A

SUMMER TRAINING PROJECT REPORT

ON
COMPARATIVE STUDY
OF FINANCIAL INSTITUTIONS
OFFERING HOME LOANS
IN
MASTER OF BUSINESS ADMINISTRATION MASTER OF BUSINESS ADMINISTRATION
(SESSION 2009-11) (SESSION 2009-11)
SUBMITTED TO:
Ms. Neha Gupa Ma!
SUBMITTED B":
Aa#ash Bha$%a&a
BBA-'
T(
SEM
RO)) NO-0*91+101,10
-AGANNAT( INTERNATIONA) MANAGEMENT
S.(OO)
/A)/A-I0 NE1 DE)(I
.ONTENTS

Acknowledgement
Executive Summary
Company Profile
Objective of the study
ajor players in the field of housing finance
!etails of loan transfer cases studies "Analysis#
$end analysis of financial
%nstitution offering home loans
&esult and suggestions
&esearch And ethodology
'imitations
(A)S
Appendix
)uestionnaire
*ibliography
2REFA.E
%ndustrial interface through project is compulsory for
the fulfilment of **A degree course+ so that student are able to
reali,e the practical experience of corporate world through
project+ we come to understand the between theories and real
aspects of business-
% feel pleasure in presenting this report title
.FINANCIAL INSTITUTIONS OFFERING HOME
LOANS which is detailed collection and survey of /!(C
*ank and other competitors-
Study of market share is very essential for an
organi,ation to position its product in the market
successfully-
% expect that the comparative analysis of offering home
loan by different financial institutions+ and various
data are beneficial to my company- $he conclusions
are drawn and recommendations have been put better
of the performance of /!(C *ank-
A./NO1)EDGEMENT
% am very thankful to M$. Aa#ash Bha$%a&a "officer0
recoveries# for giving me valuable suggestions and ideas for
completing the project report- % am also grateful to M$.
Ashu3sh Bha$45a6 (B$a78h Ma7a%e$0 De9h:) for his help and
keep interest in project-

% am grateful to Ms. Neha Gupa Ma! my project guide
who provided me valuable guidance and should a great deal of
enthusiasm and commitment for this project+ without his
guidance this project might not have reached the present stage-
All the faculty member of 1agannath %nternational anagement
School+2alkaji and all the concerned persons contacted under
the summer project report-
AAKASH BHARGAVA
BBA-5
TH
SEM
ROLL NO - 06914101710
E;E.UTI<E
SUMMAR"
E;E.UTI<E SUMMAR"
/ousing finance is one of the industries which are driven by ups
and downs in the real state industry- Although there has been an upsurge
in the demand for the home loans in the recent past+ it has not translated
into a stupendous performance by the housing finance companies
"/(C3s#-the housing finance industry is important from the point of view
of over all development of the economy -/ousing is being increasingly
viewed as being important for over all infrastructural development in the
economy- $he national housing policy reflected the trust +the government
wished to give to the housing sector and pointed out that housing was not
merely a consumption expenditure +but also a productive investment
which would provide economic activity and create a base for attaining
several national policy goals such as providing shelter and raising the
4uality of life - %t specifies the interest rate to be followed in lending and
borrowing+ income recognition 5 prudential norms+ borrowing limits 5
audits to the finance cos -%n spite of such figures there is an urging need
on the part of management to keep close look on financial institutions
offering loans- Comparative study of financial institutions that is exactly
what our project aimed at- $o give our project a more structured look we
had taken certain parameters -$his provides us a clear picture regarding
the financial institutions- %n addition to the above proper analysis was
done with the help of certain financial tools-
.OM2AN" 2ROFI)E
OF
(.D.F..
2ROFI)E OF (.D.F..

/-!-(-C was set up on 67
th
October+ 6877 by %-C-%-C-%- out of the
consideration that a specialised institution was needed to channel
household savings as well as funds from the capital market into the
housing sector- /-!-(-C- has emerged as the largest mortgage finance
institution in the country- $he primary objective of /-!-(-C is to enhance
residential housing stock and promote home ownership- One of its major
objectives is to increase flow of resources for housing through the
integration of housing financial institutions with the domestic market-
Ma$#e:7% e==3$
arketing efforts and initiatives at /!(C '$! have always revolved
around the customer- $he objective is to reach out to the customer and
provide him9her with all housing related solutions- $hus /!(C '$! has
right since inception positioned it self not just as a company providing
finance to customers+ but a company that also provides loan counselling+
technical and legal assistance and other property related solutions- Credit
appraisal skill and legal and technical expertise has been built over the
years- $hese set of skills+ supplemented with the vast database and trained
personnel is today proving to be one of /!(C '$!3 strongest assets-
App$3&a9s a74 D:s>u$se!e7s
$otal approvals during the year stood at &s-8+ :;6-<= crores as against
&s->?78-77 crores in the previous year+ representing a growth of @6A-
'oan disbursements during the year were &s-7+ >6>-=> crores against
&s-=+ ?:@-:6 crores in the previous year representing a growth of @6A-
SUBSIDIARIES AND ASSO.IATES
/ousing is the core business of /!(C '$!- while the main focus is to
grow the housing portfolio+ organically and inorganically+ in order to
capitalise on /!(C strong brand value and maximise returns for
shareholders+ /!(C '$! has made investments in various group
companies- $hese group companies have strong synergies with /!(C
'$! and such diversification will enable /!(C '$! to offer a wide
gamut of financial services and products to customers- %nvestments made
in the group companies are from borrowed funds+ where there is an
interest charge debited to the profit and loss account+ with out a
corresponding revenue flow in the initial years- Bhile these investments
are long0term in nature+ the businesses have tremendous potential+
thereby enhancing the valuations of /!(C- $he shareholding of /!(C
in its subsidiary and associate companies as at arch @6+ <::@C are
givenC0 /!(C !evelopers 'imited+ /!(C %nvestments 'imited+ /!(C
/oldings 'imited+ /!(C $rustee Company 'imited+ /!(C Chubb
Deneral %nsurance Company 'imited+ /!(C &ealty 'imited+ /!(C
Asset anagement Company 'imited+ D&E/ (inance 'imited+ %ntelenet
Dlobal Services 'imited+ Credit %nformation *ureau"%ndia# 'imited+
/!(C Securities 'imited+ /!(C *ank 'imited-
R:s# Ma7a%e!e7
/!(C manages various risks associated with the mortgage business-
$hese risks include credit risk+ li4uidity risk and interest rate risk- /!(C
manages credit risk through stringent credit norms- 'i4uidity risk and
interest rate risks arising out of maturity mismatch of assets and liabilities
are managed through regular monitoring of the maturity profiles-
2RUDENTIA) NORMS FOR (OUSING FINAN.E
.OM2ANIES((F.?s)
$he F/* has issued guidelines to /(CGs on prudential norms for income
recognition provisioning+ asset classification+ provision for *ad and
!oubtful+ Capital ade4uacy and concentration of credit 9 investment-
/!(CGs position with respect to the guidelines is as followsC0
/!(CGs capital for the purpose of determine the capital ade4uacy
companies entirely of $ier 6 Capital- $he $ier was &s- <+:>>-76
Crores- %n accordance with the norms prescribed by F/*+ /!(CGs
capital ade4uacy is at 6;-:=A of risk weighted assets-
Assets are classified as standard+ Sub0Standard+ doubtful and loss
assets- Any asset which is not standard asset is a non0performing
asset- $he principal loans outstanding"along with Preference Shares
and !ebentures for financial real
Estate projects# + where payments were in arrears for over six
months as of march @6+<:::+amounted to &s- 8?-76crores and
constituted :-8:A of the portfolio-
/!(C is in compliance with the limits prescribed by F/* in
respect of concentration of credit9investment-
OB-E.TI<E OF
T(E STUD"
OB-E.TI<E OF T(E STUD"
$o undertake competitive analysis and to understand the information
contained in the financial statement with a view to know the weakness
and strength of the firm and to make a forecast about the future
prospects of the firm-
$o assess the present profitability and operating efficiency of the firm
$o assess the long term as well as short term li4uidity position of the
firm-
$o find out the influencing features 9 benefits behind home loans-
$o find out the preferences of the people regarding certain parameters-
$/%S $A*'E S/OBS $/E C&%$E&%A $/A$ /AS *EEF
(O''OBE! %F
S$E!H%FD $/E (%FAFC%A' %FS$%$E$%OFS O((E&%FD /OE
'OAFS
C&%$E&%A
PA&AE$E&S
%nterest rate
Charges
Product offer
Advertising
Schemes
*alance sheet
$HPE O( AFA'HS%S
&atio Analysis
$rend Analysis
MA-OR 2)A"ERS IN T(E
FIE)D OF
(OUSING FINAN.E
MA-OR 2)A"ERS IN T(E FIE)D OF
(OUSING FINAN.E
ajor housing finance institutions are identified on the basis of the
following parametersC
6- Fet Sales
<- Fet Profit
@- Fet Borth
1. NET SA)ES
NET SALES
0
1000
2000
3000
H
D
F
C
L
I
C
I
C
I
C
I
C
A
N
F
I
N
S
b
i
Financial Institutions
N
e
t

