A

PROJECT REPORT
HOME LOANS

Submitted in the partial fulfillment for the award of

Masters Degree in Business Administration
Submitted to :

Submitted BY;

MR. SACHIN SABHARWAL

GUNJAN AGGARWAL
ROLL NO

02221303915

ACKNOWLEDGEMENT
This making of any report calls for contribution and cooperation from many
others besides the individual alone. It is the result of meticulous effort put in by
many minds that contribute to the final report submission and this work too is
not an exception.
Thus, one of the best parts of writing this report is the opportunity to thank
those who have contributed towards it.
First and foremost, I would like to take the opportunity to express my sincere
gratitude to MR.SACHIN. For his valued insights, suggestions and continuous
support, without which this project would not have reached successful
completion.
I would like to thank all the respondents who took time out of their busy
schedule to fill out the questionnaires and have interaction with me. All the
above, made considerable contribution to which these few lines can hardly do
justice to their patience and generous support.
Last but not the least, I would like to thank my friends.

AN INTRODUCTION

Housing is a primary human need next in importance only to food and

clothing. A first priority for a youngster who begins life is therefore to plan
for a house. This takes precedence over other household expenditure and
creature needs. Housing, however, is a major expenditure and cannot be
funded out of a family's normal monthly income or savings. The
prospective homeowner must look for a loan substantial in size and so
structured that he can repay it over a longer period of time, in many cases
almost one's entire working life.

Loan is offered to a borrower to purchase or build a new house on the basis of

his/her eligibility and the bank's lending rules. One of the important basic
human needs is shelter. House is the ultimate dream of every middle class
family. Government gave encouragement for house finance subsidiaries by
offering number of tax concessions to individuals. With the overall
encouragement given to this sector, a number of players entered in housing
finance.

One of the most important benefits of taking a home loan is the interest rate
that is allowed on the home loan. Fixed and variable interest rate options are
also available for home loans. Many financiers also offer home improvement
loans at the same interest rate as they offer the home loans.

ABOUT THE REPORT

TITLE OF THE STUDY:

The present study is titled as A PROJECT REPORT ON HOME LOANS. The

study is made with special reference to bankbranch

OBJECTIVE OF THE STUDY:

The following are the objective of the present study:

1. The main objective of doing this project is to study the corporate culture
2. To analyze various methods of operating a home loan
3. To gain knowledge about various home loan products
4. To know various rates available while providing home loan.

Data and Methodology:

For the purpose of the present study both primary and Secondary data were
used.
Primary data collected from bank visits, interviewing with
staff etc. secondary data collected from books, websites and newspaper.

A THEORETICAL VIEWHOME LOAN

The section 5 (b) of the Banking Regulation Act 1949 defines Banking as,"
Accepting for the purpose of lending or investment of deposits of money from
the public, repayable on demand or otherwise and withdrawable by cheque,
draft or otherwise."

A "home loan" is a credit to a consumer for the purchase or transformation of

the private immovable property he owns or aims to acquire secured either by a
mortgage on immovable property or by a surety commonly used in a Member
State for that purpose."

A home loan requires you to pledge your home as the lender's security for
repayment of your loan. The lender agrees to hold the title or deed to your
property until you have paid back your loan plus interest. In simple words a
home loan is a fund or the loan which the buyer has taken from any financial
institution or bank to purchase a new home at an agreed rate of interest specified
during the contract.Home loan is the finance borrowed from a bank or financial
institution to buy or modify a residential real estate property. Any Resident or
Non-resident individual who is planning to buy a house in India can apply for a
Home loan. If you have decided to buy a property in the near future you can
even apply for a loan before you select your property.

SCHEMES OF HOME LOANS:

1) Home loans for construction of new house / flat, purchase of old house/
flat, etc:
Initially, lenders approved a home loan for family/own residence only. After
gaining experience and more importantly to be competitive, lenders now
approve loans even when the applicant has more than one house or
flat/apartment. Today there is no general restriction on the number of houses
owned by an individual. The only stipulation is that the home loan funds should
not be used for commercial purposes.

2) Home extension loan:

These loans are given for expanding or extending an existing home. These are
some of the instances for which you could take an Extension Loan.

To construct an additional room or floor by getting additional FSI granted.

Using grills or sliding windows to enclose the balcony.
Construction of a garden or garage in the building vicinity.

3) Home improvement loan:

Home improvement loans for repairs /renovation including waterproof,
plumbing, compound wall, digging of well/tube-well, flooring/tiling, additions
like built-in cupboards /shelves, internal repairs including replacing
doors/windows, etc. A loan for purchase of household furniture including spacesaving furniture (kitchen racks, cupboards, etc) may also be sanctioned as a
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home improvement loan.

