Guide to Getting Home Loan Property in India as an NRI

In India, buying a house is something that everyone must do – to the point that it has become a matter of pride. Whether they are physically in India or not, people from this part of the world have always shown great interest in the real estate.

For NRIs, buying land in India doubles an investment. Still, as an NRI, there are certain rules and factors that you might want to familiarize yourself with.

What Is a Non-Resident Indian (NRI)?

A non-resident Indian is, like the name suggests, an Indian that no longer lives in India. They still hold of their citizenship, but they have decided to move overseas for various reasons: work, love, etc.

Those part of the “Indian Diaspora,” as it has been called, have been born in India and lived there throughout most of their life. They lived there for enough time to get their citizenship – but they have now moved outside the republic on a visa or second citizenship.

Strictly speaking, the “non-resident” term only refers to the tax status of that particular person. The income tax rates are very different, depending on whether you are a resident or a non-resident.

Simply put, to be considered a resident of India, you will have to stay in India for at least 182 days of the financial year. Another alternative would be to stay for 364 days over the course of four consecutive years – but at least 60 days in the taxable year.

According to this act, if someone does not meet the criteria of being a “resident of India,” they are automatically sent in the non-resident category. With this happening, they will be treated as an NRI when it comes to paying their income taxes.

Can NRIs Buy Property and Real Estate in India?

Buying property in India is quite some task – particularly if you do not live in India. For example, if you are a foreign citizen wishing to move to India, you’ll find out that it’s next to impossible to buy unless you receive your citizenship.

However, what happens if you are originally from India and wish to return? What if you previously had property there, sold it, and realized after a few years that you wish to go back? Can you still buy property there, even if you are not staying in India?

To answer that question: yes, you can. But there are a few catches that you might want to keep in mind. Granted, the foreign exchange laws have changed with FEMA – and considering that most NRIs are purchasing under these laws, people might want to properly understand their legal position.

In the end, the RBI has issued a notification that grants general permission for non-resident Indians to buy certain types of property in India – without requiring any special permission from the RBI.

As a result, if a citizen has become an NRI, they may purchase certain properties for FEMA purposes – without actually requiring any permission from the RBI. You can purchase that house for yourself to live in – or you can choose to invest in it instead. Investment properties are actually very popular in India.

However, bear in mind that there are still a few limits when it comes to property purchase. For instance, while you may be able to purchase a commercial or residential property, you cannot buy plantation properties and agricultural land. It might be fashionable – as well as highly profitable to invest in a farm – but for an NRI, that is simply not possible.

3 Reasons for NRIs to Invest in Indian Real Estate

The real estate market in India is seeing a dramatic shift – and while some people are purchasing a home simply so that they could live in it, others get it as an investment.

The good news is that you may not even have to return to the country in order to reap the advantages. You just have to take a home loan for NRI in India, purchase the house, invest in it – and see how it blooms into success.

You might not want to get yourself into more debt – but if you think about it, generally speaking, a loan is your best option. Plus, considering that you’ll be reaping from this investment, you will be able to pay it off in no time.

Still thinking about whether you should take the dive or not? Here are three reasons why you definitely should.

1. You Could Earn More Money

Let’s say that you are an NRI that is living in places such as the USA, the UK – or even Dubai. The currencies in those respective places are far stronger compared to the rupee. As a result, if you decide to make an investment in real estate, you’ll be able to earn more money from the gap between the values of the currencies.

2. There’s Demand

As mentioned, Indian folk take housing seriously. Therefore, no matter if you wish to sell the property later on or rent it out, you will definitely find eager clients to help out.

The demand is mostly high for better-designed properties – so you might want to invest a bit in a certain property before putting it out there. Considering that this might not exactly be cheap, you might want to get a home loan for NRI in India first.

3. You Could Save on Income Tax

Probably the best part of NRIs investing in Indian real estate is the fact that they are barely liable to comply with any legal formalities. In this case, they will only have to go through with the registration – without the payment of income tax.

Nevertheless, if they earn income from rent over that particular property, then they may have to go through certain tax compliances. However, considering that investments in realty projects barely have any major legal formalities, these payments will not be as significant.