S
a
l
e
s

(
I
n

C
r
o
r
e
s
)
Series1
c
%n the financial year <::@ I :; + /!(C 'td- recorded the highest net sales
of &s- <>8:-;7 crores followed by '%C /ousing (inance 'td- with net
sales of &s-?7@-<> crores+%C%C% /ome fin-co-ltd with &s-686-8> crores+
CAF(%F /omes'td- &s- 6@?-8; crores and S*% /ome (inance 'td-
&s-@8-@> crores-
2. NET 2ROFIT
NET PROFIT
-200
0
200
400
600
800
H
D
F
C
L
I
C
I
C
I
C
I
C
A
N
F
I
N
S
b
i
Financial Institutions
N
e
t

P
r
o
f
i
t

(
I
n

c
r
o
r
e
s
)
Series1
%n the year <::@ I :; + /!(C 'td- recorded the highest net profit of &s-
=?:-:6 crores followed by '%C /ousing (inance 'td-with net profit of
&s-6;7-=; crores+%C%C% /ome fin-co-ltd &s-8-=? crores+ CAF(%F /omes
'td- with &s- 6>->@ crores and S*% /ome (inance'td- &s-08:-68 crores-
@. NET 1ORT(
NET WORTH
-1000
0
1000
2000
3000
HDFC LIC ICICI CANFIN Sbi
Financial Institutions
N
e
t

W
o
r
t
h

(
i
n

c
r
o
r
e
s
)
%n the year <::;I:=+ /!(C recorded the highest net worth of &s-
<7:<-?; crores followed by '%C /ousing (inance 'td- with net worth of
&s- 7@7- <@ crores+ %C%C% /ome fin-co-ltd &s-6>6-?? crores+ CAF(%F
/omes 'td- &s- 66@-:= crores and S*% /ome (inance 'td-&s-06=;-7?
crores-
ANA)"SIS
ANA)"SIS ()OAN TRANSFER)
)6- Bhat is the reason 9 benefit that influences your choice of the
financial institution for a housing loan J
0
10
20
30
40
P
e
r
c
e
n
t
a
g
e
Reasons !enefits
&easons"A# ;: : ; ; 6< <? 6<
%nterest
&epayme
nt Pd
Scheme
Easy
Avail
Ads
%nt 9Easy
avail
%nt9Sch
AFA'HS%S
(rom the above given data we can conclude that out of a sample si,e of
<= + majority+ that is ;:A of the respondents are influenced by interest
rates+<?A by interest rates and easy availability of the loan+ ;A look out
for various schemes+ and 6<A are influenced by both interest rates and
schemes available-
)<- Allocate Hour preferences in ranking order which makes you decide
about a financial institution for a housing loan -
0
5
10
15
20
25
30
35
40
P
e
r
c
e
n
t
a
g
e
(
"
)
Preferenecs Ran#e$ %
Percentage(%) 40 1 3 4 12 28 12
Interest
Repayme
nt Pd
Scheme
Easy
Avai
Ads
Interest!
avaia"i
Interest!
Scheme
AFA'HS%S
(rom the above graph and data it can be said that ;:A of the customers
give their first priority to rate of interest+ <?A rank interest rates 9 easy
availability as their priority+6<A each are affected by advertisements and
interest rates 9 schemes+ and ;A+@A and 6A give their first preference to
easy availability+ scheme and repayment period-
)@- /ow do you rate /!(C 'td- in the following services J
a# %nterest &ates
b# &epayment Period
c# Customer Care
d# $ransaction Period
&
'&
(&
)&
*&
Ser+ices Offere$ ,- H.FC
P
e
r
c
e
n
t
a
g
e
(
"
)
E/cellent
0er- 1oo$
1oo$
Poor
0er- Poor
Excellent ? ;: ;; <:
Kery Dood >: => 6> =<
Dood <? ; 6< <;
Poor ; : ; :
Kery Poor : : <; :
%nterest &ates &epayment Period Customer Care
$ransaction
Period
)-;# Bhat is the reason of your loan transfer from /!(C 'td- J
0
5
10
15
20
25
30
35
40
P
e
r
c
e
n
t
a
g
e
(
"
)
Reasons Of Loan Transfer
Percentage(%) 40 16 16 8 20
Higher
Rate Of
Interest
Less
Loan
Amount
Lac of
Informati
on
Longer
!anction
Perio"
Annua#
Rest
AFA'HS%S
Out of a sample si,e of <= + ;:A of the respondents said that they shifted
to other financial institutions because of /igher rate of interest charged in
/!(C '$!+ 6>A transferred because they did not get the full amount
they wanted as loan+ 6>A said they were not given relevant information
time to time by the /!(C '$! staff + ?A said that disbursement period
was too long and <:A said that E% was calculated on Annual &est basis
rather than on onthly rest basis-
)=- %n what terms 9 services do you find the other institutions "in which
your loan is
transferred# is better than us J
20%
24%
12%
44%
Better Services
Customer Cre
Fu!! Lo" Amou"t
S"ctio"e#
Lo$ %te &' I"terest
AFA'HS%S
(rom the above given data we can conclude that <:A out of a sample si,e
of <=+ said that services of other financial institutions are better than
/!(C '$!+ ;;A said that they shifted to other institutions because of
low interest rate as compared to /!(C '$!+ <;A said that customer care
services are better as proper information is given and customers are
informed personally about the new schemes and 6<A said they shifted
because they got the desired loan amount sanctioned-
)>-Can we do anything to help you J
0
5
10
15
20
25
30
35
40
P
e
r
c
e
n
t
a
g
e
(
"
)
Reasons Of Loan Transfer
Percentage(%) 16 12 24 8 40
$onth#%
rest
O&tion
Im&ro'e
the
!er'ices
(ustome
r (are
)u## Loan
Amount
*othing
AFA'HS%S
(rom the above given data we can conclude that ;:A of the respondents
said nothing can be done now when $hey have already Shifted to other
financial %nstitutions+ <;A said /!(C '$! should improve its customer
care services+ 6>A said that monthly rest option should be introduced+
6<A said services should be improved and ?A said that the desired loan
amount should be sanctioned-
)7- Are you satisfied with services of the financial institution you are
currently dealing withJ
60%
40%
(es
No
AFA'HS%S
Out of the sample si,e of <= + >:A of the customers said that they are
satisfied with the services of the financing institutions they are currently
dealing with but still ;:A of the respondents said that services of /!(C
'$! were better as compared to other institutions-
)?- (inancial %nstitutions in which Customers of /!(C '$! transferred
their loan J
;;A
6>A
6>A
?A
6<A
;A
ICICI
PN!
S!I
!O!
LIC
OTHERS
AFA'HS%S
(rom the above data we can conclude that majority of customers that is
;;A have shifted to %C%C% /ome fin- co- ltd the reason being low interest
rates+ 6>A have transferred to S*% and PF*+ and ? A have shifted to
*O*+ 6<A have shifted to '%C and rest ;A to other financial institutions
like SHF!%CA$E bank+ S$AF!A&! C/A&$E&E!+A''A/A*A!
*AF2 etc-
TREND ANA)"SIS OF
FINAN.IA)
INSTITUTIONS
T$e74 a7a9As:s 3= =:7a78:a9 :7s:u:37s
/!(C 'td
"EAR
ENDING
SA)ES Rs
.$3$e
2BT Rs
.$3$e
TREND(B)SA
)ES
TREND(B)
2BT
8? 6;;=-<= @<>-=@ >6 =8
88 67><-?7 @?8-:< 7; 7:
:: <:66-?6 ;>:-8= ?= ?@
:6 <@7;-? ==>-<@ 6:: 6::
:< <>8<-;6 >8:-8@ 66@ 6<;
S*% home finance ltd-
"EAR
ENDING
SA)ES Rs
.$3$e
2BT Rs
8$3$e
TREND(B)SA
)ES
TREND(B)
2BT
8? ?<-<> 07-=> <:; @=
88 >>-88 0;;-=6 6>> <:7
:: =@-=@ 0<;-<; 6@@ 66<
:6 ;:-@7 0<6-== 6:: 6::
:< @8-;> 08:-6< 8? ;6?
'%C housing finance ltd-
"EAR
ENDING
SA)ES Rs
.$3$e
2BT Rs
.$3$e
TREND(B)SA
)ES
TREND(B)
2BT
8? ;8;-?; 66;-<@ >= 78
88 =76-76 6<;-?8 7= ?:
:: >=7-67 6@7-?@ ?> ??
:6 7><-:@ 6=>->= 6:: 6::
:< ?7@-<> 6?:-?7 66= 66=
CAF(%F homes ltd-
"EAR
ENDING
SA)ES Rs
.$3$e
2BT Rs
.$3$e
TREND(B)SA
)ES
TREND(B)
2BT
8? 6::-<> 6;-?6 7? >;
88 6:8-7> 68-;> ?> ?;
:: 66<-87 6?-<7 ?8 78
:6 6<7->@ <@-68 6:: 6::
:< 6@8-:@ <;->? 6:8 6:>
%C%C% /OE (%F- CO- '$!
"EAR
ENDING
SA)ES
Rs .$3$e
2BT Rs
.$3$e
TREND(B)SA)
ES
TREND(B)2
BT
8? FA FA : :
88 FA FA : :
:: FA FA : :
:6 =7-7= 6-8@ 6:: 6::
:< 686-8> 6<->; @@<-@8 >==
T$e74 (B) sa9es 3= =:7a78:a9 :7s:u:37 3==e$:7% h3!e 93a7s-A
83!pa$:s37

