Professional Documents
Culture Documents
Aakansha Tyagi Research Project2
Aakansha Tyagi Research Project2
Name:
Roll No.:
4
ACKNOWLEDGEMENT
5
At this juncture, I would also like to thank to
my collage facility. Without their
indispensable cooperation, the project wont
have been completed within the stipulated
time period. Finally I would like to thank the
staff of other home loan provider banks,
without whose cooperation in providing the
data for the project would have been
impossible.
PREFACE
6
themselves are changing it is therefore a
problem highly complex and ticklish.
CONTENTS
CHAPTE PAGE
TITLES
R NO.
I
7
INTRODUCTION 8
II REVIEW OF LITERATURE
37
III OBJECTIVES OF THE STUDY
52
IV RESEARCH METHODOLOGY
55
V DATA ANALYSIS AND INTERPRETATION
57
BIBILIOGRAPHY 112
Chapter- 1
INTRODUCTION
9
HOME LOAN
10
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.
11
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.
FINANCIAL IMPLICATIONS OF
AVAILING A LOAN (SMALL OR BIG)
13
3. Pre-EMI- A simple interest calculated
on the disbursement amount in case of a plot
under construction.
4. EMI- The EMI is an abbreviated form of
the equated money installment and is simply
referred to as monthly installment in common
parlance. And, being a self-explanatory term
that is exactly what it is. The amount you will
have to pay you financier every month when
repaying your loan. Being a monthly
payment, at the end of the year, you would
have paid 12 EMIs.
14
GENERAL CONDITIONS THAT GOVERN A
HOME LOAN:
15
added benefit that you get when you
avail of a loan from an HFI.
You repay the loan either through
Deduction against Salary, Post dated
cheques, and standing instructions or by
Cash/DD.
16
home for e.g.: addition of an extra room
etc.
Home conversion loan: This is for
those who have financed the present
home with home loan & wish to
purchase& move to another home for
which some extra funds are required
through home on version loan ,existing
loan is transferred to the new home
including the extra amount required
eliminating the 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.
17
HDFC BANK
INTRODUCTION
COMPANY PROFILE
18
HDFC was amongst the first to receive an in
principal approval from RBI to set up a bank
in the private sector, as a part of the RBIs
liberalization of the Indian banking industry. It
was incorporated on 30th august 1994 in the
name of HDFC Bank Limited, with its
registration office in Mumbai. HDFC began its
operations as a scheduled commercial bank
on 16th January 1995.
19
With its tremendous brand equity, the strong
reputation in the Indian and international
financial services market, large shareholder
base and unique consumer franchise, HDFC
was ideally positioned to promote a bank in
the
BUSINESS PHILOSOPHY
20
The bank seeks to achieve the status of a
preferred organization among its major
constituents- customers, shareholders,
regulators, employees, suppliers etc. while
maintaining the highest level of integrity and
corporate governance.
WHOLESALE BANKING
21
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
22
mutual fund sales and other investment
related products, their principal competitors
are brokers and foreign private banks.
TREASURY
LOANS
1) Personal loans.
2) Consumer loans.
3) Auto loans
4) Loans against shares
5) Loans against RBI bonds
6) Loans against insurance policy
7) E- Instant loans give the facility of loans
approval in the 60 second on the
internet.
23
8) HDFC has offices spread all over the
country. This extensive network helps
HDFC in providing services to large and
well spread out clients. This network of
interconnected offices (on data circuits)
helps HDFC to process application for
purchase of property anywhere in India.
HDFC has further established an office
in Dubai and service associates in
Kuwait, Oman and Quarter to make to
easier for Middle East based non-
resident Indians to apply for loan to
HDFC-India.
9) HDFC is pioneer of housing finance in
India and has been a leader in business
for the last 23 years. HDFC has vast
experience and a very committed and
skilled staff to handle housing loan
applications and solving customer
problems.
Land purchase
Home construction/purchase
24
Home extension
Home improvement loans
Short-term bridge loans
Non-resident premises loans for
professionals.
LOAN AMOUNT
LOAN TENURE
RATE OF INTEREST
SECURITY
26
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 the property is under
construction. Collateral or interim security
could be assigned to HDFC 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 HDFC.
DOCUMENTS/SUPPORTING DOCUMENTS
TO BE ATTATCHED:
27
FOR ALL THE APPLICANTS:
a) Ration card
b) Passport
c) Driving license
d) Voters identity card
28
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 HDFC in appraising the
loan proposal.
ADDITIONALLY
29
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 bank pass 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.
30
4) 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.
TAX BENEFIT
ELIGIBILITY
31
you can comfortably repay the amount you
borrowed.
32
HDFC has over the years invested
substantially into the computer systems and
training. This has enabled HDFC to respond
to customer needs and build up capabilities
to approve loan on the spot or disburse them
fast.
BRANCH NETWORK:
33
and very committed and skilled staff to
handle housing loan applications and solving
customer problems.
FREE COUNSELLING:
34
house is one of the most Important decisions
in this life.
35
This facility is especially helpful to those
customers who want to get a loan on an
amount
that is not falling within the permissible limit
of their repayment capacity. It also is in line
with HDFCs aim to provide greater degree of
personalization in service and the tools.
Hence there can be the situation wherein the
applicant is not in the position to pay the
required EMI which is calculated by the ILPS
(Individual loan processing system).HDFC in
this case offers to let the applicant use one of
the two plans to repay the loan amount.
36
The customer can hence decide when he
wants to repay the maximum amount of the
Loan to HDFC and when he wants to repay
minimum leftover or remaining amount of the
loan in the form of still smaller EMIs.
37
5. The length of the term among others.
39
the sons salary only for the next remaining
60 months.
