Home Loans for NRIs

It has been observed that most of the non-resident Indians and persons of Indian origin want to buy a house in India for themselves or for their family. Generally, NRIs have a doubt in their mind as to whether they can invest in a residential house property in India by remitting funds from overseas under the current foreign exchange regulations or not. Let us look at some of the aspects related to this matter.

An NRI refers to an Indian citizen who is residing outside India.
They can acquire any immovable property in India other than agricultural land, plantation and farmhouse. These days a number of options are available to buy houses of international standard with all the facilities such as clubhouse and gymnasium. An NRI may use his own funds to acquire immovable property. He can also avail of an NRI home loan for this purpose.

Interest rates for NRI home loans do not vary much from that of the Indians living in this country. But the home loan tenure for NRI's are sanctioned only for a shorter period. NRIs get only 85% of cost of home as loan amount. The size of the loan depends upon the borrower's repayment capacity. Up to 36 times of the gross monthly earnings of the applicant may be issued as loan. However, there is a maximum limit. Calculation of eligibility is same as that of Indians living in the country.

The NRI home loan re-payment has to be made through equated monthly Installments (EMI) through Non - Resident Ordinary (NRO) account or the Non Resident External (NRE) Account. For security, most banks insist that the first mortgage of the property should be in their name. If the property is under construction then adequate additional security is required such as guarantee of third party (either resident or non-resident).

The Government of India in 1991 embarked on liberalisation and economic reforms with a view to bring about rapid and substantial economic growth and move towards globalisation of the economy. As a part of the reforms process, the Government under its New Industrial Policy, revamped its foreign investment policy recognising the growing importance of foreign direct investment as an instrument of technology transfer, augmentation of foreign exchange reserves and globalisation of the Indian economy.

Simultaneously, the Government, for the first time, permitted portfolio investments from abroad by foreign institutional investors in the Indian capital market.

Basically, foreign direct investment relates to direct investment in an Indian company either through a joint venture agreement or as a wholly owned subsidiary with management interest. Foreign direct investment is also permitted through the route of Global Depository Receipt/Euro issue/FCCB.

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