Will home loan cover first 20% down payment for NRI home loan?

Hi Anil,

I am an NRI looking to buy an under-contruction property in Mumbai worth approx a crore. Margin money is 20%–that means i need to end up paying 20 lacs.
20% of the flat cost needs to be paid out in the first 45 days (lets call it Rs X).
Here’s my question:
If i go for a home loan, will the bank fund Rs X or will i have to pay Rs X on my own? i am getting conflicting POVs that the first set needs to be my downpayment and the bank will pay only after that.
If i go by your example above, i shouldnt worry about this because for every payment my share will be 20%. so 20%x20%= 4% is what i need to pay in the first 45 days.

Appreciate your help.
Gunjan

Hi Gunjan,

  1. Banks in India never finance 100% of the cost of property. You have to put in some money as down payment and that varies between 10-20% at the minimum.
  2. Coming to your question, the situation depends on your loan approval and sanctioned amount out of 1 crore.
    2.1 If you get your loan sanctioned for 80 lakhs, your portion is 20 lakhs. You are right that you should be liable to pay only 20% of 20% to the builder in first payment.
    This sounds perfectly logical and correct. But, remember its India and ground reality is different.
    2.2 Bank would need the allotment letter and other such papers for legal evaluation of your case. These papers can only be given to you when you have actually booked an flat and builder has allotted in your name.
    2.3 To reach the point where builder can give you all those documents, you have to pay at-least the booking amount (generally 10% of total cost). This would be 10 lakhs in your case.
    2.4 Please do remember that when you apply for the loan, bank sales person will guarantee you the finance for full 80 Lakhs. But, reality is different here as well. You can expect to get about 75 lakhs sanctioned. They seldom approve the full amount that you apply for. So, I would advice to keep a 5% buffer there as well.

So, if you talk about ground reality, you would certainly need to pay about 20 lakhs (call it down payment) to the builder and get the allotment letter. The concept of margin money would come into play when your loan would have been sanctioned and bank has to make the next payment.

Let me know if you need more information.