay after taxes and other payroll deductions. The EMI/NMI ratio varies in the range of 20% to 70% for different Net Annual Income slabs. The loan amount can be increased by including a co-applicant.

Can I apply jointly with my spouse? Will both our salaries be taken into consideration for calculating the loan amount?

Yes, your salaries can be clubbed for the purpose of calculation of the loan amount. This can be done either when the property is jointly held with the spouse or the spouse stands as a guarantor. Thus, we ensure a great deal of flexibility in the entire exercise of financing your house.

What are the various documents needed to apply for a home loan?

You would be required to submit the following documents:

  • Proof of Identity: PAN, Driving license, Voter ID, Aadhar Card
  • Proof of Income:
    • Salaried Applicants: Latest 3 Months salary slip showing all deductions and Form 16 for the last three years.
    • Self Employed Applicants: IT returns for the past 2 years and computation of income for the last 2 years as certified by a CA
  • Bank Statement: Past 6 months
  • Guarantor Form (Optional)

What is the difference between fixed rate and floating rate of interest?

In the fixed interest rate scenario, the interest remains constant throughout the loan period irrespective of the changes in market conditions while in the floating interest rate scenario, the interest can decrease or increase depending on market fluctuations.

• How is the interest rate calculated?

The interest on home loans is usually calculated either on monthly reducing or yearly reducing or daily reducing balance by Bank. SBI charges interest on daily reducing balance.

Specifics are mentioned below:-

  • Annual reducing method: In this system, the principal, for which you pay interest, reduces at the end of the year. Thus, you continue to pay interest on a certain portion of the principal that you have actually paid back to the lender. This means that the EMI for the monthly reducing system is effectively less than the annual reducing system.
  • Monthly reducing method: In this system, the principal, for which you pay interest, reduces every month as you pay your EMI.
  • Daily Reducing method: In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than in the monthly reducing system and a year is treated as consisting of 365 days irrespective of leap or non-leap year.

How do I benefit if the interest is calculated on a daily reducing balance for SBI Home Loans?

On an annual reducing balance method, you will continue to pay interest on amounts you repay during the coming one year as the interest for the year is determined on the basis of the balance outstanding at the beginning of the year.

In the case of the daily reducing balance, which is the methodology we employ, your interest is calculated only on the outstanding loan amount, which reduces every time you pay off your EMIs or make any prepayments. This in essence lowers your effective rate of interest significantly.

Are there any other charges that accompany home loans?

Home loans are usually accompanied by the following extra costs:

  • Processing Charge: It is the fee payable to the lender upon applying for a loan. It is either a fixed amount not linked to the loan amount or a percentage of the loan amount.
  • Pre-payment Penalty: When a loan is repaid before the scheduled duration, a penalty may be charged by some banks, which is known as the pre-payment penalty. SBI at present does not charge any pre-payment penalty.
  • Miscellaneous Costs: Bank may also ask for documentation or other consultation charges.

What are the processing fees charged by the bank?

The following processing fees is applicable on SBI Home Loans. In addition to the processing fee, actual charges towards valuation fee, advocates fee for property search and title investigation report and stamp duty is applicable.

Processing Fee 0.35% of Loan Amount subject to a minimum of Rs 2000/- plus applicable taxes and Maximum of Rs 10,000/- plus applicable taxes

What is the tax rebate available on a home loan?

As per Section 80C of the Income Tax Act, you are allowed separate deductions on the principal and interest amount of the home loan amount, along with other entities like ULIP, EPF, PPF, ELSS and NSC’s. In case of the principal amount, you can claim a deduction of upto Rs 1.5 lakhs while in case of interest, it is upto Rs. 2 lakhs. The amount of stamp duty and registration is also eligible for tax deduction.

It is important to note that the tax break can only be claimed for the year in which the construction of the property has been completed.

What is a down payment?

Generally, banking & finance institutions pay around 75% to 85% of the cost of the property bought. The remaining 20% of the amount is paid on an up-front basis, which is popularly known as the down payment.

What is the normal time required for disbursement of a home loan?

On an average, loans are disbursed within 3-10 days after satisfactory and complete documentation and completion of all the required procedures.

Can a single woman get a loan?

