INTRODUCTION

The roof over ones head and ground beneath ones feet count as the bare
necessities of life. Theres nothing quite like owing a home, however humble to give that
warm and glowing feeling. But when one buys a home, one has much more than a feel
good purchase in mind! Its also a crucial investment decision, perhaps the biggest
spending decision of ones life. There are ample opportunities today for young salaried
investors to plan their moves early and buy a house at right time- and at right price. In
the process, not only do they fulfill that cherished dream of owning a house, but also put
themselves on the path to acquiring property that would meet the needs and aspirations
of their growing family, even as it leads to wealth creation. Every individual aspires to
own a home. But many either spend a lifetime saving to purchase a house or exhaust
money on monthly house rents.
Take a house loan and let the monthly rent (easily converted into affordable EMIs)
build dream home.

OBJECTIVE OF THE STUDY

The main objective of the study is to find out the tariff changes charges by other
banks in comparison to HDFC bank.
The aim of the study is to help HDFC to know where it lacks in loans and how
for the performance of other banks is better so that HDFC figure out the common
problems being faced by the customers while dealing in the loan department so
that further HDFC can improve its services and schemes offered by them to their
customers.
PROFITABLE PROPOSITION
The overall demand in residential sector has grown by about 7-8% in the past few
months as compared to the same period last year. The growth is on account of two main
factors:
One, income tax exemption.
Two, with no similar rebates available for individuals in the high income group,
they are creating a second asset.
Add to this the stable property prices over the last year and plunging interest rates,
planning for dream,] home could not have been better timed. Rock-bottom interest rates,
standardization of periodicity of interest calculation across lenders (which make it easier
to compare loans), lower interest charges, waiver of loan application processing fee and
a customer friendly attitude is reason enough to celebrate the ascension of the home loan
consumer as the king.
In response, private players like ICICI Bank, IDBI Bank, Standard Chartered Bank and
few others too lowered their rates. Market leader HDFC also brought down its interest
rateto8.75% very recently, to participate in the interest rate war. If one is still not
satisfied with the lowered loan rates theres more. Some industry watchers believe that
the floating home loan rate will slip to 8% for long term loans another two or three years.
Most banks have changed the way the interest is calculated from annual rest to monthly
rests. Under the annual rest method, the EMIs (equal monthly installment) one pay
through a year, are factored in as part-repayment of the principal component only at the
end of each year. In other words one has to pay interest even on the installments one has
2

paid until they are reduced from the principal at the end of each year. Under monthly
rests, the principal is lowered by the appropriate amount each month. The thumb rule
being that the more frequently interest is calculated, the better for the creditor.
HDFC added monthly rests on its fixed interest loans apart from annul rests. As a result
the fall in the EMIs on fixed interest loans (where the interest rate is constant for the
entire tenure of the loan, irrespective of the changes in the lending rates) is more
pronounced than on floating rate loans (where the loan interest rate varies with the
changes in the interest rate). For example, the EMI on a fifteen year fixed interest loan
for Rs. 15 lakh has come down by Rs. 15 lakh has come down by Rs. 840, the
corresponding fall in the EMI on a floating rate loan is only 4165. apart from lowering
the cost of ones loan, the switchover to monthly rests has another advantage : it makes it
easier to compare loans.
HOME LOAN
Home loans are loans you have access to, depending on whether you want to buy or
build a house and can also be used to repair or extend an existing house.
Who can avail of these loans?
According to lending institutions, any Indian resident who is over 21 years of age
at the beginning of the loan and below 65at its maturity can avail of the loan. Salaried
Employees as well as Self- Employed citizens can apply. NRI Salaried and RBI Self
Employed, under RBI guidelines, can approach only nationalized banks and other HDFC
for loans.
Why should one option for a loan to buy a house?
Taking a loan seems like a good option when the money at hand is insufficient to buy the
house of your dreams. Consider couples in their twenties and thirties. They enjoy a good
income currently, buy their accumulated capital isnt enough to purchase a house.
Whereas a home loan can give them access to capital their current earnings.
Also, if you take a 10 years old loan when you are thirty, you could repay it by the time
youre forty. So you dont have to be burdened with the interest and are free to plan your
retirement savings.

The Quantum of loan that one can avail of

Loan sanctioned depend on your repayment capacity which is based on your current
income and your future repayment capacity. You would include your spouses name to
enhance the loan amount.The maximum loan can be sanctioned varies with each
bank/institutions and ranges from Rs.10 lakhs to Rs. 1 crore.
Benefits of taking a home loan:
A home loan is very different from a personal loan like a car loan for instance. You can
utilize a home loan for financing an asset that will hold its value and even appreciate
over the period of the loan. Though its price could fluctuate in the short terms, Total
Estate will show capital appreciation over the years. The value of your house generally
while the loan remains constant. If you had opted to wait, save up and buy a house, it
would, in the long run cost you much more; home loans also come with many tax
benefits.
Tax benefits of taking a home loan:
The income tax authorities look with favor upon those servicing a housing loan from
specified financial institutions. And, it is up to you to be wise enough to take advantage
of this.
Section 24 of the Income Tax:
Interest on loan till Rs.1.5 lakhs per annum is exempted form income tax (under section
23/24(1) of the Income tax act).
Section 88 of Income Tax Act:
You get a 20% rebate on repayment of principle during a financial year. Once again, over
the years, the principle repayment eligible for rebate has been enhanced from Rs.10,000
to the current limit of Rs.20,000 Stamp duty, registration fee or transfer of such house
property to the assesses is also considered under this amount.

Financial Institutions, which give, home loans:

Leading Banks Housing finance companies
FINANCIAL IMPLICATIONS OF AVAILING A LOAN (SMALL OR BIG)
There are several expenses involved apart from repayment of the actual loan amount:
1.

Processing fees- A processing fee (PF) is charges at the time of submission of the
application form and covers expenses incurred for processing the application form.
This fee has to be paid upfront by the customer in some cases, it is nonrefundable.

2.

Administration fees- to meet operating expenses.

3.

Pre-EMI- A simple interest calculated on the disbursement amount in case of a plot

under construction.

4.

EMI- The EMI is an abbreviated form of the equated money installment and is
simply referred to as monthly installment in common parlance. And, being a selfexplanatory term that is exactly what it is. The amount you will have to pay you
financier every month when repaying your loan. Being a monthly payment, at the
end of the year, you would have paid 12 EMIs.

TYPES OF LOANS AVAILABLE

Broadly two types- fixed rate and variable rate loans; while the former deals with a
fixed rate of interest over the entire duration of the loan, the latter has the rate of interest
changing according to the fluctuations in the market.
LOAN THAT ONE CAN AVAIL
Up to 85-90% of the total cost based primarily upon the individuals payback capacity.
GENERAL CONDITIONS THAT GOVERN A HOME LOAN:
These are likely to vary with respect to the different types of housing loans:
The maximum period of the loan is normally fixed by HFIs. However, HFIs do
provide for different tenors with different terms and conditions.
The Installment that you pay is normally restricted to amount 45% of your
monthly gross income.
You will be eligible for a loan amount, which is the lowest as per your eligibility.
This is calculated on the basis of your gross income and payback capabilities.
Some HFIs insist on guarantees from other individuals for due repayment of your
loan. In such cases you have to arrange for the personal guarantee before the
disbursement of your loan tasks place.
Most HFIs have a panel of lawyers who go through your property documents to
ensure that the documents are clear and are not misrepresented. This is an added
benefit that you get when you avail of a loan from an HFI.
You repay the loan either through Deduction against Salary, Post dated cheques,
and standing instructions or by Cash/DD.
WHAT ALL ONE CAN TAKE THE LOAN FOR?
There are different types of home loan tailored to meet ones needs heres all some of
them.
Home purchase loan: This is the basic home loan for the purchase of new home.
Home improvement loans: These loans are given for implementation repair
works & renovation in a home that has already been purchased by the client.
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 Home construction loan: This is available for the construction of new home.
Home extension loan: This is given for expanding or extending an existing
home for e.g.: addition of an extra room etc.
Home conversion loan: This is for those who have financed the present home
with home loan & wish to purchase& move to another home for which some
extra funds are required through home on version loan ,existing loan is
transferred to the new home including the extra amount required eliminating the
pre payment of the previous loan.
Land purchasing loan: this loan is available for the purchasing of land for both
construction and investment purpose.
Bridge loan: these are designed for those people who wish to sell the existing
home & purchase another one. The bridge loan help finance the new home, until
a buyer is found for the home.

