home loans report

7/28/2019 Home Loans Report

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INTRODUCTION

Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and

above all gathering funds little by little to afford ones dream. Home is one of the

things that everyone wants to own. Home is a shelter to person where he

rests and feels comfortable.

The roof over ones head and ground beneath onesfeet count as the bare necessities

of life. Theres nothing quite like owing a home, however humble to give that warm

and glowing feeling. But when one buys a home, one has much more than a feel good

purchase in mind! Its also a crucial investment decision, perhaps the biggest

spending decision of ones life. There are ample opportunities today for young

salaried investors to plan their moves early and buy a house at right time- and at right

price. In the process, not only do they fulfill that cherished dream of owning a house,

but also put themselves on the path to acquiring property that would meet the needs

and aspirations of their growing family, even as it leads to wealth creation. Every

individual aspires to own a home. But many either spend a lifetime saving to purchase

a house or exhaust money on monthly house rents.

Take a house loan and let the monthly rent (easily converted into affordable

EMIs) build dream home.

NEED FOR THE STUDY

Retail banking has been popular segment to enter into for many banks. In the retail

banking, housing sector has been most promising segment which is promising a

Comprehensive growth rate of about 30% for the next five years. With the

government keen on infrastructure development and announcing various tax Sops

housing loan segment has been a tempted area for many banks to enter into housing

sector can be bifurcated into organized and unorganized segments with the

unorganized segments accounting for over 75% of the housing units constructed.


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During the past 45 years the housing sector helped by the growing housing finance

industry has witnessed significant developments.

Housing Finance Evaluation:

Housing Development Finance Corporation (HDFC) was the first housing finance

Company to setup operations in India in 1977. After the National Housing Bank Act,

1987, was passed NHB came into existence as a Subsidiary of the Reserve Bank of

India (RBI) to regulate housing finance companies and provide them with refinancing

to supplement their fund requirements.

Public sector banks were allowed to provide housing loans directly to retail clients

only in 1988.

OBJECTIVE OF THE STUDY OF HOME LOANS

The study was mainly conducted to understand the concept of home loan

scheme and the eligibility criteria of the customers.

The study is done to understand the documents involved in the home loan

scheme and the repayment methodology adopted by SBH.

A depth study on interest rates provided by the different commercial banks to

the customers.

The innovative home loan schemes and the risk capturing mechanism adoptedby the HFIs and the future of the home loan segment has been undertaken as a

part of this study

PROFILE OF SBH BANK


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In 1953, the Bank took over the assets and liabilities of the Hyderabad Mercantile

Bank Ltd. In the same year, the Bank started conducting Government and Treasury

business as agent of Reserve Bank of India. In 1956, the Bank was taken over by

Reserve Bank of India as its first subsidiary and its name was changed from

Hyderabad State Bank to State Bank of Hyderabad. The Bank became a subsidiary of

State Bank of India on the 1st October 1959 and is now the largest Associate Bank of

State Bank of India.

All the branches of the Bank are totally networked under Core Banking Solutions,

offering a wide range of products to its customers. All the customers of the Bank have

access to the latest technologies like Internet Banking, ATMs etc. The Bank has pan

India presence and operates through more than 1000 Bank branches.

Management Team

O. P. BhattChairman

Amitabha Guha - Managing Director

Madhavi SharmaDirector

Jiban GoswamiDirector

S. A. ThimmiahDirector

Gajendra Singh RajukhediDirector

I. Ram ReddyDirector

M HarshavardhanDirector

Ramesh DatlaDirector

Dr. C. L. Laxmipathi GowdaDirector

S P S Sangwan - Director

HOME LOANS

A home loan scheme is generally offered to the person to accommodate finance for

purchasing the house or for renovation or extension of the existing house.


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OR

Home loans are loans you have access to, depending on whether you want to buy or

build a house and can also be used to repair or extend an existing house.

SCHEMES OF HOME LOANS

The various extensive schemes, which are included in the home loan portfolio, are:

Home Purchase Loan:

This is the basic home loan for the purchase of a new home.

Home Improvement Loans:

These loans are given for implementing repair works and renovations in a home that

has already been purchased by you.

Home Construction Loan:

This loan is available for the construction of a new home.

Home Extension Loan:

This is given for expanding or extending an existing home.

For eg: addition of an extra room etc.

Home Conversion Loan:

This is available for those who have financed the present home with a home loan and

wish to purchase and move to another home for with some extra funds are required.

Through home conversion loan, the existing loan is transferred to the new home

including the extra amount required, eliminating the need of pre-payment of the

previous loan.

Land purchasing loan:

This loan is available for the purchasing of land for both construction and investment

purpose.

Bridge loan:

These are designed for those people who wish to sell the existing home & purchase

another one. The bridge loan help finance the new home, until a buyer is found for the

home.

SBH OFFERS


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1. Attractive Interest Rates

2. Available as Term Loan and Overdraft also

3. Easy Documentation

4. Fast Processing

5. Daily Reducing Balance

6. Low Processing Fee

7. No Hidden Costs or other charges

OBJECTIVES OF HOME LOANS

Attractive Interest Rates

Available as Term Loan and Overdraft also

Easy Documentation

Fast Processing

Daily Reducing Balance

Low Processing Fee

No Hidden Costs or other charges.

REQUIREMENT OF HOUSE & HOME LOANS

Why should one option for a loan to buy a house?

Taking a loan seems like a good option when the money at hand is insufficient to buy

the house of your dreams. Consider couples in their twenties and thirties. They enjoy

a good income currently, buy their accumulated capital isnt enough to purchase a

house. Whereas a home loan can give them access to capital their current earnings.

Also, if you take a 10 years old loan when you are thirty, you could repay it by the

time youre forty. So you dont have to be burdened with the interest and are free to

plan your retirement savings.

The Quantum of loan that one can avail of:


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Loan sanctioned depend on your repayment capacitywhich is based on your

current income and your future repayment capacity. You would include your spouses

name to enhance the loan amount. The maximum loan can be sanctioned varies with

each bank/institutions and ranges from Rs.10 lakhs to Rs. 1 crore.

Benefits of taking a home loan:

A home loan is very different from a personal loan like a car loan for instance. You

can utilize a home loan for financing an asset that will hold its value and even

appreciate over the period of the loan. Though its price could fluctuate in the short

terms, Total Estate will show capital appreciation over the years. The value of your

house generally while the loan remains constant. If you had opted to wait, save up and

buy a house, it would, in the long run cost you much more; home loans also come

with many tax benefits.

Tax benefits of taking a home loan:

The income tax authorities look with favor upon those servicing a housing loan from

specified financial institutions. And, it is up to you to be wise enough to take

advantage of this.

Section 24 of the Income Tax:

Interest on loan till Rs.1.5 lakhs per annum is exempted form income tax (under

section 23/24(1) of the Income tax act).

Section 88 of Income Tax Act:

You get a 20% rebate on repayment of principle during a financial year. Once again,

over the years, the principle repayment eligible for rebate has been enhanced from

Rs.10,000 to the current limit of Rs.20,000 Stamp duty, registration fee or transfer of

such house property to the assesses is also considered under this amount.


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ELIGIBILITY CRITERIA FOR HOME LOANS

Eligibility:

Age: - Min: You should be at least 18 years of age.

