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LEGAL INFORMATION

At times, navigating the legalities of a new home purchase can be a daunting task. To make the process easier, we have compiled the basic legal considerations for acquiring a property in India. Additionally, you can get in touch with us with any specific queries.

1. Non-resident Indians holding an Indian passport do not require any permission from the RBI to acquire immovable property for bonafide residential purposes.
2. Non-resident Indians holding an Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of their NRO/ NRE/ FCNR account.
3. Ensure that the title report of the property contains no conditions written in fine print and that there are no specific reservations by the State Government.
4. Look for specific clearance reports. For instance, if the construction is near a seafront, you will need to check for Coastal Regulation Zone (CRZ) clearance. If the project is being constructed over or in close vicinity of a heritage building, you must check for any heritage reservations for the premises. The idea is to ensure that you avoid getting stuck with a property that is or may get caught in any sort of dispute. Lack of title clearance also means that you will not be able to avail of home loans
The Non-Resident Indians (NRIs) are recognised under the Foreign Exchange Regulation Act, of 1973. Every bank and housing finance company follows the RBI guidelines to define an NRI – “An Indian citizen who holds a valid document such as an Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is an NRI.”

Broadly categorised, Non-Resident Indians qualifying for NRI housing loans are:

1.Indian citizens who stay abroad for employment, for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad.
2.Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India, where the officials draw their salaries out of government resources.
3.Government servants deputed abroad on assignments with Foreign Governments or regional or international agencies like the World Bank, the International Monetary Fund (IMF), the World Health Organisation (WHO), and the Economic and Social Commission for Asia and the Pacific (ESCAP).
4.Officials of the State Government and Public Sector undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.
The documents required for resident Indians and NRIs to get home loans are different in some respects. Home loans for NRIs are available for the construction of new houses/flats, the purchase of an old house/flat, addition/alteration to an existing house and repairs/renovation etc. NRIs can avail of loans by mortgaging an existing residential property. However, to avail of home loans, NRIs have to fulfil certain conditions, according to the provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year, or they should have stayed in India for at least a total of one year or more.
The FDI policy that permits FDI up to 100% from a foreign/NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available.
Last but not least, NRIs should take due care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.
The eligibility criteria for NRIs differ from Resident Indians based on a few parameters. The parameters include:

Age

  • The loan applicant has to be 21 years of age.

Qualification

  • The NRI loan seeker has to be a graduate.

Income

  • The loan applicant has to have a minimum monthly income of $ 2,000 (although, this criterion may differ across HFCs). Eligibility is also determined by the stability and continuity of employment or business.

Payment options

  • The NRI also has to route his EMI (Equated Monthly Instalment) cheques through his NRE/NRO account. The individual cannot make payments from another source, such as a savings account in India.

Number of dependants

  • The eligibility of the applicant is also determined by the number of dependents, assets, and liabilities.
Home loans for an NRI applicant range from a minimum of INR. 5 lakhs to a maximum of INR. 1 crore, based on the repayment capacity and the cost of the property, which although is variable by the priorities of the home loan provider. An applicant will be eligible for a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of the purchase of land, based on the repayment capacity of the borrower.
However, the eligibility can be enhanced by applying for home loans with a co-applicant who has a separate source of income. Also, the rate of interest for home loans to NRIs is higher than that offered to Resident Indians. The difference is somewhere between 0.25% – 0.50%. Some HFCs also have an internally earmarked ‘negative criterion’ for NRI home loans. As such, the NRIs who hail from locations that are marked as being ‘negative’ in the books of HFCs, find it difficult to get a home loan.
Last but not least, NRIs should take due care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.
The Reserve Bank of India (RBI) has clarified that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO), purchasing immovable property in India must pay for the acquisition with funds received in India through normal banking channels by way of inward remittance from outside the country.
The NRIs and Resident Indians can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued certain directives for sanctioning home loans to Non-Resident Indians.

The guidelines provided are:

  • The home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining 15% needs to be provided by one’s own contribution towards the cost of the unit financed.
  • The cost of a dwelling unit, which is by own contribution financed less than the loan amount, can be met through direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] account and/or Non-Resident (Ordinary) [NR(O)] account in India.
  • However, repayment of the loan, comprising of the principal and interest, including all the charges, is to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] account and/or Non-Resident (Ordinary) [NR(O)] account in India.
The repayment option for NRIs is that they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time.

List of Classified Documents for Salaried and Self-Employed NRI Applicants:

Salaried NRI Applicants

  • Copy of a valid passport showing visa stamps.
  • Copy of a valid visa/work permit, or equivalent document supporting the NRI status of the proposed account holder.
  • Overseas bank A/C for the last 3 months showing salary credits.
  • Latest contract copy evidencing salary/salary certificate/wage slips.

Self-Employed NRI Applicants

  • Passport copy with valid visa stamps.
  • Brief profile of the applicant and a Business/Trade licence, or an equivalent document.
  • 6 months overseas bank account statements and NRE/NRO account.
  • Computation of income, P&L account, and B/Sheet for the last 3 years certified by the C.A./CPA or any other relevant authority as the case may be (or equivalent company accounts).

Property Documents

  • Original title deeds tracing the title of the property for at least a period of the last 13 years.
  • Encumbrance Certificate for the last 13 years.
  • Agreement of sale/construction, if any.
  • Receipts for payments made for the purchase of the dwelling unit.
  • Approved plan/licence.
  • ULC clearance/conversion order, etc.
  • Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and/or the Non-Resident (Ordinary) account in India.
  • Allotment letter from the co-operative society/association of apartment owners. Latest tax paid receipt.
  • Latest tax paid receipt
  • Agreement for sale/sale deed/detailed cost estimate from the Architect/Engineer for the property to be purchased/constructed/extended/improved.
  • Copy of approved drawings of proposed construction/purchase/extension.
Additional Documents to be Submitted by the Person of Indian Origin Photocopy of PIO Card
If the PIO card is not available, photocopies of any of the following documents:
  • The current passport with birthplace as ‘INDIA’.
  • The Indian passport, if held by the individual earlier.
  • Parent’s/Grandparent’s Indian Passport/Birth Certificate/Marriage Certificate substantiating the individual’s claim as a person of Indian origin.

Permissions and Approvals

  • Before construction on a project can begin, the builder must seek several permissions and approvals from relevant bodies. Without these clearances, the construction attracts litigation.

One Big NRI Happy Families

Mr. Petrich

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