NRI Real Estate and Property Investment in India
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Commercial Property Loans and Finance

NRIs show a marked preference for purchase of residential property over commercial spaces for investment in India. Surveys conducted in the USA amongst NRIs had only 9% of investors interested in commercial property. The RBI does provide for NRIs wishing to conduct business in India to procure loans against commercial property

Loan against Bank Deposits
Loans to buy commercial property for carrying out their business activities are available to NRIs against the NRO, NRE and FCNR (B) Term Deposits.

Banks may also grant Rupee loans to NRIs as per policy laid down by the Bank's board, other than for activities like business of chit funds, nidhi companies, agricultural or plantation companies or real estate firms or farm houses, trading in transferable development rights and investment in capital market, including margin trading and derivatives.

Loan Limits
Bank loans towards commercial property can be availed, with funding upto 60% of the value of the property.
With effect from 31st January, 2007, the RBI restricted the maximum loan permitted to NRIs against their own deposits held under Non Resident (External) Rupee NRE Accounts and Foreign Currency Non Resident deposits FCNR (B) Accounts to Rs. 20 lakh.

Loan Tenure
The loan tenure may range from 1-15 years, though some institutions would insist on wrapping up the loan in 4 -5 years.

Supporting Documents
Documents required for purchasing a house are different from documents required for acquiring a commercial space. The following need to be submitted:

  • Photo identity,
  • Residence proof
  • Bank statements for the last six months
  • Certified copies of balance sheets,
  • Profit and loss statement of accounts,
  • IT acknowledgement,
  • Advance tax challans for both company and personal accounts for the last three years, partnership deeds
  • Brief profile.

Loan Disbursal
The sanctioned loan is disbursed only after

  • Identification and selection of the property.
  • Submission of the legal documents.
  • Legal and technical clearance of the property
  • Investment of personal contribution towards the property

Conditions to the Loan
The loan shall not be utilised either singly or in association with other person, for any of the activities in which investment by NRIs is prohibited, namely;

  • The business of chit fund,
  • Nidhi Company,
  • Agricultural or plantation activities or in
  • Real estate business (excluding development of townships, construction of residential/ commercial premises, reads or bridges),
  • Construction of farm houses;
  • Trading in Transferable Development Rights (TDRs).

Repayment of Loan
Repayment of loan shall be made from

  • Out of remittances from outside India through normal banking channels,
  • By debit to the NRO/NRE/FCNR account of the borrower or,
  • Out of the sale proceeds of shares or securities or,
  • Immovable property against which such loan was granted.

 

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