Yes, a single woman can get a loan. SBI has a special scheme for them, such as concessional rate of interest.

What are the number of properties that I can own?

You can own as many properties as you want.

How can I qualify for exemptions on the Capital Gains Tax?

There are a few exemptions available for long term Capital Gains, if you:-

  • Buy or construct a new house: - If you build a new house or buy one from the money you receive from selling a property, you are exempted from paying the tax on Capital Gains. However, the new purchase should be done either one year before or within two years of the sale and the construction should be completed within three years from the date of the transfer. The new property bought or constructed should not be sold within three years from the date of its purchase or the date of completion of construction.
  • Capital Gain Account Scheme: - Through the Capital Gain Account Scheme (CGAS), you can save the received money in the designated banks. CGAS helps you in buying time to look for suitable investments as it serves to inform the Income Tax department that you plan to invest the money received, albeit at a later date.
  • Invest in Bonds: - You can also invest in financial assets or bonds to save tax. Such bonds are issued by the Rural Electrification Corporation and the National Highway Authority of India and should be bought within six months of transferring the property. You can invest a maximum of Rs. 50 lakhs through these bonds.

What is the difference between long-term Capital Gains and short-term Capital Gains?

If the house is held for a period of less than three years prior to its sale, it is termed as a short-term capital asset and any gain arising from such a sale is treated as a Short-Term Capital Gain. There are no tax exemptions for short-term capital gains and one needs to pay it according to the applicable tax slab.

However, if the property is sold after holding it for a period of more than three years, it is treated as a long-term capital asset and the gain arising from it is called the Long-Term Capital Gain. Such gains attract a flat or basic exemption rate of 20%.

What are the Capital Gains on a property purchase?

Property is considered as a capital asset and Capital Gains Tax is levied on the gains arising from the sale of property. Such gains are calculated after duly adjusting the inflation rate, transfer and renovation charges.

Do I need to pay stamp duty if the property is transferred or is received in the form of a gift?

Yes. Generally, the stamp duty on the gift deed ranges from 5% to 12% in all states. In few states like Haryana, Rajasthan and Delhi, a concession of 1% to 2 % has been provided to female transferors.

What is the meaning of Stamp Duty? Who is liable to pay Stamp Duty? Do I get tax benefits on Stamp Duty?

Stamp Duty is the tax paid for the legal recognition of property. It is paid by the home buyers. You can claim tax incentives of up to Rs. 1.5 lakh on stamp duty and registration charges on a new property purchase or construction of a house. However, these benefits are available with respect to one self-occupied property only.

What are the current rates for the different property taxes that need to be paid?

A summary of the charges is as follows:-

  • TDS - 1% on immovable properties (except agricultural land) exceeding Rs. 50 lakhs.
  • Stamp Duty - Depending upon the various individual state and municipal laws
  • Service Tax - - It is a central tax paid for the services offered by the developer to you. From April 1, 2015 onwards, if the apartment is worth less than Rs. 1 crore, or has a floor area of less than 2,000 sq ft, the service charge is levied @14% on car parking and preferential location charges (PLC) and @3.50% on the basic sale price. If the apartment is worth over Rs. 1 crore, or has a floor area greater than 2,000 sq ft, the service tax is levied @14% on car parking and preferential location charges (PLC) and @ 4.2% on the basic sale price of the flat.

Which are the taxes that I need to pay before buying a property?

The buyer needs to pay the following taxes:-

  • TDS or tax deduction at source on an amount exceeding Rs. 50 lakhs for the purchase of property, excluding agricultural land.
  • Stamp duty
  • Service Tax - Applicable if the property is being purchased from the builder who conceived and constructed the project before offering possession to the buyer. If a `ready to move in’ property is purchased from the seller, service tax is not applicable.
  • Value Added Tax (VAT) - If applicable in the concerned state.

How can I convert a leasehold property to freehold?

The property could be converted from leasehold to freehold if the local laws permit the same. To cite just one example, properties under DDA can be converted to freehold by executing a Conveyance Deed but the same is not allowed if the property is owned by the Noida Authority.

What is the difference between a leasehold property and a freehold property?

The difference between a leasehold property and a freehold property lies in its ownership. In a leasehold property, the ownership remains with the concerned local authority or the government (as the case may be). The lease period varies typically between 30 to 99 years. However, this does not prevent the individual owner from selling or performing other transactions with the property, provided the lease deed has been registered.

