Krutesh Tandel Project1

VEER WAJEKAR ARTS, SCIENCE AND COMMERCE COLLEGE,
TAL-URAN DIST-RAIGAD PIN-400 702
SUBMITTED BY
Krutesh Raghunath Tandel
Roll No.: 22773
T.Y.B.M.S. SEMESTER – VI
Study on Factors Affecting Consumer's Buying Behavior towards Home

Loans
PROJECT GUIDE
RENU SAROJ
SUBMITTED TO
UNIVERSITY OF MUMBAI
Year- 2022-2023
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INDEX
Sr. No Topics Page no.

1. Introduction 3
 History of Home Loan 6
 Type of home loan 11
 Objectives of home loan 19
 Features of home loan 21
 Importance of home loan 26
 Benefits of home loan 27
 Structure of home loan 29

31
 Home loan interest rate future predictions
 Study on Factors Affecting Consumer's Buying
35
Behavior towards Home Loans
 Review of literature
36
 Dealing with difficulties of customer
46
 Type of home loan taken by Respondents
48
 Conclusion
50
 References
52
 Type of loan
55
 Advantage and Disadvantage of Home loan
66
 Types of interest rate
71
2. Keywords 75
3. Procedure 78
4. Findings 81
5. Declaration 84
6. Certificate 85
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Introduction
The concept of housing finance and the housing finance systems has been evolving over time.
According to Loic Chiquier and Michael Lea, “Housing finance brings together complex and
multi-sector issues that are driven by constantly changing local features, such as a country‟s
legal environment or culture, economic makeup, regulatory environment, or political system”.
The demand for housing has increased day by day.
Housing finance plays an important role as an engine of equitable economic growth though the
reduction of poverty and prevents slum proliferation in economy. To meet the growing housing
demand the government needs to provide the finance for housing to the people. The housing
finance sector in India has experiences unprecedented change in its structure since its
formulation stage of being a solely a government undertaking to a very competitive sector with
a large number of financing entities all over India. The housing finance sector in India has
experienced the unprecedented change in its structure since its formulation stage of being a
solely a government undertaking to a very competitive sector with a large number of financing
entities all over India. The paper aims to study the various factors that influence the decision
of the consumer for taking Home Loan.
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The paper focuses on the Home loan offered by LIC and SBI and makes a comparative analysis
of the factors that affect the consumers. The paper has a practical implication both for the
academicians and for the readers regarding their concern with the aspect issues regarding
factors influencing the buyer behaviour towards Home loans. The paper is original and the
highlights of the paper can be used for further research purpose and provide the knowledge
base to the readers. The concept of housing finance and the housing finance systems have been
evolving. According to LoicChiquier and Michael Lea, “Housing finance brings together
complex and multi-sector issues that are driven by constantly changing local features, such as
a country’s legal environment or culture, economic makeup, regulatory environment, or
political system.” The demand for housing has increased day by day. Housing finance plays an
important role as an engine of equitable economic growth though the reduction of poverty and
prevents slum proliferation in the economy.
To meet the growing housing demand the government needs to provide the finance for housing
to the people. The housing finance sector in India has experienced the unprecedented change
in its structure since its formulation stage of being a solely a government undertaking to a very
competitive sector with a large number of financing entities all over India. Home is a place
where we relax after coming back from our day’s tiring work; it is the place where we can give
time to our family and spend beautiful moments with them.
After years of thinking, anticipating, saving and research, we finally decide to build our dream
house. At the time, finance is the major criteria which pull back everyone from moving towards
the cherished goal. To acquire a home which can be christened as our ‘Own House’ is a life-
time decision and has to be made with efficient planning and requires huge finance. Our Dream
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Home is not far away with a Home Loan which will fulfill our dream into a reality. Home Loan
is a Secured Loan offered by a bank against the security of a house/property which could be a
personal property or a commercial one. It is a loan collected by a borrower from a bank issued
against the property/security intended to be bought on the part by the borrower giving the
banker a conditional ownership over the property, i.e., If the borrower has failed to pay back
the loan, the banker can retrieve the finance by selling the property.
This research paper studies the factors influencing customers' choice while borrowing a home
loan in Pune. Maharashtra. A survey of 123 individuals was conducted through a questionnaire
to examine which factors are taken into consideration by individuals while borrowing a housing
loan and how these factors differ among the individuals who have already taken a loan and
who are planning to take a loan. The variation in the consideration of factors according to
demographics is also analysed. Since Pune is one of the rapidly growing cities of India, it
receives a large member of migrants coming for educational purposes, better job opportunities
and hence they tend to settle here due to better standard of living and thus demand for housing
also increases. Therefore, recognizing the demand of customers becomes important for the
financial institutions offering home loan packages to attract more customers. This study can be
helpful for formulating better home loan packages catering to the requirements of the customers
in the region.
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History of Home loan
Own a home. There will probably be changes, especially in such areas as interest rates, simply
because the housing market changes at different times, depending on the national economy.
Real estate is currently one of the fastest growing sectors in India. The banking sector is also
registering the profitable business for the last few decades, with the growth of real estate.
Majority of the banks are also offering easy home loans at attractive rates to their customers.
Now that getting a home loan is so easy, it seems everyone can fulfill his / her long-cherished
dreams of purchasing lands, building their houses and expanding their homes. A home loan, or
mortgage, is a secured loan that borrowers obtain to purchase a home. As a home is the largest
purchase many individuals will ever make, most borrowers prefer home loans. Most loans paid
for promptly result For many years, the only way to obtain money to purchase a home was to
apply for a conventional home loan.
This type of loan was obtained through a bank, credit union or other private, non-government-
affiliated financial institution. In 1938, the Federal National Mortgage Association, better
known as “Fannie Mae,” was created and established as a federal agency by the President Mr.
Franklin Roosevelt as a part of his New Deal. This made it possible, even during those days,
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when most people had little income were still be able to afford a home. In 1970, the Federal
Home Loan Mortgage Corporation, known as “Freddie Mac,” was created to lessen the
“monopolization” of home lending that Fannie Mae enjoyed. Both Fannie Mae and Freddie
Mac, once considered as “government” auspices, are private establishments now. World War
II came along, and hundreds of citizens went to war. When it ended, they returned home to
pick up their lives where they had left off, or to start a new life.
These people needed places to live, so the Serviceman’s Readjustment Act of 1944, Public
Law 78-346, was enacted. This made it possible for veterans to borrow money for the purchase
or building of a house. Several major changes in the Act have been made in the years since
1944, allowing veterans of subsequent wars, such as Korea, Vietnam and, most recently, the
Gulf wars, to have the same advantages in obtaining home loans. All home loans---
conventional, VA, Fannie Mae, and Freddie Mac--accomplished the same goal: they allowed
people to become homeowners. The Veteran’s Administration, Fannie Mae and Freddie Mac,
however, provided a level of protection for the loans and those involved with them that other
financial institutions might not necessarily have. Having different types of home loans to
choose from allow more people to be able to own their own home. Depending on the terms and
conditions, it may be easier to obtain a loan from one entity than from another. As long as there
are financial institutions that will make home loans, there will be the opportunity for people to
in a positive notation on credit reports, meaning that borrowers may be able to qualify for larger
loans at better interest rates
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Banking in India is very old. Nationalised banks are in existence since 1969. However,
Home Loans are a comparatively new product. In the 1970s, there was no concept of Home
Loans in India. HDFC was the only organized player in the Home Loan market.
The first Home Loan borrower
The credit for availing the first Home Loan goes to one D B Remedios took a Home Loan
of 30,000 from HDFC in 1978 to construct his house in Malad, Mumbai. The total cost of
the house was 70,000. Thus, you can see that Home Loans are just four decades old.
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The Home Loan scenario
In the past, the mentality of the people was to save and purchase. People used to dip into
their Provident Fund savings and retirement benefits to raise money for constructing houses.
HDFC started the trend of Home Loans in 1978. Banks were reluctant to finance Home
Loans because there was no recovery mechanism in place. The only recourse available to
banks was to file a civil suit in the court of law. The litigation expenses were higher than
the actual loan amount.
It can surprise you that the Home Loan interest rates were around 11-14% up to 1994.The
average age of the Home Loan borrower was about 42 years with the average amount of
loan being 39,000 (Source HDFC).
With the opening of the economy in 1991, banks started to enter the Home Loan market.
ICICI Ltd (later on merged with ICICI Bank) ventured into the Home Loan market in 1999.
The year 2000 saw the introduction of the floating rate concept by ICICI Bank. The rates
started plummeting from around 2003-04 when floating rates for Home Loans were in the
range of 7% to 7.25%. The fixed rates were around 7.5-8%.
State Bank of India entered the market in a big way and introduced the teaser rate concept.
They could afford to do so because of the high proportion of CASA (Current Account
Savings Account) deposits. Other banks did not have this advantage. They resorted to
measures like maintaining high Loan to Value (LTV) ratios to attract customers.
During the early days of Home Loans, the LTV ratio used to be less than 50%. The increase
in the competition saw the LTV ratios go up to even 120%. Subsequently, the Reserve Bank
of India (RBI) capped it at 80%. Banks have the freedom to go up to 90% in case the loan
is for less than 30 Lakhs.
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SARFAESI Act 2002
Before 2002, there were no regulations to deal with defaults on home loans. There was a
need for strong legislation. The introduction of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act (SARFAESI) in 2002 gave banks
the power to deal with Home Loan defaults. This Act encouraged the banks to foray into the
home loan sector.
The freeing of the interest rate regime:
With the opening of the economy, the RBI gave banks the freedom to fix their rates of
interest on Home Loans depending on the cost of funds. It blew out into an interest rate war
with banks competing against each other to offer the best rates to the customers. There was
a spate of Home Loan offers from banks trying to entice customers.
Even today, the floating rate regime is prevalent in the industry. Some banks offer fixed
rates but only for a specific period, after which they convert to the floating rate concept.
The growth of the Home Loan sector
As banks started feeling comfortable giving Home Loans, customers began availing them.
Hence, the average age of the Home Loan borrower began reducing. Today, the average age
is around 32 years. Customers have realised that taking a Home Loan to buy a house is
better than doing so with their savings. The Government of India has played the role of the
catalyst in the growth of the Home Loan sector by introducing concessions in income tax
for home loan borrowers.
Today, these concessions are one of the principal reasons why people opt for home loans.
Banks have also come up with various new products like Home Loan Balance Transfers,
loans for purchase of plots, loans for home renovation and improvement, and so forth.
Today, home loans constitute a significant portion of the bank’s loan portfolio.
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TYPES OF HOME LOAN
Lenders offer home loans, not only for buying a house but also for a variety of other purposes.
Some of the popular types of home loans available in the financial market are described below.
 Loans for Purchase of Land
Several banks offer loans for land purchase. Purchasing a land is a flexible option,
the buyer can save funds and construct a house whenever his finances allow or just
have the land as an investment. Up to 85% of the cost of the land is given as loan by
lenders like Axis Bank.
Eligibility Criteria for Purchase of Land
The following are the eligibility criteria for purchase of land:
Documents Needed for Home Purchase Loan
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Given below are the documents that are needed to apply for home purchase loan:
 Proof of Age: Birth certificate, Std.10 marksheet

