Divya-home Loans Project

8/8/2019 Divya-home Loans Project

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CHAPTER- 1


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C A 1

INTRODUCTION

1.1 INTRODUCTION TO HOME LOANS

Your Home is a place where you relax after coming back from your days

tiring work, it is that place where you can give time to your family &

spend beautiful moments with them. To acquire a home which can be

christened your Own House is a life-time decision & has to be taken

with a lot of planning & requires huge finances. Your Dream Home is not

very far away with a Home Loan which will fulfill your Dream into a

reality. Home Loan is a Secured Loan offered against the security of a

house/property which is funded by the banks loan, the property could be

a personal property or a commercial one. The Home Loan is a loan taken

by a borrower from the 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 is failed to pay back the

loan, the banker can retrieve the lent money by selling the property.

Whether to go for a fixed rate or floating rate interest for home loans is a

dilemma which almost every home loan borrower faces. Even after

deciding on a particular loan regime, the home loan terms and condition

fine prints can create havoc with your interest rates. For examp le even if a

borrower has opted for fixed rate home loan and the bank has promised

him a rate which he feels is good, the catch is in the fine prints which

authorizes the bank to vary this fixed rate every 2 years, things can go

worse for the fixed rate borrower. Similarly if the bank doesn't pass you

the benefit of lowered interest rates in floating interest rate regime, it will


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be of a little value. Avoiding such a situation essentially means that you

study the terms and conditions of home loan carefully and clearly ask the

bank about such things. In case of floating interest rates the facts can be

verified by checking how the interest rates on home loan dropped during

low interest periods. A Floating interest rate for home loans is a loan

where the interest rate which is payable is linked to the market rate e.g.

the bank lending rate. The interest rate payable by you will also rise and

fall as per bank lending rates which may fluctuate. A Fixed interest rate

for Home loans is one where the rate charged by the HFC on the loan

amount is constant over the tenure of the loan. A fixed interest rate

protects the borrower from a rise in home loan rates. While on the flipside, he may not benefit if the market rates were to fall. Therefore, it is

advisable to go in for a fixed rate if you feel that the rate of interests in

the market have touched rock bottom and the rates can only move

upwards. Home loans interest rate in India is usually calculated either on

monthly reducing or yearly reducing balance. In the Monthly reducing

system, the principal on which you pay interest reduces every month as

you pay your EMI. While in the Annual Reducing system the principal is

reduced at the end of the year, thus continuing to pay interest on a certain

portion of the principal which you have actually paid back to the lender

thus making EMI for the monthly reducing system effectively lesser than

the second system of calculating interest.

The Mortgage financing industry was estimated approximately at US $

18 billion in India. The mortgage industry is undergoing a change as the

market is dominated by banks in the direct housing finance sector.

Though the housing finance industry in India is growing for the past few

years still financing through the organized sector continues to account

only for 25% of the total housing investment in India (Source: LIC

Housing finance).


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The top players in this industry are housing finance companies,

commercial (local as well as foreign) banks, cooperative banks and other

non-banking financial companies (NBFCs). Presently Housing

Development Finance Corporation (HDFC) is the market leader followed

by State Bank of India (SBI). The Industrial Credit and Investment

Corporation of India (ICICI) Bank and the Life Insurance Corporation

(LIC) Housing Finance Limited also have significant market share. The

industry sources has reported that, 8 to 10 percent of the market share that

foreign-owned banks have in the industry, Citibank has 5 percent share,

followed by Standard Chartered and HSBC with about the 3 to 5 percent.

The formal mortgage finance sector continues to elude the lower income

groups. The twin problems of affordability and accessibility that hinder

the progress of housing in South Asia need to be addressed. For this,

governments have to withdraw from direct participation in the housing

and housing finance sector and instead need take on the role as facilitators

to create the enabling environmen t to encourage private sector capital.

Further efforts of the government are required to strengthen foreclosurelaws, land records need to be computerised and archaic land laws

especially rental laws need a complete overhaul. Small steps such as

encouraging credit bureaus, introducing mortgage insurance, allowing

real estate mutual funds and creating a favorable environment to facilitate

foreign direct investment in housing will help stimulate the housing

finance sector. The road is long but not untenable.

There are various steps involved in getting a Home Loan from selecting

your property to filling up the loan application. Following are the various

stages in Home Loan:

a) The first step involved in the process is to find your property which isfollowed by the verification of property documents, post that the


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documents are examined & simultaneously you can start searching for the

lender who can offer the BEST Home Loan Deal after checking your

eligibility criteria.

b) Know the Home Loan Eligibility: Banks offer the loan amount onlyafter checking your profile & based on various eligibility criterias like

age, income & salary banks lend you the money.

c) Select the Best Home Loan after evaluation:Comparing is the primaryfeature in the home loan selection, however other fees & charges like

Application fees, processing fees, legal charges should not be neglected

when comparing various loan offers. To check the interest rates & other

charges incurred by various banks.d) Applying for the Loan: After you have selected your lender, you have to

fill in the application form wherein the lender requires complete

information about your financial assets & liabilities; other personal &

professional details together with the property details & its costs.

e) Documentation & Verification Process: You are required to submit thenecessary documents to the bank which will be verified together with the

details in the application.

f) Credit & default check: Bank checks out the borrowers loan eligibility(through repayment capacity) & the amount of loan i s confirmed. The

borrowers repayment capacity is reached which is based on the income,

salary, age, experience & nature of business etc. Bank also checks credit

history which plays a critical role in deciding & approving your loan

application. Low Credit Score implies that the bank upfront rejects your

application on the basis of earlier credit defaults; on the other hand high

credit score gives a green signal to your application.

g) Bank sanctions Loan & Offer letter to the borrower: After the creditappraisal of the borrower bank decides the final amount & sanctions the

loan, the bank further sends an offer letter to the borrower which


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constitutes the details like rate of interest, loan tenure & repayment

options etc.

h) Acceptance Copy to the Bank: The borrower needs to send anacceptance copy to the bank after the borrower agrees with the terms &

conditions in the offer letter.

i) Bank checks the legal documents: The bank further asks the legaldocuments of property from the borrower to check its authenticity so as to

keep them as a security for the loan amount given. The next step involved

is the valuation of the property by the bank which determines the loan

amount sanctioned by the bank.

j) Signing of agreement & the loan disbursal: The borrower signs theloan agreement & the bank disburses the loan amount.

Terms used in Housing Finance:

y EMI: Equated Monthly Installment till the loan is paid back. It consistsof a portion of interest and the principal

y Floating Rate of interest: Rate of interest which varies with the marketlending rate. This means that there is an element of risk of paying more

than budgeted amount in case the lending rates goes up

y Monthly Reducing balance: In this system interest reduces monthlywith repayment of Principal amount

y Annual Reducing Balance: In this system principal is reduced annuallyat the end of the year so you end up paying interest even for the portion of

principal you have actually paid back

y Fixed rate of interest: Rate of interest remains unchanged throughoutthe period of the loan


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y Processing charge: It's a fee payable to the lender on applying for theloan

y Prepayment Penalties: When loan is paid back before the agreed term ofthe loan, then banks/ institutions charge penalty for the prepa yment

y Commitment Fee: Some institution charge commitment fee in case theloan is not availed within a stipulated period, after it is processed and

sanctioned

y Miscellaneous Cost: It is quite possible that some lenders may chargedocumentation or consultant charges.