In case of a freehold property, the owner of the property is the legal owner and can sell/lease/rent the property as per his/her discretion.

What should be the language of the registration document?

The language of the registration document must be the one that is commonly / prominently used in your district. According to Section 19 of the Indian Registration Act, the Registering Officer or the Registrar has the discretionary authority to decline the registration of your document if it is presented in a language which is not commonly used in the district, unless and until it is accompanied with the authentic translation of the language in use.

Can I authorize someone else to register my property by granting him a Power of Attorney?

Yes, you can execute a Special Power Of Attorney to get your property registered by someone else.

What is a Power Of Attorney?

A Power of Attorney allows a person to grant another person the right to make decisions regarding the person’s assets, finances and real estate properties.

There are two types of power of attorney. First, the ‘General Power of Attorney’ where a property owner confers ‘general’ rights. The rights include but are not limited to sell, lease, sub-lease etc. The second one is the ‘Special Power of Attorney’ wherein only a specific right is given by the owner to the chosen person.

What is the process to register my property?

Registration of a property includes necessary stamping and paying of registration charges for a sale deed and getting it recorded at the sub-registrar's office of the concerned jurisdictional area. If a property is purchased from a developer directly, getting it registered amounts to an act of legal conveyance. In case the purchased property is a second or third transaction, it involves a duly stamped and registered transfer deed. Nowadays, property registration process has been completely computerized in most states.

What is the meaning of property registration?

It refers to the registering of documents relating to transfer, sale, lease or any other form of disposal of an immovable property. Registration is compulsory by law for all properties under Section 17 of the Indian Registrations Act, 1908. Once a property has been registered lawfully, it means that the person in whose favour the property has been registered, is the lawful owner of the premises and is fully responsible for it in all respects.

What documents would I need at the time of possession?

  • Original copies of the chain of title agreements and Building Plan approvals
  • Original registration and stamp duty receipts
  • Possession Letter
  • Original share certificate (In case of societies)
  • Proof of payment of all dues like maintenance charges, electricity bills, phone, water and property taxes up to the date of handing possession
  • NOC from the Society or any other concerned body confirming that there is no objection to the transfer

How can I verify that the documents shown to me by the seller are genuine?

  • Project approvals can be verified from the corporation or the sanctioning authority’s office
  • Ownership documents can be confirmed from the Sub Registrar’s office wherein they are registered
  • Share certificates related to societies can be verified from the concerned society itself

What documents do I need to check if I am buying a resale property?

Clear and marketable Title, Sale Deed, Encumbrance Certificate, latest tax receipts, Occupancy Certificate, Building Plan Approvals and Possession Certificate.

What documents are required to get a resale property duly registered?

New Sale Deed, PAN Card and photographs.

What documents are required for registration of a new apartment/plot?

Sale Deed, No Objection Certificate (NOC) from builder, NOC from banks, Building Plan approvals, Completion Certificate, PAN Card and photographs.

What documents are needed for registration of an independent house?

Allotment papers of the plot, Building Plan approvals, Transfer Deed (in case of multiple owners), Sale Deed, PAN Card and photographs.

What documents should I check before buying a new property?

  • Sale Deed
  • Title Deed
  • Approved Building plans
  • Completion Certificate (For Newly constructed property)
  • Commencement Certificate (For Under-construction property)
  • Conversion Certificate( If agricultural land is converted to non-agricultural)
  • Khata Certificate (especially in Bengaluru)
  • Encumbrance Certificate
  • Latest Tax Receipts
  • Occupancy Certificate

Is an FIR necessary while making any claim?

Yes. FIR is compulsory in cases where insurance is claimed for malicious damages, riots, terrorism, burglary, theft and larceny. In case of a fire incident, you need to submit the assessment report compiled by the fire department as well.

How do banks value the property for insurance purposes?

Property valuation is done by multiplying the built up area of the property with the cost of construction per square feet. This is the usual method followed by most banks.

What is generally the tenure of a home insurance?

It varies from bank to bank. Generally, most policies cover a period of five years.

What is covered under personal possessions?

