In order to get a housing loan approved by a Housing Finance Company,
a NRI borrower is required to submit several documents pertaining
to the property. Financing a home through housing finance companies
carries a double advantage for NRIs.
Apart from making funding easier for the investor, the HFC examines
the documents before disbursing the loan, and certifies that the
papers are in order. Even though all liabilities are eventually
borne by the buyer, the process reassures him of the credibility
of the investment.
Besides, since NRIs are allowed to repay the loan in foreign
currency, the proceeds of the sale from the property are fully
repatriable, in case he wishes to dispose of it at a later date.
To avail a loan, the following elements can be kept in
Non-resident Indians planning to return
Government servants stationed overseas
on duty with the Indian missions or deputed abroad by foreign
Governments or international agencies
Loans are also granted for renovation
of an existing property.
Persons of Indian origin, however, are not extended housing loans
by housing finance companies.
Housing finance companies can cover up to 85% of the cost of the
residential property, with an upper limit of Rs.1 crore. The capacity
to repay determines the maximum that an NRI can borrow, which
in turn is determined by such factors as: income, age, qualifications,
work experience, number of dependants, income of spouse, assets,
liabilities, stability and continuity of occupation, employment
prospects in India, and savings history.
As per a circular issued by the RBI on 31st January, 2007, if
the loan is against the NRI's NRE and FCNR accounts, the maximum
loan amount cannot exceed Rs. 20 lakhs.
Rate of Interest and other charges
Interest rates will range from 11.25% to 14.25% per annum, as
different finance companies have an independent structure broadly
guided by RBI directives.
Processing fee to be paid on the loan varies between 1 and 2%
of the loan amount, depending on the financial institution.
The interest is generally paid on the reducing balance, i.e. interest
is paid only on the unpaid portion of the loan. Individuals must
check on the calculations - whether it is being calculated on
a monthly, quarterly or annual reducing balance. A monthly reducing
balance, wherein interest is calculated every month is easier
on the pocket, as the principal becomes lower at monthly intervals.
The shorter the period of the loan the higher the amount you
pay each month. So choose your repayment capacity, and then work
backwards to settle your payback period. To calculate your payment
plan your dealer wi11 calculate your total liability, i.e. principal
and interest, and then apportion it into EMI's (Equated Monthly
Installments). Processing fees and administrative fees also have
to be borne by the borrower.
An amortization schedule is a helpful tool to keep track of the
loan amount, as it gives the reduced loan amount every month.
It also gives the breakup of every EMI towards repayment interest
and outstanding principal of the loan.
Time Span of Loan
Generally loans are disbursed for a period of 3 to 10 years, and
NRIs can avail of time spans to suit their convenience.
Repayment of Loan
Loans are repaid in Equal monthly installments (EMI) comprising
principal and interest Repayment starts from the month following
the month in which the loan was disbursed. Pre-EMI interest is
paid on the principal amount first, before the EMI starts. NRIs
can make EMI payments through post dated cheques from their NRO
Payments for fees, charges, and pre-EMI interest should be remitted
from abroad through normal banking channels or from the Non-Resident
(External) Account/Non-Resident (Ordinary) account in India.
Loans can also be repaid by the borrower's close family through
their account in India by crediting the borrower's loan account.
Settlement of loan in foreign exchange is treated as equivalent
to foreign exchange received for purchase of residential property.
Guarantee for the loan
The residential property that is being purchased is mortgaged
to the financing institution, by submitting title deeds and other
collateral security as may be required.
The borrower can choose between a one-time disbursal of loan and
a series of instalments to suit the payment module of the property
one intends to buy. Either way, the loan can be availed as soon
as the documents are processed and the individual has paid up
his own contribution.
Pre-payment of Loan
The NRI can repay the loan well ahead of schedule by remittances
from abroad through normal banking channels, the Non-Resident
(External) Account and/or Non-Resident (Ordinary) Account in India.
Most institutions do not levy a pre-payment charge.
Supporting documents to avail a Housing Loan:
1. Employment/Residency related documents
Photo copies of:
Employment contract (if the contract
is in a language other than English, an English translation
of the same attested by the Embassy/Employer should be attached).
Latest salary slip.
Latest work permit.
Identity card issued by current employers.
Visa stamped on the passport.
Continuous Discharge Certificate (CDC)
- (if applicable).
Overseas Bank Account Statement for the
last four months.
2. Property Related Documents
Receipts for payments made for purchase
of the dwelling unit.
Copy of approved drawings of proposed
Agreement for sale/sale deed/detailed
cost estimate from Architect/Engineer for property to be purchased/constructed/extended.
Allotment letter from the co-operative
society/association of apartment owners.
3. Power of attorney