by Shajai Jacob,
CEO – GCC (Middle East)
ANAROCK Property Consultants
Just like resident Indians, NRIs can invest in any number of properties in India and are also eligible to avail of home loans for as many properties as they like. Of course, while there is no cap on the number of properties for which an NRI can take home loans for, repayment capacity must always be factored in. Over-leveraging is never a good idea and regardless of what viewpoint a bank takes, NRIs must do their own repayment capacity calculations.
In India, most banks and non-banking financial institutions offer home loans to NRIs. However, the tenure of the home loan may vary, and the rate of interest is usually higher for NRIs.
Loan Tenure and Rate of Interest
An NRI usually has to pay a higher rate of interest than resident Indians. The tenure for a home loan to an NRI usually ranges between 5 to 20 years – only in select cases can it go up to 30 years for salaried professionals.
Most banks determine the loan amount eligibility of NRI borrowers based on their income and credit history. Apart from fulfilling basics like minimum age, qualification and years of employment, one must earn a minimum amount to qualify for a home loan.
The mandatory income limit again varies from bank to bank and also differs for the country of residence. For instance, $24,000 a year is considered the minimum income level for US-based NRIs. The loan amount can start from a few lakhs and go up to crores, depending on how much is the bank convinced of one’s eligibility.
Some banks may allow NRIs to club their spouse’s or sibling’s income with theirs to improve their eligibility, while other banks will only consider the principal borrower’s income. Obviously, it is important to have a good credit history and high credit score, as banks will invariably check the intending borrower’s credit report – both in the country of residence and India.
Any NRI can apply for a home loan in India as long as he/she is capable of repaying the loan and meets the eligibility requirements. These can again vary from bank to bank – however, most banks follow basic guidelines:
- Age: The home loan applicant should be minimum 18 years and maximum 60 years of age. This age limit may differ depending on the bank in question – for instance, Axis Bank lists 24 years as the minimum age for NRI applicants.
- Job tenure: The applicant should have been employed abroad for at least two years, or should be serving a valid job contract abroad for a minimum period of two years.
- Type of account: The applicant needs to open an NRE/NRO (non-resident rupee/non-resident ordinary) account from which to service the home loan.
Documents Required for Availing Home Loan
- Valid passport and visa documents for the mandatory know your customer (KYC) exercise.
- Permanent address proof in India.
- Appointment letter, work experience certificate, work permit and contract of employment from the current employer in the concerned country.
- Salary pay-slips and supporting statements of Non-Resident External (NRE) and Non-Resident Ordinary (NRO) bank accounts.
- Address proof from the current country of residence, verified by the current employer (this can be supplied by mail as well), along with the income tax return statements from the concerned country.
- A valid qualification certificate to pass eligibility criteria.
- A General Power of Authority (GPA), duly notarized.
Repayment of Home Loan
An NRI can opt for various routes to make the repayment of their home loan EMIs, which must mandatorily be paid in Indian rupees via an NRE or NRO account:
- Transfer money from an overseas bank account through regular banking channels.
- Issue post-dated cheques or an Electronic Clearance Service (ECS) mandate from an NRE, NRO or Foreign Currency Non-Repatriable (FCNR) bank account.
- Pay from the rental income accrued from the property.
- Issue cheques for the EMI from a local relative’s bank account.
The designated GPA holder must be present in person at the time of disbursement of the home loan, as his/her signature is required by the bank in the absence of the main applicant.
Importance of Power of Attorney
Most lenders require a Power of Attorney (PoA) while extending home loans to NRIs. A PoA is a document stating that the NRI has given someone else the authority to make certain decisions and act on their behalf.
The logic behind this requirement is since the NRI lives in a foreign country, the lender needs someone in India to deal with. The PoA enables the bank to have a point of contact in India in case of any property or loan-related issue. Usually, lenders insist that the NRI borrowers appoint their parents, friends or children as the PoA holder.
While these are the broad guidelines for NRIs availing home loans in India, it is also important that NRIs do their own due diligence and compare the best bank options available.
Since certain rules vary from bank to bank, NRIs should check the information available online and also speak to the concerned representative in each of the banks under consideration. This not only allows them to identify the best option suiting their requirements but also opens a window for possible customizations.