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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
Applicationform with
photograph
Applicationform with
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)
Processingfee cheque
Processingfee cheque
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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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