RESEARCH MYTHODOLOGY
Research methodology is an important part of every project. Because it helps in knowing
how to select the representative sample from the world or the general population, the
right research tools and techniques to complete the research.
The study of the consumer behavior is important because he is the king. The research
process is based upon survey method, so in order we go to service provider and services
user which is the customers.
The research involves the following steps:
Define the problem and research objective: The problem and objective is to
assess the services offered by the various service providers and what the
customer wants.
Developing the research plan: The second stage of the research methodology is
to develop a research plan. The research plan designed to take the decision on the
data sources, research approaches, research instruments, sampling plan and
contact methods.
Survey research: It was a descriptive research.
Research instrument:

The use of an effective research instrument is very

important because through this instrument we collect data in this project through
observations and personal interview were conducted.
Personal interview: as we were doing direct selling we interacted with my
customers and asked about their views in selecting a service and what are their
wants and expectations from a service provider.
Sampling plan: After finalizing the research approach and instruments a
sampling must be designed.
Sampling procedure: what process should be used to collect the sample. So,
representation sample, convenience sampling is used.
Collect the information: After completing all the steps, the data are collected
from different sources.
Analyze the information: After the data is collected they are analyzed to know
the findings. The data is then tabulated to develop the frequency distribution.
Present the findings: As the last step, the findings are presented that are relevant
to the major marketing decisions.
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HDFC BANK PROFILE

INTRODUCTION
HDFC (Home Development Finance Corporation) Home Loan, India have been serving
the people for around 3 decades and providing various housing loan according to their
varied needs at attractive and reasonable interest rates. Owing to their wide network of
financing, HDFC Home Loans provide services at doorstep and helps you find a home as
per your requirements.
COMPANY PROFILE
HDFC Limited founded in 1997 by Ravi Maurya and Hansmukh bhai Parekh, is an
Indian NBFS focusing on home loans. HDFC operates through almost 450 locations
throughout the country with its corporate head quarters in Mumbai, India. HDFC also
has an international office in Dubai, UAE with service associates in Kuwait. HDFC is
the largest housing company in India for the last 27 years.
HDFC was amongst the first to receive an in principal approval from RBI to set up a
bank in the private sector, as a part of the RBIs liberalization of the Indian banking
industry. It was incorporated on 30th august 1994 in the name of HDFC Bank Limited,
with its registration office in Mumbai. HDFC began its operations as a scheduled
commercial bank on 16th January 1995.
ABOUT THE PROMOTER
HDFC, the promoter, is Indias premier housing finance company and enjoy an
impeccable track record in India as well as in international markets.
Since its inception in 1997, HDFC has maintained a consistent growth in its operation
and profitability. Its outstanding loan portfolio covers over a million dwelling units.
HDFC has developed significant expertise in retail mortgage loans to different market
segment and also has a large corporate client base in relation to its housing related credit
facilities and its investment in portfolio.
With its tremendous brand equity, the strong reputation in the Indian and international
financial services market, large shareholder base and unique consumer franchise, HDFC
was ideally positioned to promote a bank in the

10

Indian environment. HDFC (together with its fully owned subsidiary HDFC Investment
Limited) owns about 31 % of the equity. They had started with a strategic alliance with
the Natwest group in UK with 20% equity, which has divested later on. The bank has
also signed a memorandum of understanding for strategic business collaboration with
chase Manhattan Bank in Feb. 2, 1999.
BUSINESS PHILOSOPHY
The mission of the HDFC Bank is to be world class Indian bank. This would imply a
bank that would meet various financial needs of its customers in a convenient and cost
effective manner at international standard of service.
The bank seeks to achieve the status of a preferred organization among its major
constituents- customers, shareholders, regulators, employees, suppliers etc. while
maintaining the highest level of integrity and corporate governance.
The business philosophy at HDFC bank is based on four core values: operational
excellence, customer focus, and product leadership and people competitors.
The Bank faces the strong competition in all of their principal lines of business. Their
primary competitors are large public sector banks, other private sector banks, foreign
banks and in some product areas, non-banking financial institutions.
WHOLESALE BANKING
Principal competitors in wholesale banking are public and new private sector banks as
well as foreign banks. The large public sector banks have traditionally been the market
leaders in the commercial lending. Foreign banks have focused primarily on serving the
needs of multinational companies and the Indian corporations with cross- border
financing requirements including trade, transactional and foreign exchange services,
while the large public sector banks have extensive branch networks and large local
currency funding capabilities.

11

RETAIL BANKING
In retail banking, their principal competitors are the large public sector banks, which
have much larger deposit bases and branch networks,, other new private sector banks
and foreign banks in case of retail loan products. The retail deposit shares of the foreign
banks are quite small in comparison to the public sector banks, and have also declined in
the last five years, which we attribute principally to the competition from new private
sector banks. However, some of the foreign banks have a significant presence among
non-resident Indians and also compete for non-branch based products such as auto loans
and credit cards. They face significant competition primarily from foreign banks. In
provision of debit cards and also expect to face competition from foreign banks when we
begin offering credit cards. In mutual fund sales and other investment related products,
their principal competitors are brokers and foreign private banks.
TREASURY
In treasury advisory services for corporate clients, the compete principally with foreign
banks in foreign exchange and derivatives trading as well as SBI and other public sector
banks ion the foreign exchange and money market business.
LOANS
HDFC brings back you a wide range of loans to cater your financial needs.
The bank offers the following loans:
1) Personal loans.
2) Consumer loans.
3) Auto loans
4) Loans against shares
5) Loans against RBI bonds
6) Loans against insurance policy
7) E- Instant loans give the facility of loans approval in the 60 second on the
internet.
8) HDFC has offices spread all over the country. This extensive network helps
HDFC in providing services to large and well spread out clients. This network of
12

interconnected offices (on data circuits) helps HDFC to process application for
purchase of property anywhere in India. HDFC has further established an office
in Dubai and service associates in Kuwait, Oman and Quarter to make to easier
for Middle East based non-resident Indians to apply for loan to HDFC-India.
9) HDFC is pioneer of housing finance in India and has been a leader in business
for the last 23 years. HDFC has vast experience and a very committed and skilled
staff to handle housing loan applications and solving customer problems.
HDFC LOAN SCHEME PURPOSE
HDFC Limited offers loans for the following purposes:
Land purchase
Home construction/purchase
Home extension
Home improvement loans
Short-term bridge loans
Non-resident premises loans for professionals.
LOAN AMOUNT
You can avail of maximum of up to 85% of the cost of the property, including the cost of
the land.
LOAN TENURE
You can repay the loan over a maximum period of 20 years under both FRHL and
ARHL. Repayment will not ordinarily extend beyond your age of retirement (if you are
employed) or on your reaching 65 years of age, whichever is earlier. However, HDFC
will endeavor to determine the repayment period to suit your convenience.
RATE OF INTEREST
The rate of interest of HDFC is 8.75%.under the monthly rest option, interest is
calculated on monthly rests. Principal repayment is credited at the end of every month.

13

At HDFC you have the choice between the normal FRHL and the innovative ARHL.
Alternatively you can also avail the part of the loan under FRHL and balance under
ARHL.
HDFC also offers you the option to switch between schemes for the nominal fee. Interest
rates on ARHL will be linked to HDFCs Retail Prime Lending Rate (RPLR) which
currently is 13.75% .The rate on your loan will be revised every three months from the
date of first disbursement, if there is a change in RPLR, i.e. the interest rate on your loan
may change. However, the EMI on the home loan disbursed will not change. (if the
interest rate increases, the interest component in an EMI will increase and the principal
component will reduce, resulting in an extension of the term of the loan, and vice versa
when the interest rate decreases).customer will be provided with an annual statement
indicating the details of the interest and principal payment made during the year.
SECURITY
Security for the loan normally is first mortgage of the property to be financed and/or
such other collateral security as may be necessary. Interim security may be required, if
the property is under construction. Collateral or interim security could be assigned to
HDFC of life insurance policies, the surrender value of which is at least equal to the loan
amount, guarantees from sound and solvent guarantors, pledge of shares and such other
investments that are acceptable to the HDFC.
Loans from HDFC are available even if you are availing a housing loan from your
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 do ensure that the title of the property is clear, marketable and free from
encumbrance. To elaborate there should not be any existing mortgage, loan or litigation
which is likely to affect the title to the property adversely.
DOCUMENTS/SUPPORTING DOCUMENTS TO BE ATTATCHED:
FOR ALL THE APPLICANTS:
1) Allotment letter of the o-operative society/association of the apartment owners.
2) Copy of approved drawings of proposed construction/purchase/extension.
14

