Are you an NRI (Non-Resident Indian) planning to apply for a home loan to purchase/construct a house in India but not sure how to go about it? Don’t worry, with many financial institutions offering home loans for non-resident Indians (NRIs), it has become quite easy to own a home in India. So, there is no need to wait to get your dream home here. Read this blog to know more about NRI home loans, how they work, the application process, eligibility criteria, and more.
NRI home loans are meant for NRIs wanting to own a home in India. These special loans are made for anyone defined as an NRI by the Foreign Exchange Management Act (FEMA) 1999. This law defines NRIs as people residing abroad for employment, business purposes or vocation for an indefinite period.
FEMA also stipulates any individual who stays in India for less than 182 days in the previous fiscal year will be defined as an NRI.
There is a large demand for home loans among NRIs and PIOs, especially during the holiday season. As a result, lenders often offer attractive interest rates, minimal processing charges, documentation and flexible repayment options for these loans.
NRI home loan rates are usually similar to that of normal home loan rates.
|SBI||6.90% – 7.50% p.a.|
|Bank of Baroda||6.85% – 7.20% p.a.|
|Axis Bank||6.90% – 8.55% p.a.|
|HDFC Ltd.||6.90% – 8.00% p.a.|
|Canara Bank||6.90% – 8.90% p.a.|
Just to put it out there, another alternative for an NRI home loan would be asking your relative or sibling or parents living in India to take a home loan for you; you could repay the amount to them as per your home loan EMI obligations. For instant home loans, they can download the Navi app. With Navi, you can get loans up to Rs.10 crore at attractive rates starting at 7.39% p.a. and flexible repayment tenures up to 25 years. One point to note, for NRI home loans, the tenure could be lesser than normal home loans.
The loan application process could vary from lender to lender. Below mentioned are the most common steps that most lenders ask you to follow
You could either visit the lender’s website or download the app.
Click on the NRI Home Loan section to proceed with your loan application.
Use an online NRI home loan eligibility calculator to check your loan eligibility. You may have to provide your income details, monthly employment status, employer name, etc.
The lender would give you details of the loan you’re eligible for including the amount and interest rate. Choose the amount you need along with the loan tenure.
Review the details you have provided and apply.
Once done, the loan amount would be credited to your account. This could take 3-14 days.
Similar to normal home loans, to qualify for an NRI home loan, you need to meet certain eligibility parameters. These criteria help the lenders in determining whether you will be able to repay the loan amount in the given tenor or not.
So, if you fail to meet the eligibility criteria, the lender may reject your loan application, which will, in turn, could have a negative impact on your credit profile.
The eligibility criteria for NRI housing loans are different for each financial institution. However, most have them have some common ones like:
|Age||23 – 65 years|
|Residential Status||Non-resident Indian (NRI), Person of Indian Origin (PIO) or Overseas Citizen of India (OCI).|
|Employment||Salaried or Self-employed|
|Work Experience||Minimum 2 years of employment in the current company|
|Minimum Salary||Depends on the lender|
|Tenure||Up to 15 years|
NRI home loan eligibility depends on multiple factors. Here are a few of them:
Fixed Obligations to Income Ratio (FOIR)
FOIR represents the disposable income that you can use to repay the debt. So, if your FOIR is 50%, it indicates that your monthly obligations are 50% of the monthly income. The financial institution will consider the remaining amount to determine the loan amount you can borrow.
Every lender sets a minimum income criterion based on the city you stay and work in. If you are salaried or self-employed with a steady source of income, you are eligible to apply for a home loan.
Employment status and age
Similar to your income, your employment status also affects home loan eligibility. If you are a salaried employee for a reputable private or public limited company, you are considered a more reliable borrower.
Lenders assess the creditworthiness of borrowers through their credit score, which is a three-digit numerical score ranging between 300 and 900. The higher your score, the better are your chances of obtaining a home loan at reasonable terms.
Also Read – Home Loan For Women
Property related documents
Every borrower needs to repay their loan via EMI or equated monthly instalment. You can use any online EMI calculator to calculate your monthly repayment obligations. Here’s how to use an NRI home loan EMI calculator. Enter the loan amount, interest rate and tenure. If you want to check the total loan cost, you can enter the processing fee as well. Hit “enter” to calculate your EMI. Some EMI calculators come with an amortisation table. That would give you an idea of how much you would pay towards the interest and principal amount and what would be the outstanding amount every month till the end of the loan tenure.
1. Take a look at the pre-requisites
Many lenders have certain pre-requisites for income and educational qualifications for NRI home homes. You will also want to take a look at the minimum number of years of experience you need in a foreign country.
2. Rules for property ownership in India
NRIs cannot own more than two residential properties in India. There are no such restrictions on commercial property, but NRIs cannot own any agricultural land.
3. Power of attorney requirement
Lenders will require you to extend the power of attorney (PoA) to someone when extending home loans. This could be a trusted relative or a chartered accountant (CA). This is done so that the bank can reach out to the PoA in case of any repayment issue.
4. Cost of home ownership
The cost of a home in Indian rupees will include forex losses/gains during the purchase plus interest and statutory dues in India or abroad. The cost of ownership may increase if the Indian currency strengthens over the dollar.
NRIs will need to know about the taxation rules in India and their resident country. Factors like foreign currency fluctuations and Indian tax policies can also affect the taxation costs for their homes in India.
Many lenders are offering competitive interest rates for NRI home loans. Its application process is quick, simple and transparent. So if you meet the eligibility criteria, you can easily apply for a home loan in India from any corner of the world.
Ans: The usual tenure for NRI home loans is between 5 to 15 years. However, some lenders can allow a maximum tenure of up to 30 years.
Ans: Most lenders offer these loans at around the same interest rates as regular home loans or slightly higher. Others offer mixed-interest rates, where the rates remain fixed for a certain period and then get charged on a floating rate.
Ans: You can repay EMIs of these home loans only through NRE and NRO accounts from abroad. All repayments need to be made in Indian rupees.
Ans: Yes. The usual tax benefits for home loans are available for NRIs if they file income tax returns in India. For a vacant home, you can get a tax deduction of Rs. 2 lakhs on the interest repayment and Rs. 1.5 lakhs on principal repayments.
Ans: Yes. You can make a joint application to reduce the interest burden of your home loan. You may get preferential rates if you are taking a joint home loan with your wife. Some banks offer interest rate concessions for women borrowers.
Before you go…
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.