 Proof of Address: Voter ID card, Aadhar Card, Utility Bills
 Proof of Income: Salary slip, Income Tax Returns (ITR) details
 Identification proof: Permanent Account Number (PAN ) card, Voter ID,
Passport
 Property related documents
 Existing loan documents
 Loans for Home Purchase
The most popular type of home loan is the loan for purchase of a new or a pre-owned
home. This loan is also commonly available and is offered by many banks in different
variants. The interest rate is either floating or fixed and generally ranges anywhere
between 9.85% and 11.25%. Also, 85% of the total amount is offered as a loan by
many banks.
Eligibility Criteria for Home Purchase Loans
The following are the eligibility criteria for home purchase loans:
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Documents Needed for Home Purchase Loan

 Proof pf Income: Salary slip, Income Tax Returns (ITR) details
 Identification proof: Permanent Account Number (PAN) card, Voter ID,
Passport
 Documents of property
 Existing loan documents (if any)
 Loans for Construction of a House
This loan is specially designed for people who want to construct a place according to
their wishes rather than buying a pre-constructed house. The approval process for
this type of loan is different for it takes into account the cost of plot also. The most
important clause when applying for a home construction loan is that the plot must
have been purchased within a year for the plot cost also to be included in the loan
amount. The loan amount is decided based on a rough estimate of the construction
cost. The amount may be disbursed at one go or in multiple installments. Popular
home construction loans include the schemes offered by Bank of Baroda, UCO Bank
and Canara Bank.
Eligibility Criteria for a Loan for Construction of a House
The following are the eligibility criteria for home purchase loans:
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Documents Needed for Loan for Construction of a House

 Proof pf Income: Salary slip, Income Tax Returns (ITR) details
Passport
 Existing loan documents (Optional)
 House Expansion or Extension Loans
Want another balcony or an additional bedroom? No worries, some banks also offer
loans for house expansion including alteration of current structure and construction
of new rooms. HDFC Home Extension loan and house renovation loan offered by
Bank of Baroda are popular in this category.
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Eligibility Criteria for Home Expansion or Extension Loans
Given below are the eligibility criteria for home expansion or extension loans:

Passport
 Existing loan documents
 Home extension or property related documents
 Loans for Home Improvement
Renovation and repair works like external and internal repair, painting, construction
of overhead water tank and electrical renovation certainly will make your house look
better. But if you lack the finances for repair and renovation, banks like Union Bank
of India,Vijaya Bank offer specialized home improvement loans.
Eligibility for Home Improvement Loan
The following are the criteria for home improvement loan:
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Passport
 Original Property Title Deeds
 Estimated Renovation Quotation

 Balance Transfer Home Loans
This option can be availed when an individual wants to transfer his home loan from
one bank to another bank owing to reasons like lower interest rates or better services
offered by the other bank. This is done to repay the remaining loan at a revised, lower
interest rates offered by the other lender.
Eligibility Criteria for Balance Transfer Home Loans
The following are the eligibility criteria for balance transfer home loans:
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Passport
 Bank statement showing repayment of ongoing loan
 Loan statement and list of property documents in possession of the existing
lender
 NRI Home Loans
Specially designed to support non-resident Indians in buying a residential property
in India, the formalities and application procedure for this type of loan is different
from the others. Generally, most of the private and public sector banks offer NRI
loans as a product of their housing loan portfolio.
Eligibility Criteria for NRI Home Loans
The following are the eligibility criteria for NRI Home Loans:
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Documents Needed for Loan for NRI Home Loans
Given below are the documents that are needed to apply for NRI home loan:

Passport
 General power of attorney
 Property papers
 Last year ITR except for NRIs who belong to the Middle East countries
 Bridged Loans
Bridged Loans are short term loans that are designed for existing homeowners who
are planning to purchase a new property. It aids borrowers to fund the purchase of
new house until a buyer is identified for the existing property. This type of loan
usually requires the mortgage of new house with the bank and is extended for less
than two years. Several banks like Vijaya bank and HDFC Bank offer bridged loans.
Eligibility Criteria for Balance Transfer Home Loans
Given below are the eligibility criteria for balance transfer home loans:
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Passport
 Bank statement showing repayment of ongoing loan
Objectives
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P
Home is an integral aspect of emotional fulfilment and shelter. It is imperative for individuals to
have a place they can call their own. And Home Loan plays a major role in today’s age when one
steps into buying their home. Even though everyone has different options for a home loan,
understanding the reason to choose the right one will comprehensively assist you in owning your
dream home. Purchasing a home is one of the major investments people make and a lot needs to be
taken into consideration. Because it’s the assortment of features that will be assisting you finalise
your decision. At Kotak Mahindra Bank, we’ve always been committed to making your home-
buying experience a seamless one and provide you with the best of services, such as:
 Attractive Interest Rates

