- Who is an NRI?
A person residing outside India who is a citizen of India or a person outside India who is of Indian origin is an NRI. The definition of Person resident outside India is defined under section 2(w) of Foreign Exchange Management Act, 1999 as "a person who is not resident in India"
A person shall be deemed to be a person not resident in India in the following cases:-
- When the person stays in India for less than or up to 182 days during the preceding financial year
- When a person who has gone out of India or who stays outside India, in either case –
- for or on taking up employment outside India, or
- for carrying on outside India a business or vocation outside India, or
- for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period
- Who is a PIO?
The definition of 'Person of Indian Origin' is defined under section 2 (b) of Foreign Exchange Management (borrowing and lending in rupees) Regulations, 2000 and under section 2 (xii) of Foreign Exchange Management (Deposit) Regulations, 2000 as given under:-
"Person of Indian Origin' means a citizen of any country other than Bangladesh or Pakistan, if
- he at any time held an Indian passport; or
- he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
- the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b)"
Person of Indian Origin (PIO) for the purpose of acquiring immovable property in India as given under:-
- "Person of Indian origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
- at any time, held an Indian passport; or
- who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955)"
- Do non-resident Indian citizens require RBI's permission to acquire residential/commercial property in India?
- NRI / PIO / Foreign National who is a person resident in India (citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank) may acquire immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and / or non-repatriable funds
- In what manner should the purchase consideration for the residential immovable property be paid by foreign citizens of Indian origin under the general permission?
The payment of purchase price, if any, should be made out of
- funds received in India through normal banking channels by way of inward remittance from any place outside India or
- funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank.
Note: No payment of purchase price for acquisition of immovable property shall be made either by traveller's cheque or by foreign currency notes or by any other mode other than those specifically permitted as above.
- Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift / inheritance?
- An NRI may acquire any immovable property in India other than agricultural land / farm house plantation property, by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India
An NRI may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India
- An NRI may transfer any immovable property in India to a person resident in India.
- An NRI may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.
In respect of such investments, NRIs are eligible to repatriate:
- The sale proceeds of immovable property in India if the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account.
- The amount to be repatriated should not exceed the amount paid for the property in foreign exchange received through normal banking channel or by debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.
- Can they dispose of such properties and can sale proceeds of such property be remitted out of India? In the event of sale of immovable property, other than agricultural land / farm house / plantation property in India, by a person resident outside India who is a citizen of India / PIO, the repatriation of sale proceeds is restricted to not more than two residential properties subject to certain conditions.
If the property was acquired out of Rupee sources, NRI or PIO may remit an amount of up to USD one million per financial year out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.
- application / earnest money / purchase consideration made by house-building agencies/seller on account of non-allotment of flats / plots and
- cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of NRE/FCNR (B) account/inward remittances.
- Can authorised dealers grant housing loan to NRI's where he is a principal borrower with his resident close relative as a co-applicant / guarantor or where the land is owned jointly by such NRI borrower with his resident close relative?
- Yes. Such housing loans availed in rupees can also be repaid by the close relatives in India of the borrower. For further information please visit the FAQ Section of http://www.rbi.org.in
- Can housing loan of NRI / PIOs be repaid by close relatives of the borrower in India?
- Housing Loan in rupees availed of by NRIs/ PIOs from ADs / Housing Financial Institutions in India can be repaid by the close relatives in India of the borrower.
Loan for NRIs
If you are a NRI, acquiring a home loan in India can be a complicated and confusing process. Go through the following information to understand the process of receiving a home loan.
- HOME LOANS
The 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 document 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."
Broadly categorized, Non-Resident Indians qualifying for NRI housing loans are:
- Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in 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 as well as for NRIs for getting Home Loans are different in some respect. Home loans for NRIs are available for construction of new house / flats, purchase of old house / flat addition / alteration to an existing house and repairs / 31 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 investor 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 the 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.
- ELIGIBILITY FOR NRI:
The eligibility criteria of NRIs differ from Resident Indians based on a few parameters. The parameters include:
The loan applicant has to be 21 years of age.
The NRI loan seeker has to be a graduate.
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 dependants:
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 32 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, a 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.
- RBI DIRECTIVE LOANS:
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 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 an own contribution towards the cost of unit financed.
- The cost of 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 economical stability of the applicant, home loans for NRIs are quite feasible, because they are well in economic resource.
- DOCUMENTS REQUIRED FOR LOAN:
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, 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 (in English) specifying name, date of joining, designation and salary details
- Bank Statements for the last six months
List of Classified documents for Salaried and Self Employed NRI Applicants:
Salaried NRI Applicants:
- Copy of valid passport showing VISA stamps
- Copy of valid visa / work permit / equivalent document supporting the NRI status of the proposed account holder
- Overseas Bank A/C for the last 3 months showing salary credits
- Latest contract copy evidencing Salary / Salary Certificate / Wage Slips
Self-Employed NRI Applicants:
- Passport copy with valid visa stamp
- Brief profile of the applicant and business/ Trade license or equivalent document
- 6 months overseas bank account statement and NRE/ NRO account
- Computation of income, P&L account and B/Sheet for last 3 years certified by the C.A. / CPA or any other relevant authority as the case may be (or equivalent company accounts)
- 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 individuals claim as a person of Indian origin
- PERMISSIONS AND APPROVALS:
Before a construction can begin, the builder must seek several permissions and approvals from relevant bodies. Without these clearances, the construction may come under litigation.