Max: At the time of loan maturity, you should not exceed 65 years or your

retirement age, whichever is earlier.

Individuals:

You should have completed a minimum of 2 years of service (with a minimum of 1

year in the current job).

Businesspersons/Self-employed professionals:

You must have an established business or professional practice of not less than 3

years, with a positive net worth and must have posted a net profit for the last 2 years.

Note: Minimum net take home salary of Rs. 6000/- p.m. for salaried employees or

annual income of not less than Rs. 1.20lakh for businesspersons/ self-employed

professionals. (Spouse/co-applicants income can be included in the income

computation).

1. Individuals who are salaried or self-employed, professionals, businessmen are

eligible. Proprietary concerns, HUF, partnership firms or limited companies are not

eligible for this loan, where partners at their individual capacity are free to avail this

loan.

2. As a customer to enhance the loan eligibility, all HFIs lay down conditions to who

be co applicants, al co owners to the property should necessarily be co-applicant.

Income of the co-owners can be clubbed together to get higher loan eligibility. Minors

are not eligible to become co owners, as also friend and relatives only blood rela tives

are eligible to take a property jointly.

Some of the acceptable relationships where loan clubbing is possible:


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Income clubbing of coapplicants

Combinations Income clubbing

Husbandwife YES

parentSon YES (if only son)

ParentDaughter YES (If only child)

Brother- Brother YES (if currently staying together and

intend staying together in the new

property)

BrotherSister NO

SisterSister NO

ParentMinor child Not eligible for loan

3. The minimum age for the applicant and the co applicant to become eligible for

the commencement of eh loan is 23 years, and co applicant can be of 18 years of

age if their income is not clubbed to calculate the loan eligibility.

4. The maximum age at the time of loan maturity for applicant or co-applicant is

60 years or the retirement age whichever is earlier.

Amount of Finance

Maximum loan amount will be lowest of loan amount assessed on the basis of the

under noted 3 options (a.b.c) below:

a) Project cost which may include cost of land, house/ flat, cost of additional amenities

related with said house/ flat, registration charges, stamp duty, property insurance,

service tax and other statutory dues, if any, less applicable margin.

b) Permissible EMI/ NMI ratio.

c) Maximum Permissible Loan to Value (LTV) ratio.

Processing fee

Up to Rs. 25.00 lacs- 0.25% of loan amount subject to minimum of Rs.5,000/-


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Above Rs. 25.00 lacs to Rs. 75.00 lacs- Rs.6, 500/-

Above Rs. 75.00 lacs- Rs.10, 000/-

Other Charges

Lawyers, Valuers fee etc to be borne by the borrower on the basis of actual cost

EMI/ NMI Ratio

Based on income-wise graded ratio as under:

Up to `0.60 lacs: 20%

Above `0.60 lakhs to `1.20 lakhs : 25%



Above `5.00 lakhs to `10.00 lakhs: 55%

Above `10.00 lakhs : 65%

Margin

Loan

Amount

For House/ Flats

under construction

New House/ Flats for

ready possession

Old House/ Flats for

ready possession

Upto 20

Lakhs15% 15% 15%

Above 20

Lakhs20% 20% 20%

TYPES OF LOANS AVAILABLE TO THE CUSTOMERS OF SBH


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Broadly two types- fixed rate and variable rate loans; while the former deals with a

fixed rate of interest over the entire duration of the loan, the latter has the rate of

interest changing according to the fluctuations in the market.

% OF LOAN AMOUNT THAT ONE CAN AVAIL

Up to 85-90% of the total cost based primarily upon the individuals payback

capacity.

GENERAL CONDITIONS THAT GOVERN A HOME LOAN:

These are likely to vary with respect to the different types of housing loans:

The maximum period of the loan is normally fixed by HFIs. However, HFIs do

provide for different tenors with different terms and conditions.

The Installment that you pay is normally restricted to amount 45% of your

monthly gross income.

You will be eligible for a loan amount, which is the lowest as per your

eligibility. This is calculated on the basis of your gross income and payback

capabilities.

Some HFIs insist on guarantees from other individuals for due repayment of

your loan. In such cases you have to arrange for the personal guarantee before

the disbursement of your loan tasks place.

Most HFIs have a panel of lawyers who go through your property documents

to ensure that the documents are clear and are not misrepresented. This is an

added benefit that you get when you avail of a loan from an HFI.

You repay the loan either through Deduction against Salary, Postdated

cheques, and standing instructions or by Cash/DD.

WHOLESALE BANKING

Principal competitors in wholesale banking are public and new private sector banks as

well as foreign banks. The large public sector banks have traditionally been the


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market leaders in the commercial lending. Foreign banks have focused primarily on

serving the needs of multinational companies and the Indian corporations with cross-

border financing requirements including trade, transactional and foreign exchange

services, while the large public sector banks have extensive branch networks and large

local currency funding capabilities.

RETAIL BANKING

In retail banking, their principal competitors are the large public sector banks, which

have much larger deposit bases and branch networks,, other new private sector banks

and foreign banks in case of retail loan products. The retail deposit shares of the

foreign banks are quite small in comparison to the public sector banks, and have also

declined in the last five years, which we attribute principally to the competition from

new private sector banks. However, some of the foreign banks have a significant

presence among non-resident Indians and also compete for non-branch based products

such as auto loans and credit cards. They face significant competition primarily from

foreign banks. In provision of debit cards and also expect to face competition from

foreign banks when we begin offering credit cards. In mutual fund sales and other

investment related products, their principal competitors are brokers and foreign

private banks.

LOANS

SBH brings back you a wide range of loans to cater your financial needs.

The bank offers the following loans:

1) Personal loans.

2) Consumer loans.

3) Auto loans

4) Loans against shares

5) Loans against RBI bonds


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6) Loans against insurance policy

7) E- Instant loans give the facility of loans approval in the 60 second on the

internet.

8) SBH has offices spread all over the country. This extensive network helps SBH

in providing services to large and well spread out clients. This network of

interconnected offices (on data circuits) helps SBH to process application for

purchase of property anywhere in India.

9) SBH has vast experience and a very committed and skilled staff to handle

housing loan applications and solving customer problems.

LOAN AMOUNT

You can avail of maximum of up to 85% of the cost of the property, including the cost

of the land.

LOAN TENURE

You can repay the loan over a maximum period of 20 years under both FRHL and

ARHL. Repayment will not ordinarily extend beyond your age of retirement (if you

are employed) or on your reaching 65 years of age, whichever is earlier. However,

SBH will endeavor to determine the repayment period to suit your convenience.

RATE OF INTEREST

Period/ Amount Up to `30 lacs Above `30 lacs

Up to 30 Yrs 10.20% 10.20%

SBH Maxgain Housing

Loan

10.20% 10.20%

Processing Charges 50% off

SECURITY

Security for the loan normally is first mortgage of the property to be financed and/or

such other collateral security as may be necessary. Interim security may be required, if


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the property is under construction. Collateral or interim security could be assigned to

SBH of life insurance policies, the surrender value of which is at least equal to the

loan amount, guarantees from sound and solvent guarantors, pledge of shares and

such other investments that are acceptable to the SBH.