ELECTRONIC MAIL:
40
HDFC through its E-mail services can
promptly respond to queries. In addition,
HDFC can promptly send its application form
cum brochure and other detail on its loan
products by e-mail to interested individuals.
For Non-resident Indians our interactive
website offers another means of contacting
us. In our effort to reach out globally
dispersed Non-resident Indians, we will
continuously enhance our website.
41
Individuals may make an application for the
loan even if the property has not been
selected or the construction has not
commenced. HDFC can provide assistance in
locating an appropriate house to such
customers.
FEE:
42
Rs.20000
Rs.100
Rs.100000
Rs. 500
CHARGES:
43
or any other documents that HDFC deems
necessary to verify the source of
prepayment.
You can make payment for fees and charges
by cheque marked payees account only
drawn on a bank in a city where HDFC has an
office or by demand draft (payable at par to
HDFC).
HOW TO APPLY
44
HDFC will consider your application, make
enquiries as it deems necessary and convey
its decision to you. On acceptance of the
offer, you will have to pay an administrative
fee for the loan approved. Customer can take
the disbursement of the loan after the
property has been completed and you have
invested your own contribution in full (own
contribution is the total cost of the property
less HDFCs loan). The loan will be disbursed
in full or in suitable installments (normally
not exceeding three in number)taking into
account the requirement of the funds and the
progress of the construction, as assessed by
HDFC and not necessarily according to the
builders agreement.
DISBURSE
The Loan Double Checking
Fix Over (DCOVR) Recommendation
Chrg Over (ROVR)
es
PROCESS
Chapter- 2
46
REVIEW OF
LITERATURE
47
2) In December 2006 Fulbag Singh and
Reema Sharma had studied about the
housing Finance in India. Housing, as one of
the three basic needs of life, always remains
on the top priority of any person, economy,
government and society at large. In India,
majority of the population lives in slums and
shabby shelters in rural areas. From the last
decade, the Government of India has been
continuously trying to strengthen the housing
sector by introducing various housing loan
schemes for rural and urban population. The
first attempt in this regard was the National
Housing Policy (NHP), which was introduced
in 1988. The National Housing Bank (NHB)
was set up in 1988 as an apex institution for
housing finance and a wholly-owned
subsidiary of Reserve Bank of India (RBI). The
main objective of the bank is to promote and
establish the housing financial institutions in
the country as well as to provide refinance
facilities to housing finance corporations and
scheduled commercial banks. Moreover, for
the salaried section, the tax rebates on
housing loans have been introduced. The
paper is based on the case study of LIC
Housing Finance Ltd., which analyzes region-
wise disbursements of individual house loans,
48
their portfolio amounts and the defaults for
the last ten years, i.e., from 1995-96 to 2004-
05 by working out relevant ratios in terms of
percentages and the compound annual
growth rates. A relevant chart has also been
prepared to highlight the results.
49
model of the factors affecting results for
2004-2005, we predict that 2006 results will
continue to show an increase in the
percentage of loans that are higher priced
when final numbers are released in
September 2007.
50
prospects of the U.S. housing/mortgage
sector over the next several years. Based on
our analysis, we believe there are elements
in place for the housing sector to continue to
experience growth well above GDP. However,
we believe there are risks that can materially
distort the growth prospects of the sector.
Specifically, it appears that a large portion of
the housing sector's growth in the 1990's
came from the easing of the credit
underwriting process. Such easing includes: *
The drastic reduction of minimum down
payment levels from 20% to 0% * A focused
effort to target the "low income" borrower *
The reduction in private mortgage insurance
requirements on high loan to value
mortgages * The increasing use of software
to streamline the origination process and
modify/recast delinquent loans in order to
keep them classified as "current" * Changes
in the appraisal process which has led to
widespread over appraisal/over-valuation
problems If these trends remain in place, it is
likely that the home purchase boom of the
past decade will continue unabated. Despite
the increasingly more difficult economic
environment, it may be possible for lenders
to further ease credit standards and more
51
fully exploit less penetrated markets.
Recently targeted populations that have
historically been denied homeownership
opportunities have offered the mortgage
industry novel hurdles to overcome. Industry
participants in combination with eased
regulatory standards and the support of the
GSEs (Government Sponsored Enterprises)
have overcome many of them. If there is an
economic disruption that causes a marked
rise in unemployment, the negative impact
on the housing market could be quite large.
These impacts come in several forms. They
include a reduction in the demand for
homeownership, a decline in real estate
prices and increased foreclosure expenses.
These impacts would be exacerbated by the
increasing debt burden of the U.S. consumer
and the reduction of home equity available in
the home. Although we have yet to see any
materially negative consequences of the
relaxation of credit standards, we believe the
risk of credit relaxation and leverage can't be
ignored. Importantly, a relatively new method
of loan forgiveness can temporarily alter the
perception of credit health in the housing
sector. In an effort to keep homeowners in
the home and reduce foreclosure expenses,
52
holders of mortgage assets are currently
recasting or modifying troubled loans. Such
policy initiatives may for a time distort the
relevancy of delinquency and foreclosure
statistics. However, a protracted housing
slowdown could eventually cause
modifications to become uneconomic and,
thus, credit quality statistics would likely
become relevant once again. The virtuous
circle of increasing homeownership due to
greater leverage has the potential to become
a vicious cycle of lower home prices due to
an accelerating rate of foreclosures.
53
undermine them. The most visible triggers of
the recent surge in sub prime delinquency
have produced calls for emergency
foreclosure avoidance interventions (as well
as front-end regulatory fixes). Whatever their
merit, I contend that a system of mortgage
delinquency management should be an
enduring component of housing policy.
