How to Handle Home Loan – Part Re-Payment

Part Re-Payment on Home Loans isn’t something we all intend on doing right from day one when Home Loan is applied. The Bank gives us two options:

Reduce the Monthly EMI of your Loan & Retain the Tenure

B. Reduce the Tenure of the Loan & Retain the EMI

If you choose option A.  The Burden on your Monthly Budget will be lower and you will have more surplus cash every month to utilize for other expenses.

But if you choose option B.  The Loan will be repaid well in advance and the Nri Interest Rates you repay to the Bank will be much lower.

Now which one to choose is a difficult decision? So I would suggest you to choose option B. In fact, by Default the banks will also offer the option of Lowering the Loan Tenure by retaining the same EMI. This is because; any change in EMI requires a lot of Additional Paperwork.

From the Customer’s Perspective if you see how reducing the Tenure would be useful. I will explain with an assumption that is  let’s say you have taken a 20 year Tenure Home Loan for Rs. 50 Lakhs where your EMI works out to approx. Rs. 50,000 per month then:

Your EMI per month would be 50000/- , Repayment per year would be 6 lakhs and Repayment over 20 year would be 1.2 Crore. So if 2-3 lakhs is paid on original EMI on reduced tenure of the loan, you save 6 lakhs!

Isn’t it better saving Rs. 2000 or so every month in EMI? And importantly by choosing option B it is “Affordability” because that reduced tenure is going to come only 10 or 15 years from now. But if you really want to go for option A then don’t compromise on your peace of mind to reduce your loan tenure by 1 or 2 years. Make a choice that will suit you the Best.

[Source: http://loanwalle.com/blog/how-to-handle-home-loan-part-re-payment/]

NRI Home Loans - The NRI dream home in India!

Owning a home is a dream for most of us and thanks to the diverse home loan schemes available to make that dream a reality. How is this different in case of Non- Resident Indians (NRI)? Is it equally easy for them to obtain a home loan and own the property of their choice? NRI home loans are now easily available in India, subject to fulfilment of certain conditions.

NRI Status:

When it comes to defining a NRI, all banks and financial institutions go by the definition specified by the Reserve Bank of India (RBI) i.e., “An Indian citizen who holds a valid Indian passport and stays abroad for employment or carrying out business or vocation under circumstances indicating an intention for an uncertain duration of stay abroad is an NRI.  So those eligible for home loans under this category would be those employed or carrying out business outside India, those posted abroad by the Indian government or companies or those Indians serving in international agencies like the IMF, UN, World Bank etc.

Properties eligible for loan:

Home loans can be availed for any property ready for possession or under construction, construction of property on an owned plot or for alterations to the existing property. Buying of a plot also qualifies for a home loan.

Maximum amount of loan allowed and other conditions:

Income and educational qualifications play an important role in deciding the maximum amount of loan available to an NRI.  Banks allow an advance of 80-85% of the value of the property, subject to the Gross Monthly Income (GMI) of an individual. Maximum amount of loan granted, is in the range of 36-40 times GMI. Some banks also go by the ratio of Equated Monthly Installment to Net Monthly Income (EMI/NMI).

For E.g.: State Bank of India puts a limit of 40% of NMI against EMI for NRIs with annual income up to Rs 2 L.  For those earning between Rs. 2-5 L, it is 50% of NMI; and for individuals earning more than Rs. 5 L annually, it is 55% of NMI.

Few other banks set different criteria depending on educational qualifications, place of residence etc. For E.g.: With ICICI Bank, for those residing in the Middle East, the minimum annual salary required is 36000 Dhms if the tenure is within 5 years and for tenures between 6-10 years the income requirement is set at 48000 Dhms. While for those residing in the USA and others the respective limits are 30000 and 42000. The criteria differs for self-employed, depending on the educational qualifications.

It is important to note that only graduate NRIs can avail NRI Home Loans in India.

Tenure of loans:

While a resident can avail loans with a maximum tenure of 30 years with some banks, tenure for NRI home loans is restricted. It is available within the range of 5-15 years. Extension beyond the term of 15 years is solely at the discretion of the bank and in exceptional cases only.

Rate of Interest:

There is a higher rate of interest charged on NRI home loans to cover the higher risk involved. There is generally a margin of 0.25% -0.50% charged.

Documents required:

The documentation required for NRI home loans is different from resident home loans. Documents normally required are copies of the passport, valid visa and work permit, contract of employment, work experience certificate, salary certificate and statements of NRENRO accounts. For those residing in the Middle East, copy of employment card is also required. Salary certificate should be attested from the embassy if the salary is not getting credited to a bank.

Submission of documents: You need not wait for your next trip to India to apply for a home loan. Many of the banks have branches in places like Dubai, Singapore, London etc. where you can apply for home loans. Few banks also extend the facility of online submission and status updating.

However, you would require executing a General Power of Attorney in favor of a resident Indian who would act on your behalf with the bank. If POA is issuing while you are abroad, it needs to be signed in front of the embassy official.

Repayment of loan: The repayment of these loans can only be through Non-resident External (NRE) or Non-resident Ordinary (NRO) accounts with remittance from abroad. No other funds can be used for repayment of these loans. The repayment needs to be made in Indian Rupees only.

Change in status from NRI to Resident: When there is a change in status from NRI to resident the loan is reworked according to the revised income and interest applicable is charged and the tenure is also revised.

Source: https://blog.bankbazaar.com/the-nri-dream-home-in-india/

Can an NRI buy property in India?

The government of India has offered permission for the Non-Resident Indian (NRI) and Person of Indian origin (PIO) to purchase immovable property in India. This is a general permission and it covers only the purchase of residential and commercial property. The purchase of agricultural land, plantation property or farmhouse in India is not permitted. The government has not fixed any limitation on the number of residential or commercial properties that can be purchased by the NRIs or PIO.

                                                                

If the NRI purchases a property under the general permission, he/she does not have to file any documents or reports with the Reserve Bank.

A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India. An NRI can take on lease an immovable property for a period not exceeding five years for without taking permission from the RBI.

A NRI or a PIO can acquire immovable property in India by way of gift either from a person resident in India or an NRI. The Nri Home Loan can however be only commercial or residential in nature. Agricultural land, plantation property, farmhouse in India etc cannot be acquired by way of gift. The government of India has offered permission for branch office of a foreign company to purchase immovable property in India.

A foreign company, which has established a Branch Office or other place of business in India, in accordance with the Foreign Exchange Regulations, 2000, can acquire any immovable property in India, which is necessary to carry out their business activities. The payment for acquiring such a property should be made by way of foreign inward remittance through the proper banking channels. A declaration in form IPI should be filed with the Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorized Dealer as a security for loan purposes. In case the business is to be closed, the sale proceeds of the property can be repatriated only with the prior approval of the Reserve Bank.

It is important for entities incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan and who have set up Branch Offices in India to get prior approval of the Reserve Bank if they want to acquire any immovable property in the country.

However, if the foreign company has established a Liaison Office in India, it cannot acquire immovable property. In such cases, Liaison Offices can acquire property by way of lease not exceeding 5 years.

The NRIs who have property acquired in the country can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO or NRE account or remitted abroad. Authorized dealers could allow the income to be taken home by those who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid.

[Source: https://blog.bankbazaar.com/can-an-nri-buy-property-in-india/]