INTRODUCTION

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

NEED FOR THE STUDY

Retail banking has been popular segment to enter into for many banks. In the retail banking, housing sector has been most promising segment which is promising a Comprehensive growth rate of about 30% for the next five years. With the government keen on infrastructure development and announcing various tax Sops housing loan segment has been a tempted area for many banks to enter into housing sector can be bifurcated into organized and unorganized segments with the unorganized segments accounting for over 75% of the housing units constructed.

During the past 4 5 years the housing sector helped by the growing housing finance industry has witnessed significant developments.

Housing Finance Evaluation: Housing Development Finance Corporation (HDFC) was the first housing finance Company to setup operations in India in 1977. After the National Housing Bank Act, 1987, was passed NHB came into existence as a Subsidiary of the Reserve Bank of India (RBI) to regulate housing finance companies and provide them with refinancing to supplement their fund requirements. Public sector banks were allowed to provide housing loans directly to retail clients only in 1988.

OBJECTIVE OF THE STUDY OF HOME LOANS The study was mainly conducted to understand the concept of home loan scheme and the eligibility criteria of the customers. The study is done to understand the documents involved in the home loan scheme and the repayment methodology adopted by SBH. A depth study on interest rates provided by the different commercial banks to the customers. The innovative home loan schemes and the risk capturing mechanism adopted by the HFIs and the future of the home loan segment has been undertaken as a part of this study

PROFILE OF SBH BANK

Our Vision To be the most preferred and trusted Bank Our Mission To achieve value based operational excellence providing customer delight resulting in consistent superior financial performance Values Transparency and ethics in all dealings. Respect and empathy for customers. Competence and dedication in all that we do. Nurturing a culture of learning and technological excellence. Commitment to national and social objectives.

HISTORY State Bank of Hyderabad was constituted as Hyderabad State Bank on 08.08.1941 under Hyderabad State Bank Act, 1941. The Bank started with the unique distinction of being the central bank of the erstwhile State of Hyderabad, covering present-day Telangana region of Andhra Pradesh, Hyderabad Karnataka of Karnataka state and Marathwada of Maharashtra state, to manage its currency Osmania Sikka and public debt apart from the functions of commercial banking. The first branch of the bank was opened at Gunfoundry, Hyderabad on 5th April, 1942. State Bank of Hyderabad was previously known as Hyderabad State Bank. Its first branch was opened at Gunfoundry, Hyderabad. The bank provides depository, international banking, Internet banking, safe deposit lockers, ATM and NRI services.

The bank has been authorized to conduct government business like Provident Fund Schemes 1968, income tax collection and RBI Relief Bonds and saving bond schemes. It became a subsidiary of the State Bank of India in 1959 and is now the largest associate bank of State Bank of India.

In 1953, the Bank took over the assets and liabilities of the Hyderabad Mercantile Bank Ltd. In the same year, the Bank started conducting Government and Treasury business as agent of Reserve Bank of India. In 1956, the Bank was taken over by Reserve Bank of India as its first subsidiary and its name was changed from Hyderabad State Bank to State Bank of Hyderabad. The Bank became a subsidiary of State Bank of India on the 1st October 1959 and is now the largest Associate Bank of State Bank of India. All the branches of the Bank are totally networked under Core Banking Solutions, offering a wide range of products to its customers. All the customers of the Bank have access to the latest technologies like Internet Banking, ATMs etc. The Bank has pan India presence and operates through more than 1000 Bank branches. Management Team O. P. Bhatt Chairman Amitabha Guha - Managing Director Madhavi Sharma Director Jiban Goswami Director S. A. Thimmiah Director Gajendra Singh Rajukhedi Director I. Ram Reddy Director M Harshavardhan Director Ramesh Datla Director Dr. C. L. Laxmipathi Gowda Director S P S Sangwan - Director HOME LOANS A home loan scheme is generally offered to the person to accommodate finance for purchasing the house or for renovation or extension of the existing house.

OR Home loans are loans you have access to, depending on whether you want to buy or build a house and can also be used to repair or extend an existing house.

SCHEMES OF HOME LOANS The various extensive schemes, which are included in the home loan portfolio, are: Home Purchase Loan: This is the basic home loan for the purchase of a new home. Home Improvement Loans: These loans are given for implementing repair works and renovations in a home that has already been purchased by you. Home Construction Loan: This loan is available for the construction of a new home. Home Extension Loan: This is given for expanding or extending an existing home. For eg: addition of an extra room etc. Home Conversion Loan: This is available for those who have financed the present home with a home loan and wish to purchase and move to another home for with some extra funds are required. Through home conversion loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need of pre-payment of the previous loan. Land purchasing loan: This loan is available for the purchasing of land for both construction and investment purpose. Bridge loan: These are designed for those people who wish to sell the existing home & purchase another one. The bridge loan help finance the new home, until a buyer is found for the home. SBH OFFERS

1. Attractive Interest Rates 2. Available as Term Loan and Overdraft also 3. Easy Documentation 4. Fast Processing 5. Daily Reducing Balance 6. Low Processing Fee 7. No Hidden Costs or other charges

OBJECTIVES OF HOME LOANS Attractive Interest Rates Available as Term Loan and Overdraft also Easy Documentation Fast Processing Daily Reducing Balance Low Processing Fee No Hidden Costs or other charges.

REQUIREMENT OF HOUSE & HOME LOANS

Why should one option for a loan to buy a house?

Taking a loan seems like a good option when the money at hand is insufficient to buy the house of your dreams. Consider couples in their twenties and thirties. They enjoy a good income currently, buy their accumulated capital isnt enough to purchase a house. Whereas a home loan can give them access to capital their current earnings. Also, if you take a 10 years old loan when you are thirty, you could repay it by the time youre forty. So you dont have to be burdened with the interest and are free to plan your retirement savings.

The Quantum of loan that one can avail of:

Loan sanctioned depend on your repayment capacity which is based on your current income and your future repayment capacity. You would include your spouses name to enhance the loan amount. The maximum loan can be sanctioned varies with each bank/institutions and ranges from Rs.10 lakhs to Rs. 1 crore.

Benefits of taking a home loan:

A home loan is very different from a personal loan like a car loan for instance. You can utilize a home loan for financing an asset that will hold its value and even appreciate over the period of the loan. Though its price could fluctuate in the short terms, Total Estate will show capital appreciation over the years. The value of your house generally while the loan remains constant. If you had opted to wait, save up and buy a house, it would, in the long run cost you much more; home loans also come with many tax benefits.

Tax benefits of taking a home loan: The income tax authorities look with favor upon those servicing a housing loan from specified financial institutions. And, it is up to you to be wise enough to take advantage of this.

Section 24 of the Income Tax: Interest on loan till Rs.1.5 lakhs per annum is exempted form income tax (under section 23/24(1) of the Income tax act).

Section 88 of Income Tax Act: You get a 20% rebate on repayment of principle during a financial year. Once again, over the years, the principle repayment eligible for rebate has been enhanced from Rs.10,000 to the current limit of Rs.20,000 Stamp duty, registration fee or transfer of such house property to the assesses is also considered under this amount.

ELIGIBILITY CRITERIA FOR HOME LOANS

Eligibility: Age: - Min: You should be at least 18 years of age. Max: At the time of loan maturity, you should not exceed 65 years or your retirement age, whichever is earlier. Individuals: You should have completed a minimum of 2 years of service (with a minimum of 1 year in the current job).