Under personal possessions, home insurance companies generally cover furniture, electronic/electrical gadgets and jewellery under personal possessions. However, the maximum liability of these items depends upon the type of insurance cover sought or valuations done by the bank.

What does a home insurance policy cover?

Home insurance policies cover the house structure as well as its contents or possessions. Many insurance policies also combine various personal insurance features too.

What is home insurance?

Home insurance is a type of insurance policy that covers private residences and protects them from unpredictable damages, natural or man-made disasters, burglary and theft.

Can I repay the loan ahead of schedule?

Yes, lending institutions allow you to prepay your loan. However, these institutions may charge early repayment penalties, which may vary ranging from 2% to 3% of the outstanding principal amount.

Do I need a guarantor to get a home loan?

It depends from one bank to another. Some banks ask for 1 or 2 guarantors.

If I have money, is it still necessary to avail of a bank loan for buying a home?

It is generally advantageous to go for a home loan as it helps you in availing tax benefits. However, please consult your CA or tax advisor to discuss the pros and cons.

Do I need to furnish any security to get a home loan?

In a majority of the cases, the property to be purchased itself becomes the security and is mortgaged to the lender till the entire loan is repaid. A number of lenders may ask for additional security such as life insurance policies, fixed deposit receipts and savings certificates.

Can I sell the property even when the home loan is outstanding?

Yes, you can sell the property with the prior consent of the financing bank.

If the buyer wants to take a loan to buy the property, the process is much easier if he/she approaches the same bank. In these cases, the bank does not need to release the property papers to another bank before getting the payment.

If the buyer wants to make a payment outright, he can make it to the bank directly. The property papers will be released only after the bank has recovered the entire loan amount and other dues

Can a single woman get a loan?

Yes, a single woman can get a loan. Many lending institutions also have special schemes for them, such as a discount of up to 0.25% on the interest rate.

What is a down payment?

Generally, banking & finance institutions pay around 75% to 85% of the cost of the property bought. The remaining 20% of the amount is paid on an up-front basis, which is popularly known as the down payment.

What is the normal time required for disbursement of a home loan?

On an average, loans are disbursed within 3-15 days after satisfactory and complete documentation and completion of all the required procedures.

I have two housing loans on two different properties. Can I get tax rebate for both the loans?

Yes, you can get the benefit on both these loans. However, the total amount that you would be entitled to will not exceed Rs 1,50,000 for both the homes.

What is the tax rebate available on a home loan?

As per Section 80C of the Income Tax Act, you are allowed separate deductions on the principal and interest amount of the home loan amount, along with other entities like ULIP, PF, PPF, ELSS and NSC’s. In case of the principal amount, you can claim a deduction of upto Rs 1.5 lakhs while in case of interest, it is upto Rs. 2 lakhs. The amount of stamp duty and registration is also eligible for tax deduction.

It is important to note that the tax break can only be claimed for the year in which the construction of the property has been completed.

Are there any other charges that accompany home loans?

Home loans are usually accompanied by the following extra costs:

  • Processing Charge: It is the fee payable to the lender upon applying for a loan. It is either a fixed amount not linked to the loan amount or a percentage of the loan amount.
  • Pre-payment Penalty: When a loan is repaid before the scheduled duration, a penalty is charged by some banks, which is known as the pre-payment penalty.
  • Miscellaneous Costs: Some lenders may also ask for documentation or consultation charges.

What is the difference between fixed rate and floating rate of interest?

In the fixed interest rate scenario, the interest remains constant throughout the loan period irrespective of the changes in market conditions while in the floating interest rate scenario, the interest can decrease or increase depending on market fluctuations.

How is the interest rate calculated?

The interest on home loans is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing method is also adopted.

Specifics are mentioned below:-

  • Annual reducing method: In this system, the principal, for which you pay interest, reduces at the end of the year. Thus, you continue to pay interest on a certain portion of the principal that you have actually paid back to the lender. This means that the EMI for the monthly reducing system is effectively less than the annual reducing system.
  • Monthly reducing method: In this system, the principal, for which you pay interest, reduces every month as you pay your EMI.
  • Daily Reducing method: In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than in the monthly reducing system

What are the various documents needed to apply for a home loan?