1.2 ADVANTAGES OF HOME LOANS

The various benefits of home loans arising to the customers are: -

a) Attractive interest rates:-The various banks offer attractive interest ratesto boost and help their customers. Many banks provide loans on fixed or

floating rates to facilitate consumers as per their needs.

b)Help in owning a home:-The home availed by a person with the help of banks, because they provide technical and financial ass istance to

customers for owning their dream home.

c) No requirement of guarantor:-The commercial banks now a dayliberalize their laws regarding home loans. Some of banks dont even

require the guarantor to grant loan to their consumers. They also make

consumers free by reliving him to find a guarantor to complete the

proceedings of availing loan.

d) Door-Step Services:-These doors to step services are provided fromenquiry stage to the final disbursement takes place such services are

beneficial for customers in present busy life. Banks like ICICI bank and


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standard chartered bank provide door to step services to customers to

borrow loan.

e) Loan period: -There are many banks which provide maximum loantenures up to 15-20 years based on the loan amount and the creditability

of customers. This relieves the customers to repay loan amount till a long

period.

f) For accidental death insurance:-Some banks provide free accidentaldeath insurance with housing loan which is also beneficial for the

customers.

These benefits or advantages of home loans are responsible for making it

so popular among customer that a person who doesnt have their home

and want to buy, they can get it financed by taking a home loan. Home

loans help such persons in making their dream home.

1.3 DISADVANTAGES OF HOME LOANS

The main disadvantages of home loans are high lightened as below:

a) Delays in processing: -Many times, there are huge delays in processingof providing home loans because various formulations to be fulfilled in

this process. Due to these delays customers feel mentally as well as

financially weak.

b) Fluctuating interest rates:-Some banks give home loans at floatingrates, which fluctuate at Different intervals due to some reasons. These

changes sometimes, may lead to increase in interest rate which will

increase the cost of home loans to the customers .

c) High Cost: - The public sector banks charge high processing cost forhome loans sanctioning. They are forced to pay serious charges at

various stages to fulfill the requirements. Some consumers are not able to


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pay such charges so such people could not avail the benefits of home loan

schemes.

d) Problems in disbursement:-There are many problems in disbursementof home loan amount. There are some delays in disbursement of loan

amount to the customers due to legal formalities. This causes problems to

the customers.

These are limitations or disadvantages of home loans. But sometimes

some banks charges high installments to repay loan amount. This also

causes problem to the customers. These limitations can be removed by

providing good services to the customers.

1.4DISBURSEMENT OF HOME LOANS

The every bank has its own procedure to disburse the loan amount among

customers. After choosing your right home, the next step is disbursement

of home loans. The loan amount is disbursed after identifying and

selecting the property or home that are purcha sed and submit the requisite

legal documents. In the disbursement of home loans a clear title and full

verification to ensure that a person has full rights on his house. The 230A

clearance of seller and /or 371 clearances from the appropriate authority

of income tax are also needed.

a. Eligibility criteria: -However, if one is a resident or non-resident

individual who is planning to buy a house in India, one can apply for a

home loan. If a person has decided to buy a property in the near future,

he/she can apply for a loan before even selecting the property. Once the

maximum amount to put into the property has been decided, the Housing

Finance Institutions or Banks will let the customer know that how much

he/she is eligible for and this helps to plan out the b udget.


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b. Conditions regarding co-applicants: -All Housing Finance Institutions

lay down conditions on who can be co-applicants. All co-owners to the

property need to be co-applicants to the loan necessarily. These

institutions do not permit minors to join in as either co-owner or as co-

applicants because a minor is not eligible to enter into a contact as per

law. They do not permit even friends or relatives who are not blood

relatives to take a property jointly. However, Income of co-applicants can

be clubbed together to get higher loan eligibility.

c. General Terms and Conditions: -The following are the terms and

conditions applicable to the basic home loan product only. These are

likely to change on the basis of the variations of the home loan product.Typically, in general home loans, the following conditions are applicable

:-

y The loan to value ratio (LTV) cannot exceed a particular percentage. This

differs from product to product and from one Housing Finance

Institutional Bank (HFI/B) to another. The components of the value of the

Property calculated here are covered under cost of pro perty.

y The maximum tenure of the bank is nominally fixed by HFI/Bs.

However, HFls/Bs do provide for different tenures with different terms

and conditions.

y The installment that one pay is normally restricted to about-50-per cent

of the monthly-gross income of the candidate.

y The total monthly outflow towards all the loans that have been availed of,

including the current loan is normally restricted to 50% of the gross

monthly income.


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y One will be eligible for a loan amount which is the lowest as per one's

eligibility. This is calculated as per the LTV norms, the HR, norms and

the FOIR norms as mentioned above.

y Most HFls considers the profile before they judge the repayment

capacity. The judgment is based on age, qualifications, number of

dependents, employment details, employer credentials, work experience,

previous track record of repayment of any loans that have been availed

of, occupation, the industry to which the candidate's business relates to, if

he/she is self-employed, then the turnover in the last 3 -4 years etc.

y

Some HFIs/Bs insists on guarantees from other individuals for therepayment of the loan. In such cases, the customers have to arrange for

the personal guarantee before the disbursement of the loan takes place.

y The property should be technically clear before the HFIs/Bs disburses the

loans amount. Most of institutions and banks have a team of technical

experts who visit the site to get a technical report before the disbursement

of loan. This is also beneficial to the customer as they check for the

technical quality and compliance with local laws.

y The property should be legally clear before one can avail of a

disbursement of the loan amount. Housing-Finance Institutions /Banks

(HFIs/Bs) take legal clearance from their lawyers before the disbursement

of amount. This proves to be beneficial to the customers as a legal expert

checks his/her documentation to ensure that he/she get a proper title to the

property.

y The disbursement of the loan is as per the progress of construction of the

property unless it is a ready property in which case the disbursement will

be by one single cheque. PEMI or simple interest on the loan amount


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disbursed to the customer in case of a part disbursement will be payable

by the customer on the disbursement.

y The disbursement in most cases will be favoring the builder or the seller

or the society or the development authority as the case may be. The

disbursement will come in the customer's favour under special

circumstances only.

y The repayment of loan can be made either through deduction against

salary, post-dated cheques, standing instructions or Auto debit

instructions to bank.

y The principle is amortized either on annual reducing or monthly reducing

basis as the case may be.

The above terms and conditions are generally true for most Housing

finance Institutions/Banks with respect to the general Home Loans.

However, the specific terms and conditions vary with respect to special

Housing Finance Institutions or Banks.

d. Charges applicable to home loans :- The different kinds of charges

applicable to home loans are discussed below :

y Processing fees: -This is a charge that is levied by most HFls/Bs. Thishas to be paid at the time of submission of the application form. It's

normally charged as a percentage of the loan amount sanctioned. Some

HFls also charge a flat fee based on the loan amount instead of a

percentage. When a lower amount is sanctioned the excess fees paid at

the time of submission of the application is adjusted with the charges,

which one make to the HFI/B subsequently. Most HFls/Bs refund the

processing fee if the loan application is rejected.


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y Administrative fees:-This charge is again, normally, a percentage of theloan amount sanctioned. It is collected by the HFI/B for the maintenance

of customer's records, issuing interest cert ificates, legal charges, technical

charges, etc. though the tenure of the loan. It is payable by the customer

when he/she accepts the offer letter given by the HFI/B. This payment

has to be made before the disbursement. The mode of collection of these

fees varies from one HFI/B to another.

y Rate of interest: -This is the rate of interest applicable on the loanamount through the tenure of the loan. It is charged on the principal

monthly reducing method. Most HFIs/Bs gives an option to select either a

fixed rate of interest or a variable rate of interest.

y Legal Charges:-Some HFIs/Bs mainly Public Sector Banks levy legalcharges that they incur on getting the property documents vetted by their

panel of lawyers.

y Technical Charges:-These charges are also levied by certain HousingFinance Institutions/Banks (HFIs/Bs) to meet their expenses on the

technical site visits to the customer's property. This ensures quality of

construction and construction within the norms as stipulated by the

respective approval authority.

y Stamp duty and registration charges:-HFIs that go in for a registeredmortgage pass these charges on to the customer. These are rather heavy in

certain states depending on the laws laid down by the state where one

buys a property.

y Personal Guarantee from Charges: -Since the personal guarantee provided by the customer need to be stamped, these charges are also

recovered from the customer. They are charged to him by HFIs who

demand for Guarantees.


