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Finance

Finance

 Can NRIs obtain loans for acquisition of house/flat for residential purpose from authorized dealers/financial institutions providing housing finance?

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., and authorized dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation subject to certain conditions. The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittance or out of funds held in the investor’s NRE/FCNR/NRO accounts.s


 What are the terms & conditions for availing the housing loan in India?

Terms and Conditions:

I. The applicant should be a Graduate.

II. The monthly income should not be less than $2000. NRI property loans can be availed against:

a. The security of funds held in NRE/FCNR accounts.

b. The security of immovable property other than agricultural, plantation or farm property.

III. The loan can be availed up to 1, 00, 00,000 INR or 85% of the property cost, including cost of the land, whichever is lower.

IV. The principal shall not be credited to the applicant’s NRE/NRO/FCNR accounts.

V. The tenure of the loan for NRI is less than that for a resident Indian. The tenure of the loan is decided by the housing finance company which does not exceed 15 years.

VI. The loan shall be fully secured by mortgaging either the proposed property or the borrower’s other assets in India.

VII. NRI home loan rates shall be more than for a resident Indian, in compliance with Reserve Bank of India and National Housing Bank directives.

VIII. Repayment of the loan can be by way of remittance from abroad through normal banking channels given out as Equated Monthly Installments (EMIs) and shall be in the form of post-dated cheques, or by debit to his NRE/NRO/FCNR accounts or from the rent received on his Indian property or out of sale proceeds of the immovable property against which such loan was granted.

IX. There are many repayment options, to help choose the most suitable and effective to follow. Repayment ahead of schedule is permitted.

X. All documents as applicable to a resident Indian are mandatory along with few other documents like copy of the passport and a copy of the works contract. The Power Of Attorney (PAO) is a must.


PARTICULARS

Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR(B) Account)

Tax on Interest Income

Not Taxable


Operations by Power of Attorney in favour of a resident by the non-resident account holder

Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.


Loans:

a. In India: i) To the Account holder. ii) To Third Parties Permitted up to Rs.100 lakhs Permitted upto Rs.100 lakhs.

b. Abroad: i) To the Account holder ii) To Third Parties Permitted USD equivalent to Rupees 100 lakhs $ Provided no funds are remitted to India and are used only in abroad

c. Foreign Currency Loans in India: i) To the Account holder ii) To Third Parties Permitted upto Rupees 100 lacs or its equivalent Not Permitted


Purpose of Loan:

a. In India i) To the Account holder

i) Personal purposes or for carrying on business activities.

ii) Direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms / companies

iii) Acquisition of flat / house in India for his own residential use. (Please refer to para 9 of Sch. 2 to FEMA 5)


ii) To Third Party

Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *. (Pl. refer to para 9 of Sch. 2 to FEMA 5).


b. Abroad : To the account holder and Third Party Fund based and / or non-fund based facilities for bonafide purposes.


Non-Resident (External)Rupee Account Scheme (NRE Account)

Tax on Interest Income

Not Taxable


Operations by Power of Attorney in favour of a resident by the non-resident account holder

Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.


Loans:

a. In India: i) To the Account holder ii) To Third Parties Permitted up to Rs.100 lakhs Permitted upto Rs.100 lakhs

b. Abroad: i) To the Account holder ii) To Third Parties Permitted USD equivalent to Rupees 100 lakhs $ Provided no funds are remitted to India and are used only in abroad

c. Foreign Currency Loans in India: i) To the Account holder ii) To Third Parties Not Permitted


Purpose of Loan:

a. In India i) To the Account holder

- Personal purposes or for carrying on business activities.

- Direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms / companies

- Acquisition of flat / house in India for his own residential use. (Please refer to para 6(a) of Sch.1 to FEMA 5)


ii) To Third Party

Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *. (Please refer to para 6(b) of Sch. 1 to FEMA 5)


b. Abroad : To the account holder and Third Party

Fund based and / or non-fund based facilities for bonafide purposes.


Non-Resident Ordinary Rupee Account Scheme (NRO Account)

Tax on Interest Income

TDS on Interest earned on NRO deposits to be deducted at 30.90% If the interest amount paid exceeds Rs.10 lacs, TDS will be @ 33.99% However, deduction of TDS is subject to DTAA with many countries. For further information pl. refer to IBD Circular letter no. 5920 dt. 29.05.08


Operations by Power of Attorney in favour of a resident by the non-resident account holder

Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.


a. In India: i) To the Account holder ii) To Third Parties Permitted

b. Abroad: i) To the Account holder ii) To Third Parties Not Permitted $ Provided no funds are remitted to India and are used only in abroad

c. Foreign Currency Loans in India: i) To the Account holder ii) To Third Parties Not Permitted


Purpose of Loan:

a. In India i) To the Account holder Personal requirement and / or business purpose *

ii) To Third Party Personal requirement and / or business purpose *


b. Abroad : To the account holder and Third Party Not permitted.


 What are the documents required while applying for a Home Loan:

The instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.