Businesspersons/Self-employed professionals: You must have an established business or professional practice of not less than 3 years, with a positive net worth and must have posted a net profit for the last 2 years. Note: Minimum net take home salary of Rs. 6000/- p.m. for salaried employees or annual income of not less than Rs. 1.20lakh for businesspersons/ self-employed professionals. (Spouse/co-applicants income can be included in the income computation).

1. Individuals who are salaried or self-employed, professionals, businessmen are eligible. Proprietary concerns, HUF, partnership firms or limited companies are not eligible for this loan, where partners at their individual capacity are free to avail this loan.

2. As a customer to enhance the loan eligibility, all HFIs lay down conditions to who be co applicants, al co owners to the property should necessarily be co-applicant. Income of the co-owners can be clubbed together to get higher loan eligibility. Minors are not eligible to become co owners, as also friend and relatives only blood relatives are eligible to take a property jointly. Some of the acceptable relationships where loan clubbing is possible:

Income clubbing of co applicants Combinations Husband wife parent Son Parent Daughter Brother- Brother Income clubbing YES YES (if only son) YES (If only child) YES (if currently staying together and intend staying together in the new property) Brother Sister Sister Sister Parent Minor child NO NO Not eligible for loan

3. The minimum age for the applicant and the co applicant to become eligible for the commencement of eh loan is 23 years, and co applicant can be of 18 years of age if their income is not clubbed to calculate the loan eligibility. 4. The maximum age at the time of loan maturity for applicant or co-applicant is 60 years or the retirement age whichever is earlier.

Amount of Finance Maximum loan amount will be lowest of loan amount assessed on the basis of the under noted 3 options (a.b.c) below: a) Project cost which may include cost of land, house/ flat, cost of additional amenities related with said house/ flat, registration charges, stamp duty, property insurance, service tax and other statutory dues, if any, less applicable margin. b) Permissible EMI/ NMI ratio. c) Maximum Permissible Loan to Value (LTV) ratio.

Processing fee Up to Rs. 25.00 lacs- 0.25% of loan amount subject to minimum of Rs.5,000/-

Above Rs. 25.00 lacs to Rs. 75.00 lacs- Rs.6, 500/Above Rs. 75.00 lacs- Rs.10, 000/-

Other Charges Lawyers, Valuers fee etc to be borne by the borrower on the basis of actual cost

EMI/ NMI Ratio Based on income-wise graded ratio as under: Up to `0.60 lacs: 20% Above `0.60 lakhs to `1.20 lakhs : 25% Above `1.20 lakhs to `2.00 lakhs : 30% Above `2.00 lakhs to `5.00 lakhs : 50% Above `5.00 lakhs to `10.00 lakhs: 55% Above `10.00 lakhs : 65%

Margin Loan Amount Upto 20 Lakhs Above 20 Lakhs For House/ Flats under construction New House/ Flats for ready possession Old House/ Flats for ready possession

15%

15%

15%

20%

20%

20%

TYPES OF LOANS AVAILABLE TO THE CUSTOMERS OF SBH

Broadly two types- fixed rate and variable rate loans; while the former deals with a fixed rate of interest over the entire duration of the loan, the latter has the rate of interest changing according to the fluctuations in the market.

% OF LOAN AMOUNT THAT ONE CAN AVAIL Up to 85-90% of the total cost based primarily upon the individuals payback capacity.

GENERAL CONDITIONS THAT GOVERN A HOME LOAN: These are likely to vary with respect to the different types of housing loans: The maximum period of the loan is normally fixed by HFIs. However, HFIs do provide for different tenors with different terms and conditions. The Installment that you pay is normally restricted to amount 45% of your monthly gross income. You will be eligible for a loan amount, which is the lowest as per your eligibility. This is calculated on the basis of your gross income and payback capabilities. Some HFIs insist on guarantees from other individuals for due repayment of your loan. In such cases you have to arrange for the personal guarantee before the disbursement of your loan tasks place. Most HFIs have a panel of lawyers who go through your property documents to ensure that the documents are clear and are not misrepresented. This is an added benefit that you get when you avail of a loan from an HFI. You repay the loan either through Deduction against Salary, Postdated cheques, and standing instructions or by Cash/DD.

WHOLESALE BANKING

Principal competitors in wholesale banking are public and new private sector banks as well as foreign banks. The large public sector banks have traditionally been the

market leaders in the commercial lending. Foreign banks have focused primarily on serving the needs of multinational companies and the Indian corporations with crossborder financing requirements including trade, transactional and foreign exchange services, while the large public sector banks have extensive branch networks and large local currency funding capabilities.

RETAIL BANKING

In retail banking, their principal competitors are the large public sector banks, which have much larger deposit bases and branch networks,, other new private sector banks and foreign banks in case of retail loan products. The retail deposit shares of the foreign banks are quite small in comparison to the public sector banks, and have also declined in the last five years, which we attribute principally to the competition from new private sector banks. However, some of the foreign banks have a significant presence among non-resident Indians and also compete for non-branch based products such as auto loans and credit cards. They face significant competition primarily from foreign banks. In provision of debit cards and also expect to face competition from foreign banks when we begin offering credit cards. In mutual fund sales and other investment related products, their principal competitors are brokers and foreign private banks.

LOANS SBH brings back you a wide range of loans to cater your financial needs. The bank offers the following loans:

1) Personal loans. 2) Consumer loans. 3) Auto loans 4) Loans against shares 5) Loans against RBI bonds

6) Loans against insurance policy 7) E- Instant loans give the facility of loans approval in the 60 second on the internet. 8) SBH has offices spread all over the country. This extensive network helps SBH in providing services to large and well spread out clients. This network of interconnected offices (on data circuits) helps SBH to process application for purchase of property anywhere in India. 9) SBH has vast experience and a very committed and skilled staff to handle housing loan applications and solving customer problems.

LOAN AMOUNT You can avail of maximum of up to 85% of the cost of the property, including the cost of the land.

LOAN TENURE

You can repay the loan over a maximum period of 20 years under both FRHL and ARHL. Repayment will not ordinarily extend beyond your age of retirement (if you are employed) or on your reaching 65 years of age, whichever is earlier. However, SBH will endeavor to determine the repayment period to suit your convenience.

RATE OF INTEREST Period/ Amount Up to 30 Yrs SBH Maxgain Housing Loan Processing Charges SECURITY Security for the loan normally is first mortgage of the property to be financed and/or such other collateral security as may be necessary. Interim security may be required, if Up to `30 lacs 10.20% 10.20% Above `30 lacs 10.20% 10.20% 50% off

the property is under construction. Collateral or interim security could be assigned to SBH of life insurance policies, the surrender value of which is at least equal to the loan amount, guarantees from sound and solvent guarantors, pledge of shares and such other investments that are acceptable to the SBH.

Loans from SBH are available even if you are availing a housing loan from your employer. SBH has already entered into arrangements with several employers enabling employees to avail of loans both from the employer as well as SBH for the same property. Please do ensure that the title of the property is clear, marketable and free from encumbrance. To elaborate there should not be any existing mortgage, loan or litigation which is likely to affect the title to the property adversely.

