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For the purchase of real estate for bonafide residential purposes, Non-Resident Indians with Indian passports are not required to obtain RBI permission.
Non-resident Indians with an Indian passport may pay the purchase consideration by remitting money through standard banking channels from overseas or by using their NRO/NRE/FCNR accounts.
Non-Resident Indians (NRIs) are recognized under the Foreign Exchange Regulatory Act, 1973. Every bank and housing finance companies follow the RBI guidelines to define NRI – “An Indian citizen who holds a valid documents like Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a NRI.”
Documents required for Resident Indians and NRIs to get Home Loans are different in some respect.
Home loans for NRIs are available for construction of new houses/flats, purchase of old house / flat addition/alteration to an existing house and repairs/renovation etc. NRIs can avail of loans by mortgaging an existing residential property. However, for availing home loans, NRIs have to fulfill certain conditions according to provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more.
The FDI Policy that permits FDI up to 100% from foreign/NRI investors under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available.
Last but not least, NRIs should take due care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.
The eligibility criteria of NRIs differ from Resident Indians based on a few parameters. The parameters includes-
Age: The loan applicant has to be 21 years of age.
Qualification: The NRI loan seeker has to be a graduate.
Income: The loan applicant has to have a minimum monthly income of $2,000 (although, this criterion may differ across HFCs). The eligibility is also determined by the stability and continuity of your employment or business.
Payment options: The NRI also has to route his EMI (Equated Monthly Installments) cheques through his NRE/NRO account. He cannot make payments from another source, say, his savings account in India.
Number of dependents: The eligibility of the applicant is also determined by the Number of dependents, assets and liabilities.
An NRI applicant is eligible to get a home loan ranging from a minimum of Rs 5 lakhs to a maximum of Rs 1 crore, based on the repayment capacity and the cost of the property, which, although, is variable by the priorities of the home loan provider. Also, Home Loan Tenure for NRIs is different from Resident Indians. An applicant will be eligible for a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land, based on the repayment capacity of the borrower.
However, an NRI can enhance his loan eligibility by applying for home loans with a co-applicant who has a separate source of income. Also, the rate of interest for home loans to NRIs is higher than those offered to Resident Indians. The difference is to the extent of 0.25%-0.50%. Some HFCs also have an internally earmarked ‘negative criterion’ for NRI home loans. As such, the NRIs who hail from locations that are marked as being ‘negative’ in the books of HFCs find it difficult to get a home loan.
The Reserve Bank of India (RBI) has clarified that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO) purchasing immovable property in India should pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country.
The NRIs and Resident Indians can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued a certain directive for sanctioning home loans to Non-Resident Indians. The guidelines provided are:
The repayment option for NRIs as they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999 and the regulations made by the RBI from time to time. As most of the home loan provider companies consider the economic stability of the applicant, home loans for NRIs are quite feasible because they are well in economic resources.
The documentation required to be submitted by the NRIs are different from the Resident Indians as they are required to submit additional documents, like a copy of the passport and a copy of the works contract, etc. And, of course, NRIs have to follow certain eligibility criteria in order to get Home Loans in India.
Another vital document required while processing an NRI home loan is the Power of Attorney (POA). The POA is important because since the borrower is not based in India, the HFC would need a ‘representative’ ‘in lieu of’ the NRI to deal with and if needed. Although not obligatory, the POA is usually drawn on the NRI’s parents/wife/children.
The documents needed for obtaining NRI home loans are:
Photocopy of PIO card. If the PIO card is not available, photocopies of any of the following documents
It is not wise to sign a title report that you obtained from the property's solicitor if it has any fine print or particular government reservations. Accept clear and detailed clearance reports. For instance, if you're interested in purchasing a property that has been constructed over reclaimed land, check to see if the government has approved the construction. You can avoid being involved in conflicts in the future by taking precautions. This will also assist in preventing the scrutiny of your mortgage loans.
The builder must obtain many permits and approvals from the necessary authorities before work can begin. Without these approvals, the construction may be the subject of legal action. Here is a list of the paperwork and clearances the builder needs in order to start any construction projects in the Mumbai & Kalyan Dombivli Municipal Region -
| Stamp Duty And Registration Charges Maharashtra 2022 | |
|---|---|
| Region | Stamp Duty in Maharashtra from 1st April 2021 onwards |
| Mumbai And Its Suburbs | 5 percent |
| Other Urban Areas Of Maharashtra | 6 percent |
| Rural Maharashtra | 4 percent |
Source: Government of Maharashtra
To be eligible for a home loan, the applicant must be at least 21 years of age with a regular source of income from employment or self-employment. The loan must terminate before or when the applicant turns 65 years of age. The applicant should also possess at least 6 months of income proof.