P!T Tren$ (") of financial institutions
offering ho2e loans3 A co24arison
&
'&&
(&&
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.
F
C
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!
I
L
I
C
C
A
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F
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I
C
I
C
I
Financilal Institutuions
P
r
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t

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e
f
o
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e

T
a
/

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(
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)
%55*
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'&&&
'&&%
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&
6&
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7&&
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H.FC S!I LIC CANFIN ICICI
Financial Institutions
T
r
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S
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%55*
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'&&'
ANA)"SIS
(rom the graph and the data table we can arrive the conclusion that on the
whole+ there was a continuous increase in volume as well as profit before
tax of financial institutions except S*% home finance 'td- not only the
client was arrested but positive growth was also visible from the year
688? to <::@-
*ut the figure of the S*% home finance 'td when compared with the
figure of other financial institutions reveal that the sales have reduced
year by year- $he sales of the financial institutions have continuously
over a period of five years commencing from 688?- $he over all analysis
of the financial institutions shows that the financial institutions are doing
well and financial position is bound to be good-
RESU)T
AND
SUGGESTIONS
RESU)T AND SUGGESTIONS
On the basis of the ratio analysis and trend analysis it can be said that the
position of the /!(C 'td is sound from the point of view+ of leverage+
profitability+ and solvency- On the other hand interest coverage ratio and
fixed assets turnover ratio of /!(C 'td is showing and increasing
position+ of course+ never falling below the previous year- $his means that
firm is maintaining its li4uidity and long term solvency position of the
firm seems to be stronger than other financial institutions- $he gross
profit ratio of /!(C 'td has also increase which reflects better
managerial and operational picture- $he /!(C 'td- is showing a study
and upward trend of percentage sales and the trend percentage of profit
before tax which is growing year by year- (inally we want to give some
suggestions on the basis of comparative study of financial institution
offering home loans-
&A$E O( %F$E&ES$ should be competitive with other financing
institutions-
Emphasis should be given on retaining customers-
Proper credit appraisal of the customers should be done-
&elevant information should be provided to customers time to
time-
People who deal with customers should have full knowledge about
the housing finance industry-
$he area where we lack is the area of Advertising /!(C 'td
should do more organi,ed communication between the costumer
and the branch offices-
&egular news letter should be send to the customers by post
+courier to enhance awareness of the home loan schemes -
Resea$8h Meh34393%A
Resea$8h Meh34393%A
Sa!p9e a74 Sa!p9:7% Meh34
Sampling is the process of collecting information only from a small
representative part of the population- Stratified &andom Sampling is one
amongst the most elementary random sampling techni4ues- A stratified
random sampling is a method that allows each possible sample to have an
e4ual probability of being picked and each item or individual in the entire
population have an e4ual chance of being included in the sample- (or this
project work+ without replacement sampling method is used- %t means that
a person or item once selected is not returned to the frame and therefore
cannot be selected again- $his selection process continues until the
desired sample si,e Ln3 is obtained-
Sample Selection C As the objective of the project is to study the
Employee Engagement to know the perception of the Employees+ sample
is selected from Koice and Fon voice based profiles-
S3u$8e 3= 4aa: (or the purpose of the study the following sources of
data are used-
2$:!a$A 4aaC Primary data refers to the collection of first hand data-
!ata is collected through
)uestionnaire
Observations
Cues:377a:$eC )uestionnaire is prepared and circulated to the
employees to know their opinion-
O>se$&a:37sC Observations were done during the visits to the
organi,ation-
Se8374a$A 4aaC
Secondary data refers to the data+ which is not newly generated but rather
obtained from-
Published sources-
Enpolished sources i-e-+ information about the performance of the
company
&eport on the study-
&eview of literature etc-
i- Sampling chosen with the &andom method
ii- Sampling Area would be !elhi 5 FC& and near area only
iii- Sample Si,eC 6::
)IMITATIONS
)IMITATIONS
6# $ime was a major constraint+ in completing the project- As the project
was very vast and there was paucity of time-
<# (rom the different financial institutions we could not get the data of
ending year <::= so i am not able to comparative study on the ending
year <::=-
@# !uring the analysis i have taken those financial institutions which
have the same accounting policies-
;# Some of miner factor where neglected during the analysis because of
lack of time how ever i try to put in my best in the limited period and
covered the major factor-
RO)E OF NATIONA) (OUSING BAN/
Fational housing bank was formed as a subsidiary of the &*% when
national /ousing Policy was announced in 688? regulating the housing
finance industry in %ndia- $he national housing policy reflected the trust+
the government wished to give to the housing sector and pointed out that
housing was not merely consumption expenditure+ but also a productive
investment which would provide economic activity and create a base for
attaining several national policy goals such as providing shelter and
raising the 4uality of life- $he national housing policy also envisaged that
an impetus given to housing would stimulate economic activity through
creation of substantial employment opportunities-
$he national housing bank specifies various norms to be followed
by the /(C3s and regulates the industry on line of regulation of F*(Cs
by the &*%- %t specifies the interest rate to be followed in lending and
borrowing+ income recognition and prudential norms+ borrowing limits
and audit to the housing finance companies- %t provides refinancing
facility to the housing finance companies and facilitates promotion of
these companies on the specified lines-
O>6e8:&es 3= N(B
$he following are the major objectives of F/*0
6- to promote + establish+ support or aid in the promote and
establishment of housing finance institutionsM
<- to make a loans and advances or render any other form of financial
assistance whatsoever to housing finance institutions and scheduled
bank to any authority established by 9under any central state act and
engaged in slum clearanceM
@- to subscribe to or purchase stocks+ shares+ bonds+ debentures and
securities
of every other descriptionM
;- to guarantee the financial obligations of housing finance institutions
and underwrite the issues of stocks+ shares+ bonds+ debentures and
securities of every other description of housing finance institutionsM
=- to coordinate with '%C+ E$%+ D%C and other financial institutions in
the discharge of its overall functions and
>- $o act as an agent of the central 9state government "s# or &*%9any
authority authori,ed by &*%-
NORMS FOR A22RO<A) OF (OUSING
FINAN.E .OM2ANIES B" N(B
