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Comparing NRI Home Loan and Home Loan for Indian Residents: What You Need to Know
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To gain a better understanding of NRI home loans, it is crucial to grasp the definition of NRI. Based on their place of residence, Indian citizens can be categorised into two groups: Indian residents and NRIs.
What Does NRI Mean?
An NRI, or non-resident Indian, is an individual who was born in India but currently resides abroad. NRIs encompass Indian citizens who possess valid Indian passports but do not reside in India. Additionally, individuals who spend less than 182 days in India within a year are categorised as NRIs.
Now that you are familiar with the concept of an NRI, let us explore the distinctions between an NRI home loan and a residential home loan.
What is an NRI Home Loan?
When it comes to home loans, NRIs can apply for an NRI home loan while Indian residents can go for a traditional home loan. The structure of the loan is the same for both borrowers as it has to be paid in the form of monthly equated instalments (EMIs).
However, the interest rates are slightly higher for NRI home loans when compared to resident loans, because of the income disparity that depicts a higher repayment capability for NRIs. Also, the tenure of the loan is less than resident loans due to the NRI's capacity for higher EMI payment and their wish to close their loan as soon as possible.
NRI Home Loan vs. Resident Home Loan
|
|
NRI home loan |
Resident home loan |
|
Interest rate |
NRI home loan interest rates are slightly higher. |
Resident home loan interest rates are lesser than NRI home loans. |
|
Home loan Eligibility |
Salaried or self-employed. |
Salaried or self-employed. |
|
Account opening |
Mandatory to open an NRE/NRO account. |
Not mandatory to open another account. You can use your savings A/c. |
|
Manner of repayment |
You should repay only through NRE/NRO A/c. |
You can repay the home loan using savings A/c. |
|
Guarantor/ power of attorney |
A power attorney is required |
Not required |
|
Documents |
Identity proof, address proof, income proof, and property-related documents. You also need to submit a copy of your passport, valid visa, statement of NRO or NRE account, work permit, salary certificates and power of attorney. It varies from lender to lender. |
You have to submit KYC documents like address proof, ID proof (Aadhaar card, etc.) salary slips, passport-size photos, bank statements and income tax returns. |
Things to Remember When Taking an NRI Home Loan
(NRI home loans promise your dream home)
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Loan Repayment
You should repay the loan in rupees only through an NRE (Non-Residential External) or an NRO (Non-Residential Ordinary) account.
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Tax Benefits
As a NRI, you can also avail tax benefits on the loan. Under Sections 24 and 80C, you can get a tax benefit of Rs.1.5 lakhs on the principal payment and Rs. 2 lakhs under Section 80C.
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Restrictions in Property Owned
According to the Indian Government, you can own any number of commercial properties in the country, but only two residential properties whether it's rented or not. Also, it is not permitted to own land for agriculture if you are an NRI.
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Final Word
Both Indian residents and NRIs often require financial assistance for purchasing a home. In such situations, NRIs have the option to apply for an NRI home loan through an Indian financial institution. The primary distinctions between a conventional home loan and an NRI home loan are that the interest rate is slightly higher, and repayment is facilitated through NRE (Non-Residential External) and NRO (Non-Residential Ordinary) accounts for an NRI home loan.
At IIFL Home Loans, we understand your aspiration for owning a home. To ensure you fulfil your dream of being a homeowner, we offer home loans with affordable interest rates and flexible repayment schedules. Whether you wish to gather additional information about our home loans or initiate the application process, take a step closer to becoming a homeowner by exploring the possibilities with IIFL Home Loans.
FAQ
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1. Can I get a joint NRI home loan?
Yes, you can have a joint loan as this will help in reducing the burden of interest payments.
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2. How can I repay an NRI home loan?
You have to repay the loan using only NRE or NRO accounts.
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3. For how many days should I stay in India as a resident?
A person who stays more than 182 days annually in India is termed as a resident, while those who stay less than 182 days annually are NRIs.
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