Loans from SBH are available even if you are availing a housing loan from your

employer. SBH has already entered into arrangements with several employers

enabling employees to avail of loans both from the employer as well as SBH for the

same property. Please do ensure that the title of the property is clear, marketable and

free from encumbrance. To elaborate there should not be any existing mortgage, loan

or litigation which is likely to affect the title to the property adversely.

DOCUMENTS/SUPPORTING DOCUMENTS TO BE ATTATCHED:

FOR ALL THE APPLICANTS:

1) Allotment letter of the co-operative society/association of the apartment

owners.

2) Copy of approved drawings of proposed construction/purchase/extension.

3) Agreement for sale/sale deed/detailed cost estimate from architect/engineer for

the property to be purchased/constructed/extended/renovated.

4) If you have been in your present employment/business or profession for less

than a year, mention an a separate sheet details of the of the occupations for

previous five years, giving position held, reason for change and period of same.

5) Applicable processing fees.

6) Proof of residence: attested copy of any one of the following:

a) Ration card

b) Passport

c) Driving license


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d) Voters identity card

e) Current telephone bill/electricity bill/gas bill

7) Proof of identity: attested copy of ay one of the following:

a) Passport

b) Driving license

c) Voters identity car5d identity card issued by the employer (if employed

in state/central government)

d) PAN card

8) Certificate of loan outstanding issued by the lender (for refinance cases only)

9) Any other information regarding your repayment capacity that is necessary and

will assist SBH in appraising the loan proposal.

ADDITIONALLY

IF YOU ARE EMPLOYED:

1) Verification of the employment form with only part I filled in.

2) Latest original salary slip/salary certificate showing all deductions.

3) If your job is transferable, permanent address where correspondence relating to

the application can be mailed.

4) A letter from your employer agreeing to deduct the EMI towards the

repayment of the loan from your salary. This will expedite the processing of

your loan application.

5) Your updated original bankpass book/s or original bank statement/s showing

salary and saving entries for the last six months.

6) A photo-copy of your Form-16 (issued by your employer) for the last

assessment year.

Proof of Employment:


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The proof of employment is verified by the

Identity card issued by the employer

Visiting card.

IF YOU ARE SELF EMPLOYED:

1) Balance Sheets and Profit & Loss Accounts of the business/profession along

with copies of individual income tax returns for the last three years certified by

the Chartered Accountant.

2) A note giving information on the nature of your business/profession, form of

organization, clients, suppliers, etc.

3)

Copies of individual tax chalans for the last three years4) Copy of advance tax chalan (if any)

5) Your updated original Bank Pass Book/s or Original Bank Statement/s

showing saving s entries for the last twelve months.

The documents required to be submitted by the businessmen as follows:

a. Last three years Profit & Loss Account Statement duly attested by a

Charted Accountant

b. Last three years Balance Sheets duly attested by a Chartered Accountant

c. Last three years Income Tax Returns duly filed and certified by Income Tax

authorities

Proof of Investments:

1. Bank statements for the last six months of all current accounts.


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2. Any other photocopies of investments held, as required by the HFI.

The above are the various documents required by the businessman in addition to the

documents, which are common to the entire category.

The businessman is also judged on the basis of the business conducted by him, if his

Business profile is in the negative list, he will be thoroughly considered for his

credibility before dispersing loan, the organization and property location should not be

in the negative list.

These are the additional documents which are required to be looked at before going on

for completing the pre sanction formalities with respect to dispersing of the home

loans to the business class.

THE PARAMETERS INVOLVED IN HOUSING LOAN EVALUATION

There are a number of parameters on which the housing loans are built:

They are:

1. TENURE

The tenure of the home loan refers to the time limit for a customer to repay the loan

Generally, the maximum tenure of home loans is 20 years, with a few lenders offering

tenure of 20 years or more (SBH has recently launched a 30 years loan). The longer

the tenure, more a customer pays in total interest, but monthly payments will be less.

So depending on the earning potential and bank balance of the customer, an

appropriate can be chose. An important requirement of most banks/ HFIs is that they

pay up the entire loan before you retire. The customer can always prepay the entire

loan amount before it is due.

As long as the tenure goes up a customer pays more interest which is up to 0.25

0.5%, generally above the home loan rates.

2. AMOUNT PAID BY THE FINANCER/ MARGIN REQUIREMENTS


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The financer does not pay the entire amount of the loan, they request the customer to

maintain margin, most banks go in for a 85% funding of the property value including

the stamp duty and charges, it however varies among various banks.

This is also treated as the margin money or own contribution required to be put by the

prospective loan seeker as the contribution towards the purchase of the house. Most

HFIs believe the amount paid is upfront before they release any disbursement.

As a rule of thumb, depending upon the HFC, the prospective loan seeker has to

cough up 15% - 20% of the loan amount as a down payment. For smaller amounts,

this may not be much. But for figures running into lacks, this could make loads of

difference.

For example: An apartment costing Rs. 10lacss may get 85 per cent financing. So,

customer has to arrange for the remaining Rs 1.5lacs.

Some banks however make way for the payment for 90% of financing and about

100% financing for some new projects, however they are subjected to a large number

of factors and constrains.

3. INTEREST RATES

Without doubt the most important parameter to factor into home loan calculations.

The interest rates may vary from institutions to institutions and generally range from

about 10.20% - 10.25% to around 9% Repayment is in the form of EMIs (Equated

Monthly installments). The longer the tenure, the more you pay in interest, but your

monthly payment will be less.

The two kinds of interest rates available to a customer are:

Fixed interest rates

Floating interest rates

Fixed interest rates remain fixed over the tenure of the loan.

Floating interest rates are affected by the rates in the market, they fluctuate according

to the rates issued or changed by the RBI from time to time.

The finance ministers diktat on home loans does not hold for private banks. Indias

largest home loan provider and second largest bankSBH Bankon Tuesday


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hiked its home loan by 1%. The bank has also increased its deposit rates.

As per the new rate structure, customer will have to pay 10.2% on the home loans

with a floating rate, while the fixed home loan will now invite an interest of 10.5%.

With this increase, the monthly installment on an Rs.1lakh loan for 20 years goes up

by Rs70.

Some public sector banks do so only once in 12 months while some private sector

lenders do it as frequently as a quarter. Though the current interest rate quote maybe

lower, over the life of the loan, a customer will be able saved more in the case of a

lender who resets your floating rate more frequently.

The investors are also given the option of changing their option from fixed rate loan to

a floating rate loan, of course by paying a penalty.

4. AMORTISATION

It means the method or the calculation by was of which the entire Principal

amount/loan amount is paid through the tenure of the loan.

This helps the customer to know what his outstanding principal is at any point of time.

There are two methods generally followed:

Annual rests

Monthly rests

Annual rests:

This is more commonly known as annual reducing balance of the principal/loan

amount lent to you. In an annual rest the EMIs (fixed monthly payment for the

dispersal of the loan amount) are calculated on a annual basis.

The component of interest is higher in the initial years and later on the component of

principal increases and the interest keeps reducing year after years. In other words, the

interests in the EMI will keep reducing year after year and the principal component

keeps increasing.


