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MASTER of BUSINESS ADMINISTRATION

CERTIFICATE

This is to certify that the dissertation paper entitled “Housing

Finance: a comparative analysis on the contemporary home loans
in Indian banks”, submitted by Parmita Dubey (Roll No- VU/MBA-
IV-S, 08; Registration no- 120 of 2007-08). This is in partial
fulfillment of the requirement for the award of the degree in
Master of Business Administration (Department of Commerce
with Farm Management), Vidyasagar University found to be
satisfactory and hereby approved for submission.

…………..………………

Prof. Kartick Chandra Paul

Coordinator, MBA
 DECLARATION

I, Miss PARMITA DUBEY,hereby declare that the dissertation

work entitled’housing finance:comparative analysis of the
contemporary housing loans in Indian banks” is the original work
done by me and submitted to Vidyasagar university in partial
fulfillment of the requirements for the award of MBA in FINANCE
specialization under the supervision and guidance of Mr.
ARINDAM GUPTA,Professor,Department of Commerce with Farm
Management,Vidyasagar University.

Date:

Parmita Dubey
 ACKNOWLEDGEMENT

This dissertation work entitled “Housing Finance: a Comparative Analysis

on the contemporary housing loans in Indian Banks” would not have been
a success without the sympathetic and competent help and valuable
guidance of my honourable teacher, Mr. Arindam Gupta, dissertation
supervisor [and professor, Dept. of Commerce with Farm management,
Vidyasagar University], so I convey my special regards for his tremendous
encouragement and co-operation and who through his magnanimity has
instilled the confidence that it would be possible to achieve such a
mammoth task of completion of this dissertation paper.
I extend my heartiest thanks to Mr. Mrinal Mukherjee (Credit Manager,
Bank of India, Purulia Branch), who had provided me the required
information and valuable suggestions regarding hosing finance as and
required.
I am also very much enriched with the valuable suggestions and advises by
some professional experts, Mr. Avinash Singhania, Senior Branch manager,
Axis Bank, Hiranandini branch, Powai, Mumbai ,Mr. Ritesh Mathur ,
Cashier, SBI, Hiranandini branch, Powai, Mumbai Branch and Bikash Jain,
Indian Overseas Bank, Bokaro Steel City Branch, in the field of housing
loans in banking arena.
I also express my gratefulness to Professor Kartick Chandra Paul
(coordinator, MBA and other faculty members of Vidyasagar University
who have provided the required information as and when approached.
I express special thanks to my parents, my sister Moumita and my friend
Tanmoy for constantly supporting me to achieve my goal.

Parmita Dubey
 EXECUTIVE SUMMARY:-
In the recent scenario of booming industrialization, banking industry has
emerged as a major global player and has successfully curved a niche of it
in this competitive environment. This has become possible due to various
underlying factors, including both direct and indirect factors. The banking
industry being a very much secured side for investment and credit
business, moreover also due to the recent global meltdown, stock market
has become volatile and much a dicy affair. Hence people are shifting their
activities towards the banking sector. Thus the study in the different arenas
of banking sector has gained massive importance.

Banking sector covers a wide spectrum of study, among which housing

finance has always remained a special aspect of study and is gaining
momentum day by day. Housing finance is considered as one of the
pioneers in the banking industry and thus plays an effective role in the
development of banking industry and thereby aids in building up of a
strong and sound financial system which ultimately contributes to the
economic development of a country.

Housing finance vis-a-vis the real estate business is considered as one of

the major pillars to the economic development of a country. In recent times
housing finances has attributed to a wide spectrum of activities and is
directly interlinked to development. Hence an analysis of different aspects
of housing finance becomes essential. Proper channelization of investment
avenues and credit business for an efficient cost benefit analysis towards
the housing sector is an important arena and thus the primary objective of
this study is to examine and hence make a comparative analysis of the
home loans (Methodologies and interest rate differential) as provided by
the different bank of India and to justify whether they are exist a significant
variation in the methodologies and interest rates of home loans in public,
private and co-operative banks.

A secondary objective also entails in analyzing the trends in disbursement

of housing loans by the different categories of banks viz. public, private and
co-operative banks. By this a comparative decision can be visualized
regarding a home loan proposal to be effective and efficient depending on
the suitability of customer needs.

CONTENTS
  INTRODUCTION

 Modern housing finance scenario

 ORGANIZATION OF HOUSING FINANCE

 Basic structure
 Major Players of housing finance

o National housing bank

o Other major players

 GENERAL ASPECT OF HOUSING FINANCE

 Basic norms and methodology of housing loans

 Case study

 METHODOLOGY

 Descriptive analysis

o Sample collection and data source

o Comparative scheme of investigation
o Findings and results

 Statistical/technical analysis
o Sample collection and data source
o Tools used for technical analysis in comparative scheme
(standard deviation & test of significance)
o Findings and result.

 RESULTS OF DESCRIPTIVE AND STATISTICAL ANALYSIS

 CONCLUSION AND RECOMMENDATION

 EFFECTIVENESS AND LIMITATIONS OF STUDY

 BIBLIOGRAPHY

INTRODUCTION
 The housing finance sector in India is the pivotal role player in the growth
of real estate scenario and thereby paving the way for rapid economic
development of the country. In the current economy of India the housing
finance sector has the maximum propensity to generate income, and
demand for material, equipment and services and hence it is on its way to
donning the image of an organised industry with global standards.

MODERN HOUSING FINANCE SCENARIO

The last decade has been a clincher in terms of the increasing interest
shown by all the spheres of the business world Including international
property consultants, commercial banks, insurance organisations, central
and state governments, specialised housing finance institutions and
corporations, development financial companies and others. In investing in
these sectors and providing housing loans. Now freeing, disorganisation,
poor governance have taken a back seat. The expansion in terms of space
and range encompasses residential, commercial, infrastructure and
logistics. With the retail boom poised for huge growth, a good chunk of
projects are in the commercial real estate space, with the residential sector
commanding its own share in the sector.

With the host of real estate funds from financial institutions, financial
support from banks and housing finance companies that have access to low
cost retail funds and refinance given by national housing bank at
competitive rates, more investors are willing to pledge their assets in the
realty sector. In this concern banks and housing finance companies are
entering into tie ups with development authority in order to improve the
credit delivery system and device competitive pricing with aggressive
strategies. Moreover the property market in India undergoes
transformation to align itself with global standards with an increased
emphasis on quality and cost control and documentation methods.

 With the booming housing finance market, the housing finance

companies are formed by co existing with buyers requirements of
home loans for investing in properties. Nowadays customers are
regarded as the focal point, hence majority of the financial institution
offer home loans at floating and fixed interest rates or blended ones
and also possesses attractive EMI options and have customised
packages for special purpose home loans.
  For construction or buying a new home
 For home repairs and renovations
 For purchase of plots
 Against mortgage of property

Loans for non-residential premises, home equity are also available. Also in
this regard housing finance institutions offer a wide spectrum of home
loans with much simpler procedural formalities. Incorporation of
marketing strategies has become pivotal in this competitive era in order to
attract more customers to their base. Moreover, a person looking for
a housing loan can avail himself of life insurance covers, home protection
insurance, and other privileges related to banking facilities. Besides home
loans, Commercial property loans are also available and different financial
institutions in India provide commercial loans at different rates and
different upper limits.

