Owning a home is a dream for most of us and thanks to the diverse home loan schemes available to make that dream a reality. How is this different in case of Non- Resident Indians (NRI)? Is it equally easy for them to obtain a home loan and own the property of their choice? NRI home loans are now easily available in India, subject to fulfillment of certain conditions.
Before getting into the details of a home loan for NRIs, it is essential to understand just who is a non-resident Indian. All banks and non-banking financial companies (NBFCs) go strictly by the definition of NRI as adopted by the Reserve Bank of India. Under the RBI definition, any citizen who holds a valid Indian passport and stays out of India for employment or business spending less than 182 days in India in one financial year is deemed as abefore applying for a home loan under NRI category, make sure you qualify for a NRI home loan keeping in view the minimum number of days to be spent away from India.
Here we take a look at what is required to avail this loan and how it differs from a normal loan taken by a resident Indian:
Eligibility and Documents required
An NRI should meet the criteria on minimum age and minimum years of work experience abroad. The criteria vary across institutions. In State Bank of India (SBI) the minimum age limit is 18 years and the number of years a NRI should have worked should be 2 years. But if you intend to take a loan from ICICI bank, then it is enough if you had worked for one year abroad, but your minimum age should be 25 years. If you are a self-employed, then you should have stayed abroad for at least 3 years.
For the documentation process, a copy of your passport, visa and employment related documents such as your three to six month salary slips, appointment letter, employment contract if any and address proof, are mandatory. These documents can be submitted to the overseas bank branch located the closest to you, in the country where you reside. The documents are then sent to the Indian branch for processing.
Loan tenure & Interest rates.
Earlier there were differences in the interest rate charged for a NRI home loan and for the ones offered to resident Indians. But now the rates are the same.
When it comes to loan tenure, institutions and banks like HDFC and SBI offer longer periods of 20 to 30 years – the same as offered to a resident Indian. But in some cases the loan tenure is restricted to 10 or 15 years.
Maximum Loan Available
While banks and non-banking financial companies are free to use their discretion in offering the maximum loan amount for NRI home loans, there is not much difference in deciding maximum amount of loan compared to Indian residents. Usually NRIs can expect a maximum loan amount ranging from 80-85 percent of the total market value of the property. There is however a difference in which banks or NBFCs calculate the maximum loan amount for NRIs.
Some banks use the gross monthly income of the NRI as a yardstick offering upto 40 times the gross monthly income as the maximum home loan amount. Other banks use net monthly income as their defining yardstick limiting a certain percentage of net monthly income as a deciding factor.
Features of NRI loans
- Loan tenor restricted to 10-15 years in some cases
- No difference in interest rate offered to residents and non-residents
- Repayments made through NRE/NRO accounts
- Loan repayment is eligible for tax exemption only if an additional taxable income earned from India