DOCUMENTS/SUPPORTING DOCUMENTS TO BE ATTATCHED:

FOR ALL THE APPLICANTS:

1) Allotment letter of the co-operative society/association of the apartment owners. 2) Copy of approved drawings of proposed construction/purchase/extension. 3) Agreement for sale/sale deed/detailed cost estimate from architect/engineer for the property to be purchased/constructed/extended/renovated. 4) If you have been in your present employment/business or profession for less than a year, mention an a separate sheet details of the of the occupations for previous five years, giving position held, reason for change and period of same. 5) Applicable processing fees. 6) Proof of residence: attested copy of any one of the following:

a) Ration card b) Passport c) Driving license

d) Voters identity card e) Current telephone bill/electricity bill/gas bill

7) Proof of identity: attested copy of ay one of the following: a) Passport b) Driving license c) Voters identity car5d identity card issued by the employer (if employed in state/central government) d) PAN card

8) Certificate of loan outstanding issued by the lender (for refinance cases only) 9) Any other information regarding your repayment capacity that is necessary and will assist SBH in appraising the loan proposal.

ADDITIONALLY

IF YOU ARE EMPLOYED:

1) Verification of the employment form with only part I filled in. 2) Latest original salary slip/salary certificate showing all deductions. 3) If your job is transferable, permanent address where correspondence relating to the application can be mailed. 4) A letter from your employer agreeing to deduct the EMI towards the repayment of the loan from your salary. This will expedite the processing of your loan application. 5) Your updated original bankpass book/s or original bank statement/s showing salary and saving entries for the last six months. 6) A photo-copy of your Form-16 (issued by your employer) for the last assessment year.

Proof of Employment:

The proof of employment is verified by the Identity card issued by the employer Visiting card.

IF YOU ARE SELF EMPLOYED:

1) Balance Sheets and Profit & Loss Accounts of the business/profession along with copies of individual income tax returns for the last three years certified by the Chartered Accountant. 2) A note giving information on the nature of your business/profession, form of organization, clients, suppliers, etc. 3) Copies of individual tax chalans for the last three years 4) Copy of advance tax chalan (if any) 5) Your updated original Bank Pass Book/s or Original Bank Statement/s showing saving s entries for the last twelve months.

The documents required to be submitted by the businessmen as follows:

a.

Last three years Profit & Loss Account Statement duly attested by a Charted Accountant

b. c.

Last three years Balance Sheets duly attested by a Chartered Accountant Last three years Income Tax Returns duly filed and certified by Income Tax authorities

Proof of Investments: 1. Bank statements for the last six months of all current accounts.

2. Any other photocopies of investments held, as required by the HFI. The above are the various documents required by the businessman in addition to the documents, which are common to the entire category.

The businessman is also judged on the basis of the business conducted by him, if his Business profile is in the negative list, he will be thoroughly considered for his credibility before dispersing loan, the organization and property location should not be in the negative list.

These are the additional documents which are required to be looked at before going on for completing the pre sanction formalities with respect to dispersing of the home loans to the business class.

THE PARAMETERS INVOLVED IN HOUSING LOAN EVALUATION There are a number of parameters on which the housing loans are built: They are: 1. TENURE The tenure of the home loan refers to the time limit for a customer to repay the loan Generally, the maximum tenure of home loans is 20 years, with a few lenders offering tenure of 20 years or more (SBH has recently launched a 30 years loan). The longer the tenure, more a customer pays in total interest, but monthly payments will be less. So depending on the earning potential and bank balance of the customer, an appropriate can be chose. An important requirement of most banks/ HFIs is that they pay up the entire loan before you retire. The customer can always prepay the entire loan amount before it is due. As long as the tenure goes up a customer pays more interest which is up to 0.25 0.5%, generally above the home loan rates.

2. AMOUNT PAID BY THE FINANCER/ MARGIN REQUIREMENTS

The financer does not pay the entire amount of the loan, they request the customer to maintain margin, most banks go in for a 85% funding of the property value including the stamp duty and charges, it however varies among various banks. This is also treated as the margin money or own contribution required to be put by the prospective loan seeker as the contribution towards the purchase of the house. Most HFIs believe the amount paid is upfront before they release any disbursement. As a rule of thumb, depending upon the HFC, the prospective loan seeker has to cough up 15% - 20% of the loan amount as a down payment. For smaller amounts, this may not be much. But for figures running into lacks, this could make loads of difference. For example: An apartment costing Rs. 10lacss may get 85 per cent financing. So, customer has to arrange for the remaining Rs 1.5lacs. Some banks however make way for the payment for 90% of financing and about 100% financing for some new projects, however they are subjected to a large number of factors and constrains.

3. INTEREST RATES Without doubt the most important parameter to factor into home loan calculations. The interest rates may vary from institutions to institutions and generally range from about 10.20% - 10.25% to around 9% Repayment is in the form of EMIs (Equated Monthly installments). The longer the tenure, the more you pay in interest, but your monthly payment will be less. The two kinds of interest rates available to a customer are: Fixed interest rates Floating interest rates Fixed interest rates remain fixed over the tenure of the loan. Floating interest rates are affected by the rates in the market, they fluctuate according to the rates issued or changed by the RBI from time to time. The finance ministers diktat on home loans does not hold for private banks. Indias largest home loan provider and second largest bank SBH Bank on Tuesday

hiked its home loan by 1%. The bank has also increased its deposit rates.

As per the new rate structure, customer will have to pay 10.2% on the home loans with a floating rate, while the fixed home loan will now invite an interest of 10.5%. With this increase, the monthly installment on an Rs.1lakh loan for 20 years goes up by Rs70. Some public sector banks do so only once in 12 months while some private sector lenders do it as frequently as a quarter. Though the current interest rate quote maybe lower, over the life of the loan, a customer will be able saved more in the case of a lender who resets your floating rate more frequently.

The investors are also given the option of changing their option from fixed rate loan to a floating rate loan, of course by paying a penalty.

4. AMORTISATION It means the method or the calculation by was of which the entire Principal amount/loan amount is paid through the tenure of the loan. This helps the customer to know what his outstanding principal is at any point of time. There are two methods generally followed: Annual rests Monthly rests

Annual rests: This is more commonly known as annual reducing balance of the principal/loan amount lent to you. In an annual rest the EMIs (fixed monthly payment for the dispersal of the loan amount) are calculated on a annual basis. The component of interest is higher in the initial years and later on the component of principal increases and the interest keeps reducing year after years. In other words, the interests in the EMI will keep reducing year after year and the principal component keeps increasing.

Monthly rests: This is called monthly reducing balance or principal. The calculation in the above method remains the same as of the above except that the balance is calculated on a monthly basis and the EMI is broken up every month to arrive at the opening balance of the principal for the next month. It is always better for a customer to seek an HFI, which generally has monthly rests, based system; this will reduce the amount of interest paid by the customer. Many banks have adopted to the monthly rests system.

5. REPAYMENT FACILITY The bank has given three options for repayment of the loan to suit the convenience of Borrower. Equated Monthly Installments (EMI) uniform monthly installment, inclusive of interest, for the entire repayment of only interest for the first five years, and thereafter in EMI for the next 10 years. Repayment of only interest in the first five years, 30% principal plus interest in the next five years, and balance 70% plus interest in the remaining period. Repayment to start on completion of construction, but not later than 18 months from first disbursement and in case built up houses after one month from disbursement. Interest during gestation shall be paid as & when due. The repayment not to extend beyond the age of retirement of the borrower or 70 years whichever is earlier, however where co-borrower is taken, a maximum repayment period of 20 years may be considered provided the loan is liquidated within the age of 70 years of the borrower/ co-borrower having capacity to service the loan.