Real estate loans are available to builders, promoters and real estate

developers.

The scenario was almost the other side of the coin a couple of decades ago
where customers had to intentionally make good personal relationship
with home loan providers in addition with good credibility and reputation
for granting a home loan proposal. Earlier the home loan sector in India
was solely dependent on nationalized and public sector banks, but the
entry of public sector banks into the housing finance business marked the
beginning of the first round of interest rate cuts. And this reduction in
interest rates has enhanced the borrowing power of customers.

. With the growth in living standards amongst the average Indian, and
increase in disposable income, new apartments are selling like hot cakes
and construction of houses are occurring at lightning fast speed. Moreover
with more tax incentives given to the housing sector in the annual budget,
transaction related to buying and selling of residential properties has
increased considerably in the following years since the new classes of
buyers are relatively younger set of customers who are more aware of their
legal dimensions and approvals, buyers are n own more end users rather
than investors. Today, the amount of money that a city dweller spends on
rent is roughly the same, or only slightly less than the amount he pays as an
EMI on a housing loan. Moreover, HFCs are offering incentives to attract
investors like

 Some companies sanction the housing loan without requiring you to

identify property as a pre-requisite for eligibility
  Free accident insurance & property insurance
 Waiving of pre-payment penalty
 Waiving of processing fee.

A support of this is the total investment required in the tenth plan period,
has been estimated at Rs 1,108,800 crore approximately. In addition the
annual monetary and credit policy statement has presented a finding that
the growth in the activity in financial, insurance, real estate and business
services stood at 11.01% as compared to 10.9% the previous year. This
definitely can be a positive note as we look forward to enthusiastic
development in the housing sector.

ORGANISATION OF HOUSING FINANCE STRUCTURE IN INDIA

The implementation of housing finance policies presupposes efficient

institutional arrangements but a matter of fact that there were no well
established financial systems till the mid eighties, but with the setting up of
national housing bank as an apex institution was the culmination of the
fulfilment of a long overdue need of housing finance industry in India.

The realty boom in India has given a new dimension to the finance sector in
India - both in Home Loans and Home Insurance segments. This has not
only given a competitive edge to the finance companies to provide
attractive options to customers but has also contributed to the increased
investments in the real estate sector. This has resulted in 13 new
institutions foraying into the housing finance business in the last three
years. The system has also been characterised by the emergence of several
specialised financial institutions that have considerably strengthen the
organisation of the housing finance system in the country.

ORGANISATION OF HOUSING FINANCE STRUCTURE

NHB  Central and state govt.

 HUDCO
 Specialised housing finance institutions.
 Insurance organisations.
 State housing finance society.
 Commercial banks

Major Home Loan Providers

Banks & Public State Bank of India, Corporation Bank, Punjab National
Sector Housing Bank, Central Bank, Dena Bank, Allahabad Bank, Bank
Finance of Maharashtra, Bank of Baroda Housing Finance, Can
Companies Find Homes, GIC Housing Finance, LIC Housing
Finance, PNB Housing Finance, SBI Home Finance,
Citibank Home Finance, HUDCO, LIC, etc.
Financial HDFC, ICICI Ltd, Citibank, HSBC, Standard Chartered-
Institutions Grind lays, IDBI Bank, etc

At present there are about 320 housing finance companies.

 Brief accounts of some of the agencies are given below:

NATIONAL HOUSING BANK

The NHB was established in the year 1988 to operate as the principle
agency to promote HFIs at both local and regional levels and to provide
financial and other support to them. It is a body corporate

 Business:-

The NHB is authorised to transact the following business;

 Promoting, establishing, and supporting HFIs.

 Providing financial assistance (loans and advances) for housing
activities to HFIs, banks.
 Subscribing to shares, bonds, debentures and securities.
 Drawing, accepting, discounting, buying, selling and dealing in BOE
and other instruments.
 Setting up of mutual funds for undertaking housing finance activities.
 Undertaking housing mortgage insurance.
 Undertaking research and surveys on construction techniques and
other studies relating to housing. Also providing technical and
administrative assistance.
 Formulating schemes for purpose of mobilisation of resources and
extension of credit for housing and for EWS.
 Organising training programmes related to housing.
 Exercising all powers and functions in the performance of duties
entrusted to it under the NHB act.
RESOURCE BASE
For the purpose of carrying out its functions, the NHB may:

 Issue and sell bonds and debentures.

 Borrow money from the central government, banks financial
institutions mutual funds etc.
 Accepting deposits
 Borrow money from RBI by way of loans and advances or out of
national housing credit.
 Receive for services rendered, remuneration, commission,
consultancy charges, royalty and other consideration of other
description.
 The NHB may borrow in foreign currency from any financial
institution in consultation with RBI
 Powers of NHB:

The NHB is vested with a variety of powers namely

 power to acquire rights

 Power to transfer rights,
 power to impose conditions,
 power to call for repayment before agreed period,
 Right to access records.

HUDCO

Housing Urban Development Corporation (HUDCO) plays a major role in

implementation of National Housing Policy. HUDCO was established on 25 th
April 1970 HUDCO's mandate is to meet the needs of the low income group
(LIG) and economically weaker sections (EWS).

Its operations cover the entire country. HUDCO offers loans to the primary
house building Cooperative Societies, State level Housing Finance Societies
and the Housing Boards for undertaking housing projects for members of
Cooperative Societies according to norms available of Urban Housing
Schemes.

 Resource base:

HUDCO is financially aided by the Government, institutional agencies like

LIC, GIC, UTI banks and also have been able its resources from international
institutions like World Bank, USAID, and ADB etc. to improve housing stock
in India. Its Niwas scheme is a housing finance instrument for individual
families which offers loan assistance to individuals constructing or buying a
house or a flat. Similar loan assistance is also extended to extend or
improve an existing house or flat.

 HUDCO is bestowed with the following objectives:

 To provide long term finance for the construction of houses for

residential purposes or finance or undertake housing and urban
development programmes in the country.
 To finance or undertake the setting up of new satellite towns.
 To finance or undertake the setting up of building materials
industries.
 To undertake housing development programmes.
 Purchase of house /flat.
 Purchase of a plot from public agencies/Co-op. societies of
Government employees/ reputed developers; 
 Extend or improve the exiting House or Flat; 
 Registration of existing house including conversion from leasehold
to free hold; 
 Refinancing of existing housing loan from other financial
institutions/banks;
 Loan to Professionals for non-residential premises; 
 Loan against residential property.

 Form of assistance:

The HUDCO extends assistance under a broad spectrum Of

programmes given below:

 Housing: Rural housing, cooperative housing, urban employment

through housing and shelter up gradation.
 Infrastructure: Land acquisition, basic sanitation, environmental
improvement of slums.
  Consultancy services: Building centres for technology transfer,
building material industries.
 Training: Training in human settlements and technical assistance to
all borrowing agencies.
 Urban infrastructure: It finances urban infrastructure projects
covering the sector of water supply, sewage, drainage, roads, and
bridges.