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y Cheque Bounce Charges :- In case the cheques through which one makea payment to HFls get dishonored, some minimum charges are levied by

the HFI. The same are recovered from the customer.

yDelayed payment charges: -HFls/Bs charge delayed payment chargesfrom the customer if he/she delays the payment of installments beyond

the due date.

y Additional charges: -These are levied as a percentage on the delayed payment charges by most HFls. They are levied if one fails to pay the

dues within the stipulated time after a delay has taken place.

y Incidental charge: -This is payable in case the HFI/B sends arepresentative from their organization to collect their outstanding dues . It

is normally charged at a flat rate per visit. These charges are levied by

most HFls/Bs.

y Prepayment Charges: -This is a penalty charged by HFls/Bs from whenone makes either a part prepayment or a full repayment of the loan. This

charge is levied only on lump sum payments and not on the EMls that one

pays. This charge is levied on the amount prepaid by one and not on the

entire outstanding principal. These charges are gradually being discount.

So, these are the charges levied by most Housing Finance Institutions and

Banks while granting home loan to the customers.

e. Credit documentation: - Given below is the exhaustive list of credit

documents- that need to be submitted for a general home loan product.

The documents vary from one HFI/B to another based on one's employer,

qualifications experience etc. The general requirements are as follows : -

y Income Documents :For salaried slips for the last three monthsappointments letter-salary certificate-retainer ship agreement, if

appointed as a consultant-Form 16 issued by the employer in customer's


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name income document for self employee - last three years profit and loss

account statement duly attested by Chartered Accountants. Last three

years Balance Sheets duly attested by Chartered Accountant, last three

years Income Tax Returns with computation chart duly filed and certified

by the Income Tax authorities.

y Proof of employment:-Identify card issued by the employer- Visitingcard.

y Employer's details (In case of private limited companies):-Profile ofemployer on employers letterhead (to be signed by a senior person in the

organization) comprising of:

i. Name of promoter/directorii. Background of promoters/director

iii. Nature of business activity of your employeriv. Number of employeesv. List of branches/factories

vi. List of suppliersvii. List of clients/customers

viii. Turnover of employerix. Annual reports of the employer for the last two to three

years.

y Proof of age (Anyone of the following) :- Passport- Voter's ID card-PAN card-Ration card-Employer's identity card-School leaving

certificate-Birth certificate.

y Proof of residence (Anyone of the following): -Ration card-Passport-PAN card-Rent agreement, if the customer is staying currently on rent-

Bank Pass book-Allotment letter from the company if he/she is residing

in company quarters.

y Proof of name change (If applicable) : -A copy of the official gazette A copy of a newspaper advertisement publicizing the name change -

Marriage certificates.


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y Proof if investment (If required) :- Bank statement for the last sixmonths of all operating and salary accounts - Bank statements for the last

six months of all current accounts, if self-employed-any other

photocopies of investments held, if required by the HFC.

y Legal documentation :-Legal Documentation the typical legaldocuments that need to be submitted to the HFC arc discussed here.

Given below is a list of legal property documents that need to be

submitted to the HFC for mortgage of the property. The name and the list

of documents vary from state to state and also depend on the type of

property being financed. A broad outline of the documents required is

given below:

i. Acceptance copy of the offer letter issued by the HFC/B.ii. Title documents of the property that include -sale agreement duly

registered-Own contribution receipts - Allotment letter-Registrationreceipt-Land documents indicating ownership, if applicable - Possessionletter-Lease agreement, if applicable (Property bought from adevelopment authority) - Mortgage deed if the HFC opts for a registeredmortgage.

iii. No Objection Certificate from the developer, society or developmentauthority as applicable.

iv. Personal Guarantees, if applicable.v. In case of alternator additional security, documents for the same

depending upon the security details.vi. Postdated cheques for the EMls.

The above documents are only indicative in nature and do not cover the

entire list. It may, also be noted that in a resale case, the previous chain of

agreement also need to be taken.

f. The Tax benefits that are applicable to housing loans forindividuals:-

Currently Tax Benefits to individuals are available only for the Home

Loans and Home Extension Loans products. The benefits available are

covered under these sections:


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y Property Insurance:-Is it compulsory to insure the property? SomeHFls insist on a mortgage redemption life insurance policy. In this case

the customer gets a benefit of an interest rate reduction. Though the HFI

may not insist, it is better to go in for property insurance to safeguard the

asset against any sort of damage or loss. The customer can select the

tenure for the property insurance. The insurance premium is changed up

front. Most insurance companies provide for huge discounts on the rate of

premium for larger tenures. The premium charged currently is seventy-

seven for every lakh of property for a year. So a customer has to fulfill

various conditions to be eligible for availing home loan from a Housing

Finance Institution/Bank After fulfilling these conditions, a customer can

avail loan at low interest rate i.e. fixed rate floating rate. A decision on

whether one should go in for a fixed-rate loan or a floating-rate loan now

is a function of two factors i.e. One's perception of where interest rates in

the economy are headed and one' capacity to ride the interest rate

changes. A floating-rate loan let one take advantage of further falls in

interest rates but one stand to lose if interest rate, rise again. However this

decision is based on the perception of the consumer.

1.5TYPES OF HOME LOANS

There are different types of home loans available in the market to cater

borrowers different needs.

Home Purchase Loan: This is the basic type of a home loan which has

the purpose of purchasing a new house.

Home Improvement Loan: This type of home loan is for the

renovation or repair of the home which is already bought .


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Home Extension Loan: This type of loan serves the purpose when the

borrower wants to extend or expand an existing home, like adding an

extra room etc.

Home Conversion Loan: It is that loan wherein the borrower has

already taken a home loan to finance his current home, but now wants to

move to another home. The Conversion Home Loan helps the borrower to

transfer the existing loan to the new home which requires extra funds, so

the new loan pays the previous loan & fulfills the money required for new

home.

Bridge Loan: This type of loan helps finance the new home of the

borrower when he wants to sell the existing home, this is normally a short

term loan to the borrower &helps during the interim period when he

wants to sell the old home & want to buy a new one, It is given till the

time a buyer is found for the old home.

Home Construction Loan: This type of loan taken when the borrower

wants to construct a new home.

Land Purchase Loan: It is that loan which is taken to purchase a land

for construction & investment. Home Loan Criteria by various banks The

borrowers eligibility of getting a home loan depend upon his/her

repayment capacity & the banks establish this repayment capacity by

considering various factors such income, spouse's inco me, age, number of

dependants qualifications , assets, liabilities, stability and continuity of

occupation and savings history.


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CHAPTER- 2


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C A TER 2

HOME LOAN IN INDIA

2.1 THE HISTORY OF INDIAN HOME LOANS

Real estate in India is currently one of the hottest investments options in

Asia. A recent survey of the real estate scenario acknowledge the Indian

metropolis of Mumbai, Bangalore and New Delhi as the top three

investors' choices for real estate investment in Asia. But there were

concerns mainly related to the availability of necessary funds for

investment and in the more recent times, the boom in the real estate

market opened the doors for a host of realty funds from financial

institutions. Prior to five years, the real estate segment in Indi a was

neither organized nor were there too many large institutions in the

construction industry. But now with an organized finance sector and with

the increase in transparency levels, it has become easier to createfinancing vehicles.

The decrease in housing loan interest rates and an increase of disposable

income has contributed largely to an increased demand in the residential

segment. In spite of a rise in home loans interest rates and qualitative

sanctions being levied by the RBI on banks, buying interest has not

waned because home loans are still cheaper than ten years ago. The retail

markets are also undergoing a defining change with the introduction of

larger retailing formats. The financial institutions also wasted no

opportunity in tapping the fund requirement catering to the inflow of

potential buyers in the retail sector. While most funds were initially

floated by financial Institutions or banks such as HDFC, ICICI Bank and


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IDBI Bank to name a few, real estate developers like DLF Universal and

even retailers such as Pantaloons Retails (I ndia) have now entered the

real estate sector for creating more retail facilities and have been hugely

successful.

