A lot of non-resident Indians who go abroad for business
often plan to comeback someday. For these NRIs, an NRI home loan provides an
ideal opportunity to buy their dream home back in India and gives them the
ability to settle when they come back to the country. These home loans are
given out by all major banks and can be requested by anyone who fits the
description of an NRI, which is in general; a person who is an Indian citizen,
holding an Indian passport, who stays out of the country for the purposes of
business or work for an uncertain period of time.
This includes those who work as government officials in
international organizations such as the UN, individuals who work for private
companies with postings abroad or anyone else who conducts or facilitates
business outside the country. For these people, buying a house back in India
makes sense as they are most likely planning to come back to India upon
completion of their work. But it wouldn’t be practical if they had to come to
India and then start searching for a home as we all know that the process of buying
a home in our country is complicated and often long drawn out. It is for this
reason that many banks have provided the facility of availing an NRI home loan,
which allows the individual to find and set up their house in India while
they’re still abroad making the process of settling convenient, quicker and
easier. For those considering an NRI home loan, it is important to bear these
five crucial points in mind.
What does an NRI home
loan avail you?
Just like a normal home loan, an NRI home loan entails you
with the ability to purchase or develop certain properties in India. In fact,
an NRI home loan entails you the same properties that a resident Indian can
purchase through their home loan. The properties that are covered by this
scheme are of four types; properties that are already constructed, properties
that are under construction, properties that are to be constructed on an owned
area and existing properties to which changes are to be made. In each of these
cases a home loan can be requested from a bank to purchase or develop the
property except in the case of creating alterations to a pre-existing property;
in which case there will be a variation in the type of loan that is provided.
This is besides the fact that every bank will have different terms and
conditions for the loan they provide.
How much can I
request for as my loan amount?
There is no set lower and upper limits for the loan amount
you can request for. Each bank sets its own terms and conditions on the amount
of loan that you can avail from them. The amount you can avail usually depends
on three main factors; your educational or professional qualifications, your
place or country of residence and you gross monthly and net monthly income (GMI
and NMI). In the case of educational qualifications, if you’re looking for a
home loan in India, you will have to be a graduate or higher for a bank to even
consider you for a loan. Apart from that, your level of qualification also
affects the loan amount you can avail. The same goes for any professional
qualification you may hold. The next factor is your place or country of
residence. Most major banks have their offices in many countries and the
economic status of the country you’re residing in plays a major role in
deciding the amount of loan you can request for. Depending on the relative
value of the currency, financial situation existing in the country and a host
of other factors, banks set a minimum criterion for earnings based on which you
can apply for a loan. As it differs for each country, you should do research
for the country you live in before applying for a loan. The final factor is
your income. In most cases, banks provide for an advance of around 80-85% on
the value of the property based on your gross monthly income. Usually, the
maximum amount of loan a bank is willing to grant is in the range of 36-40
times your gross monthly income. In some cases the banks may also look at the
ratio between your equated monthly installments (EMI) to your net monthly
income (NMI).
What is the rate of
interest and tenure of loans I can look forward to?
As an NRI is not working in India and it is uncertain for
how long the person would be present abroad, there is a greater risk in the
repayment of loans. It is for this reason that in the case of an NRI Home
Loan the tenure and rate of interest differs from that of a residential
home loan. While a person living in India can look forward to tenure of thirty
years for their home loan, an NRI is restricted to tenure between five to
fifteen years based on the bank and the loan amount. Also, it is usually found
that an NRI will have to pay a further 0.25 – 0.50 % more on the base rate of
interest as compared to a resident on a residential home loan.
What are the
documents that I need?
The documentation required for an NRI home loan is different
from a normal home loan. To apply for the loan you will need; copies of your
passport, a valid visa and permit for your work, your employment contract, a
work experience certificate showing the amount you’ve worked, your salary
circulars, statements from the bank of your NRE or NRO accounts and if you are
residing in the Middle East, you will have to provide your employment card as
well. Although so many documents are required, submitting and having them
verified isn’t difficult. Many banks have their branches present overseas and
some of them even provide the facility of submitting your documents online. In
case you would like a resident back home to do your submission, you will have
to grant that person a Power Of Attorney so that they can complete the process
for you.
How do I repay my
loan and what happens if my status changes to reflect a resident?
In order to repay the loan, you will have to possess a
non-resident external (NRE) or a non-resident ordinary (NRO) account. Payments
will only be accepted from either of these types of accounts and payments can
only be done in Indian rupees. If by any chance, during the process of
repayment or anytime during this entire process you happen to become a resident
of India and change your status from that of an NRI, the various aspects of the
loan such as the loan amount, tenure and rate of interest will also be changed
in order to reflect your new status.
Keep in mind that although the process is usually common
across the different banks, every bank can have slight variations in their mode
of operation. So it is best that you learn of these variations beforehand so
that when you do apply for your loan, the process is streamlined.
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