The loan amount depends on a number of factors such as age, income, number of dependents, qualifications, assets and liabilities, income stability, business, profits, etc.
However, there are ways to increase loan eligibility and amount. If a spouse or fiance is earning, applying together as co-applicants can increase the chances of a larger loan amount. In such cases, proof of marriage must be submitted. On the contrary, if there are any co-owners, they must necessarily be co-applicants. Providing additional security like bonds, fixed deposits and LIC policies may also help to enhance eligibility. However, the most important factor in sanctioning loans is repayment ability. The total cost includes registration charges, transfer charges and stamp duties.
The loan will be sanctioned after the selection of property and submission of the required legal documents. The process might take some time as each document needs to be verified for the safety of the applicant. The 230 A Clearance of the seller and/or 37I clearance from the appropriate income tax authorities (if applicable) is also needed. Once the above has been submitted and verified, the registration of the conveyance deed and investment of the applicant’s own contribution and the loan amount will be disbursed by the bank. The disbursement will be in favor of the builder.
When buying a property with loans from specific financial institutions, tax authorities provide certain benefits and exemptions from tax payments.
Section 24 of the Income Tax Act states that an investor is allowed to deduct an amount equivalent to the total interest payable on the housing loan from his/her taxable income within the same financial year. If an investor were to take a loan, he/she would receive a deduction of up to 1.5 lakhs on the interest rate paid. The only concern is that the property would have to be bought or constructed within 3 years from the end of the financial year in which the loan was taken and would have to be self-occupied.
According to Section 80c of the Income Tax Act: A deduction u/s 80C (2) (xviii) is available on repayment of the principal during a financial year of up to Rs. 1,00,000/-, this aforesaid limit is within the overall limit of Rs 1 lakh, specified in section 80C of the Income Tax Act. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount. This deduction is taken from the Gross Total Income.
Yes, you can have as many loans against different properties. The only criteria is that you should be able to repay all the EMIs every month.
Yes, a loan for land purchase is available as long as it is for residential purposes only.
Many mortgage lenders like HDFC and State Bank of India offer this loan. You can get up to 85% of the purchase amount based on your credit profile and paying capacity.
You get no tax breaks if you take a loan to buy a plot of land. But, if you take a loan for construction, that means a loan to build a house on that plot of land, then you can get a tax break. In such a case, the tax benefits are available on both portions of the loan the one to purchase the plot and the one taken to construct the house thereon.
Please note that the benefits under Section 80C and Section 24 can be availed only when the construction of the house is complete.
Yes, Non-Resident Indians can avail of an NRI housing loan to buy a property in India. However, the loan disbursement process, as well as the terms & conditions for a loan taken by an NRI are different from regular home loans granted to Indian residents.
Many builders get their projects ‘pre-approved’ by specific home loan lenders. The lender examines the legal documents of the title of that project, the stage of construction, as well as the builder’s track record to complete the project in time. It then declares all properties in the project to be ‘pre-approved’. You do not need to go for legal and technical checks in case of a ‘pre-approved’ property.
The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house (if is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
The Government Of India has granted general permission for NRI/PIO/OCI to buy property in India and they do not have to pay any taxes even while acquiring property in India. However, taxes have to be paid if they are selling this property. Rental income earned is taxable in India, and they will have to obtain a pan and file return of income if they have rented this property. On sale of the property, the profit on sale shall be subject to capital gains.
If they have held the property for less than or equal to 3 years after taking actual possession then the gains would be short-term capital gains, which are to be included in their total income as tax as per the normal slab rates shall be payable and if the property has been held for more than 3 years then the resultant gain would be long term capital gains subject to 20% tax plus applicable cess.
India has DTAA’s with several countries which give a favorable tax treatment in respect of certain heads of income. However, in case of sale of immovable property, the DTAA with most countries provides that the capital gains will be taxed in the country where the immovable property is situated. Hence, the non-resident will be subject to tax in India on the capital gains which arise on the sale of immovable property in India. Letting of immovable property in India would be taxed in India under most tax treaties in view of the fact that the property is situated in India.
Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.
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