You would be required to submit the following documents:

  • Proof of Identity: PAN, Driving license, Voter ID, Aadhar Card
  • Proof of Income:
    • Salaried Applicants: Latest 3 Months salary slip showing all deductions and Form 16 for the last three years.
    • Self Employed Applicants: IT returns for the past 2 years and computation of income for the last 2 years as certified by a CA
  • Bank Statement: Past 6 months
  • Guarantor Form (Optional)
  • How does my salary influence my home loan amount?

    Apart from other criteria and norms of the lending bank, the home loan amount is generally calculated @ 30% to 65% of your gross income. You can increase your loan amount by including a co-applicant.

    What are the general eligibility conditions for availing a home loan?

    The general eligibility conditions are as follows:

    • The borrower should be a resident of India or an NRI
    • He / she should be above 24 years of age at the beginning of the loan
    • He / she should be below 60 years (65 for self-employed) or at the retirement age when the loan matures

    Can a Home Loan be Pre-approved?

    Yes. One can avail of a pre-approved loan from a housing financial institution or a bank.

    What is Pre-EMI?

    Under the Pre-EMI option, the borrower is required to pay only the interest on the loan amount that will be disbursed as per the progress on the construction of the project. The actual EMI payment starts after the possession of the house.

    What is an EMI?

    EMI or Equated Monthly Instalment is a fixed amount paid by you to the bank on a specific date every month. The EMI’s are fixed when you borrow money from the bank as a loan. EMI’s are used to pay both interest and principal amount of a loan in a way that over a specific number of years, the loan amount is repaid to the bank alongwith interest.

    Does the tenure affect the loan cost?

    Longer the tenure you have, the lesser will be your EMI but higher would be the interest outgo. In shorter tenures, you pay a greater EMI, but the loan gets repaid faster and you pay less by way of interest.

    What is the average tenure of a home loan?

    As home loans involve a large sum of money, the tenure generally varies between 3 to 30 years.

    What are the types of Home loans available?

    The banks usually offer the following types of loans on interest:

    • Home Purchase Loan: It is the most common type of loan taken for purchasing a new residential property or an old house from its previous owner.
    • Home Improvement Loan: Home improvement loans are given for executing repair and renovation work at home.
    • Home Construction Loan: These loans are sanctioned to construct a house on a piece of land you have already purchased. The loan approval and application process for these loans is somewhat different from the other commonly available home loans.
    • Home Extension Loan: Home extension loans are offered for expanding or extending an existing house. To cite a few examples, addition of an extra room, a floor etc.
    • Land Purchase Loan: This type of loan is granted for the purchase of a plot of land for both residential or investment purposes.
    • Home Conversion Loans: These loans are available for people who have already purchased a house by taking a home loan but would now want to buy and move to another house. With these loans, they can fund the purchase of the new house by transferring the current loan to the new house.
    • Balance Transfer Loan: These loans are availed to transfer one’s home loan from one bank to another. It is usually done to repay the remaining amount of loan at lower interest rates or when a customer is unhappy with the services provided by his existing home loan provider and wants to switch to a different bank.
    • NRI Home loans: These are specialized loans, structured to suit the requirements of NRI’s who wish to build or buy a home in India.
    • Loan against Property (LAP): These loans are given or disbursed against the mortgage of a property.

    What is a home loan?

    Home loan is the money borrowed from a bank or a housing finance institution on interest for buying / constructing / upgrading a residential real estate property.

    Can I get an in-principle approval and actually avail of the loan later?

    What we do is, before you choose the house you want to buy, we give you an in-principle approval based on your income and capacity to repay. This makes the entire process of identifying and buying a house easier and more flexible. You won't be under pressure to identify a house as you know how much funds the bank would make available to you.

    And how long is this approval valid?

    This in-principle approval is valid for 45 days 3 months to give you sufficient time to choose a flat/house of your choice.

    • What security do I have to furnish?

    SBI requires a mortgage of the property for which the loan is being taken. Where mortgage can't be provided, other tangible security would need to be provided. The title of the property should be clear, for which a certificate would be required from the Bank's approved advocate, safeguarding your interests as well as Bank's interests.

    Additional security may be required where the house is under construction. This may be for an interim period, by way of tangible security or guarantees from sound and solvent individuals.

    I want to sell my property. What are the documents which would be required to be furnished to the buyer?