F/* refinances only those /(C3s that are approved to be set up by it-
Some of the conditions that have to be set up by it - Some of the
conditions that have to be met for approval areC
6- inimum paid up capital of /(C should at least be &s-6 cr-
<- At least < directors on the board should be nominated by banks+
financial institutions or by F/*-
@- Any appointment of auditors should only be done by prior approval
of the F/*-
;- At least 7=A of the housing loans that are to be granted should be
of long I term nature-
=- Promoter3s contribution in /(C should at least be @:A of the total
paid0up capital- Of the remaining capital+ at least <:A of the capital
should be contributed by either one or all of banks+ financial
institutions+ and government or approved housing finance
companies-
>- $he proposed housing finance company should not promote a real
estate or a construction company and should maintain an Larm3s
length Ldistance from such companies- F/* has imposed
restrictions as regards to their names+ relationship with construction
companies and so on- $he names of /(C3s- Should not resemble
the name of any construction company and the top management of
the /(C should not hold similar offices in construction company-
TaD $ea!e7 3= )3a7s =3$ 837s$u8:7% (3uses:
Section <;"6# of the %ncome $ax Act allows deduction of interest on
borrowed capital from the Dross Annual Kalue of the house on accrual
basis- Any interest paid on the loan borrowed for the purpose of
constructing9 buying or upgrading the house for which the annual value is
assessed+ is allowed as deduction- Also+ any interest on the amount
borrowed during the pre0construction period "starting form the date of
borrowing and ending on arch @6
st
or the date of completion of the
construction+ which ever is earlier# is allowed to be deducted in five
successive years-
&educe taxable income by claiming deduction upto &s-6+ =:+:::90 p-a-
on the interest payable u9s <;"b# of the income $ax Act+ 68>6-
Claim tax rebate upto &s-;:::90p-a- subject to a maximum principal
repayment of &s-<:+ :::90p-a- u9s ??"<# "xiv# of the income $ax Act+
68>6-
The Ohe$ I7::a:&es
2$3>9e!s
$he lack of ade4uate loan security is cited as the most pernicious
stimuli,ing block of mortgage finance-
'ow mortgage tenure- $he existing loan tenure is 6= years in %ndia
while in overseas it can exceed ;: years-
/(C3s face asset mismatch problem-
Sudden spurt in credit will have an inflationary impact on housing
with regard to prices- ainly because of construction time lag-
23ss:>9e s39u:37s
One route adopted overseas to tackle defaults is by mortgage
%nsurance+ where mortgage premiums are paid along with E%S-
ortgage terms should be raised and the escalation in mortgage risk
for the /(% due to higher tenure can be mitigated by early
repayment option-
ortgage securiti,ation permits the /(C3s to offload long0term
mortgages to other investors- $he stumbling block here is high
stamp dutyIas high as @ percent-
&oute more funds through the consumer to the developer- Bhich
obviates the need for /(C3s to directly finance the developer in
addition+ if the developer is dependent on the consumer demand
simulated by mortgage availability for a large part of funds+ he will
reduce cash component to house value too-
GENERA) TERMS AND .ONDITIONS OF A
(OUSING )OAN
$he (ollowing are the terms and conditions applicable to the basic
/ousing 'oan product only- $hese are likely to vary with respect to the
different types of /ousing 'oans-
6- $he loan to value ratio cannot exceed a particular percentage- $his
differs from product to product and from one /(% to another-
<- $he maximum tenure of the loan is normally fixed by /(%s-
/owever+ /(%s do provide for different tenors with different terms
and conditions-
@- $he instalment that you pay is normally restricted to about ;:A of
your monthly gross income- $his is known as the %nstalment to
%ncome &atio "%%&#-
;- Hour total monthly outflow towards all the loans that you have
availed of including the current loan is normally restricted to =:A
of your Dross onthly %ncome- $his is known as the (ixed
Obligation $o %ncome &atio "(O%&#-
=- Hou will be eligible for a loan amount which is the lowest as per
your eligibility- $his is calculated as per the '$K norms+ the %%&
norms and the (O%& norms as mentioned above-
>- ost /(%s consider your profile before they judge your repayment
capacity- Hou are judged on the basis of age+ 4ualifications +
number of dependents + employment details + employer
credentials + work experience + previous track record of repayment
of any loans that you have availed of occupation + the industry to
which your business relates to if you are self0 employed + your turn
over in the last @ I ; years + etc-
7- Some /(%s have a team of civil engineers visit the site to get a
technical report on the 4uality of construction and compliance with
the local laws before they disburse the loan-
?- Some /(%s insist on guarantees from other individuals for due
repayment of your loan- %n such cases you have to arrange for the
personal guarantee before the disbursement of your loan takes
place-
8- ost /(%s have a panel of lawyers who go through your property
documents to ensure that the documents are clear and are not
misrepresented- $his is an added benefit that you get when you
avail of a loan from /(%-
6:-$he disbursement of your loan is as per the progress of
construction of your property unless it is a ready property in which
case the disbursement will be by one single che4ue- PE% or
Simple %nterest on the loan amount disbursed to you in case of a
part disbursement will be payable by you on the disbursement-
66- $he disbursement+ in most cases+ will be favouring the builder or
the seller or the society or the development authority as the case
may be- $he disbursement will come in your favour under special
circumstances only-
6<-Hou repay the loan either through !eduction Against Salary+ Post
!ated Che4ues+ standing instructions or by cash 9 !!-
6@-$he principal is amorti,ed either on annual reducing or monthly
reducing basis as the case may be-
$he above terms and conditions are generally true for most /(%s with
respect to /ousing 'oans- /owever+ $he specific terms and conditions
vary with respect to specific /(%s-
.$e4: D38u!e7a:37
Bhat are the typical credit documents that need to be submitted to the
/(%J
Diven below is the exhaustive list of credit documents that need to be
submitted for a general product- $he documents vary from one /(% to
another based on your employer+ 4ualifications+ etc- $he general
re4uirements are as follows C
6- %ncome documents
<- Proof of employment
@- Employer3s details "%n case of private limited companies#
;- Proof of age
=- Proof of residence
>- Proof of name change "%f applicable#
7- Proof of investments "%f re4uired#
?- A copy of the marriage certificate is re4uired by some /(C3s
I783!e D38u!e7s
Salary slips for the last three months
Appointment letter
Salary certificate
&etainership agreement+ if appointed as a consultant
(orm 6> issued by the employer in your name
'ast three years Profit 5 'oss Account Statement duly attested by
a Chartered Accountant employed-
'ast three years *alance Sheets duly attested by a Chartered
Accountant+ if self I employed-
'ast three years %ncome $ax &eturns duly filed and certified by the
%ncome $ax authorities-
2$33= 3= E!p93A!e7
%dentity card issued by your employer
Kisiting card
E!p93Ae$Es 4ea:9s (I7 8ase 3= p$:&ae 9:!:e4 83!pa7:es)
Profile of employer on employer3s letterhead "to be signed by a
senior person in the organi,ation# comprising of C
a# Fame of promoters 9 !irectors
b# *ackground of promoters 9 !irectors
c# Fature of business activity of your employer
d# Fumber of employees
e# 'ist of branches 9 factories
f# 'ist of suppliers
