Source – Sukanya Kumar, Hindu Business Line, July 27, 2014
Let’s clear the air around some of the common misconceptions about home loans for NRIs
There are a number of Indians who have settled abroad for better career opportunities. For them, a property back home usually gives a sense of attachment and security, which is a prime reason for investment in real estate here by NRIs.
But there are many misconceptions associated with borrowing in India for this purpose. Let’s address the more common misconceptions you might have.
Power of Attorney only to blood relatives: Though certain banks like ICICI Bank or Axis Bank insist that power of attorney should only be given to blood relatives in India, there are lenders such as HDFC and Standard Chartered Bank where this is not a policy.
In other words, NRIs can give the general power to any person whom they trust, including friends and associates.
Also, there are certain banks like HSBC and Citibank that have developed mechanisms where the NRI does not need to give the Power of Attorney to a resident of India in order to take a loan, making it more convenient. Of course, they have other requirements, including a blood relative as a local co-applicant for the loan.
No joint loans with resident Indians: An NRI and a resident Indian can jointly apply for a loan, but this would be still be considered an NRI loan. Even if the asset is jointly owned, the NRI would be regarded as the principal applicant and his income would be primarily considered while determining loan eligibility.
The EMI payments will also be made by the NRI, which he could either do through his non-resident external (NRE) account or by opening a non-resident ordinary (NRO) account jointly with the resident Indian and then issuing cheques or standing instructions from that account.
Shorter tenures and lower interest: Loan tenure and the rate of interest for resident Indians and NRIs are the same. In case of a change in status from NRI to resident, the loan is reworked according to the revised income; the relevant interest applicable is charged and the tenure is also revised.
NRIs from Middle East can’t get a loan: Just like other countries, NRIs from the Middle East can avail a home loan to purchase property in India. But they need to submit an extra document and that is a copy of their work permit. The card needs to be translated into English by Government-authorised translators.
Visiting at least once while the loan is being processed: To avail a home loan in India, it is not necessary for NRIs to visit the country at any stage.
One just needs to have all documents in place, including passport copies, a valid visa, a work permit, contract of employment, work experience certificate, etc., and submit self-attested copies of the same to banks.
OCI cannot apply for a home loan: Overseas Citizens of India are individuals who have dual citizenship, i.e., they hold a foreign passport but have an OCI card, which also makes them a citizen of India. The home loan norms for them are similar to what is applicable to NRIs.
The only difference for OCI holders is that they need not pay taxes in India and are not eligible to vote.
PIOs cannot buy property in India: Foreign nationals or individuals with foreign passports can avail home loans to buy property in India too, but only if they are of Indian origin. All they need to do is to present their PIO card along with other requisite documents.
While the norms have been eased for NRIs, the only important aspect that they need to keep in mind is that when they are investing in a property in India, they should approach a bank that has a presence in their country.
The city where the property is purchased should also have a branch of the bank.
The writer is the founder & director of RetailLending.com, a home loan advisory firm