As the realty prices in India skyrockets, housing complexes mushrooming

and city landscapes becoming unrecognizable, the growth across all re al

estate segments and experts estimate that demand will remain steady at

the currently high levels because of the improving economic environment

and the real estate sector is expected to grow 30% every year. This rising

property prices encourage banks and financial institutions to lend more

with the increase in collateral values. Although the home loan providershave hiked their rates twice in less than three months, home loans

continue to be nearly 45 per cent cheaper than what they were in early

2001. Because if statistics are referred to, the interest rates which now

range between 9-10 per cent are still much lower than what they were ten

years ago, at 16-17 per cent. In addition to funds being raised by the

Indian financial institutions like HDFC, ICICI and IDFC abroad, the

money could be used to develop business and IT parks and townships. A

study has revealed that as many as one million homes are financed every

year in India. Home loans, it is a very safe area of loans from the point of

view of financial institutions. They are easier to increase their share in the

home loan sector. So they are coming with the attractive schemes.

Customers can have the benefit of liberal terms and conditions as well as

tax benefits if they choose to take a home loan. So the use has gain

attention. The increasing number of home loans available today as

strengthened the middle class individual to venture forth and fulfill his

dreams. Our country, India, where population has already crossed 1

billion mark measures 3214 km from north to south and 2933 km from

east to west with a total land area of 3,287,263 sq km. Even with such a


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large amount of area, there is scarcity of land for people almost in all

parts of the country, thanks to our rapidly growing population. In such a

scenario, a major part of our country's population lives in slums where

living conditions are very inferior due to poverty, unhygienic

environment and lack of basic facilities like proper drinking water and

electricity.

Owning a beautiful home with a sufficient amount of space, ventilation

and floors equipped with necessary facilities of water and electricity is

desire of every individual irrespective of his or her occupation and

financial position. To the fortune of many such individuals, this desire of

them can be fulfilled through the medium of home loans. This is due to

the fact that in the current scenario, there are organizations that are

willing to issue loan to you. There are large number of banks like ICICI,

HDFC and SBI to name the few, financial institutions like IDBI and

Citigroup that actually giving out home loans. Due to large sources of

home loans in the market the competition is high and everyone wants t o

flourish its business in order to survive in the market. To facilitate thisgoal of survival as well as profit, home loan interest rates India have

fallen to a very affordable level. Such competition has proved very

beneficial for general public as earlier they were not in a position to apply

for loans due to high house loan rate in India.

Although, the terms and conditions for home loans differ from company

to company. Generally, the interest rates offered by home and financial

institutions in India are similar to the interest rates that prevail in the

market. Thus more or less all of them are similar as far as interest on loan

charged by them is concerned.


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But as far as the terms of home loan are concerned most companies and

financial institutions may have their own criteria. T here are few

companies who believe in idea of asking the borrower to keep his or her

property papers with them, for security reason. This practice is called

keeping collateral Securities with the home loan issuer. The organization

that issues the loan thoroughly inspects your property papers and

calculates real market value of your property. After completion of this

task if they feel that your paper s are fair and relevant enough to be

considered by them as Collateral Securities, they grant you the loan.

On the other hand, there are a large number of lending companies who go

about asking the finance seeker to make a lump sum deposit initially,

commonly known as the down payment. And most importantly there are

certain parameters or rules that are fixed by the all the companies issuing

home loan, which must abided by the loan seeker while going for home

loans, otherwise he or she might land up in trouble along with his family.

Home loans in India have made people Buy Property in India in spite of

the skyrocketing prices. Today, we find considerable Real Estate

Investment in India, either in the field of Residential Property in India or

Commercial Properties in India. Home Loans in India are disbursed by

many Banks as Loan Banking is on of the most important function of the

Financial Services in India. Property and Real Estate Consultants in

India usually recommend that we undertake appropriate Home Loan or

Mortgage Loan counseling so that we can Buy Apartment in India at an

affordable Mortgage Rate. Purchasing the home of your dreams is not an

easy task. Especially when you plan to buy a home on loan. Home loan

means that you buy a house on installments. In simpler terms when you

want to own a home and cant afford to pay the amount in lump sum, you

can pay it in monthly installments with an interest rate.


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The interest rates of home loans are expected to go down even further

according to analysts who foresee a cut down in the rates by the RBI in

the wake of the decision taken by US Federal Reserve to cut its rates by a

significant margin.

There are number of companies offer cheap home loans at a low interest

rate. You can avail loan against existing house for renovation or

expansion etc. There are many nationalized banks that offer finance for

affordable housing. India Housing has put together a comprehensive data

to provide you with the cheapest Home Loans available in the market.

We have listed all the important housing finance institutes and some of

the top home finance banks providing lowest interest rates.

In the last few years, housing loan scenario in India has changed

drastically. It has taken a front seat and people are looking forward to

owning their own houses. It is no more a dream that required lifetime

saving and a difficult decision to make. Today the new home purchase

loan is much easily available and is much cheaper than what was

available earlier. Banks are now everywhere and the schemes are

implemented even in villages and smaller towns. The housing loans are

popular there too, however, the activity of building flats is little slow. It

would not be wrong to say that there has been a boom in the home loan

market and with this boom; there is also a boom in the Number of home

loans mortgage brokers in India.

The main reason for this boom in home loan market is the change in

government policies. It is our governments motivation that the home

loan interest rates in India have fallen considerably. Lot many banks are

offering home loans and this is available at low EMIs (Equated monthly


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Installments). High EMIs are now a thing of past. Today lending rate is in

the range of 7.5 to 15 %.

There is also a trend to opt for home construction loan. This loan is

available to those who want to design their homes according to their

requirement and taste. In other words, this loan is meant for those who

themselves want to construct their new home.

As shared earlier, taking a loan is not a difficult task. However, before

taking a loan, one must realize that the relationship with the bank will be

for a longer period usually 15 to 20 years so one must ensure faith and

integrity in bank. Apart from low rate of interest, the bank should alsoprovide some value added services. The other thing is to look into is the

property that is to be brought. Making sure that the builder has all

sanctions and facility to build a good building is very important.

Taking home loans these days has become simpler. With the RBI

regularly bring down interest rates; taking home loans have become

extremely easy. Housing loans which were 16.5% to 18% a few years ago

fell by 11.5% to 13%. With interest rates going down, people increasingly

number apply to take these loans. Some of the leading banks offering

home loans in India, including ICICI Bank, IDBI Bank, HDFC Bank ,

Bank of Baroda, SBI, Standard Chartered Bank and Axis Bank .

2.2 HOME LOAN PROCEDURE IN INDIA

y Submission of Application Form: -After choosing a particular home loan, the customer submits the

application form to the housing finance company (HFC) along with other

relevant documents as required by the HFC. They comprise documents to

establish income, age, residence, employment, investments, etc. The

customer also needs to hand over a cheque for payment of an up front


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(non -refundable) processing fee of about 0.5-1% of the loan amount to

the HFC.

y Validation of the Information: -In the next stage, HFCs validate the information provided by the

customer on the application form. They usually conduct checks on the

residential address of the customer, the place of employment of the

customer, and credentials of the employer. Some HFCs may insist on a

personal interview with the customer and perform a reference check on

the references provided by the customer on the application form.

y Issue of Sanction Letter :-After due appraisal of customer profile, a sanction letter is issued which

contains details such as loan amount, rate of interest, annual / monthly

reducing balance, tenor of the loan, mode of repayment and general terms

and conditions of the loan. This is the actually the approval of the money

lending procedure by the company. However, the money is sanctioned

only after the documents and the property on behalf of which the loan is

being granted is thoroughly verified.

y Submission of Documents: -Once the sanction letter is passed, the customer is required to leave the

entire set of original documents pertaining to the property being

purchased with the HFC as security for the loan amount sanctioned.