INSURANCE ORGANISATIONS:

The insurance organisations support the housing activity both directly and
indirectly. Besides subscribing to the bonds of HUDCO and state housing
boards they also grants loans to the state of their rural housing
programmes and to PSUs for construction.

 LIC HOUSING FINANCE LTD:

LIC Housing Finance Limited was incorporated on June, 19, 1989 and
promoted by the Life Insurance Corporation of India. As one of the leading
players and an earlier entrant in the market for housing loans, LIC Housing
Finance Limited boasts of an extensive distribution network.

LIC offers home loans for construction/purchase of house/flat and also for

renovation of existing flat/house. While LIC Griha Prakash and are for
purchase, construction of properties and extension of residential
units, LIC Griha Sudhar Loan facilitates repairs/renovation of properties.

LIC Housing Finance provide loans for

 Purchase / construction / repair and renovation of new / existing

flats / houses.
 Finance for existing property for business / personal needs
 Loans to professionals for purchase / construction of Clinics /
Nursing Homes / Diagnostic Centres / Office Space.
 Loans to Corporate Bodies and Companies under different schemes
for purchase / construction of office premises for their own use,
 construction of staff quarters and also for onward lending to meet
the requirements of employees
 Loans to Property Builders and Developers for residential and
commercial projects.

COMMERCIAL BANKS

The trend of commercial banks lending to individuals for housing emerged

in the wake of the report of the R C SHAH working group on the ROLE OF
BANKING SYSTEM IN PROVIDING FINANCEFOR HOUSING SCHEMES. They
have been lending based on annual credit allocations. According to RBI
scheduled commercial banks are required to allocate 1.5% of their
incremental deposits for disbursing as housing finance.

 ICICI Ltd

ICICI pioneered the concept of 'doorstep delivery' which marked a

complete shift from the existing industry norms. Quality and value-added
service has been at the heart of the Bank's offerings and ever since it
ventured in the home loan segment in 1999, it has left no stone unturned in
pursuing its fiercely aggressive marketing strategy.

ICICI home loans have freebies and benefits like easy interest rates,
simplified documentation, and doorstep service and free Personal Accident
Insurance. In terms of interest rate and other facilities, the choice of home
loans it offers has loads of benefits. These loans sponsor the purchase,
construction of a new home, home extension or renovation, purchase of
land for residential use and loans by mortgaging an existing residential
property.

In ICICI Smart Fix Home Loans, for the first 3 years the borrower pays at
fixed interest rate and the fourth year onwards, the loan gets switched to
the prevailing floating interest rate. 

ICICI Bank offers Home Improvement Loans for refurbishment of one's

home.
ICICI MaxMoney Home Loans have high loan eligibility with a lower initial
instalment.
SPECIALISED HOUSING FINANCE INSTITUTIONS (HFIs):

There are certain institutions termed as ‘specialised HFI” which cater only
to the needs of the housing sector. They can further be classified as housing
finance companies (HFCs), promoted in the publish/joint/private sectors
and cooperative housing finance societies. A lead player in the HFC
category is the HDFC LTD. Besides it a number of HFCs have been
sponsored by the banks such as the SBI home finance ltd, canfin homes ltd
and so on.

 HDFC

HDFC or Housing Development Finance Corporation Ltd. is India's largest

housing finance company with a market share of 55% in loan disbursals.
Being in the business for over 25 years, HDFC has an impressive loan
portfolio for varied housing finance needs. In the home loan segment, HDFC
offers home loans for individuals to purchase (fresh /resale) or construct
houses.

There is a great flexibility and variety in the home loans  In addition to the

attractive loan schemes, HDFC customers can avail of a host of related
benefits like Loan Cover Term Assurance Plan, automated repayment
of home loan EMI and in-house scrutiny of property documents. Existing
HDFC Bank home loan customers can avail of other loans such as Personal
Loans and Car Loans at lower interest rates.

COOPERATIVE BANKS:

The cooperative banking sector consists of state cooperative

banks(SCBs),district central cooperative banks(DCBs) and primary urban
cooperative banks(PUCBs).the first set of comprehensive guidelines for
these cooperative banks were issued in 1984 by the RBI. Cooperative banks
finance individuals, cooperative group housing societies, housing boards
and others who undertake housing projects for the EWS, LIGs, and MIGs.

CENTRAL AND STATE GOVERNMENTS:

Earlier the responsibility to provide housing finance rested by and large

with the government. They indirectly support the housing building effort.
The central government has introduced from time to time various social
housing schemes for laying down broad principles, providing necessary
advice and rendering financial assistance in the form of loans and
subsidies. The government also provide equity support to the HUDCO and
guarantees the bond issued by it. Apart from it they also provide house
building advances to their employees.

GENERAL ASPECT OF HOUSING LOANS

The banking industry being a commercial area, hence disbursement of

loans and advances for credit business is the primary objective, there exist
a fairly large basket of loan products especially designed to suit personal
needs of which housing loans encompasses a wide spectrum of the retail
credit portfolio and has immense potential for building up of long term
secured assets.

This housing finance scheme brings an excellent opportunity to have your

own house or flat. The scheme has been carefully tailored to suit your
requirements and match your capacity. The reasonable rate of interest is a
common phenomenon as provided by various banks due to intensive
marketing strategy adopted by the banks.

BASIC NORMS AND METHODOLOGIES

PURPOSE:-

Housing finance in banks can be granted for

 Purchase of a plot of land/house/flat or construction of a house/flat

 To renovate / extend/repair existing house/flat.
 Takeover of an existing housing loan.
 Pre allotment booking finance.
 Loan takeover with additional refinance
 To acquire household articles for furnishing the house/flat.

ELIGIBILITY:-

 Salaried individuals who are permanent in government sector/

reputed companies.
 Professionals (Doctors, Engineers, Lawyers, Chartered accountants,
company secretary, Architects etc.).
 Self-employed individuals.
 Special case; Group of individuals, NRIs, PIOs, HUF, proprietary firms,
corporate.

AGE:-

 The applicant should be more than 24 years at the time of

commencement of the loan and up to years at the time of loan
maturity.
QUANTUM OF LOAN:-

 The loan amount varies from a minimum price of 1 lac to a maximum

size of 300 lac as provided by the various banks for
construction/purchase of a house/flat.
 For repairs/renovation/extension or addition to a house/flat =20
lacs.
 Purchase of a plot of land= 30 lacs.
 Purchase/acquisition of household articles for furnishing a
house/flat=1 lac (15% of home loan amount).
 The loan amount given for different purposes is subjected to
variation from bank to bank.

In general, the loan amount is determined by taking several factors into

consideration: cost of the project (including stamp duty, registration, car
parking, amenities, maintenance and societal charges) and the character,
capacity, credibility of an individual.

MARGIN:-

The minimum margin maintained is generally taken at 15% for loan up to

Rs. 10 lac and 20% for loan above 10 lac.

N.b- The cost incurred by the proponent from their own sources can be
accepted as a part of margin. Moreover liquid securities such as TDR, NSC,
and KVP etc can also be regarded as margin ensuring higher quantum of
loan. Margin is also calculated based on the cost of the project viz. 15% in
case of normal product and 25% in case of improvement or renovation
loans.

Note- Margin is subjected to variation depending upon the home loan

proposal offered by different banks.