Furtherance of housing and household policy
objectives hinges in part on the conditions
under which homeownership is obtained,
maintained, leveraged, and - in some
situations - exited. Given that high leverage
or trigger events such as job loss and
medical problems play significant roles in
mortgage delinquency independent of loan
terms, better origination practices cannot
eliminate the need for delinquency
management. One function of this brief essay
is to identify an existing rough framework for
managing delinquency. Legal scholarship
should no longer discuss mortgage
enforcement primarily in terms of foreclosure
law and instead should include other debtor-
creditor laws such as bankruptcy, industry
loss mitigation efforts, and third-party
interventions such as delinquency housing
counseling. In terms of analyzing this
54
framework, it is tempting to focus on its
impact on mortgage credit cost and access or
on the absolute number of homes
temporarily saved, but my proposed analysis
is based on whether the system honors and
furthers the goals of wealth building, positive
social psychological states, and community
development. Because those ends are not
inexorably linked to ownership generally or
owning a particular home, a system of
delinquency management that honors these
objectives should strive to provide fair,
transparent, humane, and predictable
strategies for home exit as well as for home
retention. Although more empirical research
is needed, this essay starts the process of
analyzing mortgage delinquency
management tools in the proposed fashion.
55
effect on private mortgage debt as well as
housing consumption by applying a model
where mortgage debt demand is derived
from house purchase decisions and is
determined jointly with housing consumption.
We use a simultaneous equation Tobit
estimation method. Wealth effects on private
mortgage debt, likelihood of borrowing, and
housing consumption are not elastic. On the
other hand, a change in housing consumption
affects the likelihood of borrowing elastically
much more than the private mortgage
amount of borrowers. Housing and private
mortgage markets fluctuate very closely with
the number of participants in the mortgage
market. Therefore, the number of housing
starts is linked strongly to the private
mortgage market.
56
relative risks of the borrowers who do and do
not receive commitments, commitment loans
could be safer or riskier on average than
other loans. the empirical results indicate
that commitment loans tend to have slightly
better than average performance, suggesting
that commitments generate little risk or that
this risk is offset by the selection of safer
borrowers.
57
lines of credit and have a higher rate of line
utilization. Firms experiencing more
uncertainty in their funding needs commit to
smaller credit lines. Almost all firms convert
unused credit line portions into spot loans
and take out new lines.
58
11) In november2000 Michelle J. White and
Emily Y. Lin had studied about the Bankruptcy
and the Market for Mortgage and Home
Improvement Loans. They studied that this
paper investigates the relationship between
bankruptcy exemptions and the availability of
credit for mortgage and home improvement
loans. We develop a combined model of
debtors' decisions to file for bankruptcy and
to default on their mortgages and show that
the theory predicts positive relationships
between both the homestead and personal
property exemption levels and the probability
of borrowers being denied mortgage
(secured) and home improvement loans. We
test these predictions empirically and find
strong and statistically significant support
when evidence from cross-state variation in
bankruptcy exemption levels is used.
Applicants for mortgages are 2 percentage
points more likely to be turned down for
mortgages and 5 percentage points more
likely to be turned down for home
improvement loans if they live in states with
unlimited rather than low homestead
exemptions. These relationships also hold
when we introduce state fixed effects into the
model.
59
12) In October 14, 2008 David P. Bernstein
had studied about the Home Equity Loans
and Private Mortgage Insurance: Recent
Trends & Potential Implications. They studied
about the impact of increased use of home
equity lines and decreased private mortgage
insurance (PMI) on mortgage markets. The
data confirms that in the years leading up to
the mortgage crisis home buyers and lenders
have aggressively used piggyback loans to
avoid taking out PMI on first mortgages.
Multiple-mortgage financing packages as a
percent of newly originated mortgages
(mortgages originated within the previous
five years) went from 14.8% in survey year
2001 to 21.5% in survey year 2007. The
multiple-mortgage percentage for seasoned
mortgages (mortgages originated more than
five years prior to the origination date) also
increased by a modest amount. Further
comparisons reveal a large decrease in the
proportion of mortgages with PMI with the
largest decreases in PMI coverage occurring
among newly originated multiple-lien
packages. Data from the SCF was used to
compare five financial characteristics (credit
card debt, installment loans, consumer
60
credit, home-owners equity, and liquid
assets) for multiple-lien versus single-lien
households. The comparisons suggest single-
lien households tend to have slightly stronger
financial variables than multiple-lien
households. The data does not support the
view that homeowners with multiple liens are
less risky and should therefore be allowed to
avoid PMI. The reduced use of PMI and the
increased use of home equity loans increased
mortgage holder risk in several different
ways and was a contributing factor to the
2008 mortgage and financial crisis. This
change in lending and borrowing behavior is
not a sub prime market problem.
61
specially targeted programs. Empirical results
show that individual credit characteristics
and financial factors, including pricing,
generally drive product choice, with some
variation evident when loans are originated
through brokers. Results also indicate that
targeted conventional programs effectively
compete with government-insured products
in the LMI segment.
62
market. Many states imposed moratoria on
both farm and nonfarm residential mortgage
foreclosures. Although moratoria reduced
farm foreclosure rates in the short run, they
appear to have also reduced the supply of
loans and made credit more expensive for
subsequent borrowers. The federal
government took a number of steps to
relieve residential mortgage distress and to
promote the recovery and growth of the
national mortgage market. The Home Owners
Loan Corporation (HOLC) was created in 1933
to purchase and refinance delinquent home
loans as long-term, amortizing mortgages.
Between 1933 and 1936, the HOLC acquired
and refinanced one million delinquent loans
totaling $3.1 billion. The HOLC refinanced
loans on some 10 percent of all nonfarm,
owner-occupied dwellings in the United
States, and about 20 percent of those with an
outstanding mortgage. The Great Depression
experience suggests how foreclosures might
be reduced during the present crisis.
