Hello everyone, I am planning to lend a person money 40L in Hyderabad-India for buying a flat and paying for his registry and I am wondering how can I take safety measures so he can pay me back responsibly in USD in a given time let say 10 years. I don’t want to run from pillar-to post for my own money. If possible, I would like to go with an option that protect both lender and buyer. If I made registry under my family name the borrower could feel upset since he’s giving away registry papers as well as making payments. can one of you help me prepare such documents or guide me the process? At the registrar mentioning the terms and conditions of the such as principal, payback period and that he’ll relinquish equivalent property as per money lent if he doesn’t pay back? And put a clause so he cannot sell it. By far he mentioned two options 1) joint-registry concept with me and him which I am not aware of since I am USC without OCI. 2) Mortgage deed. Questions that I have are: How powerful this mortgage deed or joint registry under the eyes of the law if borrower fail to pay? Can a US Citizen without OCI get added in registry documents as a joint owner? If not, I am planning to add my Indian brother if that keep things simple. please advise. I need few options, please advise. Thank you.
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1) it is not good idea to advance Rs 40 lakhs to person for purchase of property
2) there is no guarantee that he will repay the loan amount
3) if he fails to repay you have long legal battle ahead
4) if you still want to go ahead person can mortgage the property to you and agree to repay loan amount in x period at y rate of interest
5) mortgage should be registered
6) if he fails to repay mortgage deed should contain a clause that you will have right to sell the property
1. As you have rightly suggested, let the borrower and your Indian brother become joint owners of the property. Let the borrower execute an Indemnity Bond in your favour for the money being lent to him.
2. In the above situation, if the borrower fails to repay the loan, based on the Indemnity Bond, legal action can be initiated against him. Also, since it would be a jointly owned property with your Indian brother, selling of the property by the borrower alone cannot happen without the active co-operation of your Indian brother and hence your Indian brother would have control over the borrower.
A person resident in India (other than an Indian company) may borrow on non-repatriation basis from an NRI or a PIO outside India subject to following: Amount of loan shall be received by inward remittance from outside India or out of NRE/FCNR/NRO account of the lender in India.
People resident in India may borrow, both in rupees or foreign currency; but conditions apply. In case of borrowing in INR from NRIs/PIOs, these terms and conditions need to be complied with...
* Borrowing shall be only on a non-repatriation basis.
* The amount of loan should be received either by inward remittance from outside India or by debit to the NRE/NRO/FCNR(B)/NRNR/NRSR account of the lender, maintained with an authorized dealer/bank in India.
* The period of loan shall not exceed three years.
* The rate of interest on the loan shall not be more than 2% above the bank rate prevailing on the date of taking the loan.
* The payment of interest and repayment of principal shall be made only to the NRO account of the lender.
The terms and conditions are prescribed under the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, for borrowing in foreign currency from NRIs/PIOs. However, a loan from a foreign national in favour of an Indian citizen under the automatic route may not be possible.
Since there are restrictions to lend as mentioned above, you may better lend the amount through your close relatives under a mortgage loan which will be very safe especially if he fails to return the amount, his property can be brought to sale and money can be recovered.
You can enter a loan agreement with the debtor, you yourself being the creditor and in order safeguard your interest you can also demand the debtor for post dated cheques in your favour.
you can also enter in a hypothecation deed which will further concretize your safety.
you can also get the property jointly regsitered in your name and in the name of the debtor, as you are a PIO, i.e. person of Indian Origin and thus you can buy immovable property in India.
If you enter a lease deed in India it is fully valid and enforeceable by court of law.
1. In case he will delay in Payment of the said loan amount , then you will have to take legal action against him ,even you will enter into an agreement with the post dated cheques
- Yes, you can register the said property in joint names , and being OCI even you can purchase residential & residential property in India.
2. Joint registry is better option
You need to send the draft or conditions to the advocate to personally vet same. General discussions cannot be made to finalise
Dear client,
When lending a substantial amount of money to someone for the purpose of buying property in India, it's crucial to take proper legal precautions to protect your interests. Here are some options to consider:
1. Loan Agreement:
You should create a detailed loan agreement that outlines the terms and conditions of the loan, including the principal amount, interest rate (if any), repayment schedule, and consequences of default.
Specify the currency in which the loan is to be repaid (USD in your case), and the repayment period (e.g., 10 years).
Include clauses related to the consequences of non-payment, such as the right to take legal action to recover the loan.
2. Mortgage Deed:
A mortgage deed is a legal document that allows you to secure the loan against the property being purchased. If the borrower defaults, you can initiate foreclosure proceedings to recover the loan amount through the sale of the property.
Consult with an Indian lawyer to draft a legally binding mortgage deed. Your presence in India or appointing a power of attorney may be necessary for the execution of this deed.
3. Co-ownership or Joint Registry:
A joint ownership arrangement allows you to be a co-owner of the property. You can either jointly own the property or hold a share in it.
Consult with a legal expert to understand the implications of co-ownership and its potential tax implications in both India and the United States.
As a US citizen, you may not need to have an Overseas Citizen of India (OCI) card to be a joint owner, but consult with a legal professional to confirm.
