Finance

Five Things That NRI must know about the Home Loans

The taxes and foreign exchange regulations should be understood to an NRI in India who wants to purchase a property using a home loan. Here are the dos and don’ts for NRIs in India who are making use of home loans. For non-resident Indians (NRIs), the Indian real estate industry presents a lucrative investment opportunity.

Like resident Indians, NRIs, with the aid of a housing loan, are also permitted to purchase properties in India. For NRIs and resident Indians, though, the home loan laws are not quite the same.

Therefore, understanding the key differences is critical.

Five Things NRI Home Loans borrowers Must Know:

  • As per FEMA and the Income Tax Act, who is an NRI? 

An Indian is referred to as an NRI who has not resided in the country for 183 days or more and is resident in another country. This period has been planned to be extended to 245 days in the Budget for 2020-21.

Researchers pointed out that the Foreign Exchange Management Act (FEMA) will decide whether you are able to invest as an ordinary citizen or as an NRI, while the Income Tax Act points out the tax burden associated with that investment.

  • For NRI home loan borrowers, what are the eligibility criteria? 

The following conditions should be met by an NRI home loan applicant:

  • At the time of the loan submission, a minimum of 2 years of work experience in the country in which he/she lives.
  • The cumulative permitted term of the loan is approximately 20 to 30 years. 
  • The median age permitted for a home loan to be serviced is normally up to 60 years. 
  • The loan-to-value (LTV) ratio would depend upon the age and income of the borrower.

  • Procedure for home loan repayment/norms for NRIs 
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In order to repay the home loan, an NRI can transfer money from an overseas bank account through standard banking channels, issue post-dated checks or an Electronic Clearing Service (ECS), or issue checks from a local relative’s bank account. When expanding home loans to NRIs, lenders require a Power of Attorney (PoA), so they live in a foreign country and the lender wants someone to negotiate with them in India.

  • Ownership Cost of property for NRIs 

The ownership cost is the price to be charged in Indian rupees to the seller/ developer, plus forex losses or profits during the acquisition of the asset, plus regulatory dues to be paid in India and abroad, plus capital costs (interest on bank loans). If the Indian currency tops the US dollar, the cost of ownership for projects under construction will rise annually. It could be better to purchase a ready home, depending on one’s desires, availability of funding, and loan terms, so that the cost of ownership is locked down in Indian rupees.

  • Can NRIs benefit from home loans? 

As the cost of debt is typically cheaper in most countries outside India, international banks are able to offer loans at competitive rates without thinking about forex through corresponding partnerships and branches in India. NRIs who purchase a home with a loan in India would be vulnerable to currency fluctuation threats. They should also examine the possibilities for hedging the possibility of currency fluctuation, in order to prevent a spike in the cost of the loan. Opt for PNB Housing for the best home loan interest rate available in India.

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