The Hindu Business Line : NRI home loans surging

The concept of `home' still remains a confusion for NRIs. Yet they are building homes in India. NRI home loans are galloping at an annual growth rate of 50 per cent and now account for 15-20 per cent of the banks' retail portfolio.

"There is a growing level of interest among the NRIs in the Indian real estate sector. They are interested in acquisition of property either for future occupation, rental income or for pure investment," said Mr Sandeep Kotak, Head-Home finance, Kotak Bank. Growth in this segment is estimated to be close to a 50 per cent increase year-on-year, he added.

Relaxation in policy

Factors favouring the NRIs are the relaxations made in the recent review of the credit policy.

RBI has dispensed with the lock-in period for the remittance of sales proceeds of immovable property of NRIs or PIOs (Persons of Indian Origin) from their non-resident ordinary account. Earlier, the remittance from such sales proceeds had a lock-in period of 10 years. They can also remit up to $ 1 million per calendar year for any bonafide purpose.

"The current real estate boom has been largely contributed by rising income levels and buying capacity, lower interest rates and low mortgage to GDP ratio. We expect an increasing number of NRIs to now invest in India as existing regulations regarding property transactions have been relaxed by the RBI," said Mr Rakesh Singh, Business Manager Mortgages, Standard Chartered Bank.

Big ticket

The average ticket size of NRI home loans is around two to three times higher than domestic home loans. The average size of Kotak Bank's NRI home loans, for instance, is in the range of Rs 50-60 lakh and carries an interest rate of around 9.25 per cent to 9.50 per cent per annum.

"NRIs generally look for large properties in India, because of the lifestyle enjoyed overseas. A surging Indian economy has prompted many NRIs settled overseas to relocate to India," said Mr Anup Bagchi, Head-International Retail Banking, ICICI Bank.

Most of the loan originations are from the Middle East, the US and UK, said Mr Manasije Mishra, Senior Vice-President and Head NRI Services, HSBC. NRI home loans contribute approximately 20 per cent to the bank's total home loan portfolio.

Most NRIs buy houses in their native towns. While Mumbai, Delhi, Bangalore, Chennai and Pune figure prominently among the hotspots for NRIs, there is a growing interest in Goa and Kerala.

More Stories on : Real Estate & Construction | NRIs | Housing Finance

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