Under the Foreign Exchange Regulation Act of 1973, Non-Resident Indians are:
Indian citizens who stay abroad for employment or carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad;
A foreign citizen is deemed to be of Indian origin if:
- he held an Indian Passport at any time or
- he or his father or paternal grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955. However this does not apply to citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal.
Guidelines issued by the Reserve Bank of India for grant of housing loans to NRIs. The guidelines are:
- The loan amount shall not exceed 85% of the cost of the housing unit.
- Own contribution, which is the cost of housing unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
Reimbursement of the loan, comprising of the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
An NRI can borrow against the security of immovable property from an authorized dealer subject to following conditions:
- the loan should be used for meeting the personal requirements or for borrower’s own business purposes; and
- Loan should not be used for forbidden activities, namely;
- business of chit fund, or
- agriculture or plantation activities or in real estate business, or construction of farm houses, or
- trading in Transferable Development Rights (TDRs)
- The loan amount cannot be remitted outside India,
- Repayment of loan shall be made from out of remittances from overseas or by debit to NRE/FCNR/NRO account or out of the sale profits of shares or securities or immovable property against which such loan was granted.
Steps to be taken by an NRI follow for getting all the clearances in a hassle-free manner
- Get in touch with consultants for advice on the city of choice
- Outline your objectives, the size of your investments
- Have an approximate of the returns you are expecting. The yield that has evolved from distinct parameters ranges between of 8 – 8.5% to 12% for office space and 4% – 6% in residential
- Whether the land is for investment or for development is also a deciding factor, as is the local demand-supply situation. While investing in India, the availability and quality of infrastructure or utilities like power, connectivity, security and long-term future plans need to be scrutinized.