NRI Tips
Q. Who is a NRI?
Foreign Exchange Regulation Act of 1973 a NRI as “a person who has gone out of India or who stays outside India, in either case -

  • for or on taking up employment outside India, or
  • for carrying on outside India a business or vocation outside India, or
  • for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period.”

Q. What are the Reserve Bank guidelines regarding Investment in immovable Property by a NRI
A. An NRI:
“May acquire immovable property in India other than agricultural/plantation property or a farmhouse out of repatriable and non-repatriable funds.
In respect of such investments NRIs are eligible to repatriate

  • Sale proceeds of immovable property acquired in India to the extent of repatriable funds used for acquiring the property, without any lock-in period, up to two residential properties. The balance will be repatriable through NRO Account subject to conditions mentioned at item (I) (d).
  • Refund of (a) application / earnest money / purchase consideration made by house-building agencies/seller on account of non-allotment of flats / plots and (b) cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of NRE/FCNR(B) account/inward remittances.”
  • Housing Loan in rupees availed of by NRIs from ADs / Housing Financial Institutions can be repaid by the close relatives in India of the borrower.

Q. Can foreign citizens of Indian origin acquire commercial properties in India?
A. “Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchasers’ NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.”

Q. Can a NRI returning back to India hold or transfer immovable property situated outside India?
A. A returning NRI :

  • ” may continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was acquired, held or owned when resident outside India.”
  • · “may open, hold and maintain with an authorized dealer in India a Resident Foreign Currency (RFC) Account to transfer balances held in NRE/FCNR(B) accounts. Proceeds of assets held outside India at the time of return, can be credited to RFC account. The funds in RFC accounts are free from all restrictions regarding utilization of foreign currency balances including any restriction on investment in any form outside India.”

Q. What are the criteria regarding availment of home loans for NRIs in India?
A. According to Reserve Bank guidelines for NRIs

  • The loan amount shall not exceed 85% of the cost of the dwelling unit.
  • Own contribution, which is the cost of dwelling unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
  • Repayment of the loan, comprising of the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.

Q. Can a NRI give a Power of Attorney to a person in India for completion of loan formalities on their behalf?
A. Yes.

We very well understand that as an NRI you have a different set of needs with respect to your real estate management and investment requirements and we also understand that it needs special set of services to cater to your requirements. The good news from India is that government has allowed 100% repatriation for NRIs.

A. Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC,LIC Housing Finance Ltd.,etc. to grant housing loans to non-resident Indian nationals for acquisition of houses/flats for self-occupation subject to certain conditions.

Q. What are the options available for obtaining guarantors while applying for a HDFC/LIC loan?
A. One will need a guarantor for a loan mainly for collateral security. The guarantor will have to demonstrate appropriate networth to cover for the loan. Usually one can have a guarantor in any city where the loan issuer has a branch. Talk to loan issuers they will work something out for NRIs and foreign banks.

Q. While purchasing real estate most developers demand a Power of Attorney in their favor, is there a way to avoid it?
A. One can choose not to grant the Power of Attorney (POA) to the developers. However this will mandate the mailing of all documents to your foreign residence and associated time delays. A good compromise is to grant the POA to the builder only for specific necessary items.
If you are an NRI or a Property Buyer/Investor you need to understand your Investment Horizons in Real Estate pretty well.

Term of Investment – This is important as you need to hold on for at least 1 to 3 Years for a decent capital appreciation and if you sell your property within 3 years you are in for a short term capital gains which is at par with the Income Tax rules of nearly 30 to 35% as applicable. It is better to stay invested for 3 years and then plan the next investments with Capital Gains etc.

Pre-Launch offers – Investing in property means also an entry load by paying stamp duty and registration fees and other incidental charges to the Builder etc. If you are investing it is always wise to invest as soon as the project is launched as this gives you enough time for appreciation as usually the builder goes in the Stock Market kind of a mode in the first year of its property by hiking the prices every few months.

Know your Builder – It is imperative to know your Builder and the project as at the time of your exit the builder has to be extremely co-operative, the first question to shoot when you are buying an Under Construction Project is – If I sell what happens? When can I Sell? Will you charge me some transfer fees? How is the paper work will be done between the Seller, Builder and the Buyer?

