NRI Loans Overview

Who is an NRI or PIO or OCI?

“Non-Resident Indians” (NRIs) are people of Indian birth or descent who live outside India, who are citizens of India holding Indian passports and who are not residents of India. Thus, in order to determine whether an individual is a non-resident Indian or not, his residential status is required to be determined under Section 6. As per Section 6 of the Income-tax Act, an individual is said to be non-resident in India if he has not stayed in India for a period of 182 days or more during the previous year.

“Persons of Indian Origin” (PIO) or “Overseas Citizens of India” (OCI):

Persons of Indian Origin (PIO) are also called Overseas Indians. They are individuals who are Indians at birth or descent of Indian origin who live outside of the Republic of India. The Persons of Indian Origin means a foreign citizen (except a national of Pakistan, Afghanistan, Bangladesh, China, Iran, Bhutan, Sri Lanka and/or Nepal), who:-

⇒  At any time held an Indian passport or 

⇒  Either of their parents or grandparents or great-grandparents were born in undivided India or 

⇒  Is a spouse of a citizen of India or a PIO

Overseas Citizenship of India (OCI) is an immigration status authorized for a foreign citizen of Indian origin to live and work in the Republic of India indefinitely. The OCI was introduced in response to demands for dual citizenship by the Indian diaspora, particularly in developed countries. It was introduced by the Citizenship (Amendment) Act 2005 in August 2005.

Both PIO and OCI can get issued an OCI card, which is a Blue booklet similar to an Indian Passport. The OCI card in conjunction with a current valid foreign passport is sufficient to travel to & from India and is also required for applying for Loans in India.

Purpose:

NRIs in India can get loans for purchase or against any of following types of properties in India:

♦  Ready-to-move Flats / Apartments / Floors / Bungalows

♦  Under-construction Flats / Apartments / Floors / Bungalows

♦  Home Improvements on properties already owned by them

♦  Home Construction / Extension on residential plots already owned by them

Employment Status:

Following categories of NRI or PIO or OCI are eligible to apply for loans in India:

♦  Salaried NRIs employed with Companies outside India

♦  Self-Employed NRIs having owned Businesses outside India

♦  Merchant Navy Individuals having NRI residential status in India

Maximum Loan Amount:

This is same as a normal Home Loan to a Resident India as follows:

♦  Upto 30 lacs:                  Upto 90% of Cost of Property

♦  From 31 lacs - 75 lacs:  Upto 80% of Cost of Property

♦  More than 75 lacs:         Upto 75% of Cost of Property

The above is subject to income repayment capacity of the NRI Borrowers

Maximum term: 

♦  Upto 25 years Mortgage Home Loans are available depending on various Bank Policies subject to the retirement age of NRI.

Applicant and co-applicant to the loan: 

♦  Home Loans can be applied for either individually or jointly. Proposed owners of the property will have to be co-applicants. However, the co-applicants need not be co-owners of the Property.

POA / GPA Holder: 

♦  As per RBI norms and Internal Bank policies, an NRI needs to appoint a General Power of Attorney (GPA or POA) in India who is a local Indian resident. The GPA Holder need not be co-applicant in the loan and so does not share any liability of the loan with the NRI. However, he is to be appointed as a GPA for signing on documents on behalf of the NRI and as point of contact during the tenure of the loan.

Home Loans:

All features and benefits available to a resident Indian borrower while applying for a home loan are also available to a NRI home loan borrower. Click here to apply for a NRI Home Loan in India. 

Loan Against Property:

Few Banks and NBFCs in India also provide Loans against Property to NRIs settled outside India. This means that NRIs can avail term loans against pre-owned properties in India which are 100% complete and registered in their names. These Banks and NBFCs do enquire about the end-usage of the loan, although generally the funds usage is not monitored. 

For Example: ICICI Bank and Axis Bank have policies and products to give Loan Against Property to NRIs.

Most other features and benefits available to a resident Indian borrower while applying for a LAP are also available to a NRI LAP borrower.

Click here to apply for a NRI LAP in India.

Balance Transfer:

Over a period of time due to macro-economic changes and Bank internal policy changes rate of interest reduce, for this reason the existing borrowers may feel that they are paying a higher rate of interest than the market would be offering.

As Borrower you would want to shift your existing loan for any or all of these reasons:

♦  Lower Rate of Interest and other terms of the new Lender

♦  Enhanced loan amount given by the new Lender

♦  Better Product Variant being offered by the new Lender like Home Loan OD A/c

♦  Better services being offered by the new Lender

♦  Better Brand image of the new Lender

** Most other features and benefits available to a resident Indian borrower while doing Balance Transfer of loans are also available to a NRI borrower.

Click here to apply for a NRI Balance Transfer in India.