These documents remain in the custody of the HFC till the time the loan

is fully repaid. Once the documents are handed over to the HFC, they

send all the documents for a thorough legal scrutiny.

y Validation of Property: -Prior to disbursement, the HFC also conducts a site visit to the customer's

property to ensure that all construction norms have been adhered to

properly. Once the HFC is satisfied that the property is legally and


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technically clear, they disburse the loan amount. The disbursement from

the HFI is on the basis of the stage of construction of the property.

y Payment Procedure: -Once all the above mentioned process, the borrower is entitled to take the

money from the lender party. Until such time that the entire sanctioned

amount is not drawn, the customer is supposed to pay a simple interest on

the Actual Amount drawn (without any principal repayments). The EMI

payments commences only after the entire sanctioned loan amount is

drawn.

2.3 HOME LOAN FOR RESIDENT INDIANS

Home loan for resident Indians are offered by the Housing Finance

Companies (HFCs) which range from buying a house either from the

developer - built, un-built or under construction or from a second owner

or for the improvement and renovation of the existing building structure.

With the latest boom in the Real estate, and investment market in India,

many venture capitalists are coming forward to have their share invested

in so called rich dividend paying projects. And so has been the

mushrooming of banks and financial institutions that are coming forward

to offer to the customers a variety of deals to choose from.

And since Home being the integral part of an individual, who since his

birth and childhood, dreams to have a living space of his own in India.

Once in a lifetime investment requires loan to accomplish it, and that is

how the home loans comes into the scheme of things.


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With so many private sector banks, and private as well as public sector's

housing financing companies lending their shoulders out, it's becoming

gradually uneasy for the consumers to choose the best deal as well.

For an Indian resident to avail loans, certain factors including eligibility

criteria, documentation need to be considered, and of course you must

know about some Home Loan Tips before applying for Home Loan,

which are discussed in this section, which includes eligibility, amount of

loans, types of interest, tenure of interest, the documents required, rate of

interest, and even disbursal of loans.

2.4 HOME LOAN FOR NRIs

The Non-Resident Indians (NRIs) are recognized under the Foreign

Exchange Regulatory Act, 1973. Every bank and housing finance

companies follow the RBI guidelines to define NRI :"An Indian citizen

who holds a valid documents like Indian passport and who stays abroad

for employment or for carrying on business or vocation outside India or

stays abroad under circumstances indicating an intention for an uncertain

duration of stay abroad is a NRI." Broadly categorized, Non -Resident

Indians qualifying forNRI housing loans are:

y Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in

circumstances indicating an indefinite period of stay abroad;

y Government servants who are posted abroad on duty with the Indianmissions and similar other agencies set up abroad by the Government of

India where the officials draw their salaries out of Government resources;

y Government servants deputed abroad on assignments with foreignGovernments or regional/international agencies like the World Bank,


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International Monetary Fund (IMF), World Health Organization (WHO),

Economic and Social Commission for Asia and the Pacific (ESCAP)

It has been observed that most of the non-resident Indians and persons of

Indian origin want to buy a house in India for themselves or for their

family. Generally, NRIs have a doubt in their mind as to whether they can

invest in a residential house property in India by remitting funds from

overseas under the current foreign exchange regulations or not. Let us

look at some of the aspects related to this matter.

An NRI can acquire any immovable property in India other than

agricultural land, plantation and farmhouse. These days a number of

options are available to buy houses of international standard with all the

facilities such as clubhouse and gymnasium. An NRI may use his own

funds to acquire immovable property. He can also avail of an NRI home

loan for this purpose.

Interest rates for NRI home loans do not vary much from that of the

Indians living in this country. But the home loan tenure for NRI's aresanctioned only for a shorter period. NRIs get only 85% of cost of home

as loan amount. The size of the loan depends upon the borrower's

repayment capacity. Up to 36 times of the gross monthly earnings of the

applicant may be issued as loan. However, there is a maximum limit. The

NRI home loan re-payment has to be made through equated monthly

Installments (EMI) through Non - Resident Ordinary (NRO) account or

the Non Resident External (NRE) Account. For security, most banks

insist that the first mortgage of the property should be in their name. If

the property is under construction then adequate additional security is

required such as guarantee of third party (either resident or non-

resident).Basically, foreign direct investment relates to direct investment


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in an Indian company either through a joint venture agreement or as a

wholly owned subsidiary with management interest. Foreign direct

investment is also permitted through the route of Global Depository

Receipt/Euro issue/FCCB.

Documents required for Resident Indians as well as for NRIs for getting

Home Loans are different in some respect. Home loans for NRIs are

available for construction of new house / flats, purchase of old house / flat

addition / alteration to an existing house and repairs / renovation etc.

NRIs can avail of loans by mortgaging an existing residential property.

However, for availing home loans, NRIs have to fulfill certain cond itions

according to provisions of the Income Tax Act. They should have stayed

in India for a period of 182 days or more within an assessment year or

they should have stayed in India for at least a total of one year or more.

Banks have attractive NRI housing schemes to accommodate the

housing needs of NRIs. From the stables of HFCs, NRI housing finance

plans with suitable repayment options are available. Last but not the least,

NRIs should take due care while selecting their home loan providercompanies or HFCs. Considering the geographical distances involved, it

is significant that loan seekers associate with a proactive and responsive

HFC.

2.5 HOME LOANS -A FORCE BEHIND REAL

ESTATE BOON

The home loans or housing finance has been a force of significant

importance behind the real estate boom in India . Home loans in India

have enabled the real estate industry to achieve new heights. It will not be

wrong to say that finance is the very life line of the real estate industry in

India.


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Everybody from the developers to the buyers rely on the finance provided

by the banks and housing finance companies in India to give shape to

their dreams. The finance industry has been growing very rapidly in India

and has been providing seamless credit facilities to all class of people.

The home loans / finance facility is provided by almost all the

government and private banks governed by the Reserve Bank of India

(RBI).

Their facility of home loans can be availed for various uses like purchase

of property, renovation, construction etc. Apart from this you can also get

home equity loan, a unique concept wherein the borrower can mortgage

his existing property to avail loan that can be used for any kind of

purpose as desired by the buyer. Generally, people avail home equity loan

facility for the purpose of marriage, education, or bearing medical

expenses. The maximum loan amount that banks normally offer is about

60% to 65% of the market value of the property.

The housing finance companies follow a very stringent process while

providing a home loan. The loans are disbursed in line with the credit

policies of the home finance bank and financial institution. As part of

their process, banks verify the credit history of the borrower to ensure

that he/she is not a defaulter with some other financial organization or if

he/she has misused any of the banking products.

A dream home of your choice comes into existence only after a lot of

investment of money and time. Therefore, it becomes very important to

keep this treasured property protected from possible risks and dangers.

Home insurance is the best way to protect your home from all potential

perils. The risks that can be covered under a home insurance policy can

range from loss that can occur due to natural calamities like fire,


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earthquake, and cyclone or to insure the contents of the house from theft

or damage. The home is still at a very embryonic stage and is being

promoted by many private and government general insurance companies.

Getting home loans is not much of a problem today provided you are

eligible to take one. There is a cut-throat competition amongst the

housing finance companies to make their offers more attractive. This fray

is good for the customers as they get home loans at affordable terms.

Home loans in India has come a long way and has got widespread

acceptance as more and more people are purchasing through this mode.

In the last decade or so, housing loan scenario in India has changed

drastically. It has become a major part of buying houses and people are

looking forward to owning their own houses on the base of these home

loans provided by almost every bank in India today. It is no more a

cherished dream that required lifetime saving and a difficult decision to

make. Today the new home purchase loan is easily available and is very

cheaper as compared to what was available earlier. Banks are now

everywhere and the schemes are implemented even in villages and

smaller towns. The housing loans are popular there too, however, the

activity of building flats is little slow. It would not be wrong to say that

there has been a boom in the home loan market and with this boom; there

is also a boom in the number of home loans mortgage brokers in India.