THE LOAN PROCEDURE FOLLOWED AT SBH BANK

The procedures involve in the disbursement of home loan by any bank entails the following steps: Home loan application form is first submitted by the customer covering all details. Checklist of requirements is requested for from the customer, and all documents are required to be submitted (copies), they are then verified whether the details are failed in correctly and whether all the documents are submitted. Additional loans, if any are applicable. Many banks provide for supplementary loan as a part of their comprehensive home loan scheme. The following diagram indicates the loan procedure at the

Customer

Branch manager

Loan Department

Legal opinion, valuation And Technical

Branch manager For large borrows

bank
Regional Officer RISK CAPTURING MECHANISM

One of the important aspects in the home loan financing is to ensure that the loan seeker is worthy and credible. SBH follows the credit score model to male home loan disbursements. Credit score model is a risk capturing mechanism, which is used to assess the risk perspective of the loan seekers. The prospective loan seeker is assessed on a number of parameters which helps in the evaluation of his profile and each parameter is assigned a score based on which the decision is taken. A score of 100 is fixed, and a score of 75 is considered to be good, score of 55 is considered above average and score of 25 to be average. The prospective loan seeker on a scale of 100 is expected to get 55 avail the home loan.

The parameters on which risk is assessed are:

1. DEMOGRAPHIC PROFILE

The demographic profile includes a number of sub-parameters they are basically: Age Educational Qualifications Number of Dependents Marital status The demographic profile of the loan seeker is allotted a maximum score of 15.

2. RELATIONSHIP WITH SBH BANK

The relationship with the bank is also considered for the benefit of its customers. The sub-parameters considered here are: Value of relationship (in terms of deposits) Number of years The relationship with the bank is given a weight of 10 on the total score of 100.

3. INCOME MODEL The income module of the bank includes parameters such as: Gross Eligible Monthly Income IRR ( Income to Installment Ratio) FOIR (Fixed obligations to income ratio) Net take home The income model is given the highest score of 50 points.

4. STABILITY AND CONTINUITY

The stability and continuity factors are based on Organization Profile : Govt. / public sector companies / public limited or private limited companies or partnership or others Length of service in Present job / organization. This module is provided with maximum score of about 15 points.

5. ASSET MODULE The asset module include factors like Margin Net-Worth ( Total assets Total Liabilities) The asset module is given a weight of 10 on a scale of 100.

The various parameters of the credit score model and their respective weights are depicted in the following chart.

Parameters in the model

AM 10%

SC 15% DM 15% Ricici 10%

IM 50%

The abbreviations of the above term are: DM Demographic profile Income Module Stability and Continuity RSBH Relationship with the SBH IM SC

6. SCRUTINY OF THE DOCUMENTS The retail processing is a procedure, which involves careful scrutiny of accounts. SBH Bank uses a specialized system to go through the accounts, before dispersing the loan to the customer. The basic groups set up in the process of loan application are: 7. RETAIL MANAGER ENTERER GROUP: This group does the data entry. Upon completion of the data entry the group forwards the same to the RM Verifier group to verify and resends it to the former in case of tiny discrepancies for editing.

The Loan officer enterer group and the RM Verifier group should ensure, confirm and verify the following: The organization is in the appropriate list. The organization is not in the negative list

 The property location is not in the negative list.

Applicant Details: Name and the personal details Identity details Address Employment details salaried Financial details: Income asset ownership, Existing bank account details and credit card details Employment details: Business Financial details: Existing bank accounts and credit card details.

8. EXITING LOAN DETAILS: The name of the financial institution (in case of takeover) type of loan, purpose of loan amount etc., as per the home loan application form.

Loan request: Including the disbursement details. Acquisition details: Gee details, loan amount recommended, name of the customer preferred branch. Reference details: Entry of at least one reference is mandatory. Property details: The RM enterer group and the RM Verifier group shall affix their initials on the home loan process note.

Upon completion of the above activities, the field investigation, legal opinion and the technical appraisal process shall be initiated by the RM. The basic scrutiny checks followed by the bank: A. Field investigation study. B. Technical Feasibility C. Legal Feasibility

A. FIELD INVESTIGATION STUDY: The manager RM shall go through the documents and inform the same to the field investigation agency the details: a) Field Investigation Report: Residence and Reference (Tele Check) Name, Address, Office or Business telephone number of the applicant and Co-applicant. Income Tax return.

The reports are too given on the letterhead of the respective approved agency by their authorized employee with agencys rubber stamp. The RM should ensure from the field investigation agency in case of Residence and reference (Tele-check) The details in the report should match with the information given in the home loan application form.

IT-Return: It should be tallied as per the office records. The manager RM shall make a tele-check to cross verify the investigation made by the agency in case, for the salaried applicants where the disbursement is greater than 10 lacks and in case of the businessman where the disbursement is greater than 10 lacks.

B. LEGAL FEASIBILITY

The bank should arrange for the legal opinion. The manager RM should forward it to the banks empanelled lawyer various documents for scrutiny. Some of the documents required for the scrutiny by the lawyer are:

 Sale agreement duly registered Own contribution receipts Allotment letter Land documents indicating ownership, if applicable registration receipt Possession letter Lease agreement, if applicable (Property bought from a development authority) No objection certificate from the developer, society or development authority. In case of the construction of the house the agreement of construction of the house between the land owner and the contractor.

The above are the list of documents to be referred to by a lawyer. The manger has to provide the copies of the documents should be provided by duly specifying the name of the applicant, particulars of property and list of documents attached.

All correspondence with regard to the legal opinion must be carried forward between the lawyer and the RM only.

C. FINANCIAL SCRUTINY Prior to disbursement, the HFI also conducts a site visit to the customers property to ensure the following: In case of under construction property: Stage of construction is the same as that mentioned in the payment notice given to the builder. Quality of construction

 Satisfactory progress of work. Lay out of the flats and area of property is within the permission granted by the governing authority Requisite certificate have been received by the builder to start the construction at the site.

In case of ready / Resale construction: External maintenance of the property. Internal maintenance of the property. Age of the building Whether the building will last the tenure of the loan Quality of construction There is no existing lien or mortgage on the property

The list of valuation engineers empanelled by the bank need to take up these various documents and ensure that the report is furnished in the prescribed format and that loan amount requested by the applicant is sufficient to complete the project. The details in the property report given by the technical term and compare it with the legal opinion and application and ensure that there are no discrepancies. After completion of the above checks and scrutiny the manager RM must forward the home loan process not along with the home loan application and other enclosures Legal opinion, technical appraisal report, for further processing to the Loan Manager term, after retaining in the customers file, copy of the following papers: Home loan application Legal opinion with all enclosures Technical appraisal report Loan Department has to send the documents and papers to the RM for further scrutiny and processing of the proposals. This would increase the turnaround time, of processing and also additional charge towards the courier charges and also losing the

documents in transit, In order to avoid the above discrepancies the documents are verified by the document imaging system.

Newgen document imaging system is introduced to facilitate electronic transmission of documents for processing of proposals by RM. It facilitates scanning and maintenance of scanned images. It also provides the provision of linking the documents if the same document is required for multiple loans Provisions to make remarks, on the document without disturbing the original. Scanned images can be attached to any mail

This facilitates easy transmission of data and other documents and also provides the flexibility in loan processing and helps in fast transmission of data, these all advantages helps in easy disbursement of loans.

