1

1. Retail Banking Industry Profile

Retail Banking Industry in India covers industry segments like housing loan, auto loan, personal loan, education loan, consumer durable loan, credit card, debit cards, bank assurance and the regular operation of the banks. The major players(including Public, Private, and Foreign sector) in the Indian Banking Industry includes Bank of Baroda, State Bank of India, Canara Bank, Punjab National Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Citibank, Standard Chartered Bank, HSBC Bank, ABN AMRO Bank, American Express, etc. During 2006-07, gross credit extended by Indian commercial banks grew by 34.83% to touch INR 19,495 billion. Retail credit constitutes about 25% of the total credit and has grown by 28.0% to INR 4,218.3billion The annual growth in bank credit to the commercial sector is at 25.4% as on March 31, 2007 and was lower than 27.2% against previous year. Until 2010, retail banking is expected to grow at a CAGR of 28% to touch a figure of INR9, 700 billion. India's retail-banking assets are expected to grow at the rate of 18% a year over the next four years (2006-2010). Housing loan accounts for major chunk of retail loan.

Pension fund industry in India grew at a CAGR of 122.44% from 1999-00 to 200708.

In terms of ownership, debit cards are more in number than credit cards but in terms of transactions, use of credit cards is more prevalent than debit cards.

The ATM outlets in India increased at a rate of 28.09% from March 2007 to March 2008.

Outstanding Education loan segment is expected to grow at 36.41% till March 2009 from March 2007 onwards to cross Rs. 27000 Crore Mark.
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Two-wheeler finance industry is projected to forge ahead at a CAGR of 14.21% till 2009-10 from 2005-06.

Indian Mutual Fund industry witnessed a growth of 49.88% from May 2007 to May 2008, and a higher 215.61% growth was recorded in closed ended schemes.

Increasing number of millionaires in India is increasing the scope of Wealth Management Services.

Bankable households in India are estimated to move up at a CAGR of 28.10% during 2007-2011.

India's retail-banking assets are expected to grow at the rate of 18% a year over the next four years (2006-2010). Housing loan account for major chunk of retail loan.

2. Housing Finance sector in India

Industry Classification
Life cycle position
Housing finance as a financial service is relatively young in India. The growth in housing and housing finance activities in recent years reflect the buoyant state of the housing finance market in India. The real estate sector is the second largest employment generator in the country. In 1970, the state set up the Housing and Urban Development Corporation (HUDCO) to finance housing and urban infrastructure activities, in 1977, the Housing Development Finance Corporation (HDFC) was the first housing finance company in the private sector to be set up in India. Currently there are 29 HFCs approved for refinance assistance from NHB. The following types of home loans are generally available in the market: Home Equity Loans: A form of finance to the customer by way of mortgage of existing property to the financier for taking a loan for some other purpose. The current market value of the property is the basis for providing home equity loans. Home Extension Loans: The purpose of this loan is the extension of existing houses tike the addition of rooms, toilet facilities etc. Such loans fall under the category of home loans. Home Improvement Loans: These loans are provided mainly for repairs and maintenance of existing houses- These could include internal and external repairing, waterproofing and roofing, complete interior renovation, tiling and flooring etc. Home Purchase Loans: Finance provided for the purchase of ready-made houses. Land Purchase Loans: These loans are being provided for the purchase of land for the purpose of construction of residential houses.Private housing finance sector is also doing very well in catering the need for housing finance. Dewan Housing Finance Corporation Ltd. is one of the best options in private housing finance sector. Having 22 branches all over the country and dealing in the market for more then 15 years, the group is well established in the market. Rural housing finance is one of the best schemes in India offered by Dewan

Housing. With most competitive interest rates in private sector housing finance market, and personalized finance is made available to informal sectors besides formal sector like service class. HUDCO is a powerful government organization. Financing state government for infrastructural development is the main aim. But ever since it has entered individual housing finance sector, the entire scenario has changed. The main war of interest rates has actually begun when HUDCO has started giving housing finance for 11.5 % and after deductions the interest rates comes to 8.81%. After NHB, many housing finance companies looked at HUDCO for refinancing their proposals. Hometrust Ltd., a company by Gujarat Ambuja Group, Global Housing finance Ltd., a syndicate of reputed builders, Weizmann Homes Ltd., a company from Weizmann Finance Ltd., Maharishi Housing Finance Corporation Ltd., a company from Maharishi Group, are also catering to housing finance sector. SBI Home finance Ltd., a subsidiary of SBI, PNB Housing Finance Ltd., a subsidiary of PNB is also doing very good business. SBI Home Finance Ltd. is doing little bit slow for the time being but PNB Housing Finance Ltd. has recently opened its new branch near Shoppers Stop, Andheri. BOB Housing Finance Ltd., a subsidiary of Bank of Baroda also having very attractive housing finance schemes. Can Fin Homes, very aggressive subsidiary of Canara Bank in Southern India, is also doing very good job in Western parts of the country. Nationalized banks are coming in a very big way into housing finance market. SBI, an oldest financial institution and bankers for majority of Indians have entered with interest rates of 12.24 %. PNB has crossed Rs. 50 crore alone in Mumbai region for housing finance in very short period of time. LIC housing finance Ltd., is one of the largest and oldest housing finance institute, is offering one of the best services in the industry. Having its branches all over India, it offers variety of loans like housing finance for new purchases, re-constructions, renovations, NRI

housing finance etc. GIC Housing Finance Ltd., a company from the house of General Insurance Company is also having very strong clientele in recent years. A silent company, but very vibrant in its performance, is also gearing for new land marks in the industry. Last but not the least, HDFC, one of the best housing finance company in the country is all set to take on the challenges of housing finance sector. With reduced interest rates, the company is having its name as synonymous as, housing finance. Gruh Finance, a subsidiary of HDFC is also giving very good business in Gujarat.
Table2. 1

Interest Rates for various loan amount

Bank name

Interest Type

upto 5 lakh

5-20 lakh

20-30 lakh

30-50 lakh

50-75 lakh

>75 lakh

Action

83 Sample Results based on default inputs.

Allahabad Bank Axis Bank Axis Bank Bank of Baroda Fixed Floating Fixed 12.25 8.75 14 12.25 8.75 14 12.25 8.75 14 12.25 9.25 14 12.75 NA NA 12.75 NA NA

Floating

9.75

9.75

9.75

Bank of India Star Home Loan Floating Bank of Maharashtra

Floating

9.25

9.25

9.25

10.25

11

11

Floating

9.25

9.25

9.25

9.75

9.75

9.75

Bank of MaharashtraFestive offer

Floating

8.25

8.25

8.25

Bank of Rajasthan Bank of Rajasthan Canara Bank Canara Bank HDFC HDFC

Fixed

Floating Fixed Floating Floating Fixed

7.5 11.5 9.25 8.75 14.25 9.0 14.0 8.75 16 11

7.5 11.5 9.25 8.75 14.25 9.0 14.0 8.75 16 11

7.5 11.5 9.25 8.75 14.25 9.0 14.0 8.75 16 11

8 11.75 10 9 14.25 9.0 14.0 9 16 11

8 11.75 10 9.25 14.25 9.0 14.0 9.5 16 11

8 11.75 10 9.25 14.25 9.0 14.0 9.5 16 11

HSBC Bank ICICI Bank ICICI Bank IDBI Bank IDBI Bank Special Scheme IDBI Home Finance IDBI Home Finance Indian Bank Indian Overseas Bank J & K Bank Kotak Bank LIC Fix-oFloaty LIC Housing Finance

Floating Floating Fixed Fixed

Floating

8.25

8.25

8.25

8.25

8.25

8.25

Floating

8.25

8.25

8.25

8.25

8.25

8.25

Fixed Floating

13.75 9.75

13.75 9.75

NA 10

NA 10.5

NA 10.5

NA 10.5

Floating Floating Floating

8.75 11.5 8.5

8.75 11.5 8.5

8.75 12.25 8.5

10.25 12.25 8.5

NA 12.25 8.5

NA NA NA

Floating

8.9

8.9

8.9

8.9

8.9

8.9

Floating

9.75

9.75

9.75

9.75

9.75

9.75

Moneyline Credit Ltd

Floating

15

15

15

15

15

15

Oriental Bank of Commerce

Floating

9.25

9.25

9.5

10.25

10.25

10.25

Oriental Bank of Commerce

Fixed

10.25

10.25

10.5

NA

NA

NA

PNB Housing Finance Ltd

Floating

9.5

9.5

10

10

10

10

PNB Housing Finance Ltd Punjab & Sind Bank Punjab National Bank Punjab National Bank

Fixed

13

13

13

13

13

13

Floating

8.25

8.25

8.5

10

10

10

Fixed

10.5

10.5

10.75

10.75

10.75

10.75

Floating

9.25

9.25

9.75

9.75

9.75

9.75

Punjab National Bank- Festive offer (Fixed) Punjab National Bank- Festive offer (Floating) Reliance Home Finance SBBJ Advantage Home Loan SBBJ Advantage Home Loan

Fixed

8.5

8.5

8.5

8.5

8.5

8.5

Floating

8.5

8.5

8.5

8.5

NA

NA

Floating

8.25

8.25

8.25

8.25

8.25

8.25

Fixed

NA

NA

NA

NA

Floating

NA

NA

NA

NA

SBBJ Easy Home Loan

Fixed

NA

NA

SBBJ Easy Home Loan SBI

Floating Floating

8 9.75

8 9.75

8 9.75

8 10.25

NA 10.25

NA 10.5

SBI Advantage Home Loan SBI Advantage Home Loan SBI Easy Home Loan SBI Easy Home Loan South Indian Bank

Fixed

NA

NA

NA

NA

Floating

NA

NA

NA

NA

Fixed

NA

NA

Floating

NA

NA

Fixed

12.75

12.75

12.75

13.5

13.5

13.5

Few Housing Finance Companies & Banks of India

Housing Development Finance Corporation Limited (HDFC) Housing Development Finance Corporation Ltd (HDFC) is one of the leaders in the Indian housing finance market with almost 37% market share. Serves more than 26 lakh customers across the nation, HDFC also offers customized solutions that fit to the need of the customer. In the FY 2008, it registered a net profit of Rs. 2,282.54 crore. It also registered a net profit of Rs. 663.94 crore in the quarter ended September 30, 2009.

State Bank of India Home Finance (SBI) State Bank of India is another major player in the Indian housing finance market with almost 16% of the market share. The SBI Housing Loan schemes are specifically designed to meet the varied requirements of the customers. It offers home loan for various purposes including new house/flat, purchase of land,

10

renovation/alteration/extension of existing house/flat etc. SBI Home Finance registered a net profit of Rs. 24.63 crore in the year ended March 31, 2009.

LIC Housing Finance Limited LIC Housing Finance is another major player in housing finance sector in India with almost 13% of market share. Promoted by Life Insurance Corporation of India, LICHFL has an extensive distribution network with a strong brand presence. Recently, the company has been awarded Consumer Superbrand 2009/10 Status by Superbrands Council. In the last financial year (ended on March 31, 2009), LICHFL earned a net profit of Rs. 387.19 crore, comparing to Rs. 279.14 in the previous FY. It also registered a net profit of Rs. 171.25 crore in the quarter ended on September 30, 2009.

ICICI Home Finance Company Limited ICICI is a leading housing finance company in India with almost 6% market share. It offers various types of home loans for its customers which may have tenure up to 20 years. The home loan interest rate is connected to the ICICI Bank Floating Reference Rate (FRR/PLR). Here it can be added here that, the PLR has been reduced to 14.75% from its previous rate of 15.25% since June 4, 2009. As on January 23, 2009, ICICI HFC has 1416 branches with an asset of Rs. 3,74,410 crore. As on December 31, 2008, the company has a net worth of Rs. 50,035 crore.

Dewan Housing Finance Corporation Limited (DHFL) Dewan Housing Finance Corporation Limited is one of the largest housing finance solution providers in India with an extensive network of 74 branches, 78 service centers and 35 camps spread across the nation. The company registered a net profit of Rs. 8,631.83 lacs in 2008-09, comparing to a net profit of Rs. 8,257.74 lacs in the

11

previous financial year. In the quarter ended on September 30, 2009, DHFL earned a profit (after tax) of Rs. 3,751.09 lacs.

12

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3. The Housing Finance System in India

The following chart shows the financial institutes, banks and other specific institutes involved in financing the people for the houses.