Invest with Deep Thought - The present market is volatile in Mumbai and it is imperative for you to give a deep thought on various accounts, which begins from the Project, Infrastructure available within the Project, Outside the project in the neighborhood, Selling prospects, Leasing prospects, Neighborhood development, Distances to Schools, Markets, Malls, Hospitals, Highways, Airports, Railway stations etc. These should act as your analysis points.

Home Loans – You can set off your EMI’s if you invest wisely in a property as the rates are presently around 8% and your rental returns are around 4-6%. You can be a happy man if you do this fool proof homework as your EMI can be hedged off against the rent receipts to a certain degree.

Re-Sale Properties – In a booming market every property owner wants to encash his property at the best value. A few issues which we face is the commitment level of the seller and we can stumble on to good transactions at times, but this is more of a time consuming process at times. The repair value, old building and other property documentation issues can be challenging in certain transactions.

Returns – It is always advisable to take a conservative approach in both Capital Appreciation and Rental returns. However one can safely expect appreciations anywhere upwards of 15% Per Year and Rental Yields of 4 to 6%.

Commercial and Malls - The opening of new Malls is surely a good sign but one has to be very careful in investments in Malls and Commercial real estate. The returns though can be constant, but for smaller players the Malls and Commercial complexes can be too hot to handle as the outgoings are pretty steep and there is a huge difference between the built up and carpet ratio. It is excellent for self use and business or for a pre-leased option.

Home Loan Tips
From where can one get home loans?
Yes, you can avail of a Home Loan. There are several Housing Finance companies, some of them are:

  • SBI Home Finance
  • HDFC
  • ICICI
  • LIC Home Finance
  • GIC Home Finance
  • IDBI
  • Standard Chartered Grindlays
  • HSBC
  • CITI Bank
How much loan can one get?
You can get a Home Loan of up to 85% of the Total Consideration Value.

Who can be a co-applicant for the loan?
The spouse of the applicant can be included as a co-applicant for the home loan and his/her income shall be included to enhance the loan amount. Further, in case there are any other co-owners, they also need to be co-applicants.

What is the repayment period of the loan?
You can select the payment period you are comfortable with up to 15 years provided it does not extend beyond retirement age or on your reaching 65 years of age whichever is earlier.

How are home loans repaid?
The home loan repayment is by Equated Monthly Installments (EMIs) comprising of interest and principal amount calculated on annual rests. Post Dated Cheques or being directly deducted from your salary can pay EMIs.

In case of part disbursement of the loan, monthly interest is payable only on the disbursed amount. This interest is called Pre-EMI interest and is payable monthly till the final disbursement is made, after which the EMIs would commence.

What is the security provided for the loan?
The security of the property and/or such other additional /collateral security has to be provided as may be mutually agreed.

What documents are required to get the loan sanctioned?
Representatives of the concerned firm will discuss the documents that are required to submit in detail. An indicative list is given below:

  • Passport size photograph of all applicants.
  • Residence and age verification, which may be established from the PAN card, election ID passport, driving license and ration card.
  • Bank statements for the last six months.
  • Latest salary slip/ statements showing all deductions in case of employed applicants.
  • Certified copies of Balance sheets and profit and loss accounts., IT acknowledgement, advance tax challans ( for both company/ firm and personal account ) for the last three years in case of self employed applicants.
  • Memorandum / Articles of association for companies, partnership deeds for firms and a brief profile of your company /firm in case of self employed applicants.
How will they disbursed the loan?
The loan will be disbursed on:
  • The identification and selection of the property.
  • Submission of legal documents.
  • Legal and technical clearance of the selected property.
  • On satisfactory completion of the above and on the investment of the owners’ contribution, the loan amount (as warranted at the stage of construction) will be disbursed.
What tax benefits do I enjoy?
Tax benefits are available on the principal and interest components of a loan as per the Income Tax Act, 1961. As the benefits could vary from year to year, it is advisable to check the current benefits available.
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