Investing in Property from Outside India? Here's Everything You Need to Know About Home Loans for NRIs

By Lodha

While moving abroad allows you to make the most of new opportunities, nothing can sever the thread that ties you to your home country. From fond childhood memories to familial roots that define who you are, India is still your home in more ways than one. While you might visit frequently, whether for personal or commercial reasons, having a home base in India makes a world of a difference. Not only does it allow you to have a space of your own in your home country but can add value to your portfolio as well. 

With India's economy on the rise, investing in property in India can help you leverage the growing ROI rate. Additionally, you can also harness the property's resale value later and contribute to the nation's ever-burgeoning real estate market. However, purchasing property can be a capital-intensive affair, especially if you have a whole life to finance in another country. Thankfully, you can apply for financial aid in the form of NRI housing loans and create a second home in India. If you're not abreast with how housing loans for NRIs work, here is a definitive guide that will help you through the application process.

A Complete Guide on NRI Property Loans

Before getting into the details, it's important to clear some basics. An NRI home loan functions similarly to a regular housing loan. The only difference is that is catered towards Indians not residing in India. You can apply for an NRI housing loan for various purposes, from purchasing a ready-to-move or under-construction property to procuring funds for repair or renovation work. All you have to do is apply for the loan and if your application is approved, you will be disbursed a certain sum. You will be charged interest as per the prevailing rate and must repay the amount during the loan tenure. Usually, banks and financial institutions allow you to repay the loan amount via EMI payments. However, before applying for a loan, it is best to have a working idea of the various terms and conditions associated with it.

NRI Home Loan Tenure

Usually, lenders lend you a loan amount for a specific period. This time window, also known as the tenure, is also the period within which you must repay the loan amount. The tenure for an NRI housing loan differs from lender to lender. Additionally, it may also vary based on how strong your application is. Usually, the tenure for an NRI housing loan does not exceed 25 years.

NRI Home Loan Rates

Just like a regular home loan, an NRI housing loan also comes with an interest rate. Again, the interest rate tends to differ based on your lender. However, you will be informed of what the prevailing interest rate at a bank or financial institution is before you apply. You will have to pay interest as per the decided rate while repaying the loan amount. Interest rates on NRI housing loans begin at 6.85% p.a. and can vary as per the lender's discretion. Do note than NRI home loans are issued in Indian rupees (INR) and are repayable in the same currency. You may be asked to open a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) account with an Indian bank or financial institution. You can use these accounts to transfer your foreign earnings and repay the loan. Make sure to check the exchange rate fluctuations before doing so. 

NRI Home Loan Eligibility

Before applying for an NRI housing loan, it is crucial to check whether you are eligible to do the same or not. While the NRI loan eligibility criteria differ from lender to lender, here are a few basics you should have covered:

• Age: You should be at least 18 years of age and cannot be older than 60 or 70 years.

• Employment: You must be either a salaried or a self-employed individual.

• Nationality: You must be a Non-Resident Indian.

Along with these basic criteria, you will also have to meet other prerequisites set by your lender. Lenders also factor in your monthly income, age at the time of applying, credit history, retirement age, and so on while processing your application. Most lenders also require you to have a local co-applicant to apply for the loan jointly. Today, most lenders have a complete list of eligibility criteria listed on their websites. They also provide eligibility calculators that help you determine whether you can apply for a certain NRI housing loan or not.

NRI Home Loan Documents

While applying for an NRI housing loan, you will have to hand in certain documents to supplement your application. Again, the exact documents needed will differ from lender to lender. However, in general, you may have to submit the following documents:

• Identity Proof: You can hand in a valid passport or VISA card.

• Income Proof: You must provide the last 3 months' salary slips, the last 6 months' bank statements, Form 16 and IT returns, appointment letter, details of POA, and 6 months' Domestic NRE/NRO account statements.

• Property Documents: You must furnish (as applicable) a copy of the buyer agreement along with the payment receipt, copy of the agreement to sell, title deeds, proof of no encumbrances, and construction estimate.

Do note that this list of documents is not definitive nor is it exhaustive. A lender may not ask for some of the documents listed above and instead require other proof.

CIBIL score for NRI Home Loan

As mentioned, your credit history also plays a vital role in whether or not your home loan application gets approved. Your CIBIL score is considered to be a good indicator of your credit history and is taken into consideration while assessing your application. Ideally, a CIBIL score of 900 can make getting an NRI housing loan approval easier. However, any score upwards of 750 can improve your chances of getting approval.

Tax Implications of NRI Home Loans

As an NRI, you are eligible to claim deductions under Section 80C on the principal amount paid up to Rs. 1.5 lakhs. You can also claim deductions under Section 24 (b) on the interest amount up to Rs 2 lakhs. 

Now that you know more about how to apply for an NRI housing loan, you can seek the funds needed to set up a home base in India. To make the home loan approval process easier, it is best to go with a credible builder with a stellar reputation. 

At Lodha, our dedicated team, known as Lodha Fincorp, is committed to assisting NRI real estate investments through comprehensive support for home loan acquisition. This team partners with a wide network of more than 15 banks to provide the most streamlined and customer-centric home loan solutions. Our emphasis is on suggesting the most appropriate bank for each customer, tailored to their individual profile, thereby elevating the overall convenience of the home loan process.