Can NRIs get a loan against property in India?

Real estate, without a doubt, is one of the best tangible assets you can use to resolve your financial difficulties. You can get immediate liquidity at reasonable interest rates by mortgaging your property with a financial institution. This loan can be used to cover both business and personal expenses. But what if you are an NRI and require funds to cover various expenses you encounter when living abroad? Will you be eligible for a loan against your property in India? Let us investigate further in this article.
 

Who is NRI?

An NRI, or Non-Resident Indian, is an Indian national who stays in another country for more than 183 days in a fiscal year for work. In the context of the Income Tax Act of 1961, a person is referred to as NRI if he or she has a taxable Indian income of more than Rs 15 lakhs in a fiscal year and meets either of the following conditions:
 

• He or she has visited and stayed in India for at least 120 days in the previous year. 

• He or she has stayed in India for a total of at least 365 days in the previous four years. 

 

Can an NRI apply for a loan against property in India?

 
Yes, NRIs, like all other Indian nationals, can obtain a loan against property that they have in India. However, the list of documents they must provide differs slightly from that for regular Indian citizens. As an NRI, you must confirm the paperwork process and minimum eligibility criteria with your preferred lender before submitting your loan application.
 

Documents required for NRI Loan Against Property

If you are an NRI and want to get an easy mortgage loan approval, you should have the following documents ready:
 

• Duly filed mortgage loan application form
• Identity and address proof
• Passport with visa stamps
• Work permit copy, valid visa, or OCI card
• Last few months’ NRO or NRE account statements 
• Audited balance sheet if your business turnover exceeds the prescribed limit
• Signature proof
• Business existence proof
• Property-related documents 
• Other documents that your lender specifies at the time of loan application 

 
Also Read: Common Queries That Revolve Around Loan Against Property Misconceptions
 

Factors Affecting NRI Loan Against Property Approval

 

1. Credit Score

   A credit score is a three-digit number between 300 and 900 that informs lenders about your credit behaviour. Lenders can determine the risk associated with your profile by using this score and reviewing your credit report. If you have a higher credit score, you will easily get approval for an NRI loan against property on favourable terms. 
    
   However, if you have a low credit score, you must first improve it by following the tips outlined below.
    
   • Automate your EMI payments to avoid any delays.
   • Limit your business or personal credit card usage and avoid exceeding 30% of the total limit.
   • Keep an eye on your credit report for any discrepancies. If you discover any errors or omissions, notify the concerned lenders immediately and ask them to send a rectification request to credit bureaus.
    

2. Debt-to-income ratio

   If you are an NRI entrepreneur with multiple businesses in different countries, you may have used business financing to meet your capital requirements. If you are working abroad as an employee, you may have incurred debt during education or when purchasing some assets.
    
   As such, it becomes crucial for lenders to determine your present debt-to-income (DTI) ratio. If the DTI is below 50, you are unlikely to get a mortgage loan approval. Therefore, if possible, try to reduce your existing debts by foreclosing a few, at least the ones with lower EMIs or those nearing the end of their tenure.
    

3. Employment status

   Many borrowers only provide an NRI loan against property to people running their own businesses. If you are a salaried employee, you may have difficulty finding a lender willing to extend you a loan. However, certain criteria apply to business owners as well. If you are an entrepreneur who conducts business with an enemy country of India or involved in a business that the Indian government considers illegal, you will be denied a mortgage loan.
    
   Similarly, if your business only receives orders during a specific season and does not operate during the remaining days of a year, you may not be approved for a loan.
    

4. Property condition

   The property condition and location are pivotal to mortgage loan approval. Both these factors play a major role in determining the property's resale value. If your property is in a commercial area or posh area, with facilities such as schools, hospitals, shopping malls, and grocery stores within a three-kilometre radius, you will have no trouble getting your loan approved. 
    
   Moving on to the property condition, if you are mortgaging a property that is in poor condition, such as one having leakages from the ceiling, cracks in the walls, or a collapsed portion, your loan application will be rejected during the inspection process.
    
   Many people want to know that "can an NRI get a loan for commercial property?" The straightforward answer to this doubt is "Yes, NRIs can get loans against a commercial property." In fact, commercial property can get you a higher loan to value (LTV) and faster approval. The reason is that if you default, such a property is easier to auction off to recover the outstanding debt. Furthermore, a commercial property allows the loan applicant to earn a high passive income through rentals even if they lose their primary source of income.
    

5. Property insurance

   Lenders will not accept a mortgage application if the property in question does not have insurance. Insurance protects you financially in the event your property is damaged by fire or natural disasters. Simply put, insurance is required because it aids in property maintenance and protects the lender in case of loan default.
    

   How to apply for an NRI mortgage loan?

   
   As an NRI, you can submit your mortgage loan application online or offline. We have described the online process below.
    
   • Compare the various lenders’ schemes for interest rates, eligibility criteria, and documentation process by visiting their respective websites.
   • When a lender is finalised, visit their website to apply for a mortgage loan.
   • Navigate to the loan against property product page and select the "Apply Now" tab.
   • Share your basic details like name, address, etc., on the application page and upload the required documents.
   • The lender's executive will then verify your information.
   • If the details you have provided are correct and up to date, you will be contacted for further steps in your loan processing.
    

Also Read: Mortgage Loan Interest Rate: Everything You Want to Know
 

To conclude

As an NRI, you are eligible to apply for a loan against property if you have a stable income and can provide all the necessary documents. Also, make sure you do not have too many debts and that your DTI is less than 50%. If you have a good credit profile, the mortgage lender will not hesitate to sanction the loan at a low loan against property interest rate.