    A buyer could ask you for the original Sale Deed, Title Deed, relevant tax receipts and an Encumbrance Certificate.

    Who is required to pay the stamp duty?

    Only the buyer is required to pay the Stamp Duty.

    Is there a procedure to be completed or forms to be filled upon execution of the Sale Deed or Transfer Document?

    Yes. However, the procedure and forms may vary from state to state depending upon the location of the property. Every state in India has formulated its own set of forms under the registration rules. These forms are required to be filled up and filed at the time of the registration of Sale Deed/Transfer Deed.

    In the Income Tax Act under the clauses governing rules for a sale transaction, it is mandatory for the buyer and seller to provide their PAN card number and in the event of a sale, either the seller and/or the buyer would need to fill up Form 60 as presecribed under Income Tax Act.

    If the buyer or the seller is a Non-Resident Indian (NRI) not assessed for taxes in India, the person would not need to file Form 60 under the Income Tax.

    Is it mandatory to register documents for the sale of property?

    Yes. You can get it done at the sub-registrar's office of the concerned district.

    When is the sale of a residential property formalized?

    The sale of a residential property is said to have been formalized if the seller has received the entire consideration amount, registration of the documents has been carried out and actual possession of the property has been granted to the buyer.

    Are there any tax benefits for Non-Resident Indians buying properties?

    No. Tax benefits are available for NRI's only if you file your returns and subsequently become eligible to avail the tax benefits as mentioned under Home Loan FAQ's.

    What are the documents required for obtaining NRI Home Loans?

    Apart from the documents mentioned under the home loan section for Indian citizens, NRI’s are required to submit a few additional documents as well. These include:

    • A copy of a valid passport
    • A copy of the work contract or the labour card
    • The power of attorney (POA). (POA is required because the borrower is not based in India)

    What is the mode of payment for NRI home loans?

    The housing loan needs to be paid upfront for the entire tenure of the loan by way of direct remittances from abroad through normal banking channels or from other financial accounts as may be permitted by RBI. Generally, payments are done through NRO, NRE, NRNR and FCNR accounts. These accounts change on the basis of RBI regulations.

    What is the repayment period for the home loan for NRI’s?

    Home loan offered to NRI’s do not exceed 5 years in major cases. However, some financial institutions offer loans for a term of 7 years as well. The repayment for the loan is done through monthly instalments (EMI), which usually begin after the entire loan amount has been disbursed. As regards cases which involve part disbursement, you need to pay simple interest at the interest rate applicable on the loan amount disbursed.

    What are the eligibility criteria for obtaining NRI Home Loans?

    The eligibility is calculated in the same way as is done for resident Indians with a special emphasis on:

    • Qualifications - Graduate (Minimum)
    • Current job profile and work experience
    • Chances of continuing abroad for the loan tenure
    • Chances of servicing the loan with an extended tenure in case the applicant needs to return to India

    What kind of property can an NRI avail a home loan for?

    To purchase a house which is either ready to move in, under construction or bought from another owner, an NRI is eligible to apply for home loans. Additionally, NRI’s can apply for home loans under the following scenarios:-

    • For construction of a property on a plot of land by self
    • To purchase a plot allotted by a society / development authority
    • For the purpose of renovation or improvement of an existing property in India

    Can proceeds of the sale of such properties be remitted out of India?

    In case of residential properties, the repatriation of sale proceeds is restricted to not more than two such properties, if the property was purchased from funds held in an NRE Account.

    Additionally, the amount repatriated out of India should not exceed the amount paid for acquisition of the immovable property in the foreign exchange received through normal banking channels or from the funds held in FCNR or NRE Account.

    Can a home/land be sold by an NRI or Person of Indian Origin without the permission of the Reserve Bank of India?

    Yes. The RBI has granted general permission for sale of property. However, wherein another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.

    What should be the mode of payment for purchase of residential/commercial property in India by an NRI/PIO?

    Under the existing general permissions available, an NRI/PIO may purchase residential/commercial property in India out of the funds remitted to India through normal banking channels or through funds held in his NRE/FCNR (B)/NRO account. No consideration would be paid outside of India.

    Can an NRI or a PIO or a foreign national of non-Indian origin hold any immovable property in India acquired through inheritance from a person resident outside India?

