Buyers Guide

• Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in the circumstances indicating an indefinite period of stay abroad.
• Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources.
• Government servants deputed abroad on assignments with foreign Governments or regional/international agencies like the World Bank, International Monetary Fund (IMF), World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP).
• Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

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 home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining amount, that is 15%, needs to be provided with its own contribution towards the cost of the unit financed.
• The cost of a dwelling unit, which is own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.
• However, repayment of the loan, comprising of the principal and interest, including all the charges, are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.

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:

• Passport and Visa
• A copy of the appointment letter and contract from the company employing the applicant.
• The labor card/identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East Salary certificate (please verify) specifying name, date of joining, designation and salary details.
• Bank Statements for the last six months.

• Original title deeds tracing the title of the property for a minimum period of the last 13 years.
• Encumbrance Certificate for the last 13 years.
• Agreement of sale/construction, if any.
• Receipts for payments made for the purchase of the dwelling unit.
• Approved plan/license.
• ULC clearance/conversion order etc.
• Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and/or the Non-Resident (Ordinary) account in India.
• Latest tax paid receipt.
• Allotment letter from the co-operative society/association of apartment owners.
• Agreement for sale/sale deed/detailed cost estimate from Architect/Engineer for property to be purchased/constructed/extended/improved.
• Copy of approved drawings of proposed construction/purchase/extension.

Photocopy of PIO card. If the PIO card is not available, photocopies of any of the following documents:

• The current passport, with birthplace as 'INDIA'.
• The Indian passport, if held by the individual earlier
• Parents/grandparents' Indian passport/birth certificate/marriage certificate substantiating the individual's claim as a person of Indian origin.

• Stamp duty is payable under Section 3 of The Bombay Stamp Act, 1958.
• Stamp duty is payable on market value or agreement value whichever is higher.
• Market value of any property is determined by the stamp duty authorities on the basis of the Stamp Duty Ready Reckoner issued by the government on January 1 every year.
• A proper stamp duty paid document gets evidentiary value and is admitted as evidence in the court of law. The documents that are insufficiently stamped are not admitted as evidence by the court.

Source: Government of Maharashtra

• Once the stamp duty is paid on the document, it has to be registered with the Sub Registrar of Assurances of the respective district. The document is to be registered according to the provisions of The Registration Act, 1908.
• The document should be registered within 4 months from the date of execution.
• All parties executing the document admit before the Sub Registrar of Assurances that they have executed the document presented for registration. Parties are then identified by two independent witnesses.
• Parties to the document are photographed and their left-hand thumb impression is taken and such photograph and thumb impression is affixed on additional pages attached to the document apart from colour photographs and thumb impression which a person affixes in agreement value while executing a document.
• The Sub Registrar of Assurances records the content of the document, including the additional pages, either by photocopying or scanning the content of the documents.
• If a particular document is required to be compulsorily registered under the law and is not registered then the proper legal title will not pass on to the purchaser i.e. the title will be defective and the document becomes inadmissible in the court of law.
• Registration fees is 1% of the market value or agreement value, whichever is higher, subject to a maximum of Rs. 30,000/-.
• The property Agreement executed before obtaining O.C. is subject to service tax at 2.575%.
• There is also VAT (Sales Tax) applicable at 1% of the agreement.

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.

• Updated passbook or photocopy of the applicant's statement of accounts for the past 6 months.
• A photocopy of the applicants' ration card.
• A profile of the applicants’ business mentioning at least the nature of the business, client list, suppliers, employee strength, geographical spread, etc.
• In the case of a business partnership, a copy of the partnership deed, 3 years P & L a/c, B/S, computation of income certified by a CA and individual computation of income and tax returns for the last 3 years is required.
• In the case of a proprietor or professional, 3 years P & L a/c, B/S, computation of income certified by a CA and an income tax return file statement for 3 years is required.
• If the company applying for a loan is a Pvt. Ltd., a remuneration certificate, the board resolution for fixing remuneration, the company’s annual report and individual IT returns for the last 3 years is required.

• Latest salary certificate or the original slip.
• A photocopy of Form no.16 A (TDS Form) from the applicants' Employer.
• The original certificate from the applicants' employer for any other allowances that are not reflected in the applicants' salary slip.
• A photocopy of the applicant's updated bank passbook or a statement of the applicant's accounts for the last 6 months.
• A photocopy of the applicant’s voter I.D. card or the applicant's Company’s I.D. or the applicant’s passport/ ration card.
• A passport-size photograph of the applicant & co-applicant.

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.

• Loan Agreements
• Disbursement Requests
• Post-Dated Cheques
• Personal Guarantor’s Document

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.