RATE OF INTEREST:-

Home loans can be granted on the basis of fixed or floating rate of interest
as per the choice of the customer. The interest rate is subjected to changes
depending on the necessity of the current situation. Moreover interest rate
also varies from banks to banks in the same situation. In majority of cases
interest rate is calculated on daily reducing balances.

A typical interest rate chart is provided as follows-

LOAN AMOUNT YEAR RATE OF INTEREST

Upto 30 Lacs  1st year  8%

 2nd year  9%
 3rd year  1% SBAR fixed/
(fixed/floating) o 2%below SBAR
floating.
Above 30 lacs  1st year  8%
 2nd-3rd year  9.5%
 After 3 years  0.5 % fixed/1% floating
below SBAR

Upto 50 lacs  1st year  8%

 2-3 years  8.5%
 After 3 years  9% floating/10.5% fixed

Above 50 lacs  1st year  8%

 2-3 year  9%
 After 3 years  10% floating/11% fixed

PROCESSING CHARGES:-

One time processing charges as per RBI guidelines should be collected and
the details of processing charges as follows-

Loan Amount Processing Fee

Upto Rs.5 Lac Rs.1000/-

Above Rs.5 Lac and up to Rs.10 Lac Rs.2000/-

Above Rs.10 Lac and up to Rs.20 Lac Rs.5000/-

Above Rs.20 Lac and up to Rs.50 Lac Rs.7,000/-

Above Rs.50 Lac and up to Rs.1 Cr Rs.8,000/-

Above Rs.1 Cr and upto Rs.5 Cr Rs.10,000/-

Above Rs.5 Cr Rs.20,000/-

For partnership firms and corporate borrowers processing charges will be

double that of applicable to individuals.

For rural areas processing charges will be 50% that of applicable to

individuals.

Note: - the processing charges may vary from banks to banks.

REPAYMENT:-

The stipulation for maximum repayment period for which loans can be
granted are-

 For home acquisition plan/construction of a house/flat/takeover of

existing home loans/takeover of existing home loans with additional
refinance is highly flexible i.e. from 20-25 years including
moratorium period of 18 months (maximum) in EMIs. Repayment in
such cases will start within 18 months after the first disbursement or
will start on completion of construction or purchase of house/flat
whichever is earlier.
 For loans of improvement/renovation/extension of existing property
as well as for loan against existing property-n the repayment period
is of 10 years.
 In cases where the loan is disbursed in stages, pending
commencement of EMIs, the interest on the loan disbursed should be
recovered on monthly basis from the date of disbursement.
 Progressive or step up EMI is also present in some banks (Example-
Bank of India).
Monitoring and follow up for recovery:-

 The account should be closely monitored and regular follow up for

repayment of the loan should be made. The properties financed by
the bank should be visited periodically. A track on the affairs of the
borrower should be kept and appropriate steps should be taken to
protect the interest of the bank.
 In case of default of 3 consecutive monthly loan instalments, suitable
legal action should be considered as per bank guidelines.

Penal Interest:-

In case of default in repayment of any instalment beyond 30 days of due

date, penal interest @ 2% p.a. should be charged on the overdue amount.

DISBURSEMENT:-

 Request for 100% disbursement before completion of a house/flat

can be permitted subject to the availability of additional security of
125% of the unsecured portion of loan amount to be disbursed.
 The loan may be disbursed in full or in suitable instalments
(normally not exceeding three in number), taking into accounts the
requirements of funds and progress of construction as assessed by
the banks. Disbursement should be made directly to the
seller/builder etc.
 In case of takeover of loans, the pay order should be made in favour
of the institution from whom the loan is being taken over.

PREPAYMENT:-

As per present RBI guidelines, there are no additional charges or penalty in

case of prepayment of the loan by the borrower (administrative fees and
commitment charges).

 No charges, if the prepayment is made from the own sources of the

borrower.
  0.65 p.a on the outstanding loan amount for remaining maturity of
the loan, subject to maximum 2.25 of outstanding loan amount in
case of takeover b y other banks.
Other charges:-
 Legal expenses/valuation charges/stamp paper.
 Charges at actual-loan agreement copy, charges as applicable.
EQUITABLE QUANTUM OF LOAN/EMI:
Calculation of quantum of loan is related to the income or repayment
capacity of the proponent or borrower.
 Salaried employee: 48 times of gross monthly salary/4 times of gross
annual income based on IT returns.
 Self employed/professionals/individuals engaged in trade: 4 times of
gross annual income based on IT returns.
 Chartered accountants/doctors: 5 times of gross annual income
based on IT returns.
 HUF/company/partnership firm: 4 times of their cash accruals as per
BS/P&L account.
CONVERTION CHARGES/SWITCHING COST:
The RBI guidelines issued from time to time for permitting switching from
floating rate scheme to fixed rate scheme and vice-versa or allowing a fixed
rate customer to reschedule the loan to lower rate of interest should be
followed.
 Fixed to floating rate of interest @0.25% p.a. on o/s balance for the
remaining maturity of the loan.
 Floating to fixed ROI @0.40% p.a. on o/s balance for the remaining
maturity of the loan.

SECURITY:-
The loan should be secured as under:-
 Equitable mortgage of the property to be financed by way of deposit
of title deeds.
  In case the property is under construction, interim security (UTI
units, NSCs, LIC policies, bank deposits etc.) for a minimum 50 % of
the loan amount and referred as collateral security.
 Third party guarantee of a person of satisfactory means of the
applicant should be obtained.
 The requirement of a personal guarantee of satisfactory means is
desirable.
SUPPORTING DOCUMENTS:-
Purpose Borrower documents

Proof of identity Voters ID card/driving license/PAN

card/passport and recent
photograph

Proof of identity Latest salary certificate/form 16/it

returns for last 2 years.

Proof of residence Bank account statement/latest

electricity bill/telephone bill/latest
LIC/NSC policy.

Bank statement /passbook where Last 6 months.

salary income is credited.

SECURITY DOCUMENTS:
Following stamped document should be obtained:
 Term loan agreement
 Equitable/registered mortgage.
 Agreement with the builder/seller, duly registered.
 Title clearance certificate/valuation report.
 Blue print of plot/land/house approved by the sanctioning authority.
 No objection certificate from builder/society to mortgage the flat.
APPROVED PLANS AND PERMISSIONS:
According to RBI guidelines, obtaining copies of sanctioned plans is
necessary while financing any residential property. The detail modalities to
be followed in this regard are given below:
 Self construction on a plot/land already owned: a copy of the
sanctioned plan by the competent authority in the name of the
person applying for such credit facility should be obtained before
sanctioning the home loan.
 Self construction properties: An affidavit cum undertaking should be
obtained from the person applying for credit facility that he/she shall
not violate the sanctioned plan and construction shall be strictly as
per the sanctioned plan.
 Ready/built up properties: It is mandatory for the applicant to
declare by way of an affidavit cum undertaking that the built up
properties has been constructed as per the sanctioned plan
 Self construction cases: An architect appointed by the bank should
certify at various stages of construction of building that the
construction of the unit is strictly as per the sanctioned plan.
Note: No loan should be given in respect of properties which fall in the
category of unauthorised colonies in less and until they have been
regularised and development and other charges paid. No loan shall also be
given in respect of properties meant for residential use but the applicant
intends to use for commercial purpose.
PROCESSING AND SANCTION
After fulfilling all the procedural formalities,the loan should be processed
and the recommendation should be submitted to the sanctioning
authority.monyhly report should be sent in zonal office.
INSPECTION
It should be carried out prior to disbursement and also during the process
of construction.proper records of the inspection should be maintained.