Indian middle-class, which is estimated to be 216 million strong, is

coming off its conventional aversion to take loans for buying homes,

consumer electronics, and automotives, as per Mckinsey & co. a New

York-based consulting firm. As a consequence of this change in the

perception of India middle class, there has been a continuing increase in

retail lending. The bank has observed robust growth both in corporate and


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retail advances, which has added to its profitability. International and

rural banking are powerful growth engines for the bank. Foreign trade has

also added to its fee income, as per experts.

As per a research analysts view at INCOS, who has done a report named

"Indian retail banking sector analysis", rising consumer mortgages,

growing investment by Indian corporations, and foreign acquisitions

together with government's push for expanding credit in rural areas of

India will help sustain growth in the fourth largest economy of Asia.

Taking a loan is not a difficult task. However, before taking a loan, one

must realize that the relationship with the bank will be for a longer period

usually 15 to 20 years so one must ensure faith and integrity in bank.

Apart from low rate of interest, the bank should also provide some value

added services. The other thing is to look into is the property that is to be

brought. Making sure that the builder has all sanctions and facility to

build a good building is very important.

Although in the past few weeks several banks cut home loan rates, butthose decisions applied only to new customers. HDFC is the first major

housing lender to cut rates for both current and new customers. While

commenting on this matter, KekiMistry, HDFC vice chairman and MD

said that the bank was able to exercise the move especially because of the

recent reduction in the cost of funds.

2.6 HOME INSURANCE IN INDIAThe Home Insurance sector in India has seen considerable transformation

in the last few years. One of the key responsibl e factors has been the

booming real estate sector in the country. Recent statistics reveal that the

home insurance premium touched the Rs 150 crore -mark registering a


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growth of 25% in the last financial year and the trend is predicted to

continue. As per individual estimates, 60% of the revenue in premium is

generated in the new housing development areas; prominent among

which are the real estate investments in the fast developing National

Capital Region (NCR) and Navi Mumbai. Home Insurance plays a

categorically pivotal role in protecting your house and valuable

possessions as this insurance policy is a guarantee provided by the

insurance company that combines insurance on the home, its contents the

personal possessions of the homeowner, as well as liability insurance for

accidents that may happen at the house like fire and natural calamities .

The extent of the risk covered however depends on the type of policy. Aformatted Home Insurance policy usually covers calamities - natural and

man-made.

y Firey Earthquakey Lightning, Storm, Cyclone, Floody Tsunamiy Riot, Strike, Malicious damagey Terrorismy Aircraft lawsy Impact from rail/ road vehiclesy Landslidey Burglary

Moreover, influencing the home insurance sector are the financial

institutions, which in their latest inclusion have made home insurance

obligatory, for housing loans approval. The housing finance sector

contributes to a major chunk of the home loan market. Industry sources

point out that, if this sector continues in its stand to make home insurance

mandatory for seeking home loans, then the insurance segment is soon set

to achieve a 100%growth.Another responsible factor for an upswing in

the home insurance sector is the recent spate of natural calamities that hit


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the country. The extent of losses met by calamities like the earthquake,

floods, storms and tsunami have also made people become more aware

contributing to an additional upsurge in the current financial year. And as

home insurance become obligatory and people are more interested in

protecting their homes, the home insurance sector are providing their

customers with attractive policy plans to suit their needs.

y The initial procedure for home insurance begins with the evaluation ofyour property. The value of your house is evaluated as per the area of

your home multiplied by the rate of construction per. sq. feet, as on the

date of taking the policy. For example, if your home is 1500 sq. feet and

the construction rate till date per sq. feet is Rs1000/ -, then the sum

insured for your homes building structure is Rs. 15,00,000.

y The insurance of household possessions or contents are ascertained on themarket value of the goods. This means that if there were a loss, the claim

would be paid on the value of purchasing a similar new item, less

reduction for the usage.

The thriving real estate sector in India is considered to be the driving

force in the resurgence of the Home Insurance sector. Predicting a

booming market, more and more companies are making their foray into

the home insurance sector. Apart from the predominant players in the

public sector like New India Assurance, United India Insurance, Oriental

Insurance and National Insurance Company, the companies which have

played a significant role in the revolutionary growth in this sector are

private insurance companies like ICICI Lombard General Insurance,

Bajaj Allianz General Insurance, IFFCO-TOKIO and Royal Sundaram

Alliance to name a few. There is a huge untapped market in the home

insurance segment and with real estate expanding beyond metropolis to

the Tier II and Tier III zones, the sector is expected to touch new heights


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CHAPTER- 3


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CHA TER-3

HDFC BANK PROFILE

3.1 INTRODUCTION

The Housing Development Finance Corporation Limited (HDFC) was

amongst the first to receive an 'in principle' approval from the Reserve

Bank of India (RBI) to set up a bank in the private sector, as part of the

RBI's liberalisation of the Indian Banking Industry in 1994. The bank was

incorporated in August 1994 in the name of 'HDFC Bank Limited', with

its registered office in Mumbai, India. HDFC Bank commenced

operations as a Scheduled Commercial Bank in January 1995.

HDFC Bank's mission is to be a World-Class Indian Bank. The objective

is to build sound customer franchises across distinct businesses so as to

be the preferred provider of banking services for target retail and

wholesale customer segments, and to achieve healthy growth in

profitability, consistent with the bank's risk appetite. The bank is

committed to maintain the highest level of ethical standards, professional

integrity, corporate governance and regulatory compliance. HDFC Bank's

business philosophy is based on four core values - Operational

Excellence, Customer Focus, Product Leadership and People.

HDFC Bank offers a bunch of products and services to meet the every

need of the people. The company cares for both, individuals as well as

corporate and small and medium enterprises.

For individuals, the company has a range accounts, investment, and

pension scheme, different types of loans and cards that assist the


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customers. The customers can choose the suitable one from a range of

products which will suit their life-stage and needs. For organizations the

company has a host of customized solutions that range from funded

services, Non-funded services, Value addition services, Mutual fund etc.

These affordable plans apart from providing long term value to the

employees help in enhancing goodwill of the company.

HDFC is India's premier housing finance company and enjoys an

impeccable track record in India a s well as in international markets. Since

its inception in 1977, the Corporation has maintained a consistent and

healthy growth in its operations to remain the market leader in mortgages.

Its outstanding loan portfolio covers well over a million dwelling units.

HDFC has developed significant expertise in retail mortgage loans to

different market segments and also has a large corporate client base for its

housing related credit facilities. With its experience in the financial

markets, a strong market reputation, large shareholder base and unique

consumer franchise, HDFC was ideally positioned to promote a bank in

the Indian environment.

HDFC Bank is headquartered in Mumbai. The Bank at present has an

enviable network of 1,725 branches spread in 780 cities across India. All

branches are linked on an online real-time basis. Customers in over 500

locations are also serviced through Telephone Banking. The B ank's

expansion plans take into account the need to have a presence in all major

industrial and commercial centers where its corporate customers are

located as well as the need to build a strong retail customer base for both

deposits and loan products. Being a clearing/settlement bank to various

leading stock exchanges, the Bank has branches in the centers where the

NSE/BSE has a strong and active member base.


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The Bank also has 4,393 networked ATMs across these cities. Moreover,

HDFC Bank's ATM network can be accessed by all domestic and

international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and

American Express Credit/Charge cardholders.

HDFC Bank operates in a highly automated environment in terms of

information technology and communication systems. All the bank's

branches have online connectivity, which enables the bank to offer

speedy funds transfer facilities to its customers. Multi-branch access is

also provided to retail customers through the branch network and

Automated Teller Machines (ATMs). The Bank has made substantial

efforts and investments in acquiring the best technology available

internationally, to build the infrastructure for a world class bank. The

Bank's business is supported by scalable and robust systems which ensure

that our clients always get the finest services we offer. The Bank has

prioritised its engagement in technology and the internet as one of its key

goals and has already made significant progress in web-enabling its core

businesses. In each of its businesses, the Bank has succeeded inleveraging its market position, expertise and technology to create a

competitive advantage and build market share.