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Figure 3. 1

The following institutes are providing different Home Loan product to the different class of the people in the society and conduct the activity of financing and refinancing in the sector. 1. Scheduled Commercial Banks

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2. Housing Finance Companies 3. Scheduled Cooperative Banks (Scheduled State Co-operative Banks, Scheduled District Cooperative Banks and Scheduled Urban Cooperative Banks) 4. Agriculture and Rural Development Banks
5. State Level Apex Co-operative Housing Finance Societies

Scheduled Commercial Banks The SCBs have the largest network of branches and are also the largest mobilizer of savings in the country. Since housing finance becomes a part of the 40 per cent Priority Sector lending, it makes business sense for banks to undertake this activity. Moreover, a favorable tax and regulatory regime, act as catalyst for doing business in this sector. Further, the earmarking of 3 per cent of incremental deposits of SCBs to finance housing activities has ensured availability of adequate funds for housing activities. Security by way of mortgage of property and robust demand has been major considerations for banks to lend to this sector. Housing Finance Companies To boost the housing sector there is a need to regulate and have a greater access of credit for housing. Thus a good housing finance system is imperative. Housing Finance Companies (HFC) need to be recognized as a part of total financial system and should be given a level playing field. Amidst liberalization certain provisions of the Companys Act 1956, such as, restrictions on interoperate loans and deposits continue to discriminate Housing Finance Companies against other non-banking financial companies. Also certain tax laws, such as deduction of tax at sources, restrictions on acceptance of cash as deposits are disadvantages to HFC. The Reserve Bank of India has put housing finance on priority core sector lending. In the developed countries, the flow of housing finance a substantial share of total financial

16

system. In fact, the savings for housing is among the single largest source of funds in their entire financial system. Schedule Cooperative Banks The concept of Co-operatives as an institutional mechanism for satisfying various needs of the people is premised on the principles of self-help as well as collectiveeffort. Scheduled State Co-operative Banks, Scheduled District Cooperative Banks and Scheduled Urban Cooperative Banks come under heading of the Schedule Cooperative Banks. Housing cooperatives have a prominent place in the cooperative movement in the country. Today, it is estimated that there are over 92,000 primary housing cooperatives with over 6.5 million members. The co-operative sector has played an important role in providing housing to its members and has made a significant impact across the country. The cooperative sector is expected to play a lead role, particularly in land acquisition, allotment of land and housing sites to encourage group housing and development of amenities in their projects, as envisaged in the National Housing and Habitat Policy. The National Co-operative Housing Federation (NCHF) was established as an apex organization for coordinating, guiding and promoting cooperative housing activities in the country. Agriculture and Rural Development Banks Keeping in view the housing shortage in rural areas, a few state governments, after suitable legislative amendments, have permitted the Agriculture and Rural Development Banks (ARDBs) to lend for housing. As the ARDBs do not fall under the category of either SCBs or specialized housing finance institutions, NHB formulated a scheme to subscribe to special rural housing debentures floated by ARDBs, backed by the mortgages originated by them, in order to extend financial assistance to this category of institutions.

17

State Level Apex Co-operative Housing Finance Societies Apex Co-operative Housing Finance Societies (ACHFS) at the state level are affiliated to The National Co-operative Housing Federation (NCHF) of India, which looks after their growth strategies, policy formulations and evolving housing programmes besides interfacing with various institutions to channel finances for these Societies for onward lending to the ultimate borrowers. In addition, NCHF also helps the ACHFS in improving their financial, organizational and technical capabilities. The primary housing co-operatives functioning at the grass root level are supported by 25 ACHFS all over the country with a membership of over 6.5 million. These ACHFS represent about 92,000 housing co-operatives all over the country out of which, about 31,000 housing co-operatives are affiliated to state level ACHFS for getting financial assistance.

18

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4. Issues with the Housing Finance sector in India

Aggressive approach may lead to defaults Growing competition coupled with reduction in risk weights on housing loans has led the lending institutions to adopt aggressive practices including very high loan has led the lending institutions to adopt aggressive practices including very high loan to value loans, softening of collateral requirements, competitive pricing etc. with such an aggressive approach being followed may lead to increase in the default rates. Cost of funds The prevailing interest rate war has resulted in constant downward revision of interest rates. Further, the spreads are increasingly becoming thin as the lending rates are fast nearing the cost of funds. While during 1993-94, the interest rate on housing loans were in the range of 17-18% the same right now are in the range of 7%-8.5%. This may lead to erosion of profitability in the long run. Security Deficit due to norms Many primary lending institutions are making terms and conditions of sanction flexible and liberal, thus enabling the borrowers to avail the loans even more than value of security for long tenure of 20 to 25 years. The large quantum of institutional finance in the property transactions may lead to the problem of security deficit. Due diligence Issues

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Increasingly, there have been instances of dilution in due diligence on the part of lenders. Sometimes, loans are sanctioned without strictly complying with laid down rules, systems and procedures. This situation arises primarily out of fierce competitive pressures. It is observed that the growing customer expectations force the Prime Lending Institutes to compromise due to diligence, field verification process and appraisal norms, in a rush to sanction the loan at the earliest. Lack of Uniformity of norms amongst industry players While banks and HFCs are the prominent players, HFCs face few constraints. The regulatory norms stipulate 10% capital adequacy for banks whereas the same is 12% for HFCs. Further, banks have access to lower cost retail funds compared to HFCs. Uniformity in norms and hence a level playing field has to be ensured for a healthy housing finance system. These are newer challenges which need to be addressed and resolved in times to come. Industry Fragmentation The fragmented nature of the housing finance industry is a major impediment for its further growth. Despite this, the industry has managed to grow mainly due to consistent decline in interest rates, tax incentives given by the government and changing income profile of the Indian middle class population. Conflicting Interests While the private housing finance institutions are required to abide by the guidelines of the NHB, the general financial institutions, which include the commercial banks, follow the guidelines set by the RBI. Today, both these sections are competing with each other for the same housing pie but their functioning and lending practices seem to bear no similarity. ALM

21

Asset liability mismatch is one of the biggest risks housing finance institutions are confronted with. Funding of long term loans with short term deposits, leads to a mismatch between assets and liabilities that can be overcome by adopting appropriate asset liability management (ALM) techniques.

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Future Outlook
The onset of year 2010 has brought in some good news for those who are dreaming of a 'home' with home loan rates as well as property rates spiraling downwards. The considerable reduction in rates is already beginning to affect deposit rates and will soon lead to a fresh round of rate cuts for both deposits and loans. In fact home seekers are likely to see single digit interest rates for regular 20 year home loans (not just for those below Rs. 20 lacs) in this quarter from at least the PSU banks. Recently announced stimulus package by the Government entails consumers seeking home loans between Rs. 5 lacs+upto Rs. 20 lacs a fixed interest rate (for 5 years) of 9.25% and nil processing and pre-payment fees and free life insurance to boot. However it cannot solve the issue of lack of risk appetite in the banks. Clearly, the banks want to play safe. On the other hand consumers The significant reduction in interest rates is likely to result in some increase in demand for such properties. Notwithstanding some corrections, property prices in popular areas continue to be unaffordable and we are unlikely to see new demand emerging till the prices reach some kind of equilibrium. So the number of consumers who will take advantage of this package is unlikely to be very high. Only if the property rates drop by between 20-25% in the middle and high-end home segments, one can expect a spurt in the business. In the meanwhile RBI can make the home loan seeker better equipped by issuing the licenses to Credit Bureaus so that the consumer's right to his own credit report can be activated. This will have a significantly positive effect on credit sensitivity in the country and bring home to the consumer the benefits of paying their bills on time as well as the cost of not paying them on time. Also make the necessary operational changes in Section 138 of the Negotiable instruments act to ensure so that people realize the seriousness of issuing cheques and the impact of dishonoring them. Finally, activate the Mortgage guarantee scheme so that the effective down payment can be brought down in a home purchase.This

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will raise the customer's confidence level and this is the need of the hour! Clearly all things going right we should see a spurt in business in the last quarter of the year which is also traditionally a large demand quarter. Also await a further reduction in property prices before they will act on the property purchase decision.

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5. Research Proposal
Objectives

Macro Objective To imbibe a broad knowledge regarding Housing Finance Sector.

Micro Objective
1.

To study the preference and satisfaction level of the customers regarding To study the Home Loan process in ICICI Housing Finance.

Housing Finance providers.

2.

Scope
We have taken the Housing Finance as the product of Retail Banking sector. This project has helped to know the macro factors affecting the Housing Finance sector in India. When it comes to micro factors, customer satisfaction, preference and behavioral aspects regarding the Housing Finance are the out puts of the live research. The study of the Home Loan Process at ICICI Housing Finance has helped us to get practical exposure of operation hierarchy of Home Loan Process.

Research Methodology
Data Source:Primary data: Information collected though the survey of consumers of the bank Secondary data:

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Industry portals, company websites, magazines, newspapers, trade journals, other financial data provided by the bank required for the study.

Research Approach:We have used the Survey Research to collect the primary data, as it is best suited for descriptive research.

Research Instrument:We have used the questionnaire as our research instrument. In which close-ended and openended questions have help to understand consumer preference and behavior more clearly.

Sampling Plan:Sample Unit Sampling Size Sampling Method : : : One Home Loan Taker consumers Simple Random Sampling

Contact Method:Out of the four method of primary data collection namely mail questionnaire, telephone interview, personal interview and online interview; we will be using personal interview and telephone interview , so that we can ask more questions.

Limitations

As it is the questionnaire survey, there are chances of bias answers. We have taken simple random sampling because population survey is not possible.

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Sampling plan is limited to Ahmedabad region only. Limited time period to conduct the project Limited information was available from company side.

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6. Guidelines for the Sanctioning Process

Here are the basic guidelines which every loan provider has to accept and follow before sanctioning any loan in India. Basic qualifications for a home loan (Resident Indian)

(I) A resident Indian is eligible for a home loan if he satisfies the following conditions:
1. He must be earning a regular monthly income. 2. If he is from the salaried class, then he should a minimum of 5 years of service left. 3. Above 21 years of age at the commencement of the loan 4. Below 65 when the loan matures 5. If he is a business person or a professional or a self employed individual, then his age should be less than 58 years at the time of applying for the loan. 6. The property that he wishes to purchase/construct should have a clear and marketable title.

(II) Documents required to be submitted at the time of application

There are certain sets of documents that need to be submitted at the time of application. The documents sets will vary according to individual status- either resident or non-resident in India, as also the type of loan that an individual may want to avail of.

Resident Indian
(a)

Salaried Individual

Salary slip/Form 16A

29

A photocopy of the first and last pages of ration card or copy of PAN /telephone/ electricity bills. A photocopy of Investments (FD certificates, Shares, any fixed asset, etc) or any other documents supporting the financial background of the borrower A photocopy of LIC policies with the latest premium payment receipts (if any) Photographs (as applicable) A photocopy of bank statement for the last six months.

(b) Self employed or businessman

A brief introduction of business/profession Balance sheet, profit & loss account and statement of income with Income Tax returns for the last 3 years certified by the Chartered Accountant A photocopy of advance tax payments (if applicable) A photocopy of registration certificate of establishment under shops and establishments Act/factories Act A photocopy of registration certificate for deduction of profession tax (if Applicable) Bank statements of current and saving accounts for the last six months A photocopy of certificate of practice (if applicable) A photocopy of any bank loan (if applicable) A photocopy of the first and last pages of the Ration card or a copy of PAN/telephone/electricity bills A photocopy of investments (FD certificates, shares, any other fixed assets)

(c)

If flat is purchased from builder

Original copy of your agreement with the builder 7/12 extract of your agreement with the builder Copy of N.A. permission for the land from the collector Search and title report (with the details of the documents) for the last 30 years Development agreement between the owner of land and the builder
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Copy of the order under the urban land ceiling Act Copy of building plans sanctioned by the competent authority Commencement certificate granted by the corporation / Nagar Palika Building completion certificate (if available) The latest receipts of taxes paid Partnership deed or memorandum of association of the builder firm

(d) If the property is being purchased in a co-operative society

Original share certificate of the society Allotment letter from the society in your name Copy of the lease deed, if executed Certificate of the registration of the society Copy of the bye-laws of the society No objection certificate from the society 7/12 extract or property register card in the societys name Copy of N.A permission for the land from the collector Search and title report (with the details of documents) for the last 30 years Copy of order under the urban land ceiling Act Copy of the building plans sanctioned by the competent authority Commencement certificate granted by the corporation / Nagar Palika The latest receipts of tax paid Original Agreement to assign/ Deed of assignment

(e) If constructing on own land

Original sale deed of land and extract of index 2 7/12 extract or property register card in your name Copy of N.A permission for land from the collector Search and title report (with the details of documents) for the last 30 years Copt of order under urban land ceiling Act Copy of the building plans sanctioned by the competent authority
31

Building permission granted by corporation / Nagar Palika The latest receipts of taxes paid Estimate of cost of construction certified by the architect

Non-residents
(a) Income Documents

Employment contract (if the contract is in any language other than English, the same has to be translated into English and arrested by the employer/Indian Embassy) Certified copy of the latest salary slips of the past 6 months Identity card issued from the current employer Continuous discharge certificate, if applicable Latest work permit Visa stamped on passport NRE bank account passbook sheets Overseas bank account statements for the past 6 months Bio-data covering educational qualifications, age job experience, nature of profession/ business with necessary proof Power of attorney in favour of local representative in India, if required Guarantor forms along with net worth proof / income proof. Number of guarantors as per the norms of the company. The guarantors should be related to the applicant(s)