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Monthly rests:

This is called monthly reducing balance or principal. The calculation in the

above method remains the same as of the above except that the balance is calculated

on a monthly basis and the EMI is broken up every month to arrive at the opening

balance of the principal for the next month. It is always better for a customer to seek

an HFI, which generally has monthly rests, based system; this will reduce the amount

of interest paid by the customer. Many banks have adopted to the monthly rests

system.

5. REPAYMENT FACILITY

The bank has given three options for repayment of the loan to suit the

convenience of Borrower.

Equated Monthly Installments (EMI) uniform monthly installment, inclusive of

interest, for the entire repayment of only interest for the first five years, and thereafter

in EMI for the next 10 years.

Repayment of only interest in the first five years, 30% principal plus interest in the

next five years, and balance 70% plus interest in the remaining period.

Repayment to start on completion of construction, but not later than 18 months from

first disbursement and in case built up houses after one month from disbursement.

Interest during gestation shall be paid as & when due. The repayment not to extend

beyond the age of retirement of the borrower or 70 years whichever is earlier,

however where co-borrower is taken, a maximum repayment period of 20 years may

be considered provided the loan is liquidated within the age of 70 years of the

borrower/ co-borrower having capacity to service the loan.


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THE LOAN PROCEDURE FOLLOWED AT SBH BANK

The procedures involve in the disbursement of home loan by any bank entails the

following steps:

Home loan application form is first submitted by the customer covering

all details.

Checklist of requirements is requested for from the customer, and all

documents are required to be submitted (copies), they are then verified

whether the details are failed in correctly and whether all the documents

are submitted.

Additional loans, if any are applicable. Many banks provide for

supplementary loan as a part of their comprehensive home loan scheme.

The following diagram indicates the loan procedure at the

bank

RISK CAPTURING MECHANISM

Customer

Branch manager

Loan Department

Branch manager

Regional Officer

For large borrows

Legal opinion, valuationAnd Technical


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One of the important aspects in the home loan financing is to ensure that the loan

seeker is worthy and credible. SBH follows the credit score model to male home loan

disbursements.

Credit score model is a risk capturing mechanism, which is used to assess the risk

perspective of the loan seekers.

The prospective loan seeker is assessed on a number of parameters which helps in the

evaluation of his profile and each parameter is assigned a score based on which the

decision is taken.

A score of 100 is fixed, and a score of 75 is considered to be good, score of 55 is

considered above average and score of 25 to be average. The prospective loan seeker

on a scale of 100 is expected to get 55 avail the home loan.

The parameters on which risk is assessed are:

1. DEMOGRAPHIC PROFILE

The demographic profile includes a number of sub-parameters they are basically:

Age

Educational Qualifications

Number of Dependents

Marital status

The demographic profile of the loan seeker is allotted a maximum score of 15.

2. RELATIONSHIP WITH SBH BANK

The relationship with the bank is also considered for the benefit of its customers.

The sub-parameters considered here are:

Value of relationship (in terms of deposits)

Number of years

The relationship with the bank is given a weight of 10 on the total score of 100.


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3. INCOME MODEL

The income module of the bank includes parameters such as:

Gross Eligible Monthly Income

IRR ( Income to Installment Ratio)

FOIR (Fixed obligations to income ratio)

Net take home

The income model is given the highest score of 50 points.

4. STABILITY AND CONTINUITY

The stability and continuity factors are based on

Organization Profile : Govt. / public sector companies / public limited or

private limited companies or partnership or others

Length of service in Present job / organization.

This module is provided with maximum score of about 15 points.

5. ASSET MODULE

The asset module include factors like

Margin

Net-Worth ( Total assetsTotal Liabilities)

The asset module is given a weight of 10 on a scale of 100.

The various parameters of the credit score model and their respective weights

are depicted in the following chart.


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The abbreviations of the above term are:

DM Demographic profile

RSBHRelationship with the SBH

IM Income Module

SC Stability and Continuity

6. SCRUTINY OF THE DOCUMENTS

The retail processing is a procedure, which involves careful scrutiny of accounts. SBHBank uses a specialized system to go through the accounts, before dispersing the loan

to the customer. The basic groups set up in the process of loan application are:

7. RETAIL MANAGER ENTERER GROUP:

This group does the data entry. Upon completion of the data entry the group forwards

the same to the RM Verifier group to verify and resends it to the former in case of tiny

discrepancies for editing.

The Loan officer enterer group and the RM Verifier group should ensure, confirm and

verify the following:

The organization is in the appropriate list.

The organization is not in the negative list

SC

15%

DM

15%

Ricici

10%

IM

50%

AM

10%

Parameters in the model


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The property location is not in the negative list.

Applicant Details:

Name and the personal details

Identity details Address

Employment detailssalaried

Financial details: Income asset ownership, Existing bank account details and

credit card details

Employment details: Business

Financial details: Existing bank accounts and credit card details.

8. EXITING LOAN DETAILS:

The name of the financial institution (in case of takeover) type of loan, purpose of

loan amount etc., as per the home loan application form.

Loan request:

Including the disbursement details.

Acquisition details:

Gee details, loan amount recommended, name of the customer preferred branch.

Reference details:

Entry of at least one reference is mandatory.

Property details:

The RM enterer group and the RM Verifier group shall affix their initials on

the home loan process note.

Upon completion of the above activities, the field investigation, legal opinion and the

technical appraisal process shall be initiated by the RM.

The basic scrutiny checks followed by the bank:

A.Field investigation study.

B. Technical FeasibilityC. Legal Feasibility


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A. FIELD INVESTIGATION STUDY:

The manager RM shall go through the documents and inform the same to the

field investigation agency the details:

a) Field Investigation Report:

Residence and Reference (TeleCheck)

Name, Address, Office or Business telephone number of the

applicant and

Co-applicant.

Income Tax return.

The reports are too given on the letterhead of the respective approved agency by their

authorized employee with agencys rubber stamp. The RM should ensure from the

field investigation agency in case of Residence and reference (Tele-check)

The details in the report should match with the information given in the home loan

application form.

IT-Return:

It should be tallied as per the office records.

The manager RM shall make a tele-check to cross verify the investigation made by the

agency in case, for the salaried applicants where the disbursement is greater than 10

lacks and in case of the businessman where the disbursement is greater than 10 lacks.

B. LEGAL FEASIBILITY

The bank should arrange for the legal opinion.

The manager RM should forward it to thebanks empanelled lawyer various

documents for scrutiny.

Some of the documents required for the scrutiny by the lawyer are:


27/57

Sale agreement duly registered

Own contribution receipts

Allotment letter

Land documents indicating ownership, if applicable registration receipt

Possession letter

Lease agreement, if applicable (Property bought from a development authority)

No objection certificate from the developer, society or development authority.

In case of the construction of the house the agreement of construction of the

house between the land owner and the contractor.

The above are the list of documents to be referred to by a lawyer. The manger has to

provide the copies of the documents should be provided by duly specifying the name

of the applicant, particulars of property and list of documents attached.

All correspondence with regard to the legal opinion must be carried forward between

the lawyer and the RM only.

C. FINANCIAL SCRUTINY

Prior to disbursement, the HFI also conducts a site visit to the customers property to

ensure the following:

In case of under construction property:

Stage of construction is the same as that mentioned in the payment notice given

to the builder. Quality of construction


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Satisfactory progress of work.

