Thursday, June 3, 2010

NRI Home Loans

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An Indian who has been living abroad for employment, conducting business or pursuing a vocation is eligible for a NRI Housing loan. This post gives all the information on home loans from NRIs.

NRI can get home loans for the purpose of:
  • Construction of new house / flat
  • Purchase of an already built (even old) house / flat
  • Extension to a house / flat
  • Purchase of a residential plot
An NRI can avail of a loan of up to Rs.1 crore or an amount of up to 85% of the cost of the property. The rate of interest varies from 11.25% to 14.25% per annum. Almost all banks and financial institutions charge a processing fee, which is payable once and will amount to approximately 0.5% to 2% of the loan amount applied for.

The eligibility of the amount of loan disbursed will depend upon the individual’s repayment capacity. The calculation of repayment capacity is made based on factors such as monthly and annual income, source of income, savings and credit history, work experience, age, qualifications, number of dependants, other sources of income including spouse’s income, and assets and liabilities. Further, the probability of the individual continuing in the same occupation or his /her interest in alternate employment prospects when he/she comes back to India is assessed. The amount is disbursed in Indian Rupees.

The typical duration for repayment of the loan is three to ten years. The repayments are usually made in Equated Monthly Installments (EMIs), which are a combination of the principal and interest amounts. EMIs get deducted from the month following the month in which the loan gets disbursed and can be made through post-dated checks from the NRE/NRNR account held by the NRI in India.

Housing loans are offered to NRIs by leading financial institutions and commercial banks in India like Citibank, SBI etc. As an NRI you can opt for the government supported ‘Griha Shobha’ scheme.

Banks typically ask for a security (atleast one of the below):
  • Equitable Mortgage of House / Flat
  • One Guarantor
  • Life Insurance Cover of any existing or new policy issued under any acceptable plan of insurance having insurance cover to the extent of loan amount.
There is no need for the main applicant to come to India. His spouse or relative having Power of Attorney as per the specified format can deal on behalf of the applicant.

The list of documents needed to process this application is a long one. Some of these are quite similar for Indian residents as well.

Property and related documents:
  • All receipts for payments made by individual towards purchasing the house.
  • Copies of approved drawings of the property.
  • Copies of Agreement for Sale and sale deed.
  • Document containing detailed cost estimates from the architect/engineer for the house.
  • Allotment letter issued by the association of apartment owners
Employment and related documents:
  • Copy of the work permit.
  • Copies of the Visa stamped on the passport.
  • Copy of the existing/current employment contract.
  • Latest wage slip/ salary certificate or statement.
  • Copy of the Identity card issued by current employers.
  • Overseas bank account statement (four months).
  • Copy of the Continuous Discharge Certificate (if applicable)
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