Top-up Loans (with BT and Internal Top-up loan):

A Top-up loan on an existing Home Loan availed by an NRI in India is like taking Loan against property. As mentioned above in LAP, only few Banks and NBFCs in India can provide Top-up loans to NRIs. The funds are released in the name of the NRI borrower and they can be utilised for any personal purposes in India.

**Most other features and benefits available to a resident Indian borrower while doing Top-up loans are also available to a NRI borrower.

Click here to apply for a NRI Top-up in India.

NRI Individuals eligible for Loans in India are as follows:

Profiles:

♦ Non Resident Indian (NRI), Person of Indian origin (PIO), Overseas Citizen of India (OCI), except Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan.

Age:

♦ Minimum age 21 years. 

♦ Maximum age limit is 60 years or retirement age (whichever is earlier), at the time of loan maturity.

Work experience: 

♦ Applicant should have a minimum overseas work experience of six months with total work experience of 2 years

Minimum Income:

♦ Your income determines the amount of loan you are eligible for. Banks generally keep an EMI to Income ratio at 50% for NRIs

Property Cost & Market Value:

♦ Lower of the Property cost or Market Value is taken by Banks for calculating maximum loan amount. Higher the home loan amount, lower the percentage of funding available as per RBI norms as follows:

Tenure of the loan:

♦ The longer the tenure you opt for, the more loan you are eligible for as the EMI amount decreases with increase in tenure.

Interest rate offered:

♦ If your interest rates are on a lower side, then the home loan eligibility will be higher and vice-versa as the EMI amount decreases with decrease in interest rate

Existing Loans:

♦ In case you are paying EMIs on existing loans (Both in India and in your country of residence), then the home loan eligibility amount will come down to keep the EMI to income ratio 50%.

Credit History:

♦ In case of NRIs, they might have credit history both in India as well in the country of residence. So Banks check for credit ratings in both countries.

For India, they will pull out the credit report of the NRI from CIBIL which stands for Credit Information Bureau India Ltd. It is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its members in the form of credit information reports. Individuals can also access their own credit reports from CIBIL. For more information refer www.cibil.com

For the overseas country, Banks will ask the NRI themselves to provide for a Credit report with score from any authorised Credit Rating agency in their country of residence.

Some of the international companies providing credit rating services are Experion, Transunion, Equifax etc.

Generally a Credit Score of 700 & above is considered GOOD. Many Banks these days are following CIBIL Score based Interest Rates, which means: - 

Better your CIBIL Score, Better Interest Rate you will get!

Bank Account in India:

As per RBI Guidelines in India, the NRI loan borrower is required to open an NRO, NRE, NRNR or FCNR account in any scheduled Bank in India. 

All payments towards the loan, like initially for processing fees cheque or for loan repayment of EMIs or part-prepayment of the loan have to be made from the NRO, NRE, NRNR or FCNR account only.

POA / GPA Holder: 

As per RBI norms and Internal Bank policies, an NRI needs to appoint a General Power of Attorney (GPA or POA) in India who is a local Indian resident. The GPA Holder need not be co-applicant in the loan and so does not share any liability of the loan with the NRI. However, he is to be appointed as a GPA for signing on documents on behalf of the NRI and as point of contact during the tenure of the loan.

Click here to apply for a NRI Home Loan or LAP in India.

NRI, PIO or OCI are required to submit various types of documents for a Home Loan Application in India:

♦  KYC Documents 

♦  Income Documents 

♦  Bank Statements 

♦  Existing loan details

♦  Property Documents

♦  Signed GPA format with KYCs of GPA Holder

** Generally the documents required are almost similar across all Banks; however they may differ with various banks depending upon specific requirement etc. 

For a Detailed list of NRI Documents required - Click here....

Click here to apply for a NRI Home Loan or LAP in India.

An NRI home loan borrower also enjoys all Tax Benefits as available to a Resident Indian borrower. Multiple Tax Benefits on both Interest and Principal repayment under the following sections of the Indian Income Tax Act, 1961:

However these tax benefits can be availed only against any taxable income of the NRI in India, while filing Income tax returns in India.

♦  NRIs Loans are charged at same interest rates and fees / charges as a normal Resident Indian

♦  Home Loans command the lowest interest rate in the Banking Industry. 

♦  All Banks link their interest rates to external Benchmark rate of RBI - Repo Rate

♦  At present Home Loan rates vary from 7.50% to 8.50% depending on Loan Amount, CIBIL Score, Income Profile and the Lender.  

Click Here to know the ongoing NRI Home Loan Interest Rates…

Click Here to know the ongoing NRI LAP Interest Rates…

NRIs Loans have similar fees and charges as compared to a Resident Indian Home Loan or Loan Against Property.

Click Here to know normal Home Loan Fees & Charges…

Click Here to know normal LAP Fees & Charges…

Click here to apply for a NRI Home Loan or LAP in India.