HDFC Home Loans

Home Loans It is important to choose a good housing finance company which can handhold the customer right through his home buying process. Since a home loan is a long term commitment of 15-20 years, several factors like expertise, quality of service, in-depth domain knowledge and the companys level of commitment and transparency right through, the loan procedures, the fine print, quality of services offered and safe retrieval of the title deed are critical.

HDFC Home Loan Advantages

Counselling and advisory services for acquiring a property. Instant Home Loan Approval. Widest range of home loan products & services like Home Loans, Home Improvement Loans, Home Extension Loans, Loans to professionals for office or clinic, Home Equity Loans (Loan against Property), Short Term Bridging Loan etc.

Loan from any office for purchase of home anywhere in India Loan approval even before a property is selected Flexible loan repayment options. Vast network of over 331 in India, offices in Singapore, London & Dubai and franchises in the Gulf Cooperation Council (GCC) region.

Most experienced and empowered personnel to ensure smooth & easy processing

Free & safe document storage. Online loan application facility.

Features:

Maximum loan

80% of the cost of the property (including the cost of the land) and based on the repayment capacity of the customer.

Maximum Term

The maximum period of repayment of a loan shall be upto 30 years (Telescopic Repayment option) under the Adjustable Rate Home Loan product, depending upon the specific repayment scheme as may be opted (*). The maximum period of a loan shall be upto 20 years under the Fixed Rate Home Loan product. Repayment will not ordinarily extend beyond your age of retirement if you are employed or on reaching 70 years of age, whichever is earlier. However, HDFC will

endeavour to determine the repayment period to suit your convenience.

Applicant and Co- Applicant to the loan

Home Loans can be applied for either individually or jointly. Proposed owners of the property will have to be co-applicants. However, the co-applicants need not be coowners.

Adjustable Rate Home Loan

Loan under Adjustable Rate is linked to HDFC's Retail Prime Lending Rate (RPLR). The rate on your loan will be revised every three months from the date of first disbursement, if there is a change in RPLR, the interest rate on your loan may change. However, the EMI on the home loan disbursed will not change. If the interest rate increases, the interest component in an EMI will increase and the principal component will reduce resulting in an extension of term of the loan, and vice versa when the interest rate decreases.

Interest Rate

W.e.f : 6th Feb 2013

RPLR: 16.40%

Applicable Variable rates Loan Slabs % ( Monthly Rest Basis ) Upto and including Rs 30 lacs Over Rs. 30 lacs 10.15% to 10.65% 10.40% to 10.90%

Basis : RPLR minus Spread

RPLR - 6.25 to - 5.75 RPLR - 6.00 to - 5.50

The above rates are subject to change without notice.

TruFixed Plus Home Loan

Under this product the customer has the option to choose a Fixed Interest Rate Period (FIRP) between 3 to 15 years . Post the fixed rate period the loan will automatically convert to a variable rate product. The customer also has the option, subject to our eligibility norms to take a complete fixed rate term product for a fixed term of 3 to 15 years. Or, he can avail a long term loan of 15 to 20 years with a part fixed and part floating for the entire tenor of the loan. The full disbursement of the loan, irrespective of the fixed period chosen, shall have been availed within the first 3 years from the date of first disbursement of the loan. Post the fixed rate period the interest rates applicable on the loan shall be the then applicable HDFC RPLR minus the spread as applicable currently on the loan amount being availed under this product.

The applicable interest rates in the Fixed Interest Rate Period (FIRP) are linked to sanctioned loan amount and as per details given below: Loan Slabs Interest Rates during the Fixed Interest Rate Period ( %) Upto and including Rs 30 lacs Rs.30.01 lacs onwards 10.50 10.75

Eligibility

The product is available to salaried and self-employed customers for loan applications subject to first disbursement on or before July 31st, 2013.

PurposePurchase of a. Flat, row house, bungalow from developers b. Existing freehold properties

c. Properties in an existing or proposed co-operative housing society or apartment owner's association d. First Power of Attorney purchases in Delhi for DDA flats allotted before 1992. e. Refinance (balance transfer) of an existing home loan from another financial institution.

Fees

0.5% of the loan amount applied plus applicable service taxes and cess.

No Charges for
a. b. c.

Replacement of cheques Income Tax Certificates Accelerated Repayment Option

Other Charges
a. Cheque dishonor charges : Rs. 100** For Home Loans, Home Improvement Loans, Home Extension Loans, Short Term Bridging b. Prepayment charges : Loans, Plot Loans & Rural Housing Finance For Loan Against Property, Non Residential Premises Loans, Top-Up Loans For Home Loans, Home Improvement Loans, Home Extension Loans & Rural Housing Finance C. Conversion fees : For Plot Loans For Loan Against Property & Non Residential Premises Loans

d. e. f.

Fees on account of external opinion : -For advocates/technical experts, as the case may be Insurance charges :

as per actuals applicable to a case

as per actuals applicable to a case

Charges on account of delayed payments/defaults:

i ii

Additional interest Incidental charges

: 18 % p.a. : *** : as per actuals applicable to a case Statutory /regulatory charges: All applicable charges on account of Stamp duty / Central Registry of Securitisation Asset

iii Expenses

Reconstruction and Security Interest of India g. CERSAI charges(Central Registry of Securitisation Asset Reconstruction and Security Interest of India) (CERSAI) or such other statutory /

regulatory bodies and applicable taxes shall be borne and paid (or refunded as the case may be) solely by the Borrower.

You may visit the website of CERSAI for all such charges at www. Cersai.org.in

AXIS BANK

Features of Axis Bank Home Loans Axis Bank housing loans are designed for todays home-hunter. Our easy home loans are rich in features and offer a number of benefits.

Attractive housing finance rates: We offer attractive interest rates that make your housing loans affordable and easier on your pocket every month.

Flexible rates: Choose between fixed and floating rate options depending on which way you think interest rates are moving.

Balance transfer facility: Not satisfied with your existing Home Loan provider? You can transfer your Home Loan to us without any hassles.

Doorstep service: You don't have to go the bank for Home Loans; the bank will come to your doorstep. Perfect for those leading busy lives.

Nil prepayment charges: Come into some money and want to pay off your housing loan early? You can do that at Axis Bank without worrying about prepayment charges.

Quick and transparent processing: Special Benefits available for Premium Banking customers. To know more, contact your Relationship Manager today!

Home Loan Eligibility Criteria

A) - Salaried Individuals

Individuals in permanent service in the Government or reputed companies meet our Home Loan eligibility criteria

Applicants should be above 24 years of age at the time of loan commencement and up to the age of 60 or superannuation, whichever is earlier at the time of loan maturity.

B) - Professionals

Professionals (ie, doctors, engineers, dentists, architects, chartered accountants, cost accountants, company secretary, management consultants only) can apply.

Applicants above 24 years of age at the time of loan commencement and up to 65 years or less at the time of loan maturity meet our housing loan criteria.

C) - Self Employed Individuals

Any individual filing income tax returns can apply Applicants should be above 24 years of age at the time of loan commencement and up to 65 years or less at the time of loan maturity.

Limits on Home Loan Minimum - Rs 3 lac Margin Sr. No Loan amount (Rs.) Margin 1 2 3 For Housing Loan upto Rs.20 Lacs For Housing Loan above Rs.20 Lacs Improvement or renovation loans 25% 15% 20%

Our Home Loan Rates Sr. No 1 Floating Less than Rs. 25 Lac Type Loan amount (Rs.) Base Rate + Mark Up Base Rate + Effective Rate Of Interest 10.75% p.a.

