Whether you’re an Indian resident or a non-resident Indian (NRI), owning a home is a big accomplishment. Even though there are many different home loan options available on the financial markets, to make an informed choice, it is crucial to comprehend the distinctions between an NRI home loan and a regular home loan. By contrasting the two loan kinds according to their eligibility, characteristics, rewards, and application procedures, this article will walk you through the fundamentals of NRI home loan vs normal home loan.
Table of Contents
NRI Home Loan vs Normal Home Loan
- Tenure of the Loan: For Indian residents, a home loan’s maximum term is typically 20 years. An NRI home loan, on the other hand, usually has a term of five to fifteen years.
- Availability: A home loan for Indian citizens is intended only for those who live in India. Conversely, non-resident Indians who are living overseas and possess valid Indian passports are eligible for an NRI house loan.
- Documentation: Residents of India must provide KYC documents, including proof of address and identification, pay stubs, income tax returns, bank statements, and passport-size photos, to be eligible for a home loan.
- Manner of repayment: Indian citizens can use a standard savings bank account to pay back their home loans. Only through NRO and NRE accounts with foreign remittances can NRIs pay back their loans. Indian rupees must be used for the repayment.
- Interest rates: Several variables, including individual borrower profiles and market conditions, can affect the interest rate on a house loan. It’s important to remember, nevertheless, that NRI home loans often have higher interest rates than resident Indian home loans. This is because there is a little bit more risk involved in lending money to NRIs. Depending on several variables, including creditworthiness and market conditions, house loan interest rates for Indian residents typically begin at 6.65%. However, the interest rates on NRI home loans are typically greater than those for Indian residents.
Eligibility Factors For Indian Citizens
- Age Limit for Self-Employed Individuals: Your age restriction should be between 21 and 65 if you are self-employed or run your firm.
- Minimum Salary: Your monthly earnings also affect the amount of your house loan. To qualify for a home loan in India, you need to make at least ₹10,000 a month.
- Age Limit for Salaried Individuals: Your employment profile determines the age limit for a home loan. For example, to qualify for a home loan, a salaried individual must be between the ages of 23 and 60 or 65.
- Minimum Business Income: The financial institution finds it challenging to approve the home loan amount because business incomes are so erratic. To qualify for a home loan, business owners must earn at least ₹2 lakh annually.
- Financial Position: The loan amount is heavily influenced by the applicant’s income, both now and in the future. This decision is also heavily influenced by your credit score and credit history, both past and present. A spotless payback history is seen favorably.
Interest Rates and Charges
| Category | Interest Rate Range | Description |
| Fixed Interest Rate | 8.00% – 9.50% | Fixed rates don’t change throughout the tenure. Starting prices can change. |
| Floating Interest Rate | 7.50% – 9.00% | Rates change according to the Repo Rate or MCLR. Initial rates are frequently lower. |
| Hybrid Interest Rate | 8.00% – 9.50% (initial fixed) | combines a fixed rate for a predetermined amount of time with a variable rate beyond that. |
| Fixed Interest Rate | 8.50% – 9.75% | Generally speaking, fixed rates are a little higher than those for Indian citizens. |
| Floating Interest Rate | 7.75% – 9.25% | Rates change according to the Repo Rate or MCLR. In general, a little pricier than for locals. |
| Hybrid Interest Rate | 8.50% – 9.75% (initial fixed) | combines a fixed rate for a predetermined amount of time with a variable rate beyond that. typically more than that of Indian inhabitants. |
Tax Benefits
| Tax Benefit | Indian Residents | Non-Resident Indians (NRIs) |
| Section 24(b) – Interest Deduction | Section 24(b) of the Income Tax Act allows for the deduction of interest paid on home loans up to ₹2 lakhs annually. Properties that are self-occupied are eligible for this benefit. | NRIs are also entitled to interest deductions under Section 24(b) for self-occupied or rented properties up to ₹2 lakhs annually. |
| Section 80C – Principal Repayment | Section 80C allows for the deduction of principal repayment on home loans up to ₹1.5 lakhs annually. Other Section 80C-eligible assets are included in this cap. | For principal repayment on real estate loans in India, non-resident Indians (NRIs) are eligible to deduct up to ₹1.5 lakhs annually. |
| Section 80EE – Additional Interest Deduction | First-time homebuyers may be eligible for up to ₹50,000 a year under specific circumstances (loan up to ₹35 lakhs and property value up to ₹50 lakhs). | Not relevant: NRIs are not eligible for this benefit. |
| Section 80 EEA – Additional Interest Deduction (Affordable Housing) | For house loans taken out for affordable housing under specific conditions (loan up to ₹45 lakhs and property value up to ₹50 lakhs), the annual maximum is ₹1.5 lakhs. | Not relevant: NRIs are not eligible for this benefit. |
| Section 37(1) – Interest on Loans for Rental Properties | Fully deductible: Under Section 37(1), the full interest amount may be deducted if the property is rented out. | Fully deductible: Non-resident Indians (NRIs) are eligible to deduct all interest paid on loans for properties rented out in India. |
Conclusion
Making wise financial decisions requires an understanding of the differences between NRI home loan vs normal home loan. This guide helps you sort through the intricacies and select the choice that best suits your needs and financial objectives by comparing loan tenure, eligibility, repayment plans, interest rates, and tax benefits for Indian citizens and non-resident Indians.