Buyers Guide


An Indian citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Persons posted in U.N. organisations and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-temporary assignments are also treated as non-residents). Non-resident foreign citizens of Indian origin are treated on par with non- resident Indian citizens (NRIs).
A person of Indian origin means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:
held an Indian Passport at any time, or
who or whose father or paternal grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955
The Reserve Bank of India (RBI) has granted general permission to NRIs, PIOs and foreign citizens to invest in real estate for their residential purpose.
The general permission covers only residential and commercial property.
NRIs can purchase commercial, as well as residential property in India (except for agricultural land, farm house & plantation property) provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchaser's NRE/FCNR accounts maintained with banks in India.
The payment of the purchase should be made out of the funds received in India through the financial options made available by the Indian. In case the funds are held in a non-resident account, that account should be maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank.
Yes, NRIs can sell their residential/commercial property without the permission of RBI. If the property is purchased by another PIO, funds towards the purchase consideration have to be remitted to India or paid out of balances in NRE/FCNR accounts.
As per the general permission granted by RBI, NRIs are allowed to receive financial assistance in the form of housing finance from certain financial institutions namely, HDFC, LIC Housing Finance, IDBI etc.
Housing loans can be availed in rupees.
Even though the criteria regarding the purpose of the loan are at par with those applicable to the resident citizens, the repayment period of the loan should not exceed 15 years.
NRIs have different eligibility criteria in order to get home loans in India. A copy of the passport, copy of work contract is a must. Having a power of attorney (POA) may not be obligatory but it is nevertheless very important as the financial institute would want a representative since the borrower is not based in India. Here is a general list of documents needed for NRIs to obtain home loans:
  • Passport & Visa
  • Appointment letter and contract from the employing company
  • Bank statement for the last six month
  • Labour card/identity card
  • More documents may be needed depending upon the requirements of different banks.
Yes. The housing loan of an NRI or a PIO can be repaid by his/her close Indian relatives.


Most lenders would consider any property bought during the last 3 -6 months as a regular home loan application. You would be eligible for the same rates and income tax benefits as any other home loan. However, if you delay and the property purchase becomes more than 6 months old it will be treated as Loan against Property. The rates for the same are higher and there would be no tax benefits as well.
You would not be eligible for a loan as most home loan lenders allow only immediate relatives to co-own a property. This means that a parents-son combination and a husband-wife combination are only allowed. The reason for this restriction is that if some dispute arises between the joint borrowers, their incomes might not be pooled any longer and there might be a problem in repaying the loan to the bank.
Yes, a single woman can get a loan. Till a few years back, banks hesitated to give loans to single women fearing loss of income after marriage. With double income families becoming the norm rather than exception, lenders now are lending to single women as well. Many lenders also have special schemes for women offering them a discount up to 0.25%.
No, currently no home loan lender provides loan for purchasing properties abroad. The primary reason being operational difficulties in property verification, disbursement and different legal structure governing both home loan and repossession terms.
Most home loan lenders offer special privileges to self-employed professionals. They recognize the fact that in such cases, income is generally under stated and the earning potential of such individuals is higher that what has been disclosed. Every Housing Finance Institution (HFI) has its own conditions regarding the type of professionals they would cater to. The HFI also decides on the qualifications required for such professionals to qualify for the relaxed norms for loan eligibility calculations.
Yes, you can have as many loans against different properties. The only criteria being that you should be able to repay all the EMIs every month.
Fixed rate home loan is one where the interest rate on home loans charged by the lender is constant over the tenure of the loan. It is advisable to go in for a fixed rate only if you feel that the rate of interest prevailing in the market have touched rock bottom and the rates can only move upwards. Here are the latest offers on a 10 year fixed rate home loan and 20 year fixed rate home loan from the leading banks and housing finance companies in India.
In a monthly rest, the interest is calculated on the outstanding principal at the beginning of every month. Once the interest is calculated at the rate applicable to you for the month it is deducted from the EMI received during the month. Annual rest works on the same principal only the interest is calculated on your outstanding principal at the beginning of every year. It is also commonly known as “Yearly Reducing Balance”. Monthly reducing balance is a better option all other things being equal as you get immediate credit for repayment and the interest component keeps reducing almost immediately on a monthly basis.
Fluctuating value of the property does not affect your EMI or your home loan liability. If you fail to repay your home loan you will be damaging your credit profile and any chances of getting a loan in the future. In such a case, where you want to dispose of the property because of loss in value. You will be much better off if you prepay your home loan and then sell the property.


You get a 20% rebate on 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.
Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.
This is now a substantial amount. 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 later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh.
So, 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 taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
  • Assume interest payment during the first financial year is Rs 1.60 lakh
  • Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh – Rs 1.5 lakh being the maximum limit)
  • Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980)
  • Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket)
The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house (if is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
No, currently no home loan lender provides loan for purchasing properties abroad. The primary reason being operational difficulties in property verification, disbursement and different legal structure governing both home loan and repossession terms.
The Government Of India Has Granted General Permission For NRI/PIO/OCI To Buy Property In India And They Do Not Have To Pay Any Taxes Even While Acquiring Property In India. However, Taxes Have To Be Paid If They Are Selling This Property. Rental Income Earned Is Taxable In India, And They Will Have To Obtain A PAN And File Return Of Income If They Have Rented This Property. On Sale Of The Property, The Profit On Sale Shall Be Subject To Capital Gains.
If They Have Held The Property For Less Than Or Equal To 3 Years After Taking Actual Possession Then The Gains Would Be Short Term Capital Gains, Which Are To Be Included In Their Total Income As Tax As Per The Normal Slab Rates Shall Be Payable And If The Property Has Been Held For More Then 3 Years Then The Resultant Gain Would Be Long Term Capital Gains Subject To 20% Tax Plus Applicable Cess.
India Has DTAA’s With Several Countries Which Give A Favorable Tax Treatment In Respect Of Certain Heads Of Income. However, In Case Of Sale Of Immovable Property, The DTAA With Most Countries Provide That The Capital Gains Will Be Taxed In The Country Where The Immovable Property Is Situated. Hence, The Non-Resident Will Be Subject To Tax In India On The Capital Gains Which Arise On The Sale Of Immovable Property In India. Letting Of Immovable Property In India. Would Be Taxed In India Under Most Tax Treaties In View Of The Fact That The Property Is Situated In India.
Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.
Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.