How to Buy a Home in India as an NRI

As mentioned, an NRI will not need any special permission to buy property in India – but you need to know that while some sellers may accept the common foreign currencies, not all of them do. To make a purchase, you will have to use Rupees and regular banking channels.

As per the rules of the FEMA and the RBI, a potential buyer will have to keep their funds in an NRE (non-resident) account. Strictly speaking, there are no differences between investments made by residents and non-residents. They are all treated on par – except for a few restrictions that you might find below:

• You have to make the payment in rupees, and you will have to deposit the loan money directly into the seller’s account – not the NRIs account.
• Generally, only 80% of the property value can be provided by a home loan for NRI in India. The buyer will have to bring the rest of the deposit themselves.
• Since NRIs live outside of India, they may choose to give the power of attorney to a friend or a relative living in India. If you are in this situation, you can go for a general power of attorney – or a specific one, depending on how many rights you want your representative to exercise in your absence.

Bear in mind that if you want to buy property in India, you will have to adhere to a few rules. Considering that the tax benefits of NRIs and residents are relatively the same, a property can be a great tax saving tool. You just need to know how to follow the rules.

• Make sure that you know of the nature of the property before buying it.
• Prior to making the purchase, you might want to examine the legal paperwork first.
• Make sure that the original title deed bears the name of the seller that you are buying it from. This will avoid any potential claims to your property or pitfalls. Similarly, you might want to be wary of sellers that bring photocopies instead of original documents. There’s a high chance that these might be a fraud.
• Before signing any documents, you might want to seek the counsel of an attorney. Granted, while the seller may bring their own lawyer to follow through, they will have their interest in mind. An attorney that you purchased yourself will have yours.
• As an NRI, you will be able to claim a max. deduction of Rs. 2,000,000 instead of interest paid on a home loan. Make sure that you know all your rights.

Having said all that, as long as you bring all the paperwork that you are asked for, you should be able to purchase the property right away. Every lender will have their requirements, but generally speaking, you will need to bring proof of your identity, address, and income.

Home Loans for NRI in India with Stilt

A home loan is generally one of the most convenient choices for those who wish to buy property – and likely, your only choice unless you have a small fortune waiting for you in a bank account. You may be gaining more money as an NRI compared to your home country – but considering today’s market, the chances of you not needing a loan are slim.

Stilt can help you with that. Considering that a home loan for NRI in India is not always easy to obtain, Stilt will try to make this very straightforward for you. If you are interested in taking out a loan, here are some steps that you will have to follow:

1. Submit Your Application

As long as you are eligible for a loan, the process for receiving your financing is very straightforward. You will just have to fill in the form, and submit it along with the necessary documentation:

• Banking details and income proof
• Address proof and age proof
• Identity proof
• Employment letter, appointment letter, or contract copy (depending on your workplace)
• Power of attorney (in case you are using a local applicant)

Once the paperwork has been submitted, all you have to do is go for the next step.

2. Receive the Approval

As long as everything is right with your paperwork, Stilt will announce you that you have been approved for the loan. This process is generally quick – so, from the moment you sent your application, it should not take long until you receive your feedback.

When giving you a loan, Stilt will also need you to:

• Be at least 18 years of age
• Have a valid passport
• Be employed for at least two years, or at least have a contract that spreads over a minimum of two years on your abroad job.
• Have an existent NRE/NRO account

Whether you receive the loan or not, this will depend on various factors: your ability to pay, your banking activity, and so on. Based on your level of risk, you will be given an offer of principal and interest rate. That money will be sent into your account (or your seller’s account) in 2-3 business days.

3. Start Making Payments

You have the money now; all that is left for you is to begin your payments. The sooner you get it done with, the better – and as long as you respect the agreed-upon payments, there should be no problems. The good news is that now that you have made an investment in that house, you may use the extra income to pay off the loan.

Whether you are a non-US citizen or not, it should be an easy process for you to get through. Apply, get approved, and start paying: it’s that easy!

Start Investing Today!

Investments might sound scary in the beginning. However, as long as you invest in the right property, you will benefit a lot in the long run. And all you will have to do is get a loan from Stilt and make a purchase – from wherever you are!

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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