If you are an NRI and have zeroed in on the property that you want to purchase, the next step that you have to think about is payment. There is a complete procedure behind the payment for a property that you must know about. Sometimes, NRIs can’t pay the entire price of the property at one go. In such cases, they look for loans for buying property in India. RBI has provisions that allow an NRI to apply for a home loan with the help of Indian financial institutions. Here is a list of factors that you can keep in mind when you apply for a home loan to finance the house you want to buy (payment and tax related):
Sources of Finance
A housing finance company or a bank that is registered with the National Housing Board can grant a home loan to an NRI who wants to buy property or to invest in Indian real estate after choosing one from a trusted real estate portal. If you are an NRI, you can avail the loan for buying apartments, land, and for building or renovating a home. An NRI can purchase or construct any number of commercial and residential properties. In such a case, he or she can’t get the whole amount credited to their banks. The developer and seller of the property can disburse the money as well. Also, the transactions related to residential properties or other property purchases must take place in Indian rupees on a strict basis.
An NRI who has to buy property in India can access their Foreign Currency Non-Residential (FCNR), Non-Residential Ordinary (NRO) account, or Non-Residential External account (NRE) in order to send or receive funds.
Eligibility for the Home Loan Application Process
Just like the CIBIL score for residents of India is checked, the same is done for NRIs in case of property buying. The CIBIL score needs to be good, according to the country’s standards in order for the NRI to be eligible for a home loan. Plus, a salaried NRI will be required to showcase a bank specific detail, such as a minimum amount, for him or her to apply for the loan. Not only this, they also need to be in India for a certain amount of time to get the loan and to apply for it either online or offline. If this cannot happen, a General Power of Attorney can be applied for on their behalf. Additionally, the signing of the required documents can then take place in the Indian consulate of the country in which the NRI resides.
List of Documents
The following is a list of documents required at the time an NRI applies for a home loan for a property they want to buy from the Indian real estate market:
# Passport copies
#1 passport size photograph (signed)
# Address proof for the country of residence
# PAN card
# Power of Attorney document
Additional List of Documents for Salaried Individuals:
# Salary pay slip (last 3 months)
# Bank statement (last 6 months)
# Copies of previous appointment letters (if applicable)
# Copy of appointment letter
Additional Documents For Self-Employed Individuals:
# Income proof
# Partnership deed (if applicable)
# Bank statement in company’s name (for the last 6 months)
# Bank statement in applicant’s name (for the last 6 months)
# Office address proof
# Copy of incorporation of business
An NRI that buys properties in the Indian real estate market can repay the loan amount by using their FCNR, NRO, or NRE accounts after they return to their resident country for paying their EMI. If a case occurs where the NRI is short on cash, a person who is a resident of India can transfer the required amount to the NRO or NRE account to pay for the loan. If the property is of a Buy-to-Let type, the NRI can use their rental income to settle the EMI. If you want to secure funds for buying a property, you really don’t have to worry much because of the hassle-free payment procedure in place.
Tax Implications and Regulations
When we consider the scenario of an NRI buying property in India, tax implications are applicable in the Indian real estate market too. NRIs have different tax regulations as compared to resident Indians. If you are an NRI who wants to buy property in India, you must have knowledge of the tax implications in the Indian real estate market so as to better under the home buying process.
The NRI who buys property in India for self-use is when it is the only property they own, irrespective of country they reside in, and they are purchasing such a property with the help of a home loan then the interest that they will need to pay is deducted from the total taxes that will be paid. An NRI can avail tax benefits under section 80C of the Income Tax Act of 1961.
On the other hand, if an NRI buys property in India with the aim of generating secondary income with the help of rent, then the interest gets deducted from the taxable income. The difference that you will find in this case is that there is an upper limit placed on the amount availed from a tax deduction.
In the end, it is important to note that the taxes that will be applied at the time of property buying and ownership are additional taxes that will be taken into account at the time of sale of the property.
These are some pointers to keep in mind at the time of the property purchase, along with the tax implications. In all, the entire process is a seamless one and provides much needed benefits.