 Doorstep Service
 Convenient loan disbursement process
 Simplified documentation
 Insurance options to cover your home loan at attractive premium
 Quicker turnaround time
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The main purpose of a housing finance is to empower you to own your dream home. A home
provides a long-term security and moreover a real estate property, usually, appreciates often than
the other way around. A real estate is an investment that will give you good returns in the coming
future. If you buy a house today, chances are within a few years, the market value of your property
will substantially increase.
At Kotak Mahindra Bank, we understand the importance of your dreams and that is why we strive
to provide efficient solutions through our range of services. We provide you home loans
accompanied by highly customised facilities and services for a seamless home-buying experience.
1. To study the perception of consumers towards home loans.
2. To understand consumers' preference towards home loan among public and private sector
banks.
3. To know consumers' satisfaction level wit interest rates among public and private sector
banks:
4. To find out whether identified important features of consumer perception and demographic
profile of the respondents are dependent on each other or not.
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Features of Home loan
As anyone who’s spent time shopping for a home loan understands, there’s more to a home
loan than the headline rate. In this guide, we’ll run you through some of the features you should
look out for to make sure your mortgage works for you.
Extra repayments
If a home loan comes with this option it means you can make additional payments on your
mortgage on top of your regular repayments. This lets you chip away at the principal amount
and pay less interest in the long run.
To illustrate how this might be helpful, say you have a home loan of $500,000 with a 3% p.a
interest rate over a term of 25 years. If you decide to pay an extra $200 a month, you could
save almost $26,000 in interest and shave two years and nine months off the life of your loan.
Both fixed and variable rate home loans can offer an extra repayments facility, though you’re
more likely to find it on the latter.
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Among fixed rate loans that let you make extra repayments, many come with limits on how
much you can repay each year. You’ll also need to be mindful of any break cost fees that might
apply if you pay off the loan early.
To see how much you could save by pumping extra into your home loan, try our repayments
calculator.
Redraw facility
The ability to make extra repayments on a loan usually goes hand in hand with a redraw facility.
This lets you retrieve any extra repayments you’ve made to use for some other purpose.
Often homeowners will choose to redraw to cover expenses that arise further down the track,
such as a home renovation, car upgrade, or new arrival in the family.
Just keep in mind that redrawing can negate the hard work you’ve done by making extra
repayments. However, it’s often a more thrifty option than using a credit card or taking out a
personal loan, as the interest rates on mortgages tend to be much lower.
Offset account
An alternative to making extra repayments is putting any extra cash you might have in an offset
account. This is like a bank account attached to your mortgage. Any money in the account is
offset against the home loan principal, meaning you’ll be charged less interest.
For example, if you have a $500,000 home loan and keep $50,000 in an 100% offset account,
you will only be charged interest on $450,000.
Just like a bank account you can arrange for your salary to be deposited into the offset account,
make online transactions, and pay bills. You’ll also receive a debit card from the provider for
everyday purchases.
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The reason many homeowners and investors opt for an offset account over using an extra
repayments facility is because you can draw on that balance whenever you want without any
limitations.
Split rate option
When you take out a home loan you can choose between a fixed rate, which is locked in for a
set period of up to five years, or a variable rate, which fluctuates over time. But did you know
you can have the best of both worlds?
A split rate loan lets you fix a portion of your home loan, which can provide some security if
rates rise, while keeping the remaining portion variable, allowing you to take advantage of
features like an offset account or redraw facility.
Interest only
Most people who take out a home loan will be paying back the principal (the amount borrowed)
along with the interest charged by the bank for issuing the loan. However, there’s also the
option to only repay the interest.
Interest only options are popular with investors, as they can claim the interest charged on their
home loan come tax time. First home buyers might also benefit from paying just the interest,
if only for a short period, as it brings down the ongoing repayment amount and makes it easier
to budget.
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Repayment schedule
Most home loans let you choose whether you want to make your repayments weekly,
fortnightly or monthly. This means you can opt for the repayment cycle that best matches how
often you get paid.
If you currently pay on a monthly basis, it might be worth switching to weekly or fortnightly
repayments. Depending on how your lender calculates your repayments, it could mean paying
off your loan faster.
For example, if you repay $1,000 on a monthly basis, this adds up to $12,000 a year. But if
your lender calculates fortnightly repayments by halving the amount you’re currently paying
monthly, $500 paid fortnightly would amount to $13,000 paid over the year.
Repayment holiday
Paying a mortgage over a 25 to 30 year period can be hard on your wallet and your well-being,
and as with all things in life sometimes a little break is necessary. Thankfully, many lenders
will let you take a repayment holiday for a limited period.
A repayment holiday might come in handy if you currently have other commitments that
demand your attention (e.g. changing jobs or raising a newborn). It can also help reduce the
impact of any unexpected illnesses or injuries which demand you take time off work.
Just keep in mind that many lenders will only grant repayment holidays to borrowers that are
ahead on their mortgage. What’s more, once the repayment holiday ends your lender will either
extend your loan term or increase your repayment amount. So while it’s a good feature to have,
it certainly isn’t free.
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Home loan portability
If you need to move houses down the track, paying everything from the break cost fee (if you
have a fixed rate loan) to the upfront application fee can be a pricey affair. Home loan
portability lets you get around this problem by transferring your mortgage to another property.
Home loan top-up
If you’ve built up enough equity in your home, your lender might let you borrow more money
via a home loan top-up. Just like when redrawing on your loan, you can use the top up feature
to pay for big ticket items like renovations or a new car.
Given that mortgage rates tend to be much lower, topping up your loan might be preferable to
using a credit card or taking out a personal loan.
Just keep in mind that a top-up involves renegotiating the terms of your mortgage. Along with
the additional debt you’ll be taking on, which will increase the size of your monthly
repayments, there might also be some fees involved.
Line of credit facility
A line of credit lets you access funds via your loan whenever you need them, up to an approved
limit. The amount you’ll be able to borrow using a line of credit will generally be determined
by the amount of equity you’ve built up in your home.
You'll typically be charged a higher interest rate and fees to use the facility. But once in place,
you’ll be able to use it to fund just about anything, and you’ll only pay interest on the amount
you borrow.
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Importance
Apart from knowing what is a Home Loan, it is important to know how to opt for the correct
option among the various types of Home Loans offered. To apply for a Home Loan that will
work best for your requirements you must consider the following factors:
• Interest Rate:
Make sure to understand the kind of Home Loan interest rate you are being offered. A variable
interest rate can vary during the tenure as opposed to a fixed interest rate that remains the same.
Read more about fixed and floating Home Loan interest rates here.
• Tenure:
The tenure is an essential variable and decides the EMI amounts payable each month on the
due date. Thus, knowing the exact tenure can help you plan your finances accordingly.
Application:
It helps to choose a Home Loan that has a simple application process without excessive
documentation. Ideally, you should pick a Home Loan that allows for online application and
quick disbursals.
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Benefits
Taxation: A Home Loan allows you to claim income tax deductions on the interest and
principal amount due. Under the Income Tax Act, 1961, as per Section 80C, you can claim up
to INR 1.5 lakh on principal repayments, and up to INR 2 lakh on interest repayments under
Section 24B. You can avail of other tax benefits via a Home Loan, as well.
• Interest Rate:
When compared to the various kinds of loans available, the interest rate on a Home Loan is
relatively lower. Plus, in case of a cash crunch, you can also apply for a Top-Up Loan in
addition to the existing Home Loan.
• Due Diligence:
When you apply for a Home Loan, banks check the property from a legal standpoint and ensure
that the documents are valid and the title is clear. This step can prevent you from being
scammed and passing this due diligence can validate your property.
1. Tax benefits on home loan
To encourage more and more people buy their own house, government of India provides tax
deduction on the principal as well as interest paid on home loan. An individual is eligible to
claim a deduction of up to Rs 1.5 lakh under Section 80C of Income Tax of India 1971 Act in
a financial year. While a deduction of up to Rs 2 lakh is allowed on the interest portion under
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Section 24B of Income Tax of India Act. The deductions under income tax are only available
after the construction of the house is complete.
2. Tax benefits on second house:
In case of second house, you are eligible to claim deduction for the entire amount of housing
loan interest paid under Section 24B of Income Tax Act.
3. No prepayment charges:
Unlike other loans where lenders charge prepayment penalties on payment made towards home
loan , there are no prepayment penalties on floating rate home loans . So, whenever you have
surplus money, you can utilize it for making part payment towards your home loan and lower
your burden. However, there will be prepayment charges in case of floating rate home loan.
4. Balance Transfer Facility:
In case of home loan you have the facility to transfer your home loan to different lender if he
is giving you loan at a lower interest rate.
5. Makes it easy to buy dream home:
For many people buying house with own money is not possible, home loan as it can be repaid
in easy monthly installments makes it easier to buy a house.
6. High repayment Tenure:
Among all types of home loan, It has the longest repayment tenure which goes up to 30 years,
so one can reduce the burden of equated monthly installments by extending the tenure. Use
our house loan EMI calculator to know how EMI change as you change your home loan tenure
7. Enjoy capital appreciation:
You will also benefit from the rise in prices of the property over time.
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8. Saves you from paying rent:
As rent in metro cities is quite high they put strain on your monthly budget. It is better to pay
the EMIs and own a house.
Structure of home loan
Home purchase is one of the critical decisions of one’s life. It is good to know that you want
to take it with a sharp perspective on other financial priorities. With regard to your
understanding of personal finance, you seem to be ticking all the right boxes.
Coming back to the query in hand, since you have not mentioned the amount of home loan you
are seeking, I would be highlighting a few pointers keeping some assumptions in min
1. Ask for a maximum LTV*(loan-to-value of the property). This will help you in reducing
your upfront margin money and will enable saving necessary cash.
*LTV Sabs
a) 90% for loan amount up to 30 lakhs
b) 80% for loan amount between 31 lakhs and 75 lakhs
2. Ask for maximum tenure to keep the monthly outlay at the lowest level possible. There are
three types of products available in the market which are based on the age of retirement.
a) Till 60 years - this will enable a tenure of 15 years.
b) Beyond retirement age with the addition of another younger financial applicant.
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c) Beyond 60 years and up to 70 years of age (enabler for 25 years’ tenure) with additional risk
mitigation taken by the lender.
I assume Option 1 of 15 years’ tenure will be a hinderance for you to achieve your other
financial goals. Further, Option 2 is not applicable to you since you have mentioned children’s
education as one of the goals.
In option 3, since the lender would be taking extra risk of giving additional tenure of 10 years
to a non-pensioner (working with a private firm), the bank would like to mitigate its risk. One
such product available in the market is the Mortgage Guarantee product (you must reach out to
your lender to check if the Mortgage Guarantee product is available). This acts as an enabler
for home ownership by guarding the lender’s interest. The customer can pay a nominal fee to
avail benefits under this product in the form of higher eligibility and maximum tenure. In the
event of default, the Mortgage Guarantee safeguards the interest of the lender through cash
flow support, which is a win-win solution for all.
31
Home loan interest rate future predictions in india
The real estate sector has witnessed a treble factor in 2022 due to repo rate hikes. On one side,
residential property prices have gone up along with home loan interest rates, and on the other
side, sales momentum continued to stay strong. Going ahead, RBI is expected to continue
hiking the repo rate however at a much smaller size which is likely to lead housing loan rates
to its peak level. American investment banker and financial services provider, Jefferies
highlighted that despite the rising interest rates scenario, domestic demand has shown positive
momentum with an upside in the credit cycle and residential property market.
From April till December 2022 in fiscal FY23, RBI has hiked the repo rate by 225 basis points
taking it to the highest level since August 2018 at 6.25%. The reason behind the rate hike trends
is to tame multi-year high inflation. With the rise in repo rates, banks and other financial
services providers too followed suit by raising interest rates on term loans including home
loans.
32
Jefferies Christopher Wood said, "if the current focus in Asia is, naturally, on China and the
reopening story, the Indian domestic demand story remains rock solid to GREED & fear. The
latest data shows positive momentum in terms of both the credit cycle and the continuing upturn
in the residential property market despite rising interest rates."
In his latest edition of widely followed Greed and Fears, Jefferies' Wood pointed out that bank
credit rose to 17.4% YoY in mid-December.
As per the edition, in November, at home, both primary and secondary market property
transactions remained strong. Also, primary residential sales in the top seven cities which are
monitored by consultant Prop Equity --- surged by 13% YoY in the three months to November,
and were also up by 30% YoY in the first 11 months of the year 2022.
Also, the second market property registrations in Mumbai and Delhi increased by a whopping
15% YoY and 101% YoY respectively in November
There has also been an upward tick in residential prices. As per Jefferies' report, the average
selling price increased by an estimated 10% YoY in the top seven cities in 4QCY22.
Furthermore, it mentioned that inventory in the top seven cities is at 10-year lows running at
19 months of sales.
Going ahead, Jefferies expects another 25-50 bps rate hike from RBI. This could take mortgage
rates to their peak in the current year 2023.
In December 2022, India's retail inflation eased to 5.72% from 5.88% in November and 6.77%
in October 2022. The December month print is the lowest reading since December 2021, also
the second consecutive month where inflation has stayed below RBI's upper tolerance limit of
6%. This better-than-expected CPI in December escalates hope for further smaller size hike
rates to a sooner-than-expected pause in repo rate going forward from RBI.
Jefferies cited that RBI at its December meeting signalled growing confidence that inflation
has peaked. Inflation was projected by the RBI to decline from an estimated 6.6% YoY in
3QFY23 ended 31 December to 5.0% YoY in 1QFY24.
33
With RBI's policy repo rate at 6.25%, Jefferies’ head of India research Mahesh Nandurkar
believes that there will be only another 25-50bp of tightening at most.
That being said, Jefferies also expects the mortgage rates to peak out at around 9% this year,
up from 8.4% at present. In Jefferies' view, this should keep affordability at not too-demanding
levels even though residential property price rises have been faster than income growth since
FY21 ended 31 March 2021.
The housing affordability ratio, measured as the home loan payment-to-income ratio, is
estimated by Jefferies’ India office to rise from the low of 27% in FY21 to 34% in FY23 and
36% in FY24. This remains below the average of 40% between FY01 and FY22, the edition
said.
Further, Jefferies’ India property analyst Abhinav Sinha expects residential sales volume in the
top 7 cities to increase by 10% in 2023, following an estimated 25% increase in 2022, while
house prices are expected to appreciate by another 8-10% this year.
34
35
A Study on Factors Affecting Consumer’s Buying Behavior towards Home
Loan
Housing finance and the housing finance systems have been evolving. According to and
Michael Lea, “Housing finance brings together complex and multi-sector issues that are driven
by constantly changing local features, such as a country’s legal environment or culture,
economic makeup, regulatory environment, or political system.” The demand for housing has
increased day by day. Housing finance plays an important role as an engine of equitable
economic growth though the reduction of poverty and prevents slum proliferation in the
economy.
36
To meet the growing housing demand the government needs to provide the finance for housing
to the people. The housing finance sector in India has experienced the unprecedented change
in its structure since its formulation stage of being a solely a government undertaking to a very
competitive sector with a large number of financing entities all over India. Home is a place
where we relax after coming back from our day’s tiring work; it is the place where we can give
time to our family and spend beautiful moments with them. After years of thinking,
anticipating, saving and research, we finally decide to build our dream house. At the time,
finance is the major criteria which pull back everyone from moving towards the cherished
goal.To acquire a home which can be christened as our ‘Own House’ is a life-time decision
and has to be made with efficient planning and requires huge finance. Our Dream Home is not
far away with a Home Loan which will fulfill our dream into a reality
Home Loan is a Secured Loan offered by a bank against the security of a house/property which
could be a personal property or a commercial one. It is a loan collected by a borrower from a
bank issued against the property/security intended to be bought on the part by the borrower
giving the banker a conditional ownership over the property, i.e., If the borrower has failed to
pay back the loan,the banker can retrieve the finance by selling the property.
Review of Literature
Gudadhe (2013) discussed the customer perception towards products and services of
State Bank of India. The author has focussed on research by taking into account the branches
of Mahatma district. The article discussed the SBI Bank Group-wise perception and satisfaction
level of customers, the availability and use of products and services given by the bank. The
author concluded by stating that the customer expects higher quality services from banks
which, if fulfilled, could result in significantly improved customer satisfaction levels. 99.27%
customers expressed their satisfaction towards the services. Rao T. S. (2013) discussed the
perception and problems of home loan takers in Andhra Pradesh.
37
The author has focused on research by taking into account the HDFC and SBI bank. The paper
discussed the Housing Policy frame work, trends and progress in Housing Finance, the
operational performance of HDFC and SBI about providing housing finance to individuals,
perception and problems of home loan takers in the State of Andhra Pradesh. The author
concluded by stating that the Housing Finance in India faced some set-back in decades but the
designing of shelter policy, the organization of the housing finance market, the introduction of
fiscal incentives have bought about some changes in the housing finance. The services and
product innovations are the key tools for success.
Mittal (2014) discussed the demographic profile of the customers and their choice
of a particular type of bank. The author has focused on research by taking into account the
customers of SBI and ICICI bank. The paper discussed the customer needs, preferences and
usage rate, understand the service quality perception of customers towards retail banking
services. The author concluded by stating that age, occupation and education significantly
influence the customer’s choice for a particular type of bank. There was a significant difference
between the age-wise, education-wise and occupation-wise distribution of the two types of
banks. The income of the customers and their choice of a particular type of bank were
independent of each other.
Kumaraswami M. and Nayan J. (2014) discussed the importance of housing