63
explore the determinants of the international
pattern of home ownership using the
Luxembourg Income Study (LIS), a collection
of microeconomic data on fourteen OECD
countries. In most, the cross-section is
repeated over time and includes several
demographic variables carefully matched
between the different surveys. This allows us
to construct a truly unique international
dataset, merging data on more than 400,000
households with aggregate panel data on
mortgage loans and down payment ratios.
After controlling for demographic
characteristics, country effects, cohort effects
and calendar time effects, we find strong
evidence that the availability of mortgage
finance - as measured by outstanding
mortgage loans and down payment ratios -
affects the age-profile of home ownership,
especially at the young end. The results have
important implications for the debate on the
relationship between saving and growth.
64
Mortgage Disclosure Act (HMDA) rate spread
reporting. Following the Oaxaca (1973),
Blinder (1973), and Fairlie (2005)
decomposition techniques, this study
identifies the fraction of the increase due to
the flattening of the yield curve. Even after
controlling for changes in borrower risk
characteristics, the findings reveal that
during 2004-2006, the flattening of the yield
curve explains a significant amount of the
increase in rate spread reportable loans. This
is the case for both prime and sub prime
originations.
65
role of house price appreciation in providing
funds that may be used for consumer
spending or other purposes.
66
19) In July 2005 Gwilym B.J. Pryce and Patric
H. Hendershott had studied about the
Sensitivity of Homeowner Leverage to the
Deductibility of Home Mortgage Interest.
Mortgage interest tax deductibility is needed
to treat debt and equity financing of homes
equally. Countries that limit deductibility
create a debt tax penalty that presumably
leads households to shift from debt toward
equity financing. The greater the shift, the
less is the tax revenue raised by the
limitation and smaller is its negative impact
on housing demand. Measuring the financing
response to a legislative change is
complicated by the fact that lenders restrict
mortgage debt to the value of the house (or
slightly less) being financed. Taking this
restriction into account reduces the
estimated financing response by 20 percent
(a 32 percent decline in debt vs. a 40 percent
decline). The estimation is based on 86,000
newly originated UK loans from the late
1990s.
67
the 2004 and 2005 HMDA data have
engendered a lively debate over the pricing
of mortgage credit and its implications
regarding the treatment of minority
mortgage borrowers. We provide a unique
empirical assessment of this issue by using
aggregated proprietary data provided to us
by lenders and an endogenous switching
regression model to estimate the probability
of taking out a sub prime mortgage, and
annual percentage rate ("APR") conditional
on getting either a sub prime or prime
mortgage. We find that up to 90 percent of
the African American APR gap, and 85
percent of the Hispanic APR gap, is
attributable to observable differences in
underwriting, costing and market factors that
appropriately explain mortgage pricing
differentials. Although any potential
discrimination is problematic and should be
addressed, our analysis suggests that little of
the aggregate differences in APRs paid by
minority and non-minority borrowers are
appropriately attributed to differential
treatment.
68
Reinvestment and Credit Risk: Evidence from
an Affordable Home Loan Program. This study
examines the performance of home purchase
loans originated by a major depository
institution in Philadelphia under a flexible
lending program between 1988 and 1994. We
examine long-term delinquency in relation to
neighborhood housing market conditions,
borrower credit history scores, and other
factors. We find that likelihood of delinquency
declines with the level of neighborhood
housing market activity. Also, likelihood of
delinquency is greater for borrowers with low
credit history scores and those with high
ratios of housing expense to income, and
when the property is unusually expensive for
the neighborhood where it is located.
Chapter- 3
OBJECTIVE OF THE STUDY:
69
The aim of the study is to help HDFC to know
where it lacks in loans and how for the
performance of other banks is better so
that HDFC figure out the common
problems being faced by the customers
while dealing in the loan department so
that further HDFC can improve its
services and schemes offered by them
to their customers.
PROFITABLE PROPOSITION
70
make it easier to compare loans), lower
interest charges, waiver of loan application
processing fee and a customer friendly
attitude is reason enough to celebrate the
ascension of the home loan consumer as the
king.
71
one has paid until they are reduced from the
principal at the end of each year. Under
monthly rests, the principal is lowered by the
appropriate amount each month. The thumb
rule being that the more frequently interest is
calculated, the better for the creditor.
72
Chapter- 4
RESEARCH MYTHODOLOGY
74
in selecting a service and what are their
wants and expectations from a service
provider.
Sampling plan: After finalizing the
research approach and instruments a
sampling must be designed.
Sampling unit: Data have been
collected from banks.
Sampling size: It has been collected
from four banks.
Sampling procedure: what process
should be used to collect the sample.
So, representation sample, convenience
sampling is used.
Collect the information: After
completing all the steps, the data are
collected from different sources.
Analyze the information: After the
data is collected they are analyzed to
know the findings. The data is then
tabulated to develop the frequency
distribution.
Present the findings: As the last step,
the findings are presented that are
relevant to the major marketing
decisions.
75
Chapter- 5
ANALYSIS OF DATA
76
ROI(FIXED) 14% 1 -5 Yrs. Up to 5yrs- Year 1 -
-16% 9.25% (up to 8%
5 - 10 20 lakh) Year 2 & 3
Yrs. - 16 & - 9%
% 10 -15 10% (above
Yrs. - 20 lakh)
16%
5 to 10yrs-
15
10%
-20Yrs-
(up to 20
13.75%
lakh)
&
10.25%
(above 20 lakh
)
10 to 20 yrs-
10.50% (up to
20 lakh)
&
10.75%
(above 20
lakh)
ROI(FLOATING) Up to 30lakh- 1 - 5 Up to 5yrs- Year 4
8.75% Yrs.- 16 8.75% (up to onwards -
30 lakh-50lakh- % 20 lakh)
9% 5 - 10 &
Above50lakh- Yrs.- 9.50% (above up to 50
9.25% 11.25 % 20 lakh) lakh-
77
10 - 15 9.25%
Yrs.-16
% over 50
15 - 20 5 to10yrs-9% lakhs-
Yrs- 16 9.75%
(up to 20
% lakh)
&
9.50%(above
20 lakh )
10 to20yrs-
9.25% (up to
20 lakh)
&
9.75% (above
20 lakh)
78
COMPARISON OF MAJOR PLAYERS
79
Faster rise 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).
