Many factors make NRIs consider investing in or purchasing property in India. Sometimes they want to return after midlife or the expiration of a work visa, and other times, they want to make an investment.
Buying property in India is quite a challenging task. What complicates the situation is the extended legal process and the plethora of documents involved in a purchase.
We provide a brief guide to the documents required for a home loan and buying a home.
Required Documents for Home Loans
Not everyone requires a home loan. But most would, since high-end, three-bedroom apartments cost close to half a million dollars or more in most Indian metropolitan areas.
The papers needed by the bank in order to provide a home loan are listed below. These are the minimum requirements. The bank may ask for more details during due diligence.
- Passport and work visa (if applicable) photocopies. In case the individual is an OCI, the relevant documents certifying the same are needed.
- Employment contract in case of an employee.
- For businessmen, profit and loss accounts of the last few years. Legally, three years are required, but more might be asked to determine the financial stability of a business.
- Salary certificate to ensure the applicant is currently employed.
- Pay stubs from the last 6 months.
- Last one-year bank statement of your NRE and NRO accounts. The bank may summon the details of the salary account if required.
- Power of Attorney to act on behalf of the NRI. This PoA allows the bank to foreclose or sell, and it is different from the PoA mentioned later.
Required Documents for Home Purchase
- Title Deed
This proves that the developer has explicit ownership rights to the property. Without it, there is no way to be sure that the developer has the right to build on the land.
After an apartment complex is constructed, the Title Deed is transferred to the name of the housing society formed.
Examination of the Title Deed ensures that the property is not being constructed on agricultural land or land obtained by illegal or dubious means.
- Sale Deed
It is proof of the sale of the property to the buyer. There might be several parts to it with varying names, depending on the state.
The first is the Sale Agreement, which details the property to be sold, details of the design, parties involved (with address), total cost, amount of advance or deposit, and probable completion date.
Another is the Sale Deed that is given when the seller hands over the flat. At this stage, the buyer receives the right of occupancy (right to use his own lock and key).
There might be contracts before the Sale Agreement that express interest in buying and selling property, but those are not executed on stamp paper.
- Completion Certificate
This is provided by the municipality to the promoter of property, and he will give each occupant a notarized copy. The Certificate of Completion is a no-objection statement by the authorities stating that the building has no illegal structures and is fit for habitation.
- Building Plan
This may or may not be legally required. The buyer has the right to acquire the blueprints of his portion alone, not the whole. However, it is best to obtain a copy from the local municipality to resolve disputes later. Disputes among neighbors are common in apartment complexes.
- Encumbrance Certificate
This certifies that the property is free and clear of all liabilities. Basically, even if a creditor sues the developer, they cannot seize the flat you have purchased since it is free of all encumbrances.
- Mutation Certificate
This is a municipal department formality and consists of the transfer of the property taxpayer’s name. It never occurs instantly but takes up to at least a year. The municipality has to evaluate the property and issue a hearing date. At that time, an application for a change of name known as a mutation has to be made. A mutation may take several years.
Does the NRI Have to Be Present?
Not necessarily. Issuing a Power of Attorney to a relative or lawyer would suffice. Since development is time-consuming, with some projects stretching well over two years, it is best to provide someone trustworthy with a PoA and ask them to attend to the formalities.
In fact, an NRI does not even need to be in India to issue the PoA. They could execute it in an Indian embassy abroad.
Almost every Indian bank provides home loans from overseas branches.
What has made the process easier is that banks have pre-approved projects for which they can provide loans quickly. Most reputed Indian developers hold roadshows abroad to sell apartments.
There is, of course, a lot of paperwork—but not an alarming amount of it. After all, the aim of the paperwork is to protect your interests. However, note that land purchase and sale are state subjects, and the laws vary slightly across India. You would have to adjust this checklist accordingly.
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