Lay out of the flats and area of property is within the permission granted by the

governing authority

Requisite certificate have been received by the builder to start the construction

at the site.

In case of ready / Resale construction:

External maintenance of the property. Internal maintenance of the property. Age of the building

Whether the building will last the tenure of the loan Quality of construction There is no existing lien or mortgage on the property

The list of valuation engineers empanelled by the bank need to take up these various

documents and ensure that the report is furnished in the prescribed format and that

loan amount requested by the applicant is sufficient to complete the project. The

details in the property report given by the technical term and compare it with the legal

opinion and application and ensure that there are no discrepancies. After completion

of the above checks and scrutiny the manager RM must forward the home loan

process not along with the home loan application and other enclosures Legal opinion,

technical appraisal report, for further processing to the Loan Manager term, after

retaining in the customers file, copy of the following papers:

Home loan application Legal opinion with all enclosures Technical appraisal report

Loan Department has to send the documents and papers to the RM for further scrutiny

and processing of the proposals. This would increase the turnaround time, of

processing and also additional charge towards the courier charges and also losing the


29/57

documents in transit, In order to avoid the above discrepancies the documents are

verified by the document imaging system.

Newgen document imaging system is introduced to facilitate electronic transmission

of documents for processing of proposals by RM.

It facilitates scanning and maintenance of scanned images.

It also provides the provision of linking the documents if the same document is

required for multiple loans

Provisions to make remarks, on the document without disturbing the original.

Scanned images can be attached to any mail

This facilitates easy transmission of data and other documents and also provides the

flexibility in loan processing and helps in fast transmission of data, these all

advantages helps in easy disbursement of loans.

HDFC Home Loans

Home Loans

It is important to choose a good housing finance company which can

handhold the customer right through his home buying process. Since a

home loan is a long term commitment of 15-20 years, several factors like

expertise, quality of service, in-depth domain knowledge and the

companys level of commitment and transparency right through, the loan

procedures, the fine print, quality of services offered and safe retrieval o

the title deed are critical.
http://www.hdfc.com/http://www.hdfc.com/


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HDFC Home Loan Advantages

Counselling and advisory services for acquiring a property.

Instant Home Loan Approval.

Widest range of home loan products & services like Home Loans, Home

Improvement Loans, Home Extension Loans, Loans to professionals for office

or clinic, Home Equity Loans (Loan against Property), Short Term Bridging

Loan etc.

Loan from any office for purchase of home anywhere in India

Loan approval even before a property is selected

Flexible loan repayment options.

Vast network of over 331 in India, offices in Singapore, London & Dubai and

franchises in the Gulf Cooperation Council (GCC) region.

Most experienced and empowered personnel to ensure smooth & easy

processing

Free & safe document storage.

Online loan application facility.

Features:

Maximum loan

80% of the cost of the property (including the cost of the land) and based on the

repayment capacity of the customer.

Maximum Term

The maximum period of repayment of a loan shall be upto 30 years (Telescopic

Repayment option) under the Adjustable Rate Home Loan product, depending upon

the specific repayment scheme as may be opted (*).

The maximum period of a loan shall be upto 20 years under the Fixed Rate Home

Loan product.

Repayment will not ordinarily extend beyond your age of retirement if you are

employed or on reaching 70 years of age, whichever is earlier. However, HDFC will
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endeavour to determine the repayment period to suit your convenience.

Applicant and Co- Applicant to the loan

Home Loans can be applied for either individually or jointly. Proposed owners of the

property will have to be co-applicants. However, the co-applicants need not be co-

owners.

Adjustable Rate Home Loan

Loan under Adjustable Rate is linked to HDFC's Retail Prime Lending Rate (RPLR).

The rate on your loan will be revised every three months from the date of first

disbursement, if there is a change in RPLR, the interest rate on your loan may

change. However, the EMI on the home loan disbursed will not change. If the

interest rate increases, the interest component in an EMI will increase and the

principal component will reduce resulting in an extension of term of the loan, and

vice versa when the interest rate decreases.

Interest Rate

W.e.f : 6th Feb 2013 RPLR: 16.40%

Loan Slabs

Applicable Variable rates

%

( Monthly Rest Basis )

Basis : RPLR minus

Spread

Upto and including Rs 30

lacs10.15% to 10.65% RPLR - 6.25 to - 5.75

Over Rs. 30 lacs 10.40% to 10.90% RPLR - 6.00 to - 5.50

The above rates are subject to change without notice.


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TruFixed Plus Home Loan

Under this product the customer has the option to choose a Fixed Interest Rate

Period (FIRP) between 3 to 15 years . Post the fixed rate period the loan will

automatically convert to a variable rate product. The customer also has the option,

subject to our eligibility norms to take a complete fixed rate term product for a fixed

term of 3 to 15 years. Or, he can avail a long term loan of 15 to 20 years with a part

fixed and part floating for the entire tenor of the loan. The full disbursement of the

loan, irrespective of the fixed period chosen, shall have been availed within the first

3 years from the date of first disbursement of the loan. Post the fixed rate period the

interest rates applicable on the loan shall be the then applicable HDFC RPLR minus

the spread as applicable currently on the loan amount being availed under this

product.

The applicable interest rates in the Fixed Interest Rate Period (FIRP) are linked to

sanctioned loan amount and as per details given below:

Loan Slabs Interest Rates during the

Fixed Interest Rate Period (

% )

Upto and including Rs 30 lacs 10.50

Rs.30.01 lacs onwards 10.75

Eligibility

The product is available to salaried and self-employed customers for loan

applications subject to first disbursement on or before July 31st, 2013.

PurposePurchase of

a. Flat, row house, bungalow from developers

b. Existing freehold properties


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c. Properties in an existing or proposed co-operative housing society

or apartment owner's association

d. First Power of Attorney purchases in Delhi for DDA flats allotted

before 1992.

e. Refinance (balance transfer) of an existing home loan from another

financial institution.

Fees

0.5% of the loan amount applied plus applicable service taxes and cess.

No Charges for

a. Replacement of cheques

b. Income Tax Certificates

c. Accelerated Repayment Option

Other Charges

a. Cheque dishonor charges : Rs. 100**

b.Prepayment charges :

For Home Loans, Home Improvement Loans,

Home Extension Loans, Short Term Bridging

Loans, Plot Loans & Rural Housing Finance

For Loan Against Property, Non Residential

Premises Loans, Top-Up Loans

C. Conversion fees :

For Home Loans, Home Improvement Loans,

Home Extension Loans & Rural Housing

Finance

For Plot Loans

For Loan Against Property & Non Residential

Premises Loans

d.Fees on account of external opinion :-For advocates/technical experts, as the

case may be

as per actuals applicable to a case

e. Insurance charges : as per actuals applicable to a case

f. Charges on account of delayed payments/defaults:
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iAdditionalinterest

: 18 % p.a.

iiIncidentalcharges

: ***

iii Expenses : as per actuals applicable to a case

g.

