First, let’s understand who is a Non-Resident Indian or NRI. As per the definition rendered by the Reserve Bank of India to financial institutions including banks, “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.”
Considering that Indian citizens themselves have to go through a lot of hassles to get a home in India, do NRIs have to face even stricter regulations as well as legal provisions on the financing modes chosen by them for buying a house in India?
Since the payment to buy a home in India has to come through the proper banking system in the country, an NRI can’t pay in foreign currency or through a traveller’s cheque. Non Residential External (NRE) rupee, Foreign Currency Non-Resident account (FCNR) or Non-Resident Order (NRO) or money in the credit accounts can be used to fund the house. In fact, housing loans can be availed by NRIs from Housing Finance Companies or banks in Indian currency. Even an Indian employer can take a loan for his/her NRI employee.
Only residential and commercial properties can be bought by NRIs. Home loans can be availed by graduate NRIs for purchasing a plot or for constructing a house.
The filling up of the application form depends on the NRI’s source of income, whether the individual is self-employed or salaried and the country of residence as well as the educational qualification. In case of a self-employed NRI, a minimum period of three years is asked for by banks but in case of a salaried NRI, a minimum period of 1 year is enough to apply for a home loan. The application can be made offline as well as online and comprise documents like passport, visa, power of attorney, proof of residence, proof of period of stay in the resident country, etc. Banks may ask for a guarantor for the NRI applicant who also needs to furnish the required details like identity, income and address proof.
Remittances from outside India can be used to pay off EMIs. These transactions can either be done through FCNR, NRO, NRE or the bank. The home loan can also be paid through the rentals on property that has been rented out to others. To service the home loans, one can also use money in the NRO account which has been received from close relatives with proper documentation. NRE and FCNR deposits can be used to avail loan for servicing the home loan if the NRI has purchased the house for his/her stay.
Repatriation or the process of converting the currency of some other country to the currency of one’s own country, can take place if the NRI sells a property or inherits the property. The catch, however, is that the number of properties under such repatriation cannot exceed two in number. The repatriated money must not exceed the money received as remittances from outside India, either for servicing or purchase of a home loan. Including the money remitted for a house sale, only USD 1 million can be remitted by an NRI out of India.