Many NRIs investing in real estate property in India rely on a home loan to get the necessary funds. Read on to know more about the important things NRIs must know while applying for a home loan in India.
Over the past few years, the number of NRIs (Non-resident Indians) investing in properties in India has increased significantly. However, not many are aware that there are different regulations for the NRIs regarding applying for a home loan. So, if you wish to apply for a home loan in India, you must be aware of the following important things.
Home loan Eligibility for NRIs
The eligibility for NRI home loans may differ from lender to lender, but most lenders in India have certain common requirements, which are:
- All non-resident Indians, including PIO (Person of Indian Origin) and OCI (Overseas Citizen of India), are eligible to apply for a home loan in India.
- The minimum age for an NRI applicant must be 24 years, and the maximum age must be 60 at the time of applying for a home loan.
- The applicant must have at least two years of work experience with a minimum of six months working in a foreign country.
- NRIs can apply for a home loan to purchase a ready-to-move-in property, construction of a new home on the land they own, and extension of an existing home.
Documents Required for NRIs
All lenders in India require home loan applicants to submit certain documents to verify the details mentioned in the application form. The documentation for the NRI applicants is distinct from the resident Indian applicants. Although each lender may have a different requirement, most lenders ask for the following documents:
- A duly-filled application form along with signature and passport-sized photographs
- Details of permanent address in India and residence address in the country of current residence
- Details of appointment letter, work experience letter, work permit, contract of employment
- A valid passport and copy of a valid visa
- Educational certificates
- Income details, including salary slips issued by the employer, statement of NRI bank account where the salary is credited, etc
NRI Home Loan Interest Rate
A home loan’s interest rate is an important factor to consider as it affects the affordability. The higher the interest rate, the higher will be EMI. The NRI home loan interest rates are generally higher by about 0.25% to 0.50% than the interest rate offered to resident Indians.
If your NRI status changes in the future, the home loan interest will be reworked and revised as per changes in the income. The lenders may levy interest as applicable to resident Indians.
Other Important Things to Know
Just as it is important to choose the right lenders that offer the loan at a lower interest rate, it is critical to select the right loan tenure. Home loan for NRIs are usually available for five to 20 years, but some lenders offer loans for 30 years. The repayment of the home loan must be made only through an NRE or NRO account.
Often, many NRIs wish to close their home loan account at the earliest and therefore make a partial prepayment of the principal amount. Today, most lenders in India do not levy any charges or penalties for partial or full prepayment.
Like resident Indians, NRIs, too, are eligible for tax benefits on the home loan. You qualify for a tax benefit up to Rs. 1.5 lakhs on the repayment of the principal amount under Section 80C of the IT Act and up to Rs. 2 lakhs on the repayment of the interest amount.