CERSAI charges(Central Registry ofSecuritisation Asset Reconstruction and

Security Interest of India)

Statutory /regulatory charges: All applicable

charges on account of Stamp duty / Central

Registry of Securitisation Asset

Reconstruction and Security Interest of India

(CERSAI) or such other statutory /

regulatory bodies and applicable taxes shall

be borne and paid (or refunded as the case

may be) solely by the Borrower.You may visit the website of CERSAI for all

such charges at www. Cersai.org.in

AXIS BANK

Features of Axis Bank Home Loans

Axis Bank housing loans are designed for todays home-hunter. Our easy home loans

are rich in features and offer a number of benefits.

Attractive housing finance rates: We offer attractive interest rates that make

your housing loans affordable and easier on your pocket every month.

Flexible rates: Choose between fixed and floating rate options depending on

which way you think interest rates are moving.

Balance transfer facility: Not satisfied with your existing Home Loan

provider? You can transfer your Home Loan to us without any hassles.

Doorstep service: You don't have to go the bank for Home Loans; the bank

will come to your doorstep. Perfect for those leading busy lives.

Nil prepayment charges: Come into some money and want to pay off your

housing loan early? You can do that at Axis Bank without worrying about

prepayment charges.

Quick and transparent processing: Special Benefits available forPremium

Banking customers. To know more, contact your Relationship Manager today!
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Home Loan Eligibility Criteria

A) - Salaried Individuals

Individuals in permanent service in the Government or reputed companies meet

ourHome Loan eligibility criteria

Applicants should be above 24 years of age at the time of loan commencement

and up to the age of 60 or superannuation, whichever is earlier at the time of

loan maturity.

B) - Professionals

Professionals (ie, doctors, engineers, dentists, architects, chartered accountants,

cost accountants, company secretary, management consultants only) can apply.

Applicants above 24 years of age at the time of loan commencement and up to

65 years or less at the time of loan maturity meet our housing loan criteria.

C) - Self Employed Individuals

Any individual filing income tax returns can apply

Applicants should be above 24 years of age at the time of loan commencement

and up to 65 years or less at the time of loan maturity.

Limits on Home Loan

Minimum - Rs 3 lac

Margin

Sr. No Loan amount (Rs.) Margin

1 For Housing Loan upto Rs.20 Lacs 15%

2 For Housing Loan above Rs.20 Lacs 20%

3 Improvement or renovation loans 25%

Our Home Loan Rates

Sr.

No

Type Loan amount (Rs.) Base Rate +

Mark Up

Effective Rate

Of Interest

1 Floating Less than Rs. 25 Lac Base Rate + 10.75% p.a.
http://www.axisbank.com/personal/loans/home-loan/home-loan-features.aspxhttp://www.axisbank.com/personal/loans/home-loan/home-loan-features.aspx


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Rate 0.75%

Loans greater than Rs.25

lac - Rs. 75 lac

Base Rate +

1.00%

11.00% p.a.

Loans greater than Rs. 75

lac

Base Rate +

1.25%

11.25% p.a.

Top Up - All loans,

Renovations

Base Rate +

2%

12.00% p.a.

Base Rate - 10.00%

NISHCHINT - Home Loan with Fixed Rate of Interest

Type Effective Rate Of Interest

Fixed Rate 11.75% p.a.

Other Charges:

Sr.

No

Type Charges

1 Repayment Instruction/Instrument Return charges Rs.500/- per

instance

2 Cheque/Instrument Swap charges Rs.500/- per

instance

3 CERSAI Charges Rs.500/-

4 Duplicate Statement issuance charges Rs. 250/- per

instance

5 Duplicate Amortization schedule issuance charges Rs. 250/- per

instance

6 Duplicate Interest Certifcate (Provisional/Actual)

issuance charges

Rs. 250/- per

instance

7 Issuance charges for Photocopy of title documents Rs.250/- per

document set

8 Charges on customer initiated requests for copies

of documents

Rs. 250 per

document set


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9 Equitable mortgage creation charges As applicable in the

state

10 Credit Bureau report issuance charges Rs.50/- Per Instance

Switching Cost:

Switching from the floating rate scheme to the fixed rate scheme and vice versa is

permissible. If a fixed rate customer wants to reschedule loan to the present fixed

interest rate applicable to the new customers, the same is also permissible. The

existing customers can also switch over to the new rate of interest applicable for the

new customer. For all of the above changes, a nominal switching fee is applicable.


38/57

ICICI BANK

ICICI Bank Home Loans

Building your own home is special. As one of the leading home loan providers, ICICI

Bank Home Loans is here to help you lay the foundation for your dream home.

With the experience of sharing the dream of millions of our customers, we offer you

the most convenient housing loan plans to suit your needs.

Advantages

Wide range of product to choose from

Flexible repayment options

Guidance throughout the process making home buying hassle free

With a network of 2500 branches we are always close to you

Doorstep service at your comfort

Simplified documentation

Over 246 Bank Branches pan India for servicing of your loans

Free Personal Accident Insurance

Sanction approval without having selected a property.

Insurance options for your home loan at attractive premium

Home Loan - Interest Rates

Home Loan Interest Rates

ICICI Bank floating rate:

Category Effective Rate of Interest Rate

HL Rs. 3.0 million 10.40% to 11.00% I-Base + 0.65% to


39/57

LIC HOUSING FINANCE LTD

LIC housing finance ltd has LIC Griha Prakash LIC home loans plan where individuals can

get LIC housing loan amounting to 85% of the total property cost provided the total value

of the property doesnt exceed the value of 1 Crore Rupees. This LIC home loan scheme is valid on

both purchase and construction of property and covers the money that the buyer spends while signin

agreement, making registration charges and payment of stamp duty fees.

Loan Category : Griha Prakash

Loan Amount : Min. Rs.5,00,000.

Loan to Property Cost :85% of total Cost of the property including Stamp Duty and

Registration Charges.

Loan Term : Maximum 20 years

Repayment Mode : Equated Monthly Instalments(EMI) - Monthly Rest Basis

Security : 1. Equitable Mortgage of Residential House / Flat / Plot

2. Demand Promissory Note.

Upfront Fees : 1.00% of Loan Amount Sanctioned + Service Tax as applicable.

LIC housing finance ltd is also committed to help non-professional loan seekers to take advantage o

Griha Shobha LIC home loan project where they can get a minimum LIC home loan of 5,00,000 RS

for a maximum time of 10 years. Professionals get an extended advantage of repayin

back this LIC housing loan in 15 years.

1.25%

Notes:1% Cashback benefit is available on above product

1% Cashback benefit is available if EMI payment is through Auto Debit from ICICI

Bank Account


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STATE BANK OF INDIA (SBI)

The origin of the State Bank of India goes back to the first decade of the nineteenth

century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806.

Three years later the bank received its charter and was re-designed as the Bank of

Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of

British India sponsored by the Government of Bengal. The Bank of Bombay (15 April

1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three

banks remained at the apex of modern banking in India till their amalgamation as the

Imperial Bank of India on 27 January 1921.

Primarily Anglo-Indian creations, the three presidency banks came into existence

either as a result of the compulsions of imperial finance or by the felt needs of local

European commerce and were not imposed from outside in an arbitrary manner to

modernise India's economy. Their evolution was, however, shaped by ideas culled

from similar developments in Europe and England, and was influenced by changes

occurring in the structure of both the local trading environment and those in the

relations of the Indian economy to the economy of Europe and the global economic

framework.