4) Home loan for purchase of housing site:

Here again, initially many banks did not approve such loans. However, market
forces have now made this a universal feature of the home loan market.
However, care has been taken in structuring the schemes for avoiding financing
for purchase of land for speculative lation purposes.

5) Home equity loans:

A home equity loan (sometimes abbreviated HEL) is a type of loan in which the
borrower uses the equity in their home as collateral. These loans are sometimes
useful to help finance major home repairs, medical bills or college education. A
home equity loan creates a lien against the borrower's house, and reduces actual
home equity.

Hom e loan for

purchase of
housing site

Hom e
equity
loans

Hom e
im prove
m ent
loan
SCHEM E
S OF
HOM E
LOAN
Hom e
extensi
on loan

Hom e loans for

construction of new
house / flat

Rate of Interest:
The lender decides the rate of interest chargeable on the home
loan, taking the

following into consideration:

1. Cost of funds:
The cost of funds is different for each lender, depending upon
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the mix of liabilities, liability-raising costs (based on the image

of the bank in the market) and with different costs in different
maturity buckets.
2. Tenor of the loan:
Generally, banks have borrowed funds with maturities up to 5
years, and some capital fund surpluses, which may be available
for allocation to home loan assets.
3. Capital allocation costs:
Banks are required to allocate capital based on the risk weight
of each class of asset taken on to the balance sheet.
4. Costs of administering the specific scheme.
5. Swap costs, other funding costs
6. Profit margin
7. Tenure of the loan is an important factor in pricing the
loan

8. Special considerations like group lending, which may

bring down the administration or monitoring costs.

Competition:
The lender may have to levy interest at market rates, even if
his cost plus margin is higher than competition.

SECURITY:
1)

A simple registered mortgage or equitable mortgage on the

property acquired out of the loan is taken as security. This is the

primary security for the loan.

2)

In case of flats of a group housing society, triparilite

agreement shall be entered into.

3)

In case of jointly owned properties, it should be ensured that

all the co-owners and co - Applicants execute the documents.

Home is the basic and the most expensive necessity that a man has to
fulfil in his life. With an increase in prices and the reduction in
purchasing power, a man cannot accumulate huge funds at a time. So,
in order to fulfil its basic necessity, a man has to go for a home loan. As
the repayment of home loan comprises of a large portion of interest
rates, Home loan interest rates offered by major banks in Home loan
segment. Search for Home Loans >>

Bank Name

Home loan interest rates

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9.70% to 10.15%
ICICI Bank Home loan

9.50% to 9.55%
SBI Home loan

9.60% to 9.70%
HDFC Home loan

9.95% to 11.00%
PNB Housing Finance Limited Home loan

9.60% to 9.90%
LIC Housing Home loan

9.95% to 10.35%
Federal Bank Home Loan

9.90% to 12.00%
DHFL Home Loan

9.90% to 10.80%
Indiabulls Home loan

9.95% to 11.75%
Axis Bank Home loan

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Therefore, these are the Home loan interest rates offered by different banks to
its customers. The normal range of Home loan interest rates are from 10.10%
to 12.75%. In this race, Government banks along with some private numbers
and financial institutions are running in a front panel by offering lowest
interest rates on home loans @ 10.10%. The front runners are SBI, ICICI,
Standard chartered bank and LIC. SBI and ICICI bank has given a privilege
to its women borrowers by providing them a home loan interest rate at
10.10% which is 0.05% lesser than the home loan interest rate provided to the
male borrowers. So, women are going to be benefited with this revolution in
home loan interest rate and this will encourage women to put a hand for
buying her own house.
BankBazaar facilitates you to compare the home loan interest rates offered by
different banks and then to take the most important decision of your life.
After comparing the interest rates offered by different banks, you can also
calculate your EMI based upon that by just entering few particulars in the
EMI calculator provided by the BankBazaar. This calculation will help you
decide the loan amount that you can easily pay off and the loan tenure in
which you can easily pay off the debt without compromising on your other
needy expenses.
Before going for a home loan, you must be careful enough to see
the nature of its interest rates. There are two types of interest
rates i.e. fixed interest rates and floating interest rates. You have
to carefully choose between the two. Fixed home loan interest
rates will remain fixed all over the tenure and floating home loan
interest rate will keep on changing with the change in the base
rate. But, the floating home loan interest rates are cheaper than
the fixed home loan interest rates on the first front

Step By Step Guide To Home Loan

Process In India
In India, the developing real estate market offers a wide range of residential projects
suitable for all income group populace from studio apartments to luxury villas, budget
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homes to high rise sky scrapers in metro, tier II and III cities. As the housing rent
increases in skyrocketing speed, it is advisable to invest your income in a residential
property which will save your monthly rentals in addition to serving as an investment.

