One of the most in-demand financial investments for Non-Resident Indians (NRIs) is buying property back house. At a time when the Indian rupee is deteriorating versus the US dollar, taking a home loan in India might be an excellent option for the NRIs rather than utilizing up all the money earned in the international currency. Are NRIs permitted to take a housea mortgage in India? Yes, they have. NRI Home Loans are provided both by banks and Non-Banking Financial Companies (NBFCs). Here we take a lookhave a look at what is needed to get this loan and how it varies from a normal loan taken by a resident Indian.
Eligibility and documents needed
An NRI ought to satisfy the requirements on minimum age and minimum years of work experience abroad. The criteria vary throughout organizations. In State Bank of India (SBI) the minimum age limit is 18 years and the number of years a NRI need to have worked should be 2 years. But if you plan to take a loan from ICICI bank, then it suffices if you had actually worked for one year abroad, however your minimum age need to be 25 years. If you are a self-employed, then you need to have stayed abroad for at least 3 years.
Banks like ICICI Bank and Axis Bank even have a minimum income monthly as one of the eligibility requirements. If you work in any of the Gulf Cooperation Council (GCC) countries then you require to have a minimum monthly income of 5,000 AED (United Arab Emirates Dirham) and for operating in US and other countries $3,000 monthly is the minimum wage to be made if you wantshould take a NRI househome mortgage in Axis Bank.
For the paperwork procedure, a copy of your ticket, visa and employment related files such as your 3 to 6 month salary slips, appointment letter, work agreement if any and address evidence, are obligatory. These documents can be sent to the overseas bank branch located the closest to you, in the nation where you live. The files are then sent out to the Indian branch for processing. Note that the abroad branch simply acts as an intermediary for colleting and sending the documents to India. The confirmation procedure happens only in the Indian branch.
Loan tenor and interest rate
Previously there were differences in the interest rate charged for a NRI housemortgage and for the ones provided to resident Indians. ButNow the rates are the very same. The interest rate and other charges like processing charge for NRI home loans are the same as provided to resident Indian. Also, loans to NRI are of larger typical size of # 8377; 40 lakh when as compared to a typical size of # 8377; 23.5 lakh for a resident Indian homehome mortgage. The processing cost is 0.5 per cent of the loan amount however topped at # 8377; 10,000, says the spokesperson for HDFC. A ceiling on the processing charge offers NRIs more leeway on taking a larger loan.
When it comes to loan tenor, institutions and banks like HDFC and SBI provide longer periods of 20 to Three Decade – the exact samelike provided to a resident Indian. But in some cases the loan tenor is limited to 10 or 15 years. For example, Bank of Baroda limits the loan tenor for NRIs to 15 years. LIC Housing Financing Ltd provides a 15 year homehome mortgage to NRIs with expert credentials, but for others the loan tenor is simply 10 year.
The payment of a NRI loan is due just in Indian rupees and not the international currency. Satish Kotian, Chief Operating Policeman, Aspire Home Financing Corporation Ltd (A Motilal Oswal Group Business) clarifies that – Under the RBI policies, the repayment of the real estate loan by NRIs can just be made by remittances from abroad through regular banking channels or through a Non Resident Rupee (NRE) or a Non Resident Ordinary Rupee account (NRO).
Prepayment of loan is allowed for NRIs and there is typically no charge for prepayments. However there are some exemptions. For circumstancesFor example ICICI Bank imposes a 2 percent pre-closure charge on the exceptional amount and the amount pre-paid in the last 12 months, if the house loan is prepaid in full.
On a house loan, a resident Indian can get a tax benefit on payment of approximately # 8377; 1.5 lakh on the primary component and # 8377; 2 lakh on the interest component. Can the NRI who repays the house loan likewise obtain of tax advantages? Most of the NRIs who are currently serving their househome mortgage are not aware of the tax ramifications on their loan payment. They simply earn their earnings abroad and repay their loan.
Tapati Ghose, Partner, Deloitte Haskins amp; Sells LLP states, if the income earned abroad is the only source of earnings, a NRI does not have an opportunity to claim tax exemption on homemortgage repayment, since he is not taxable in India. However, in case if a NRI earns an added taxable incomegross income from India apart from the income earned abroad, then he is qualified to declare tax exemption for the home loan payment.
Functions of NRI loans
Loan tenor restricted to 10-15 years sometimes
No distinction in interest rate provided to citizens and non-residents
Repayments made through NRE/NRO accounts
Spokes on tax sops
Loan repayment is qualified for tax exemption only if an added taxable income earned from India