Most Non-Resident
Indians think a lot before investing in property in India and most of
the time put off the plan due to the effort, the research and the
planning involved. In some instances, it is put off as they do not have
enough funds. For such individuals there is always the NRI home loan.
The Reserve Bank of India defines NRI as 'an Indian citizen who holds a
valid 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'.
The NRI loans are made available for the following purposes:
* Self-construction of a property on a plot of land.
* Finance the purchase of a plot of land allotted by a society/development authority.
* Renovate/improve an existing property in India.
* Purchase of a house either under construction or on a resale.
Non-Resident
Indians are also permitted to purchase an existing house or flat. RBI
has not prohibited banks from providing financing to NRIs for the
purchase of a second house, but the loan on the house is for the
self-occupation of the NRI upon their return to India. Loans are also
offered to NRIs against NRE (Non-Resident External) deposits. These
loans can be repaid out of NRE funds but the interest would be charged
at a commercial rate.
Loans to NRIs are
also provided against FCNR (Foreign Currency Non-Resident) deposits.
NRI home loans can be availed by any NRI with as much ease and convince
as any Resident Indian would avail a home loan. However, some
difference exists between the two kinds of loans, in terms of tenure,
documents, repayment, etc. Interest rate is little costlier for NRIs
than Indian residents, it is 0.25 per cent to 0.50 per cent more for
NRIs. The NRI gets the only 85 per cent cost of the property as a loan
amount. The tenure of loan is also short: it ranges from 7 years to 15
years.
The size of the loan depends
upon the borrower's repayment capacity. Up to 36 times of the gross
monthly earnings of the applicant may be issued as loan. However, there
is a maximum limit. Calculation of eligibility is same as that of
Indians living in the country.
The repayment can be done in equated
monthly instalments (EMIs) from the Non-Resident Ordinary (NRO) account
or the NRE account. For security, most banks insist that the first
mortgage of the property should be in their name. If the property is
under construction then adequate additional security is required such
as guarantee of third party (either resident or another NRI).
NRIs
cannot claim tax benefits on home loans in India as they have to pay
tax in the nation where they work and earn. However, they need to file
tax returns to become eligible for home loans. But if they pay tax in
India for income earned in India, they can claim tax rebate for the
home loan. An estimated 25 million NRIs living in 130 countries have
remitted $52 billion so far this year (December 2009). In fact India
topped the list of countries in remittance flow followed by China and
Mexico, according to World Bank report on Migration and Development
Brief.
The impact of global slowdown,
job losses and unviable job offers has necessitated a section of NRIs
to return to Indian shores. According to housing finance companies and
banks disbursing home loans to NRIs/PIOs in Dubai [ Images ], there has
been a sudden surge in demand for residential property across Indian
cities and particularly for Tier-II cities in the wake of the economic
slowdown in the emirate.
Southern
cities, particularly Bengaluru , Chennai and Hyderabad, are driving the
demand though minimal level demand exists for other cities as well.
Most of the NRIs keen to invest in real estate back home are looking
for home loans as they are unable to get loans locally due to the
current tight liquidity situation across the United States.
Source:- Nri Realty News