Rate Loans greater than Rs.25 lac - Rs. 75 lac

0.75% Base Rate + 1.00% 11.25% p.a. 11.00% p.a.

Loans greater than Rs. 75 Base Rate + lac Top Up - All loans, Renovations Base Rate - 10.00% NISHCHINT - Home Loan with Fixed Rate of Interest Type Fixed Rate Effective Rate Of Interest 11.75% p.a. 1.25% Base Rate + 2%

12.00% p.a.

Other Charges: Sr. No 1 Repayment Instruction/Instrument Return charges Rs.500/- per instance 2 Cheque/Instrument Swap charges Rs.500/- per instance 3 4 CERSAI Charges Duplicate Statement issuance charges Rs.500/Rs. 250/- per instance 5 Duplicate Amortization schedule issuance charges Rs. 250/- per instance 6 Duplicate Interest Certifcate (Provisional/Actual) issuance charges 7 Issuance charges for Photocopy of title documents Rs. 250/- per instance Rs.250/- per document set 8 Charges on customer initiated requests for copies of documents Rs. 250 per document set Type Charges

Equitable mortgage creation charges

As applicable in the state

10

Credit Bureau report issuance charges

Rs.50/- Per Instance

Switching Cost: Switching from the floating rate scheme to the fixed rate scheme and vice versa is permissible. If a fixed rate customer wants to reschedule loan to the present fixed interest rate applicable to the new customers, the same is also permissible. The existing customers can also switch over to the new rate of interest applicable for the new customer. For all of the above changes, a nominal switching fee is applicable.

ICICI BANK

ICICI Bank Home Loans Building your own home is special. As one of the leading home loan providers, ICICI Bank Home Loans is here to help you lay the foundation for your dream home. With the experience of sharing the dream of millions of our customers, we offer you the most convenient housing loan plans to suit your needs.

Advantages

Wide range of product to choose from Flexible repayment options Guidance throughout the process making home buying hassle free

With a network of 2500 branches we are always close to you Doorstep service at your comfort Simplified documentation Over 246 Bank Branches pan India for servicing of your loans Free Personal Accident Insurance Sanction approval without having selected a property. Insurance options for your home loan at attractive premium

Home Loan - Interest Rates Home Loan Interest Rates ICICI Bank floating rate: Category Effective Rate of Interest Rate HL <= Rs. 3.0 million 10.15% I-Base + 0.40% HL > Rs. 3.0 million 10.40% to 11.00% I-Base + 0.65% to

1.25% Notes: 1% Cashback benefit is available on above product 1% Cashback benefit is available if EMI payment is through Auto Debit from ICICI Bank Account LIC HOUSING FINANCE LTD

LIC housing finance ltd has LIC Griha Prakash LIC home loans plan where individuals can get LIC housing loan amounting to 85% of the total property cost provided the total value of the property doesnt exceed the value of 1 Crore Rupees. This LIC home loan scheme is valid on

both purchase and construction of property and covers the money that the buyer spends while signing agreement, making registration charges and payment of stamp duty fees.

Loan Category Loan Amount

: :

Griha Prakash Min. Rs.5,00,000. 85% of total Cost of the property including Stamp Duty and Registration Charges. Maximum 20 years Equated Monthly Instalments(EMI) - Monthly Rest Basis 1. Equitable Mortgage of Residential House / Flat / Plot 2. Demand Promissory Note.

Loan to Property Cost : Loan Term Repayment Mode Security : : :

Upfront Fees

1.00% of Loan Amount Sanctioned + Service Tax as applicable.

LIC housing finance ltd is also committed to help non-professional loan seekers to take advantage of Griha Shobha LIC home loan project where they can get a minimum LIC home loan of 5,00,000 RS for a maximum time of 10 years. Professionals get an extended back this LIC housing loan in 15 years.

advantage of repaying

STATE BANK OF INDIA (SBI)

The origin of the State Bank of India goes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921. Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernise India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework. With a tradition of trust and transparency, through 13, 700 branches across the country, SBI brings you exclusive benefits:

Interest on a daily reducing balance No prepayment penalties Open loan account closest to your present or proposed residence

So what are you waiting for? You can reduce your interest burden and optimally utilize your surplus funds, only with SBI.

EMI in `/lac/month Period of Loan(Years) 30 25 20 15 Upto ` 30 lacs @ 9.95% p.a 874 905 962 1,072 Above ` 30 lacs @ 10.10% p.a 885 916 972 1,081

The chart shows the survey results which was conducted last year. It is very evident that majority of the Indians choose SBI for acquiring home loans compared to any other commercialized or nationalized banks.

IDBI BANK

Home Loan in India - IDBI Bank Home Loan Interest Saver Home Loan Interest Saver provides customer the facility of linking Home Loan account with the operative Account. The interest liability of the borrower on home loan comes down to the extent of surplus funds parked in the operative account. Customer will be allowed to deposit and withdraw from the operative account as and when required. Interest on Home loan will be calculated based on the balance maintained in the operative account. The IDBI Bank Home Loan Interest Saver Advantage

Maximum Tenor Attractive Rate of Interest Maximum Funding Interest Rate on Daily Reducing Balance Simple Documentations Personalized Doorstep Services Savings on Interest Payable

The IDBI Bank Home Loan Interest Saver Features

Loan Range from min of Rs. 5 lacs up to Rs. 500 lacs Rs. 250 Lacs in case of NRIs (salaried)

Loan to value ratio: Upto Rs. 20 lacs 90% of cost of property Above Rs. 20 lacs 80% of cost of property Repayment period 20 years for Salaried and Self-employed professional and 15 years in case of NRIs (salaried) & self-employed non - professionals No prepayment charges

Interest Rates As per RBI mandate, Savings Bank interest will be calculated on the daily balances

maintained in your account, at a rate of interest as specified by RBI from time to time (existing rate is 4.00% p.a.). vings Bank Rate (w.e.f. May 03, 4.00 % p.a. 2011) Base Rate (w.e.f 2013) % February 01, 10.25 All the loans are linked to Base Rate of the Bank

Current BPLR (w.e.f February 01, 14.75 % 2013)

COMPARATION OF INTEREST RATES AMONG VARIOUS BANKS Bank Name State Bank Of Floating Interest rate
9.95%