80
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.
81
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.
82
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
83
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.
84
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 fixed a
home loan at significantly lower rates
(at times you can get a discount of as
high as 0.50 percent). Here again get a
confirmation of the rate (and for how
long it will remain fixed) via a letter.
85
approval. Also do not borrow more
money than you need or can afford.
86
The RBIs position is that lending such sums
will remain additional risk for the bank. In
case of default, the bank may not have
sufficient collateral security to recover dues
and may have to write off the additional
borrowings. However, the bankers do not
seen unduly worried. Nonperforming assets
in the housing segment are quite low below
1% and that, say bankers, is due to the
higher asset quality.
STRENGTHS
87
1) The industry has been witnessing very
fast growth rate, which is 6% growth in
the first
2) Quarter of 2002-2003 as against 3-5%
growth recorded in the first quarter of
2001-2002
3) The market faces a high demand curve,
thoroughly mismatched by a low supply
curve
4) Investment is based in assets that are
securities & those that have historically
appreciate rapidly.
5) Tax benefit & other facilities provided
on loan repayments.
WEEKNESSES
1) The foreclosure rules of court of law
such as provision regarding the
ownership of not more than one house
(in Delhi) binds the industry.
2) The healthy of an HFC depend upon its
ability to mob up low cost funds.
3) AN HFC is unable to tap the rural market
due to lack of proper retrieval
procedures so whilst
4) The rural market offers a higher rate of
return; it has a higher risk & default
rate.
88
5) Many legal impendent exist, deferring
purchase of certain types of property
beyond a
6) Certain extent thereby negatively
impacting weak mortgage laws,
resulting in an increase in risk compo
ending this.
OPPORTUNITIES
89
Creditworthiness of the prospective
client and providing for group securities.
5) The roles of NHB in refinancing &
providing regulation of housing finance
system.
6) The governments initiatives to promote
the sector & its contribution in uplifting
the sector.
THREATS
The industry faces increased competition as
more & more foreign backs & Housing
Finance Companies are providing loan facility.
STRENGTH
WEAKNESS
90
Product is very good but it is mainly suitable
for higher income group & is not suitable for
the Middle income group
OPPORTUNITIES
THREATS
91
HISTORY
OVERVIEW
92
home improvement. Besides the companies
also offers loans for commercial property and
loans against existing property. The loans are
offers foe tenors up to 30 years. The
company has also introduced several
customers friendly services such as door
step services, know your loan on phone
facility and ICICI home search free property
brokerage services. ICICI Personal Financial
Services Limited (ICICI PFS) formerly ICICI
credit was one of the first four companies to
obtain registration as non banking financial
banking companies(NFBc) from the reserve
bank of India (RBI)on sep 10, 1997 under the
new section 45 I A of the RBI act ,1939.
93
Corporation Limited to (ICICI PFS) effective
march 22, 1999.
a) FIIS
b) OCBS
c) OFFSHORE FUNDS
d) VENTURE FUNDS
2) Overseas government agencies.
94
3) Institutional looking for proprietary
investment.
4) Mutual funds
5) Private investment companies
6) Large corporate
7) High net worth individual
95
condition being that ICICI Bank has Home
Loans operations in both the cities.
PERSONAL BANKING
96
security, flexibility of operations & maximum
returns.
The various services provided under this is as
follow:
1) Maximum cash-saving account
2) Quantum fixed deposits
3) Quantum optima value added saving
account
4) Money plus-current act
5) ATM
6) Treasure chest cocker facility
7) Power pay roll
8) Retail treasury instruments
CORPORATE BANKING
MOBILE COMMERSE
ICICI bank now brings back account & ICICI
credit card to customers fingertips .with
mobile commerce customer can perform a
wide range of query based transaction from
their orange tm (Mumbai) & Airtel (DELHI)
mobile phone , without even making a call.
97
4) Mini statement listing of last three
transactions5) Request for account
statements (by mail or fax)
ICICI
1) Attractive IR
2) Door step service from enquiry stage till
the final disbursement.
3) No guarantor required.
4) Can transfer your existing high interest
rate loan.
5) Special 100% funding for special
properties.
99
ICICI Bank Home Loans, Indias leading
Home Loans Provider, offers attractive
interest rates and unbeatable benefits to
ensure that you get the best deal. Keeping
your convenience in consideration, we ask
you for minimal mandatory documents for
the sanctioning of your home loan, to keep
the process totally hassle-free.
100
Profit & Loss Account certified by Chartered
Accountant for last 2 years (3 years for Home
Equity) (both for business and personal of
partners/directors)
Bank statement for the last 6 months from
operating account
Repayment Track record of existing loans /
Loan closure letter
Board Resolution in case of a company
Proof of existence
Office Address Proof
HOME LOAN
LOAN AMOUNT
101
A number of factors are taken into
account when assessing repayment
capacity.
Customer income, age, number of
dependents, qualification, asset
&liabilities, stability and continuity of
customer employment. Business is one
of them. However there are ways by
which you can enhance your eligibility.
If the customer spouse is earning put
he/she as a co-applicant. the additional
income shall be included to enhance the
loan amount. Incidentally, if there are
any co owners they must necessarily be
co-applicant customer fiances income
can also be considered sanctioning the
loan on your combined
Income .the disbursement of the loan,
however will be done only after the
submit proof of Marriage. Providing
additional security like bonds, fixed
deposits & LIC policies may also help to
enhance Eligibility.