(b) Property documents: purchase of a flat from the builder/promoter

Title deeds of the builder/land owner for a period of at least 13 years Development agreement between the builder and land owner if applicable Power of attorney executed in favour of the builder, if applicable Non-encumbrance certificate for the past 13 years The khata certificate (basic document indicating ownership of property as entered in the register of the government authorities)
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Up-to-date tax paid receipts of the property A sanctioned plan and Licence An agreement for sale and a construction agreement with the borrower

(c) In case of purchase of house from second owner

Title deeds of land owner for a period of at least 13 years Non-encumbrance certificate for the past 13 years Khata certificate Up to date tax paid receipts of the property Sanctioned plan and license Agreement for sale in favour of the applicant(s) Valuation report from the qualified valuers

(d) Incase of repairs/ renovation/ extension of house/ flat

Title deeds of land owner for a period of at least 13 years Non-encumbrance certificate for the past 13 years Khata certificate Up to date of tax paid receipts of the property Sanctioned plan and license for the extension Agreement for sale in favour of the applicant(s) Estimates of costs from the qualified engineer

(e) Personal Documents

1 passport size photograph 1 copy of your passport/ PAN card/ Driving License/ school leaving certificate/ birth certificate/ LIC policy/ bankers sign verification

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1 copy of last months telephone bill / ration card (first and last page) / title deed property / rental agreement / driving license

(III) Loan amount eligibility

The maximum amount that a resident Indian can borrow from housing finance companies is 75% - 85% of the project cost. Subject to this condition, the borrowers repayment capacity takes into consideration factors such as income, age, qualifications, number of dependants, spouses income, assets, liabilities, stability and continuity of occupation and saving history. Loans beyond the above mentioned limits can be considered by the housing finance companies depending on the merits of the case.

(IV) Documents required to be submitted after sanction

Apart from the various documents to be submitted at the time of application of loan, there are further documents to be given to the housing finance company once the loan is sanctioned.

Tri-partite agreement between the borrower, builder and housing finance company Proof of investment of margin money Loan papers by the applicants Guarantee agreements with sureties Post dated Cheques Original documents executed with the builder or previous owner No objection certificate from the builder to mortgage the property in favour of the housing finance company No objection certificate from other housing finance companies if the builder has availed a project loan No objection certificate from the co-operative housing society Share certificate of housing society

34

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8. Home Loan: The Process

From applying for a home loan to getting it involves various stages. These are:

Step 1: Application form Step 2: Personal Discussion Step 3: Bank's Field Investigation Step 4: Credit appraisal by the bank and loan sanction Step 5: Offer Letter Step 6: Submission of legal documents & legal check Step 7: Technical / Valuation check Step 8: Valuation Step 9: Registration of property documents Step 10: Signing of agreements and submitting post-dated cheques

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Step 11: Disbursement

1. Applying for a loan

Filling up the application form is the first step. The look of an application form may differ from bank to bank, but nearly 80 per cent of the information they need is similar. Most of this is basically personal and professional information, details of applicants financial assets and liabilities and the details of the property (if finalized) including the estimated cost and the means of financing the same. Documents to submit: While submitting the application form, every bank asks for several documents. And most banks these days provide doorstep service, so that applicant doesn't have to spend time visiting their office to submit the documents. However, some banks still insist on the customer visiting their offices at least once. Proof of income: This will need to be backed up by proof such as copies of last three years Income Tax returns (along with copies of Computation of Income/Annual accounts, if any), Form 16/Form 16A, last three months salary slips, copies of the last 6 months statements of all applicants active bank accounts in which applicants salary/business income details are reflected, etc. Other documents that applicant need to provide with application form include age proof, address proof and identification proof. Applicant may also be asked to give applicants employment details. Age proof: Copy of school leaving certificate/Driving license/Passport/ration card/PAN card/Election Commission's card/etc. Address proof:

38

Similar documents need to be provided to prove that applicant is actually staying at his/her current address.

Identification proof: Same as above, but with photograph. Sometimes, the same document if it contains a photograph, the current residential address and the correct age can be the proof for all 3 things. Employment details: If applicants company is not well-known, then a short summary about the nature of the company, its business lines, its main customers, its competitors, number of offices, number of employees, turnover, profit, etc may be needed. Usually, the company profile that is available on the standard website of the company is enough. Financial check: All the income-related documents submitted by applicant serve a specific purpose. The lending institution uses them to study financial status. The bank statements are scrutinized for:

Level of activity in the case of self-employed persons, this gives a very good clue about the extent of business activities. Average bank balance a cursory glance at the average bank balances maintained in a savings bank account speaks volumes about the spending/saving habits of any individual.

Cheque returns a small charge debited by bank in the statement indicates that a cheque issued by applicant was returned by applicants bank. Many such cheque returns can have a negative impact on applicants loan sanction.

39

Cheque bounces if cheques deposited by applicant are returned by the issuer's bank, they will be visible in applicants bank statement and again, banks have specific norms as to how many such returns are acceptable in a period of one year.

Regular periodic payments the existence of periodic payments to other finance companies/banks etc. indicate an existing liability and applicant will need to provide full details to the lender.

Applicants investments also come under the scanner. This helps the bank to estimate applicants ability to pay the down payment as well as applicants savings habit.

Processing Fee: Along with the application form and the credit documents, banks ask for a processing fee. This fee varies from bank to bank, but is usually around 0.25% to 0.50% of the total loan amount. The agent dealing with applicant earns a commission from the bank, which to some extent is also affected by the amount of fees paid. Most banks have flexible fee structures, and it is advisable that applicant negotiate hard to find out the bank's minimum possible fees though it is unlikely that a bank will agree to provide a loan without any upfront fee at all. Some banks have zero upfront fee loans, but that advantage may be negated as their other charges such as legal charges and 'stamp duty is normally higher. This fee is collected to maintain applicants loan account, and includes work like sending Income Tax certificates every year, maintaining post-dated cheques, etc.

2. Personal discussion
After applicant has formally and successfully completed the application process, all applicants have to do is wait till the home finance institution evaluates applicants papers. The wait normally lasts only a day or two or sometimes even less. However, some banks

40

insist on meeting applicant after receiving the application form, and before the loan sanction. This is to gather more details about applicant that may not be mentioned in the application form and to reassure them of applicants repayment capacity.

3. Field Investigation
Thousands of people apply for loans everyday. And however eager a bank is to complete its targets, every loan is a risk. So, it is only natural that it confirms or validates the details applicant provides. The bank checks all applicants information including applicants existing residential address, applicants place of employment, employer credentials (if applicant work for a small organization), residence and work telephone numbers. Representatives are sent to applicants workplace or residence to verify the details. Even the references applicant has provided in the application form are checked out. While this may sound irritating and an invasion of his/her privacy, banks are forced to undertake validation in the absence of any credit bureau. Once applicants credentials are validated, it helps establish trust between applicant and the bank.

4. Credit appraisal and loan sanction

This is the make-or-break stage. If the bank is not convinced about applicants credentials, applicants application may get rejected. If it is satisfied, it sanctions applicants loan. The bank or the home financier establishes applicants repayment capacity based on applicants income, age, qualifications, experience, employer, nature of business (if self employed), etc, and based on these, works out applicants maximum loan eligibility, and the final loan amount is communicated to applicant. The bank then issues a sanction letter. This letter may either be an unconditional letter, or may have certain terms and conditions mentioned, which applicant have to fulfill before the loan disbursal.

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5. Offer letter

Once the loan is sanctioned, the banks sends applicant an offer letter mentioning the following details:

o o o o o o o o

Loan amount Rate of Interest Whether fixed or variable rate of interest linked to a reference rate Tenure of the loan Mode of repayment If the loan is under some special scheme, then the details of the scheme General terms and conditions of the loan Special conditions, if any

Acceptance copy If applicant agree with what is mentioned in the offer letter from the bank, applicant will have to sign a duplicate letter of the same for the bank's records. Earlier, banks used to charge administrative fees along with the offer letter. However, with rising competition, administrative fees have virtually disappeared from the home loan market.

6. The legal angle: Property and papers

Now, the focus of the banks activities shifts from applicant to the property applicant intends to buy. Once applicant select his/her property, need to hand over the entire set of original documents pertaining to applicants property to the bank so that it can keep them as security for the loan amount given to applicant.

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The title documents of applicants seller, which prove the seller\'s title including the chain of title documents if he is not the first owner. NOCs from the legal owners such as cooperative housing societies, statutory development authorities, the lessor of the land in the case of leasehold land, etc. NOCs are not required where the property is situated on freehold land and the entire land is being transferred along with the structure. These documents remain in the bank's custody until the loan is fully repaid.
Legal check

Every bank conducts a legal check on applicants documents to validate their authenticity. Even the draft sale documents that applicant will be entering into with seller will be scrutinised. The documents are sent to a lawyer in their panel (either in-house or outsourced) for a thorough scrutiny. The lawyer's report either gives a go-ahead if documents are clear, or it may ask for a further set of documents. In the latter case, applicant is expected to hand over the additional documents to the bank for a clear title.

7. Technical / Valuation check

Banks are extremely careful about the property they plan to finance. They send an expert to visit the premises applicant intend to purchase. This expert could either be a bank employee or he could belong to a firm of architects or civil engineers. Site visit: The site visits to applicants property are conducted to verify the following:

In case of under construction property: Stage of construction is the same as that mentioned in the payment notice given to applicant by the builder. o Quality of construction

43

o Satisfactory progress of work. o Layout of flats and area of property is within permissions granted by the governing authority. o The builder has the requisite certificates to start construction at the site. o Valuation of the property in relation to other deals in the surrounding areas.

In case of ready/resale construction o External / internal maintenance of the property. o The age of the building. o Will the building last the loan tenure? This has a direct bearing on applicants loan eligibility, since the loan tenure will be restricted to the maximum age of the property as decided by the bank's engineer and this will impact applicants loan eligibility. o Quality of construction. o Surrounding area (development). o Whether the builder has received the requisite certificates for handing over possession of the flat. o There is no existing lien or mortgage on the property. o Valuation of the property in relation to other deals in the surrounding areas. o These inspections are carried out to protect consumer interests in terms of construction quality, adherence to local laws, approved building plans, etc. A technical inspection also lets the bank understand the progress of construction so as to release the staggered disbursements.

8. Valuation: Reality check

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Since housing loans are cheaper than other loans, there have been cases where individuals have shown purchase of properties from related entities at inflated prices to obtain cheap loans. Since the risk associated with diversion of funds is higher than if the loan was used for genuine purposes, banks carry out an independent valuation to find out whether the transaction is in line with the existing market price of the area. Valuation of real estate as a profession is still in its infancy in India and is still nonstandardised. In many cases, the valuer determines the value of the property at an amount that is lower than the documented cost of the property and this would result in the loan amount being lower, since the bank funds a certain percentage of the cost or valuation of the property, whichever is lower.

This practice has led to severe consumer issues in an increasing number of cases, as the valuation is normally done only after the consumer takes a sanction (by paying a fee) and after identifying and committing to buy the property. The valuation issue rarely arises when a property is purchased through a reputed builder directly or if the property is pre approved. In both the cases, the banks would have already completed the valuation and therefore, applicant can safely assume that there is no difference between the documented cost of the property and the bank's valuation amount.

9. Registration: Sealing the deal

After the legal and technical / valuation check, the draft documents as cleared by the lawyer need to be finalized and signed and the stamping and registration of the documents need to

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be done. Also, if any NOCs are pending, these need to be obtained in the format approved by the bank's lawyer.

10. Signing the home loan agreement: In black & white

All borrowers need to sign the home loan agreement. Applicant also needs to submit postdated cheques for the first 36 months (if that is the agreed mode of repayment). The original property documents have to be handed over to the bank at this stage. Some banks also create a document recording the handing over of the property documents to them as security for the due repayment of the home loan. This document is also called a memorandum of entry and attracts significant stamp duty depending on the amount of the loan in some states. The stamp duty payable on such a memorandum is naturally recovered from applicant. Not all banks create this memorandum and hence the stamp duty may or may not be payable, depending on the practice of the specific bank. However, even where no such memorandum of entry is created, the state government concerned may, in the future, demand a stamp duty on the loan transaction, which naturally is recoverable from applicant as per the home loan agreement signed by applicant.

11. Disbursement
After the bank has ensured that the property is legally and technically clear, all the original documents pertaining to transfer of ownership of property in applicants favor have been submitted and all the necessary loan agreements have been executed. Applicant will now actually receive the cheque in his/her hand. Before the big moment arrives, applicant need to submit documents to prove that applicant has paid his/her personal contribution towards the property, since banks normally finance only up to 85-90 % of the total cost of the house.

