Loans For NRIs In India :
Though all the banks will tell you that they offer all kinds of loans to the NRIs/PIOs/OCIs, like Home loan, Loan against property, Car Loan, Personal Loan, Education Loan (and whatnot), in reality most of the banks actively promote only two types of loan for NRIs/PIOs/OCIs.
Home loan to buy property in India
Loan against property held in India
If you actually enquire about any other loans, like car loan or personal loan, you will find out either they don’t offer that loan or the loan is actually given to any of your resident close relative, and you are just a financial co-borrower. This simply means, in case of any unfortunate events, bank will hold your close relative responsible for the repayment of the loan.
Moreover, these loans come with a high interest rate. Hence, It makes more sense to borrow at your country of residence at lower rate and remit the amount to India, for any smaller amount or for the purposes like buying a car/ education of any relatives/ Wedding/ Vacation & so on.
For example, it always makes more sense to borrow $ 15000 in US and send the money to India and later repay @ 5% p.a, rather than borrowing Rs 10 lakh in your parents’ name @ 15% in India.
Only when it comes to home loan or loan against your existing property in India, the role of Indian banks comes into the picture. Basic reason being ;
Home loans are generally large in size, and you need more time to repay that. For instance, an one crore home loan is not a very unusual amount for an NRI. But, getting a $150,000 personal loan may not be that easy, as most of the personal loans from the overseas lender come with a tenure of 3-5 years, which makes the EMI amount unaffordable. Then, if you want to take a home loan in your country of residence so that you can repay over 15-20 years with relatively lower EMI, they will expect you to buy the property where you are living. Not in India.
Bottomline……… If you are planning to purchase a property in India, you need to take the loan from an Indian bank. Most of the prominent Indian banks offer Home loans to NRIs/PIOs/OCIs, for purchasing properties in India.
Let’s take a detailed look into the NRI – Home Loans.
Few things to remember before we start with Home Loans For NRIs In India:
NRIs/PIOs/OCIs are not allowed to buy agricultural land, plantation land or farm houses,
NRIs/PIOs/OCIs may buy any no.s of immovable residential/ commercial properties in India. However, repatriation of the sales proceeds of immovable properties are restricted to TWO.
The funds have to be routed through regular banking channels. Travelers’ cheque or foreign currency cash can not be used for full or any part of the payments.
Well…now that you know what to do and what not to ……Let’s take a step by step approach to check out Home Loans For NRIs in India…
Step 1 : Finalize your budget :
This is your first step towards owning your dream home back in India. Keep two things into mind while making the budget;
- You need to make a down-payment. Though earlier the down payment used to be 20% of the property value, now a days lots of builder and banks have came up with 10-80-10, 10-90 kind of plans. But these facilities are not available in all the locations or on all the properties. So, keep a rough estimate of 20% down payment in mind to be on safer side.
- Make an approximate calculation of the EMIs. Again, for rough estimation keep a figure of Rs 1000/per month/ per lakh of loan for 15 years tenure.
For Example, if you are planning to buy a home worth Rs 1 crore, then first of all you should be ready with about Rs 20 lakh of down-payment. For the rest 80 lakh bank loan, take an estimate of approx. EMI of Rs 80,000/ month for 15 years. These figures are just for the purpose of illustration. All the banks will provide you with EMI calculators where you can calculate your exact EMI.
One gentle piece of advice, take a conservative approach when planning the budget.
Step 2: Shortlist few properties:
In next step forward, shortlist few properties in your preferred location as per your budget. Look out for the properties/ projects already approved by the major banks. Do some online research. Google with the keywords like…
“Good residential projects in south Delhi approved by so & so banks” ……. you will get some ideas.
Or, go to the banks’ websites and search for approved projects. Most of the banks will have location wise list of approved builders as well as projects.
Check out the approved properties and shortlist few of them.
Step 3: Finalize the bank:
This could be the most confusing task. Keep the following aspects in mind while narrowing down your search for the right loan.
- Rate of interest.
- Processing fee or other charge
- Ease of reaching the bank
- Customer friendliness & approachability
- Documentation
Most of the banks now a days offers an interest rate somewhere between 8.25-9.25% depending of the borrower’s profession, size and price of the property, amount of loan etc. High end properties with a higher loan amount will generally tend to bear a higher interest rate.
Again, do some online search for the available offers from the banks. You will be flooded with options. Select whichever suits you the best.
Just remember that, the bank offering the lowest interest may not always be the perfect one. Ultimately, you need to get the loan sanctioned and disbursed on time as well. So, customer friendliness and easy accessibility of the bank is also very important factor.
Now……once you have finalized the bank and the loan…. Let’s do a little bit of homework before approaching the bank….
Calculate your loan eligibility…. Approximately.
Rule is simple and almost the same across all the banks:
- Take your fixed net take home salary/ Income. Do not include variable pay like bonus or incentives.
- Take 60% of that as your EMI paying capacity. If you are earning $ 5000/ month, $ 3000 (60% of $ 5000) is your EMI paying capacity.
- Deduct all the existing EMI that you are already paying in your country of residence or back in India. In the above example, if you are already paying an EMI of $500 against your car loan, then your final EMI paying capacity is now $ 2500 ($3000-$500)
- Multiply your final EMI paying capacity with the prevailing exchange rate (Take a conservative approach). For example, in the above-mentioned case the final EMI paying capacity of $ 2500 will come to Rs 1,75,000/ month in rupee term. ($ 2500* 70 as USD-INR exchange rate)
- Divide the Rupee EMI by 1000. The figure you get is your (approx.) loan eligibility in lakh. As in the above case, it will be 175 lakh (1,75,000 / 1000) which is actually Rs 1.75 cr.
Looks complicated…?
Actually not. Try it with your own salary…. it’s not that tough. This way you will know how much loan you can apply for, even before going to any bank. This tool will help you in planning your budget as well.
One last preparation before initiating the loan enquiry….
Take a look at the list of the documents required to apply for home loan. Most of the banks will ask you to get all these documents while applying for the loan. Why not start preparing the documents in advance. Anyway, they are going to ask for these.
List of documents for home loan:
- Latest salary certificate/ last 6 months pay slips,
- Last 6 months salary account statement,
- Employment letter/ Labor contract or similar type of documents showing at least 3 year’s employment continuation.
- Valid passport, Valid visa.
- PAN card/ Form 60
- Overseas address proof (Can be your salary a/c statement also)
- Loan account statement if you are serving any current loan anywhere.
- Recent colored photograph.
Remember, in most of the cases, you would require a co-applicant (Either resident or Non-resident) and a Power of Attorney holder (mandatorily Resident). However, some bank will skip this part if you are purchasing a ready for possession property.
Done……you are all set to apply for the home loan like a boss now….!!!
Step 4_Final step: Initiating the Loan application procedure:
Contact your choice of bank. Go to their website. Generate an enquiry. Drop your contact details.
Now sit back, relax and wait for the call………