3.2 HOME LOANS FEATURES AND BENEFITS

HDFC Bank brings HDFC home loans to your doorstep. Over 3 decades

of exclusive experience, a dedicated team of experts and a complete

package to meet all your housing finance needs, HDFC Home Loans,

help you realize your dream.

y Home Loan - Home loans for individuals to purchase (fresh / resale) orconstruct houses. Application can be made individually or jointly. HDFC


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finances up to 85% maximum of the cost of the property (Agreement

value + Stamp duty + Registration charges) based on the repayment

capacity of the customer).

y Home Improvement Loan - HIL facilitates internal and external repairsand other structural improvements like painting, waterproofing, plumbing

and electric works, tiling and flooring, grills and aluminum windows.

HDFC finances up to 85% of the cost of renovation (100% for existing

customers) subject to market value of the property.

y Home Extension Loan - HEL facilitates the extension of an existingdwelling unit. All the terms are the same as applicable to Home Loan.

y Land Purchase Loan - Be it land for a dream house, or just aninvestment for the future, HDFC Land Purchase Loan is a convenient

loan facility to purchase land. HDFC finances up to 85% of the cost of

the land (Conditions Apply). Repayment of the loan can be done over a

maximum period of 15 years.

y Choose from Fixed Rate or Floating Rate with options to structureyour loan as Partly Fixed or Partly Floating.

y Flexible repayment options to suit your individual needs.y Loan cover Term Assurance Plan - HDFC Standard Life Insurance

Company Ltd. offers an insurance plan*, which is designed to ensure that

life's uncertainties do not affect your family's interests and your precious

home. LCTAP provides a lump-sum payment on the unfortunate demise

of the life assured. This pure risk plan is designed in a way that the cover

decreases as you repay your home loan making it a low cost premium

insurance plan.

y Automated Repayment of Home loan EMI - You can give us standinginstructions to repay your Home Loan EMIs directly from your HDFC


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Bank Savings Account, thus, saving you the trouble of procuring, signing

and tracking post-dated cheques.

y HDFC also offers In-house scrutiny of Property documents for yourcomplete peace of mind.

y Customer privileges - If you are an existing HDFC Home Loancustomer, you can avail of other loans (such as Personal Loans, Car

Loans, Two-wheeler Loans and Loan against securities) at lower interest

rates.

3.3 ADVANTAGES

y Wide network of service centery Easy documentationy Accelerated approvalsy Choice of multiple schemesy Attractive interest ratey User friendly after sale servicesy Safe document storage facilitiesy Interest rate linked to PLRy Free legal and technical assistance3.4 FEES AND CHARGES PAYABLE

Adjustable Rate Home Loan [ARHL]

If a prepayment is made within 3 years of the first disbursement, under

Adjustable Rate Home Loan (ARHL) option early redemption charges of

2% of the amount being prepaid is payable if the amount being repaid is

more than 25% of the opening balance.

Fixed Rate Home Loan [FRHL]


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Redemption charges of 2% of the amount being prepaid is payable if the

amount being repaid is more than 25% of the opening balance In case of

commercial refinance under both the FRHL and ARHL an early

redemption charge of 2% is payable. You may be required to submit

Salaried

Customers

Self

Employed

Professionals

Self

Employed

Businessman

Applicationform with

photograph


photograph


photograph

Identityand

ResidenceProof

Identity andResidence

Proof

Identity andResidence

Proof

LatestSalary-slip

EducationQualifications

Certificateand Proof of

businessexistence

EducationQualifications

Certificateand Proof of

businessexistence

Form 16Last 3 yearsIncome Taxreturns (self

and business)

Businessprofile

Last 6monthsbank

statements

Last 3 yearsProfit /Lossand Balance

Sheet

Last 3 yearsIncome Tax

returns

Last 3 yearsProfit /Lossand Balance

Sheet

Processingfee cheque

Last 6 monthsbank

statements

Last 6 monthsbank

statements(self and

business)




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copies of your Bank Statements or any other documents that HDFC

deems necessary to verify the source of prepayment.

3.5 DOCUMENTS REQUIRED FOR HOMELOAN

3.6 RATE OF INTEREST CHARGED AND EMI

Under the monthly rest option, interest is calculated on monthly rests.

Principal repayments are credited at the end of every month. At HDFC


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Security for the loan normally is the first mortgage of the property to be

financed and/or such other collateral security as may be necessary.

Interim security may be required, if the property is under construction.

Collateral or interim security could be assignment to HDFC of life

insurance policies, the surrender value of which is equal to the loan

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

and such other investments that are acc eptable to HDFC.

Loans from HDFC are available even if you are availing a housing loan

from a employer. HDFC has already entered into arrangements with

several employers enabling employees to avail of loans both from the

employer as well as HDFC for the same property. Please ensure that the

title to the property is clear, marketable and free from encumbrance. To

elaborate. There should be any existing mortgage, loan or litigation which

is likely to affect the title to the property adversely.

CHAPTER- 4


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CHAPTER- 4

CASE STUDY ON HDFC BAN


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AGE GROUP OF SURVE E RESPONDENTS

TABLE 4.1:

Interpretati n:-

From t chart above we fi that 36% ofthe respondents fallin the agegroup ofBelow 30 years, 26% fallin the age group of 30-40 years and30% fallin the age group of 40-50 years.

Therefore most ofthe respondents are relatively young (below 30 yearsof age) and 8% respondent s age are 50 years and above.

OCCUPATION

TABLE 4.2

36%

26%

30%

8%

Number of Respondents

Below 30 Years 30-40 Years 40-50 Years 50 Yearsand above

Serial No. Age Category Nu ber of Respondents Percentage

1. Below 30 Years 18 36

2. 30-40 Years 13 30

3. 40-50 Years 15 26

4. 50 Years and above 4 8

Total 50 100%


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Interpretation:

From the table and graph above it can be seen that 38% ofthe

respondents are salaried people, 22% are self employed and 30% are

professionals and 10% ofthe respondents come under other category.

3

%

%

38%

1

%

N . Re ondentProfessional Self employed Salaried Others

Sr. No. Category Nu ber of

Respondents

Percentage

1 Professional 15 30

2

Self

employed 11 22

3 Salaried 19 38

4 Others 5 10

Total 50 100%


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ANNUAL HOUSE HOLD INCOME

TABLE-4.3

Sr. No. Category No. of

Respondents

Percentage

1

Less than2 lakhs 25 50

2

Between

2 to 4

lakhs 13 26

3

Between

4 to 6lakhs 8 16

4

Morethan 6

lacs 4 8

Total 50 100%

Interpretation: From the table and graph above it can be seen that

50% respondent s annual household income is less than 2 lacs. 26% respondent s annual household income is between 2 to 4lacs. 16% respondent s annual household income is between 4 to 6lacs. 8% respondent s annual household income is more than 6lacs.

Fro Where Did You Get Your Ho e

5 %

%

1

%

8%

No. of Respondents

Less than

lakhs Between

to 4lakhs

Between 4 to

lakhs More than

lacs


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banks. This is because of the extra services provided by the banks. The

data shows 18% of customers from ICICI BANK, 10% Customers took

loan from State Bank Of India, 58% of customers took loan from HDFC

LTD and a 14% of customers fall under the category of 'Any other' which

included Punjab national bank, Dena Bank, Bank of India etc.

What Is The Reason For Getting For Getting It Financed?

TABLE 4.5

Sr. .No. Number of Reasons Number of

respondents

Percentage

of customers

a.

Non-

availability of

funds 18 36

b.Reluctances to

pay cash 15 30

c.

Tax benefit 14 28

d.