g# 'ist of clients 9 customers
h# $urn over of your employer-
i# Annual reports of your employer for the last two to three
years-
2$33= 3= a%e (A7A 37e 3= he =39935:7%)
Passport
Koter3s %! card
PAF card
&ation card
Employer3s %dentity card
School leaving certificate
*irth certificate-
2$33= 3= $es:4e78e.(A7A 37e 3= he =39935:7%)
PAF card
&ation card
Passport
&ent agreement+ if you are staying currently on rent
*ank pass book
Allotment letter from your company if you are residing in company
4uarters-
2$33= 3= 7a!e 8ha7%e (I= app9:8a>9e)
A copy of the official ga,ette
A copy of a newspaper advertisement publici,ing the name change
arriage certificate
2$33= 3= :7&es!e7s (I= $eFu:$e4)
*ank statement for the last six months of all operating and salary
accounts
*ank statements for the last six months of all current accounts+ if
self0employed
Any other photocopies of investments held+ if re4uired by the /(%-
)e%a9 D38u!e7a:37
Bhat are the typical legal documents that need to be submitted to the /(%
J
Diven below is a list of legal property documents that need to be
submitted to the /(% for mortgage of your property- $he name and the list
of documents vary from state and also depend on the property being
financed- A broad outline of documents re4uired is given below- (or a
detailed the documents are re4uired to be submitted+ for a property in
aharashtra-
1. A88epa78e 83pA 3= he 3==e$ 9ee$ :ssue4 >A he (FI.
2. T:9e 438u!e7s 3= he p$3pe$A ha :789u4e
Sale agreement duly registered
Own contribution receipts
Allotment letter
&egistration receipt
'and documents indicating ownership+ if applicable
Possession letter
'ease agreement+ if applicable "Property bought from a
development authority#
ortgage deed if the /(% opts for a registered mortgage
@. N3 3>6e8:37 8e$:=:8ae =$3! he 4e&e93pe$0 s38:eA 3$
4e&e93p!e7 auh3$:A as app9:8a>9e.
+. 2e$s37a9 Gua$a7ees0 := app9:8a>9e.
'. I7 8ase 3= a9e$7ae 3$ a44::37a9 se8u$:A0 438u!e7s =3$ he
sa!e 4epe74:7% up37 se8u$:A 4ea:9s.
*. 23s 4ae4 8heFues =3$ he EMIs.
$he above documents are only indicative in nature and do not cover the
entire list- %t may also be noted that in a resale case+ the previous chain of
agreements also need to be taken-
D:==e$e7 #:74s 3= 8ha$%es app9:8a>9e 3 (3us:7% )3a7 p$34u8s:-
All the different kinds of charges mentioned below may not be levied by
all /(%s- Hou will need to check the different charges that are levied by
your /(%s before availing of a loan- $he different kinds of charges
applicable to /ome 'oans are listed below-
2$e-4:s>u$se!e7 8ha$%es
6- Processing fees-
<- Administrative fees-
@- &ate of %nterest-
;- 'egal charges
=- $echnical charges-
>- Stamp duty and registration charges-
7- Personal Duarantee form charges
23s-4:s>u$se!e7 8ha$%es
6- Che4ue *ounce charges
<- !elayed Payment charges
@- Additional charges
;- %ncidental charges
=- Prepayment charges
>- P!C Swapping charges
2$e-4:s>u$se!e7 8ha$%es
2$38ess:7% =eesC $his is a charge that is levied by most /(%s to
cover the costs that they incur on the processing of your loan
application-$his has to be paid at the time of submission of the
application form-%t3s normally charged as a percentage of the loan
amount sanctioned-Some /(%s also charges a flat fee based on the
loan amount instead of a percentage- Bhen a lower Amount is
sanctioned the excess fees paid at the time of submission of the
application is adjusted with the charges+ which you make to the
/(% subse4uently- ost /(%s refund your processing fee if your
loan application is rejected
A4!:7:s$a:&e =ees: $his charge is again+ normally+ a percentage
of the loan amount sanctioned- %t is collected by the /(% for the
maintenance of your records+ issuing interest certificates+ legal
charges+ technical charges+ etc- through the tenure of the loan- %t is
payable by you when accept the offer letter given by the /(%- $his
payment has to be made before you avail of the disbursement- $he
mode of collection of these fees varies from one /(% to another-
Rae 3= I7e$es: $his is the rate of interest applicable on your loan
amount through the tenure of the loan- %t is charged on the principal
on either annual reducing method or monthly reducing method-
$he difference between the two has been detailed out in the
Dlossary section under the respective heads- ost /(%s give you
an option to select either a fixed rate of interest or a variable rate of
interest- $his is also covers in the Dlossary section under the
respective for your information-
)e%a9 8ha$%es: Some /(%s levy legal charges that they incur on
getting your property documents vetted by their panel of lawyers-
Te8h7:8a9 8ha$%es: $hese charges are also levied by certain /(%s
to meet their expenses on the technical site visits to your property-
Sa!p 4uA a74 $e%:s$a:37 8ha$%es: /(%s that go in for a
registered mortgage or English mortgage "see Dlossary for more
details# pass these charges on to you- $hese are rather heavy in
certain states depending on the laws laid down by the state where
you buy a property-
Personal Duarantee form chargesC Since the personal guarantees
provided by you need to be stamped+ these charges are also
recovered from you- $hey are charged to you by /(%s who demand
for Duarantees-
23s-4:s>u$se!e7 8ha$%es
.heFue B3u78e .ha$%es: %n case the Che4ue through which you
make a payment to /(%s gets dishonoured+ some minimum charges
are levied by the *ank- $he same are recovered from you-
De9aAe4 2aA!e7 .ha$%es: /(%s charges delayed payment charges
from you if you delay the payment of instalments beyond the due date-
A44::37a9 8ha$%es: $hese are levied as a percentage on the delayed
payment charges by most /(%s- $hey are levied if you fail to pay the
dues within the stipulated time after a delay has taken place-
I78:4e7a9 8ha$%es: $his is payable in case the /(%s sends a
representative from their organi,ation to collect their outstanding
dues- %t is normally charged at a flat rate per visit- $hese charges are
levied by most /(%s
2$epaA!e7 8ha$%es: $his is a penalty charged by /(%s from when
you make either a part prepayment or a full repayment of loan- $his
charge is levied only on lump sum payments and not on the E%S that
you pay- $his charges is levied on the amount prepaid by you and not
on the entire outstanding principal- $hese charges are gradually being
discontinued by the /(%s-
2D. s5app:7% 8ha$%es: %n case+ you wish to swap the P!Cs given
by you to the /(% for your E% repayments+ some /(%s charges a flat
fee for the same-
)33# >e=3$e A3u 9eap
6- /ow not to trip up while taking a loanJ
Applying for a loan is a complicated process where a customer is faced
with many bewildering choices- %t is important to make the right
impression on your loan officer to get the loan you want- /owever+ there
are some important to make the right impression on your loan officer to
get the loan you want- /owever+ there are some things that you should
just not do- /ere are 6: common0enough pitfalls to avoid while applying
for a loan-
D37E 9:e :7 A3u$ app9:8a:37 =3$!
All the columns in the application form are meant to provide vital
information that the prospective lender uses to evaluate your
creditworthiness- !o not leave out any important details about your
income+ your address "both temporary 5 permanent# and about your past
or existing relationship with the lender- All this information has also to be
supported by documents- 'ying in the application form amounts to
fudging documents-
D37E =u4%e sa9a$A s9:ps a74 :783!e sae!e7s
!on3t ever fudge salary slips or income statement- Hour loan officer
handles hundreds of loan cases- $he chances are+ he knows ever trick in
the book before you could even think of one- (udging salary slips is a
serious offence- %t is fraudulence of a high order- !on3t ever do it -not
only will you not get this loan+ you can even be blacklisted by not only
