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After reading my article on buying of a house property in India, my friend Shyam who is settled in Australia, called me again to know about the options available to him to buy a residential property in India with the help of a home loan. Here is what I shared with him and thought of sharing with you as well.
The properties which an NRI can purchase in India:
As per the general permission issued by RBI, an NRI and a Person of Indian Origin (PIO) can purchase any residential or commercial property in India without any specific permission from RBI.
However an NRI is not allowed to buy any agricultural land, plantation property or farmhouse in India without specific permission from RBI.
RBI guidelines on home loan for buying residential accommodation:
RBI has given general permission to banks and Housing Finance Companies (HFCs) registered with National Housing bank to grant home loan to NRIs for the purpose of buying residential house property in India.
As per these guidelines, the loans to be granted to NRIs shall be on the same basis and criteria as those are applicable in case of resident Indians. These would include the loan amount eligibility based on the income, tenure of the loan and the extent to which the lenders can finance purchase of residential house property by NRIs.
It may be noted that these loans shall be given in Indian Rupees and shall also be repayable in Indian Rupee.
It is interesting to note that as per the regulations, the amount of loan cannot be credited directly to the bank account of the NRI and thus by implication should only be disbursed to the seller or the builder.
In case where the NRI has already paid the consideration, the loan cannot be availed subsequently.
The home loan to NRI shall be secured by equitable mortgage of the property which the NRI intends to purchase. The lenders are also allowed to accept any other assets in India as security.
Repayment of the home loan:
The home loan taken by NRI from these banks/ housing finance companies can be serviced through various sources. Since the NRI is working outside India, it is always convenient for him to pay the EMI by way of remittances through the banking channels.
The loan can also be serviced out of the funds lying in his credit in any of the banking accounts like his NRE account, of his FCNR deposits. Even the home loan taken by him can be repaid out of the funds lying in his NRO account.
The RBI even permits the rental incomes received on such property to be used for the purpose of servicing of the EMIs.
Repatriation of the sale proceeds:
In case he has purchased any property through home loan, he cannot repatriate whole of the sale proceeds. There are some restrictions on repatriation of the funds.
Though there are no restrictions as to the number of properties an NRI can purchase or retain in India but he is allowed to remit sale proceeds of only two properties out of India as per the existing guidelines.
Moreover only the portion of sale proceeds which was paid using the foreign currency can only be repatriated. This will include the money remitted directly from abroad as well as money utilized out of the Foreign Currency Non Resident Account or NRE account.
However in case the funds were used from the NRE account, the amount to be remitted would be restricted to equivalent foreign currency used on the date of payment.
The above money will include the down payments made as well as amounts remitted/used for servicing of the housing loan out of the above sources. It is pertinent to note that an NRI can sell the property so purchased anytime and there is no lock-in period for selling the property so acquired.
In addition to the above amount he can remit an amount equal to USD One Million every year from your NRO account.
So from the above discussion it becomes clear that home loans are available to not only the resident Indians but also to non residents as well as to persons of Indian origin on the same terms and conditions.
Moreover you are allowed to remit back the money to the extent foreign exchange was used for the purpose of buying of the property and servicing of the loan.
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