EMPANELLED LAWYER AND VALUER

It is essential to have an approved lawyer for scrutinising the documents
relating to the plot/house/flat which is being financed and given legal
option on the title of the property.it is also preferable to have an approved
valuer for valuation of the property.
INSURANCE
The property should be fully insured in favour of the bank against all
possible hazards ,the cost of the insurance should be borne by the
borrower.on the other hand in some cases the bank also tie ups with other
insurance companies and thus provides free insurance cover to the
borrower viz
 Fire and special perils insurance cover
 Personal accident.
For low quantum of loans insurance cover is generally not provided.
INCENTIVES:
 Free personal accident insurance cover (covering accidental death as
well as permanent total disablement) as per terms of insurance
policy covering loan outstanding as on the date of accident.
 Loan amount of Rs.1 lac (15% of home loan-max. Rs. 1 lac)for
furnishing the house or flat at a ROI as applicable to housing loan
scheme
 By the insurance cover ,the home loan burden on the family
decreases as the home loan comes with life insurance cover.it also
gives protection against loan amount.
 Scheme is simple and hassel free.
 Higher non-medical limit:age upto 45 years:Rs. 10 lacs, age above45
years:Rs. 8 lacs.
 Tax benefits:Insurance premium is eligible for tax benefits u/s 80 C
and claim proceeds are tax free u/s 10 D as per the prevailing tax
laws.

CASE ANALYSIS

(Avishek Agarwal, Prospective customer of Bank of India)

PROFILE:
The proponent named Avishek Agarwal is a valuable customer of Bank of
India. He possesses high capacity, credibility and a sound personal
character. He also maintains a standard volume of deposits in various
deposit schemes as offered by the bank and is transacting with the bank
since long. Besides this he also have a good reputation in the society and is
financially sound for meeting the financial commitments.thus his proposal
of housing loan was analysed with utmost care and importance.

A detailed analysis of his housing loan proposal is described herewith;

PROPOSAL OF HOUSING LOAN FOR AVISHEK AGARWAL UNDER STAR

HOME LOAN SCHEME:

 Proposal no.-BR/OPS/OS-10/18/54
 Area: The residential area is urban.
 Name of the borrower: Avishek Agarwal
 Net worth: 28.65 lacs ;the basis of net worth for it was taken is CBD
23.
 Income:(monthly/annual)13403-13044
 Name of the guarantor: Rekha Agarwal
 Calculation for estimated cost of the land:
Cost of the land: 1600000
(-) margin @42.64% 650000
Amount of loan proposed 950000
REPAYMENT:

 The repayment is agreed to be done under 144 EMIs of Rs.10946

each commencing from Jan 10.
 Percentage of EMI to total monthly salary:40.62%
 Amount or percentage of net monthly salary/income to gross
monthly salary Rs.16001

DETAILS AND VALUE OF SECURITY (primary/collateral)

 EQM of house proposed to be purchased:9.5 lac

 Assignment of LIC policies:4 lac
  The location of the property to be financed and credentials of the
seller is verified:
 Date of searching and title report: It was done by the advocate Ritesh
Khedia on Banks approval.
 Date of valuation report of the property was done by the architect on
banks approval
 The architect name was Nitish Pandey.
 Value of the property:10 lac
 Date of pre sanction inspection:8/11/09.
 The conduct of existing accounts of the borrower was satisfactory.
 Security documents obtained by the borrower:
 DP note
 L435
 L440
 L515
 L516

BRANCH RECOMMENDATION:

The credit manager of the bank makes a recommendation of the borrower

regarding the credibility, and sends to the zonal office for further
processing.

The borrower, Avishek Agarwal maintains savings bank account with good
amount. He is a reputed businessman. The borrowers proposal is to
purchase a new house of Rs. 16 lac at 9.5lac.but the reduction and distress
sale value of the property as per our approved value is Rs. 22 lac and 19 lac
respectively .For the eligibility and income purpose the joint income of the
borrower and the co applicant is taken. The repayment criteria are also
feasible. Besides this collateral securities are also considered including
third party guarantee and thus the proposal was taken for consideration.

PRESANCTION INSPECTION

Site visit report:

 General aspect: Loan amount:10 lac

 Applicants name: Avishek Agarwal
 Date of inspection:8.9.09
  Address of the property: willcox by lane, sadar para, Purulia town.
 Plot no. 543;ward no.9;holding no-240.
 Comments were also made regarding the surrounding/accessity of
the property, which was found to be accessible.
 Comments was also made regarding whether the vendor title to the
property is clear and marketable and when and how equitable
mortgage will be created was verified and was found to be
satisfactory.
 Comments on collateral securities was also made

METHODOLOGY
COMPARITIVE ANALYSIS ON PUBLIC, PRIVATE, AND COOPERATIVE
BANKS

DESCRIPTIVE STUDY

DATA SOURCE AND SAMPLE COLLECTION:

The data’s and samples regarding the methodologies of home loans in

public, private and cooperative banks was collected from:-

 Axis Bank-Manual.
 Websites of UCO Bank, Allahabad Bank, Bank of India.

Home Loan
Salient Features For purchase or to construct a house / flat /
renovate / repair or alter an existing house / flat
Eligibility * Maximum permissible age at the time of
applying is 50 years & at the end of repayment
period is 60 years.

* Salaried Class with minimum service of three

years.
* Businessmen, Professionals and Self-employed
with minimum experience of three years.
* Pensioners with repayment capacity.

Quantum of Loan * 36 times of Gross Monthly Income or 60 times

of Net Monthly Income whichever is higher.
* Spouse Income can be included for calculating
eligible amount if he / she has steady income. 
* (Take home Income should be more than 40%
of gross income after deduction of EMI for the
proposed loan, apart from other deductions.)

