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NRI Home Loan

One of the main motives behind Non Resident Indians (NRIs) buying a house property in India is that they can stay connected to their roots. Having a house in India also brings a sense of belonging for NRIs to that country where they are born and brought up. For buying a house property in India, NRIs also look for home loans from any bank, HFC or NBFC in India providing NRI home loan.

There are many banks, HFCs or NBFCs who offer NRI home loan at attractive interest rates. Being an NRI, the individual needs to fulfill stipulated conditions as required by the lender. Banks allow a finance of upto 80% to 85% of the value of the property, subject to the Gross Monthly Income (GMI) of an NRI.

You also get tax benefits on repayment of your home loan.

You can take a loan to:

  • Buy
  • Extend
  • Refurbish
  • Build property
  • Buy land

Properties Eligible for NRI Home Loan

NRI Home Loan can be availed for any of the following House Properties:

  • Buying of a plot
  • Construction of property on an owned plot
  • Under construction
  • Ready for possession
  • Alterations/ extension of the existing property
  • For taking over of the Home Loan liability from other lender (re-finance)

Process of Availing NRI Home Loan

To apply for a home loan, NRI is required to submit following items to the lender:

  • Duly filled NRI home loan application form
  • Necessary Personal Documents
  • Property Related Documents
  • Submission of Security and/ or Guarantor, as required by the lender

NRI can apply for home loan to the lender either directly or through a POA holder.

You can apply the loan either by visiting the lender or through online mode through website of the lender.

NRI Home Loan Repayment Tenure

NRI Home Loan is available in the range of 5 to 30 years. Some lenders may extend the tenure of home loan even beyond 20 years in exceptional cases, subject to eligibility of the NRI.

Rate of Interest

NRI home loans is available in the range of 8.50% to 10.50% which is very attractive and on the lower side as compared to all other categories of loans.

Repayment of NRI Home Loan

Loan repayment is in Equated Monthly Installments (EMI) comprising of principal and interest through Post Dated Cheques/ Electronic Clearance System over entire loan tenure.

The repayment of loan can only be through Non-resident External (NRE) or Non-resident Ordinary (NRO) accounts with remittance from abroad. It is, therefore, needed to have an NRE/ NRO account in India to make EMI payments. Any other fund cannot be used for repayment of this loan. The repayment has to be made in Indian Rupees only.

Tax Deduction for Home Loan

You are eligible to a tax deduction on interest paid and loan repayment on your home loan if you are an NRI as per the income tax definition and file your income tax returns in India.

You are eligible for deduction of:

  1. Up to Rs.1.5 lakhs on housing loan principal repayment under section 80C
  2. Up to Rs. 2 lakhs on interest payments if the home is lying vacant, if it is rented out, the entire interest payable can be claimed as exemption.

Points to Note for NRI Home Loan

  • NRI need to check their residential status as per Foreign Exchange Management Act, 1999 (FEMA) and the Income tax Act, 1961.
  • It is desirable for NRI to appoint a Power of Attorney (POA) in India who will act on his/ her behalf in his/ her absence.
  • Non Resident Indians (NRIs) can own property in India subject to fulfilment of stipulated conditions.
  • NRI needs to have an NRE/ NRO account in India to make EMI payments.
  • NRI is not allowed to buy agricultural land out of NRI Home Loan.

Types of Interest Rate on NRI Home Loan

As you know that the interest rate is the key factor in determining the cost of the loan. The higher the home loan interest rate, the higher the amount you will have to pay out every month as EMI for repaying the loan.

There are basically following two types of interest rates for NRI Home Loan, and you can choose anyone from these two types:

(1) Floating Rate Loans: Floating rate loans offer you the option to hedge the risk of rising home loan interest rates. These loans are linked to MCLR which vary along with repo rate declared by the RBI. In decreasing interest rate regime, this type of interest rate is preferred by the borrowers. The major advantage of floating rate loans is that they are cheaper than fixed rate loans.

(2) Fixed Rate Loans: In case of Fixed rate loans, interest rates are locked for a pre-defined period of time (say upto 3 years) and after that they get converted to floating rate loans linked to MCLR. Here, the benefits is that the interest rate remains fixed irrespective of market conditions. The primary disadvantage with fixed interest loans is that they are usually 1 to 2 percentage points higher than the floating rate loans. In increasing interest rate regime, this type of interest rate is preferred by the borrowers.

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