An NRI has the luxury to buy residential or commercial property in India but cannot buy agricultural plots, farmhouses, or plantations. If you are an NRI who is living outside India but is interested in buying a property in India, your timing couldn't be better. The real estate sector of India is flooded with rewards due to which properties have become more lucrative with favourable currency rates. In this blog, you will get a glimpse of documents needed to buy a property,
eligibility, documents needed for a home loan, essential papers to monitor and register, and much more. So stay on and read on!
NRIs have the liberty to buy a property with the help of home loans. But the rules of these home loans are not the same for the NRIs. Because of this, the NRIs must understand the basic steps and crucial differences before engaging in such activity.
An NRI is a person who has not resided in India for 183 days or more and is living in another country. The Foreign Exchange Management Act determines whether or not a person is eligible to invest as a citizen or as an NRI. The Income Tax Act determines the tax obligation related to these kinds of investments.
Passport and OCI card: An NRI applicant looking for a home loan should first present his/her Indian passport. Even if the NRI applicant possesses a foreign passport, they can buy property in India by providing a PIO card, also known as Persons of India Origin, or can also provide their OCI (Overseas Citizen Of India) Card.
Pan Card: The Pan Card is needed at the time of property transactions.
Power of Attorney: In case, as an NRI applicant, you are not available in India to continue your purchase transaction, you will have to appoint a special power of attorney. That power of attorney should be registered and notarized. No general power of attorney has the authority to execute the property transaction.
If an NRI applicant for a home loan is unavailable in India, then a power of attorney authorises another person residing in India to fulfi l the transaction on their behalf. The NRI home loan applicant should duly sign the POA in the presence of a consulate offi cer or a notary. They should also attest to it.
To stand eligible for the NRI home applicant, one must fulfi l the following criteria
An NRI has an option to transfer the money from an overseas bank account through regular banking channels. One can also issue post-dated cheques or an ECS. An NRI also has an option to issue cheques from the local relative’s bank account to repay the home loan.
The price paid to the seller or the real estate developer in Indian currency, plus forex losses or gains during the purchase of property with statutory dues to be paid in India and foreign, plus the bank loan interest, gives us the cost of ownership price for NRIs. Just in case the currency of India strengthens over the US Dollars, then the cost of ownership will increase each passing year for the projects that are under development. Some NRIs tend to buy ready houses so that the cost of ownership gets locked down in Indian rupees.
There will be no surprise to see that NRI is opting for a home loan from a bank that is located in his residence, which also has a branch in India. Before choosing this option, the bank and the details should be extensively explored. The cost of debt is likely to be cheaper in most countries outside India. With their relationships in India, foreign banks provide loans at very reasonable rates without the addition of forex. Whereas in some scenarios, NRIs tend to fear home loans in India because of the currency fluctuation risks involved. But one should safely comprehend the options in order to avoid escalation in the cost of the loan.
As per RBI, NRI home loans are available with the lowest interest rate starting from 6.85% per annum. Under Section 80 C of the Income Tax Act 1961, an NRI is eligible for tax benefi ts on a home loan if and only if they file income tax returns in India. There are two ways by which the tax deduction happens- the interest component and the principal component.
Under the interest component, the deduction is up to Rs 2 Lakh on the interest repayment amount, whereas on the Principal component, the deduction is up to Rs 1.50 lakh on the principal amount repayments.