Margin Loan for construction / purchase of a new house

/ flat:
* For Loans upto Rs. 20 lakhs : 20% & for loans
above Rs. 20 lakhs : 25%
* Loan for purchase of old house / flat: 30% (for
all loan amounts)

Processing fee * 0.25 % on Loan amount (Non refundable) (to

be remitted at the time of submission of
application)
* 0.32 % on Loan amount (at the time of
acceptance of sanction)

Intetest Rates Please see the Interest Rate link on home page
Repayment Period * Loans for purchase / construction of House /
Flat : 20 years (including holiday period) for
floating rate loans and 10 years (including
holiday period) for fixed rate loans.
* Maximum Holiday Period of 18 months
allowed for Home Loans for the purpose of
construction of House / Flat
Prepayment charges * No pre-closure charges, if loan is closed out of
own funds.
* 2% on Balance outstanding or applicable
Drawing Limit whichever is higher, if loan is
closed by way of takeover by another Bank /
Financial Institution.
Security * Equitable Mortgage of Property purchased /
constructed out of loan proceeds 
* {Equitable Mortgage to be registered (at
Applicant’s cost) if there is a provision for the
same in the State where property is located }
Documents to be 1. Completed Application Form with passport
submitted for size photograph.
processing the 2. Proof of Identity such as PAN Card / Voter’s
application ID/Passport/Driving License.
3. Proof of residence such as Recent Telephone
Bill / Electricity Bill / Property Tax Receipt /
Passport / Voter’s ID
4. Proof of business address in respect of
businessmen / industrialists.
5. Proof of Employment.
6. Salary Certificate.
7. Proof of other income like rent, interest on
investment, if any.
8. Balance Sheet for the past three financial
years in the case of Professionals, Businessmen
& Self employed.
9. Income Tax / Wealth Tax (if applicable)
Returns for the past 3 years
10. Agreement of Sale / Sale Deed.
11. Approved Building Plan.
12. Title Deed Documents for 30 years.
13. Proof of title in the Revenue Records.(Legal
Opinion from Advocate & Valuation of property
 from Engineer will be arranged by Bank at
applicant’s cost)
Value added Group Insurance cover (IB Griha Jeevan):
* At the option of the applicant, Group Insurance
Life Cover is arranged (at present through L I C)
at concessional premium (to be borne by the
Applicant).
* The Applicant may opt for including the
premium amount as part of Home Loan Project
Cost.
Insurance Property (offered as security) to be insured at
borrower’s cost with Bank clause against fire,
flood, earthquake, riot and other risks, which
are normally covered by insurance companies.

Home Loan – Floating Rate (both resident and NRI)

Sanctioned Limits upto Rs. 20 lakhs

Interest Rate w.e.f. 01.07.2009
Period of Loan
(for both existing & fresh accounts)
Up to 5 years 9.00 %
> 5 years up to 10 years 9.25 %
> 10 years up to 15 years 9.50 %
> 15 years up to 20 years 9.75 %

Sanctioned Limits above Rs. 20 lakhs & upto Rs. 30 lakhs

Interest Rate w.e.f. 01.07.2009
Period of Loan
(for both existing & fresh accounts)
Up to 5 years 9.25 %

> 5 years up to 10 years 9.50 %

> 10 years up to 15 years 9.75 %

> 15 years up to 20 years 10.00 %

Sanctioned Limits above Rs. 30 lakhs & upto Rs. 2 Crore

Interest Rate w.e.f. 01.07.2009
Period of Loan
(for both existing & fresh accounts)
 Up to 5 years 9.75 %
> 5 years up to 10 years 10.00 %
> 10 years up to 15 years 10.25 %
> 15 years up to 20 years 10.50 %

Sanctioned Limits above Rs. 2 Crore

Interest Rate w.e.f. 01.07.2009
Period of Loan
(for both existing & fresh accounts)
Period upto 20 years 13.50 %

* Home Loan Fixed Rate (for residents only)

Sanctioned Limits upto Rs. 20 lakhs

Interest Rate w.e.f. 01.07.2009
Period of Loan
(for fresh accounts only)
Up to 5 years 10.50 %
> 5years up to 10 years 11.00 %

Sanctioned Limits above Rs. 20 lakh and upto Rs. 2 Crore

Interest Rate w.e.f. 01.07.2009
Period of Loan
(for fresh accounts only)
Up to 5 years 11.50 %
> 5years up to 10 years 11.50 %

> For Limits above Rs. 2 crore – Fixed Rate not permitted.
> Fixed Rate Home Loans are restricted to maximum repayment period of 10 years.
> Fixed Rate Home Loans shall be subject to: ‘force maejure’ clause, and interest reset at the end of every 2
years on the basis of fixed interest rates revailing then.

* Plot Loan (both resident and NRI)(floating rate only)

(Maximum Repayment period : 10 years)

Interest Rate w.e.f 01.07.2009

Category of Loan
(for both existing & fresh accounts)
For sanctioned limits
upto 10.00 %
Rs. 10 lakhs
> For fresh sanction of limits above Rs. 10 lakhs interest rates to be considered on case to case basis on merits
> For the existing accounts with sanctioned limits above Rs.10 lakhs, existing terminal interest rates to continue.
There is no change in the interest rate for such accounts. BPLR Revision not to be passed on.

* I B Home Improve (floating rate only)

(Maximum Loan amount : Rs. 5 lakhs; Maximum Repayment period : 5 years)

Interest Rate w.e.f 01.07.2009

10.25 %
(for both existing & fresh accounts)

* Salary Loan 14.50 %

Clean Salary Loan to LIC
14.50 %
employees
To be considered on case
Ind Share – ESOP
to case basis

> Reverse Mortgage Loan interest Rate shall be subject to reset clause – Interest reset at the end of every 5
years on the basis of Reverse Mortgage Loan interest rates prevailing then.
> Vehicle Loan Fixed Rates shall be subject to reset clause – Interest reset at the end of every 2 years on the
basis of fixed Vehicle Loan interest rates prevailing then.

UCO SHELTER HOME LOAN

 This housing finance scheme brings to you an excellent opportunity

to have your own house or flat. The scheme has been carefully
tailored to suit your requirements and match your capacity. The
reasonable rate of interest that you pay will be calculated on
reducing balance, i.e. you do not have to pay interest on the loan
instalments actually repaid from the date of such repayment.

 ELIGIBILITY

 You are eligible for a loan under UCO SHELTER singly, or jointly as
husband-wife/parent-son/parent-daughter, if you are
 Indian resident having regular source of income.

 Minimum 21 years of age.

 Maximum 65 years of age inclusive of repayment period

 Singly or Jointly as Husband-Wife, Parent-Son & Parent-Daughter

 Maximum 75 years of age for Senior Citizens availing finance to

secure Shelter in Old

 Age Home against full coverage by Bank’s own Term Deposit.

 PURPOSE

 Purchase of new independent house/ready built flat for residential

purpose.

 Construction of independent house on the site already owned by the

applicant or site proposed to be purchased from own sources.

 Purchase of old house/flat not more than 30 years old, free from
tenancy and constructed as per approved plan.

 Extension/Repair/Renovation of existing house/flat not more than

50 years old.

 Takeover of home loans availed from other banks/FIs subject to

certain terms.

 Furnishing of house to be constructed/acquired with UCO Shelter

Loan.

 Loan for more than one purpose is allowed

 UCO Shelter Loanee may be allowed to avail personal loan also under
certain conditions.

 Purchase of plot of land for housing purpose under certain

conditions.

 QUANTUM OF LOAN
 The quantum of loan will be decided as per loan entitlement subject
to a maximum of 85% of the total project cost of
construction/purchase price of house/flat. Required margin of 15%
may be by way of cost of land.

 Quantum of loan for furnishing will be 75% of cost of such furnishing

subject to a ceiling of 20% of loan eligible for
construction/acquisition of house/flat.

 The area-specific maximum limits for construction/purchase are as

under :

 Rural Areas : Rs.25 Lac

 Semi-urban/Urban/Metro Areas : Rs.100.00 Lac

 Maximum limits for Repair/Extension/Renovation are Rs.7.50 lac in

rural areas and

 Rs.25.00 lac in Metro/Urban/Semi-Urban areas.

