How can high net-worth NRIs leverage loans against assets they hold in India?

Non-resident Indians (NRIs) often face challenges when accessing loans or utilising their assets in India. However, with the advent of digitisation and advancements in financial technology, there are now promising opportunities for NRIs to leverage loans against their assets held in India.  

“High net-worth Non-Resident Indians (HNI-NRIs) have investable assets over $1 million, excluding their primary residence. The total net worth of NRIs world-over is well over $1 trillion, which is invested in a combination of financial assets, real estate, business investments, and other assets,” said Shreyans Nahar, Co-Founder and CEO of Finsire. 

NRIs who own property in India can leverage it to acquire capital to meet their financial needs with loans against property. These loans offer multiple benefits. Being secured loans, the interest rates on them are generally lower compared to unsecured loans, such as personal loans. The loan amount offered under a loan against property is usually high as it is determined based on the pledged property’s value and the lender’s criteria.  

Adhil Shetty, CEO of Bankbazaar.com, says, “In terms of repayment, lenders tend to offer flexible repayment options on loans against property, making it easier for borrowers to repay the loan without stressing their finances. Another advantage of these loans is that lenders usually don’t put restrictions on the end use of the loans. As a result, borrowers can utilise the loan amount for multiple end purposes based on their requirements. Lastly, loans against property may also fetch NRI borrowers the applicable tax benefits, subject to prevailing tax laws and fulfilment of the necessary eligibility criteria.”  

What are loans against the property? As the name suggests, loans against property (LAP) or mortgage loans are a type of secured loan that can be availed against property wherein the property becomes the collateral against which the loan is given. Indian residents and NRIs can avail of this loan to take care of expenses, such as renovating their house, expanding business operations, consolidating debt, weddings, education, etc.  

“In the case of a mortgage loan, lenders typically allow commercial, residential, and industrial properties to be used as collateral. However, the property in question must not be under dispute or have any title-related issues,” said Shetty.  

Eligibility criteria for these loans: To be eligible to apply for a loan against property, NRI must fulfil certain eligibility criteria. These are usually about the borrower’s age, income, creditworthiness and the property against which the loan is being taken. “Typically, NRI borrowers between the ages of 25 and 70, with a stable source of income, will be eligible to apply for a loan against property. However, the age and income requirement may vary for different lenders and the country where the borrower resides. The borrower must also have healthy credit history and repayment ability,” said Shetty. “Speaking of collateral, the NRI borrower must legally own the property being pledged as collateral. In the case of a jointly held property, they must be a legal co-owner. As part of the loan process, lenders will evaluate the property based on set criteria to determine its value. The property’s value must satisfy the lender’s criteria to be considered as collateral.” 

NRI borrowers can make EMI payments on their LAP via their NRE or NRO accounts for added convenience. Repayments may also be made by remitting funds from overseas. It is advisable to check with the lender to have clarity on the modes of repayment they may allow as these can differ from lender to lender. Borrowers may also have the option to prepay or foreclose their loan based on their loan terms.    

Applying for a LAP: The process of applying for this loan begins with submitting the required documents. NRI borrowers must typically submit proof of identity, income, and residence. In addition, they will also be required to submit documents pertaining to the property being pledged as collateral and their bank statements.   

Shetty said, “NRIs applying for a loan against property in India may not be able to travel to India to complete the loan process. In such a situation, they may grant a power of attorney (POA) to a trusted person who can represent them during the loan application process.” 

Also, as mentioned earlier, the lender will evaluate not just the borrower’s profile in terms of their eligibility but also the property as part of the loan process. The property evaluation will include legal and technical checks and an assessment of its market value.  

This piece further explores how NRIs, especially HNIs, can tap into the potential of their Indian assets and benefit from easier access to credit. 

Today, NRIs have limited access to unsecured loans. Generally, NRIs spend little to no time in India, and accessing unsecured loans in India can be cumbersome. Traditional lenders typically require a physical presence, extensive documentation, and a thorough verification process, making it challenging for NRIs to obtain unsecured credit.  Moreover, secured loans in India usually involve providing collateral, which historically involves significant amounts of paperwork and time-consuming procedures. This tedious process has deterred NRIs from considering secured loans. 

Digitisation enables NRIs to easily monitor, manage, and leverage their Indian assets remotely by providing secure digital access to collateral.

Improved credit profiles: Digitisation opens doors for NRIs to establish and improve their credit profiles in India. By leveraging their Indian assets as collateral, NRIs can demonstrate their creditworthiness and establish a financial track record in their home country. This can positively impact their credit scores and enhance their ability to access credit for various purposes, including investments, business ventures, or personal financial needs. 

Cost reduction and efficiency: Easy digital access to collateral brings about cost reduction and efficiency in the borrowing process for NRIs. By eliminating the need for physical presence and extensive paperwork, digitization significantly reduces transaction costs and saves time. “NRIs can leverage their Indian assets to obtain loans at competitive interest rates without the inconvenience and delays associated with international transfers. This enhances their financial flexibility and provides opportunities to make timely investments or address liquidity requirements in their home country,” said Nahar. 

Optimal planning for liquidity needs: NRIs who require liquidity in their home country can strategically invest in short-term, higher-interest government or corporate debt in India. This allows them to mitigate the transaction costs associated with international transfers while earning attractive returns on their investments. By aligning their investment horizon with their liquidity needs, NRIs can optimise their asset allocation and make the most of their Indian holdings. 

Nahar said, “Digitisation is reshaping the lending landscape and opening new avenues for NRIs, especially HNIs, to leverage loans against their Indian assets. Streamlined processes, improved access to credit, and enhanced financial flexibility are now within reach for NRIs through digital platforms. With careful planning, NRIs can unlock the potential of their Indian assets, establish credit profiles, mitigate transaction costs, and efficiently address their liquidity requirements.”