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In case applicant is expecting money from other sources to fund his/her own contribution, need to provide sufficient evidence for the same. It is only after submitting this proof that the bank will release part-disbursement of the loan. The cheque will be in the name of the reseller (for resale flats), builder, society or the development authority. It is only in exceptional circumstances, that is, if applicant provides documents to support that he/she has made an excess payment from his/her own account then, the cheque will be handed over to applicant directly by the bank. Disbursement in stages Usually, loans are disbursed on the basis of the stage of construction of the property. So, in case of resale or ready possession properties, the disbursement is full and final. However, in case of under-construction properties, the payment is made in parts, also known as partdisbursement. Each option would have different disbursement processes. 1. Part disbursement: When a loan is partly disbursed, the bank does not start EMIs immediately, since it is calculated on the total loan amount at a particular rate of interest and for a given tenure. Moreover, it normally does not start breaking up the installments into its principal and interest components until the entire loan amount is disbursed. To overcome this difficulty, banks charge simple interest on the partly disbursed loan amount. For instance, if applicant have a sanctioned loan of Rs10 lakh, but the property is under construction and the bank has disbursed only Rs4 lakh, applicant will be charged a simple interest only on the disbursed amount. This process continues until the final disbursement takes place. The simple interest paid is called Pre-EMI interest or PEMI. At this stage, banks may take only around three to six post-dated cheques on account of PEMI. 2. Full and final disbursement: If it is a ready-possession property, the bank disburses the entire loan amount in favor of either the reseller or the builder.

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Post Disbursement Relationship

The final disbursement does not end applicants relationship with the bank. In fact, it is just the beginning. And there are various issues / situations that arise in between the beginning of the relationship and its end. These include: o Payment Receipt o Repayment o Income tax certificate o Prepayment o Loan preclosure/satisfaction Payment receipt: Once the bank hands over the pay order to applicant, applicant in turn are expected to hand it over to the reseller or the builder. Applicant should get a receipt from them for the payment and hand it back to the bank, as it will become part of applicants mortgage documentation.

Share certificates: In case applicants property is part of a society, applicant will need to get the flat transferred to applicants name by asking the society to issue the share certificate in applicants name and recording the transfer of ownership in their books. This normally happens at the first AGM/EGM after the sale transaction. This transferred share certificate also happens to be a part of the mortgage documentation and has, therefore, to be handed over to the bank after the transfer takes place.

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Repayment: The loan is generally repaid by equated monthly installments, using post-dated cheques. Banks usually ask for 12, 24 or 36 PDCs, after which applicant need to repeat the process until applicant have repaid the loan. Some banks may also insist on a cheque for an amount equivalent to the loan outstanding at the end of PDC period to ensure timely replenishment of PDCs for the next 12, 24 or 36 months as the case may be. In case applicants installments are to be deducted against applicants salary, applicant needs a letter from applicants employer accepting this arrangement and directly remitting the amount to the bank every month. This is possible only if applicants organisation has an arrangement with the bank for all employees. Some banks allow applicant to give standing instructions to the bank where applicant have applicants savings/current account to deduct money each month crediting applicants home loan account. Another possible mode of payment is by cash or demand draft (not all banks offer this). Applicant can deposit the EMI every month at the bank's office.

Income Tax certificate: Every bank issues an income tax certificate that serves as requisite proof to let applicant avail of tax benefits that accrue on repayment of a home loan. This will typically contain the total amount of interest and capital repaid during the year. This is mandatory to claim the tax benefit in respect of self-occupied property. Applicant will have to file this with applicants tax returns and submit this to applicants employer or chartered accountant to calculate applicants tax liability.

Prepayment

49

Applicant can prepay a loan either in part or in full at any given point of time. Applicant can also prepay it even when it is only partly disbursed. However, most banks have an upper limit on the number of times a person can prepay his loan in a year as well as on the minimum amount applicant can prepay each time. Until recently, banks charged a penalty for part or full prepayment. But increased competition has forced most banks to allow partial prepayment at nil charge. Most banks levy a prepayment charge if applicant make full repayment and ask for release of applicants property documents.

Loan pre-closure- satisfaction Applicant also has the option of completely repaying the loan at any time. Of course, each bank has its conditions for preclosure. Also, the loan will get completely paid off on the expiry of the tenure of the loan if applicant has paid all installments on time. Once applicant has completely repaid his/her loan, ensure that the entire set of original property documents is handed back to applicant. Applicant should also ask the bank for a No-Objection Certificate saying the account has been cleared. As an option, the bank may issue a consent letter stating that the property is now free from mortgage. If applicant has guarantors, the bank will issue a separate letter for each of the guarantors stating that their liability has come to an end. Only after applicant receive these documents can applicant say that the property is now completely free of mortgage. At this stage, in some cases, applicant may discover that the original documents have yet not been received by the bank from the registrar. In such cases, applicant will need to follow up with the registrar and get the documents from them directly by showing them a copy of the bank's clearance certificate. Sometimes (and we must stress only sometimes) the bank may misplace applicants original property documents leading to avoidable stress. In fact, the bank may claim that these

50

documents were never given to them at all. Hence the importance of insisting on a proper receipt of title documents while handing them over to the bank. Remember that receipt will come in very useful when the loan is fully paid off. Also, it is extremely useful when applicant want to shift applicants loan to a new lender.

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52

9. Home Loan in ICICI Housing Finance

Products in ICICI Housing Finance

ICICI Bank Home loans provide not just the most competitive interest rates & best level of service, but also products designed to cater to the specific needs of consumer. Home Loans are provided to individuals to own a residential property Land Loans Land loans give an opportunity for individual customer to purchase a residential plot of land to do self- construction. Thus, customer can invest now in a plot of land & build in future. The Land loan can be financed only within municipal limits of HUB locations or in case of direct allotment outside municipal limits by DA. Land Loan can be availed by Resident Indian whether Salaried or Self-Employed and also by Non- Resident Indian. Home Improvement Loans

Home Improvement Loan is offered to facilitate improvement of a self-owned dwelling unit to existing or new customer. HIL considers a range of facilities internal or external to the structure without increase in the living pace. Thus, a customer can add or improve facilities to his dwelling unit with a loan at Home Equity Loan rate of interest. Home Improvement Loan can be availed by Resident Indian whether salaried or Self-Employed. Office Premises Loans

Office Premises Loan can be used for purchase, construction, extension & also for

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improvement (at the time of acquisition of office premises. It creates an opportunity to extend loans to self-employed individuals to house their profession or business giving a permanent address for generating steady flow of income. The product can also include the estimate of renovation at the time of purchase of the property. This loan is especially meant for self-employed professionals like Doctors, Architects etc. Home Loans can be availed by Resident Indian who is Self-Employed and also by NonResident Indian who are Salaried. EMI under Construction EMI under Construction is offered for structuring a home loan to enable individuals to commence his EMI in a partly disbursed under construction project. Commencement of EMI ensures re-payment towards principal amount leading to savings in interest and faster repayment of the loan. The EMI paid is as per the sanctioned loan amount and remains constant during the tenure of the loan. The tenure of the loan keeps moving up with additional amount being disbursed. EMI under Construction can be availed by Resident Indian whether Salaried or SelfEmployed and also by Non- Resident Indian. Balance Transfer Balance Transfer is a facility offering the customer a choice to transfer the outstanding balance of the loan availed for better terms & conditions. Balance Transfer helps to move from higher rate of interest to lower rate of interest or increase in loan component as Top up. BT is possible only from loans taken from HFCs approved by NHB for refinance, Banks or employer Loans taken from Central or State Government. Balance Transfer can be availed by Resident Indian whether salaried or Self-Employed MoneySaver

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Money Saver account is a home loan account with transaction facility. The account holder can deposit & withdraw to the extent of balance maintained. On the commencement of EMI the interest will be calculated on the outstanding debit balance. Thus, the home loan account holder maintaining large balance in the Money Saver account can save on the interest paid by faster repayment. This means one can pay less & repay loan faster. This product can be offered only in case of first and final disbursement Part disbursement cases cannot be offered this product. MoneySaver would be available at Floating Rates only & Fixed EMI per lac per month would be applicable. IT certificate in the case of MoneySaver is not issued. Money Saver can be availed by Resident Indian whether salaried or Self-Employed Top Up Loan Top Up Loan can be availed time and again for various personal requirement based on value of the property. It offers the customer additional funds against the security of the same property. To avail Top Up loan, the vintage of at least six months is required for the loan availed. The basic eligibility emerges with good repayment track record. The end use letter is essential to be collected. The End use of Top Up Loans can be

Furnishing of home Consumer durable Childs education Daughters marriage Family holiday Vehicle

Any other personal requirement of the borrower provided it is not speculative or illegal in nature. This product is applicable to fully disbursed cases with no post- disbursement document pending. This product is priced more than base home loan rates but lower than
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any personal loan rates. Top Up Loan can be availed by Resident Indian whether Salaried or Self-Employed. Loan on Phone Loan On Phone is a pre-sanctioned loan. Its is based on the existing relationship of the customer with ICICI Bank. The biggest advantage is that the customer can get the loan with minimum documentation. Good banking transactions and repayment records becomes a strength for availing loans in future. Loan on Phone can be availed by Resident Indian whether salaried or Self-Employed Home Equity Loan Loan against property gives the owner of residential or commercial premises to leverage on the value of the property. It offers the ability to unlock funds gives the advantage of looking at the asset as a source of security bringing liquidity and retaining ownership. In case of HEL the property should be self occupied by one of income considered applicants. The security of the property ensures competitive rate of interest. The interest component of the EMI paid by SEP / SENP can be booked as expenses in their P & L Home Equity Loans are provided for many personal requirements of the customer viz.

Marriage Child Education Business Purchase of Property (Where mortgage is not possible) Improvement of Property Medical Treatment

Home Equity Loans can be availed by Resident Indian who is Self-Employed and also by Non- Resident Indian who are Salaried.

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Property Overdraft The overdraft facility from ICICI Bank Home Loans allows you to borrow money against your self-occupied property. The overdraft facility comes with a multi-city cheque book and phone banking facility. The customer is charged interest only for the amount that he withdraws from the account. Whenever he deposits funds into the account, they go towards reducing the outstanding balance in the account.

It offers the following benefits:

Generating capital against property (R) or ( C) for business or personal use Convenience of Pre - Sanctioned limit and draw as you need Pay interest on the amount drawn and for days utilized Convenience of depositing & withdrawing like any Current Account Benefit of Cheque Book & Phone banking Fast Processing and door-step service Multi-city cheque book and phone banking facility

Property Overdraft can be availed by Resident Indian who is Self-Employed Lease Rental Discounting Lease Rental Discounting helps to raise funds against the future expected rentals of self owned commercial property. The property should be occupied by the Lessee. Similar to Home Equity Loans, LRD can be provided for any personal requirements of the customer viz.

Marriage Child Education Business

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Purchase of Property (Where mortgage is not possible) Improvement of Property Medical Treatment

Lease Rental Discounting can be availed by Resident Indian whether salaried or SelfEmployed

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Eligibility Norms for Home Loans

Home Loans can be availed by Resident Indian whether salaried or Self-Employed and also by Non- Resident Indian who are Salaried. For resident Indians the following are the eligibility norms

One must be at least 21 years of age when the loan is sanctioned. The loan must terminate before or when one turns 65 years of age or before retirement, whichever is earlier. One must be employed or self-employed with a regular source of income

Factors affecting Home Loan Amount

ICICI Housing Finance provides home loan suited as per clients needs. The home loan amount depends on clients repayment capability and is restricted to a maximum of 85% of the cost of the property or the cost of construction as applicable. 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 clients can enhance their eligibility If clients spouse is earning, put him/her as a co-applicant. The additional income shall be included to enhance loan amount. Incidentally, if there are any co-owners they must necessarily be co-applicants.

Fiance's income can also be considered for sanctioning the loan on combined income. The disbursement of the loan, however, will be done only after the proof of marriage is submission.

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Providing additional security like bonds, fixed deposits and LIC policies may also help to enhance eligibility.

While there is no need for a guarantor, it could be that having one might enhance credibility. If so, loan officer would provide clients with the necessary details. 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 loan. Also, when the company looks at the total cost, registration charges, transfer charges and stamp duty costs are included.

Home Loan Interest Rates for Resident Indians

With varied offering of house loans and home finance, ICICI Housing Finance gives an opportunity to select the perfect home loan as per needs of clients. Clients are availed with

Adjustable Rate Home Loan Fixed Rate Home Loan Combination of the above two

Step Up Repayment Facility (SURF) SURF is a variant to enhance the eligibility of a young professionally qualified home loan customer with out increasing monthly outflow as EMI. The structuring considers a notional percentage increase in income & offers options of graded increase in EMI over the tenure of the loan contracted. The tenure is divided in three parts

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Primary being lowest EMI Secondary Tertiary being highest EMI

The following are the features of SURF

Higher eligibility of loan amount with lower EMI Graded increase in EMI considering future increase in Income Suited for young professionals.

