Commercial Property Loans and Finance

NRIs show a marked preference for purchase of residential property
over commercial spaces for investment in India. Surveys conducted
in the USA amongst NRIs had only 9% of investors interested in
commercial property. The RBI does provide for NRIs wishing to
conduct business in India to procure loans against commercial
property

Loan against Bank Deposits

Loans to buy commercial property for carrying out their business
activities are available to NRIs against the NRO, NRE and FCNR
(B) Term Deposits.

Banks may also grant Rupee loans to NRIs as per policy laid down
by the Bank’s board, other than for activities like business of
chit funds, nidhi companies, agricultural or plantation companies
or real estate firms or farm houses, trading in transferable development
rights and investment in capital market, including margin trading
and derivatives.

Loan Limits
Bank loans towards commercial property can be availed, with funding
upto 60% of the value of the property.
With effect from 31st January, 2007, the RBI restricted the maximum
loan permitted to NRIs against their own deposits held under Non
Resident (External) Rupee NRE Accounts and Foreign Currency Non Resident
deposits FCNR (B) Accounts to Rs. 20 lakh.

Loan Tenure
The loan tenure may range from 1-15 years, though some institutions
would insist on wrapping up the loan in 4 -5 years.

Supporting Documents
Documents required for purchasing a house are different from documents
required for acquiring a commercial space. The following need
to be submitted:

• Photo identity,
• Residence proof
• Bank statements for the last six months

• Certified copies of balance sheets,
• Profit and loss statement of accounts,
• IT acknowledgement,
• Advance tax challans for both company
  and personal accounts for the last three years, partnership
  deeds
• Brief profile.

Loan Disbursal
The sanctioned loan is disbursed only after

• Identification and selection of the
  property.
• Submission of the legal documents.
• Legal and technical clearance of the
  property
• Investment of personal contribution towards
  the property

Conditions to the Loan

The loan shall not be utilised either singly or in association
with other person, for any of the activities in which investment
by NRIs is prohibited, namely;

• The business of chit fund,
• Nidhi Company,
• Agricultural or plantation activities
  or in
• Real estate business (excluding development
  of townships, construction of residential/ commercial premises,
  reads or bridges),
• Construction of farm houses;
• Trading in Transferable Development Rights
  (TDRs).

Repayment of Loan

Repayment of loan shall be made from

• Out of remittances from outside India
  through normal banking channels,
• By debit to the NRO/NRE/FCNR account
  of the borrower or,
• Out of the sale proceeds of shares or
  securities or,
• Immovable property against which such
  loan was granted.