Per lac EMI

Rs.962

Processing Fee
Up to 25 lacs : 0.125% of loan amount

Prepayment Charges
Nil

India ICICI Bank

HDFC Ltd

HSBC Bank

LIC Housing

AXIS Bank IDBI

PNB Housing Finance

ING Vysya Standard Chartered Citibank

No prepayment charges shall be payable for partial or full prepayments irrespective of the source 10% to 13% Rs.965 to Rs.1172 1% of the loan amount Nil applied for, subject to a minimum of Rs 10000 plus service tax. This fee is payable on application and is not refundable Scheme I : 10.25% Scheme I : Rs.982 Up to 50 lacs : 10,000 Nil (Fixed for 2 yrs) (Fixed for 2 yrs) +(Service tax) Scheme II : Scheme II : 50 lacs & above : 10.95%(Fixed for Rs.1029 (Fixed for 15,000 +(service tax) 10 yrs) 10 yrs) 10.25% (Upto 25 Rs.982 (Upto 25 1% of the Loan Amount Nil Lacs), then Lacs), then Rs.998 10.50% 10.25% Rs.982 Up to .50%of loan If Balance amount Transfer then (Rs 2500 to be collected 2% Otherwise at login and balance at Nil the time of sanction ) 10.50%-11.25% Rs.998 - Rs.1049 0.5% NIL (For (For Salaried/SEP), Salaried/SEP), 11%-11.50% Rs.1032 - Rs.1066 (SENP) (SENP) 10.75% Rs.1015 0.5% of the loan NIL amount 9.99% (Upto Rs.964 (Upto Rs.7500/- + Service tax NIL 25Lacs), then 25Lacs), then 10.15%-10.25% Rs.975 - Rs.982 10.50% (Upto Rs.998 (Upto 0.25% (for salaried ), NIL

minimum Rs.1000/25-75 lacs : Rs.3,250/75 & above : 5,000/Scheme I :10.25% Scheme I : Rs.982 0.50% of loan amount (Fixed 1 yr) (Fixed 1 yr) upto 1 crore Scheme II : Scheme II : 10.25% (Fixed Rs.982 (Fixed 2yrs) 2yrs) Scheme III : Scheme III : 10.50% (Fixed Rs.998 (Fixed 3yrs) 3yrs) then 10.25% then Rs.982 10.15% Rs.975 0.5% or maximum 10,000+service tax (12.36%)

N.A

Deutsche Bank DHFL India Bulls

25Lacs), then 10.75% 10.50% 11% 10.15% (Upto 25Lacs), then 10.75%

25Lacs), then Rs.1015 Rs.998 Rs.1032 Rs.975 (Upto 25Lacs), then Rs.1015

0.50% ( for Self Employed) 12000 + Service Tax 1% for Salaried & 1.5% for SENP Up to 30 lacs 5,000+12.36%(Service tax) 30 lacs & above : 15,000+12.36%(Service tax) 10,000 + Service Tax 0.50% of loan amount, Maximum Rs. 10,000/0.50% (Max. Rs. 50,000/-) 0.50% of the loan amount subject to maximum of Rs.20,000/0.50% of Loan amount (Max.Rs.50,000/-)

Nil NIL NIL

Federal Bank Allahabad Bank Bank of Maharastra Central Bank of India Corporation Bank Bank of India

10.25% 10.20% (Upto 25Lacs), then 10.45% 10.55% (Upto 25lacs), then 10.75% 10.25%

Rs.982 Rs.978 (Upto 25Lacs), then Rs.995 Rs.1002 (Upto 25lacs), then Rs.1015 Rs.982

N.A NIL

Nil

Nil

10.25% 10.25%

Rs.982 Rs.982

NIL Nil

0.25% of loan amount. Min.Rs.1,000 and Max. Rs.20,000 10.25% Rs,982 Processing charges are Union Bank of 0.50% of the loan India amount subject to maximum of Rs. 15,000 10.75% (upto 25 Rs.1015 (upto 25 0.50% of the loan United Bank lacs) then 10.55% lacs) then Rs.1002 amount of India

NIL

N.A NIL

UCO Bank

10.20%

Rs.978

Bank of Baroda

10.25%

Rs.982

0.5% of the loan amount, minimum Rs.1500/- & maximum Rs. 15000/Loan upto Rs.30 Lacs 0.50% (Minimum Rs.5,000/-) Above 30 Lacs - 0.40% (Min. Rs.15,000/- & Max. Rs.50,000/-)

N.A.

Canara Bank Oriental Bank of Commerce

10.75% 10.25%

Rs.1015 Rs.982 0.50% of the loan amount, subject to maximum of Rs. 20000/- plus service tax NIL

Kotak Bank Dena Bank Punjab National Bank First Blue Home Finance

10.75%

Rs.1015

0.25% - 0.5%

10.30% 10.25%

Rs.985 Rs.982

N.A

2% on Balance transfer else NIL N.A

10.25% (for Rs.982 (for Salaried: Up to 30 lacs Salaried / SEP), Salaried / SEP), :7300 10.75% (For Self Rs.1015 (For Self 30 - 75 lacs : 11800 Employed) (Upto Employed) 75 lacs & above : 25Lacs), Then 15,000 + service 10.75% (for tax(12.36%) Salaried / SEP), 11.25% (For Self Employed) 10.50% Rs.998 0.25% of loan amount. Vijaya Bank Maximum Rs.10000. Exclusive of Service Tax 10.25% ( upto 25 Rs.982 (Upto 25 upto Rs.25 lacs Syndicate lacs ), then Lacs), then Rs.998 0.25% (Min Rs 1000 Bank 10.50% Max Rs 5000) 26 lacs to 75 lacs 0.55% (Max.Rs.500/-) above Rs.75 lacs 0.55% (Max Rs.10000/) 10.25% Rs.982 A flat rate of 0.58% of Indian the loan amountOverseas Bank maximum of Rs. 10,190/- There is no hidden charge. This is subject to change from time to time without prior intimation. 11.50% - 11.75% Rs.1066 - Rs.1084 0.75% of loan amount Reliance

Nil

N.A

N.A

N.A

NIL Nil NIL

Development Credit Bank State Bank of Travancore

11.50% 10.25%-10.50%

Rs.1066 Rs.982 - Rs.998

1% Processing fees stands reduced by50% of normal charges during the campaign period 0.5 to 1% off the loan amount. 1% + service tax

10.75% Rs.1015 Tata capital Housing Finance ltd Dhanalakshmi Scheme I: 11.50% Scheme I: Rs.1066 (Fixed for 1 yr), (Fixed for 1 yr), Bank Then 12% Scheme II: 12% Then Rs.1101 Scheme II:

N.A

N.A

Rs.1101

Indian Bank

10.20%

Rs.978

Nil

Nil

COMPARISON OF MAJOR PLAYERS

The markets for home loans have been sizzling in India. The spurt in growth in recent years and the prospect of continued buoyancy in demand have attracted many players to the industry which till a couple of years back had two major players- HDFC and LIC Housing Finance. The result is cut-throat competition, which has benefited the loan seekers. The home loan market has grown at a compounded rate of over 40% over the last four years. And from what industry experts believe that there is a little chance that there will be any significant decline in the growth rates going forward. So what have been the key factors in triggering of this high growth period? There are several reasons for the same on the demand side: Faster raise income as compared to property prices, thus making housing more affordable. Decline interest rates, which have greatly reduced the cost of borrowing (both o0n interest and capital).

Then there are factors on the supply side too which have supported this growth: More competition in the housing finance sector resulted in companies charging lower interest rates, sometimes even at the cost of spread (i.e. profit margin) The fee for getting the home loan has reduced dramatically over the last couple of years. From over 2% of the loan amount to as long as 0.25% (some companies are known to wave of the fee entirely). Housing Finance Companies have introduced several new products to meet the needs of wide variety of customers. One such scheme, the Step up Loan, where EMIs increases as the

income of the individual increases has been a big hit with the individuals just starting off with their careers. One other factor is increasing collaboration between Housing Finance Companies and builders. Such partnership minimizes the service and funding related issues significantly thus making it easier to buy property.

One innovation in the housing finance sector has been the introduction of floating rate home loan simply put the cost of such home loan or the interest rate not fixed during the tenure of the loan. Instead interest rate is benchmarked against some index/ indicator. So as the benchmark rate moves up or down, the cost of your loan too changes, at some predetermined frequency (usually once a quarter).