 Purchase of Land – financing the cost of land in deserving cases upto

50% of cost of land purchased from Urban Development
Authorities/Govt. Bodies subject to the ceiling of 30% of the project
cost (i.e. Cost of land + Construction Cost).

 LOAN ENTITLEMENT

 Within the above limits, loan entitlement will depend on the

following income criteria:

 Monthly income should be equal to/more than EMI + Rs.4,000/- in

case of a family with up to four members – Salaried/Non-salaried and
agriculturist and bank’s own staff are entitled for loan

 With increase in number of members, monthly income requirement

goes up progressively by Rs.1,000/- for each additional member.
Income of spouse & major children may be considered for enhancing
the loan entitlement on their agreeing to stand as guarantor/ co-
applicant.

 Loan limit can be enhanced if additional liquid security is offered.

  Second Loan- Allowed for repair/renovation/extension of existing
house after one year of first loan with minimum margin requirement
of 25%

 PROCESSING FEE

 0.5% of the loan amount minimum Rs.1000.00. Only 0.25% payable

on issuance of in-principle sanction. Balance amount payable on final
sanction.

 REPAYMENT

The maximum period of repayment is 25 years inclusive of moratorium.

However, the monthly interest charged during the moratorium period will
have to be paid. The entire loan will have to be adjusted before retirement
or 65 years of age, whichever is earlier. Repayment may be made by
deduction from monthly salary or by means of post dated cheques.
Flexibility in repayment is permissible through stepped up EMIs and in
case of farmer borrower, repayment is linked to crop cycles. Both in case of
Salaried and non salaried person, repayment period may be enhanced to
certain period over and above the prescribed period depending upon
repaying capacity of the co-applicant.

 PREPAYMENT CHARGE

2% of the prepaid amount, if the loan is prepaid within 3 years. No

prepayment charges thereafter. However, no pre-payment charges are to
levied if loan is pre-paid from own source.

 TAX BENEFITS

Tax relief on principal and interest components of this loan would be

available as per provisions prevailing under Income Tax Act.

 INSURANCE

Insurance cover on property under UCO Griha Raksha Yojna Scheme of

NICL and personal accident benefit to the borrower is available on death
only to cover the outstanding balance under UCO Griha Lakshmi Yojana
Scheme (UCOGLYS). Group insurance cover to home loan borrowers is
available against any type of death from Rs.50000/- to Rs.100.00 lac under
UCOGLYS.
AXIS BANK-POWER HOME LOANS:-

PURPOSE:-

Housing finance in banks can be granted for

 Purchase of a plot of land/house/flat or construction of a house/flat

 To renovate / extend/repair existing house/flat.
 Takeover of an existing housing loan.
 Pre allotment booking finance.
 Loan takeover with additional refinance
 To acquire household articles for furnishing the house/flat.

ELIGIBILITY:-

 Salaried individuals who are permanent in government sector/

reputed companies.
 Professionals (Doctors, Engineers, Lawyers, Chartered accountants,
company secretary, Architects etc.).
 Self-employed individuals.
 Special case; Group of individuals, NRIs, PIOs, HUF, proprietary firms,
corporate.

AGE:-

 The applicant should be more than 24 years at the time of

commencement of the loan and up to years at the time of loan
maturity.

QUANTUM OF LOAN:-
  The loan amount varies from a minimum price of 1 lac to a maximum
size of 50 lac as provided by the various banks for
construction/purchase of a house/flat.
 For repairs/renovation/extension or addition to a house/flat =20
lacs.
 Purchase of a plot of land= 30 lacs.
 Purchase/acquisition of household articles for furnishing a
house/flat=1 lac (15% of home loan amount).
 The loan amount given for different purposes is subjected to
variation from bank to bank.

In general, the loan amount is determined by taking several factors into

consideration: cost of the project (including stamp duty, registration, car
parking, amenities, maintenance and societal charges) and the character,
capacity, credibility of an individual.

MARGIN:-

The minimum margin maintained is generally taken at 15% for loan up to

Rs. 10 lac and 20% for loan above 10 lac.

N.B- The cost incurred by the proponent from their own sources can be
accepted as a part of margin. Moreover liquid securities such as TDR, NSC,
and KVP etc can also be regarded as margin ensuring higher quantum of
loan. Margin is also calculated based on the cost of the project viz. 15% in
case of normal product and 25% in case of improvement or renovation
loans.

RATE OF INTEREST:-

Home loans can be granted on the basis of fixed or floating rate of interest
as per the choice of the customer. The interest rate is subjected to changes
depending on the necessity of the current situation. Moreover interest rate
also varies from banks to banks in the same situation. In majority of cases
interest rate is calculated on daily reducing balances.

A typical interest rate chart is provided as follows-

 LOAN AMOUNT YEAR RATE OF INTEREST

Upto 30 Lacs  1st year  8%

 2nd year  9%
 3rd year  1% SBAR fixed/
(fixed/floating) o 2%below SBAR
floating.
Above 30 lacs  1st year  8%
 2nd-3rd year  9.5%
 After 3 years  0.5 % fixed/1% floating
below SBAR

Upto 50 lacs  1st year  8%

 2-3 years  8.5%
 After 3 years  9% floating/10.5% fixed

Above 50 lacs  1st year  8%

 2-3 year  9%
 After 3 years  10% floating/11% fixed

PROCESSING CHARGES:-

One time processing charges as per RBI guidelines should be collected and
the details of processing charges as follows-

Loan Amount Processing Fee

Upto Rs.5 Lac Rs.1000/-

Above Rs.5 Lac and up to Rs.10 Lac Rs.2000/-

Above Rs.10 Lac and up to Rs.20 Lac Rs.5000/-

Above Rs.20 Lac and up to Rs.50 Lac Rs.7,000/-

Above Rs.50 Lac and up to Rs.1 Cr Rs.8,000/-

Above Rs.1 Cr and upto Rs.5 Cr Rs.10,000/-

Above Rs.5 Cr Rs.20,000/-

For partnership firms and corporate borrowers processing charges will be

double that of applicable to individuals.

For rural areas processing charges will be 50% that of applicable to

individuals.

REPAYMENT:-

The stipulation for maximum repayment period for which loans can be
granted are-

 For home acquisition plan/construction of a house/flat/takeover of

existing home loans/takeover of existing home loans with additional
refinance is highly flexible i.e. from 20-25 years including
moratorium period of 18 months (maximum) in EMIs. Repayment in
such cases will start within 18 months after the first disbursement or
will start on completion of construction or purchase of house/flat
whichever is earlier.
 For loans of improvement/renovation/extension of existing property
as well as for loan against existing property-n the repayment period
is of 10 years.
 In cases where the loan is disbursed in stages, pending
commencement of EMIs, the interest on the loan disbursed should be
recovered on monthly basis from the date of disbursement.
 Progressive or step up EMI is also present in some banks (Example-
Bank of India).

Monitoring and follow up for recovery:-

 The account should be closely monitored and regular follow up for

repayment of the loan should be made. The properties financed by
the bank should be visited periodically. A track on the affairs of the
 borrower should be kept and appropriate steps should be taken to
protect the interest of the bank.
 In case of default of 3 consecutive monthly loan instalments, suitable
legal action should be considered as per bank guidelines.

