Home Financing Guide for NRI Buyers in India

When a non-resident Indian (NRI) opts to purchase a property in India, there are several regulations that govern how such a purchase can be financed. There are plenty of questions that revolve purchase, executing Power of Attorney (POA), home loan and tax matters related to an investment in property in India for non-resident Indians (NRI). Here are a few answers to guide an NRI homebuyer, to get a good deal in future.

Financing Sources
The money for purchasing a property in India, must come through banking channels only. Consequently, the payment cannot be tendered in the form of traveller’s cheque or foreign currency. An NRI can also use the money in his/her credit, in non-resident external (NRE) rupee or non-resident ordinary (NRO) or foreign currency non-resident (FCNR) account, maintained in India.

As NRI investment in Indian real estate or with real estate companies in Mumbai, is only allowed in residential or commercial properties, banks too, can finance only these properties. Almost all banks offer home loans to NRIs for buying a house or constructing one. One can also get a loan, for purchase of land (non-agricultural), for constructing a house in India.
The Foreign Exchange Management Act, 1999 (FEMA) is an Act of the Parliament of India “to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.” You can make use of this act to avail certain benefits.
The application for the home loan can be made online, as well as offline. The nature of documents that need to be submitted, will depend on whether the NRI is a salaried employee or whether she /he is self-employed. It will also vary, depending on the NRI’s country of residence. Nevertheless, copies of one’s passport and visa, passport-sized photographs and proof of residence in the foreign county, will be required in all cases.

The Right Choice of Property
NRIs cannot buy an agricultural or farmland or plantation property. However, they can inherit them. What documents are required from them to make a property purchase in India? Does it require RBI permission?
Also, no permission from RBI is required. All they need to have is to hold a valid passport with PIO/OCI card (wherever applicable), address proof, PAN (permanent account number in India) and photograph to buy a residential or commercial property in India. Realtors in Mumbai like Man Infra help you become aware of all these minutes. Their new projects in Mumbai can also be a good option for investment, as while investing your money you would think of a trusted name to join hands with.

What is adjudication of POA?
The POA issued abroad will have to be sent to India and the POA-holder will have to sign and adjudicate it, within 3 months from the date of assigning the power, in India at the registrar’s office. Only after this the POA will be considered ‘given’.

The tax benefits in India on home loan
According to section 24 of the Income Tax Act, the interest on a home loan is deductible from the income gained from house property to the extent of Rs.2 Lakh per annum for self-occupied property. For other than self-occupied property, you can claim actual interest paid. Moreover, up to Rs.1.5 lakh of the principal repayment can be deducted under section 80C (subject to an overall limit of Rs.1.5 lakh of that section including other investment options which allow grant under the same section).