3) Agreement for sale/sale deed/detailed cost estimate from architect/engineer for

the property to be purchased/constructed/extended/renovated.
4) If you have been in your present employment/business or profession for less than
a year, mention an a separate sheet details of the of the occupations for previous
five years, giving position held, reason for change and period of same.
5) Applicable processing fees.
6) Proof of residence: attested copy of any one of the following:
a) Ration card
b) Passport
c) Driving license
d) Voters identity card
e) Current telephone bill/electricity bill/gas bill
7) Proof of identity: attested copy of ay one of the following:
a) Passport
b) Driving license
c) Voters identity car5d identity card issued by the employer (if employed in
state/central government)
d) PAN card
8) Certificate of loan outstanding issued by the lender (for refinance cases only)
9) Any other information regarding your repayment capacity that is necessary and
will assist HDFC in appraising the loan proposal.
ADDITIONALLY
IF YOU ARE EMPLOYED:
1) Verification of the employment form with only part I filled in.
2) Latest original salary slip/salary certificate showing all deductions.
3) If your job is transferable, permanent address where correspondence relating to
the application can be mailed.
4) A letter from your employer agreeing to deduct the EMI towards the repayment
of the loan from your salary. This will expedite the processing of your loan
application.
5) Your updated original bank pass book/s or original bank statement/s showing
salary and saving entries for the last six months.
15

6) A photo-copy of your Form-16 (issued by your employer) for the last assessment
year.
IF YOU ARE SELF EMPLOYED:
1) Balance Sheets and Profit & Loss Accounts of the business/profession along with
copies of individual income tax returns for the last three years certified by the
Chartered Accountant.
2) A note giving information on the nature of your business/profession, form of
organization, clients, suppliers, etc.
3) Copies of individual tax chalans for the last three years
4) Copy of advance tax chalan (if any)
5) Your updated original Bank Pass Book/s or Original Bank Statement/s showing
saving s entries for the last twelve months.
TAX BENEFIT
You are eligible for certain tax benefits on principal and interest components of a loan
under the Income Tax Act, 1961.
ELIGIBILITY
The repayment capacity as determined by the HDFC will help in deciding how much we
can borrow (the cost of the property or Rs.1crore whichever is lower). Repayment
capacity takes into consideration factors such as income, age, qualifications, number of
dependents, spouses income, assets, liabilities, stability and continuity of occupation
and saving history. And, of course, HDFCs main concern is to make sure you can
comfortably repay the amount you borrowed.
ABOUT THE PRODUCT
HDFCs Home Loans offers you various unique benefits and are easy to arrange and
repayable in easy monthly installments. The terms of the loan can be structured
according to the customer requirement.
Home loans can be applied for by either individually or jointly. Proposed owner of the
property, in respect of which the loan is being sought, will have to be co-applicants.
However, the co-applicants need not be co-owners. Loans can avail up to a maximum of
85% of the cost of the property (including the cost of the land). HDFC lends up to a
maximum of Rs. 10000000 on a home loan to an individual. You can repay the loan over
a maximum period of 20 years. They determine the loan amount after evaluating the
16

repayment capacity of the individual. HDFCs main concern is to help individuals

comfortably repay the borrowed amount.
SUPERIOR PROCESSING CAPACITY:
HDFC has over the years invested substantially into the computer systems and training.
This has enabled HDFC to respond to customer needs and build up capabilities to
approve loan on the spot or disburse them fast.
BRANCH NETWORK:
HDFC has offices spread all over the country. This extensive network helps HDFC in
providing service to large and well spread out clients. This network of interconnected
offices (on data circuits) helps HDFC to process applications for purchase of property
anywhere in India. HDFC has further established an office in Dubai and service
associates in Kuwait, Oman, Qatar, Bahrain and Saudi Arabia to make it easier for
Middle east based non-resident Indians to apply for the loan to HDFC-India.
EXPERIENCED TRAINED STAFF:
HDFC is a pioneer of housing finance in India and has been a leader in the business for
the last 25 years. HDFC has vast experienced and very committed and skilled staff to
handle housing loan applications and solving customer problems.
FREE COUNSELLING:
HDFC believes that it is in the business of providing solutions to an individuals need for
owing a house, and not just in the business of providing finance. Keeping this in mind
HDFC will provide free counseling to on how and where to buy a house in India
(property services) or what are the prices and trends in the real estate market or what
precautions one should take before buying a house. This service is offered at any of the
HDFCs offices.

17

LEGAL AND TECHNICAL GUIDANCE:

HDFC has qualified legal and technical staffs who liaise with developer to collect and
scrutinize the property documents and permissions. We have master files of most
projects being developed by the reputed developers. It has always been HDFCs
endeavor to protect the interest of the borrower, as we believe that the buying a house is
one of the most Important decisions in this life.
FLEXIBLE (CUSTOMIZED) REPAYMENT SCHEMES:
Keeping in mind the fact that each individual has unique problem requiring unique
solution, HDFC has developed various repayment options like Step Up Repayment
Facility (SURF), Flexible Loan Installment Plan (FLIP) Balloon Payment plan and
Structured Repayment Plan.
STEP UP REPAYMENT FACILITY
HDFC Ltd has a hitherto with you, right through .This statement HDFC proves time
and Again by developing close relationship with individual customers and by constantly
Developing and marketing in the market new and innovative products that increase the
Comfort level of the customers. Along the same philosophy HDFC came up with Step
Up Repayment Facility which once again reassures customers that HDFC helps you
achieve your dream.
This facility is especially helpful to those customers who want to get a loan on an
amount
that is not falling within the permissible limit of their repayment capacity. It also is in
line with HDFCs aim to provide greater degree of personalization in service and the
tools. Hence there can be the situation wherein the applicant is not in the position to pay
the required EMI which is calculated by the ILPS (Individual loan processing
system).HDFC in this case offers to let the applicant use one of the two plans to repay
the loan amount.
The EMI Chooser 1
In this plan the applicant gets the advantage from HDFC to select the amount that
he wants to pay as his fist EMI. This means that HDFC will let the applicant decide

18

what amount he can comfortably pay to HDFC in the first term of his Loan Repayment
Schedule. The system will calculate the next two EMIs for the next two terms
The customer can hence decide when he wants to repay the maximum amount of the
Loan to HDFC and when he wants to repay minimum leftover or remaining amount of
the loan in the form of still smaller EMIs.
The EMI Chooser 2
This plan is an extension of the aforementioned plan .In this plan HDFC helps the
Applicant by letting him choose two EMIs .This means that the Applicant can select the
amount that he wants two pay for both the First and the Second terms of his repayment
schedule. This translates into more help and more convenience to the applicant. However
the benefits of these plans dont stop here.
The Applicant can also allocate the term length for which he wants to pay what amount
This translates into a great advantage to the Applicant .He can now link
1. His current salary
2. The rate of average increment,
3. His existing and expected obligations,
4. His existing and expected expenses
5. The length of the term among others.
HDFC can hence assist the Applicant in developing a much more personalized loan plan
as compared to its competitors in the Housing Loan market.
The Applicant can also save money by using these plans .This is because the total
Outflow in case of a regular plan is more as compared to these special plans. The
Applicant will hence obtain more benefit in case of Prepayment and elsewhere.
C. All Loans from HDFC Ltd are subject to Tax exemption and be treated as Rebate.
Hence HDFC lets the customer save their hard earned money.
FLEXIBLE LOAN INSTALMENT PLAN (FLIP)
Another First of its kind product from HDFC .This is also to assist the Applicant to
easily secure a loan in the following condition. FLIP is used when the applicant and coapplicant want to jointly repay the loan. There is however a problem in the situation
19

which would otherwise not allow the loan to be sanctioned. There are two applicants
hence two incomes .Therefore in the joint payment they can combine their income to
repay the loan .Let there be Mr. A and B who want to take a loan for 14 years .A is the
father and B is the son of A .Now consider the situation in which A and B want to take a
loan and jointly repay it .But A is 52 years old and B is only 25 .Hence A will retire after
8 years and will not be repaying the EMI but B can continue to repay the loan. In that
case although there will be a problem at other places but in HDFC this is solved by
taking different incomes in the terms. Hence the income that will be considered earlier
will be the fathers income and at his retirement or at any other selected stage of
repayment we will begin to consider only the income of the son.
The advantage of FLIP in terms of the Applicant is that of joint payment,
personalization, easy repayment, and freedom from many possible problems. In the
Illustration the father is going to pay only for 105 months and after that we are to
consider the sons salary only for the next remaining 60 months.
PARI PASSU/SECOND MORTGAGE ARRANGEMENT:
HDFC has a tie-up with a large number if public sector organizations and banks which
enable us to offer loans to your employees with the flexibility of their spouse also
availing a loan from his/her own employer.
SAFE DOCUMENT STORAGE FACILITIES:
HDFC has state of art storage facilities which are theft and fire proof, at various
locations where loan and property documents are stored. In this way valuable documents
are stored safely over the period of the loan and are released almost immediately after a
customer repay his loan.
ELECTRONIC MAIL:
HDFC through its E-mail services can promptly respond to queries. In addition, HDFC
can promptly send its application form cum brochure and other detail on its loan
products by e-mail to interested individuals. For Non-resident Indians our interactive
website offers another means of contacting us. In our effort to reach out globally
dispersed Non-resident Indians, we will continuously enhance our website.
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HOME CONVERSION LOAN:

HDFC offer the option of a home conversion loan to its existing customer who are
interested in moving to a new house. Through this scheme the customer can apply to
have their existing loan transferred towards the purchase of the new home. Customers
may also apply for an additional loan amount for the purchase of the new house. This
gives the customers the option of selling t6heir existing house if they wish to, without
having to repay their old loan
APPLICATION CAN BE MADE BEFORE SELECTING THE PROPERTY:
Individuals may make an application for the loan even if the property has not been
selected or the construction has not commenced. HDFC can provide assistance in
locating an appropriate house to such customers.
HOME IMPROVEMENT LOANS:
As an exclusive offer to its existing customers HDFC offers Home Improvement Loan
up to 100% of the improvement cost as compared to the home improvement loans up to
70% of the improvement cost offered to the general public.
FEE:
A processing fee of 0.5% of the loan amount applied for rs.5 per rs.1000 of the loan
applied for is payable when the application form is submitted to HDFC. This fee is in the
respect of costs incidental to the application. For example:
Loan applied for

fees

Rs.20000

Rs.100

Rs.100000

Rs. 500

On approval of the loan, a loan offer is made to you on acceptance of the offer. You have
to pay an administrative fee of Rs.0.5% of the loan approved. You can also pay the
processing fee and administrative fee upfront i.e. 1% of the loan at the time of
21

submission of the loan application itself. This fee is in respect of the costs incidental to
the application. Taxes as applicable will be charged on the fees collected.
CHARGES:
For Fixed Rate Home Loan (FRHL) an early redemption charge of 2% of the amount
being prepaid is payable, if the amount being repaid is more than 25% of the opening
balance. However under Adjustable Rate Home Loan (ARHL) option early redemption
charges of 2% is payable only in case of commercial refinance. You may be required to
submit the copies of your Bank Statements or any other documents that HDFC deems
necessary to verify the source of prepayment.
You can make payment for fees and charges by cheque marked payees account only
drawn on a bank in a city where HDFC has an office or by demand draft (payable at par
to HDFC).
HOW TO APPLY
Customer can either download (in PDF format) the application form or get the
application form by E-mail. Alternately the customers can collect the application form
from any of your nearest HDFC offices. Customer need to submit it along with
supporting documents and processing fee at any HDFC office that is convenient to the
customer. Customers can make payments by the cheque marked payees account only
drawn on a bank in a city where the HDFC has an office, by demand draft (payable at
part to HDFC) or by cash. Customer can make an application at any time after they have
decided to acquire a house even when the house has not been selected or construction
has not commenced.
HDFC will consider your application, make enquiries as it deems necessary and convey
its decision to you. On acceptance of the offer, you will have to pay an administrative fee
for the loan approved. Customer can take the disbursement of the loan after the property
has been completed and you have invested your own contribution in full (own
contribution is the total cost of the property less HDFCs loan). The loan will be
disbursed in full or in suitable installments (normally not exceeding three in
number)taking into account the requirement of the funds and the progress of the
construction, as assessed by HDFC and not necessarily according to the builders
agreement.

22

STAGES OF HOME LOAN

Application

DISBURSE

The Loan

Munirka
HUB

Fix
Chrg
es

Login

Double Checking
Over (DCOVR)

23

Scanning

Data
Entry

Recommendation
Over (ROVR)

ANALYSIS OF DATA
The home loans provided by the banks are more or less same at the basic level. The
banks generally try to go ahead of other banks in terms of attracting number of
customers to their countries. For this they are trying to offer some unique services as per
the unique requirements of the unique important customers.
COMPARITIVE STATEMENT OF HOME LOAN
PARTICULARS

HDFC

ICICI

ROI(FIXED)

14%

1 -5 Yrs. -16%
Year 1 - 8%
5 - 10 Yrs. - 16 Year 2 & 3 % 10 -15 Yrs. - 9%
16%
15
-20Yrs13.75%

ROI(FLOATING)

Up to 30lakh-8.75%
30 lakh-50lakh-9%
Above50lakh-9.25%

1 - 5 Yrs.- 16 %

24

5 - 10 Yrs.11.25 %
10 - 15 Yrs.-16
%
15 - 20 Yrs- 16
%

SBI

Year
4
onwards up to 50 lakh9.25%
over
50
lakhs-9.75%

PROCESSING
FEE
PENALTY
TENURE
MINIMUM AGE
MAXIMUM
AGE

0.5%

0.5%

0.5%

2%
25 years
21
60

2%
15 years
25
55

2%
25 years
25
55

25

COMPARISON OF MAJOR PLAYERS

The markets for home loans have been sizzling in India. The spurt in growth in recent
years and the prospect of continued buoyancy in demand have attracted many players to
the industry which till a couple of years back had two major players- HDFC and LIC
Housing Finance. The result is cut-throat competition, which has benefited the loan
seekers. The home loan market has grown at a compounded rate of over 40% over the
last four years. And from what industry experts believe that there is a little chance that
there will be any significant decline in the growth rates going forward. So what have
been the key factors in triggering of this high growth period?
There are several reasons for the same on the demand side: Faster rise income as compared to property prices, thus making housing more
affordable.
Decline interest rates, which have greatly reduced the cost of borrowing (both
o0n interest and capital).
Then there are factors on the supply side too which have supported this growth: More competition in the housing finance sector resulted in companies charging
lower interest rates, sometimes even at the cost of spread (i.e. profit margin)
The fee for getting the home loan has reduced dramatically over the last couple
of years. From over 2% of the loan amount to as long as 0.25% (some companies
are known to wave of the fee entirely). Housing Finance Companies have
introduced several new products to meet the needs of wide variety of customers.
One such scheme, the Step up Loan, where EMIs increases as the income of the
individual increases has been a big hit with the individuals just starting off with
their careers.
One other factor is increasing collaboration between Housing Finance
Companies and builders. Such partnership minimizes the service and funding
related issues significantly thus making it easier to buy property.
One innovation in the housing finance sector has been the introduction of floating rate
home loan simply put the cost of such home loan or the interest rate not fixed during the
tenure of the loan. Instead interest rate is benchmarked against some index/ indicator. So

26

as the benchmark rate moves up or down, the cost of your loan too changes, at some
predetermined frequency (usually once a quarter).
Ideally loan seekers should opt for a floating rate home loan when it is expected that the
interest rate will decline going forward. Fixed rate loans should be preferred when the
interest rates are expected to rise.
But is the choice that simple? In todays environment when there is a lot of talk about
rising interest rate, should investor shun floating rate home loan. Altogether is there still
some merit in this instrument? In the last one year, there was a trend of floating rate
home loans being more popular as compared to the fixed rate loan. As of now, this trend
is continuing says Mr. Suresh Menon , GM (Mumbai region), HDFC Limited.
There are three important issues which one needs to consider before opting for one type
of a loan over the other: First, an important determinant of what you go in for should be the long term
expectation of interest rate. For example if you (or the experts) expects the rates
to rise for the next one year, but then decline gradually over the next several
years a floating rate product may be preferable. The other option for going in for
a fixed rate product and then switching at the end of the year will entail costs
(there could be penalty of 1%-2% of the outstanding loan amount) and may not
make financial sense. Moreover floating rate home loans do not change the rate
of interest every quarter (even though they review the rate every quarter). Mr.
Menon points out The attraction of a floating rate home loan is that it does not
attract a part prepayment charge. This could appeal to individuals who get lump
sum bonuses which they can use to reduce their loan exposure.
Second, the issue whether fixed rate home loan are actually fixed rate. When
considering a fixed rate home loan over floating rate of home loan a strong
selling point is that if interest rate were to rise dramatically you will be protected.
Apparently the reality is some what different. It seems that companies that have
given out fixed rate home loans can revise their rates upwards in exceptional
circumstances (significant rise in interest rate for one) so if you think interest rate
will remain rage bound over the near term and decline over the long term, you
are still better off with the floating rate product.
27

 Third, a fixed rate loan is generally priced higher as compared to the floating rate
product. This holds true in the current environment where the fixed rate loan is
at a higher interest rate as compared to the floating rate loan. The difference is
currently about 0.25% to 21%. So if you expect that interest rate are likely to
move up, but only to the extent of this differential, then you should ideally be in
different between the two types of loan. The deciding factors then should be
when you think the rates will increase and also the long term expectations of
interest rates.
As always there is no one answer to whether you should go in for floating or a fixed rate
home loan. If you are a person with very little appetite for risk or negative surprises, opt
for fixed rate home loan. But in case you can take on some risk a floating rate home
loan is worth a look.
Five steps to take a right loan:1) Gather data on interest rate. Get interest rate information from more than one
source and get the same information from each so you can compare the offers.
2) Get information on fees. Find out about processing fees, administration charges
and other costs that may be involved in taking the home loan.