    Upon receiving specific approval from the RBI, a person who is resident outside India may hold an immovable property in India acquired through inheritance from a person resident outside India, provided the owner had acquired such property in accordance with the rules and regulations of the foreign exchange law in force at the time of acquisition or under specific FEMA guidelines.

    Can a person resident outside India hold any immovable property in India acquired by way of inheritance from a person resident in India?

    Yes. A person resident outside India can hold immovable property acquired by way of inheritance from a person resident in India as per the provisions of Section 6(5) of the Foreign Exchange Management Act, 1999.

    Can an NRI/PIO acquire residential/commercial property by way of a gift under the general permission available?

    Yes. Under the general RBI guidelines, NRI/PIO may acquire residential/commercial property by way of a gift from a person resident in India or an NRI or a PIO.

    Can a foreign national of non-Indian origin acquire residential property on a lease in India?

    Yes. A Foreign national of non-Indian origin (including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) can acquire residential properties on lease in India. If the lease does not exceed five years, he/she does not require any prior permission from the RBI.

    Can an NRI or PIO buy property in India jointly with other Indian citizens/PIO?

    Yes.

    Can NRI or PIO buy property in India jointly with foreign citizen?

    No. An NRI or a PIO cannot buy a property in India jointly with a foreign citizen.

    Can an NRI or a PIO or a foreign national of non-Indian origin acquire agricultural land/plantation property/farm house in India?

    No. A person resident outside India cannot acquire by way of purchase agricultural land/plantation property/farm house in India.

    Is there any limit on the number of housing properties that an NRI can buy?

    No. There is no limit placed on the number of residential properties that an NRI can buy in India.

    Do NRI’s require consent of the Reserve Bank of India (RBI) to buy immovable property in India?

    No. NRI’s do not require any consent from the RBI to buy immovable property in India, provided the property is residential or commercial in nature.

    What is meant by a person resident in India?

    As per India's Foreign Exchange Management Act (FEMA) 1999, a person resident in India is a person residing in India for more than 182 days during the course of the previous financial year (April-March) and who has come to or stays in India either for employment, business or for any other vocation.

    Who is a Person of Indian Origin (PIO)?

    PIO means an individual (not a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan), who at any time has held an Indian passport, or who or either of his parents or grandparents were a citizen of India according to the Indian Constitution or the Citizenship Act, 1955.

    Who is an NRI?

    As per India's Foreign Exchange Management Act (FEMA) 1999, an NRI or Non Resident Indian is a citizen of India or a foreign national of Indian origin living outside India for the purpose of employment, business or any other vocation, which would indicate his intention to stay outside India for an indefinite period of time. An Indian would also be termed as an NRI if his stay in India is less than 182 days.

    How would my property be inherited if I die without leaving a will?

    When a person dies without leaving a will, the rules of succession (or inheritance) have to be followed to distribute the deceased person's property among his legal heirs. The rules of succession determine as to who are the rightful heirs of the deceased and what would be their share in the inheritance. Note: The term 'property' refers to immovable property, unless stated otherwise).

    Do the same rules of succession and inheritance apply to everyone?

    In India, the rules of succession differ between religions. Therefore, succession works differently for Hindus, Christians, Muslims, Jews and Parsis. However, the rules of Hindu succession are also applicable to Buddhists, Jains, Sikhs and any other person who is not a Muslim, Christian, Parsi or Jew by religion. (Note: The rules of succession detailed here apply specifically to Hindus, unless stated otherwise).

    Which of my properties can be inherited by my heirs?

    Property of all forms can be inherited by your legal heirs. This would include not only your own acquired property but also your share in the ancestral property of your family.

    What is the meaning of ancestral property?

    An ancestral property can be defined as a property acquired by your great grandfather which has been passed down from generation to generation (viz., your grandfather and father) up to the present generation (you) without being divided or partitioned by the family. Therefore, the property should be four generations old and should not have been divided or partitioned by the previous three generations for the property to qualify as your ancestral property.

    What is the meaning of self acquired property?

    Self acquired property is the property that you have purchased from your own income. As far as your self acquired property is concerned, you are free to dispose it off in any manner as per your discretion.

    How is ancestral property different from self acquired property?