Any other 3 6


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Interpretation

To interpretthe response ofthe questions, the figures shows that most of

the customers find the problem in availability of funds i.e. 36% and

customers found problem in paying cash in one go is 30%, customers get

housing loan fortax benefits is 28% and 6% of customers feltthere was

no problem. This was the expected response because a large number ofpeople find a problem of availability of funds which works as an obstacle

in owning a dream home. In today's life, people hardly earn both means

and ends oflife and they don't have much of money to buy a home or a

land to construct house because of cost of property. So, they take the

advantage of home loans provided by different banks at different terms

feasible to the customers. There are very less number of people, who

don't own home even when they have sufficient funds and they take the

advantage of home loans because they don't wantto pay huge cash in one

go. On the basis of study, it is concluded that most of people lack of

money in fulfilling their dreams and few of them were reluctant to pay

cash in one go and wanted to pay their home loans slowly in installments

0

5

10

15

20

25

30

35

40

non-availabilityof funds

reluctancy tax benefit any other

percentage of

customers


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and some getit financed to gettax benefit.

SATISFACTION LEVEL OF SERVICES PROVIDED

TABLE 4.6

14%

54%

28%

4%

Satisfaction ofservicesHighlysatisfied Satisfied Neutral Dissatisfied

Sr.

No.

Satisfaction level Nu ber of respondents

Percentage

a

.

Highly satisfied 7 14

b

.

Satisfied 27 54

c

.

Neutral 14 28

d

.

Dissatisfied 2 4


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What proble s do you face while getting ho e loans?

TABLE 4.7

0

5

10

15

20

25

30

35

40

lack ofknowledge procedural delays non cooperation

ofstaffmembers

any other

Problems faced bycustomers

Sr. .No. Proble s faced No. of

respondents

Percentage

a. Lack of

knowledge

21 42

b. Procedural

delays

17 34

c. Non

cooperation of

staff members

8 16

d. Any other 4 8


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Interpretation: From the above diagram we can see that about 42% of

the customers face the problem of lack of knowledge about home loans,

34% of them faces procedural delay problem, 16% of customers face the

problem of non cooperation of staff members and 8% of them face other

problems.

There are everything in the world has good or bad points. No doubt

banking industry/ company has made many efforts to enhance the

customer satisfaction but customer still faced some problems. These are

high lightened as below:

1) The customer does not have proper knowledge about different home

loan products so they face problem in making a good deal .

2) There are procedural delays, which harass the customers lot.

3) The attitude of bank employees sometimes non cooperative and it

creates a hurdle in building trust and Confidence among customers about

banks.

4) The banks do not take into account the paying capacity of customers.

So some customers are not able to get amount of loan needed by them.

Where Do You Feel The Bank Needs Improvement?

TABLE 4.8

Sr.No. Field of improvement Number of

respondents

a. Customer service 21

b. Quick response 19


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Interpretation: From the above diagram we can see that about 42% of

the customers would like to have improvementin customer service, 38%

ofthem feelthat bank should give quick and immediate response, 16% of

customers feelthat bank need to improve theirletters and brochures and

6% of them feel bank need to improve on other aspects of banks like

ambience, increasing counters, updating new technology etc to attractmore customers etc.

c. Letters and brochures

offered

8

d. Any other 2

42%

%

16%

4%

Place of improvement

Customerservice

Quickresponse

Lettersand brochures

offered

ny other


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CHAPTER- 5


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CHAPTER-5

FINDINGS SUGGESTION AND CONCLUSIONS

5.1 FINDINGS

1. HDFC LTD having good brand image in the minds of customers.2. Majority of the people got loans from HDFC LTD only.3. Most of the customers are not aware of the products of HDFC home

loans.

4. Some of the customers felt that the interest rates are somewhat high .5. Some of the customer not having g ood faith on private banks.6. Most of the people are directly go to HDFC to apply a home loan .7. Some of the customer of HDFC already benefited through HDFC

home loan products and services.

8. Customer awareness is medium about HDFC products.9. HDFC LTD providing good services to their customers.

5.2 SUGGESTIONS

1. To increase their customers, the HDFC LTD should provide specializedservices in home loan sector. It will give proper guidance to the customer

regarding the processing of loans, especially for the customers who are

illiterate.2. To satisfy their customers and for good dealings in future, the HDFC

LTD should make prompt disbursement of loan amount to the customers

so that they can buy or construct their dream home as early as possible .


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3. The HDFC LTD should use easy procedure, or say, less lengthy procedure for the sanctioning of loan to the customer. There should be

less number of legal formalities, in case this exists, then, these should be

completed in less time. This will be helpful in attracting more customers.

4. HDFC LTD provide loan according to the repaying capacity of thecustomer and his/her eligibility. Due to which, some customers are not

able to get amount of loan needed by them. So, the HDFC LTD should

soften their norms regarding the loan amount.

5. The Company has to take care of awareness creation among thecustomers about its products and services .

6. The HDFC LTD should try to provide proper knowledge regarding theirhome loan schemes, even to people who don't know about such schemes

and their benefits especially in rural areas. So they should provide

knowledge to the ignorant customers, especially in rural areas and

backward urban area.

These are some suggestions provided to the HDFC. By considering these

suggestions, the HDFC can strengthen their customer base in home loans

sector.


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5.3 CONCLUSIONS

1. In my study we came to know that many peoples are interested to take ahome loan from HDFC LTD to construct their homes.

2. Home loans have long period when compare to other personal loans andother loans. So peoples are confused to take a home loan.

3. Even though the interest rates are high peoples are willing to take a loanfrom HDFC LTD due to some reasons.

4. The interest rates also somewhat high when compare to other banks.5. For disbursement process is also it will take low time when compare to

other banks.

Finally the whole research was carried out in a systematic way to reach at

exact results. The whole research and findings were based on the

objectives. However, the study had some limitations also such as lack of

time, lack of data, non-response, reluctant attitude and illiteracy of

respondents, which posed problems in carrying out the research. But

proper attention was made to carry out research in proper way and to

make accurate conclusion.


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http://www.hdfcindia.com/

http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_08

.html

www.hdfc.com

http://www.iloveindia.com/real-estate/housing-finance-

companies/hdfc.html

http://www.loansnews.info/Home-loan/hdfc-home-loans/

http://www.hdfcindia.com/loans/hm-loan-documents.asp

http://www.thinkplaninvest.com/2009/01/hdfc-will-cut-home-loan-rates/

http://www.suncorp.com.au/suncorp/personal/home_loans/tips/faq.aspx

www.wikipedia.comhttp://www.economywatch.com/companies/forbes-list/india/housing-

development-finance corporation.html

http://www.hdfcindia.com/loans/home-loan.asp


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http://docs.google.com/gview?a=v&q=cache:woJTMDV1HLYJ:www.hdf

c.com/pdf/32AGM%2520speech.pdf+hdfc+ho using+finance+development

+product&hl=en&gl=in

http://www.munichre.com/en/press/press_releases/2007/2007_10_30_profi

le_hdfc.aspx

http://www.hdfc.com.mv/faq.htm

http://ayaanbayaan.com/hdfc -ltd-financial-results-indian-gaap-for-the-period-april-to-june-2009/

http://www.valuenotes.com/press/pr_HDFC_250ct05.asp?ArtCd=70013&

Cat=C&Id=100

y Brochure on home loans from HDFC LTDy The Times of India and Economic times Newspapery Brochures and pamphlets of HDFC Bank


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Questionnaire for customer

Dear Sir/ Madam,

I am Divya doing TY Banking and Insurance from KELKAR COLLEGE,

MULUND EAST. For this I have designed a Questionnaire to know your

views and satisfaction level of home loans, by preparing a project on A

STUDY ON HOME LOANS. Please fill the given as per your thinkin g

and experiences. I will be thankful to you for this.

Name: ________________________________

1. Age:o Below 30o 30-40o 40-50o Above 502. Occupation:o Professionalo Self employedo Salariedo Others3. Which income group do you belong?o Below 2 lakhs p.ao 2-4 lakhs p.ao 4-6 lakhs p.ao 6 lakhs p.a and above4.

From which bank/company?

o HDFC BANKo ICICI BANKo SBIo Others5. How much loan amount you took?o Less than one lakhs


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Divya-home Loans Project

Documents

Transcript of Divya-home Loans Project