Home loans for NRIs and OCIs: the RBI rules

What the RBI rule says

Section 4 of the RBI Master Direction on borrowing and lending in rupees between residents and NRIs/PIOs (updated 8 September 2026) sets five conditions:

1. Quantum, margin and period. These “shall be at par with those applicable” to housing finance for a person resident in India.
2. No credit to NRE or FCNR(B) accounts. The loan amount “shall not be credited to NRE/FCNR(B)/NRNR account of the borrower”.
3. Security. The loan is “fully secured by equitable mortgage of the property proposed to be acquired”, and if necessary by a lien on the borrower’s other assets in India.
4. Repayment. Instalments, interest and other charges are paid by remittances from outside India, or out of NRE, FCNR(B), NRNR, NRO or NRSR funds, or out of rent from the property, or by a relative of the borrower in India through an account-to-account credit to the loan account.
5. Interest rate. It must conform to RBI and NHB directions.

The Master Direction does not set approval criteria such as income, credit history or age; those are each lender’s policy. For commercial banks, the RBI’s Credit Facilities Directions, 2025 (updated as on 1 October 2026), paragraph 111, cap the loan-to-value ratio on individual housing loans at 90% up to ₹30 lakh, 80% above ₹30 lakh and up to ₹75 lakh, and 75% above ₹75 lakh. Under paragraph 113, stamp duty, registration and other documentation charges are not included in the cost financed, except where the dwelling costs ₹10 lakh or less. These Directions apply to commercial banks; the Master Direction above makes NRI terms equal to those for residents. See home loan down payment and LTV.

The interest rate and the repo

The RBI’s policy repo rate is the benchmark for repo-linked loans. On 7 October 2026 the Monetary Policy Committee raised the repo rate by 25 basis points to 5.50%. Whether and when your loan rate moves depends on the benchmark and reset clause in your loan agreement. See the RBI repo rate and home loan rates. To estimate an instalment use the home loan calculator and read home loan eligibility and EMI.

Prepayment charges

Under the RBI’s Pre-payment Charges on Loans Directions, 2025, lenders must not levy pre-payment charges on floating-rate loans to individuals for purposes other than business, with or without co-obligants. The Directions apply to loans “sanctioned or renewed on or after January 1, 2026”. The Directions do not mention NRIs, so ask the lender whether your loan is covered. See prepayment charges.

Tax on the loan

The Income-tax Act, 2025 applies from 1 April 2026 (formerly section 24(b) and section 80C of the 1961 Act):

• Interest, section 22(1)(b). Interest on capital borrowed to buy or build the property is deducted from house property income. For a property you occupy (section 21(6)) the deduction is capped at ₹2,00,000 if the purchase or construction is completed within five years of the end of the tax year of the loan and the lender gives a certificate; otherwise the cap is ₹30,000 (section 22(2)).
• Let-out property. Rent is taxed under house property, with a 30% deduction of annual value (section 22(1)(a)) and interest. See rental income tax for NRIs.
• Principal, section 123. Up to ₹1,50,000 for repayment of loans listed in Schedule XV.
• Default regime. Section 202 is the default regime. It allows no deduction under section 22(1)(b) for a self-occupied property and no deduction under section 123 (Chapter VIII, except specified sections), and it does not allow a house property loss to be set off against other income. You may opt for the old regime under section 202(4). Which is lower depends on your Indian income; a chartered accountant can compute it.

Section 22(6) denies a deduction for interest paid outside India where tax has not been paid or deducted and there is no agent in India. This matters only if the loan comes from a foreign lender.

Loan against an NRE deposit

A different product: banks can lend against an NRE deposit “without any limits”, subject to margin, and the money may be used for a home for own residential use (Deposits and Accounts Master Direction, para 4.8.1). A loan against an NRO deposit cannot be used for real estate.

What differs by state

The loan rules are central. The state sets stamp duty and registration charges on the mortgage deed and on the sale deed, and the registration of the mortgage; use the stamp duty calculator. RERA protections for an under-construction home are state-run; see RERA project registration check.

Which professional to consult

A home loan lender regulated by the RBI or the NHB (home loan lender). A property lawyer (advocate) enrolled with the State Bar Council can read the mortgage documents (property lawyer). A chartered accountant can compare the old and default tax regimes.