NRI Home Loan – Every NRI aspires to buy a dream home in India. NRI can take a home loan for buying a flat, row house or bungalow in India. NRI can also take home improvement loan and home extension loan. Buying a home in India by availing home loan is a tedious process for NRI, especially when you are abroad.
If you are NRI and intended to buy a house India by availing Home Loan this post if for you. In this post, I will share information about NRI Home Loan, Documentation, checklist and important points about NRI home loan.
What is NRI Home Loan?
The Home loan provided to NRI for purchasing a flat, row house or bungalow in India is known as NRI Home Loan. To avail NRI home loan applicant must hold NRI/PIO status and must be working abroad.
Amount of loan
Bank offers a loan up to 80-85% of the property document. In addition to that, you can also include a cost of property registration and stamp duty while applying for the home loan. You need to arrange remaining amount for the down payment.
Example – If the home that you want to buy is costing 50 Lac, you can get a home loan up to 40 Lac. Bank will provide home loan only if they are convinced that you can repay the home loan.
You can apply for home loan individually or jointly. For the joint home loan, the co-applicant for the home loan should be your family member – spouse, parents, and children.
The Interest rate for NRI home loan will be same as that of a normal home loan. However, this rate will differ from bank to bank. Please visit Home Loan Interest rate comparison chart to get more information.
You need to produce following documents to avail home loan.
- Valid Passport
- Salary Certificate
- Bank statement of NRO or NRE account
- Work Experience certificate
- Valid Job contract or Work permit
- Proof of Income in case of self-employed professional or businessmen
- Local Address Proof
- Copy of approved building plans
- Clearance of Title
- The power of Attorney if you want the third party to authorize to execute the documents.
In addition to above, you will need an agreement of sale, letter of allotment from the builder, possession certificate.
Disbursement of home loan
NRI home loan disbursement is same as that of a normal home loan. This means you need to select the property and apply for the home loan. Bank will evaluate your document and eligibility for the home loan. Once your loan is sanction you need to pay your contribution to the builder. Once this process is completed you can apply for the disbursement.
The disbursement cheque will be issued in the name of builder or seller. If it is under construction project you can avail partial disbursement at various stages of the project.
Repayment of loan
The repayment of NRI home loan can only be done by the borrower by remittance from outside India. This repayment should be done from NRE or NRO account. Bank will accept payment in the Indian rupees only.
The down payment to builder or seller for purchasing house should be done from NRE or NRO account.
- NRI cannot get any tax benefit as they are earning money outside India and tax rule of respective country is applicable to them.
- NRI’s can avail tax benefit on income earned/ generated in India. The tax treatment, in this case, will be similar to a regular home loan.
Difference between Normal Home loan and NRI Home loan
NRI Home loan is slightly different compared to Normal Home Loan. A difference between these two loans is given below.
- NRI home loan is given only to NRI and not to normal residents of India.
- Maximum Tenure of NRI Home loan is 20 years.
- Repayment of NRI Home Loan EMI is allowed only from outside remittance through NRO/NRE account.
Frequently asked questions about NRI Home Loan –
Am I allowed to make a prepayment of the loan?
Yes, you are allowed to make a prepayment of the loan. The prepayment amount should not exceed 75% of balance principal amount. In the other word you need to keep 25% principal balance as outstanding in your loan else 2% penalty is applicable.
Do I have the option of pre-paying the entire loan amount?
You can prepay entire loan amount after 6 months from the date of disbursement of loan. You need to pay penalty as applicable.
Can I nominate my friend as a co-applicant?
No, you cannot nominate your friend as a co-applicant. Co-applicant should be family member spouse, parents or children.
What is the applicable rate of interest?
Interest rate is variable and decided by the bank time to time. For more information about interest rate of NRI home loan visit a website of respective banks.
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