SURF can be availed by Resident Indian whether Salaried or Self-Employed Professionals. Flexible Installment Plan (FLIP) FLIP is a variant for structuring enhanced eligibility of home loan applicants with varying tenure of income source. This repayment facility is given when income is going to reduce after certain time during the loan tenure due to one of the borrowers retiring before loan maturity. The EMI payable becomes affordable based on individual income source and also matching the family cash flow. This variant is offered typically to family members joining as applicants like husband & wife or father & son with varying tenure of service Period / Age norm. FLIP has the following features

FLIP considers income of two applicants and offers step down repayment facility One of the applicants should have service period till the end of the tenure of the loan FLIP would have two different EMIs during the tenure of the loan Normally the first EMI would be based on the combined income The second EMI would be smaller & based on the lower income with longer tenure of the applicant

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FLIP can be availed by Resident Indian whether salaried or Self-Employed and also by Non- Resident Indian who is Salaried. Part Fixed, Part Floating A product that offers the dual benefit of fixed rate loans as well as floating rate loans. With this product, a customer can book part of his loan under a fixed rate plan and the other part under a floating rate plan. Thus, he can minimize the impact of any adverse changes in the interest rate regimes and at the same time, avail of any benefits that may come by way of favorable changes. Part Fixed, Part Floating can be availed by Resident Indian whether salaried or SelfEmployed and also by Non- Resident Indian who is Salaried. SmartFix Home Loans 3 years fixed and floating rate thereafter. A product that offers the safety of fixed rates plus the advantages of floating rates. The Smart Fix enables the customer to lock at fixed rate of interest today with the contract to move to a floating rate on a subsequent date. For the first 3 years you get a fixed interest rate. From the fourth year, your loan gets switched to the prevailing floating interest rate. Thus, a customer gets an opportunity to observe the interest rate movement over a period of time and expects to benefit in the bargain Smart Fix can be availed by Resident Indian whether salaried or Self-Employed. The interest rate on ICICI Bank Home Loans is linked to the ICICI Bank Floating Reference Rate (FRR)/PLR. As per earlier communication, FRR/PLR was increased by 0.75 % on June 30th 2008. Subsequent to this change, as per recent announcement, the FRR/PLR has been further increased by 0.75% effective from July 31st 2008. The FRR has gone up from 13.50% to 14.25% & PLR has gone up from 15.50% to 16.25%. For all the Adjustable Rate Home Loan customers, both the above changes will be effective from July 31st 2008.

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Insurance Plans for your Home Loan

Introducing exclusive Home Insurance plans, that can provide cover to your Home loan in the face of any unforeseen event happening to your life. In case of any of these happenings, your family will have the support of the insurance cover to pay for the outstanding Home loan, without being burdened by the loan EMI's. ICICI Housing Finance presents HomeSafePlus& HomeAssure/HealthAssure two exclusive and innovative insurance plans to insure your Home Loan. HomeSafePlus Insurance cover for HomeSafePlus provided by ICICI Lombard General Insurance Company. Key Benefits of HomeSafePlus

No medical checkup Comprehensive insurance plan for individual, home and its contents Single premium long-term insurance plan Premium paid for the Critical Illness cover is eligible for tax benefits u/s 80D of the Income Tax Act Sum Insured remains constant throughout the policy period (loan O/S amount to come to bank, rest goes to individual) Multiple applicants can be covered under the same loan Simple application form

HomeAssure/HealthAssure Insurance cover for HomeAssure/HealthAssure provided by ICICI Prudential Life Insurance Company.

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Key Benefits of HomeAssure/HealthAssure

Life Cover from HomeAssure for the entire home loan tenure Critical Illness cover from life threatening illnesses like cancer, coronary artery bypass, heart attack, kidney failure, stroke, major organ transplant Special non-medical limits only for ICICI Bank Home Loans customers Dual benefit to customers, Life Cover from HomeAssure and Critical Illness Cover from HealthAssure Dual tax benefits, Section 80C benefits under HomeAssure, Section 80D benefits under HealthAssure Simplified claim procedure

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Home Assure Premium Chart: Premium as a % of the Loan amount

Table 8. 1

Age/Term 18-30 31-35 36-40 41-45 46-50 51-55 56-60

2 0.381 0.421 0.547 0.752 1.163 1.82 2.709

3 0.484 0.545 0.719 1.002 1.567 2.465 3.692

4 0.589 0.673 0.899 1.269 2.002 3.153 4.76

5 0.695 0.805 1.086 1.554 2.468 3.882 5.92

6 0.802 0.944 1.283 1.861 2.969 4.66 7.18

7 0.91 1.088 1.49 2.188 3.504 5.489 8.541

8 1.023 1.239 1.708 2.538 4.074 6.375 10.004

9 1.136 1.396 1.939 2.913 4.681 7.326 11.585

10 1.254 1.559 2.185 3.313 5.324 8.346 13.302

11 1.364 1.715 2.424 3.701 5.941 9.341 14.996

Age/Term 18-30 31-35 36-40 41-45 46-50 51-55 56-60

12 1.488 1.89 2.694 4.146 6.646 10.49 16.988

13 1.614 2.072 2.983 4.617 7.392 11.715 19.158

14 1.746 2.264 3.289 5.114 8.182 13.022 21.517

15 1.882 2.465 3.612 5.638 9.021 14.422 NA

16 2.022 2.677 3.955 6.189 9.912 15.926 NA

17 2.167 2.99 4.318 6.768 10.857 17.545 NA

18 2.319 3.135 4.701 7.378 11.855 19.285 NA

19 2.476 3.384 5.104 8.019 12.911 21.156 NA

20 2.641 3.646 5.527 8.694 14.034 NA NA

21 2.813 3.922 5.969 9.409 15.228 NA NA

Age/Term 18-30 31-35 36-40 41-45

22 2.994 4.213 6.433 10.159

23 3.184 4.513 6.917 10.949

24 3.383 4.839 7.426 11.78

25 3.592 5.174 7.959 12.654

26 3.812 5.524 8.518 13.578

27 4.042 5.888 9.105 14.556

28 4.284 6.269 9.718 15.589

29 4.536 6.666 10.359 16.68

30 4.798 7.081 11.032 NA

65

46-50

16.50 1

17.85 6 19.298

NA

NA

NA

NA

NA

NA

Home Loan Process at ICICI Housing Finance

First of all individual who is interested in taking Home Loan, is provided with all information regarding different products of ICICI Housing Finance. He/She is given information regarding general norms of availing the facility of Home Loan. If client is interested and eligible for getting Home Loan, He/She is asked to submit all the required documents.

File of all necessary documents of client is getting sourced by the Back-Office people and Client ID is given to the file of client.

If any document is remaining to be submitted then, query is conveyed to the client. Client is asked to submit the remaining documents so that the file can be moved ahead.

66

Team of

officials

called

Risk Containing Unit

(RCU)

properly verifies the documents given by the client and if there is any query, it is communicated to the Back Office people.

Property for which Loan is taken is properly identified by the Professional Evaluation Team of the ICICI Housing Finance. There are two types of property evaluation conducted by the Professional Evaluation Team mentioned below.. 1) Technical Evaluation- Eg: Layout plan, Building premises etc. 2) Resale (Legal) Evaluation- Eg: Legality of documents of previous owner, legality of property etc.

Afterwards credibility of client is verified by Credit Processing Agency (CPA). On the bases of credibility of client amount of loan is decided and sanction letter is prepared which is signed by the authorized officer. This sanction letter should be having the signature of the managers at the different hierarchy based on the amount of the loan. Up to Rs. 10 LakhBranch Credit Manager Rs. 10 Lakh to Rs. 40 Lakh- Area Credit Manager Rs. 40 Lakh to Rs. 60 Lakh- Regional Business Head More than Rs. 60 LakhZonal Business Head

67

The next step is moving of file to the Operation Department where the Disbursement Process is conducted. Client has to pay the amount, which is the difference between the property value and the amount of Loan sanction by the ICICI, to the builder of the property. Thus now property becomes ready for the disbursement from the ICICI side.

Client has to submit all necessary disbursement documents. The 230 A Clearance of the seller and / or 37I clearance from the appropriate income tax authorities (if applicable) is also needed. Followings are the 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)

68

In case of property is owned by a company Memorandum of Entry Form 8 NOC

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.

69

Case from ICICI Housing Finance

Table 8.2

Name of Main Applicant Name of Co-Applicant Age Gender Number of Family members Number of Earning Family members Occupation Income Residential Status Type of facility Facility Amount Sanction Term of Facility Type of Interest ICICI Home PLR Adjusted Interest Rate Number of EMIs Amount of EMI

Jitendra Hirabhai Rathod 34 Years Male 4 1 Business man (Mantra Ceramics Pvt. Ltd.) Rs. 4,58,900/- p.a. Ordinary Resident Residential Indian Home Loan Rs. 17,71,000/17 Years Floating Interest Rate 15.75% as on date 15.75%-5.75%* = 10.00% 204 Rs. 18,086/-

70

Processing/Administration Charges Rs. 8,855/(already included in EMI) Service Tax and Education Cess (already included in EMI) Security Fees on Part Payment Rs. 912.06/As may be specified by ICICI Housing Finance from time to time as its sole discretion 0% on Amount Prepaid** 2% on Amount Prepaid and on all Amounts tendered by the borrower towards Prepayment of the Loan during the last one year from the date of Final Prepayment HomeAssure/HealthAssure Rs. 71,000/-

Fees on Full and Final Prepayment

Insurance Type Amount of Insurance

Margin Amount which is being deducted from PLR for Loan up to Rs. 20 Lakh as

per norms of ICICI Housing Finance. Eg: If current PLR of ICICI Housing Finance is 16.00% then Adjustable Interest Rate would be (16.00% - 5.75%) = 10.25%.

**

In the case of Part Prepayment Client does not require to pay any Prepayment

Charges when he/she makes the payment of all EMIs up to the last 12 EMIs. Minimum 12 EMIs must remain to avoid the Prepayment Charges.

71

72

9. Analysis of the Information

Housing Survey
1. Purpose of taking Home Loan

There are many different products which are provided by the Banks and Housing Finance Companies in India. The reason for asking this question is to know the degree of preference towards Home Loan products by the people.
Table 9. 1

First Purchase in ready construction Under construction property Purchase in re-sale Self construction - extension of existing living space Land loans Home Improvement Loan

54 40 15 7 2 7

73

Figure 9.1 1

Purpose of taking Home Loans

First Purchase in ready construction Under construction property

6% 2% 6% 12% 42%

Purchase in re-sale

32%

Self construction extension of existing liv space ing Land loans

Home Improv ement Loan

From the above graph we can see that maximum number of people prefer the Home Loan for First Purchase in ready construction and under construction property. Out of which the preference for the First Purchase in ready construction is comparatively higher, that is 42%. This data shows that individuals are more attracted towards the purchase of house after they properly see and feel the house. 32% people have chosen the Home Loan for Under Construction Property, majority of them have approached Home Loan provider through builders tie-up. We can see that only 2% out of the sample of 200 have chosen Land Loans. These individuals are having income more than Rs. 5 Lakh. One of the major reasons for this is they get no tax benefit on principal and interest of this loan.
2. Type of Home Loan Providers

There are many Housing Finance Companies and Banks which provide home Loan products. The purpose of asking this question is to know the preferred source, of home loan provider, by the people.

74

Table 9. 2

Housing Finance Companies Banks

Figure 9. 1

41 84

Type of Home Loan providers

HFC 33% HFC Banks Banks 67%

We can see that popularity of Banks in Home Loan sector is more than the Housing Finance Companies. Banks capture 67% of our sample and 33% of people go for Housing Finance companies. The reason for this is, Banks are providing many products and people are already taking other services from Banks so Banks are easily acceptable by the people.

2. Housing Finance Companies

This question helps to know the preference of the people towards the Housing Finance Companies.

