Unlocking Opportunities: NRI Home Loan Eligibility Made Easy

The Indian real estate market is booming. After the major setback experienced during the pandemic, the sector is now witnessing a euphoric revival that promises great value, unlocking opportunities for the average investor. While Indians are too keen to take advantage of this uptrend, non-resident Indians (NRIs) are not far behind. With foreign exchange values working out largely in their favour, NRIs and Overseas Citizens of India (OCI) are looking to own a dream home back in India. Let us look at some regulatory guidelines to keep in mind, NRI home loan eligibility, and home financing options available to NRI investors.

FEMA guidelines for NRI investors

Before investing in a residential property in India, you must gain clarity about the regulations involved in such investments.

• According to the Foreign Exchange Management Act (FEMA) guidelines, an NRI or an Indian citizen living abroad, or an Overseas Citizen of India can buy property in India except agricultural land, plantation property, or a farmhouse. This means there is no restriction on investing in residential property in the country, and NRIs can buy more than one flat or apartment.
• The NRI investing in residential property in India does not need to register with RBI or any other financial institution.
• All payments for any property investment in India made by an NRI or a PIO must be through Indian currency. They cannot use foreign exchange, traveller's cheque or any such mode of payment. This means that all payments for property should come from their NRI/NRO/NRE accounts.
• As an NRI, you can invest in up to one residential property for self-occupation, and even if you cannot stay here due to your work abroad, no taxable rental income is involved in owning such property.

NRI home loan eligibility

All NRIs are eligible for up to 80 per cent of financing from banks, housing finance, and NBFC institutions registered with the RBI. As an NRI, you will need to put down a down payment of 20 per cent and can seek a home loan for the remaining amount.

To apply for an NRI home loan, the applicant must fall under one of the following categories: Non-Resident Indian (NRI), Person of Indian Origin (PIO), or Overseas Citizen of India (OCI). The applicant must be between 18 and 70 years old and either be a salaried employee or a self-employed individual. The applicant must have a credit score of 750 or above to increase the likelihood of approval. Factors such as income, country of residence, qualification, and availability of collateral are specified by various lending institutions. If you are an NRI and wish to avail of a home loan, it may be a good idea to seek the loan from the bank or institution where you hold your NRI/NRE/NRO account. You may want to compare different lenders to find a comfortable interest rate.

Advantages of NRI home loans

Apart from the ease of NRI home loan eligibility, there are some advantages you can avail of when you buy a property in India.

• If you are an NRI investor looking to purchase property, you can secure a home loan of up to 80% of the property value from RBI-registered banks or NBFCs. By availing of such a loan, you are also entitled to a 30% standard deduction on any real or deemed rental income from the property, which can be claimed towards the maintenance and repair expenses of the property. Additionally, you can claim an exemption on any property taxes paid to your local municipal authorities.
• Under section 80C, you can claim an IT deduction for the home loan principal amount repayment. Moreover, you can also claim a deduction on the stamp duty and registration charges made during the property purchase. In addition, you can claim an IT deduction of up to INR 2 lakhs on the interest paid towards the repayment of home loans.
• If you are an NRI looking to sell your property in India, you can sell it to any Indian citizen residing in the country. However, keep in mind that the TDS for NRIs is higher than that for domestic investors. Don't let this discourage you from investing in India, though, as NRI investors can enjoy nearly the same short- and long-term capital gains on property sales as domestic investors. Additionally, NRIs can qualify for an exemption from long-term capital gains by investing in specific bonds or another residential property, but this exemption is only available on the sale of the first property.

As an NRI you may want to build a home in India for your family or plan to move here post-retirement. You may also want to leverage the booming real estate growth in the country and the excellent ROI investment in properties offers. Whatever your intent, this is the best time to buy property in India.