Buyers & NRI's Guide

A complete guide to home loans in India and loan types, eligibility and documents required whenapplying for a home loan and its tax implications

Buyers Guide

Working out what you can afford

Buying a property is a big step involving a substantial long-term financial commitment, so think hard about what you can afford. You will need to consider the assets you have - like savings - as well as the money that's coming in and going out.

Although it may reduce your buying options, you don't want to commit to a mortgage and then realise you can't afford some of the nicer things in life! It may sound obvious but take time to think of all the things you spend money on throughout the year, even without a mortgage.

Getting a mortgage

For most people buying a property the biggest ongoing cost is the mortgage - simply a loan secured against a property. You can't sell the property without paying off the mortgage first and if you don't keep up the repayments the lender can repossess the property.

Because of the credit crunch, it is vital that you secure a mortgage with a lender before starting the searching process. This way, when you find the right property, you will avoid being beaten to it by another buyer and you will also be in a much stronger negotiating position.

Generally, the best mortgage deals are available to people who put in at least 15% of the property's value, leaving the mortgage company to lend the other 85%.

Finding the ideal property

You will need to consider what aspects of a property are most important to you:

  • number of bedrooms / bathrooms.
  • parking provisions.
  • separate kitchen and dining room.
  • private garden.
  • conservatory.
  • how much time/money you may want to spend redecorating etc.

Tell your agent exactly what type of property you are looking for and the elements that you could possibly compromise on. Also inform them what you don't want and whether you have a mortgage agreed in principle.

Getting the most out of viewings

Use Rightmove.co.uk to find out as much as you can about a property you like using the photographs, floorplans, virtual tours, online brochures and local information that is available with most descriptions. Always call or email the advertising agent to check any missing information.

As soon as you have established the property is of sufficient interest for you, book a viewing with the agent.

Negotiating and making an offer

Once you have found the property of your dreams, the next step is to make an offer. It is important to consider a variety of factors when choosing your price level in order to achieve the right deal for you. Take a step back to logically look at all the things that matter before making your offer.

First time buyers, buyers with no chain and buyers who have pre-arranged mortgages have a head start on most of the competition. If this is you, then make the agent and seller aware of this, as this can put you in a very favourable negotiating position, especially if the seller is in a chain. Be sure to check if they are in a hurry to sell or have been trying to sell for a long time. If so, they may be willing to accept a lower offer to make the sale. Sellers who are not in a hurry to move are more likely to hold out for a higher price.

Conveyancing - the legal aspects

Here is our quick guide to understanding what a conveyancer does. They will:

  • Obtain sellers' responses to questions, such as who owns the boundaries, whether they have had any disputes with neighbours and what fixtures and fittings are included.
  • Check copies of any guarantees on the property, details of planning permissions and building regulation certificates.
  • Check the seller really is the owner of the property and prepare a Report on Title for you.
  • Check local authority searches and plans for the local area.
  • Pay stamp duty tax on the property.
  • Arrange registration of title in your name.

NRI's Guide

Do NRI require permission of Reserve Bank to acquire immovable property in India?

No. NRI’s do not require any permission to acquire any immovable property in India other than agricultural / plantation property or a farm house.

Do NRI's require permission of Reserve Bank to transfer immovable property in India?

No. NRI do not require any permission to transfer any immovable property in India. Permission is required only in the case of transferring of agricultural or plantation property or farm house to another citizen of India NRI or PIO.

Do PIO require permission of Reserve Bank to purchase immovable property in India for their residential use?

Reserve Bank has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property other than agricultural land/ farm house/ plantation property, in India. They are, therefore, not required to obtain separate permission of Reserve Bank or file any declaration.

How should the purchase consideration for immovable property be paid by PIO under the general permission?

The purchase consideration should be met either out of inward remittances in foreign exchange, through normal banking channels or out of funds from any non resident accounts maintained with banks in India.

Can such property be sold without the permission of Reserve Bank?

Yes. Reserve Bank has granted general permission for sale of such property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.

Can sale proceeds of such property, if and when sold, be remitted out of India?

In the event of sale of immovable property other than agricultural land/ farm house/ plantation property in India by a NRI or PIO, the authorized dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied

What other facilities are available for repatriation?

Authorised dealers can allow remittance up to USD 1 million for any purpose, per calendar year from balances in NRO accounts subject to payment of applicable taxes. The limit of USD 1 million per year, includes sale proceeds of immovable properties acquired by the NRI/PIO while they were resident in India and held for a period of 10 years and above. In case the property is sold after being held for less than 10 years, remittance can be made if the sale proceeds were held for the balance period in NRO account or in any other eligible instruments. separate permission of Reserve Bank or file any declaration.

Can PIO acquire or dispose of immovable property by way of gift?

Yes. Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of immovable properties other than agricultural land/farmhouse/plantation property by way of gift from or to an Indian citizen, NRI or PIO.

Can NRI/ PIO rent out the properties (residential/ commercial) if not required for immediate use?

Yes. Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income is eligible for repatriation.

Can NRI obtain loans for acquisition of a house/ flat for residential purpose or office/ showroom for commercial purpose from financial institutions providing housing finance?

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., to grant housing loans to NRI for acquisition of a house/flat for self occupation subject to certain conditions. The purpose of loan margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investor’s NRE / FCNR / NRO Accounts.

What are the guidelines for acquisition of agricultural land/ plantation property/ farmhouse by NRI and foreign citizens of Indian origin?

All requests for acquisition of agricultural land/ plantation property/ farm house by any person resident outside India may be made to The Chief General Manager, Reserve Bank of India, Central Office, Exchange Control Department, Foreign Investment Division (III), Mumbai 400 001.