A written

statement of all the fees from the housing finance companies will ensure that
there will be no surprises later on. Use the lowest amount of fees to negotiate
with the other lenders.
3) Get pre-approval letter. This gives you substantial leverage as you are then seen
as serious buyer by the seller of the property. Also, having the letter in your hand
will set a limit to the amount of money you can commit to the property. This will
help in identifying the right property.
4) Bargain for a lower rate of interest. Housing finance will reduce their rack rates
for customers with the good credit record. A bargain deal will easily fixed a
home loan at significantly lower rates (at times you can get a discount of as high
as 0.50 percent). Here again get a confirmation of the rate (and for how long it
will remain fixed) via a letter.

28

5) Watch out for a predatory lending. Dont include false information on your home
loan application to get quick approval. Also do not borrow more money than you
need or can afford.
A floating interest rate allows customer to take advantage of interest rate movements.
They get immunity from adverse movements and read the benefits of any fall in interest
rate but a floating rate loan makes sense only when interest rate are high so that they can
take advantage of possible fall. But predicting interest rate movement could confound
even seasoned market watchers.
If they are looking for a home loan, be prepared to cough up a pretty sum as down
payment. The RBI, in a recent meeting with the bankers cautioned banks against lending
100% of the property value. That is because of increasing competition in home loan
some banks have been funding even 110% of the agreement value. This means your
loan not only pay for the property, it helps with the stamp duty and registration charges
and even furnishing. Its being sweet deal so for, as borrower not only need have no
access to other funds, they also get tax breaks.
The RBIs position is that lending such sums will remain additional risk for the bank. In
case of default, the bank may not have sufficient collateral security to recover dues and
may have to write off the additional borrowings. However, the bankers do not seen
unduly worried. Nonperforming assets in the housing segment are quite low below 1%
and that, say bankers, is due to the higher asset quality.

29

STRENGTH & WEAKNESSES

STRENGTHS & WEAKNESSES OF HOUSING FINANCE INDUSTRY
STRENGTHS
1) The industry has been witnessing very fast growth rate, which is 6% growth in
the first
2) Quarter of 2002-2003 as against 3-5% growth recorded in the first quarter of
2001-2002
3) The market faces a high demand curve, thoroughly mismatched by a low supply
curve
4) Investment is based in assets that are securities & those that have historically
appreciate rapidly.
5) Tax benefit & other facilities provided on loan repayments.
WEEKNESSES
1) The foreclosure rules of court of law such as provision regarding the ownership
of not more than one house (in Delhi) binds the industry.
2) The healthy of an HFC depend upon its ability to mob up low cost funds.
3) AN HFC is unable to tap the rural market due to lack of proper retrieval
procedures so whilst
4) The rural market offers a higher rate of return; it has a higher risk & default rate.
5) Many legal impendent exist, deferring purchase of certain types of property
beyond a
6) Certain extent thereby negatively impacting weak mortgage laws, resulting in an
increase in risk compo ending this.

30

OPPORTUNITIES
1) The housing industry faces a severe shortage of houses. The total demand for
houses is Expected to touch around 19.40 million units by the year 2003 of these
12.8 million
2) Dwelling units (65-98%) would be in rural areas & 6.6 millions dwelling units
(34.02%) in urban areas.
3) While the loan facility is backed by the security of property this sector represent
a low margin But on the low margin but on the same line low risk segment. The
address this
4) Market the ones lies on the HFCS to device bold & innovative alternatives like
mortgage Based securities use of method such as door to door collection of
installments assessing the Creditworthiness of the prospective client and
providing for group securities.
5) The roles of NHB in refinancing & providing regulation of housing finance
system.
6) The governments initiatives to promote the sector & its contribution in uplifting
the sector.
THREATS
The industry faces increased competition as more & more foreign backs & Housing
Finance Companies are providing loan facility.

31

STRENGTH & WEAKNESSES OF HDFC HOME FINANACE

STRENGTH
1) Save substantial interest.
2) Prepay whenever the customer.
3) Reduce their loan outstanding.
4) Access the surplus finds anytime.
5) Use surplus funds to invest when the right opportunities arises.
WEAKNESS
Product is very good but it is mainly suitable for higher income group & is not suitable
for the Middle income group

32

OPPORTUNITIES
There is ample scope for financing flats & apartments for the salaried class in the higher
income Group.
THREATS
1) Nationalized banks like SBI, Union Bank, PNB.
2) Private Banks likes HDFC & standard chartered & Citi Bank with its home credit
scheme.

33

ICICI HOME FINANACE COMPANY LTD

Consumer friendly housing finance company

HISTORY
ICICI home finance company ltd was incorporated on May 28, 1999 as 100% subsidiary
of ICICI Personal Financial Services Limited (ICICI PFS). ICICI finance company Ltd
was set up with objective of providing long term housing loan to individual and
corporate. The company was registered on March 302000 with National Housing Act,
1987 in terms of Housing Financing Companies (NHB) direction, 1989 with effect from
May 3, 2002, ICICI home finance has become a 100% subsidiary of ICICI bank Ltd.
OVERVIEW
ICICI home loans are at present available to customer in 150 cities/towns across the
country. Loans are offered for the purchase of new homes. Purchase of resale homes and
home improvement. Besides the companies also offers loans for commercial property
and loans against existing property. The loans are offers foe tenors up to 30 years. The
company has also introduced several customers friendly services such as door step
services, know your loan on phone facility and ICICI home search free property
brokerage services. ICICI Personal Financial Services Limited (ICICI PFS) formerly
ICICI credit was one of the first four companies to obtain registration as non banking
financial banking companies(NFBc) from the reserve bank of India (RBI)on sep 10,
1997 under the new section 45 I A of the RBI act ,1939.
During the year 1998-1999, there was a significant shift in the companys operations
from leasing and hire purchase to distribution and servicing the all the retail products for
ICICI, including two auto loans, consumer durable finance & another financial products.
The company has become a critical part of ICICIs retail strategy aims at offering a
comprehensive range of products &services to retail customers. In view of this
34

reorientation of the business, the name of the company was changed from ICICI
Corporation Limited to (ICICI PFS) effective march 22, 1999.
ICICI commenced its custodial services business in 1992 & played a pioneering role in
the business when it accepted the custodian role for the first ever GDR issue by an
Indian corporate (reliance industry Ltd). ICICI has a major market share in the segment
act as custodian of 41 ADR/GDR

issues & in the process, has established the

relationship will all the major overseas

institutional investors including foreign

institutional investors (FIIs) & as on the June 30,1999, the value of asset held in our
custody exceeded us 2 billion. At present, ICICI offers a full range of custodial services
for primary and secondary market operation pertaining to debt, equity, money market
instruments GDR/EURO issues conversion & GDR arbitrage to:
1) Overseas institutional investors like
a) FIIS
b) OCBS
c) OFFSHORE FUNDS
d) VENTURE FUNDS
2) Overseas government agencies.
3) Institutional looking for proprietary investment.
4) Mutual funds
5) Private investment companies
6) Large corporate
7) High net worth individual
As a value added services ICICI custodial services division assist the client in
preparation, submission & follow up for various applications by FIIS/OCB with
SEBI/RBI
APPLICATION PROCESS OF YOUR HOME LOAN
Your search for the perfect home loan ends here at ICICI Bank Home Loans, even before
your have found the perfect property.
The moment you decide to buy a home, you can put in your application for a home loan.
Yes, you can apply for a home loan even before you have selected the property.
35

The property need not even be in the same city where you are residing. The only
condition being that ICICI Bank has Home Loans operations in both the cities.
Should there be a change in your financial status or plans, you can withdraw your
sanction within 6 months of approval of your home loan.
However, we are always ready to assist our customers in the event of legitimate
problems. And, we might reconsider this if we find that there are satisfactory reasons for
the delay.
And, neither would we charge you extra for this delay.
If it is refinancing you are interested in, it is possible within 6 months from the date of
purchase of property.
PERSONAL BANKING
At ICICI bank they are committed to making banking a pleasure. This commitment is
manifested in services they offer a wide range of account, investment scheme &
facilities. Each services offer their customer security, flexibility of operations &
maximum returns.
The various services provided under this is as follow:
1) Maximum cash-saving account
2) Quantum fixed deposits
3) Quantum optima value added saving account
4) Money plus-current act
5) ATM
6) Treasure chest cocker facility
7) Power pay roll
8) Retail treasury instruments

36

CORPORATE BANKING
MOBILE COMMERSE
ICICI bank now brings back account & ICICI credit card to customers fingertips .with
mobile commerce customer can perform a wide range of query based transaction from
their orange tm (Mumbai) & Airtel (DELHI) mobile phone , without even making a call.
1) Access multiple accounts
2) Balance inquiry to the linked account
3) Cheque book request
4) Mini statement listing of last three transactions5) Request for account statements (by
mail or fax)
ICICI
1) Attractive IR
2) Door step service from enquiry stage till the final disbursement.
3) No guarantor required.
4) Can transfer your existing high interest rate loan.
5) Special 100% funding for special properties.
FACTORS AFFECTING YOUR LOAN AMOUNT
With ICICI Bank Home Loans, you can get a home loan suited to your needs. The home
loan amount depends on your repayment capability and is restricted to a maximum of
80% of the cost of the property or the cost of construction as applicable. A number of
factors are taken into account when assessing your repayment capacity. Repayment
capacity takes into consideration factors such as income, age, qualifications, number of
dependants, spouse's income, assets, liabilities, stability, continuity of occupation and
savings history. However, there are ways by which you can enhance your eligibility.
If your spouse is earning, put him/her as a co-applicant. The additional income shall be
included to enhance your loan amount. In case of any co-owners they must
necessarily be co-applicants.
The final amount to be sanctioned will depend on your repayment capacity. However,
what you ultimately are entitled to will have to conform within the limits fixed for each

37

loan. Also, when the company looks at the total cost, registration charges, transfer
charges and stamp duty costs are included.