this lenders too "given the amount of information0sharing between
companies#-
D37E %3 :7 =3$ a 83-app9:8a7 u79ess : :s 7e8essa$A
'oan officers are notoriously conservative- $he greater the pile of
documents related to your case in their files+ the more comfortable they
feel- Hou should always put your foot sown when a loan officer asks for
more guarantors or asks you to bring another co0applicant- $he loan
officer could be convinced of your case but may be merely trying to
protect himself from all possible eventualities- %f you follow his dictates-
Hou are killing the prospects of the co0applicant to procure a loan for
herself in the future-
D37E 3==e$ p$33= 3= a 9a&:sh 9:=esA9e 3 p$3&e 8$e4:53$h:7ess
Hour loan officer is only interested in seeing the ade4uacy of your
income- $his emerges clearly out of the income documents you submit
with your loan application- So an effort to project al lifestyle merely to
impress him is a define no0no- %t could even backfire on you if he feels
that you are living beyond your means- &emember+ he can reject your
loan application on this ground- %f you ever blew your month3s salary on
your favourite perfume or that gorgeous pashmina shawl+ please don3t tell
him-
D37E >3u78e 3$ $eu$7 8heFues
Hour bank statement speaks volumes about your spending habits- %t
mirrors your spending behaviour- %t provides your loan officer with a
comprehensive view of how you manage your money- %f there are too
many che4ues bounced or returned check entries in your bank statement+
be prepared with a convincing explanation and papers to prove it-
Denerally+ though+ there should not be any Che4ue returns or bounced
che4ues- %t lowers your creditworthiness and could result in lower or no
borrowing-
D37E sh35 a 89ea7e4-3u a883u7
aintain a certain balance a show some savings in your account-
Otherwise you will come across as someone who is barely able to meet
his expenses- Savings in your account will show the loan officer that
you3ll be able to meet the E%- Otherwise you will have to come up with
a convincing plan of lowering your expenses-
D37E h:4e 4ea:9s a>3u 3he$ 93a7s
%f there is a recurring payment on an exiting loan+ make sure you3ve
mentioned the existing liability in the form- Since other loan repayments
bring sown your incomeIto Iinstalment ratio and result in a lower loan+
this is a vital piece of information- !on3t hide details about the loan-
Consider consolidating all your debt before going in for another loan-
D37E =u4%e 4ea:9s 3= p$3=ess:37a9 4e%$ees
'oans to self0employed professionals are extended on the strength of the
professional degree and the income "especially in case of a personal
loan#- %n such a case+ fudging your professional degree or income
documents can seriously jeopardi,e your loan application- Professional
4ualifications are almost always verified-
D37E e&e$ ae!p 3 >$:>e he 93a7 3==:8e$
Hou perhaps fees that your loan application is not strong enough to get
you the loan amount you are asking for- And you probably think that you
can grease the palm of the loan officer to enhance your loan eligibility-
Can3t even think about it- Even if you got lucky and your loan officer was
the bad apple in the company3s basket "it could happen#+ your loan is
reviewed by two or sometimes three other people- Hou were not planning
to bribe all of them+ were youJ
D37E a#e a 93a7 a%a:7s A3u$ FD as 8399ae$a90 B$ea# :.
A common mistake most borrowers commit is to borrow against their
fixed deposit- $hey prefer taking loan against their own money at a rate
higher than the rate they are receiving on their fixed deposit- Hou should
consider this option only when you re4uire funds for a very short term-
Otherwise+ it makes sense to encash your (!s- $his way you3d be able to
borrow less-
A22ENDI;
A22ENDI;
F:7a78:a9 $esu9s 3= he =:7a78:a9 :7s:u:37s =3$ he Aea$ e74e4
Ma$8h 2001 G 200@
(DF. )4
/!(C 'td &s Crore arch <::6 arch<::@
Operating income <:66-?6 <@7;-?
(und base income 68@=-8 <<76-;<
(ree base income 7=-7 6:<-?<
%nterest costs 6;@>-8= 6>?8->6
!epreciation ;6->? ;@-:>
P*!$" FF&$# =:<->@ =88-<8
P*$ "FF&$# ;>:-8= ==>-<@
PA$ "FF&$# ;:6-?6 ;7@->=
Dross fixed assets ;<;-@= =><-:>
'eased assets <>>-<8 <;<-=<
%nvestments @@;6 @:=<-6;
Stock in trade : :
Cash and bank balance 6:?6-6? 6::7-?<
&eceivables 66=>8->= 6;>7=-86
Fet worths <:8=-87 <@76-8;
E4uity capital 668-66 6<:-:?
'ong term borrowing 6<??<-?< 6=;:>-?6
Current liability and
provision
6<<>-:@ 6@;;-?;
N !ata Source C%E
SBI h3!e =:7a78e )4
S*% home finance 'td- arch <::6 arch<::@
Operating income ;:-@7 @8-;>
(und base income @7-8= @>-??
(ree base income <-;< <-=?
%nterest costs =@->> =7-><
!epreciation 6-86 6-?>
P*!$" FF&$# 068->; 0??-<>
P*$ "FF&$# 0<6-== 08:-6<
PA$ "FF&$# 0<6-== 08:-6<
Dross fixed assets @<-:= @<-6=
'eased assets <=-67 <=-67
%nvestments @<-= @;-76
Stock in trade : :
Cash and bank balance <6-7 <6-@@
&eceivables @>6-?? @7=-<>
Fet worths 0>;-=8 06=;-7?
E4uity capital 6= 6=
'ong term borrowing @?8 ;@=-8
Current liability and
provision
66:-77 6;8-==
N !ata Source C%E
)I. (OUSING FINAN.E )TD.
'%C housing finance
'td- &s Crore
arch <::6 arch<::@
Operating income 7><-:@ ?7@-<>
(und base income 7<;-8; ?<8-><
(ree base income @7-:8 ;@->;
%nterest costs =>?-<7 >;;->
!epreciation 6-6> 6-@<
P*!$" FF&$# 6=7-?6 6?<-68
P*$ "FF&$# 6=>->= 6?:-?7
PA$ "FF&$# 6<6-@= 6;=-@<
Dross fixed assets 6=-:6 <6->;
'eased assets : :
%nvestments <;6-=6 @;;-<6
Stock in trade : :
Cash and bank balance =;@-7> ==:
&eceivables =@?7-;8 >@>?-8@
Fet worths >@? 7@7-<@
E4uity capital 7= 7=
'ong term borrowing =<>-?< ><:7-:=
Current liability and
provision
<7?-8> @;;-<;
* !"! S#$%&' CMIE
.ANFIN (OMES )TD
Canfin homes 'td &s
Crore
arch <::6 arch<::@
Operating income 6<7->@ 6@8-:@
(und base income 6<<-@8 6@<-<6
(ree base income =-<; >-?<
%nterest costs 8<-; 6::-;
!epreciation :-=> :-=7
P*!$" FF&$# <@-7= <=-<=
P*$ "FF&$# <@-68 <;->?
PA$ "FF&$# 67->8 6?-8?
Dross fixed assets 7-;< 7-78
'eased assets : :
%nvestments @<-?> @<->>
Stock in trade : :
Cash and bank balance @6-?? ?<-:<
&eceivables ?7-=> 6:>:-:6
Fet worths 6::-:7 66@-:=
E4uity capital <:-;8 <:-;8
'ong term borrowing ?:>-?; 8>?-:<
Current liability and
provision
@>->@ 87-?6
N !ata Source C%E
ICICI HOME FINANCE CO( LT
%C%C% /ome finance co-
'td &s Crore
arch <::6 arch<::@
Operating income =7-78 686-8>
(und base income ;@-;8 6=8-;;
(ree base income 6;-@ @<-=<
%nterest costs @@-6? 6<8-<=
!epreciation :-:7 :-;
P*!$" FF&$# < 6@-:;
P*$ "FF&$# 6-8@ 6<->;
PA$ "FF&$# 6-;8 8-=?
Dross fixed assets :-? @-;
'eased assets : :
%nvestments : 7-?6
Stock in trade : :-6
Cash and bank balance 6:-== ><-6
&eceivables 7<6-78 6><:-==
Fet worths 8;-=7 6>6-??
E4uity capital 8= 66=
'ong term borrowing <=6-= >@:-:?
Current liability and
provision @?7-?@ 8:<-?@
* !"! S#$%&' CMIE
FAC
FAC
6# Bho can avail of a home loanJ
AnyoneO Bell+ anyone who earns a regular income that isO Bhether
youGre in business or working with a company+ as long as youGre in a
position to make repayments+ youGre eligible- $he categories of eligible
applicants are I
Salaried %ndividuals
Self0Employed %ndividuals
Partnership (irms
Private 'imited Companies
So if you belong to any of the above+ consider your loan grantedO
<# Bhen can % make an applicationJ
Hou can apply the minute youGve decided to buy or construct a houseO
$hatGs right+ no bureaucratic waiting periods hereO %n fact+ some /(Cs
"/ousing (inance companies# even assist clients in locating suitable
properties through their dedicated in0house teams- Bhile youGre in the
process of identifying and selecting your property+ you can get an in0
principal approval- $his is valid for @ months during which the interest
rates at which the loan can be taken are locked in- 1ust keep in mind+
however+ that all this depends on whether the property youGve chosen is