finance and the institutions providing housing finance. A detailed discussion of the marketing
strategies adopted by financing institutions has been discussed by taking into account the loan
criteria eligibility, loan amount, interest rate, security, loan tenure, margin and processing fee.
Finally, the paper highlights the performance of the housing sector, major findings and
suggestions to improve the effective marketing of housing finance for both public and private
sector banks.
Gupta J. and Jain S. (2012) focused on the various practices adopted by cooperative banks in
India and made a comparison of the cooperative banks concerning their efficiency concerning
lending practices. The major findings of the study showed that majority (32% as per the study)
38
of the respondent was having housing loan for the bank under study, most (64% as per the
study) of the people prefer to take long-term loan which is more than 3 years, there is a very
simple procedure followed by bank for loan, easy repayment and fewer formalities are the main
factors determining customer’s selection of loans, quality of services provided by the staff is
satisfactory because bank is catering to a small segment only and the customers are properly
dealt with, customers are satisfied with the mode of repayment of installments, average time
for the processing of loan is less i.e approx 7 days.
The authors also suggested measures to improve the efficiency of the Cooperative banks.
Ghosh S.(2012) in his study mainly focused on the guidelines followed by commercial banks
in India regarding the appraisal process of housing loans with specific reference to Indian
Overseas Bank. Hingorani P. and Tiwari P. in the paper evaluated the present issues and
challenges in the Indian urban housing market and gave suggestions for tools and approaches
that can guide movement towards a more holistic approach.
Mishra A.K.(2011) discussed the overall resources invested by housing finance

company in India since their incorporation and identified the area where efficiency can be
improved and cost reduction is possible for optimum and effective utilization of
resources.Sridharan S. (2014) in the paper analyzed the Indian demographics and how,
correspondingly, the housing finance sector has evolved. According to the author “Although
there are various Government of India initiatives as well as schemes of institutions like World
Bank and its members like the International Finance Corporation (IFC), there still exists a
challenge at the ground level: the simple availability or production of affordable housing
projects.”
39
40
Data Analysis and Interpretation Demographic Profile of Respondents
It was found in the research that out of the total respondents, 84% were Male and 16%
were female respondents. Regarding the age category, it was found in the research that 33% of
the respondents were in the age group of 18-30 years, 40% of the respondents were in the age
group of 31-40 years, 18% were in the age group of 41- 50 years, 08% were in the age group
of 51-60 years and 01% were in the age group of 61-70 years. Out of the total respondents,
76% were married and 24% were unmarried.
The demographic factors of the respondents are given in Table I. It is inferred that more number
of female has taken housing loan in public sector banks and 89.08 per cent of the respondents
have involved in the house construction activity before they complete 50 years age.
The social factors of the respondents are given in Table II. It can be inferred that majority of
the respondents are salaried male with a family size of 3-5. Most of the respondents ie., 59.32
per cent of them are having either under graduation or post graduation as their qualification
The economic factors of the respondents are given in Table III Economic factors include the
respondents" income, savings and asset information. It can be understood that 51.23 per cent
of the respondents have a annual income of Rs 3,00,000 to 4,50,000. Regarding the savings
and the assets of the respondents are concerned, majority of the respondents have Rs 1.00.000
to Rs 2,00.000 as savings and Rs 5,00,000 as asset value with 52.16 per cent and 50.93 per cent
respectively.
Sources of awareness about Housing Loan are given in Table IV. To find out significant
differences in the opinion on the most informative sources of housing loans, the mean responses
41
on the various sources of housing loans and its respective F statistics are estimated.. Among
the consumers of public sector banks, the important informative television advertisements and
builders/contractors as the respective mean scores are 3.87 and 3.62. In old public sector banks,
the important sources are television advertisements and bank officials since its mean scores are
3.93 and 3.58 respectively. In the New generation public sector banks, these two sources are
agents and friends & relatives. Regarding the perception on the sources for housing loan, there
is a significant difference among the three groups of borrowers. The significant level of
differences found among the television advertisements, magazine advertisements, previous
borrowers. organizations and bank officials since respective 'F' statistics is significant at five
per cent level.
Organisation influencing the buying decision are given in Table V. Spouse is the major source
of influence for the purchase of home loans as 86.8 per cent of them opined so The next big
influencers are parents and colleagues with 60.4 and 51 per cent respectively. The lease
influencers are trade association members and co-club members with 10 and 18.1 per cent
respectively.
Product attributes are given in Table VI. As far as core product attributes are concerned, 65.7
per cent of the respondents have high perception on the core product attributes where as 24.7
per cent of the respondents is having medium level of perception. Only 9.6 per cent of the
respondents have a low level of perception with the core product. As far as tangible product
attributes are concerned, 53.9 per cent of the respondents has medium level of perception
followed by 42.7 per cent of the respondents have high level of perception whereas 3.4 per cent
of the respondents have low level of perception with the actual product As far as augmented
product attributes are concerned, 48 per cent of the respondents has medium level of perception
followed by 35.8 per cent of the respondents have high level of perception 16.2 per cent of the
respondents have low perception with the augmented product.
Effect of Independent Variables on the Perception of the Core Product Attributes using LMR
Model are shown in Table VII. LMR analysis shows that demographic, social and economic
variables have effected significantly the perception of housing loan borrowers on the housing
42
loan core features (core product attributes) of public sector and private sector banks. As far as
the perception on the core product attributes of the public sector banksare concerned, the profile
(Independent) variables such as gender the social indicator variable particularly family size,
contact with change agent, knowledge on social issues and value orientation on housing and
the economic indicator variables such as family income level and saving capacity have
positively effected to have greater perception: whereas, social indicator variable viz., level of
education & social participation and economic indicator variables such as no. of eaming
members in the family and the value of assets possessed by the family have significantly
effected to have low perception on the core product attributes
As far as the housing loan core attributes of the private sector banks are concerned, the
demographic indicators viz... age and gender, the social indicators viz., family size and the
economic indicators particularly family income have effected significantly to have high
perception of the core features. The variables such as the value of assets possessed by the family
and extent of debts other than the housing loan held have significant level of negative effect.
From the above analysis, it may be inferred that housing loan borrowers with comparatively
lower level of education as well as family with almost single earning member, possessing less
assets and less debts held seem to have high perception of the core product attributes of the
public as well as private sector banks.
This may be true due to the fact that the bankers today seem to serve the small people to a
greater extent than before. Persons with less education and lesser social participation and
having one earning members seem to have high perception on the core product attributes of the
public sector banks to a greater extent than that of the
Private sector banks. Effect of Independent Variables on the Perception of the Tangible and
Augmented Product Attributes using LMR Model are shown in Table VIII. LMR analysis
shows that demographic, social and economic variables have effected significantly the
perception of housing loan borrowers on the housing loan tangible and augmented features of
public sector and private sector banks. As far as the perception on the tangible and augmented
product attributes of the public sector banksare concerned, the profile (Independent) variables
43
such as age. the social indicator variable particularly marital status (married 1, unmarried 0)
and value orientation on housing have positively effected to have greater perception: whereas,
social indicator variables viz... family size, social participation, contact with change agents &
knowledge on social issues and economic indicator variables particularly family income and
having debts other than housing loans have significantly effected to have low perception on the
tangible and augmented product attributes. As far as the tangible and augmented attributes of
housing loan of the private sector banks are concemed, the demographic indicators viz.. age,
the social indicators viz., family size and value orientation on housing and the economic
indicators particularly value of assets possessed by the family have effected significantly to
have high perception of the core features.
The variables such as gender (male-1, female-0), social participation and contact with change
agents have significant level of negative effect. From the above analysis, it may be inferred
that borrowers who are unmarried as well as having less social participation and contact with
change agents and having less other debts seem to have high perception of the tangible and
augmented product attributes of the public as well as private sector banks.
This may be true due to the fact that the bankers today seem to serve the small people to a
greater extent than before. Old people, persons with more contact with change agents and
persons with high value orientation on housing seem to have high perception on the tangible
and augmented product attributes of the private sector banks to a greater extent than that of the
public sector banks. This may be due to adoption of more promotional tools by the Private
sector banks than the public sector banks.
Table IX indicates the mean scores of the variables influencing the consumers and its respective
'F' statistics. Among the borrowers in public sector banks, the important attributes are
processing fee and flexibility as the respective mean scores are 3.7976 and 3.7172. In old public
sector banks, the important reasons are processing time of the loan and other services since its
mean scores are 3.8754 and 3.8675. In New generation public sector banks, these two important
variables are wide loan options and adequacy of loan amount. Regarding the perception on the
various attributes influencing the selection of the bank for such differences there is a significant
44
difference among the three group of borrowers identified in flexibility, processing fee. interest
rate, processing time and other services since the respective 'F' statistics is significant at five
per cent level.
Prominent Attributes Influencing the Selection of the Bank are shown in Table X. The factors
chosen for the study are financial factors, product factors and peripheral service factors which
influence the decision on selection of bank among the borrowers to the extent of 63.68 per cent.
The most important factor is financial factor. It consists of four attributes with the reliability
coefficient of 0.8183. The eigen value and the percent of variations of this factor are 3.9142
and 24.86 per cent respectively. The prominent variables in this factor are interest rate and
processing fee. The second important factor is the product factor. It consists of five variables
with the reliability coefficient of 0.7246, The eigen value and the percent of variation of this
factor are 2.8717 and 21.96 per cent respectively.
The prominent variables in this factor are flexibility and processing time The last factor namely
peripheral service consists of four variables with the rehability coefficient of 0.7372. The
important variables included in this factor are other services and switching facility
45
46
DEALING WITH DIFFICULT CUSTOMERS
Every business faces difficult, demanding customers at some point but resolve the situation
quickly and you’ll keep them as valuable customers.
Difficult customers can be hard to deal with but it’s essential that you do professionally and
quickly before they spread the word about their experience with your start up business. Even
if they are in the wrong, it’s important that you deal with the situation in a positive way so as
not to lose them as a future customer.
Satisfied customers are more likely to return and it costs far less to retain a loyal, happy
customer than it does to win new customers for your business. Good customer service creates
loyal customers who spend more and encourage others to buy from your business.
A study in the US by the Office of Consumer Affairs found that loyal customers are worth up
to ten times as much as their first purchase, and an American Express survey found that 70%
of customers are willing to spend more with companies that they believe provide excellent
customer service.
But when faced with an angry, impatient or demanding customer, it takes skills and clear
customer service processes to get a positive outcome. This guide will look at how to deal with
difficult customers and how to prevent complaints in the first place.
47
Learn more about what makes good customer service and boost your customer
satisfaction.
How to deal with a difficult customer
No matter how good your start up, you’ll eventually have to deal with an upset or difficult
customer. Knowing how to resolve a negative customer experience should be part of your start
up culture with training provided for all staff who communicate directly with customers.
There are six steps to dealing with customer complaints – from ensuring you listen carefully
and respond professionally, to following up and making sure the issue is resolved and the
customer is satisfied with the outcome.
Key to dealing with any difficult customer is to make sure you have a positive, productive
conversation. Radio host Celeste Headlee speaks at Ted Talks event in this video on how to
have a better conversation
between staff members. Nothing frustrates the complainer more than having to continuously
repeat their complaint. Encourage staff to ask a more knowledgeable member of staff if they’re
unsure what to do, and be available to talk to customers yourself should an issue crop up.
48
Type of Home Loan Taken by Respondents
Table 1 Type of Home Loan Opted
Sr no. Category of Home LIC(%) SBI(%)