While there is no need for guarantor, it
could be that having one might enhance
your credibility with us. If so, our loan
officer would provide customer with
positive necessary details.
102
The final act to be sanctioned will
depend on your repayment capacity.
However, what customers ultimately are
entitled to will have to conform within
the limits fixed for each loan.
Also when the company looks at the
total cost, registration charges, stamp
duty, transfer charges are also included.
HOMELOAN
103
negotiating the best price. Help the legal
documentation.
LISTINGS BELOW ARE THE STEP
INVOLVED IN AVAILING OF A HOMELOAN
104
If the HFC is satisfy as to the legal &
technical aspect of the document then
the applicant is called to sign the loan
agreement
The loan disbursement schedule is
decided by the HFC according to the
stage of construction (If property under
construction) or a onetime payment is
made if property is ready for Possession.
The applicant gets possession of the
property depending upon the level of
completion of the property.
The applicant can start paying the EMIs.
DISBURSEMENT
105
technical verification to ensure that they
have full right to their home.
The 230 a clearance of the sellers or 371
clearance from the appropriate income tax
authorities (if applicable) is also needed on
satisfactory completion of above, on
registration of conveyance deed and on the
investment of your own contribution, the loan
amount (as warranted by the stage of
construction) will be disbursed by ICICI.
The disbursement will be in favor of the
builder/seller.
106
Your loan will be disbursed after you identify
and select the property or home that you are
purchasing and on your submission of the
requisite legal documents.
Disbursement Documents
107
Photograph, Identity Proof, Address Proof,
Signature Verification and Income
documents, if applicable)
AMOUNT
TENURE
108
Generally the maximum tenure of home
loans is 15 years, with a few lenders offering
tenure of 20 years or more. ICICI offers 15
year loan. The longer the tenure, the more
one pay in total interest but ones monthly
payment will be less. So depending ones
earning potential & bank balance one can
choose an appropriate tenure. An important
requirement of most of the banks/ HFCs is
that one pays up the entire loan before one
retires. One can always prepay ones entire
loan amount before it is due. There is a trend
to do away with the pre-payment penalty
being imposed by some lenders. So its best
one checks on this as well.
INTEREST RATE
109
Tenure Interest Type Interest Rate
REFINANCE
MISCELLANEOUS CHARGES
110
the processing fee and administration fees
amount to. A 0.5% administration fees and
0.5% processing fee on say, a Rs.500000
loan would be Rs.5000. other timesit could
be just one fee (either administration or
processing but could yet work out to be much
more if it is considerably higher at, say, 2.5%
or 3%. The various other fees, which one is
required to pay along with the margin
amount are:
INTEREST TAX:
PROCESSING CHARGE
PREPAYMENT PENALTIES
111
When the loan is paid back before the nd of
the agreed duration a penality is charged by
some banks or companies, which is usually
between 1% and 2% of the amount being
prepaid.
OTHERS
BENEFITS
Some of our key benefits are:
Guidance through out the process
112
Home loan amounts suited to your
needs
Home Loan tenure upto 20 years
Simplified documentation
Doorstep delivery of home loan papers
Sanction approval without having
selected a property.
Free Personal Accident Insurance (Terms
& Conditions)
Insurance options for your home loan at
attractive premium
INTRODUCTION
113
doorstep. Around 2400 offices come under
the network of Centralized Banking Solution
or CBS. A need for centralized banking
system prompted PNB to go computerized
and what followed was the establishment of
CBS in Punjab National Bank branches in all
the leading cities like Delhi, Pune, Chennai,
Mumbai, Ahmedabad, Chandigarh, Gurgaon,
Hyderabad, Jalandhar, Kolkata, Ludhiana,
Nodal and Bangalore. Internet Banking
Services are provided to all customers in the
CBS branches. A branch and ATM locator is
also available on the official website of
Punjab National Bank. For an overview of the
annual report or the bank profile, the site can
be resourceful. The website also provides info
on the careers and recruitments at PNB and
the exam results. The careers at nationalized
banks like PNB are the most sought after one
and candidates are selected on the basis of
their exam result. PNB topped the Best
Paying Commercial Bank category with an
overall rating of 87.45% as evaluated by the
SSS Retirement, Death & Funeral Benefits
Program.
PROFILE OF PNB
114
The profile of the PNB shows superior
banking services in corporate, personal
and international banking, industrial and
agricultural finance and finance of trade.
Punjab National Bank boasts of a varied
clientele consisting of small and medium
industrial units, exporters, multi-national
companies, Indian conglomerates and NRI.
The Bank is changing outdated front and
back end processes to modern customer
friendly processes to help improve the total
customer experience. With about 8500 of its
own 10000 branches and another 5100
branches of its Associate Banks already
networked, today it offers the largest banking
network to the Indian customer. The Bank is
also in the process of providing complete
payment solution to its clientele with its over
8500 ATMs, and other electronic channels
such as Internet banking, debit cards, mobile
banking, etc.The objectives of the Company
are in line with objectives laid down by RBI
for the Primary Dealers:
115
Ensure the development of underwriting
and market making capabilities for
Government Securities
Improve secondary market trading system,
which would contribute to price discovery,
enhance liquidity and turnover and
encourage voluntary holding of Government
securities amongst a wider investor base
Become an effective conduit for
conducting open market operations.
PNB HISTORY
116
was fully privatized. The joint sale by the
Philippine government and the Lucio Tan
Group of the 67% stake in PNB was
completed within the third quarter of 2005.
The Lucio Tan Group exercised its right to
match the P 43.77 per share bid offered by a
competitor and purchased the shares owned
by the government. The completion of sale is
expected to speed up the development of
PNBs franchise and operational
competitiveness.