acceptable to the finance company+ to enable them to create a valid
mortgage against it-
@# /ow do % go about getting myself a home loanJ
Fothing could be easierO Pick up the prescribed form for loan
applications from your /(C office or download it from the company
website- (ill in all the details and submit it along with the application fee
mentioned- *esides the application fee+ you will have to pay a non0
refundable processing fee+ which will be around :-@06A of the loan
applied for- Once you accept the terms of the loan offer made to you by
the /(C+ you will be charged a minimal administrative fee 0 another :-=0
6A of the loan amount sanctioned- And thatGs it 0 youGre on your way to
buying that dream home for your familyO
Re!e!>e$C if you are not the only person who will own the property you
plan to buy+ the other proposed owners will also have to sign as co0
applicants- $hat however does not mean that all co0applicants have to be
co0owners-
1ust a point to keep in mind+ some /(Cs charges a commitment fee of
6A per annum on the amount of the loan yet to be drawn- $his fee starts
being applicable nine to twelve months from the day you accept the loan
and continues to be charged till you avail of it fully-
;# /ow much time will the loan approval takeJ
Approximately between < and @ weeks-
=# /ow much time will the loan disbursement takeJ
(ortunately+ not muchO After all the relevant documents have been
thoroughly checked and all other formalities such as payment of margin
money "your contribution# etc-+ are completed+ your loan will be
disbursed in one or two weeks+ at the most- And just in case youGre
wondering 0 your contribution is the total cost of the property minus the
amount of the loanO
># %n how many instalments can the loan be disbursedJ
$he loan will be disbursed in full or in suitable instalments "normally not
exceeding# taking into account re4uirement of funds and progress of
construction+ as assessed by the /ousing (inance company- So if youGre
in a time and a cash crunch+ youGll probably get your loan accordinglyO
7# Are there any conditions % have to fulfill to avail a home loanJ
Bell+ depending on which category you belong to+ you need to meet the
following basic re4uirements I
%n the case of self0employed9salaried individuals I
$he age of the individual+ at the time of applying for the loan+
should not be less than <6 years and not more than the retirement
age at the end of the loan tenor- (or a self0employed person+ this
outer age limit can be extended to >= years-
$he individual should be employed for the last @ years-
$he individual should be a resident of the city where the /(C has a
collection center-
%n the case of professionals9businessmen I
A professional "!octor9 Engineer9 CA etc-# should have an
established practice that has been operational over the last @ years-
A businessman should be able to prove his financial soundness over the
last @ years-
?# Bhat are the general documents re4uiredJ
$o put it in a nutshell I
Proof of %dentity
Proof of &esidence
Proof of %ncome-
8# Bhat is the maximum amount % can borrowJ
Denerally speaking+ you can borrow a maximum of ?:0?=A of the cost of
the property "this includes stamp duty and registration charges#- /owever+
do remember that this limit is also linked to your paying capacity- Esually
the installment0to0income ratio "%%&# ranges between <=0=:A of a
personGs total income- Het another factor would be the upper ceiling on
the amount that the /(C itself can lend- So depending on how much you
earn and how much the /(C is able to lend 0 the maximum amount
would vary from person to person-
6:# /ow will the /(C decide the loan amount % am eligible forJ
Dood 4uestionO 'etGs see 0 the most basic criterion will be your repayment
capacityO $hat in turn will depend upon I
Hour income+
%ts stability and continuity+
Hour age+
Hour educational 4ualifications+
$he number of dependents you have+
Hour spouseGs income+
Hour assets and liabilities+
Hour savings history-
Other factors which would influence the amount of loan granted would be
I
$he purpose for which youGre taking the loan "purchase+
construction+ extension or renovation of the house property#+the
time you need to repay it-
$o put it simply+ what the /(C is concerned with while determining loan
eligibility 0 is that you should be able to repay the loan 0 comfortablyO
66# Fow if youGre wondering how the /(C calculates your monthly
incomeC hereGs a close look at how it all adds upO
$he /(C takes into account all your recurrent credits i-e-C
*asic Salary+ /&A+ and other allowance apart from '$A and
medical any rental income that you are getting-
$he amount you save on rents thanks to your moving from a rented
house to your own house-
%f your spouse is working and is your co0applicant+ his9her income will be
clubbed together with yours-
%n short+ for salaried people+ the calculation will be+ in the form of a
simple sum I
7e 8ash :7=935s - eDpe7ses H 83!!:ss:37
(or self0employed people or private companies+ the calculation will be as
per your profit and loss account I
7e p$3=: H 2I@$4 4ep$e8:a:37 H 4:$e83$s? $e!u7e$a:37
Once the E% capacity of the person has been estimated and the tenure of
loan repayment is known+ the /(C decides on the loan amount it can
provide- $his is done with the help of an E% table-
As you can see+ itGs all very scientific and sensible+ so you donGt have to
worry your own head too muchO-
$hatGs as far as detailed calculations goes- /owever some /(Cs have
schemes for professionals like CAs+ !octors+ *As and Architects which
are delightfully termed Gplain vanilla dealsGO %n these cases the amount of
loan is simply 60< times the gross receipts of the said professional-
6<# Bhat kinds of property can be financed through a home loanJ
$o get finance+ the property you choose has to be acceptable to the /(C-
$he age of the property should not be more than <= years and the title to
the property should be clear and unencumbered- %n other words+ there
should be no hidden snags or doubtful ownership claims for the property
loan to get a go0aheadO
6@# Can % get a loan for commercial property+ like offices etc-J
Hes+ you certainly can but in that case+ the loan to property0value ratio is
much less than in the case of a residential property-
6;# Can % get a loan for renovationJ
Hes+ you can get a home improvement loan for internal and external
repairs "waterproofing+ roofing+ painting+ plumbing+ electrical work+
tiling+ flooring etc-# and other structural improvements-
$he improvements have to be those that will increase the life of your
home+ contribute towards a better living environment and at the same
time+ add to the value of your house- $o get such a loan+ you need to
submit an estimate from your architect to the /(C- /owever+ you must
remember that the maximum loan amount and the maximum loan tenor
allowable is much less in this case than if you were buying or
constructing a brand new house-
6=# Can % get a loan for a plot of landJ
Sure you canO Again+ however+ the loan to value ratio will be less than in
the case of other home loans-
6># !oes the agreement for sale have to be registeredJ
Hes+ very much so- %n many states in %ndia+ the Agreement for Sale
between the builder and the purchaser is re4uired by law to be registered-
Hou are advised+ in your own interest to lodge the Agreement for Sale at
the office of the Sub0registrar appointed by the State Dovernment under
the %ndian &egistration Act+ 68:?
%n fact+ the Enion cabinet decided to make registration of immovable
property compulsory and restrict it to the area where the property is
located in order to streamline the system+ curb malpractices and black
money generation+ and plug huge revenue leakages- As a result of this