loan
1. Home purchase 42 48
2. Home improvement 16 22
3. Home construction 22 22
4. Home extension 08 ------
5. Land purchase 18 08
As shown in Table No:1, it was found in the research that out of the total respondents of
LIC, 42% of the respondents had opted for “Home Purchase”, 16% of the respondents had
opted for “Home Improvement”, 22% had opted for „Home construction, 02% had opted for
“Home extension”and 18% had opted for „Land Purchase - category regarding the Home loan.
In case of the total respondents of SBI, it was found in the research that regarding the Home
loan category, 48% of the respondents have opted for Home purchase” option, 22% of the
respondents had opted for Home Improvement”, 22% of the respondents had opted for Home
construction and 8% had opted for Land purchase.
49
Theoretical framework suggests that consumer perception towards home loan is influenced by
major factors as shown in the figure. Employees' behavior towards consumer, Physical
facilities, Understanding customer needs and Promotional strategies of bank influences
consumer perception towards home loan.
The study was conducted with the help of primary data and secondary data. The data
was collected through a structured questionnaire. The people who have taken home loan from
private sectors banks and public sector banks were considered for the study. The study is
conducted on the basis of the response of 124 respondents. SPSS 15 was used and Descriptive
statistics, Mean score and Chi square tests were used for analysis and interpretation. The study
is conducted in Bangalore city only.
This research is carried out primarily to examine factors affecting public and private
sector banks on the consumer satisfaction for the home loan disbursed to their consumer and
relationship amongst consumer satisfaction towards the bankers and availing of the loan.
Interest Rate Opted by the Respondents
Table 2 Interest Rate Opted by the Respondents
Sr no. Category LIC(%) SBI(%)

1. Fixed interest rate 98 100
2. Floating interest rate 02 -------
As shown in Table No: 2, out of the total respondents of LIC, it was found in the research
that 98% of the respondent had opted for “Fixed interest rate” and 02 % had opted for “Floating
interest rate.” In the case of the total respondents of SBI, it was found in the research that 100%
of the respondents had opted for” Fixed interest rate.”
50
Reason for Selecting SBI or LIC for Taking the Home Loan
The t-test was conducted to compare the reasons for selecting SBI or LIC by respondents
to take the home loan.
Conclusion
The demand for Home loans has been increasing in India due to the requirements of residential
accommodation. A large amount of Indian population is availing the home loan facility which
is offered by the public as well as the private sector banks. It is important for the institutions
offering the home loans to consider and keep track of the factors affecting the decision of the
buyers to avail the home loan. Home loans benefit the buyer not only regarding gaining an
asset but also interms that it’s a good instrument of saving and for employed ones it turns out
to be the source of tax benefit also.
To conclude this study, it can be generalized that there are significant difference in the actual
purchase of the consumers of the housing loans of PUBLIC SECTOR BANKSS, O public
sector banksand New generation public sector banks. TV, magazine advertisements, previous
borrowers and bank officials are the important sources of awareness on housing loans in the
PUBLIC SECTOR BANKSS, O public sector banksand New generation public sector banks.
Regarding the important product attributes are concerned, flexibility, processing fees,
processing time and interest rates plays a major role in all the three types of banks. Consumers
of housing loans of the New generation public sector banks are making fewer visits to the bank
to avail the loan than others.
51
52
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Typesofloan:-
Both the private and public sector banks offer different types of loan some of them are as foll
ow
Types of Home Loan
56
Home improvement loan
A Home Improvement Loan, also known as a Home Renovation Loan, is a type of loan
that enables you to carry out any repair or renovation work to your existing house. It is a type
of Home Loan through which you can make big and small changes to your house.
A home improvement loan can be used to cover the costs of refurbishing or renovating your space.
While a home loan is sanctioned to buy a house, a home improvement loan is used to alter the already
existing space as per your requirements.
Given below is the lowest EMI per lakh for home improvement loans from different banks, based on
their current interest rates (effective 2023), and is based on the maximum repayment tenure that is offered
by each bank. 6.85% p.a. 6.90% p.a. 8.75% p.a
You get a maximum loan amount of ₹10 Crores and this loan can be taken for renovation, repair or
improvement of the present property. HDFC Bank Home Renovation Loan: For this loan, interest starts at
7.55% per year, and you get flexible loan tenure of up to 15 years
What is the maximum tenure for a home renovation loan? You can get a home improvement loan
for a maximum tenure of 20 years. However, you can get a loan only if your home improvement project is
likely to be completed within one year.
You can choose the period over which you pay back a home improvement loan. The repayment
period can range from one to 10 years. You can choose the amount you want to borrow. But always be sure
that you can afford the monthly repayments.
FHA 203(k) rehab loans are great when you're buying a fixer-upper and know you'll need funding
for home improvement projects right away. These loans are also backed by the government, which means
57
you'll get special benefits — like a low down payment and the ability to apply with a less-than-perfect credit
profile
Home improvement loans are financing options for homeowners who want to upgrade their
homes and can afford the long-term debt. Homeowners with enough equity may be able to finance
expensive repairs with a cash-out refinance, home equity loan, or home equity line of credit
Home Extension Loan.
Loans to extend or add space to your home such as additional rooms etc. Available for both
existing and new customers.
A home extension loan can be availed by someone who wishes to make any structural changes to
their existing house to add more living space. These loans can be availed for up to 90% of the construction
estimate for a maximum term of up to 20 years
Features of Home Extension Loans
The loan can be availed from the same home loan provider from where you availed the home loan or
you may choose a new lender. The loan is granted for a specified tenure, as in case of a home loan, and you
can repay it in easy monthly instalments, popularly known as EMI.
SBI Home Loan Details
8.85% p.a. – 10.15% p.a. State Bank of India is offering a concession on home loan interest rates between
15 basis points and 30 basis points and January 2023 to 31 March 2023. The bank is providing lower interest
rates during the festive season.
Some of the biggest benefits of choosing longer repayment terms on personal loans include
the following:
 Your monthly payments are lower. The longer you take to repay your loan, the lower the monthly
payments will be. ...
 You have more flexibility. ...
 You free up cash for other things.
Typically, an extension costs 0.375 percent of the loan amount,” says Greene. “If the loan is $100,000,
then a 15-day extension would cost $375 — and then you can extend again. If rates have gone up, it might
be cheaper to pay the extension fee upfront
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In general, a loan extension will allow you to skip a certain number of immediate payments—
which, while not set in stone, is typically just one—and add them onto the back of the loan
You are eligible for tax benefits on the principal and interest components of your home
extension loan under the Income Tax Act, 1961
Whenever there is a hike in interest on floating rate home loans, lenders usually prefer to extend
the loan tenure rather than increasing the EMI amount.
Home purchase Loan
A home loan is a secured loan that is obtained to purchase a property by offering it as