117
Punjab National Bank (PNB), has announced
that it has completed 100% core banking
implementation at all its 4604 branches and
extension counters through the Finical
Universal Banking Solution from Infosys, on
Sun infrastructure and the Oracle Database
setting a significant milestone for themselves
and a new benchmark for the Indian banking
industry. Completed in November 2008, 4
months ahead of schedule, the bank
implemented industry-leading Finacle core
banking solution from Infosys across its
operations running a flexible, and scalable
database platform from Oracle and
innovative servers from Sun Microsystems
With an increasingly dynamic business and
regulatory environment, PNB sought to not
only achieve automation, but also centralize
operations, standardize branch processes,
achieve high scalability for future business
growth, provide flexibility of creating
innovative banking products to its lines of
business, and at the same time, reduce
overall costs. The visionary zeal and the
futuristic view of the Banks top management
in the year 2007-2008 incubated the idea of
introduction of a Centralised Banking
solution. The bold and innovative thought
118
culminated into the CBS architecture with
Finacle application on Oracle Database and
Sun hardware platform with Solaris Operating
System. With Finacles agile and future proof
technology, the bank today has over 22,500
concurrent users. The solutions scalability
has also enabled the banks scalability to be
the best in the country with the number of
peak transactions at 3.5 million. Finacle core
banking platform also provides the bank with
exceptional agility for product innovation and
improved flexibility of operations. With
seamless integration of delivery channels
such as ATM and internet banking solutions,
PNB is able to provide 24X7 services to
customers at a reduced transaction cost.
PNBs choice of the Oracle Database has
provided the banks IT infrastructure with
robustness, management features, security
and scalability as well as performance
requirements to service 3.5 million
transactions and 22500 concurrent users a
significant achievement in the Indian banking
industry. In addition, the Oracle Database will
help PNB take control of its enterprise
information, gain better business insight, and
quickly and confidently adapt to an
119
increasingly changing competitive
environment.20
120
REGULAR HOUSING FINANCE
SCHEME FOR PUBLIC
PRODUCTS
121
loan repayment is in Equated Monthly
Installments (EMI) over a maximum period of
20 years.
PNB Ghar Sudhar Yojana home loans are
offered for up gradation, renovation or repair
of house/flat. It includes among others,
internal and external repairs, water proofing,
roofing, flooring, electrical, woodwork etc.
The loan amount ranges from a minimum of
Rs 50,000 to a maximum of Rs. 1000000.
Borrower's minimum contribution will be 25%
of the estimated cost of repairs/renovations
INDIVIDUAL
For construction/purchase of house/flat: -
75% of the cost of construction of house or
purchase of house/flat. Cost of car parking up
to the maximum extent of 5% of the cost of
flat/house can also be included in the cost of
the project. For carrying out repairs/
renovations/ additions/ alterations: - 75% of
the estimated cost subject to maximum of
Rs. 20 lacs.
122
PRODUCT RANGE OF
COMPANY/INDUSTRY:
NRI services
International banking
Corporate banking
Agricultural banking
International banking
ELIGIBILITY
DOCUMENTS NEEDED
1. Proof of identity
2. Proof of income
3. Proof of residence
123
4. Bank statement or Pass Book where salary
or income is credited.
5. Education Certificate
6. Photos
7. Salary slips & form 16
8. Income tax return last 3 years along with
balance sheets.
9. Assets liabilities statements.
10. Documents of property.
11. Estimate of construction.
12. Guarantor
EXTENT OF LOAN
124
For construction/purchased of house/flat 75%
of the cost of construction or purchase of
house/flat. For carrying out
repairs/renovation/additions/alternation: -
75% of the estimated cost subject to
maximum of Rs. 20 lacs. Loan up to Rs. 20
lacs for purchase of land/plot
Loan is available maximum up to Rs. 2 lacs
for furnishing
CHARGES
TENURE:
125
You can repay the loan over a maximum
period of 25 years under both FRHL and
ARHL in SBI . 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.
RATE OF INTEREST
126
20 yrs
& upto
25 yrs.
DOCUMENTATION CHARGES
Rs. 1350 + Service Tax
UPFRONT FEE
For loans up to Rs. 300 lacs = 0.50% of the
loan amount with a cap of Rs. 20,000/-
For loans above Rs. 300 lacs =0.90% of the
loan amount
REPAYMENT
1. Loan is to be repaid in equated monthly
installments within a period of 25 years or
before the borrower attains the age of 65
years.
127
2. Repayment of loan for repair/ renovation/
addition/alteration has, however been
restricted to 10 years. Father/Mother can also
be made co-borrower in cases property is in
single name of his /her son and also clubbing
of their income is permitted for determining
eligibility criteria. Minimum 24 advance
cheque should be obtained as and when, 6
cheques remain, fresh lot to be obtained out
of 24, 23 cheques should be of the amount
equal to the balance. Loan is to be repaid in
EMI within a period of 25 years or before the
borrower attains the age of 65 years.
SECURITY
128
to 125% of the loan amount by way of
mortgage of some other property or pledge
of bank's FDR/ LIC policy/ Govt. Securities,
NSCs, KVPs, IVPs, / PSU Bonds etc. has to be
provided
FEATURES
129
Without approved Map.
PRE- PAYMENT CHARGES
130
STATE BANK OF INDIA
INTRODUCTION
131
Jaipur (SBBJ),State Bank of Hyderabad
(SBH).State Bank of India (SBI),State Bank of
13 Indore (SBIR),State Bank of Mysore
(SBM),State Bank of Patiala (SBP),State Bank
of Saurashtra (SBS) and State Bank of
Travancore (SBT). Today, State Bank of India
(SBI) has spread its arms around the world
and has a network of branches spanning all
time zones. SBI's International Banking Group
delivers the full range of cross-border finance
solutions through its four wings - the
Domestic division, the Foreign Offices
division, the Foreign Department and the
International Services division.
