Here are dos and don’ts for NRIs who apply for home loans

Buying a home ‘back in India’ is every NRI’s dream. Thankfully, it can be fulfilled due to availability of easy home loan facilities, relaxed rules by the RBI and online transacting options.

While the guidelines to apply for NRI home loans are same as those for resident Indians, certain terms differ for the former. NRIs are allowed to buy any property or plot for commercial or residential use however agricultural land, plantation property and farmhouse are not permissible unless specific consent from the RBI is attained.

So if you’ve shortlisted a property and want to approach a bank, it will be a good idea to ensure that you meet the following criteria.
This begins with the NRI status in the first place. Both Non-Resident Indians and Persons of Indian Origin can apply for home loans. While salaried people need to have spent a minimum of one year in employment abroad, businessmen or self-employed are eligible only after three years of employment.

Furthermore, self-employed might find themselves battling stricter rules and challenges. For example, those with office spaces and white collared jobs get granted loans, but a taxi driver might not. PIO and OCI may not be allowed to buy plots and commercial properties but those classified as NRIs can. Certain jobs may also be treated differently. For instance, Indian Merchant Navy personnel can be classified as NRI if they possess a foreign account and the same rules will apply.

Any person above the age of 21 can apply but a ruling factor for home loan sanctions are the income and educational qualification of the applicant. One is required to possess at least a graduation degree or diploma certificate. With respect to income, banks differ on minimum income limits but an average of USD 30,000 for those living in Western countries and 35,000Dhms for those in the Middle East usually suffices. But do keep in mind that banks don’t fund negative locations like Africa.

The documentation requisites mostly include passport copy, valid visa and work permit copies, proof of foreign residence, employment contracts, salary certificate and updated NRE/NRO account statements. Certain banks may ask for more documents either based on your income or location. However, the good news is one needn’t make a visit to India to apply for home loans. Most reputed banks have their branches on foreign shores, or one can even apply online. However, a friend or family member living in India will have to mandatorily be assigned the Power of Attorney and as co-applicant to carry out further formalities with the bank.

Most banks allow 80-85% of the value of property subject to gross monthly income. The rate of interest for NRI home loans tend to be the same or sometimes marginally higher than resident loans due to the higher risk involved. In case of flat purchases, the banks pay the loan amount directly in favour of the builder as per the due dates mentioned in the agreement. Unlike resident Indians, the tenure for NRI home loans is usually restricted to 15 years and can be extended at the discretion of the bank for select individuals. This is because most banks have a general idea that repayment capability is much higher for those living abroad.

The down payment and repayment of the loan can only be done in Indian Rupees and through normal banking channels or NRE/NRO accounts by way of remittances from abroad. In case the house bought is for investment purpose, the RBI also permits rent received to be paid against the EMI.

However, before going ahead with the loan, do make sure to check for any hidden costs or loopholes involved. Comparing rates of different banks and checking other costs like processing and administrative fee, pre and late payment charges etc. will help make a more informed choice.

Assigning the Power of Attorney in advance can further quicken the process. With numerous housing portals dominating the online space today, the ease of shortlisting a house and applying for loans has become a child’s play. Some of these portals have also partnered with financial institutions to provide better service and a hassle free experience. Not only do they liaison between the bank and the customer, but also ease the documentation work with builders.

So if you intend to apply for a home loan by either doing a quick visit to India or sitting comfortably on foreign shores, here is a quick checklist to keep in mind.

· Cross check your eligibility for applying, compare bank rates and terms of the loan.
· Study the market, shortlist a property and verify its details.
· Have all the documents like the passport, valid visa and work permit, contract of employment, work experience certificate, salary certificate and statements of NRE/NRO accounts etc., ready in advance. This reduces approval and processing time.
· Assign the POA to a trusted family member or friend.
· Keep a track on repayment and smooth closure for a clean credit history.

The Indian real estate market has much to offer today. For those sitting on foreign shores and looking to invest in India, there couldn’t be a better time.

(The article is contributed by Housing.com)

(Image: Thinkstock)