8 things for NRIs to know before they take a home loan in India 8 essential facts every NRI must know before taking a home loan to finance the purchase of a property in India.
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1. Employment status
You need to be a graduate and employed or carrying out business outside India. This includes those posted abroad by the Indian government or companies or those Indians serving in international agencies like the IMF and UN.
2. Home loans for 80-85 per cent of property value
Loans are provided for a property that’s ready for possession or under construction. It is also available for construction of property on an owned plot or for alterations to an existing property, or even buying a plot.
3. Loan equivalent 36-40 times of gross monthly income
Some banks also go by the ratio of equated monthly instalment to net monthly income (EMI/NMI). The loan amount maybe dependent on your educational qualifications, income levels, place of residence and other factors.
4. Typically 5-15 year loan term
Extension of loan term at the discretion of the bank and is rare.
5. Higher interest rates
A higher interest charged for NRI home loans to cover the higher risk involved. There is generally a higher margin of 0.25 -0.50 percentage point charged.
6. Specific document requirements
Among documents required are copies of the passport, valid visa and work permit, contract of employment, work experience certificate, salary certificate and statements of NRE and NRO accounts. For those residing in the Middle East, copy of the employment card is also required. Salary certificate should be attested from the embassy, if the salary is not credited to a bank.
7. Power of Attorney needed for India representatives
You need a General Power of Attorney in favour of the resident Indian who would act on your behalf with the bank. If POA is issued while you are abroad, it needs to be signed in front of the embassy official.
The India representatives will need a valid passport, visa, power of attorney for a resident who will legally represent you. Also needed would be proof of residence abroad, salary certificate and bank statements etc when you finally submit your loan application.
8. Repayment through remittance
Under RBI rules, the repayment of the housing loan can only be made through overseas remittance from normal banking channels, rental income from impugned property or through NRE and NRO accounts. The payment has to be in Indian rupees only.
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