Buying a house is not a Herculean task for the NRIs anymore as availability of NRI Housing Loan makes property investment lot more convenient. Any individual staying 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 are eligible for NRI Housing loan. Apart from that, government servants posted abroad on duty with the Indian missions or deputed abroad on assignments with foreign Governments or regional/international agencies are also entitled to these loans.
Terraform Realty has its projects approved from almost all Premier banks & financial institutions who offer NRI Housing loans exclusively as an NRI Terraform Realty customer. You can avail a maximum loan of Rs.1, 00, 00,000 or 85% of the cost of the property, including cost of the land, whichever is lower. The rate of interest will vary from bank to bank depending on the financial institution & the market conditions. At the time of making application for the loan a processing fee is payable which will vary between 0.25 % to 2% of the loan amount applied for depending on the bank. The amount of loan to be borrowed will depend upon a person’s repayment capacity. Repayment capacity takes into consideration factors such as income, age, qualifications, work experience, number of dependants, spouse's income, assets, liabilities, stability and continuity of occupation, alternate employment prospects when the concerned person returns to India and savings history.NRIs apart from loans for buying a property can also avail home improvement loan, home extension loan & land purchase loan.
While applying for a home loans in India the following documents are to be submitted along with the application:
1. Employment/Residency related documents:
- Employment contract
- Latest salary slip
- Latest work permit
- Identity card issued by current employers
- Visa stamped on the passport
- Continuous Discharge Certificate (if applicable)
- Overseas Bank Account Statement for the last six months
2. Property related documents:
- Receipts for payments made for purchase of the dwelling unit
- Copy of approved drawings of proposed construction/purchase/extension. (If the property is not pre-approved by the bank.)
- Detailed cost estimate from Architect/Engineer for property to be purchased/constructed/extended. (In case of resale or secondary market.)
- Allotment letter / EMR from the developers
- Allotment letter from the co-operative society/association of apartment owners. (In case of resale.)
3. Power of attorney
- Once the loan is sanctioned, the period of repayment of the loan is determined which normally falls in the range of three to ten years. Loan can be repaid through Equated Monthly Installments (EMIs) comprising principal and interest. Repayment by way of EMI commences from the month following the month in which you take full disbursement. EMI is payable every month, by the end of that month
- EMI payments are to be made through post dated cheques from your NON-Resident (External) Account/Non-Resident (Ordinary) Account in India
Note: People of Indian origin, holding foreign passports are not eligible to obtain loans from Housing Finance Companies.
Talking About Home loans
India's Income Tax authorities tend to favour those servicing a housing loan from financial institutions / Banks. Taking advantage of this attitude can help the process property purchase a much smoother one.
Any person, including Non-Resident Indians, with a steady source of income can borrow funds for financing the cost of a flat from housing finance companies and banks. For Non-Resident Indians, repayment of loan should be made within a period not exceeding 20 years, out of inward remittances or, out of funds held in the borrower's NRE/FCNR/NRO accounts. Loans are generally disbursed up to a maximum of 85% of the cost of the flat. The balance 15% cost of the flat is to be funded by the flat purchaser from his own contribution.
About Section 88 of the Income Tax Act
You get a 20% rebate on the repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs. 10,000 to the current limit of Rs. 20,000. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount. Going back to our earlier example: Taxable income of Rs. 4 lakh Taxable income stands reduced to Rs. 2.5 lakh Tax before rebate and surcharge: Rs. 49,000 (no surcharge is computed as surcharge is applicable on tax payable after allowing for rebate under Section 88) Rebate of Rs. 4,000 (20% of Rs. 20,000 being principal repayment) Tax less rebate of Rs. 4,000 + surcharge @ 2% = Rs. 45,900 Tax saved = Rs. 49,900 (Rs. 45,900 as shown above plus rebate of Rs. 4,000).
About Section 24 of the Income Tax Act
Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. This allows you to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year. It is now a substantial amount although it started off with the Income Tax department offering Rs.. 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This was raised to Rs. 30,000, then to Rs. 75,000 and then reached Rs. 1 lakh. At present, it stands at Rs. 1.5 lakh.
For you this means, that should you borrow money to acquire, construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs. 1.5 lakh. The criteria being: the property has to be acquired or constructed by March 31, 2003 and be self-occupied.
When put in figures, this is quite an amount. Assume a taxable income of Rs. 4 lakh, placing the assessee in the highest tax bracket along with an interest payment during the first financial year to be Rs. 1.60 lakh.
Your taxable income then stands reduced to Rs. 2.5 lakh (Rs. 4 lakh-Rs. 1.5 lakh being the maximum limit). Your total tax would then amount to Rs. 49,980 (tax of Rs. 49,000 + surcharge of Rs. 980). Therefore, you would have saved Rs. 45,900 (tax @30% on Rs. 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket).
Answering your home-loan questions
Who can apply for a housing loan?
Any person, including Non-Resident Indians, with a steady source of income can borrow funds for financing the cost of a flat from housing finance companies and banks.
Can a Non-Resident Indian avail of housing loans?
Yes. Repayment of loan should be made within a period not exceeding 20 years out of inward remittances or out of funds held in the borrower’s NRE/FCNR/NRO accounts.
How much can a person borrow?
Loans are generally disbursed up to a maximum of 85% of the cost of the flat. The balance 15% cost of the flat is to be funded by the flat purchaser from his own contribution.
How does Terraform Realty assist a flat purchaser for procuring Housing Finance?
All projects at Terraform Realty are pre approved for grant of home loans by leading housing finance companies and banks. The Terraform Realty team liaises with the all leading Housing Finance Institutions for processing the loan, documentation and disbursement of loans.
What is an EMI?
Equated Monthly Installment (“EMI”) is the amount comprising a portion of the interest and the principal loan amount which is payable by a borrower to the lender every month.
How is the rate of interest calculated in India?
Interest rates vary from time to time and from institution to institution. The current trend ranges from about 9% to 11% pa.(Septemeber 2010) The interest calculated either on a daily or monthly reducing or yearly reducing balance.
What is a fixed-rate housing loan?
A fixed-rate housing loan is a loan where the rate of interest is constant through the entire term of the loan period.
What is a floating interest rate housing loan?
A floating interest rate loan is a loan where the interest rate payable is linked to the market conditions such as the bank retail prime lending rate and rises and falls with the bank rate varies. Hence a borrower bears the risk of interest rate fluctuations. Floating interest rates offered are usually lower than the fixed interest rates.
What is the time required for approval of a loan application?
About 5-7 days. (Subject to all relevant documents submitted by the applicant).
What is the time required for disbursement of loans?
Usually loans are disbursed within 5-7 days after completion of verification by the institution, documentation (such as handing over of the original agreement for sale/ lodging receipt to the lender) and completion of all relevant procedures and only after proof that the borrowers own contribution has been paid by him to the vendor / builder / developer.
Do institutions accept joint loan applications?
What are the documents required at the time of making an application for a housing loan?
- Proof of age (Passport / License / Voters ID)
- Proof of residence (Ration card / Tel / Electricity bill)
- Latest salary slip (proof of income for salaried individuals)
- Form 16
- Bank statements for the previous six months.
- For self-employed, certified copies of balance sheet, profit and loss statement and tax “challans” / tax returns for the previous 3 years for partnership/private limited companies, the articles of association, partnership deed and details about the firm.
- For the NRIs’ latest salary certificate specifying, name (as it appears in the passport). Date of joining, passport number, designation, perquisites and salary, photocopy of labor card/ identity card, photocopy of valid resident visa stamped on the passport, photocopy of monthly statement of local bank account, property related documents.
- Details of existing loans if any.