75

Table 9. 3

Gruh Finance LIC housing Finance DHFL Any other

Figure 9. 2

14 19 5 3

Housing Finance Companies

Any other DHFL 7% 12%

Gruh Finance 34%

Gruh Finance LIC housing Finance DHFL Any other

LIC housing Finance 47%

From the graph we can see that out of 41 people who have taken home loan from the HFC, 47 % have chosen LIC Housing Finance which is highest amongst the group. One reason for this can be the lower interest rate of LIC and brand name of LIC. Gruh Finance is also having the second largest portion of 34 %. In any other category 3 people have specified PNB Housing Finance Ltd and Bank of Baroda Housing Finance as home loan provider. 4. Banks

76

This question helps to know the preference of the people towards the Bank as home loan provider.
Table 9. 4

S.B.I. I.C.I.C.I. H.D.F.C. Any other

Figure 9.3

31 19 26 8

Banks

Any other 10%

S.B.I. 36%

S.B.I. I.C.I.C.I. H.D.F.C. Any other

H.D.F.C. 31% I.C.I.C.I. 23%

From the graph we can see that out of 84 people who have taken home loan from the Banks, 36% have chosen SBI. which is highest amongst the group Out of 31 individuals who have chosen SBI, most of respondents are Government employees and business man. From this we can say that popularity of SBI. is more in Private sector employees and Businessman. 31% people have who have gone for HDFC includes 10 Private employees out of which 4 are the employees of the same organization. Out of 19 individuals of ICICI 9 individuals are

77

Professionals. Any other category includes banks like ADC, Axis, Dena Bank , Bank of Baroda and Punjab National Bank and ABN AMRO 5. Amount of loan Although the loan amount depends on the income proofs, property price and persons ability to repay the loan amount, this question helps to analyze the number of people falling in to different ranges of loan amount.
Table 9. 5

Less than 5 Lakh 5 Lakh to 10 Lakh 10 Lakh to 15 Lakh 15 Lakh to 25 Lakh More than 25 Lakh
Figure 9. 4

15 50 49 6 5

Amount of Home Loan

5%

4%

12%

Less than 5 Lakh 5 Lakh to 10 Lakh 10 Lakh to 15 Lakh

39%

40%

15 Lakh to 25 Lakh More than 25 Lakh

From the graph we can see that majority of people prefers to take a loan of second and third range which is 5 Lakh to 10 Lakh and 10 Lakh to 15 Lakh respectively. These individuals are having the income range of 2.5 Lakh to 5 Lakh and few falls in the income range of

78

more than 5 Lakh. Through this analysis we can say that middle class people are more likely to go for home loans. Two individuals out of three who have taken the loan of more than 25 Lakh is for the Land Loan. 7 Females out of 11 females have taken the Home Loan for the amount which is less than 5 Lakh. So that we can see that Females are more likely to take Home Loan of less amount. 6. Time duration of Home loan There are many options available to home loan takers for deciding their time duration of paying the Loan and amount of EMIs. This question gives an in-sight regarding the time duration preferred by the people for Home Loan.
Table 9. 6

1 year to 5 years
5 years to 10 years 10 years to 15 years 15 years or more
figure 9.5

14 36 48 27

Time Duration of Home Loan

15 years or more 22%

1 year to 5 years 11% 5 years to 10 years 29%

1 year to 5 years 5 years to 10 years 10 years to 15 years 15 years or more

10 years to 15 years 38%

From the above graph we can see that 38% of people prefer the time duration of 10 years to 15 years to pay home loan. One of the main reasons for longer duration to repay the loan is

79

lower EMIs. As number of years increase the amount of EMIs decreases and this is more convenient to the middle class people. All the individuals of the category 1 year to 5 years have taken the loan of the amount less than 5 Lakh. The entire individuals who have taken the loan of more than 15 Lakh and few from the range of 10 Lakh to 15 Lakh falls in the time duration of more than 15 years. 7. Type of interest rate There are two type of interest rate available to the Home Loan takers. This question gives an insight towards the choice of interest rate by the people.
Table 9.7

Fixed Rate Floating Rate

Figure 9.6

45 80

Type of Int. Rates

Fixed Rate 36% Floating Rate 64%

Fixed Rate Floating Rate

From the above graph, we can conclude that 64% of people go for floating rate of interest. Floating rate gives flexibility and protection to the home loan takers as it varies according to
80

the market condition and economy of the country. The data shows that number of people are less who are going for fixed rate of interest. Mostly people believe that if they take the loan at high fixed interest rate and future interest rates will decrease then they will have to bear unnecessary interest burden. 8. Range of Fixed interest rate Interest rate is the important factor affecting the amount of EMIs. In this situation this question helps to know the people who are paying the fix rate of interest falling in the different ranges shown below.
Table 9.8

5% to 7% 7% to 9% 9% to 11% 11% to 13% 13% or more

0 0 3 17 25

Figure 9.7

Range of Fixed Int. Rate

0%

7% 5% to 7% 7% to 9% 9% to 11% 11% to 13% 13% or more

55%

38%

81

The above mentioned data indicates that out of 45 people of this category, 55% pay fixed rate of interest which is more than 13%. Currently Interest rates for Home Loan is low in all Banks and HFCs. Because of non flexibility of fixed rates they are paying high interest rate and this is the major reason for the dissatisfaction of all 16 individuals who are discussed in QUE.10 (III)

1. Range of Floating interest rate

2. The characteristic of floating rate is that it changes from time to time. This information gives the clear picture of the shift of Home Loan rates from one range to another.
Table 9.9

5% to 7% 7% to 9% 9% to 11% 11% to 13% 13% or more Dont know exactly

At the time of Disbursement 0 0 5 31 44 -

Currently
0 42 24 4 0 10

82

Figure 9.8

Range of Floating Int rate (At the time of Disbursement)

0% 6%

5% to 7% 7% to 9% 9% to 11% 39% 11% to 13% 13% or more Dont know exactly

55%

Figure 9. 9

Range of Floating Int. Rate(Currently)

0% 5%

13%

0%

5% to 7% 7% to 9% 9% to 11% 52% 11% to 13% 13% or more Dont know exactly

30%

83

Recession in the Indian economy and different steps taken by the RBI for the recovery of the same is having the positive impact on the floating rates of interest in Home Loan. We can see that 5 people were falling in the range of 9% to 11% of interest rate at the time of disbursement, but currently there are 24 individuals falling in this range of floating interest rate. At the same time we can not ignore that number of individuals falling in the interest rate range of more than 13% is the highest at the time of disbursement with 55% which is now 0%. There are 10 individuals who dont know their current floating rate of interest. This situation can be because of lack of attention paid towards the timely notice letter sent by the Home Loan Company. In SBI highest people have selected floating rate of interest, while in HDFC 19 individuals have selected floating interest rate

84

10. Rating for the banks procedure from 1 to 5. (Where 5 stands for the best) This question helps to understand the satisfaction level of Home Loan takers on the following shown indicators.
Table 9.10

Ease of Documentation 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied

Figure 9. 10

6 17 55 38 9

Ease of Documentation
60 50 numbers 40 30 20 10 0 scale 2-Disatidsfied, 17 1-Highly Dissatisfied, 6 4-Satisfied, 38 Series1 5-Highly Satisfied, 9 3-Average, 55

From the findings we can see that 55 individuals out of people have given average rating and 38 individuals have given satisfactory rating. Most of the people who have given the rating of 4 and 5, which indicate satisfaction and high satisfaction, have taken the Home Loan from private sector. Out of 17 individual who were dissatisfied include 6 Home Loan

85

taker of SBI Housing Finance, 4 Home Loan takers of Gruh Finance and rest 4 were of LIC Housing Finance.

Table 9. 11

Time Duration for Loan Sanctioning 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied
Figure -9. 11

0 14 50 47 14

Time Duration for Loan Sanctioning

60 50 40 30 20 10 0
fie d is sa tis

50

47 14 Series1

Numbers

14 0
3Av er ag e d fie d 2D is at id sf ie at is fie S d

1H ig hl

scale

From the findings we can see that 50 individuals out of people have given average rating and 47 individuals have given satisfactory rating. People who were highly satisfied are

86

5H ig hl y

4Sa tis

mostly the client of SBI Housing Finance and HDFC. From this information we can say that private sector is taking less time for sanctioning of Home Loan

Table 9. 12

Interest Rate Charges 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied

8 28 53 30 6

Figure 9. 12

Interest Rate Charges

60 50 Numbers 40 30 20 10 0 1-Highly Dissatisfied 2-Disatidsfied 3-Average scale 4-Satisfied 5-Highly Satisfied 8 6 28 30 53

53 individuals out of

have given average rating to Interest rate charges. All those

individuals who are highly dissatisfied and majority of those who are dissatisfied are fixed interest rate payers. Dissatisfaction towards fixed rate of interest is because of liberal rates offered to the individuals who have opted for floating rate of interest for Home Loan.
87

Table 9. 13

Processing Fees 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied

Figure 9. 13

1 25 67 28 4

Processing Fees
80 70 60 50 40 30 20 10 0 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied 1 4 25 28 67

Processing Fees are almost similar in most of the Home Loan providers. 67 individuals have given average rating to Processing Fees. One of the reasons for this can be, when it comes to the charges or fees, people are not satisfied as they are less willing to pay such charges.

88

Table 9. 14

Charges for late payment 1-Highly Dissatsfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied
Figure 9. 14

9 16 43 45 12

Charges for late payment

50 45 40 35 30 25 20 15 10 5 0 43 45

Numbers

16

12

2-Disatidsfied

3-Av erage Scale

4-Satisfied

5-Highly Satisfied

43 people have responded for this question. Here one assumption can be made that 32 individuals, who are dissatisfied,would have had bad experiences with there Home Loan providers.

89

1. Willingness for prepayment of the Home loan

Table 9. 15

Yes No
Figure 9. 15

13 112

Willingness for Prepayment of Home Loan

Yes , 13

Yes No

No, 112

13 people are willing for the prepayment of the Home Loan in which 9 individuals are fixed interest rate payers. This is the open ended question and people have given the reasons like

90

Fixed rate of interest is high on their Home Loan and they are more likely to go for prepayment charges rather than paying high fix rate of interest.

Availability of sufficient fund.

12. Home loan with Insurance cover Generally there are two types of Home Loan Insurance Covers, one is Life Insurance and another is General Insurance. Premium of this insurance is sometimes included in the EMIs paid by the Loan taker or sometimes paid separately, as per the choice of client. Insurance cover is decided on the bases of the amount of Home loan, age of the person, property price and tenure of the loan. Insurance cover cannot be more than the amount of Home Loan. Premium paying term is the tenure of the Loan and if property is under construction then, construction period is also added in that.
Table 9. 16

Yes No

14 111

91

Figure 9. 16

Home Loan with insurance Cover

Yes, 14

Yes No

No, 111

92

As it is not compulsory and it highly depends on the preference of the Home Loan taker to either take the insurance or not, majority of people from the sample of have not taken insurance with their Home Loan. One of the reasons for this can be increased burden of premium as person is already paying EMI and individuals are not much ready to bear extra payments.

14. Willingness of transfer of home loan

People have responded for these questions for the transfer of Home Loan from one provider to another provider. This question is helpful to know the factors affecting the satisfaction level of the loan takers.
Table 9. 17

Yes No

17 108

Figure 9. 17

Willingness of Transfer of Home Loan

Yes , 17

Yes No No, 108

93

17 people are willing to transfer there loan. All these people are the clients of private Home Loan providers namely Gruh Finance, HDFC, ICICI. For this, people have given reasons like high interest rate charged by them. Out of 17 individuals 8 have committed that they want to shift to S.B.I. because of its 8% interest rate scheme. 15. Sources of approaching home loan provider

Before going for the Home Loan, people try to get the details of different products and loan providers through different sources mentioned below. Generally they seek information like Rate of Interest, commitment towards services and ease of all processes.

Table 9. 18

Personal Analyses Builders tie-up Friends suggestion From Advertisement If any other

12 20 60 15 18

94

Figure 9. 18

Sources of approaching Hom Loan Provider e

14% 12%

10% 16%

Personal Analyses Builders tie-up Friends suggestion From Adv ertisement If any other

48%

From the data we can see that word of mouth is the best source people think, to get the information as 48 % people have taken suggestion from their friends and relatives for Home Loan. Any other category includes reasons like Either that person or his/her spouse/family members working in that organization Satisfied with the banking services, so have chosen the same for Home Loan. Few were the clients of different other loans of that organization in the past and their satisfaction level has led them towards the home loan of the same organization.

95

Personal Detail

1. Gender of Home Loan taker

Table 9. 19

Male Female

114 11

Figure 9. 19

Gender of Home Loan Takers

Female 9%

Male Female Male 91%

From the above graph we can see that 91 % of the respondents are Male and only 9 % respondents are Female. This data includes the names of people who have taken the Loan on their own names. Major decisions regarding huge amount of financial products are generally taken by the Male.
96

2. Education of Home Loan taker

Table 9. 20

Post Graduates Graduates Under Graduates

49 68 8

Figure 9. 20

Education of Home Loan Takers

Under Graduates 6%

Post Graduates 39%

Post Graduates Graduates Under Graduates

Graduates 55%

From the Home Loan takers 55 % Individuals are Graduates, 39 % Individuals are Post Graduates and 6% are under Graduates. So from this data we can conclude that maximum number of people going for Home Loan are Graduates.

97

3. Occupation of Home Loan Taker

Table 9. 21

Private Employee Government Employee Businessman/Businesswoman Professional

39 14 46 26

Figure 9. 21

Professional 21%

Private Employee 31% Government Employee 11%

Private Employee Government Employee Businessman/Businessw oman Professional

Businessman/B usinesswoman 37%

From the above graph we can see that 31 % of people are private employees and 37 % of people are businessman/woman. So from this data we can conclude that maximum number of people going for Home Loan are private employees and businessman/woman.

