Pushpam Group

NRI insights

If you are an NRI, acquiring property in India can be confusing and complex. The acquisition of property always follows a great deal of deliberation. Hence, it is better to thoroughly read through all the documents before investing. The following legal information will help you understand the process better:

• NRIs holding valid Indian passports do not require permissions from RBI for acquiring immovable property for residential purposes.

• NRIs holding Indian passports may pay the purchase consideration either by remittance of funds from abroad (through normal banking channels) or out of NRO/ NRE/ FCNR accounts.

• Obtain a title report by the solicitor of the property and go through it with a fine toothcomb. Do ensure there are no encroachments, hidden conditions written in fine print, or any kind of reservations by the State Government.

• Thoroughly check the clearance reports to ensure that the property is not disputed. For example, if the project is being constructed near a heritage building, there may be issues with the Heritage department. Remember, the lack of clearance of titles will hamper the availability of home loans.

HOME LOAN

NRIs are recognized under the Foreign Exchange Regulatory Act, 1973. Every financial institution in India follows the RBI guidelines that define an NRI as – “An Indian citizen who holds a valid document like Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a NRI.”

To qualify for an NRI Home Loan, you need to meet any one of the following criteria:

• Indian citizens who stay abroad for employment or for carrying on business or vacation outside India.

• Indian citizens who stay abroad under circumstances indicating an intention for an uncertain duration of stay abroad.

• Government servants who are posted abroad on duty with Indian missions.

• Officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments or posted to branches or offices abroad.

• Indian citizens working abroad on assignments with foreign Governments or regional/international/multinational agencies like UN organizations, the World Bank etc.

• Non-Resident foreign citizens of Indian origin are treated on par with NRIs.

• NRIs should be diligent and select a proactive home loan provider (or HFC) given the geographical distances and frequent travel constraints involved.

RBI DIRECTIVE (Subject to Change as per Indian Govt. Guidelines):

NRIs and Persons of Indian Origin (POI) can acquire immovable property in India other than agricultural property, plantation or a farmhouse. The Reserve Bank of India (RBI) states NRIs and PIO purchasing immovable property in India, can pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country.”

The guidelines provided are:

• The home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining amount that is 15% needs to be provided an own contribution towards the cost of unit financed.

• The cost of the dwelling unit which is own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.

• However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.

The repayment option for NRIs is they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time.

LOAN ELIGIBILITY

The eligibility criteria of NRIs differ from Resident Indians

Age & Education: The loan applicant has to be a graduate and at least 21 years of age.

Income:The loan applicant has to have a minimum monthly income of $2,000 (although, this may differ across HFCs). The eligibility is also determined by the stability and continuity of employment/business.

Payment Options: The loan applicant to route the EMI (Equated Monthly Installments) cheques through a NRE/NRO account only.

Number of Dependents: The eligibility of the applicant is also determined by the number of dependents as well as assets and liabilities.

• An NRI applicant is eligible to get a home loan ranging from a minimum of Rs 5 lakhs to a maximum of Rs 1 crore.

• Home Loan Tenure for NRIs is different from Resident Indians.

• An applicant will be eligible for a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land, based on the repayment capacity of the borrower.

• An NRI can enhance his loan eligibility by applying for home loans with a co-applicant who has a separate source of income.

• The rate of interest for home loans to NRIs is higher than those offered to Resident Indians. The difference is to the extent of 0.25%-0.50%.

Some HFCs also have an internally earmarked ‘negative criterion’ for NRI home loans. As such, the NRIs who hail from locations that are marked as ‘negative’ find it difficult to acquire a home loan.

DOCUMENTS REQUIRED:

NRIs are required to submit additional documentation in the form of a copy of the passport, a copy of the work contract etc. Another key document required while processing an NRI home loan is the power of attorney (POA). The POA is important because, since the borrower is not based in India; the HFC would need a ‘representative’ ‘in lieu of’ the NRI. Although not obligatory, the POA is usually drawn on the NRI’s family members. The documents needed for obtaining NRI home loans are:

• Passport and Visa

• A copy of an employee appointment letter and contract

• The labor card/identity card (translated in English and countersigned by the consulate) and salary certificate (in English) specifying name, date of joining, designation and salary details

• Bank Statements of the last six months

Salaried NRI Applicants and Self-Employed NRI Applicants

•Copy of valid passport showing VISA stamps

•Passport copy with valid visa stamp

•Copy of valid visa / work permit / equivalent document supporting the NRI status of the proposed account holder

•Brief profile of the applicant and business / Trade license or equivalent document

•Overseas Bank A/c for the last 3 months showing salary credits

•6 months overseas bank account statement and NRE/NRO accountant

•Latest contract copy evidencing Salary / Salary Certificate / Wage Slips

•Computation of income, P&L account and B/Sheet for last 3 years certified by the C.A./CPA or any relevant authority as the case may be (or equivalent company accounts)

PROPERTY DOCUMENTS:

• Original title deeds tracing the title of the property for a minimum period of the last 13 years

• Encumbrance Certificate for the last 13 years

• Agreement of sale/construction, if any

• Receipts for payments made for purchase of the dwelling unit

• Approved plan/license

• ULC clearance/conversion order etc

• Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and/or the Non-Resident (Ordinary) account in India

• Latest tax paid receipt

• Allotment letter from the co-operative society/association of apartment owners

• Agreement for sale/sale deed/detailed cost estimate from Architect/Engineer for property to be purchased/constructed/extended/improved

• Copy of approved drawings of proposed construction/purchase/extension