We at Bhandari Associates always look forward to give our NRI brethren a chance to experience security and comfort of their home but we have to communicate to them, the steps involved in buying flats in Pune. To begin with, we need to understand the definition of Non-Resident Indian. Since property purchases are governed by FEMA, we need to go by the definition of NRI as stated in FEMA. According to FEMA, an NRI is a citizen of India who is resident outside India.
HOME LOAN PROCEDURE
A home loan is sanctioned to the NRIs for any of the following housing finance schemes:
- To purchase a house either ready-built, under construction or from a second owner.
- For self-construction of a property on a plot of land.
- To finance the purchase of a plot of land allotted by a society / development authority.
- For renovation or improvement of an existing property in India.
Your eligibility is calculated in the same way as it is calculated for resident Indians. More emphasis is laid on the following criteria in the appraisal of a NRI case:
- Qualifications - the NRI applicant has to be a graduate
- Current job profile & past experience
- Probability of continuing abroad for the loan tenure
- Probability of servicing the loan with an extended tenure in case you have to return to India.
The housing finance offered to NRIs normally do not exceed 5 years. However, some HFCs (Housing Finance Companies )offer loans for a term of 7 years. The repayment for the loan is by way of EMIs. The EMIs begin only after the entire loan is disbursed. In case of a part disbursement, you pay simple interest at the rate applicable on the loan amount that is disbursed to you.
The loan towards the house has to be paid upfront for the entire tenure of the loan by way of direct remittances from abroad through normal banking channels or from such accounts as may be permitted by RBI from time to time. As of today, the payments are done through NRO, NRE, NRNR and FCNR accounts. These accounts change on the basis of RBI permissions to each HFC.
No tax benefits are available for NRI customers unless you file returns and thereby become eligible to avail of the tax benefits as mentioned under Home Loans.
NRIs are required to submit additional documents than is normally required for a resident Indian.
- A copy of the passport
- A copy of the works contract (also sometimes referred to as the contract card/labor card)
- The power of attorney (POA). The POA is required because the borrower is not based in India and in such a scenario; the HFC would need a representative 'in lieu of' the NRI to deal with as required. Although not mandatory, the POA is usually drawn on the NRI's parents, wife or children
To invest in an immovable property in India, following criteria of people are applicable.
- A Person of Indian origin (PIO), who is an individual, who:
- At any time held Indian passport;
- was himself/ herself a citizen of India or whose father or grandfather was a citizen of India
- Is not a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan
A specified form called the IPI 7 needs to be filed with the central office of the RBI along with the title deed or any other certified copy of the document proving that the NRI has executed an agreement to purchase property within the country. The form has to be filed within 90 days of the purchase of property and has to be accompanied with a bank certificate stating the consideration paid for the purchase. Permissions are generally granted without undue delays if all the relevant papers are submitted. There is no limit on the number of investments or the quantity of investments that can be made in real estate. The immovable property can be purchased by inward remittances from any place outside India or through funds maintained in NRI accounts in the banks within the country
"Income from house property " this is the term used for the income that is derived from renting out a property. The Annual value will be subject to taxation after allowing deductions for (a) 30% of annual value (b) interest payable on borrowed capital for acquisition of property. Annual value is higher of (i) Actual rent received/ receivable or (ii) fair rent of the property. If the property is let out as a complete business centre wherein the purpose is to provide a composite service of providing fully furnished infrastructure for commercial use, the income will be taxed as business income. TDS would have to be deducted from Rental income.
NRIs/OCBs (Overseas Corporate Bodies) can open the following types of accounts with banks in India, which hold authorized dealer licenses, as also other banks, specifically authorized by the Reserve Bank to maintain accounts in the names of NRIs/OCBs.
- Rupee Account
Non-Resident (Ordinary) Account - NRO A/c.
Non-Resident (External) Rupee Account - NRE A/c.
- Foreign Currency Accounts
Non-Resident (Foreign Currency) Account - FCNR A/c
(in Pounds, Sterling, US Dollars, Japanese Yen and Euro).
NOTE: A person, resident in India, who is earning foreign exchange, is also permitted to maintain a Foreign Currency account in India with an authorized dealer bank, to the extent of 50% of such foreign exchange earnings, under the Exchange Earners Foreign Currency Account (EEFC) Scheme.