Ideally loan seekers should opt for a floating rate home loan when it is expected that the interest rate will decline going forward. Fixed rate loans should be preferred when the interest rates are expected to rise. But is the choice that simple? In todays environment when there is a lot of talk about rising interest rate, should investor shun floating rate home loan. Altogether is there still some merit in this instrument? In the last one year, there was a trend of floating rate home loans being more popular as compared to the fixed rate loan. As of now, this trend is continuing says Mr. Suresh Menon , GM (Mumbai region), HDFC Limited.

There are three important issues which one needs to consider before opting for one type of a loan over the other: First, an important determinant of what you go in for should be the long term expectation of interest rate. For example if you (or the experts) expects the rates to rise for the next one year, but then decline gradually over the next several years a floating rate product may be preferable. The other option for going in for a fixed rate product and then switching at the end of the year will entail costs (there could be penalty of 1%-2% of the outstanding loan amount)

and may not make financial sense. Moreover floating rate home loans do not change the rate of interest every quarter (even though they review the rate every quarter). Mr. Menon points out The attraction of a floating rate home loan is that it does not attract a part prepayment charge. This could appeal to individuals who get lump sum bonuses which they can use to reduce their loan exposure. Second, the issue whether fixed rate home loan are actually fixed rate. When considering a fixed rate home loan over floating rate of home loan a strong selling point is that if interest rate were to rise dramatically you will be protected. Apparently the reality is some what different. It seems that companies that have given out fixed rate home loans can revise their rates upwards in exceptional circumstances (significant rise in interest rate for one) so if you think interest rate will remain rage bound over the near term and decline over the long term, you are still better off with the floating rate product. Third, a fixed rate loan is generally priced higher as compared to the floating rate product. This holds true in the current environment where the fixed rate loan is at a higher interest rate as compared to the floating rate loan. The difference is currently about 0.25% to 21%. So if you expect that interest rate are likely to move up, but only to the extent of this differential, then you should ideally be in different between the two types of loan. The deciding factors then should be when you think the rates will increase and also the long term expectations of interest rates.

As always there is no one answer to whether you should go in for floating or a fixed rate home loan. If you are a person with very little appetite for risk or negative surprises, opt for fixed rate home loan. But in case you can take on some risk a floating rate home loan is worth a look.

Five steps to take a right loan:-

1) Gather data on interest rate. Get interest rate information from morethan one source and get the same information from each so you can compare the offers. 2) Get information on fees. Find out about processing fees, administration charges and other costs that may be involved in taking the home loan. A written statement of all the fees from the housing finance companies will ensure that there will be no surprises later on. Use the lowest amount of fees to negotiate with the other lenders. 3) Get pre-approval letter. This gives you substantial leverage as you are then seen as serious buyer by the seller of the property. Also, having the letter in your hand will set a limit to the amount of money you can commit to the property. This will help in identifying the right property. 4) Bargain for a lower rate of interest. Housing finance will reduce their rack rates for customers with the good credit record. A bargain deal will easily fix a home loan at significantly lower rates (at times you can get a discount of as high as 0.50 percent). Here again get a confirmation of the rate (and for how long it will remain fixed) via a letter. 5) Watch out for a predatory lending. Dont include false information on your home loan application to get quick approval. Also do not borrow more money than you need or can afford.

A floating interest rate allows customer to take advantage of interest rate movements. They get immunity from adverse movements and read the benefits of any fall in interest rate but a floating rate loan makes sense only when interest rate are high so that they can take advantage of possible fall. But predicting interest rate movement could confound even seasoned market watchers.

If they are looking for a home loan, be prepared to cough up a pretty sum as down payment. The RBI, in a recent meeting with the bankers cautioned banks against lending 100% of the property value. That is because of increasing competition in home loan some banks have been funding even 110% of the agreement value. This

means your loan not only pay for the property, it helps with the stamp duty and registration charges and even furnishing. Its being sweet deal so for, as borrower not only need have no access to other funds, they also get tax breaks. The RBIs position is that lending such sums will remain additional risk for the bank. In case of default, the bank may not have sufficient collateral security to recover dues and may have to write off the additional borrowings. However, the bankers do not seen unduly worried. Non-performing assets in the housing segment are quite low below 1% and that, say bankers, is due to the higher asset quality.

DATA ANALYSIS

SWOT ANALYSIS OF HOUSING FINANCE INDUSTRY STRENGTHS

1) The industry has been witnessing very fast growth rate, which is 6% growth in the first 2) Quarter of 2002-2003 as against 3-5% growth recorded in the first quarter of 2001-2002 3) The market faces a high demand curve, thoroughly mismatched by a low supply curve 4) Investment is based in assets that are securities & those that have historically appreciate rapidly. 5) Tax benefit & other facilities provided on loan repayments.

WEEKNESSES

1) The foreclosure rules of court of law such as provision regarding the ownership of not more than one house (in Delhi) binds the industry. 2) The healthy of an HFC depend upon its ability to mob up low cost funds. 3) AN HFC is unable to tap the rural market due to lack of proper retrieval procedures so whilst 4) The rural market offers a higher rate of return; it has a higher risk & default rate. 5) Many legal impendent exist, deferring purchase of certain types of property beyond a 6) Certain extent thereby negatively impacting weak mortgage laws, resulting in an increase in risk compo ending this.

OPPORTUNITIES

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

THREATS The industry faces increased competition as more & more foreign backs & Housing Finance Companies are providing loan facility.

SWOT ANALYSIS OF HDFC HOME FINANACE STRENGTH

1) Save substantial interest. 2) Prepay whenever the customer. 3) Reduce their loan outstanding. 4) Access the surplus finds anytime. 5) Use surplus funds to invest when the right opportunities arises.

WEAKNESS Product is very good but it is mainly suitable for higher income group & is not suitable for the Middle income group

OPPORTUNITIES There is ample scope for financing flats & apartments for the salaried class in the higher income Group.

THREATS 1) Nationalized banks like SBI, Union Bank, PNB.

2) Private Banks likes HDFC & standard chartered & Citi Bank with its home credit scheme.

CONCLUSION

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

RECOMMENDATION

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

FUTURE

The interest rates on home loans have started coming down after the Reserve Bank of India (RBI) decision to reduce the repo rate last month. The repo rate is the short-term lending rate on which the RBI extends short-term loans to banks. The repo rate is one of the major factors that decide a bank's lending rate. The lowering of the repo rate has reduced the cost of funds for banks and hence there was a drop in loan interest rates. The rates on new loan accounts have come down more than the interest rates on existing loans. This is because new accounts are viewed as fresh sales. Hence, banks float many promotional schemes and go aggressive on them. The rate cut happens on existing loans only when banks get comfortable on their overall cost of funds and are sure about maintaining their net interest margins.

BIBLIOGRAPHY

http://www.sbhyd.com/housing-loan-scheme/ http://www.jagoinvestor.com/2012/05/best-bank-home-loan-india.html http://www.icicibank.com/Personal-Banking/loans/home-loan/home-loaninterest-rates.html

http://www.thehindubusinessline.com/industry-and-economy/banking/statebank-of-hyderabad-gears-up-for-merger-with-sbi/article1819183.ece

http://articles.economictimes.indiatimes.com/2012-0519/news/31778152_1_repo-rate-loan-borrowers-rate-cuts

http://www.goodreturns.in/personal-finance/planning/2013/03/comparison-thecheapest-home-loan-rates-in-india-164789.html

http://www.deal4loans.com/home-loans-interest-rates.php