38

Documents required for Home Loan Sanction

ICICI Bank Home Loans, Indias leading Home Loans Provider, offers attractive
interest rates and unbeatable benefits to ensure that you get the best deal. Keeping your
convenience in consideration, we ask you for minimal mandatory documents for the
sanctioning of your home loan, to keep the process totally hassle-free.
We require the following documents to sanction your home loan:
Sanction Documents Completed application form
Photograph
Fee Cheque
Photo Identity Proof
Age Proof
Signature Verification Proof
Residence Address Proof
Document for the Salaried
Last 3 months Salary Slip
Form 16
Bank Statement for the last 6 months from Salary Account
Repayment Track record of existing loans / Loan closure letter
Document for the Self-employed
Income Tax Return / Computation of Total Income / Auditors Report / Balance Sheet /
Profit & Loss Account certified by Chartered Accountant for last 2 years (3 years for
Home Equity) (both for business and personal of partners/directors)
Bank statement for the last 6 months from operating account
Repayment Track record of existing loans / Loan closure letter
Board Resolution in case of a company
Proof of existence
Office Address Proof

Photo Identity Proof, Residence Address Proof, Signature Verification Statement for all the main
partners / directors.

HOME LOAN
1) Customer must be at 21 year of age when the loan is sanctioned.
2) The loan must terminate before or when you twin 65 year of age or before retirement,
Whichever is earlier.
3) Customer must be employed or self employed with regular source of income
39

LOAN AMOUNT
A number of factors are taken into account when assessing repayment capacity.
Customer income, age, number of dependents, qualification, asset &liabilities,
stability and continuity of customer employment. Business is one of them.
However there are ways by which you can enhance your eligibility.
If the customer spouse is earning put he/she as a co-applicant. the additional
income shall be included to enhance the loan amount. Incidentally, if there are
any co owners they must necessarily be co-applicant customer fiances income
can also be considered sanctioning the loan on your combined
Income .the disbursement of the loan, however will be done only after the submit
proof of Marriage. Providing additional security like bonds, fixed deposits & LIC
policies may also help to enhance Eligibility.
While there is no need for guarantor, it could be that having one might enhance
your credibility with us. If so, our loan officer would provide customer with
positive necessary details.
The final act to be sanctioned will depend on your repayment capacity. However,
what customers ultimately are entitled to will have to conform within the limits
fixed for each loan.
Also when the company looks at the total cost, registration charges, stamp duty,
transfer charges are also included.
HOMELOAN
We at ICICI bank understand the value of owing your house. Our affordable home loans
can make all the difference to their dreams of owing home.

40

FIND THE RIGHT HOME

Provide facility for search of free online property. A one stop shop for all their
Real Estate needs.
WHAT YOU GET
0% brokerage on first sale properties access the entire market under our roof site visits to
the properties short listed by you. Help in negotiating the best price. Help the legal
documentation.
LISTINGS BELOW ARE THE STEP INVOLVED IN AVAILING OF A
HOMELOAN
A person applies for a home loan
The executive meets the applicant & briefs him the entire loan process,
requirements & the various options available.
The applicant chooses a housing finance company (HFC) & handover

the

income
Document to the executive are the income documents are headed over to the
HFC for eligibility & approval.
The HFC verifies the documents & checks the repaying capacity, saving habits,
tenure of services etc. of the applicant & approves the loan amount.
After approval an offer letter is given to the applicant by the HFC, along with list
of original title documents that have to hand over to the HFC.
The applicant gives the original property title document to the HFC
The HFC scrutinizes the legal & the technical aspects of the original title
document.
If the HFC is satisfy as to the legal & technical aspect of the document then the
applicant is called to sign the loan agreement
The loan disbursement schedule is decided by the HFC according to the stage of
construction (If property under construction) or a onetime payment is made if
property is ready for Possession.
The applicant gets possession of the property depending upon the level of
completion of the property.
The applicant can start paying the EMIs.
41

42

DISBURSEMENT
Customer loan will be disbursed after you identify & select the property or the home that
customer are purchasing and on their submission of the requisite legal documents.
While the customer may be under impression that the list of documents asked for it is
rather extensive. Each and every single document asked for will be verified & check to
ensure their safety. This may take some time but the banks want to ensure a clear title
and will complete all the legal & technical verification to ensure that they have full right
to their home. The 230 a clearance of the sellers or 371 clearance from the appropriate
income tax authorities (if applicable) is also needed on satisfactory completion of above,
on registration of conveyance deed and on the investment of your own contribution, the
loan amount (as warranted by the stage of construction) will be disbursed by ICICI.
The disbursement will be in favor of the builder/seller.
At ICICI Bank Home Loans, we disburse the loan amount after you identify and select
the property or home that you are purchasing and submit the requisite legal documents.
While you may be under the impression that the list of documents asked for is rather
extensive, please note that it is for your own good. Each and every single document
asked for will be verified and checked to ensure your safety.
This may take some time but we want to ensure a clear title and will complete all the
legal and technical verifications to ensure that you have full rights to your home.
Your loan will be disbursed after you identify and select the property or home that you
are purchasing and on your submission of the requisite legal documents.
The 230 A Clearance of the seller and / or 37I clearance from the appropriate income tax
authorities (if applicable) is also needed.
On satisfactory completion of the above, on registration of the conveyance deed and on
the investment of your own contribution, the loan amount (as warranted by the stage of
construction) will be disbursed by ICICI Bank.

43

Disbursement Documents
Property documents (as per P&D for respective states and as asked by empanelled
lawyers for individual cases)
Facility Agreement
Disbursal Request Form
Cheque Submission Form for Pre EMI and EMI cheques
ECS or Auto Debit for ICICI Bank account holders or Post Dated Cheques for EMI / Pre
EMI
Personal Guarantors Documents (PG Form, Photograph, Identity Proof, Address Proof,
Signature Verification and Income documents, if applicable)
In case of property is owned by a company
Memorandum of Entry
Form 8
NOC
AMOUNT
This largely depend on a no. of facts like ones age ,profession, salary, the city one reside
is among other such factors. it varies between 2.1lakh to 1crore depending on the lenderas the rule of the thumb, depending on HFC one have to cough up 15% - 20% of the loan
amount as the down payment. For smaller amount, this may not be much. But for figure
remaining into lakh this could make loads of difference. For e.g. an apartment of costing
Rs 10 lakh may get 85% financing, so one will have to arrange for remaining Rs 15 lakh.
If one takes this into amount the additional thousands will definitely put a strain on ones
finances
.

