Like other resident Indians, NRIs too have become conscious of putting in their money where the bigger buck is!
Hence, investment in commercial property is being preferred over-investment in residential properties by NRIs.
Why?
Well, the rise in rental income from commercial property and growth in demand for commercial property is the main reason behind the shift in the trend. The growing economy and liberal policies of the Government of India are attracting investment by NRIs in the commercial sector.
NRIs are permitted to invest in commercial property, i.e. those purely intended for business purposes.
An investment in commercial property could broadly mean purchasing factories, office spaces, industrial units, retail complexes, malls, medical centers, hotels, retail outlets, warehouses, and garages, etc. Or for commercial renting.
Residential Properties
Can NRIs finance the investment?
Fact is, NRIs purchase commercial property by using funds from their bank accounts in India (through funds in NRE/NRO/FCNR account) or through remittances using normal banking channels.
NRIs can also avail loans for the purchase of property in India just like resident Indians. They can claim benefits under Section 24 and Section 80C of the Income Tax Act.
The added advantage being that, by availing loan from a bank, an NRI gets the facility of getting the property papers evaluated by bank officials who exercise due diligence before sanctioning the loan.
How toavail a loan:
The conditions are general and may vary from bank to bank.
The NRI can be a salaried person or self-employed. Different banks have different eligibility criteria.
The income of NRI matters while taking a loan. The income slab is different depending upon the country of residence of the NRI.
Many banks require a co-applicant who is a resident Indian, preferably a person who is a close relative of the NRI and should ideally be from the place where the loan has been applied for.
The period of loan also varies from bank to bank. The period of repayment in case of commercial loans for NRIs varies from 5-15 years. The period is shorter for NRIs as their repaying capacity is more than resident Indians.
The rate of interest depends upon the loan amount and the repayment period selected.
80-85% (some banks allow only 60-65%) of the loan amount is permitted against the value of the property. The loan amounts that can be availed depends upon the income also.
What are the required Documents and concerned rules for availing a loan?
An NRI would require the following:
Passport
Work permit
Salary certificate
Proof of residence
IT returns
IDs – photographs
Please Note: The Aadhar Card is not mandatory for availing a loan.
Loan Document rules:
NRIs can execute the documents on their own by ensuring their physical presence in India or through a Power of Attorney.
This would be subject to all rules related to the execution of the POA by NRIs.
Loan to NRIs for business activities against bank deposits:
RBI permits sanction of loan to NRI for doing business activities in India against their bank deposits.
This loan is not for investment in real estate business but is granted only for carrying a business activity other than this.
RBI issues guidelines for permitting the amount of loan to NRIs for carrying business activities against the NRE/FCNR/NRO accounts.
The bank may fix minimum and maximum limits as per the said guidelines.
The loan amount is sanctioned after scrutiny of all documents. NRI also has to make a personal contribution towards the commercial property purchase before a loan is disbursed.
How do NRIs repay their property loans?
The loan amount is repaid as per decided EMIs. For repayment of the loan, an option of prepayment of the loan amount is also available to NRI subject to the foreclosure charges.
Repayment is made through Internet Banking or ECS from NRE/NRO account as permitted by RBI.
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