98

4. Income of Home Loan Takers

Table 9. 22

Less than 1.5 Lakh 1.5 Lakh to 2.5 Lakh 2.5 Lakh to 3.5 Lakh 3.5 Lakh to 5 Lakh More than 5 Lakh
Figure 9. 22

2 22 59 27 15

Income of Home Loan Takers

12% 22%

2%

18%

Less than 1.5 Lakh 1.5 Lakh to 2.5 Lakh 2.5 Lakh to 3.5 Lakh 3.5 Lakh to 5 Lakh More than 5 Lakh

46%

From the above graph we can see that people going for home loan, out of that 46 % are from the income range of 2.5 Lakh to 3.5 Lakh. This people come unders the middleclass income level of the society. People having income less than 1.5 Lakh and more than 5 Lakh covers the smallest part of this chart.

99

100

CHI Square Test.

Purpose:
The purpose of this of this test is to analyze that whether the amount of loan is dependent on income of a respondent or not. So we will assume two hypotheses related to this analysis. Ho: There is significant relation between income of a respondent and amount of Home loan H1: There is no significant relation between income of a respondent and amount of Home loan

ICICI
Table 10.1

Loan Amt I Up to ncome( in Lakh) 5 Lakh Up to 1.5 1.5 to 2.5 2.5 to 3.5 0 0 1 0 3.5 to 5 More than 5 Total 0 1

5 to 10 Lakh

10 to 15 Lakh

15 to 25 Lakh

More than 25

Total

0 2 8 2 1

0 2 2

0 0 0 0

0 0 0 0

0 4 11 3

0 12

0 5

1 1

0 0

1 19

101

Expected Frequencies\ Table 10.2

0 0.21 0.57 0.15 0.052

0 2.52 6.94 1.9 0.63

0 1.052 2.9 0.78 0.26 Calculations

0 0.21 0.57 0.15 0.052

0 0 0 0 0

Arranging Observed & Expected Frequencies As Follows:

Table 10.3

Fo 0 0 0 0 0 0

fe 0 0 0 0 0 0.21

fo-fe 0 0 0 0 0 -0.21
102

(fofe)2 0.000 0.000 0.000 0.000 0.000 0.044

(fofe)2/fe 0.000 0.000 0.000 0.000 0.000 0.210

2 2 0 0 1 8 2 0 0 0 2 1 0 0 0 0 0 1 0
2

2.52 1.052 0.21 0 0.57 6.94 2.9 0.57 0 0.15 1.9 0.78 0.15 0 0.052 0.63 0.26 0.052 0

-0.52 0.948 -0.21 0 0.43 1.06 -0.9 -0.57 0 -0.15 0.1 0.22 -0.15 0 -0.052 -0.63 -0.26 0.948 0

0.270 0.899 0.044 0.000 0.185 1.124 0.810 0.325 0.000 0.023 0.010 0.048 0.023 0.000 0.003 0.397 0.068 0.899 0.000

0.107 0.854 0.210 0.000 0.324 0.162 0.279 0.570 0.000 0.150 0.005 0.062 0.150 0.000 0.052 0.630 0.260 17.283 0.000 21.309

(O-E)2 E

= 21.309

The value of 21.309 = 2 Degree of freedom (D.F.) = (r-1) x (c-1) = 16

2

tab = (at 5 % confidence level)= 26.296

103

Here 2 cal < 2 tab.

Hence Ho is accepted Interpretation:

As figure shows the sample Chi Square the value of 21.309 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan

HDFC

104

Table 10.4

Loan Amt In Up to come( in Lakh) 5 Lakh Up to 1.5 1.5 to 2.5 2.5 to 3.5 0 1 6 0 3.5 to 5 More than 5 Total 0 7

5 to 10 Lakh

10 to 15 Lakh

15 to 25 Lakh

More than 25

Total

0 2 1 1

0 3 7 4

0 0 0 0

0 0 0 0

0 6 14 5

0 4

1 15

0 0

0 0

1 26

105

Expected Frequency
Table 10.5

0 1.61 3.76 1.34 0.26

0 0.92 2.15 0.76 0.15

0 3.46 8.07 2.88 0.57

0 0 0 0 0

0 0 0 0 0 Table 10.7

Arranging Observed & Expected Frequencies As Follows:

fo 0 0 0 0 0 1 2 3 0 0 6 1 7 0 0 0 1 4 0 0 0

Fe 0 0 0 0 0 1.61 0.92 3.46 0 0 3.76 2.15 8.07 0 0 1.34 0.76 2.88 0 0 0.26

fo-fe 0 0 0 0 0 -0.61 1.08 -0.46 0 0 2.24 -1.15 -1.07 0 0 -1.34 0.24 1.12 0 0 -0.26

(fofe)2 0.000 0.000 0.000 0.000 0.000 0.372 1.166 0.212 0.000 0.000 5.018 1.323 1.145 0.000 0.000 1.796 0.058 1.254 0.000 0.000 0.068

(fofe)2/fe 0.000 0.000 0.000 0.000 0.000 0.231 1.268 0.061 0.000 0.000 1.334 0.615 0.142 0.000 0.000 1.340 0.076 0.436 0.000 0.000 0.260

106

0 1 0 0

0.15 0.57 0 0

-0.15 0.43 0 0

0.023 0.185 0.000 0.000

0.150 0.324 0.000 0.000 6.237

(O-E)2

= 6.237

The value of 6.237 = 2 Degree of freedom (D.F.) = (r-1) x (c-1) = 16

2

tab = (at 5 % confidence level)= 26.296

2

The value of 6.237 =

2

tab. =26.293

Here 2 cal < 2 tab. Hence Ho is accepted

As figure shows the sample Chi Square the value of 6.237 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan

SBI

107

Table 10.8

Loan Amt In Up to come( in Lakh) 5 Lakh Up to 1.5 1.5 to 2.5 2.5 to 3.5 1 1 2 0 3.5 to 5 More than 5 Total 0 4 0

5 to 10 Lakh

10 to 15 Lakh

15 to 25 Lakh

More than 25

Total

0 4 4 4 3 5 3

0 0 0 0

0 0 0 1

1 8 11 8

0 12

0 11

2 2

1 2

3 31

108

Arranging Observed & Expected Frequencies As Follows:

Table 10.9

Fo 0 0 0 0 0 1 4 3 0 0 2 4 5 0 0 0 4 3 0 1 0 0 0 2

fe 0.12 0.38 0.35 0.064 0.064 1.03 3.09 2.83 0.51 0.51 1.41 4.25 3.9 0.7 0.7 1.03 3.09 2.83 0.51 0.51 0.38 1.16 1.06 0.19

fo-fe -0.12 -0.38 -0.35 -0.064 -0.064 -0.03 0.91 0.17 -0.51 -0.51 0.59 -0.25 1.1 -0.7 -0.7 -1.03 0.91 0.17 -0.51 0.49 -0.38 -1.16 -1.06 1.81
109

(fofe)2 0.014 0.144 0.123 0.004 0.004 0.001 0.828 0.029 0.260 0.260 0.348 0.063 1.210 0.490 0.490 1.061 0.828 0.029 0.260 0.240 0.144 1.346 1.124 3.276

(fo-fe)2/fe 0.120 0.380 0.350 0.064 0.000 0.001 0.268 0.010 0.510 0.000 0.247 0.015 0.310 0.700 0.000 1.030 0.268 0.010 0.510 0.000 0.380 1.160 1.060 17.243

0.19

0.81

0.656

0.000 24.636

= (O-E)2
E

= 24.636

The value of 24.636 = 2 Degree of freedom (D.F.) = (r-1) x (c-1) = 16

2

tab = (at 5 % confidence level)= 26.296

2

The value of 24.636 =

2

tab. =26.293

Here 2 cal < 2 tab.

Hence Ho is accepted
As figure shows the sample Chi Square the value of 24.636 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan

Table 10.10

Other Banks

110

Loan Amt Inc Up to ome( in Lakh) Up to 1.5 1.5 to 2.5 2.5 to 3.5 5 Lakh 0 0 1 0 3.5 to 5 More than 5 Total 0 1

5 to 10 Lakh

10 to 15 Lakh

15 to 25 Lakh

More than 25

Total

0 0 3 2

0 0 0 1

0 0 0 0

0 0 0 0

0 0 4 3

0 5

1 2

0 0

0 0

1 8

fo 0 0 0 0 0 0 0 0 0 0 1 3 0 0 0 0 2 1 0 0 0

fe 0 0 0 0 0 0 0 0 0 0 0.5 2.5 1 0 0 0.37 1.87 0.75 0 0 0.

Fo-fe 0 0 0 0 0 0 0 0 0 0 0.5 0.5 -1 0 0 -0.37 0.13 0.25 0 0 -0.

111

(fo-fe)2 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.250 0.250 1.000 0.000 0.000 0.137 0.017 0.063 0.000 0.000 0.016

(fofe)2/fe 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.500 0.100 1.000 0.000 0.000 0.370 0.009 0.083 0.000 0.000 0.

0 1 0 0
2

0.62 0.25 0 0

-0.62 0.75 0 0

0.384 0.563 0.000 0.000

0.620 2.250 0.000 0.000 5.057

(O-E)2 E

= 5.057

The value of 5.057 = 2

2

Degree of freedom (D.F.) = (r-1) x (c-1) = 16 The value of 5.057 =

2

tab = (at 5 % confidence level)= 26.296

tab.

=26.293 Here 2 cal < 2 tab.

Hence Ho is accepted
As figure shows the sample Chi Square the value of 5.057 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan

Housing Finance Companies Gruh Finance

Table 10.12

112

Loan Amt In Up to come( in Lakh) 5 Lakh Up to 1.5 1.5 to 2.5 2.5 to 3.5 0 0 1 0 3.5 to 5 More than 5 Total 0 1

5 to 10 Lakh

10 to 15 Lakh

15 to 25 Lakh

More than 25

Total

0 0 4 0

0 1 3 2

0 0 0 0

0 0 0 0

0 1 9 1

0 4

2 8

0 0

1 1

3 14

113

Arranging Observed & Expected Frequencies As Follows:

Table 10.13

fo 0 0 0 0 0 0 0 1 0 0 1 4 3 0 0 0 0

fo-fe 0 0 0 0 0 0.071 0.071 0.28 -0.28 0.57 0.43 0 0 0.071 0.071 0.64 0.36 2.57 1.43 5.14 -2.14 0 0 0.64 -0.64 0.071 0.071 0.28 -0.28

fe 0 0 0 0 0

(fo(fofe)2 fe)2/fe 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.005 0.078 0.185 0.000 0.005 0.130 2.045 4.580 0.000 0.410 0.005 0.078 0.071 0.280 0.324 0.000 0.000 0.203 0.796 0.891 0.000 0.000 0.071 0.280

114

2 0 0 0 0 2 0 1

1.43 0 0.071 0.071 0.21 -0.21 0.85 -0.85 1.71 0.29 0 0 0.21 0.79

0.57 0

2.045 0.000 0.005 0.044 0.723 0.084 0.000 0.624

3.588 0.000 0.000 0.000 0.000 0.000 0.000 0.000 6.503

= (O-E)2
E

= 6.503

The value of 6.503 = 2 16

2

Degree of freedom (D.F.) = (r-1) x (c-1) =

tab = (at 5 % confidence level)= 26.293

The value of =

6.503
2

tab. =26.293

Here 2 cal < 2 tab.

Hence Ho is accepted
As figure shows the sample Chi Square the value of 6.503 is within the acceptance region. Thus we accept the null hypothesis .There is significant relation between income of a respondent and amount of Home loan.