44

TENURE
Generally the maximum tenure of home loans is 15 years, with a few lenders offering
tenure of 20 years or more. ICICI offers 15 year loan. The longer the tenure, the more
one pay in total interest but ones monthly payment will be less. So depending ones
earning potential & bank balance one can choose an appropriate tenure. An important
requirement of most of the banks/ HFCs is that one pays up the entire loan before one
retires. One can always prepay ones entire loan amount before it is due. There is a trend
to do away with the pre-payment penalty being imposed by some lenders. So its best one
checks on this as well.
INTEREST RATE
Without doubt the most important parameter to factor into ones calculations. The interest
rates may vary from institution to institution. Repayment is in the form of EMIs
(equated monthly installment). The longer the tenure, the more one pays in interest, but
ones monthly payment will be less. The interest rate of ICICI is
Tenure

Interest Type

.15 -20
10 -15
5 - 10
1-5
1-5
5 - 10
10 - 15
15 - 20

Fixed
Fixed
Fixed
Fixed
Floating
Floating
Floating
Floating

Interest Rate
13.75 %
16 %
16 %
16 %
16 %
11.25 %
16 %
16 %

45

REFINANCE
This is concept that is yet to catch on in the home loan market but is bound to be a major
service in the months to come. Under this facility, one can take a new loan from another
bank/HFC to pay back another loan before its natural tenure. It gives one the opportunity
of prepaying ones high cost debt and get a lower cost one. In todays falling interest rate
scenario one should use this vehicle to lower ones debt payment as much as possible.
The lender facilitates the shift by paying the outstanding and transferring the asset to
other portfolio.
MISCELLANEOUS CHARGES
The interest rates and EMIs are not only the cost factor. Never underestimate how much
the processing fee and administration fees amount to. A 0.5% administration fees and
0.5% processing fee on say, a Rs.500000 loan would be Rs.5000. other timesit could be
just one fee (either administration or processing but could yet work out to be much more
if it is considerably higher at, say, 2.5% or 3%. The various other fees, which one is
required to pay along with the margin amount are:
INTEREST TAX:
This is tax payable on the interest paid on a home loan and not the principal. This is
sometimes included in the interest rate of the loan, or may be charged separately as
interest tax.
PROCESSING CHARGE
It is the fee payable to the lender on applying for a loan. It is either a fixed amount not
linked to the loan or may be a percent of the loan amunt. The loan amount received by
you can be less than processing fee.
PREPAYMENT PENALTIES
When the loan is paid back before the nd of the agreed duration a penality is charged by
some banks or companies, which is usually between 1% and 2% of the amount being
prepaid.

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OTHERS
It is quite possible that some lends may levy a documentation or consultant charge.
ICICI BANK ANNOUNCES ITS BASE RATE, VALID FROM JULY 1, 2010
ICICI Bank has announced a shift in the existing benchmark rate from Floating
Reference Rate (FRR)/ I-BAR the Base Rate (I-Base). The same will be effective for all
its mortgage products from July 1, 2010.
The ICICI Bank Base Rate (I-Base) has been fixed at 7.50%. This is the minimum rate
that ICICI Bank will charge to its new customers.
BENEFITS
Some of our key benefits are:
Guidance through out the process
Home loan amounts suited to your needs
Home Loan tenure upto 20 years
Simplified documentation
Doorstep delivery of home loan papers
Sanction approval without having selected a property.
Free Personal Accident Insurance (Terms & Conditions)
Insurance options for your home loan at attractive premium

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STATE BANK OF INDIA

INTRODUCTION
State Bank of India (SBI) is India's largest commercial bank. SBI has a vast domestic
network of over 9000 branches (approximately 14% of all bank branches) and
commands one-fifth of deposits and loans of all scheduled commercial banks in India.
The State Bank Group includes a network of eight banking subsidiaries and several nonbanking subsidiaries offering merchant banking services, fund management, factoring
services, primary dealership in government securities, credit cards and insurance. The
eight banking subsidiaries are: State Bank of Bikaner and Jaipur (SBBJ),State Bank of
Hyderabad (SBH).State Bank of India (SBI),State Bank of 13 Indore (SBIR),State Bank
of Mysore (SBM),State Bank of Patiala (SBP),State Bank of Saurashtra (SBS) and State
Bank of Travancore (SBT). Today, State Bank of India (SBI) has spread its arms around
the world and has a network of branches spanning all time zones. SBI's International
Banking Group delivers the full range of cross-border finance solutions through its four
wings - the Domestic division, the Foreign Offices division, the Foreign Department and
the International Services division.
PROFILE
The SBIs powerful corporate banking formation deploys multiple channels to deliver
integrated solutions for all financial challenges faced by the corporate universe. The
Corporate Banking Group and the National Banking Group are the primary delivery
channels for corporate banking products.
The Corporate Banking Group consists of dedicated Strategic Business Units that cater
exclusively to specific client groups or specialize in particular product clusters. Foremost
among these a specialized group is the Corporate Accounts Group (CAG), focusing on
the prime corporate and institutional clients of the countrys biggest business centers.
The others are the Project Finance unit and the Leasing unit. The National Banking
Group also delivers the entire spectrum of corporate banking products to other corporate
48

clients, on a nationwide platform. The bank is also looking at opportunities to grow in

size in India as well as internationally. It presently has 82 foreign offices in 32 countries
across the globe. It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP
Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable
group in the Indian Banking scenario. It is in the process of raising capital for its growth
and also consolidating its various holdings. Throughout all this change, the Bank is also
attempting to change old mindsets, attitudes and take all employees together on this
exciting road to Transformation. In a recently concluded mass internal communication
programme termed Parivartan the Bank rolled out over 3300 two day workshops across
the country and covered over 130,000 employees in a period of 100 days using about
400 Trainers, to drive home the message of Change and inclusiveness. The workshops
fired the imagination of the employees with some other banks in India as well as other
Public Sector Organizations seeking to emulate the programme.
HISTORY
The origins of State Bank of India date back to 1806 when the Bank of Calcutta (later
called the Bank of Bengal) was established. In 1921, the Bank of Bengal and two other
Presidency banks (Bank of Madras and Bank of Bombay) were amalgamated to form the
Imperial Bank of India. In 1955, the controlling interest in the Imperial Bank of India
was acquired by the Reserve Bank of India and the State Bank of India (SBI) came into
existence by an act of Parliament as successor to the Imperial Bank of India.
Today, State Bank of India (SBI) has spread its arms around the world and has a network of
branches spanning all time zones. SBI's International Banking Group delivers the full range
of cross-border finance solutions through its four wings - the Domestic division, the Foreign
Offices division, the Foreign Department and the International Services division.

SBI RECENT ACHIVEMENTS AND MILESTONES:

AWARDS:
SBI has been the proud recipient of the ICRA Online Award - 8 times, CNBC TV 18,
Crisil Award 2006 - 4 Awards, The Lipper Award (Year 2005-2006) and most recently
with the CNBC TV - 18 Crisil Mutual Fund of the Year Award 2007 and 5 Awards for
our schemes.

49

SBI Card reaches three million milestones:

SBI Card, a joint venture between State Bank of India and GE Money, announced yet
another landmark achievement of crossing the three million cardholders-marks. Roopam
Asthana, CEO-SBI Card, said, "This milestone is even more remarkable as we have
added one million cardholders in just ten months. Our objective is to accelerate the pace
of growth by extending the benefits to a broader range of consumers in Tier II cities,
along with improved value propositions for the urban affluent customers." SBI Card
recently signed up Indian cricketer Yuvraj Singh as its brand ambassador.
SBI joins Chinese bank to touch 10,000 branches:
Public sector State Bank of India on Sunday became only the second bank in the world
to have 10,000 branches when Union Finance Minister P Chidambaram inaugurated its
latest branch here. Speaking on the occasion, Chidambaram said China's ICBC Bank
was the other bank to have 10,000 branches. Opening 10,000 branches was a great feat.
"It is not an easy milestone though the SBI was the bank of the government and Indian
people even before other banks were nationalised," he said. People all over the world,
including the Chinese, would now know about this small village where the 10000th
branch of the SBI had been opened, he said adding they would be amazed by the bank's
growth. The bank should be proud of the achievement he said and wished that the bank
opened one lakh branches. The Minister said out of the over 100 crore people, seventy
75 per cent did not have any type of insurance. Similarly, 50 per cent of the 11 crore
farmers did not have bank account. Banks should go to the people and enroll them as
account holders. 'That is what economists say is financial inclusion,' he said.
Main SBI Home Loan Schemes
SBI Realty : Purchase of plot of land
SBI Optima : Loan to existing home loan borrowers
SBI Green Home Loan : For homes that fight against the adverse climate
change, SBI offers 0.25% concession in interest rate and waiver of processing
fees
SBI Flexi : Combination of floating and fixed interest rate, in a pre determined
ratio
NRI Home Loans : Loans for NRIs and PIOs
SBI Freedom : Pledging other financial security than mortgaging the house

50

 SBI Max Gain : Operate your home loan account like your SB or Current
Account

51

PRODUCT RANGE OF COMPANY/INDUSTRY:

The products and services provided by the SBI are in various fields, such as:
Banking services
NRI services
International banking
Corporate banking
Agricultural banking
International banking
SBI HOUSING LOAN
Features
SBI Home Loan provides no cap on maximum loan amount for the
purchase/construction of house/flat.
There is an option to club the income of the applicant's spouse and children to
compute the eligible loan amount.
The bank provides free personal accident insurance cover.
A complimentary international ATM cum Debit card is also provided by SBI.
On the spot "in principle" approval is a special provision for the applicant.
If all the required documents are submitted by the applicant, SBI Home Loan is
sanctioned within 6 days of the date of submission.
The applicant can also consider SBI's Home Loan as a Term Loan or as an
Overdraft facility, in case he/she wants to save on interest and maximize gains.
SBI Home Loan also provides free personal accident insurance cover up to Rs 40
Lakhs.
Repayment is permitted up to 70 years of age, which is an added advantage of
SBI Home Loan.

