Everything You Must Know About NRI Home Loans
Defining NRI
We all know that NRI stands for Non-Resident Indian. But the official definition of NRI as per India’s Foreign Exchange Management Act 1999 (FEMA) defines NRI as, “an Indian citizen or Foreign National of Indian Origin resident outside India for purposes of employment, carrying on business or vocation in circumstances as would indicate an intention to stay outside India for an indefinite period. An individual will also be considered NRI if his stay in India is less than 182 days during the preceding financial year.” The NRI purchasing an immovable property in India is also covered under the provisions of FEMA. An NRI can purchase a property in India, but he is allowed to purchase only residential or commercial property and there is no restriction on the number of residential or commercial properties that he can purchase. However an NRI is not allowed to purchase any agricultural land or plantation property or farm house as per the act. But a person who already owns such property when he becomes an NRI can continue to hold them in his name which he is otherwise not allowed to purchase after becoming NRI.
NRI Home Loans
An NRI can opt for home loan as well as loan against property in India. There are various bank policies and rules and regulations when it comes to NRI funding, which differs from bank to banks/NBFCs. The following are the must-known key aspects of NRI home loans.
1) Both salaried and self employed NRIs qualify for applying a home loan in India, provided he is not a citizen of the countries namely – Iran, North Korea (Democratic People’s Republic of Korea), Cuba, Syria, Sudan, and Cremia Region of Ukraine, Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Nepal, Macau, nigeria, Hongkong or Bhutan.
2) An NRI needs to be present in person at the time of initial loan application. Later he may appoint a power of attorney as a proxy to sign documentation on his behalf.
3) Not all banks allow NRI mortgage loans. Only banks like ICICI bank approves mortgage funding for NRI provided the NRI is salaried. A self-employed NRI is restricted from availing the mortgage loan in India as per the Indian funding laws.
4) POA is mandatory in all NRI home/mortgage loans. POA lists out the power to the POA holder to manage the property and property related matters in the absence of NRI.
5) A salaried individual working in Indian merchant navy is also classified as an NRI.
6) A NRI is allowed to purchase a resale residential /commercial property in India owned by yet another NRI. However the seller NRI is entitled for paying a tax on capital gains when a property is sold. The tax that is payable on the gains depends on whether it’s a short term (within 2 years) or a long term (more than 2 years) capital gains. Long term capital gains will be taxed @ 20% and short term gains will be taxed at the applicable income tax slab rates for the NRI based on the total income which is taxable in India for the NRI.
When an NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property is sold before 2 year a 30% TDS is applicable.
7) There is no difference in the applicable home loan interest rates for the NRI.
8) NRE/NRO account is mandatory for an NRI applying for housing loan in India.
9) NRI is allowed to make his home loan balance transfer to another bank to enjoy the benefits of lower rates subject to the pre-payment charges of the bank/NBFC if any.
NRI Documents Checklist For Applying Home Loan
KYC & Other Documents
1) Photo ID proof of applicant & co-applicant.
2) Age Verification Proof of applicant & co-applicant. Any one of:
Pan card, Passport, Driving Licence, Aadhaar Card, Birth Certificate, Election ID, Domicile Certificate, Ration Card, School leaving certificate, SSC/HSC admit card/Mark Sheet, School/College passing certificate, Life Insurance Policy and.
3) Overseas Address proof- Self attested.
4) Indian Address proof- Self attested.
5) Latest 2 passport size color photographs of applicant & co-applicant.
6) Valid passport copy- Passport copy with arrival & departure entries.
7) Valid visa copy/ work permit.
8) Power of Attorney document duly signed by all the applicants.
9) KYC Documents of the Power Of Attorney self attested by him along with the bank’s/NBFCs POA format duly attested by the Indian consulate if the NRI is not in India & if the NRI is in India the POA can be locally notarized.
10) Duly signed application form of all the applicant & co- applicant.
11) Immediate details of family members of applicant & co- Applicant.
12) Qualification details of all applicants (applicant & co-applicant).
13) Cheque / Draft in INR (Indian Rupees) towards the processing fee (as per applicable rates of the bank/NBFC).
14) Overseas Credit Bureau report.
15) Own contribution receipt.
Financial Documents for Salaried NRI
1) Latest 4 months Salary. W 2 Forms Copy if NRI is US Based.
2) Appointment Letter / Contract Letter Copy / salary certificate (in English) clearly mentioning the date of joining, designation in the company and current salary earned.
3) Copy of previous appointment letters.
4) Latest 6 months bank account statements of the salary account.
5) Latest 6 months statement of NRE/ NRO Account.
6) Employment continuity proof: Employment Letter/ Employment Contract Copy.
7) HR contact details –Name, Number & official email ID for employment confirmation.
8) Company Profile or Company Website requirement (only for Pvt. Ltd. Co.)
9) Valid copy of Work Permit / Labour Card / Identity Card (translated in English and countersigned by the consulate) if employed in Middle East.
10) Copy of CDC in case of customers who are employed in merchant navy.
Financial Documents for Self-Employed NRI
1) Copy of Incorporation of business letter.
2) Income Proof for NRI in Middle East: Last 2 years audited/ Chartered Accountant (CA) certified P&L accounts.
3) Income Proof for NRI in US and Canada: Last 2 years Certified Public Accountant (CPA) compiled/reviewed/audited P&L accounts.
4) Income Proof for Other NRI: Last 2 years CA or equivalent certified/audited P&L accounts.
5) Office Address Proof- any one- Utility bills, telephone bills, electricity bills or its equivalent and Tax ID certificate.
6) Latest 6 months bank account statements of the current account.
7) Latest 6 months bank account statement in individual’s (NRI) name.
8) Business Existence Proof: Partnership or its equivalent with registration certificate with appropriate authority, Memorandum of Association (MOA) and article of association or its equivalent, Certificate of Incorporation with appropriate authority, Limited Liability Partnership (LLP) Agreement and Certificate of Incorporation in case of LLP.
9) For Partnership Firms: Partnership deeds/Latest list of partners along with their profit sharing ratio certified by all partners For Corporate applicant: Latest list of director and shareholding pattern certified by statutory Auditor/ CA/ Company Secretary (CS) or equivalent.
10) Business Profile on the letterhead with details like nature of business activity, product/services, number of years in business, number of employees, branches if any, group company if any, assets, future business plan, ownership/equity stake-in case of promoter/director, etc.
11) Business continuity proof.
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