With a tradition of trust and transparency, through 13, 700 branches across the

country,

SBI brings you exclusive benefits:

Interest on a daily reducing balance

No prepayment penalties

Open loan account closest to your present or proposed residence

So what are you waiting for? You can reduce your interest burden and optimally

utilize your surplus funds, only with SBI.


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EMI in `/lac/month

Period of

Loan(Years)

Upto ` 30 lacs @ 9.95%

p.a

Above ` 30 lacs @ 10.10%

p.a

30 874 885

25 905 916

20 962 972

15 1,072 1,081

The chart shows the survey results which was conducted last year. It is very evident

that majority of the Indians choose SBI for acquiring home loans compared to any

other commercialized or nationalized banks.

IDBI BANK


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Home Loan in India - IDBI Bank Home Loan Interest Saver

Home Loan Interest Saver provides customer the facility of linking Home Loan

account with the operative Account. The interest liability of the borrower on home

loan comes down to the extent of surplus funds parked in the operative account.

Customer will be allowed to deposit and withdraw from the operative account as and

when required. Interest on Home loan will be calculated based on the balance

maintained in the operative account.

The IDBI Bank Home Loan Interest Saver Advantage

Maximum Tenor

Attractive Rate of Interest

Maximum Funding

Interest Rate on Daily Reducing Balance

Simple Documentations

Personalized Doorstep Services

Savings on Interest Payable

The IDBI Bank Home Loan Interest Saver Features

Loan Range from min of Rs. 5 lacs up to Rs. 500 lacs Rs. 250 Lacs in case of

NRIs (salaried)

Loan to value ratio:

Upto Rs. 20 lacs90% of cost of property Above Rs. 20 lacs80% of cost of property

Repayment period -

20 years for Salaried and Self-employed professional and

15 years in case of NRIs (salaried) & self-employed non - professionals

No prepayment charges

Interest Rates

As per RBI mandate, Savings Bank interest will be calculated on the daily balances


43/57

maintained in your account, at a rate of interest as specified by RBI from time to time

(existing rate is 4.00% p.a.).

vings Bank Rate (w.e.f. May 03,

2011)4.00 % p.a.

Base Rate (w.e.f February 01,

2013)

10.25 %

All the loans are linked to Base Rate of the Bank

Current BPLR(w.e.f February 01,

2013)14.75 %

COMPARATION OF INTEREST RATES AMONG VARIOUS BANKS

Bank NameFloating

Interest ratePer lac EMI Processing Fee

Prepayment

Charges

State Bank Of 9.95% Rs.962 Up to 25 lacs : 0.125%of loan amount

Nil
http://www.deal4loans.com/sbi-home-loan.phphttp://www.deal4loans.com/sbi-home-loan.php


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India minimum Rs.1000/-25-75 lacs : Rs.3,250/-75 & above : 5,000/-

ICICI Bank Scheme I :10.25%(Fixed 1 yr)

Scheme II :10.25% (Fixed

2yrs)

Scheme III :10.50% (Fixed

3yrs)

then 10.25%

Scheme I : Rs.982(Fixed 1 yr)

Scheme II :Rs.982 (Fixed

2yrs)

Scheme III :Rs.998 (Fixed

3yrs)

then Rs.982

0.50% of loan amountupto 1 crore

N.A

HDFC Ltd 10.15% Rs.975 0.5% or maximum10,000+service tax

(12.36%)

Noprepaymentcharges shall

be payable forpartial or fullprepaymentsirrespective of

the source

HSBC Bank 10% to 13% Rs.965 to Rs.1172 1% of the loan amountapplied for, subject to aminimum of Rs 10000plus service tax. This

fee is payable onapplication and is not

refundable

Nil

LIC Housing Scheme I : 10.25%(Fixed for 2 yrs)

Scheme II :10.95%(Fixed for

10 yrs)

Scheme I : Rs.982

(Fixed for 2 yrs)Scheme II :

Rs.1029 (Fixed for10 yrs)

Up to 50 lacs : 10,000

+(Service tax)50 lacs & above :

15,000 +(service tax)

Nil

AXIS Bank 10.25% (Upto 25Lacs), then

10.50%

Rs.982 (Upto 25Lacs), then Rs.998

1% of the Loan Amount Nil

IDBI 10.25% Rs.982 Up to .50%of loanamount

(Rs 2500 to be collectedat login and balance at

the time of sanction )

If BalanceTransfer then2% Otherwise

Nil

PNB Housing

Finance

10.50%-11.25%(For

Salaried/SEP),

11%-11.50%(SENP)

Rs.998 - Rs.1049(For

Salaried/SEP),

Rs.1032 - Rs.1066(SENP)

0.5% NIL

ING Vysya 10.75% Rs.1015 0.5% of the loanamount

NIL

Standard

Chartered

9.99% (Upto25Lacs), then

10.15%-10.25%

Rs.964 (Upto25Lacs), then

Rs.975 - Rs.982

Rs.7500/- + Service tax NIL

Citibank 10.50% (Upto Rs.998 (Upto 0.25% (for salaried ), NIL
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25Lacs), then10.75%

25Lacs), thenRs.1015

0.50% ( for SelfEmployed)

Deutsche Bank 10.50% Rs.998 12000 + Service Tax Nil

DHFL 11% Rs.1032 1% for Salaried & 1.5%

for SENP

NIL

India Bulls 10.15% (Upto25Lacs), then

10.75%


Rs.1015

Up to 30 lacs5,000+12.36%(Service

tax)30 lacs & above :

15,000+12.36%(Servicetax)

NIL

Federal Bank 10.25% Rs.982 10,000 + Service Tax N.A

Allahabad

Bank

10.20% (Upto25Lacs), then

10.45%


Rs.995

0.50% of loan amount,Maximum Rs. 10,000/-

NIL

Bank of

Maharastra

10.55% (Upto

25lacs), then10.75%

Rs.1002 (Upto

25lacs), thenRs.1015

0.50% (Max. Rs.

50,000/-)Nil

Central Bank

of India

10.25% Rs.982 0.50% of the loanamount subject to

maximum ofRs.20,000/-

Nil

Corporation

Bank

10.25% Rs.982 0.50% of Loan amount(Max.Rs.50,000/-)

NIL

Bank of India 10.25% Rs.982 0.25% of loan amount.

Min.Rs.1,000 and Max.Rs.20,000

Nil

Union Bank of

India

10.25% Rs,982 Processing charges are0.50% of the loan

amount subject tomaximum of Rs. 15,000

NIL

United Bank

of India

10.75% (upto 25lacs) then 10.55%

Rs.1015 (upto 25lacs) then Rs.1002

0.50% of the loanamount

N.A

UCO Bank 10.20% Rs.978 0.5% of the loanamount, minimum

Rs.1500/- & maximumRs. 15000/-

NIL

Bank of

Baroda

10.25% Rs.982 Loan upto Rs.30 Lacs -0.50% (Minimum

Rs.5,000/-)Above 30 Lacs - 0.40%

(Min. Rs.15,000/- &

Max. Rs.50,000/-)

N.A.