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SCHEMES PROVIDED BY SBI

The Most Preferred Home Loan provider SBI Bank offers a Home Loan with Attractive
Interest Rates with Latest Schemes and Benefits. SBI also provides a Housing loan with
different schemes. Schemes Are:1. SBI Easy Home Loan
2. SBI Advantage Home Loan
3. SBI Housing Finance Scheme
4. SBI Happy Home Loans
5. SBI Life Style Loan
6. SBI Green Home Loan
7. SBI Home Plus
8. SBI Home Line
9. SBI MY HOME CAMPAIGN
PRODUCTS
'SBI-Flexi' Home Loans are designed to enable borrowers to hedge their Home Loan
against unfavorable movement in interest rates and gives the customers a one time
irrevocable option to choose one of the three customized combinations of fixed and
floating interest rates.
'SBI-Freedom' Home Loans are customized for high net worth individuals and offer
benefits such as 100 per cent finance of the project and no mortgage of the property,
provided the individual could show liquid securities such as LIC policies or NSCs.
ELIGIBILITY
The minimum age of the applicant is 18 years, on the date of the sanction of the loan.
The maximum age limit for a Home Loan applicant is 70 years. It is the maximum age
limit, within which the loan should be fully repaid. The applicant should consist of
sufficient, regular and continuous source of income for repaying the loan.

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DOCUMENTS
Completed Application Form with one Passport Size Photograph
Identity Proof - the applicant can make use of his/her PAN Card/Voter ID/
Passport/Driving License, for the purpose.
Residence Proof - the applicant can make use of his/her Recent Telephone Bill/
Electricity Bill/Property tax receipt/Passport/Voters ID
Proof of business address in respect of businesspersons/ industrialists
Sale Deed, Agreement of Sale, Letter of Allotment, Non Encumbrance Certificate,
Land/Building Tax paid receipt etc.
Copy of Approved Plan and approval from the Local Body
Statement of Bank Account/ Pass Book for last 6 months
INTEREST RATE (SBAR is currently 11.75%)
Year 1 - 8% fixed
Year 2 & 3 - 9% fixed
Year 4 onwards - For loans up to 50 lakhs, 9.25% floating.
For loan amount over 50 lakhs, 9.75% floating
Eligibility Criteria & Documentation required for SBI Home Loan
Salaried
21years to 60years
Rs.1,20,000 (p.a.)

Self employed
21years to 70years
Rs.2,00,000 (p.a.)

Age
Income
Loan
Amount
5,00,000 - 1,00,00000
Offered
Tenure
5years-20years
Current
2years
Experience

Documentation

5,00,000 - 2,00,00000
5years-20years
3years

1) Application form with photograph

1) Application form with
2) Identity & residence proof
photograph
3) Education qualifications certificate
2) Identity & residence proof
& proof of business existence
3) Last 3 months salary slip
4)
Business
profile,
4)
Form
16
5) Last 3 years profit/loss & balance
5) Last 6 months bank
sheet
salaried credit statements
6) Last 6 months bank statements
6) Processing fee cheque
7) Processing fee cheque

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Other Products from SBI (State bank of India)

1) SBI Personal Loan
2) SBI Card
3) SBI Home Loan
4) SBI Housing Loan
LOAN TENURE
You can repay the loan over a maximum period of 25 years under both FRHL and ARHL
in SBI . Repayment will not ordinarily extend beyond your age of retirement (if you are
employed) or on your reaching 65 years of age, whichever is earlier.
PROCESSING FEE

FEES

RUPEES

Upto 5 lakh

Rs. 1000

5lakh-10lakh

Rs. 2000

10lakh-20lakh

Rs. 5000

20lakh-50lak

Rs. 7000

50lakh-1crore

Rs.8000

1crore-5crore

Rs.10 000

Above 5 crore

Rs.20,000

PREPAYMENT CHARGES
If paid from own source- Nil,
In other cases- 2% on principal amount prepaid
LATE PAYMENT CHARGES
If paid from own source- Nil,
In other cases- 2% on principal amount prepaid

FINDINGS
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Interest rates on home loans are the major differentiator between institutions that provide
loans, no doubt. But there are other costs and fees involved during the process of taking a
home loan. A clear understanding and comparison of these costs can help you choose
between two loan providers offering similar interest rates.
The mortgage deed charge (MOD) is a major charge among the various fees you have to
cough up while taking a home loan. In general, most institutions charge 0.5 per cent of
the loan amount as an MOD charge. So for a 50-lakh loan amount, the MOD charge
will be 25,000. Some institutions market their home loan products by waiving this
charge. A good saving? Beware, there is no such thing as a free lunch. There could be
some hidden fees through which the institution will compensate for the waiver of this
charge.
Loan applications are subject to processing, such as verification of documents, before
being sanctioned. A fee is charged for this process by all institutions. State Bank of India
charges 0.25 per of the loan amount as a processing fee for loans up to 25 lakh and a
fixed amount of 6,500 for loans above 25 lakh and up to 75 lakh.
At ICICI Bank, the fee is relatively higher, at 0.5 per cent to 1 per cent of the loan
amount. So, with an equal 10.15 per cent interest rate currently, SBI scores over ICICI
Bank on this front. Some institutions may waive this processing fee. But such a waiver
might only be secured after tough negotiations.
In order to verify the legal status of the property that has been bought and for which the
loan is sought, institutions appoint external lawyers. The fees for lawyers, too, are taken
from the customer. However, if the property you are buying is approved in advance by
any institution, this fee is not applicable.
For instance, ICICI Bank and HDFC do not charge a legal fee if any project has been
approved by them. Besides these major charges, there are others as well. These include
registration fee, stamp duty and documentation charge.
Get details of all applicable charges on a home loan from different institutions. Along
with this, ask for the amortization schedule. This table will detail your equated monthly
installments (EMI) and give a break-up of each months EMI between the principal and
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interest. For example, suppose you are taking a 50-lakh loan for a period of 20 years at
an interest rate of 10.25 per cent. In this case, your EMI will be approximately 49,000.
In the first month, about 6,300 will go toward the principal component and the remaining
42,700 will be your interest component. As the loan period progresses, the principal
component will increase gradually while the interest component decreases.
Summing up all the EMIs for the entire loan tenure will give the amount you will have to
repay at the current interest rate. Now, sum up all the charges along with the EMI
outflows to arrive at the total amount you will be paying at the current interest rate.
Compare this amount across different institutions and go for the one that is the lowest.

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CONCLUSION
The Indian customer has come a long way from purchasing to fulfilling their
needs from buying a house customers now grab everything that comes their way but they
do their own survey of optimum loans; same is the case with banks & housing loans.
With innumerable choices before him, the customer is needed then king. It is therefore
imperative that if the bank has to succeed in competitive world, it should be
technological starry. Customer centric progressive driven by highest standard of
cooperative governance & guided by sound ethical values & above all should have
personalized customer services. There is scope of exploiting the vast middle income
group by releasing loans with special interest rate, which would be beneficial to both
parties.

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RECOMMENDATION
The following suggestions are strongly recommended:
To broaden the customer base the vast middle income strata should be fully
exploited.
Simplify the procedure, reduce service charges & demand only the basic essential
proof.
Most banks are reluctant to advance loan to the service class. E.g. law years,
police officers etc. this aspect must be exploited.
Adoption of flexible & more lenient penalty should the
Customer fails to deposit the payment on time. The penalty should be case to
case basis rather than the same for the entire customer base.
Restriction to be reduced to bare minimum for loan advances & for repayment.
For e.g. offers Long term repayment facilities & have no age restriction to
choosing repayment. The maximum age for repayment could be increase to 6570 years of age. Such facility will grow fast retail segment of the bank.
Offer multiple repayment loans services. Class to be exploited by offering special
reduced
Rates & linking the repayment from the source where the pay cheque to the
employee is issued. This need to undergo special contract with government
organization to ensure implementation.

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BIBLIOGRAPHY
CIRCULARS
1) HDFC BANK
Periodical circular and statement of RBI regarding to NPA management.

BOOKS
1) Uppal R. K. (2006), Indian Banking Industry, New Century Publications.
2) Dr. Bhattacharya K.M. and Agrawal O.P. (2011) Basics of banking and
Finance, Himalaya Publishing House.
3) Kapila Raj & Kapila Uma, (2001) India`s Banking and Financial Sector,
Academic Foundation Publication.

WEBSITES
www.rbi.org.in/Home.aspx
www.sbi.co.in
www.icicibank.com
www.google.com
www.wikipedia.com

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