    Your right to a share in your ancestral property is given to you by the mere fact of you being born. Your share in your ancestral property cannot be taken away. This is unlike other forms of inheritance, wherein inheritance opens only upon the death of the owner of the property. For example, your father may exclude you from the inheritance of his self acquired property. However, he is barred from doing this as far as your share in ancestral property is concerned.

    How is the share in ancestral property calculated?

    The rights of the heirs in ancestral property are determined per stripes and not per capita. This essentially means that the share of each generation is first determined and the successive generations in turn subdivide what has been inherited by their respective predecessor.

    Why is it important to determine whether a property that may form part of a inheritance is either self acquired or ancestral?

    Identifying a property that may form part of an inheritance as either self acquired or ancestral is crucial as the law treats both types of properties very differently. Identifying a property as either self acquired or ancestral will help you to plan as to how your estate would be inherited by your heirs. On the other hand, as a legal heir, this would also allow you to identify your rightful share in the family estate.

    Can a property lose its ancestral character? If yes, please explain how.

    Once an ancestral property is divided, the share of each legal heir is his or her own self acquired property. Further, property inherited by either a will or a gift is not treated as an ancestral property. Moreover, self acquired property can become ancestral property if it is thrown into the pool of ancestral properties and enjoyed in common. It should also be kept in mind that properties inherited from your mother, grandmother, uncle and even your brother cannot be considered as ancestral properties.

    {Illustration: Property gifted by a father to his son could not become ancestral property in the hands of the son simply due to the fact that he got it from his father}.

    Who are the legal heirs when no will is left behind by a male?

    Your property would be inherited by what are known as Class-I heirs who are given priority under law such as your children. Each Class-I heir would get an equal share in the property. Therefore, if you leave behind your wife, two children and your mother, each one of them would get 1/4th share of your overall estate. If there are no Class-I heirs, then your estate would be divided among Class-II heirs. In the remote possibility that there are no Class-I or Class-II heirs, your estate would be divided between the distant blood relatives.

    Who are included in the definition of Class I heir?

    • Son
    • Daughter
    • Widow
    • Mother
    • Son of predeceased son
    • Daughter of predeceased son
    • Son of predeceased daughter
    • Daughter of predeceased daughter
    • Widow of predeceased son
    • Son of predeceased son of a predeceased son
    • Daughter of predeceased son of a predeceased son
    • Widow of predeceased son of a predeceased son
    • Son of predeceased daughter of a predeceased daughter
    • Daughter of predeceased daughter of a predeceased daughter
    • Daughter of predeceased son of a predeceased daughter
    • Daughter of predeceased daughter of a predeceased son

    Who are included in the definition of Class II heir?

    • Father
    • Son's daughter's son/daughter; Brother; Sister
    • Daughter's son's son's/daughter; Daughter's daughter's son/daughter
    • Brother's son; Sister's son; Brother's daughter; Sister's Daughter
    • Father's father; Father's mother
    • Father's widow; Brother's widow
    • Father's brother; Father's sister
    • Mother's Father; Mother's mother
    • Mother's brother; Mother's sister

    What rights do women have in an inheritance?

    Initially, women were denied a share in an inheritance of property and the law gave preference to the sons. However, a daughter now has an equal right in the property left behind by their fathers. This however only applies to properties left behind after 2005. Therefore, if a person had passed away before 2005, the daughter cannot claim an equal share in the property. She is however entitled to a certain amount of maintenance if she is unmarried. At present, a daughter has the same right in the property of her father on par with a son.

    Are there any specific rules that apply only to properties left behind by women?

    A property left behind by a woman should be divided equally among her children and her husband. If a child had already passed away, then that child's share would be divided between his children. If there is no surviving spouse, child or grandchild, then the property should be divided between her parents. If her parents have also passed away, then the property would be divided between the heirs of her parents.

    Can someone be disqualified from inheriting property?

    A person is disqualified from inheriting the property of a person he has murdered or helped to murder. Further, if children convert to another religion, then the grandchildren would be disqualified from the inheritance unless the grandchildren convert back to Hinduism.

    Can a widow inherit property if she has remarried?

    If your son, grandson or brother has left behind a widow, then she would be able to claim a share in the property even if she has remarried.

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