PROFILE
132
The Corporate Banking Group consists of
dedicated Strategic Business Units that cater
exclusively to specific client groups or
specialize in particular product clusters.
Foremost among these a specialized group is
the Corporate Accounts Group (CAG),
focusing on the prime corporate and
institutional clients of the countrys biggest
business centers. The others are the Project
Finance unit and the Leasing unit. The
National Banking Group also delivers the
entire spectrum of corporate banking
products to other corporate clients, on a
nationwide platform. The bank is also looking
at opportunities to grow in size in India as
well as internationally. It presently has 82
foreign offices in 32 countries across the
globe. It has also 7 Subsidiaries in India SBI
Capital Markets, SBICAP Securities, SBI DFHI,
SBI Factors, SBI Life and SBI Cards - forming a
formidable group in the Indian Banking
scenario. It is in the process of raising capital
for its growth and also consolidating its
various holdings. Throughout all this change,
the Bank is also attempting to change old
mindsets, attitudes and take all employees
together on this exciting road to
Transformation. In a recently concluded mass
133
internal communication programme termed
Parivartan the Bank rolled out over 3300
two day workshops across the country and
covered over 130,000 employees in a period
of 100 days using about 400 Trainers, to
drive home the message of Change and
inclusiveness. The workshops fired the
imagination of the employees with some
other banks in India as well as other Public
Sector Organizations seeking to emulate the
programme.
HISTORY
134
Today, State Bank of India (SBI) has spread
its arms around the world and has a network
of branches spanning all time zones. SBI's
International Banking Group delivers the full
range of cross-border finance solutions
through its four wings - the Domestic
division, the Foreign Offices division, the
Foreign Department and the International
Services division.
135
is even more remarkable as we have added
one million cardholders in just ten months.
Our objective is to accelerate the pace of
growth by extending the benefits to a
broader range of consumers in Tier II cities,
along with improved value propositions for
the urban affluent customers." SBI Card
recently signed up Indian cricketer Yuvraj
Singh as its brand ambassador.
136
he said adding they would be amazed by the
bank's growth. The bank should be proud of
the achievement he said and wished that the
bank opened one lakh branches. The Minister
said out of the over 100 crore people,
seventy 75 per cent did not have any type of
insurance. Similarly, 50 per cent of the 11
crore farmers did not have bank account.
Banks should go to the people and enroll
them as account holders. 'That is what
economists say is financial inclusion,' he said.
137
SBI Freedom : Pledging other financial
security than mortgaging the house
SBI Max Gain : Operate your home
loan account like your SB or Current
Account
PRODUCT RANGE OF
COMPANY/INDUSTRY:
138
A complimentary international ATM cum
Debit card is also provided by SBI.
On the spot "in principle" approval is a
special provision for the applicant.
If all the required documents are
submitted by the applicant, SBI Home
Loan is sanctioned within 6 days of the
date of submission.
The applicant can also consider SBI's
Home Loan as a Term Loan or as an
Overdraft facility, in case he/she wants
to save on interest and maximize gains.
SBI Home Loan also provides free
personal accident insurance cover up to
Rs 40 Lakhs.
Repayment is permitted up to 70 years
of age, which is an added advantage of
SBI Home Loan.
139
2. SBI Advantage Home Loan
3. SBI Housing Finance Scheme
4. SBI Happy Home Loans
5. SBI Life Style Loan
6. SBI Green Home Loan
7. SBI Home Plus
8. SBI Home Line
9. SBI MY HOME CAMPAIGN
PRODUCTS
ELIGIBILITY
140
The minimum age of the applicant is 18
years, on the date of the sanction of the loan.
The maximum age limit for a Home Loan
applicant is 70 years. It is the maximum age
limit, within which the loan should be fully
repaid. The applicant should consist of
sufficient, regular and continuous source of
income for repaying the loan.
DOCUMENTS
141
INTEREST RATE (SBAR is currently
11.75%)
Year 1 - 8% fixed
Year 2 & 3 - 9% fixed
Year 4 onwards - For loans up to 50 lakhs,
9.25% floating.
For loan amount over 50
lakhs, 9.75% floating
LOAN TENURE
143
extend beyond your age of retirement (if you
are employed) or on your reaching 65 years
of age, whichever is earlier.
PROCESSING FEE
PREPAYMENT CHARGES
144
Chapter- 6
OF THE STUDY
145
police officers etc. this aspect must be
exploited.
Adoption of flexible & more lenient
penalty should the
Customer fails to deposit the payment
on time. The penalty should be case to
case basis rather than the same for the
entire customer base.
Restriction to be reduced to bare
minimum for loan advances & for
repayment. For e.g. offers Long term
repayment facilities & have no age
restriction to choosing repayment. The
maximum age for repayment could be
increase to 65-70 years of age. Such
facility will grow fast retail segment of
the bank.
Offer multiple repayment loans services.
Class to be exploited by offering special
reduced
Rates & linking the repayment from the
source where the pay cheque to the
employee is issued. This need to
undergo special contract with
government organization to ensure
implementation.
146
Chapter- 7
CONCLUSION
147
BIBLIOGRAPHY
REFERENCES BOOKS
WEB SITES
148
https://www.sbi.co.in
www.hdfc.com/loans/home-loan
www.icicibank.com/Personal-
Banking/loans/home-loan
https://www.pnbindia.in/En/ui/PNBFlexi
bleHousingLoan
www.bankbazaar.com Loans
www.policybazaar.com/home-
loans/home-loans-india.
www.allbankingsolutions.com/Lowest-
Interest-Rates-for-Home-Loans.htm
149