collateral. Home loans offer high-value funding at economical interest rates and for long tenors.
They are repaid through EMIs. After repayment, the property's title is transferred back to the
borrower.
Most banks/ lenders decide the loan amount up to 60 times one's monthly salary. So, if you earn
your monthly salary is Rs 25,000, you can get a loan amount of Rs 15 lakh approximately.
KYC documents – Passport, Driving License, Aadhaar Card, Voter Id Card (any one) 2 Your
employee ID card. 3 Salary slips of the last 2 months. 4 Bank account statements for the last 3 months
(salaried)/ 6 months (self-employed)
home loan provides financing to help you purchase your dream home comfortably. Lenders
cover up to 75-90% of the cost of the home and you must make an initial payment (down payment)
amounting to the remainder. Home loans offer ample funds at economical interest rates and have long
repayment tenors.
Some critical advantages of Home Loans include their tax benefits. Under Section 80C of the
Income Tax Act, 1961, you can enjoy tax benefits of up to INR 1.5 Lakh on principal repayment. Under
Section 24, you can claim up to INR 2 Lakh as tax deductions on the Home Loan interest repayment
component.
The remaining property value that you will pay upfront from your own pocket – the down payment.
Banks are not permitted to lend/finance the full property value, hence, you cannot avail 100% of your
property purchase price as a loan.
Documents required
 Identity proof / address proof (copy of passport/voter ID card/driving license/Aadhaar Card)
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 Bank statement of previous 3 months (Passbook of previous 6 months)
 Two latest salary slip/current dated salary certificate with the latest Form 16.
In fact, for most of us, the decision of purchasing a property is based on the amount of home loan we can
avail.
...
Here are a few simple steps which will help you bring financial disciple in your life.
1. Clean up your credit report. ...
2. Pay off existing debt. ...
3. Improve your banking habits. ...
4. Keep your documents in place
Long-term commitment: The deduction of EMIs (monthly installments) can last 10-15 years, which can
become a serious pain point. Home loans impose a major burden on personal finances. Property
Appreciation: Due to fluctuations in real-estate market, the property purchased might not give the expected
returns.
Your home loan is repaid through equated monthly instalments, or EMIs. This is a fixed amount
you need to pay your lender each month till you complete repaying your home loan. Your EMIs will be due
on a fixed date each month (for example, say 3rd of each month).
SBI Home Loan is considered the best bank for Home Loan in India. Home loans from the State
Bank of India have some of the most attractive and best home loan interest rates in India, starting at 8.55%
p.a. A loan tenure extension option of up to 30 years guarantees a comfortable repayment period
Ideal Age To Buy A Home- Should You Start Young?
 “Benefits of Buying at an Early Age (20-30)
 A home is a financial investment.
 You will get to build your credit.
 You will develop healthy spending habits.
 Banks are keener to offer loans to young people.
 The house can be a source of income.
 Renting
10 Benefits of Owning a Home
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 You can control your monthly housing payment.
 You'll build home equity with each monthly payment.
 Your home value will rise over time.
 You can use home equity to build wealth.
 You can convert your home equity to cash.
 You may get a tax deduction.
 You'll build credit.
 You can make the home your own.
Step-by-Step Guide to Home Loan Procedure
1. Fill The Loan Application Form & Attach The Documents.
2. Pay The Processing Fee.
3. Discussion With The Bank.
4. Valuation Of The Documents.
5. The Sanction/Approval Process.
6. Processing The Offer Letter.
7. Processing The Property Papers Followed By A Legal Check.
Home Loan Procedure to Apply for Home Loan
1. Step by step – Home Loan Procedure.
2. Step 1: Filling the form.
3. Step 2: Documentation.
4. Step 3: Processing and Verification.
5. Step 4: Sanction Letter.
6. Step 5: Secure Payment Fee.
7. Step 6: Legal and Technical Check.
8. Step 7: Loan Disbursal.
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So, what is the time taken for home loan approval on average? The answer depends from one application to
another. Typically, for salaried professionals, it takes about 4-5 business days. In contrast, for self-
employed individuals, the process may take up to 7-10 business days.
Stamp duty loan
That is to say, stamp duty should be paid as soon as the sale agreement is signed by all
parties. After paying the stamp duty, the document must be registered within four months of
its execution date. The cost is 1% of the market value or agreement value, whichever is greater,
up to a maximum of Rs. 30,000.
Stamping is the tax levied on legalising the documents for your home, such as mortgage papers or
the sale of a property deed.
What is stamp duty on Home Loan? Stamp duty is a specific type of tax levied by the state government
on monetary transactions. All property buyers are mandatorily required to pay the stamp duty
charges. Failing which, they will not be regarded as the lawful owner of the property
It is usually paid by the buyer with regardless to agreement and in case of property exchange,
both seller and the buyer has to share the stamp duty equally. What is stamp duty? It is a tax, similar to
income tax, collected by the government. Stamp duty is payable under Section 3 of the Indian Stamp Act,
1899.
Stamp duty is a tax imposed on the sale of property/property ownership by the state government.
It is payable under Section 3 of the Indian Stamp Act, 1899. The duration of the stamp duty at the time of
registration shall be based on the value of the house/property.
You need to pay Stamp Duty within fourteen days of buying a property or piece of land. It is possible
to add Stamp Duty to your mortgage, but it's important to note that this will incur interest over the duration
of the mortgage term, and will also affect your loan to value ratio (LTV).
That is to say, stamp duty should be paid as soon as the sale agreement is signed by all parties. After
paying the stamp duty, the document must be registered within four months of its execution date. The cost
is 1% of the market value or agreement value, whichever is greater, up to a maximum of Rs. 30,000.
Stamp duty is always paid by the person buying the property. Typically, your solicitor,
conveyancer or estate agent will file a return to HM Revenue & and Customs (HMRC) and pay any stamp
duty on the day of completion on your behalf. They will also claim any tax relief that you might be eligible
for.
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The stamp paper value for agreement that mostly is asked by the people are 100 & 500. Though 100
rs stamp paper for loan agreement is one of the commonly used stamp paper. Also, the stamp duty on loan
agreement depends upon the Loan amount and upon the state of the parties as the stamp duty differs state to
state.
It is usually 1% of the property's market value or total cost of the property. Since these are
expenses over and above the cost of the property, they are not funded by the bank. Thus if you apply for an
SBI Home Loan, the property value will not include the cost of registration or stamp duty.
How Do You Reclaim Stamp Duty? To claim back Stamp Duty, you need to complete an SDLT
return and send it to HMRC either online or by post. You can hire a solicitor or legal conveyancer to
carry out the return for you, but it's your responsibility to organise.
In what circumstances can I reclaim stamp duty? You may be able to reclaim the 3% stamp duty
surcharge in the following circumstances: You are selling or giving away your main residence with 3
years of paying the 3% surcharge. You bought a property with an annexe before 2018 and paid the
higher rate of stamp duty.
The Stamp Duty Land Tax (Reduction) Bill 2022-23 is scheduled for all remaining stages on
10 January 2023. The Bill would reduce the amount of SDLT paid by many house buyers up to 31 March
2025
NRI Home loan
An Indian resident can repay the home loan through a regular savings bank account. NRIs can repay
the loan only through NRO and NRE accounts with remittances from abroad. The repayment should
be in Indian rupees
You are eligible to a tax deduction on interest paid and loan repayment on your home loan if you
are an NRI as per the income tax definition and file your income tax returns in India. You are eligible for
deduction of up to Rs. 1.5 lakh on housing loan principal repayment under section 80C and up to Rs.
SBI NRI Home Loan allows many NRIs (Non Resident Indians) to get home loans when
investing in properties. Financially, it makes sense to purchase a property through home loan rather than
through personal financing especially when you can invest your personal funds somewhere else for better
returns.
Individuals eligible for an NRI Home Loan
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Age - Minimum age of the applicant should be 24 years. Maximum age limit is 60 years or retirement
age (whichever is earlier), at the time of loan maturity. Submit the documents listed below and get a Home
Loan / Loan Against Property sanctioned in 5 days!
5 Best Personal Loan Offers for NRIs in India
Bank Interest EMI (Per

Rate lakhs)
SBI Personal Loan 11% Rs. 2,149
PNB Personal Loan 11.40% Rs. 2,122
Bajaj Finserv Personal 13% Rs. 2,273

