Over the last few years, real estate investment in India has been steadily growing in popularity as an investment option for NRIs. In fact, many reportedly prefer it above mutual funds, fixed deposits, gold, and even stocks. This is being driven by factors such as the steady depreciation of the Indian Rupee, the rise in affordable housing as well as ultra-premium housing, and the growth of smart city projects.
Amidst it all, many NRIs want to invest in residential property in India. According to the latest CII-ANAROCK Consumer Sentiment Survey, their preferred picks are Hyderabad, Delhi-NCR, Bengaluru, and Mumbai Metropolitan Region.
If you are a non-resident Indian (NRI) who wants to buy a property in India, you may be wondering how to finance your purchase. One option is to apply for an NRI home loan from an Indian bank or financial institution that offers loans to NRIs. However, before you do so, there are some important things you need to keep in mind.
Here are 5 tips to help you get the best deal on your NRI home loan.
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Check your eligibility criteria
Different lenders have different eligibility criteria for NRIs, such as age, income, employment status, credit score, and property type. You need to make sure that you meet the minimum requirements of the lender you choose. Some lenders may also ask for additional documents, such as passport, visa, work permit, overseas bank statements, and income tax returns. You should prepare these documents in advance to avoid any delays or rejections.
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Compare interest rates and charges
Interest rates and charges vary widely among lenders, so you should shop around and compare the best offers available. You should also check the type of interest rate, whether it is fixed or floating, and how often it is reset. Floating rates may be lower initially, but they can change depending on market conditions. Fixed rates may be higher initially, but they offer stability and certainty. You should also check the other charges involved in the loan, such as processing fees, prepayment penalties, late payment fees, and conversion fees.
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Choose the right loan tenure and repayment mode
The loan tenure is the period over which you have to repay the loan. It can range from 5 to 30 years, depending on the lender and your preference. The longer the tenure, the lower the monthly instalment, but the higher the total interest cost. The shorter the tenure, the higher the monthly instalment, but the lower the total interest cost. You should choose a tenure that suits your income and repayment capacity. You should also choose a repayment mode that is convenient and cost-effective for you. Some lenders offer different options for NRIs, such as electronic clearing service (ECS), post-dated cheques (PDCs), or direct debit from your NRE/NRO account.
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Know your tax implications
As an NRI, you may be liable to pay taxes on your income and property in India as well as in your country of residence. You should consult a tax expert to understand your tax obligations and benefits in both countries. For example, you may be eligible for tax deductions on your home loan interest and principal payments under Section 24 and Section 80C of the Income Tax Act in India. You may also be able to claim tax credits or exemptions in your country of residence for the taxes paid in India.
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Protect your property and loan
Buying a property in India is a big investment, and you should take steps to protect it from any risks or damages. You should buy a comprehensive home insurance policy that covers your property against natural calamities, fire, theft, vandalism, and other perils. You should also buy a home loan protection plan that covers your loan liability in case of your death or disability. This way, you can ensure that your family does not have to bear the burden of repaying the loan in your absence.
Final Words
With the Indian real estate market offering great opportunities as well as distinct advantages to NRIs, purchasing your dream home in the country as an NRI is easier and more lucrative than ever. Thankfully, the robust home loan system in India offers NRIs the perfect foundation to make their dreams come true. If you are interested in taking an NRI home loan, don’t forget to do your due diligence and keep the above-mentioned five things in mind at all times – right from the application process to loan approval and disbursal to repayment.
