NRI Corner | Shivesh Group

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Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring immovable property for bonafide residential purposes as section 31 of FERA 1973 is not applicable to them.

Under Section 29 of the Foreign Exchange Regulation Act 1973, the Reserve Bank of India has granted General Permission to Foreign Citizens of Indian origin and Indian citizens residing outside India to let out their immovable properties (Commercial / Residential). The rental income or proceeds of any investments out of such income shall be repatriable outside India subject to Income tax being paid.

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Are you an NRI looking to buy a home in India? Explore the tabs below for complete details on legalities, RBI loan guidelines, mandatory documentation, and repatriation rules.

Understanding the legalities of homebuying is important when it comes to NRIs

Going into the legalities of purchasing a new home may become a tedious task. To make it simpler, we have listed the necessary points pertaining to legal considerations of acquiring a property in India:

Non-resident Indians holding an Indian passport do not require any permission from RBI to acquire immovable property for bonafide residential purposes.
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.
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.
Look for specific clearance reports. For instance, if the construction is near a seafront, you will need to check for a 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 do not get stuck with a property that is or may get caught in any sort of dispute. Lack of clearance of titles also means that you will not be able to avail home loans.

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

The Non-Resident Indians (NRIs) are recognized under the Foreign Exchange Regulation Act, 1973. Every bank and housing finance company follows the RBI guidelines to define an NRI – “An Indian citizen who holds a valid document like 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.”

Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad.
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.
Government servants deputed abroad on assignments with foreign Governments or regional/ international agencies like the World Bank, the International Monetary Fund (IMF), World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP).
Officials of the State Government and Public Sector undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

NRI Home Loan Features & FDI Confidence

Documents required for Resident Indians and NRIs for getting home loans are different in some respects. Home loans for NRIs are available for construction of new houses/flats, purchase of old house/flat, addition/alteration to an existing house and repairs/renovation etc. NRIs can avail of loans by mortgaging an existing residential property.

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.

RBI Directives for Sanctioning Home Loans to Non-Resident Indians

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 by 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.

Key RBI Directives:

Loan Quantum: 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 unit financed.
Margin Money Funding: The cost of dwelling unit which is by own contribution financed less the loan amount, can be met from 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.
Repayment Channels: Repayment of the loan, comprising of principal and interest including all 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 funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999 (FEMA), and the regulations made by the RBI from time to time.

Documents Required For Obtaining NRI Home Loans

Power of Attorney (POA): A vital document required while processing any NRI home loan is the ‘Power of Attorney’ (POA). Since the borrower is not based in India, the POA is important because HFCs need a ‘representative’ ‘in lieu of’ the NRI to deal with if necessary. Although not obligatory, the POA is usually drawn on the NRI’s parents/wife/children.

Applicant KYC & Employment Documents

Passport and Visa copy
A copy of the appointment letter and contract from the company employing the applicant
The labor card/identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East
Salary certificate (in English) specifying name, date of joining, designation and salary details
Bank Statements for the last six months (overseas and NRE/NRO accounts)

Having certain important documents is mandatory when it comes to home buying for NRIs

Title & Sanction Papers

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
Approved plan / municipal license
ULC clearance / conversion order, etc.

Financial & Allotment Records

Receipts for payments made for purchase of the dwelling unit
Receipts for having invested the margin money through normal banking channels from NRE / NRO account in India
Latest municipal tax paid receipt
Allotment letter from the co-operative society / association of apartment owners
Detailed cost estimate from Architect/Engineer for property constructed/extended

Photocopy of PIO / OCI 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