NRI Corner

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 a dispute. Lack of clearance of titles also means that you will not be able to avail home loans.

Source - Accounts in India by Non-residents
Source - Purchase of Immovable Property

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."

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

• 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.

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. However, for availing home loans, NRIs have to fulfill certain conditions, according to the provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more.

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.

NRIs should take due care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.

Source - Accounts in India by Non-residents
Source - Purchase of Immovable Property

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. It has issued certain directives for sanctioning home loans to Non-Resident Indians.

The guidelines provided are:

• 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
• 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
• However, repayment of the loan, comprising of the principal and interest including all the charges are 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 the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time.

Source - Accounts in India by Non-residents
Source - Purchase of Immovable Property

Apart from the documents mentioned below, 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 would 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.

The documents needed for obtaining NRI home loans are:           

• Passport and Visa                     
• 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

Source - Accounts in India by Non-residents
Source - Purchase of Immovable Property

• Original title deeds tracing the title of the property for at least a period of last 13 years                     
• Encumbrance Certificate for the last 13 years                     
• Agreement of sale/ construction, if any                     
• Receipts for payments made for purchase of the dwelling unit                    
• Approved plan/ license                     
• ULC clearance/ conversion order, etc.                     
• Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and/ or the Non-Resident (Ordinary) account in India                     
• Latest tax paid receipt                     
• Allotment letter from the co-operative society/ association of apartment owners                     
• Agreement for sale/ sale deed/ detailed cost estimate from the Architect/ Engineer for property to be purchased/ constructed/ extended/ improved                     
• Copy of approved drawings of proposed construction/ purchase/ extension                   

Source - Accounts in India by Non-residents
Source - Purchase of Immovable Property

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 individuals claim as a person of Indian origin

Source - Accounts in India by Non-residents
Source - Purchase of Immovable Property