NRI Banking
How NRIs can finance for a Home Loan in India?
Buying a home is a major financial decision and milestone. It’s an excellent financial move regardless of whether it’s for personal use or as an investment. As a Non-Resident Indian (NRI), if you want to buy a property, some financial assistance might be needed. This is where NRI home loans step into the picture. From competitive interest rates and customised repayment structure and options, you can easily finance your dream property in India.
In this article, you will be introduced to the NRI loans designed especially for you that can help you buy a home in India.
Home Loan Application Process for NRIs
In this section, we will look at the home loan application process.
Step 1: Check Your Eligibility
Any individual with an Indian citizenship who resides abroad for employment or business purposes is deemed an NRI. Depending on the lender, your eligibility criteria to obtain a home loan as an NRI in India will vary. A minimum age and income, a decent credit score, and being employed are the most frequent requirements for eligibility.
Step 2: Gather the Documents
- Recent passport-sized photographs.
- A valid passport, PAN card, and Aadhaar card.
- Income Proof such as salary slips and income tax returns.
- Property ownership – sale agreement, property tax receipts, title deed.
- A valid Power of Attorney (POA) document, if applicable.
Depending on the lender, additional documentation might be needed. Once all the documents are in place, fill an online or offline home loan application and submit it.
Step 3: Choose the Loan Amount and Tenure
Depending on the financial institution you desire to obtain your home loan from, the interest rates, processing fees and charges, repayment terms, and loan tenure will vary. As an NRI, your eligibility for home loan determines the tenure and maximum loan amount. Most house loans can finance 75-90% of the property's value for 30 years. For better financial planning, use an online EMI calculator to calculate EMIs and tenure.
Step 4: Verification and Approval
Following receipt of the application, the lender will review supporting records and conduct additional research to verify your credit history, employment history, property value, etc. If everything is in order, the loan and all of its details, such as its tenure, interest rate, and EMI schedule, will be approved.
Smart Repayment Options
Leverage Tax Deductions
Remember to take advantage of the various deductions available under the Income Tax Act for home loan repayment if you file your income tax returns in India as an NRI. For example, Section 80C of the Income Tax Act allows for an annual deduction of up to ₹1.5 lakhs for principal repayment. A deduction of ₹2 lakhs is also available for interest payments on self-occupied properties under Section 24(b). Please note that this is applicable only if you choose the old tax regime.
Choose the Right Tenure and EMI
Most financial institutions offer competitive interest rates. The interest rate on a home loan can be fixed or floating. Fixed interest comes with predictable EMIs while they vary if you opt for a floating interest rate. Choosing the right tenure for home loan is needed because it determines your EMIs.
Here is a simple table that showcases how your tenure affects your payment. For calculation purpose, let’s assume the home loan amount as ₹50 lakhs and the interest rate at a fixed rate of 8%.
| Feature | 10 years | 20 years | 30 years |
|---|---|---|---|
| EMI at 8% | ₹60,664 | ₹41,822 | ₹36,688 |
| Interest Component | ₹22,79,656 | ₹50,37,281 | ₹82,07,762 |
| Total Payable | ₹72,79,656 | ₹1,00,37,281 | ₹1,32,07,762 |
As you can see, choosing a short tenure might feel like a pinch now, but in the long run, you save a lot of money. The difference between a 10-year loan and 20-year loan is ₹27 lakhs, and that between a 10-year and 30-year loan is a whopping ₹59 lakhs.
Reduce the Principal
Two simple yet effective means to reduce the principal borrowed are:
- Making a larger downpayment to reduce the principal and interest burden in the long run.
- Making extra payments, like one extra EMI per year, can shorten the loan term. You also pay a lot less interest over the term of the loan.
Conclusion
Securing a home loan as an NRI in India has never been this simple before. Most financial institutions not only offer competitive interest rates and flexible repayment options but customised solutions to fit your needs. For example, Axis bank has home loan options for NRIs that come with features such as attractive interest rates, flexible tenures, and easy processing with minimal fees. Opting for this can make your home loan process smoother.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
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