Loan
Tata Capital Personal 10.99% Rs. 2,174

Loan
NRI Home Loan Eligibility
The credit score of the applicant must be 750 or above. The applicants with higher credit scores have a
higher chance of getting an NRI home loan approved. There are a few other factors like income stability,
resident country, qualification, asset and liability ratio, etc.
PAN Card – All NRIs or PIOs have to provide a copy of the PAN Card for applying for the loan. It is
a mandatory requirement for all co-borrowers. Copy of Passport – The NRIs or PIOs need to arrange a
copy of a valid passport and visa to the financial institutions.
Eligibility Criteria:
Employment type: Salaried and non-salaried applicants. The applicant must have a visa that includes his/her
residence status and employment. The applicant must have a regular source of income at least $6000 per
annum or $500 per month.
As an NRI, you can buy commercial or real estate properties in India. You must provide a Notarised
PoA for property purchase. You are eligible to receive tax benefits on your real estate investments. You
can avail of loans through NRE or NRO accounts and repay EMIs in INR.
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The interest earned in NRE and foreign currency accounts is tax-free. Useful for repatriation: NRI
accounts allow for the smooth movement of funds within India as well as overseas, making it convenient for
NRIs who want their funds accessible from abroad and from India
To get a home loan, NRIs must furnish the following documents:
 Copy of Indian passport and visa.
 In case an Indian passport in unavailable. ...
 Work permit / employment contract / appointment letter of your country of residence.
 Latest salary certificate / Payslips for the last six months.
 Latest income tax returns.
The majority of lenders require the applicant to be a minimum of 21 years of age to be eligible
for home loans and a maximum of 70 years (retirement age in case of salaried applicants). These criteria
vary depending on the guidelines set by the lender.
NRI applicants are generally required to submit the following basic documents to avail personal
loan:
1. Duly filled application form with passport-sized photographs.
2. Photocopy of the applicant's Passport and Visa.
3. Identity Proof: (For both applicant & co-applicant): Aadhar Card, PAN Card, etc.
The interest rates for ICICI NRI Home Loans start from 9% p.a. The bank sanctions the loan amount,
based on the repayment capacity of the customer. Along with regular home loans, ICICI Bank also offers
Home Improvement and Land loan for repayment tenures of 15 and 20 years respectively.
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ADVANTAGES OF HOME LOAN
 MAKES BUYING A HOME AFFORDABLE FOR ALL
The home loan makes it easier for an average middle-class salaried person to afford buying a
home of their own. The lenders in India sanction or reject the home loan application based on
the credit score of the applicant as well as their capability to repay the amount.
If you receive an income regularly and have the capacity to repay the EMIs (equated monthly
instalment), the lenders will quickly approve the application. Additionally, the home loans have
a long tenure, typically it ranges from 15-20 years, which means the EMI is smaller and more
affordable. So, by availing a loan, you can enjoy the happiness of being a homeowner.
 A COST-EFFECTIVE WAY OF AVAILING CREDIT
One of the major home loan loans benefits is that it comes with a lower interest rate than other
forms of borrowing like a personal loan or a gold loan. This is because the lender uses the
property that you wish to purchase as a security against the amount you borrow.
Home loans interest rates are the lowest among other types of loans, although the interest ranges
from lender to lender, it usually hovers between 8% to 12%. Make sure that you choose a lender
that is offering the loan at the best interest rate; even a slight difference in the interest rate could
save you thousands of Rupees in the long run.
 CAPITAL GROWTH
Over the past decades, the cost of the real estate properties in India has been on the rise
consistently. Many experts suggest that the capital appreciation of the real estate properties has
been much higher than the interest you pay on the home loan.
For example, if you have availed a loan of Ten lakh rupees at the interest rate of 10 per cent
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and if the value of the property increases even by 20% by the end of the loan period, then the
capital appreciation will be higher than the interest you pay. The appreciation of capital will
help you take care of the expenses and yet gain profit on the sale of the property.
 COMPULSORY WAY OF SAVING
If you are wondering whether a home loan is good or bad, you must know that it has both
sides. It is just up to you how you deal with it. When you have cash in hand, it can be challenging
to resist the temptation of spending. If you are confident that you will have a steady stream of
income but are unable to save any money, then taking a home loan is the best way to have
saving.
The money you pay towards the EMI, you can look at it as a saving rather than an expenditure.
This is because after you repay the loan completely, you will become the owner of the house,
which will have an increased value at the end of the loan tenure.
 GUARANTEES SAFETY OF THE PROPERTY
Buying a home is once a lifetime expense, and you would surely want to ensure that the property
you invest in is free of any legal issues. This is where availing a home loan can be a great boon.
When you approach a lender for a housing loan, the lender will do a full background check of
the credibility of the builder as well as the property itself. They will review the paper associated
with the property and ensure that the building is legal and that the builder has obtained all the
clearance certificates from the local authorities.
Also, the lender will ensure that the property is not involved in any legal disputes. So, with the
lender taking care of the paperwork, you need not go through the tedious process yourself, and
if the lender approves the loan, you can be sure that the property you wish you buy is safe.
 INCREASES THE LOAN ELIGIBILITY
When your home loan is in effect, and as you continue to repay the amount diligently or if you
have already repaid the loan in full, your CIBIL (Credit Information Bureau (India) Limited)
score will automatically increase, and the lenders will classify you as a safe and responsible
borrower. This will help you improve your loan eligibility. You can use this to advantage and
avail loan at a more affordable interest rate.
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 TAX BENEFITS
This is another significant benefit of availing a home loan. If you mortgaged property against a
loan, you could claim a tax deduction on the principal as well as the interest part of the
repayment. For the repayment of the principal component of the home loan, you can claim a
deduction under Section 80C. The maximum limit for deduction in this regard is Rs. 1.5 lakhs.
For the repayment of the interest component, you can claim a deduction under Section 24B.
The maximum deduction you can claim for the interest repayment is Rs. 2 lakhs. These
deductions can be a massive amount in terms of calculating your overall annual tax obligation.
If you buy a house without a loan, you will miss out on these tax benefit on home loan.
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DISADVANTAGES OF HOME LOAN
 IT IS A BIG COMMITMENT
Once the lender approves your home loan application, you are making a huge commitment for
a long period. The typical duration of a home loan last between 10 to 30 years. This means that
you would have a debt for a significant amount of time in your life. Once the loan is in effect,
you would have to be prepared to control your expenses and focus on the repayment.
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 HOME LOAN MAY CARRY RISKS
The duration of the home loan typically spans over 10 to 30 years, which is quite a long time.
During this period, several unforeseen circumstances can occur. Some of these instances can
make it difficult for you to repay the loan.
Events like divorce, sudden illness, loss of job, accident, can put in a tremendous financial
turmoil and affect your ability to cope with the burden of the loan, which in turn can result in
the loss of the property. In case, if you fail the repay the loan, the lender has the authority to
take over the property and sell it to gain back the money they lent you as a home loan.
 LOSS OF INVESTMENT OPPORTUNITY
This is one of the most overlooked disadvantages of home loan. When you apply for a loan,
irrespective of big or small the loan amount is or how long or short the duration is, as you
continue to repay the amount, you lose the opportunity to invest the same amount in an
investment tool that could yield you valuable returns. Imagine, instead of paying the EMIs, if
you could use the amount to invest in mutual funds or in a fixed deposit, you would get valuable
returns in the long run.
 LOSS OF TAX BENEFIT ON THE HRA COMPONENT
The employers pay housing Rent Allowance or HRA to the employees as part of their salary.
The HRA allows the employees to claim a tax deduction for the rent they pay for the housing.
To claim the HRA tax benefit, you must meet the following requirements:
o You must stay in a rented house in the city of employment and own a home in a
different city.
o Your house is under construction or is under re-development, and you have rented a
house until the construction work is completed.
Thus, if you are living in your own house, you lose the opportunity to claim the HRA exemption
and the entire amount will be considered as a taxable income.
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With the points mentioned above, it is quite clear that home loans have both benefits
as well as a few drawbacks. So, if you are thinking of applying for a home loan,
consider the home loan pros and cons before you make the final decision. Make sure
that you do your research well about the different lenders, as well as read the finer
details of the loan and make an informed decision so that you don’t regret anything
in the long run.
Types of Interest Rates
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Fixed Interest Rates
A fixed interest rate loan is a loan where the interest rate doesn't fluctuate during the
fixed rate period of the loan.[1] This allows the borrower to accurately predict their future
payments. Variable rate loans, by contrast, are anchored to the prevailing discount rate. A fixed
interest rate is as exactly as it sounds - a specific, fixed interest tied to a loan or a line of credit
that must be repaid, along with the principal. A fixed rate is the most common form of interest
for consumers, as they are easy to calculate, easy to understand, and stable - both the borrower
and the lender know exactly what interest rate obligations are tied to a loan or credit account.
For example, consider a loan of $10,000 from a bank to a borrower. Given a fixed interest rate
of 5%, the actual cost of the loan, with principal and interest combined, is $10,500.This is the
amount that must be paid back by the borrower.
A fixed interest rate is based on the lender's assumptions about the average discount rate over
the fixed rate period. For example, when the discount rate is historically low, fixed rates are
normally higher than variable rates because interest rates are more likely to rise during the fixed
rate period. Conversely, when interest rates are historically high, lenders normally offer a
discount to borrowers to fix their interest rate over time, as rates are more likely to fall during
the fixed rate period.
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The capital value of a fixed rate loan is generally determined as a function of future interest
rates at the time of calculation. This means that they contain a capital risk, in that if interest
rates fall, the capital value of the loan rises, and vice versa. This differs from a variable rate
loan, where the capital value is always the original loan less any capital repayments.
This can lead to counter-intuitive results. For example, a 15-year fixed rate loan of £100,000
taken out at the middle of 2011 would have had a capital value of around £115,000 at the
middle of 2013. Although UK Base Rate remained level at 0.5%, the forward curve, used to
price such instruments, fell (i.e., became less convex upwards).
For domestic mortgages, the lender often provides guarantees such that the break cost of a loan
(in excess of the reported capital outstanding) is limited, often to a number of months
repayments. These guarantees, usually only applicable where the fixed term is relatively short,
are effectively a derivative instrument whose one-way benefit is granted to the borrower.
Some fixed interest loans - particularly mortgages intended for the use of people with previous
adverse credit - have an 'extended overhang', that is to say that once the initial fixed rate period
is over, the person taking out the loan is tied into it for a further extended period at a higher
interest rate before they are able to redeem it.
In the UK, Nationwide Commercial recently issued a 30-year fixed rate mortgage as bridging
finance.
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Fluctuating Interest Rates
TABLE OF CONTENTS
 PERSONAL FINANCE
 MORTGAGE
Floating Interest Rate: Definition, How It Works, and Examples

What Is a Floating Interest Rate?
A floating interest rate is one that changes periodically: the rate of interest moves
up and down, or "floats," reflecting economic or financial market conditions. Often,
it moves in tandem with a particular index or benchmark, or with general market
conditions. It can also be referred to as an adjustable or variable interest
rate because it can vary over the duration of the debt obligation.
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KEY TAKEAWAYS
 A floating interest rate is one that changes periodically, as opposed to a fixed