order+ GbenamiG purchases and illegal transfers on power0of0attorney basis+
both common practices in cities like !elhi+ will hopefully be controlled
and reduced to some extent-
67# !oes the property have to be insuredJ
Hes+ you will have to ensure that the property is duly and properly insured
for fire and other appropriate ha,ards+ as re4uired by the /(C during the
period of the loan and will have to produce evidence each year and9or
whenever re4uired by the /(C- $he /(C will be the beneficiary of the
insurance policy- $his is an added cost that will add to the final cost of
purchase of the property 0 so donGt forget to account for it when youGre
planning your houseO
6?# Can % get a loan for properties held on power0of0attorney basisJ
Fo- After the measure taken by the union cabinet to make the registration
of immovable property mandatory+ the /ousing (inance companies
would not be able to grant a loan for property held on a power0of0attorney
basis-
68# Bhat is meant by the margin in a loanJ
$he finance companies do not finance the full value of the house- $hey
finance up to ?:0?=A of the property0value- $he remainder has to be
invested by the person taking the loan- $his is called margin money-
<:# Bhat is meant by the term co0applicantJ
A home loan is taken either in a single name by an individual or jointly-
%n such a case+ the other person applying for the same loan is known as a
co0applicant
<6# Bho can be my co0applicantJ
%f you are an individual 0 your spouse+ your parents+ or even your children
can be your co0applicants and their incomes can be clubbed with your
income to enhance the amount of loan you are eligible for- %t makes sense
therefore+ that the co0owner of a property has to be a co0applicant+ but a
co0applicant need not be the co0owner of the property- %f you are a
partnership or a private limited company+ any one of the directors or
partners can be your co0applicant
<<# Bhat are the various costs that have to be paid to the /ousing
(inance company to avail of a home loanJ
After all+ you need to know what youGre going in forO Bell+ the various
charges involved in availing a housing loan are I
I7e$es 83s
the interest cost for the finance provided-
2$38ess:7%0 O&e$hea4 a74 A4!:7:s$a:&e .ha$%es
these are one0time payments made for initiating the process of a
housing loan- $hey are generally taken as a percentage of the loan
amount+ subject to a maximum and minimum amount-
2$e-2aA!e7 .ha$%e
these are the charges that are levied for pre0paying the loan-
.3!!:!e7 .ha$%e
$his charge is levied on the un0drawn amount of the loan- $he period for
which it is levied commences after a breathing period of a few months
from the date of sanction- $he charge is levied after this period till the
borrower withdraws the funds-
<@# Bhat is the interest rate on a home loanJ
%nterest rates range between 6<-=06;-=A and vary depending on the loan
amount and the period of repayment-
<;# Bhich interest rate structure is better 0 daily9monthly9annual
reducing and whyJ
*efore you agree to a re0payment structure+ here are the pros and cons of
them all I
Da:9A Re4u8:7%
%n this case+ reducing principal repayments are credited at the end of
every day
M37h9A Re4u8:7%
/ere+ whatever you repay on your principal is credited at the end of every
month+ and interest is calculated on the outstanding principal remaining-
Since you end up paying interest on the reduced principal every month as
compared to interest
On the outstanding principal at the end of every year in the case of annual
reducing+ this tends to be the most beneficial structure+ and is indeed what
most people go forO
A77ua9 Re4u8:7%
Ender this arrangement+ interest is calculated on an annual basis on the
outstanding at the beginning of the year- $he E% therefore becomes
696<th the E4uated Annual %nstallment-
$he difference between daily and monthly rest is very negligible-
<=# Can % get the benefit of reduced interest rates in the intervening
period or the during the balance tenure of my loanJ
Hes you can+ but only if you have opted for the floating rate being offered
by some of the big /(Cs-
<># Bhat is meant by securityJ
Simply what you can offer as guarantees to the /(CO As you will see+
there are various types of securities acceptable I
$he first mortgage "e4uitable9registered# of the property to be
financed by way of deposit of title deeds-
$he personal guarantee of one9two individuals acceptable to the
/(C-
%n the case of loans to allottees of flats9houses built by state housing
development authorities or members of co0operative housing societies 0
interim security such as '%C policies+ pledge of marketable shares and
such other investments need to be provided-
<7# Bhat kind of security do most /ousing (inance companies
re4uireJ
%n most cases+ the property itself+ bought or intended to be bought+
becomes the security and is mortgaged to the lending institution till the
entire loan is repaid- Some companies re4uire additional security such as
life insurance policies+ (! receipts+ share or savings certificates-
<?# Bhat is E%J
E% or E4uated onthly %nstalment+ refers to the fixed sum of money
that you will be paying to the /(C every month- %t comprises both
interest and principal repayment-
$he si,e of the E% depends on various factors I
6- the 4uantum of the loan+
<- the interest rate applicable and the term of the loan-
<8# Bhat is a onthly &educing 'oanJ
A loan in which the principal on which you pay interest reduces with
every monthly payment you make- 'ike we mentioned earlier+ this is the
most beneficial type for the borrowerO
@:# Bhat is an Annual &educing 'oanJ
Ender this scheme+ the principal reduces only at the end of the year-
$herefore+ you continue to pay interest on a portion of the principal
which youGve already actually paid back to the lending company- %n
effect+ you end up paying more under the Annual &educing 'oan as
compared to a onthly &educing 'oan
@6# Bhat is (ixed &ate of %nterestJ
A fixed rate of interest means that the rate of interest on the loan amount
remains unchanged for the entire duration of the loan agreement+
irrespective of changes in the interest rates in the economy- $herefore+ if
you opt for a fixed rate of interest you will not be able to benefit if
interest rates are fallingO On the other hand+ if the rates are rising+ you end
up paying more than you had bargained forO So you see+ itGs one of those
double0edged decisionsO
@<# Bhat is (loating &ate of %nterestJ
A floating rate of interest is one that fluctuates according to the market
lending rate- /ence+ in an environment where interest rates are rising+
your budgeted expenditure on the house loan also goes upO conversely+
when they fall+ you get yourself a cheaper dealO
@@# Bhat are the tax benefits that are applicable to /ome 'oans and
/ome Extension 'oansJ
Every /ome 'oan customer is eligible for tax benefits under Section <;
of the %ncome $ax Act-
A9935a>9e 4e4u8:37 3= :7e$es pa:4 4u$:7% he Aea$ -
As per the *udget <:::0:6+ every customer can claim a deduction
on interest amount of a maximum of &s- 6+=:+::: or the actual
interest paid "whichever is lower# to the /ousing (inance
Company from his Dross $axable %ncome-
TaD eDe!p:37 37 2$:78:pa9 $epa:4 4u$:7% he Aea$ -
*udget <:::0:6 provides for tax exemption on a maximum of <:A of a
principal amount of &s- <:+::: or the actual interest paid during the year
"whichever is lower# to the /ousing (inance Company from the total tax
payable by the customer-
@;# Can % repay my loan ahead of scheduleJ
Bow+ looks like youGre li4uidO Hes+ you can pay your loan ahead of
schedule- /owever+ you must consider that /ousing (inance companies
charge a fee for early redemption of loans- $his fee can vary between 60
<A of the loan amount being prepaid-
BIB)IOGRA2("
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