Penal Interest:-

In case of default in repayment of any instalment beyond 30 days of due

date, penal interest @ 2% p.a. should be charged on the overdue amount.

DISBURSEMENT:-

 Request for 100% disbursement before completion of a house/flat

can be permitted subject to the availability of additional security of
125% of the unsecured portion of loan amount to be disbursed.
 The loan may be disbursed in full or in suitable instalments
(normally not exceeding three in number), taking into accounts the
requirements of funds and progress of construction as assessed by
the banks. Disbursement should be made directly to the
seller/builder etc.
 In case of takeover of loans, the pay order should be made in favour
of the institution from whom the loan is being taken over.

PREPAYMENT:-

As per present RBI guidelines, there are no additional charges or penalty in

case of prepayment of the loan by the borrower (administrative fees and
commitment charges).

 No charges, if the prepayment is made from the own sources of the

borrower.
 0.65 p.a on the outstanding loan amount for remaining maturity of
the loan, subject to maximum 2.25 of outstanding loan amount in
case of takeover b y other banks.
Other charges:-
 Legal expenses/valuation charges/stamp paper.
 Charges at actual-loan agreement copy, charges as applicable.
EQUITABLE QUANTUM OF LOAN/EMI:
Calculation of quantum of loan is related to the income or repayment
capacity of the proponent or borrower.
 Salaried employee: 48 times of gross monthly salary/4 times of gross
annual income based on IT returns.
 Self employed/professionals/individuals engaged in trade: 4 times of
gross annual income based on IT returns.
 Chartered accountants/doctors: 5 times of gross annual income
based on IT returns.
 HUF/company/partnership firm: 4 times of their cash accruals as per
BS/P&L account.
CONVERTION CHARGES/SWITCHING COST:
The RBI guidelines issued from time to time for permitting switching from
floating rate scheme to fixed rate scheme and vice-versa or allowing a fixed
rate customer to reschedule the loan to lower rate of interest should be
followed.
 Fixed to floating rate of interest @0.25% p.a. on o/s balance for the
remaining maturity of the loan.
 Floating to fixed ROI @0.40% p.a. on o/s balance for the remaining
maturity of the loan.
SECURITY:-
The loan should be secured as under:-
 Equitable mortgage of the property to be financed by way of deposit
of title deeds.
 In case the property is under construction, interim security (UTI
units, NSCs, LIC policies, bank deposits etc.) for a minimum 50 % of
the loan amount and referred as collateral security.
 Third party guarantee of a person of satisfactory means of the
applicant should be obtained.
 The requirement of a personal guarantee of satisfactory means is
desirable.
SUPPORTING DOCUMENTS:-
Purpose Borrower documents

Proof of identity Voters ID card/driving license/PAN

card/passport and recent
photograph

Proof of identity Latest salary certificate/form 16/it

returns for last 2 years.

Proof of residence Bank account statement/latest

electricity bill/telephone bill/latest
LIC/NSC policy.

Bank statement /passbook where Last 6 months.

salary income is credited.

SECURITY DOCUMENTS:
Following stamped document should be obtained:
 Term loan agreement
 Equitable/registered mortgage.
 Agreement with the builder/seller, duly registered.
 Title clearance certificate/valuation report.
 Blue print of plot/land/house approved by the sanctioning authority.
 No objection certificate from builder/society to mortgage the flat.
APPROVED PLANS AND PERMISSIONS:
According to RBI guidelines, obtaining copies of sanctioned plans is
necessary while financing any residential property. The detail modalities to
be followed in this regard are given below:
  Self construction on a plot/land already owned: a copy of the
sanctioned plan by the competent authority in the name of the
person applying for such credit facility should be obtained before
sanctioning the home loan.
 Self construction properties: An affidavit cum undertaking should be
obtained from the person applying for credit facility that he/she shall
not violate the sanctioned plan and construction shall be strictly as
per the sanctioned plan.
 Ready/built up properties: It is mandatory for the applicant to
declare by way of an affidavit cum undertaking that the built up
properties has been constructed as per the sanctioned plan
 Self construction cases: An architect appointed by the bank should
certify at various stages of construction of building that the
construction of the unit is strictly as per the sanctioned plan.
Note: No loan should be given in respect of properties which fall in the
category of unauthorised colonies in less and until they have been
regularised and development and other charges paid. No loan shall also be
given in respect of properties meant for residential use but the applicant
intends to use for commercial purpose.
PROCESSING AND SANCTION
After fulfilling all the procedural formalities, the loan should be processed
and the recommendation should be submitted to the sanctioning authority.
Monthly report should be sent in zonal office.
INSPECTION
It should be carried out prior to disbursement and also during the process
of construction. Proper records of the inspection should be maintained.
EMPANELLED LAWYER AND VALUER
It is essential to have an approved lawyer for scrutinising the documents
relating to the plot/house/flat which is being financed and given legal
option on the title of the property. It is also preferable to have an approved
valuer for valuation of the property.
INSURANCE
The property should be fully insured in favour of the bank against all
possible hazards; the cost of the insurance should be borne by the
borrower. On the other hand in some cases the bank also tie ups with other
insurance companies and thus provides free insurance cover to the
borrower viz
  Fire and special perils insurance cover
 Personal accident.
For low quantum of loans insurance cover is generally not provided.
INCENTIVES:
 Free personal accident insurance covers (covering accidental death
as well as permanent total disablement) as per terms of insurance
policy covering loan outstanding as on the date of accident.
 Loan amount of Rs.1 lac (15% of home loan-max. Rs. 1 lac)for
furnishing the house or flat at a ROI as applicable to housing loan
scheme
 By the insurance cover, the home loan burden on the family
decreases as the home loan comes with life insurance cover. It also
gives protection against loan amount.
 Scheme is simple and hassle free.
 Higher non-medical limit: age up to 45 years: Rs. 10 lacs, age above45
years: Rs. 8 lacs.
 Tax benefits: Insurance premium is eligible for tax benefits u/s 80 C
and claim proceeds are tax free u/s 10 D as per the prevailing tax
laws.

FINDINGS:

From the above study of methodologies followed in different

public, private and cooperative banks the following differences
were obtained in respect to their housing loan scheme:

 The procedural formalities and basic norms followed by the

private banks were more linient and simple in respect of
scheduled commercial banks and cooperative banks.
 Customer service was more prominent in private banks in
comparison to nationalised banks.
 The norms and formalities had simplified documentation
and thus bears less complications in private banks but in
public sector banks strict rules and regulations were
present.
 Quality and value added services is the heart of marketing
strategy in private sector bank offerings.
 Private sector banks offer more allied and additional
incentives with the home loans eg doorstep delivery, tax
benefits, free insurance cover
 In terms of interest rates private banks offer more less
interest rates.
 The housing finance schemes provided by the public sector
banks and cooperative banks are much more reliable and
safe and involves lessor amount of risks than the private
banks.
 The processing fees are comparitavely higher in private
banks than public sector banks.
 Similarly the margin money also varies slightly in the
different banks.
 It has been also examined that the repayment scheme in
EMIs is the same in public and private banks to a maximum
period of 20 years, but is different in cooperative banks
where it is 25 years (maximum).