(or unchanging) interest rate.
 Floating rates are carried by credit card companies and commonly seen with
mortgages.
 Floating rates follow the market or track an index or another benchmark
interest rate.
 Floating rates are also called variable rates.
Understanding Floating Interest Rates
A floating interest rate rises or falls with the rest of the market or along with another
benchmark interest rate. The underlying benchmark interest rate or index depends
on the type of loan or security, but it is often associated with either the London
Interbank Offered Rate (LIBOR), the federal funds rate, or the prime rate (the
interest rate financial institutions charge their most creditworthy corporate
customers).
When it comes to consumer loans and debt (like for mortgages, car loans, or
credit cards), banks and financial institutions charge a spread over this benchmark
rate, with the spread depending on several factors, such as the type of asset and the
consumer’s credit rating. Thus, a floating rate would define itself as “the LIBOR
plus 300 basis points" or "plus 3%."
Types of floating-rate products
Home loans that carry floating rates are known as adjustable-rate mortgages (ARMs). ARMs have
rates that adjust based on a preset margin and a major mortgage index such as LIBOR, the Cost of
Funds Index (COFI), or the Monthly Treasury Average (MTA). If an individual takes out an ARM
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with a 2% margin based on LIBOR, for example, and LIBOR is at 3% when the mortgage's rate adjusts,
the rate resets at 5% (the margin plus the index).
Most credit cards charge floating or variable interest rates on unpaid balances. In the credit card
agreement that new cardholders receive, it'll state that the card's annual percentage rate (APR) is such-
and-such, based on the so-and-so rate or index plus a certain amount, or margin. They'll usually add
something like "this APR will vary with the market."
Credit card interest rates are predominantly indexed to the prime rate—which
directly reflects the interest rate set by the Federal Reserve several times per year—
along with a margin that varies at the card product level and individual account
holder's credit quality.
Floating Interest Rate vs. Fixed Interest Rate
A floating interest rate contrasts with a fixed interest rate, in which the interest rate stays constant and
doesn't change. It might apply during the entire term of the loan or debt obligation, or for just part of
it
Residential mortgages can be obtained with either fixed or floating interest rates. With fixed
interest rates, the mortgage interest rate is static and cannot change for the duration of the mortgage
agreement. With floating or variable interests rates, the mortgage interest rates can change periodically
with the market.
For example, if someone takes out a fixed-rate mortgage with a 4% interest rate, the individual will
pay that rate for the lifetime of the loan, and the payments will be the same throughout the loan term.
In contrast, if a borrower takes out a mortgage with a variable rate, it may start with a 4% rate and then
adjust, either up or down, changing the monthly payments.
Example of Floating Interest Rate Loan
Herbert and Amanda are buying a house, and they take out a $500,000, 30-year 7/1 ARM. This means
their loan's interest rate is fixed at 2% for seven years. At the end of that time, the mortgage resets to
have a floating interest rate, which changes once a year; it is pegged to the LIBOR. So in the eighth
year, their interest rate rises to 4%. In the ninth year, the LIBOR rate has dropped slightly, so their
interest rate decreases to 3.7%. In the 10th year, it falls again to 3.5%. The interest the couple pays on
their mortgage will continue to fluctuate annually this way, until they pay off the mortgage in full—
or refinance it.
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Step-by-Step Guide to Home Loan Procedure
Applying for a home loan is an exciting first step in your journey to owning your dream home. This need
not be overwhelming with our step-by-step guide to the home loan procedure. While there may be minor
differences from one lender to another, the general procedure listed here will be common to all banks.
Following the steps given here will ensure that your home loan application process will be smooth and
hassle-free
1. Fill The Loan Application Form & Attach The Documents

2. Pay The Processing Fee
3. Discussion With The Bank
4. Valuation Of The Documents
5. The Sanction/Approval Process
6. Processing The Offer Letter
7. Processing The Property Papers Followed By A Legal Check
8. Processing A Technical Check & The Site Estimation
9. The Final Loan Deal
10. Signing The Agreement
11. The Loan Disbursal
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1. Fill The Loan Application Form & Attach The Documents
The procedure to take Home Loan begins with an application form. This loan application will require a few
basic information about the applicant. Usually, this includes:
 The personal details of the applicant (Name, Phone number, etc.)

 The residential address of the applicant
 The monthly or yearly income of the applicant
 The educational information of the applicant
 The employment details of the applicant
 The property details on which the loan is applied
 The estimated cost of the property
 The present means of financing the home property
Once the formal application is filled, the next step is to attach all the valid documents required by the bank
with it. Usually, this includes the:
 income proof
 identity (or ID) proof
 Age proof
 Address proof
 Employment details
 Educational proof (school/diploma/degree certificates)
 Bank statements
 Property details on which the loan is applied (if finalized)
2. Pay The Processing Fee
Once the formal application and document submission process is done, the applicant has to pay the
processing fee to the bank. This is the amount collected for maintaining the applicant’s loan account. It
includes sending some confidential paperwork (like IT certificates, post-dated cheque, etc.) every year.
The processing fee of a bank usually:
 Ranges from 0.25 % to 0.50 % of the requested loan amount.

Say, for example, the applicant has applied for a home loan of Rs. 15 lakh, then the processing fee will be
Rs. 3,750 (at 0.25%) and Rs. 7,500 (at 0.50%) respectively.
A commission is then generated by the bank to the agent handling the applicant’s home loan process, which
to an extent is taken from the processing fee paid by the applicant. Though most banks have a proper fee
structure, it can be negotiated. There is no crime in trying to bargain with the processing fee.
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Note. Every bank will have a processing fee for a loan. However, there are banks that offer zero processing
fee home loans. Well, don’t fall for this because this advantage can call for a higher rate of interest, stamp
duties, and other legal charges.
Discussion With The Bank
Once the applicant has completed the application and documentation process, he or she has to wait until the
bank or the respective financial company checks the papers. It usually takes about 1-2 days or even less if
the submitted paperwork is correct.
However, there might be times when the bank might want the applicant to pay a visit to the bank for a face-
to-face interaction before the loan is sanctioned. This is done to collect more details about the applicant and
to make sure if he/she will be able to repay the loan with the interest amount.
Use: Home Loan Repayment Calculator
4. Valuation Of The Documents
Keep in mind that millions of people apply for home loans on a daily basis and to ensure that bank approves
the paperwork as soon as possible, the applicant has to be genuine in the entire procedure.
Any fake document or fraudulent activity is unacceptable by the bank. It is a criminal offense and can lead
to bigger troubles. As soon as the application form & documents are submitted, and the processing fee is
paid, the bank authority then evaluates them.
A bank examines the following details of an applicant:
 Residential address (previous and current)

 Place where he/she is employed
 Credentials of the employer
 Workplace contact number
 Residence contact number
Note: A bank representative pays a visit to the applicant’s residence or workplace to verify his/her details.
At times, the references listed by the applicant in the form are also checked. This enables a clear trust between
both the parties.
82
FINDINGS
 Nearly 87 % of the respondents are going for house construction before

they attain 50 years.
 Salaried and educated persons are the major segments for the housing loan
Perception on product and price are the major determinant for the loan in
all the banks
 Among several sources of awareness, TV & magazine advertisement,

previous borrowers of housing loans, bank officials are found as the
prominent sources of information. 'F' statistics also proved that the above
sources are significant than other sources
 Spouse is the major source of influence for the purchase of home loans as
86.8 per cent of them opined so.
 Regarding the various attributes influencing the selection of the bank, the
attributes such as, flexibility, the processing fee, the interest rate, and the
83
processing time are found prominent since the respective 'F' statistics is
significant at five per cent level.
 As far as core product attributes are concerned, 65.7 per cent of the
respondents have high perception on the core product attributes.
 As far as tangible product attributes are concerned, 53.9 per cent of the
respondents have medium level of perception.
 As far as augmented product attributes are concerned, 48 per cent of the

respondents have medium level of perception.
 A single majority 36 - 60 percentage of the respondents have availed the

housing loan after repeated visits to the bank which range from 2 to 6 times.
 The mean number of such visits made is 4 to 5 times and which vary among
consumers.
 The loan amount sought by the respondents range from below Rs 2 lakhs
to above Rs 10 lakhs. The mean loan amount sought by the respondents is
Rs 6.85 lakhs.
84
 The loan amount availed by the respondents range from below Rs 2 lakhs
to above Rs 10 lakhs. The mean loan amount availed by the respondents is
Rs 5.94 lakhs.
 A majority 70.24 per cent of the respondents have not availed their loan as
requested.
 The F-Statistics showed that the managers' decision is the important reason
for the difference between the loan amount sought and availed since the
respective 'F' statistics is significant at five per cent level.
 A single majority 27 - 41 percentage of the respondents have availed loan

amount at a interest rate ranging from 8 to 10 percentage and the mean
interest rate sought is 9.84 per cent. However, the mean interest rate for
which applications made varies among banks. Nearly fifty eight per cent
of the respondents have opted for floating interest rates.
85
86

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VEER WAJEKAR ARTS, SCIENCE AND COMMERCE COLLEGE,

TAL-URAN DIST-RAIGAD PIN-400 702

Krutesh Raghunath Tandel

Roll No.: 22773

Study on Factors Affecting Consumer's Buying Behavior towards Home

Sr. No Topics Page no.

 Importance of home loan 26

 Benefits of home loan 27

 Structure of home loan 29

The first Home Loan borrower

The freeing of the interest rate regime:

The growth of the Home Loan sector

 Loans for Purchase of Land

Eligibility Criteria for Purchase of Land

The following are the eligibility criteria for purchase of land:

Documents Needed for Home Purchase Loan

 Proof of Age: Birth certificate, Std.10 marksheet

 Loans for Home Purchase

Eligibility Criteria for Home Purchase Loans

 Proof of Age: Birth certificate, Std.10 marksheet

 Loans for Construction of a House

Eligibility Criteria for a Loan for Construction of a House

 Proof of Age: Birth certificate, Std.10 marksheet

 House Expansion or Extension Loans

Documents Needed for Loan for Construction of a House

 Proof of Age: Birth certificate, Std.10 marksheet

 Loans for Home Improvement

Eligibility for Home Improvement Loan

The following are the criteria for home improvement loan:

 Proof of Age: Birth certificate, Std.10 marksheet

 Balance Transfer Home Loans

Eligibility Criteria for Balance Transfer Home Loans

 Proof of Age: Birth certificate, Std.10 marksheet

Eligibility Criteria for NRI Home Loans

 Proof of Age: Birth certificate, Std.10 marksheet

Eligibility Criteria for Balance Transfer Home Loans

 Proof of Age: Birth certificate, Std.10 marksheet

 Attractive Interest Rates

1. To study the perception of consumers towards home loans.

Split rate option

Home loan top-up

Line of credit facility

1. Tax benefits on home loan

2. Tax benefits on second house:

4. Balance Transfer Facility:

5. Makes it easy to buy dream home:

6. High repayment Tenure:

7. Enjoy capital appreciation:

Structure of home loan

a) Till 60 years - this will enable a tenure of 15 years.

Kumaraswami M. and Nayan J. (2014) discussed the importance of housing

Mishra A.K.(2011) discussed the overall resources invested by housing finance

Table 1 Type of Home Loan Opted

Sr no. Category of Home LIC(%) SBI(%)

Interest Rate Opted by the Respondents

Table 2 Interest Rate Opted by the Respondents

Sr no. Category LIC(%) SBI(%)

with Special Reference to Yavatmal District, (M.S.) India”, IRACST-International Journal

Technology, Volume 3, Issue 1, Jan-Feb, 88 – 90.

Kumaraswami, M. & Nayan, J. (2014). “Marketing of Housing Finance- A Comparative Study

Lending Practices,” International Journal of Scientific and Research Publications, Volume

2(10), October, 1-6.