Buying a house is not only a feeling of pride and comfort but for all those Indians who are living in abroad, having a home in their birth country is a medium of connection between them and their country and to the Indian heritage.
(NRIs) Non-Resident Indians mostly prefer to buy a house in India because of the low currency value; however, if you are suffering from a shortfall of funds, then you can smoothly go for a home loan.
GETTING IT RIGHT
To get through the implications of buying a property in India, you will have to assess your residential status. Residential status has different definitions under different categories and laws.
Let’s take a look at it:
NON-RESIDENT INDIAN (NRI):
Basically, any individual Indian citizen living in abroad is technically an NRI. However, to qualify as one, you need to be away from India for a specific duration of time.
The term NRI is defined under the Income Tax Act, 1961 and Foreign Exchange Management Act, 1999.
What’s the concept?
ACCORDING TO FEMA:
“Person resident outside India.” – It means a person who is not resident in India.
A person resident in India means a person who has resided in India for 182 days or more during the previous fiscal year. However, there are a few exceptions to this rule, such as:
- Individuals going out of India for a business, or job or vacation, or for any other purpose for an unspecified time period are considered as Non-Resident Indians, no matter how long they stay abroad.
Individuals coming to India for a business, or job or vacation, or for any other purpose for an unspecified time period are considered as Resident in India, no matter how long they stay in India.
ACCORDING TO INCOME TAX ACT:
person who is not resident in India is an NRI. An individual is
deemed to be a non-resident of India if:
- that if a person has not resided in India for more than 1812 days or more during the previous fiscal year.
- The person is in India for 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the last year.
OVERSEAS CITIZEN OF INDIA (OCI):
If you are not currently residing in India but were in the past or at least one of your parents, grandparents, great grandparents were an Indian citizen, or you are married to an Indian citizen, then you can register yourself as an OCI (Overseas Citizen Of India).
PROPERTY OWNERSHIP RULES APPLICABLE TO NRIs / OCIS
OCIs and NRIs can acquire and own immovable property (except agricultural land, farmhouse, and plantation property) in India. But if you are a citizen of Pakistan, Nepal, Iran, Bangladesh, Bhutan, Afghanistan or Sri Lanka, then you will have to seek permission from the Reserve Bank of India to acquire any property in India.
All necessary restrictions and conditions on property ownership by NRIs are laid down by the FEMA Act 1999.
HOME LOANS FOR NRIs:
A variety of home loans are available to NRIs to buy the house of their choice. However, every financial institution has its own terms and conditions.
Following is the general guide for you to understand it better:
THE ELIGIBILITY CRITERIA
To apply for a home loan, you need to be a salaried person or self-employed, and you can apply for a home loan either independently or with a co-applicants. (who may or may not be the co-owners of the property), but most importantly, all co-owners need to be co-applicants.
You can avail a home loan to buy an entirely constructed house or an apartment or to build a house on a plot or to buy a plot to renovate or extend your house or even for refinancing your existing build a new house with a home loan.
DOCUMENTS REQUIRED FOR HOME LOAN:
There are certain documents that you are required to submit along with your home loan application, which are:
- Passport size photographs of all applicants
- Photocopy of a valid passport and visa
- Proof of identity, residence, and income
- Copy of property allotment letter/buyer agreement or agreement to sell, if a property is already shortlisted
- Cheque towards processing fees
of Attorney if applicable
HOME LOAN PROCESS:
process does not take too long, all you need to do is to submit your
duly filled home loan application form along with all other required
documents to the bank or lender either through a POA holder or
MAXIMUM LOAN AMOUNT:
the loan amount approved ranges from 75% to 90% of the total value of
the property, and the rest has to be paid by the borrower.
maximum tenure can be up to 20 years; however, it depends on various
factors like your age at maturity of the loan, age of property at
loan maturity, etc.
You get an option to opt for a fixed rate home loan ) or an adjustable-rate loan. The interest rate will be applicable would be levied on the provided on the final loan amount.
REPAYMENT OF THE HOME LOAN:
If you want to or you are planning to buy an under-construction property, then you will just have to pay only the interest till its completion after that you can start paying your EMIs. However, if you are buying an entirely constructed property, then your EMI would commence immediately.
*All the EMIs must be paid through your NRE/NRO bank account in India*
However, there is no penalty on pre-payment ofr partial or full value of the outstanding loan amount paid, but if you are making a pre-payment, then you might have to pay pre-payment charges.
TAX DEDUCTION FOR HOME LOAN:
As per the income tax definition, you can avail a tax deduction on interest paid and loan repayment if you are an NRI. But you will have to file your income tax return in India.
You can avail a deduction of up to Rs. 1.5 lakhs on housing loan principal repayment amount under section 80C, but you are eligible for up to Rs. 2 lakh on interest payment if your property is lying around vacantas per Section 24.
Now with the readily available home loans, NRIs can build their wealth and stay connected to their cultural heritage in their homeland.