Canara Bank 10.75% Rs.1015

Oriental Bank

of Commerce

10.25% Rs.982 0.50% of the loanamount, subject to

maximum of Rs.20000/- plus service tax

NIL
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Kotak Bank 10.75% Rs.1015 0.25% - 0.5% 2% on Balancetransfer else

NIL

Dena Bank 10.30% Rs.985 N.A N.A

PunjabNational Bank

10.25% Rs.982

First Blue

Home Finance

10.25% (forSalaried / SEP),

10.75% (For SelfEmployed) (Upto

25Lacs), Then10.75% (for

Salaried / SEP),11.25% (For Self

Employed)

Rs.982 (forSalaried / SEP),

Rs.1015 (For SelfEmployed)

Salaried: Up to 30 lacs:7300

30 - 75 lacs : 1180075 lacs & above :15,000 + service

tax(12.36%)

Nil

Vijaya Bank 10.50% Rs.998 0.25% of loan amount.Maximum Rs.10000.Exclusive of Service

Tax

N.A

Syndicate

Bank

10.25% ( upto 25lacs ), then

10.50%

Rs.982 (Upto 25Lacs), then Rs.998

upto Rs.25 lacs -0.25% (Min Rs 1000 -

Max Rs 5000)26 lacs to 75 lacs -

0.55% (Max.Rs.500/-)above Rs.75 lacs -

0.55% (Max Rs.10000/-)

N.A

Indian

Overseas Bank

10.25% Rs.982 A flat rate of 0.58% ofthe loan amount-maximum of Rs.

10,190/- There is nohidden charge. This is

subject to change fromtime to time without

prior intimation.

N.A

Reliance 11.50% - 11.75% Rs.1066 - Rs.1084 0.75% of loan amount NIL

Development

Credit Bank

11.50% Rs.1066 1% Nil

State Bank of

Travancore

10.25%-10.50% Rs.982 - Rs.998 Processing fees standsreduced by50% of

normal charges duringthe campaign period

NIL

Tata capital

Housing

Finance ltd

10.75% Rs.1015 0.5 to 1% off the loanamount.

N.A

Dhanalakshmi

Bank

Scheme I: 11.50%(Fixed for 1 yr),

Then 12%Scheme II: 12%

Scheme I: Rs.1066(Fixed for 1 yr),

Then Rs.1101Scheme II:

1% + service tax N.A
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47/57

Rs.1101

Indian Bank 10.20% Rs.978 Nil Nil

COMPARISON OF MAJOR PLAYERS

The markets for home loans have been sizzling in India. The spurt in growth in recent

years and the prospect of continued buoyancy in demand have attracted many players

to the industry which till a couple of years back had two major players- HDFC and

LIC Housing Finance. The result is cut-throat competition, which has benefited the

loan seekers. The home loan market has grown at a compounded rate of over 40%

over the last four years. And from what industry experts believe that there is a little

chance that there will be any significant decline in the growth rates going forward. So

what have been the key factors in triggering of this high growth period?

There are several reasons for the same on the demand side:-

Faster raise income as compared to property prices, thus making housing more

affordable.

Decline interest rates, which have greatly reduced the cost of borrowing (both

o0n interest and capital).

Then there are factors on the supply side too which have supported this growth:-

More competition in the housing finance sector resulted in companies charging

lower interest rates, sometimes even at the cost of spread (i.e. profit margin)

The fee for getting the home loan has reduced dramatically over the last couple

of years. From over 2% of the loan amount to as long as 0.25% (some

companies are known to wave of the fee entirely). Housing Finance Companies

have introduced several new products to meet the needs of wide variety of

customers. One such scheme, the Step up Loan, where EMIs increases as the
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48/57

income of the individual increases has been a big hit with the individuals just

starting off with their careers.

One other factor is increasing collaboration between Housing Finance

Companies and builders. Such partnership minimizes the service and funding

related issues significantly thus making it easier to buy property.

One innovation in the housing finance sector has been the introduction of floating rate

home loan simply put the cost of such home loan or the interest rate not fixed during

the tenure of the loan. Instead interest rate is benchmarked against some index/

indicator. So as the benchmark rate moves up or down, the cost of your loan too

changes, at some predetermined frequency (usually once a quarter).

Ideally loan seekers should opt for a floating rate home loan when it is expected that

the interest rate will decline going forward. Fixed rate loans should be preferred when

the interest rates are expected to rise.

But is the choice that simple? In todays environment when there is a lot of talk about

rising interest rate, should investor shun floating rate home loan. Altogether is there

still some merit in this instrument? In the last one year, there was a trend of floating

rate home loans being more popular as compared to the fixed rate loan. As of now,

this trend is continuing says Mr. Suresh Menon , GM (Mumbai region), HDFC

Limited.

There are three important issues which one needs to consider before opting for one

type of a loan over the other:-

First, an important determinant of what you go in for should be the long term

expectation of interest rate. For example if you (or the experts) expects the

rates to rise for the next one year, but then decline gradually over the next

several years a floating rate product may be preferable. The other option for

going in for a fixed rate product and then switching at the end of the year will

entail costs (there could be penalty of 1%-2% of the outstanding loan amount)


49/57

and may not make financial sense. Moreover floating rate home loans do not

change the rate of interest every quarter (even though they review the rate

every quarter). Mr. Menon points out The attraction of a floating rate home

loan is that it does not attract a part prepayment charge. This could appeal to

individuals who get lump sum bonuses which they can use to reduce their loan

exposure.

Second, the issue whether fixed rate home loan are actually fixed rate. When

considering a fixed rate home loan over floating rate of home loan a strong

selling point is that if interest rate were to rise dramatically you will be

protected. Apparently the reality is some what different. It seems that

companies that have given out fixed rate home loans can revise their rates

upwards in exceptional circumstances (significant rise in interest rate for one)

so if you think interest rate will remain rage bound over the near term and

decline over the long term, you are still better off with the floating rate product.

Third, a fixed rate loan is generally priced higher as compared to the floating

rate product. This holds true in the current environment where the fixed rate

loan is at a higher interest rate as compared to the floating rate loan. The

difference is currently about 0.25% to 21%. So if you expect that interest rate

are likely to move up, but only to the extent of this differential, then you should

ideally be in different between the two types of loan. The deciding factors then

should be when you think the rates will increase and also the long term

expectations of interest rates.

As always there is no one answer to whether you should go in for floating or a fixed

rate home loan. If you are a person with very little appetite for risk or negative

surprises, opt for fixed rate home loan. But in case you can take on some risk a

floating rate home loan is worth a look.

Five steps to take a right loan:-


50/57

1) Gather data on interest rate. Get interest rate information from morethan one

source and get the same information from each so you can compare the offers.

2) Get information on fees. Find out about processing fees, administration

charges and other costs that may be involved in taking the home loan. A

written statement of all the fees from the housing finance companies will

ensure that there will be no surprises later on. Use the lowest amount of fees to

negotiate with the other lenders.

3) Get pre-approval letter. This gives you substantial leverage as you are then

seen as serious buyer by the seller of the property. Also, having the letter in

your hand will set a limit to the amount of money you can commit to the

property. This will help in identifying the right property.

4) Bargain for a lower rate of interest. Housing finance will reduce their rack

rates for customers with the good credit record. A bargain deal will easily fix a

home loan at significantly lower rates (at time

home loans report

Documents