115

DHFL
Table 10.14

116

Loan Amt In Up to come( in Lakh) 5 Lakh Up to 1.5 1.5 to 2.5 2.5 to 3.5 1 1 0 0 3.5 to 5 More than 5 Total 0 2

5 to 10 Lakh

10 to 15 Lakh

15 to 25 Lakh

More than 25

Total

0 1 2 0

0 0 0 0

0 0 0 0

0 0 0 0

1 2 2 0

0 3

0 0

0 0

0 0

0 5

Arranging Observed & Expected Frequencies As Follows:

Table 10.15

fo 1 0 0 0 0 1 1 0 0 0

fe 0.4 0.6 0 0 0 0.8 1.2 0 0 0

fo-fe 0.6 -0.6 0 0 0 0.2 -0.2 0 0 0

(fo(fofe)2 fe)2/fe 0.360 0.900 0.360 0.600 0.000 0.000 0.000 0.000 0.000 0.000 0.040 0.050 0.040 0.033 0.000 0.000 0.000 0.000 0.000 0.000

117

0 2 0 0 0 0 0 0 0 0 0 0 0 0 0

0.8 1.2 0 0 0 0 0 0 0 0 0 0 0 0 0

-0.8 0.8 0 0 0 0 0 0 0 0 0 0 0 0 0

0.640 0.640 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.800 0.533 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.917

(O-E)2 E

= 2.917

The value of 2.917 = 2 16

2

Degree of freedom (D.F.) = (r-1) x (c-1) =

tab = (at 5 % confidence level)= 26.293

2

The value of 2.917 = Here 2 cal < 2 tab.

tab. =26.293

Ho is accepted
As figure shows the sample Chi Square the value of 2.917 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan

118

LIC Housing Finance

Table 10.16

Loan Amt I Up to ncome( in Lakh) 5 Lakh Up to 1.5 1.5 to 2.5 2.5 to 3.5 0 0 0 0 3.5 to 5 More than 5 Total 0 0

5 to 10 10 to 15 15 to 25 Lakh Lakh Lakh

More than 25

Total

0 3 5 4

0 0 2 0

0 0 0 0

0 0 0 0

0 3 7 4

1 16

3 3

1 0

0 0

5 19

Arranging Observed & Expected Frequencies As Follows:

Table 10.17

fo 0 0 0 0 0 0 3 0

fe 0 0 0 0 0 0 2.52 0.47

fo-fe 0 0 0 0 0 0 0.48 -0.47

(fofe)2 0.000 0.000 0.000 0.000 0.000 0.000 0.230 0.221

(fofe)2/fe 0.000 0.000 0.000 0.000 0.000 0.000 0.091 0.470

119

0 0 0 5 2 0 0 0 4 0 0 0 0 1 3 1 0

0 0 0 5.9 1.1 0 0 0 3.36 0.63 0 0 0 4.21 0.78 0 0

0 0.000 0 0.000 0 0.000 -0.9 0.810 0.9 0.810 0 0.000 0 0.000 0 0.000 0.64 0.410 -0.63 0.397 0 0.000 0 0.000 0 0.000 -3.21 10.304 2.22 4.928 1 1.000 0 0.000

0.000 0.000 0.000 0.137 0.736 0.000 0.000 0.000 0.122 0.630 0.000 0.000 0.000 2.448 6.318 0.000 0.000 10.953

(O-E)2 E

= 10.953

The value of 10.953 = 2 Degree of freedom (D.F.) = (r-1) x (c-1) = 16

2

tab = (at 5 % confidence level)= 26.296

Here 2 cal < 2 tab.

Hence Ho is accepted
As figure shows the sample Chi Square the value of 10.953 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan
120

Correlation Analysis
The coefficient of correlation is the second measure that we can use to describe how well one variable is explained by another. When we are dealing with samples, sample coefficient of relation is denoted by r and is the square root of sample coefficient of determination.

Here we have used r to study the relation between income of respondents and the home loan amount.

SBI
Table 10.18

X 4.25 5 4.25 5 4.25 3 2 3 3 2 4.25 3 3 2 2 4.25 4.25 3

Y 7.5 12.5 12.5 20 12.5 20 7.5 12.5 12.5 7.5 20 12.5 12.5 5 5 20 20 12.5

x*y 31.875 62.5 53. 100 53. 60 15 37.5 37.5 15 85 37.5 37.5 10 10 85 85 37.5
121

x2 18.063 25.000 18.063 25.000 18.063 9.000 4.000 9.000 9.000 4.000 18.063 9.000 9.000 4.000 4.000 18.063 18.063 9.000

y2 56.25 156.25 156.25 400 156.25 400 56.25 156.25 156.25 56.25 400 156.25 156.25 25 25 400 400 156.25

3 2 4.25 3 2 2 2 3 4.25 5 1 2 3 98

7.5 22.5 9.000 56.25 12.5 25 4.000 156.25 25 106.25 18.063 625 12.5 37.5 9.000 156.25 7.5 15 4.000 56.25 12.5 25 4.000 156.25 7.5 15 4.000 56.25 7.5 22.5 9.000 56.25 12.5 53. 18.063 156.25 20 100 25.000 400 5 5 1.000 25 7.5 15 4.000 56.25 7.5 22.5 9.000 56.25 377.5 1317.5 346.500 5481.25

x =98, x2=346.5, y2= 5481.25 = 3.16 = 12.17 b=xy-n x2 -- n2 1317.5- 31(3.16)(12.17) 346.5- 31( 3.16)^2 b= 3.39 a = - b = 1.42

y=377.5, xy=1317.5,

=12.17- 3.4(3.16)

122

r2 =

a y + b xy - n
y2 - n 2

= 0.474 r = 0.689
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.

ICICI
Table 10.19

x 3 3 3 3 3 3 2 2 2 1 5 3 4.25 3 4.25 4.25 3 3 3 57.75

y 7.5 12.5 7.5 5 7.5 7.5 7.5 12.5 12.5 7.5 20 7.5 7.5 12.5 12.5 7.5 7.5 7.5 7.5 177.5

xy x2 y2 22.5 9 56.25 37.5 9 156.25 22.5 9 56.25 15 9 25 22.5 9 56.25 22.5 9 56.25 15 4 56.25 25 4 156.25 25 4 156.25 7.5 1 56.25 100 25 400 22.5 9 56.25 31.875 18.0625 56.25 37.5 9 156.25 53. 18.0625 156.25 31.875 18.0625 56.25 22.5 9 56.25 22.5 9 56.25 22.5 9 56.25 559.375 191.1875 1881.25

123

r2 =

a y + b xy - n
y2 - n 2

= 0.112

r = 0.336
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.

HDFC
Table 10.20

X 3 4.25 4.25 4.25 4.25 2 5 2 2 2 3 2 3 4.25 3 3 3 3 3 3 3 3 3 3

y 5 12.5 7.5 12.5 12.5 5 12.5 7.5 12.5 12.5 5 5 5 12.5 5 5 5 12.5 12.5 12.5 12.5 12.5 12.5 12.5

xy 15 53. 31.875 53. 53. 10 62.5 15 25 25 15 10 15 53. 15 15 15 37.5 37.5 37.5 37.5 37.5 37.5 37.5
124

x2 9 18.0625 18.0625 18.0625 18.0625 4 25 4 4 4 9 4 9 18.0625 9 9 9 9 9 9 9 9 9 9

y2 25 156.25 56.25 156.25 156.25 25 156.25 56.25 156.25 156.25 25 25 25 156.25 25 25 25 156.25 156.25 156.25 156.25 156.25 156.25 156.25

3 2 80.25

5 12.5 247.5

15 25 784.375
2

9 4 265.3

25 156.25 2681.25

r2 =

a y + b xy - n
y2 - n 2

= 0.0729

r = 0.27
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.

Other Banks
Table 10.21

x 3 4.25 3 5 3 4.25 3 4.25 29.75

y 5 7.5 7.5 12.5 7.5 7.5 7.5 7.5 62.5

xy 15 31.875 22.5 62.5 22.5 31.875 22.5 31.875 240.625

x2 9 18.0625 9 25 9 18.0625 9 18.0625 115.187 5

y2 25 56.25 56.25 156.25 56.25 56.25 56.25 56.25 518.75

r2 =

a y + b xy - n
y2 - n 2

= 0.484
125

r=0.696
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.

Housing Finance Companies

Gruh Finance
Table 10.22

x 3 3 5 3 5 3 4.25 3 5 2 3 3 3 3 48.25

y 12.5 12.5 12.5 7.5 12.5 12.5 12.5 7.5 25 12.5 5 7.5 7.5 12.5 160

xy 37.5 37.5 62.5 22.5 62.5 37.5 53. 22.5 25 15 22.5 22.5 37.5 583.
126

x2 9 9 25 9 25 9 18.0625 9 25 4 9 9 9 9 178.062

y2 156.25 156.25 156.25 56.25 156.25 156.25 156.25 56.25 625 156.25 25 56.25 56.25 156.25 2

r2 =

a y + b xy - n
y2 - n 2

= 0.287 r = 0.536
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.

LIC Housing Finance

Table 10.23

x 5 5 4.25 4.25 3 2 3 3 4.25 4.25 3 2 5

Y 7.5 7.5 7.5 7.5 12.5 7.5 7.5 7.5 7.5 7.5 7.5 5 12.5

y2 56.25 56.25 56.25 56.25 156.25 56.25 56.25 56.25 56.25 56.25 56.25 25 156.25

xy 37.5 37.5 31.875 31.875 37.5 15 22.5 22.5 31.875 31.875 22.5 10 62.5

x2 25.000 25.000 18.063 18.063 9.000 4.000 9.000 9.000 18.063 18.063 9.000 4.000 25.000

127

5 7.5 56.25 37.5 5 7.5 56.25 37.5 4.25 7.5 56.25 31.875 3 7.5 56.25 22.5 3 5 25 15 2 7.5 56.25 15 70.25 157.5 1368.75 581.875

25.000 25.000 18.063 9.000 9.000 4.000 281.313

b=xy-n r2 =

a y + b xy - n
y2 - n 2

= 0.0576

r =0.24

Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.

DHFL
Table 10.24

x 2 1 3 3 2 11

y 7.5 5 7.5 7.5 5 32.5

xy 15 5 22.5 22.5 10 75

x2 4 1 9 9 4 27

y2 56.25 25 56.25 56.25 25 218.75

r2 =

a y + b xy - n
y2 - n 2

128

= 0.582 r =0.763
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.

129

11. Findings
Maximum number of people prefers the Home Loan for First Purchase in Ready

Construction and Under Construction property, which is 42 % and 32 % respectively. Only 2% out of the sample of 125 has chosen Land Loans.
Banks capture 67% of our sample and 33% of people go for Housing Finance

companies.

130

 47 % have chosen LIC Housing Finance which is highest amongst the group. Gruh

Finance is having the second largest portion of 34 %.

36 % have chosen SBI which is highest amongst the group. HDFC stands at the

second position with 31 %.

40 % of people go for the Home Loan ranging from 5 Lakh to 10 Lakh. Most of the

people going for the loan, which ranges from less than 5 Lakh to 15 Lakh, are having the income range of 2.5 Lakh to 5 Lakh.
38 % of people prefer the time duration of 10 years to 15 years to pay home loan.

64 % of people go for Floating rate of interest. 36 % of people pay fixed rate of interest which is more than 13%. At the time of Disbursement 55 % of people were paying Floating Interest Rate

more than 13% and 39 % of people were paying Floating Interest rate ranging from 11% to 13%.
Currently 30 % of people are paying Floating Interest Rate from 9% to 11% and 5 %

are paying Floating Interest Rate between 11% to 13%.

55 Individuals have given average rating and 38 Individuals are satisfied with the

Ease Of Documentation.
50 Individuals have given average rating and 47 Individuals are satisfied with the

Time Duration for Loan Sanctioning.

53 Individuals have given average rating to Interest rate charges and 28 Individuals

are dissatisfied.

131

 67 Individuals have given average rating to Processing Fees. 43 Individuals which is of the 125 respondents have given average rating to charges

for late payments and 16 are dissatisfied .

13 Individual are willing for the prepayment of the Home Loaan. 14 Individuals are having Home Loan with Insurance Cover. 17 people are willing to transfer their loan. 60 people have taken suggestion from their friends and relatives for Home Loan to

approach the Home Loan Provider.

91% of the sample are Male and 9 % are Female 55 % of the sample is having Graduation and 39 % is having Post Graduation as

their Educational Qualification.

31 % of people are private employees, 37 % of people are Businessman/woman 21

% of people are professional and 11 % are Government employees.

46 % of people are having income between 2.5 Lakh to 3.5 Lakh and 22 % are

having income between 3.5 Lakh to 5 Lakh.

132

133

12. Conclusion

The Government of India and the Reserve Bank of India have been constantly providing an enabling environment for the furtherance and development of the housing finance sector and Two Million Housing Programs which are being monitored annually by the Ministry of Urban Affairs and Poverty Alleviation. To give the boost to the economy and to control the money supply in the market RBI has reduced the interest rates for home loans. Majority of population of India consist of middle class people. This Housing survey reflects the same fact that it is dominated by the middle class people when it comes to take the Home loan. Recession in the Indian economy and different steps taken by the RBI for the recovery of the same is having the positive impact on the floating rates of interest in Home Loan. Popularity of Floating rate of interest is more compared to fixed rate of interest due to flexibility according to economic condition Main purpose of Housing Finance Companies is to provide Home Loan but still people are more inclined to go for a Bank when it comes to taking a Home Loan. Reason for dissatisfaction among the Home Loan taker is high fixed interest rate which is paid by these people so they are more willing for prepayment and transfer of Home Loan. Concept of insurance with Home Loan is not much popular in Home Loan takers, rather than believing it as a risk cover people are taking it as an additional burden on their ongoing EMIs. Above mentioned factors affect this sector positively or adversely but one of the major factors which is helping this sector to grow is rapidly increased population and people are accepting this as a need rather than a financial burden.

134