Nowadays there are government and private banks in India offering home loans for
home buyers by lending up to 80% of the total cost. If you are a first time home buyer
looking for loan, here is the step by step guide to the process of obtaining a home
loan:After choosing the bank for home loan, prepare your payment as banks offer only
80% of the total cost. Also check your loan eligibility and keep all the necessary
home loan related documents ready.
1. Home loan Application
You can avail the application form from any bank office or download it from online.
Duly fill the form and attach copies of the loan related documents such as ID proof,
Address proof, Age proof, Income proof, proof of educational details and
employment, bank balance statement etc., if you apply online, you can get instant
provisional approval within 24 hours.
Send the form and the non refundable processing fee to the bank for loan approval
process. The processing fee differs from one bank to another from 0.25% to 0.50%
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which is usually non refundable in case if the loan is denied. This is used for the loan
processing procedure and maintenance of your loan.
2. Discussion with the Bank
After submission of application form, the applicant will be called by the bank for a
face to face discussion to evaluate the papers and decide on the payment capacity
and to decide on the loan amount etc. This discussion meet happen in 2 or 3 days
after the submission of application form. At this point, the applicant can also bring the
original documents of all the proofs submitted earlier.
3. Bank Investigation
A field investigation will be conducted to check all the information stated in the
application form and qualified bank employee or a verification agent will investigate
and verify all the details. The representatives will visit the office and residence of the
applicant to verify the details. In the process, the references mentioned by the
applicant will also be checked and cross verified.
After this, the bank will verify the applicants repayment capacity and if it is not
satisfactory, the loan will be rejected. It will check the ability of the borrower to repay
the loan amount with interest on time along with the previous loan transactions track
record. If the bank finds that the applicant can repay, then the loan will be
sanctioned.
4. Offer Letter for the loan sanction
Once the loan is sanctioned, the bank will send an offer letter to the applicant with
details regarding the home loan such as loan amount sanctioned, interest rate for the
loan, type of interest selected: fixed or floating interest rates, loan tenure, mode of
loan repayment, special scheme or offer if applicable and the general terms and
conditions of the home loan approved.
If you are satisfied with all the norms, then you can provide an acceptance letter with
your signature to the bank to acknowledge the sanction.
5. Submission of legal documents
These days, the bank requires all the legal documents related to the property for
availing the loan. The bank will perform legal check and these documents will be
detained by the bank till the applicant repays the loan amount.
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6. Technical Valuation of property

Along with the legal check, the bank will also perform a technical valuation of the
property. For under construction projects, the bank will check the quality and
progress of the construction work along with the locality valuation to evaluate the
value of the property. The bank has qualified valuators to assess the property value
under established parameters. This is performed to ensure a clear title and if the
property is viable and meets the valuation standards.
7. Registration and Signing
After all the financial and technical valuations, the home loan registration process
begins. The legal loan documents will be prepared on stamp papers by the bank
lawyer. The loan agreement must be signed and submitted back to the bank along
with post dated cheques.
8. Loan Disbursal
After registration, the bank will disburse the loan amount based on the agreed terms
of disbursal either as a full payment or partial payment mode in stages. Usually for
ready possession of the property, the amount will be disbursed in full.

The above mentioned home loan process is applicable in most banks though
there might be changes according to individual bank policies. This long home
loan process is now simplified with the instant home loan process available
online. You can try ay one based on your convenience and requirements.

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.EQUATED MONTHLY INSTALLMENTS (EMI): The monthly

repayment by the applicant is related to his cash flow. There
is an element of interest and of principal in the monthly
payments. The interest payable over the period of the loan is
calculated and added to the loan amount to arrive at the
total payable amount .this amount, divide by the total
number of monthly installments is called equated monthly
installment (EMI).

CHARGES IN HOME LOAN: Acquiring a Home Loan doesnt

only involve the cost of home loan interest rates but it also
includes other charges & fee accompanying at various
stages of taking the Home loan. You must consider all these
charges while comparing the cost structure across banks.
Following is the detailed fee structure incurred by banks at
different loan stages:
Processing Charge:
It is a fee payable at the time of submitting the loan
application to the bank which is normally non-refundable.
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The fee ranges between 0.5 per cent and 1 per cent of the
loan amount.
Administrative Fee:
It is a fee incurred by banks at the time of loan sanction;
there are few banks who have removed this fee so you must
check it with all the banks.
Prepayment Penalties:
When the borrower pre-pays the loan before the loan tenure,
banks charge a penalty which usually varies between 1 per
cent and 2 per cent of the pre-paid amount.
Legal Charges:
Banks also incur some charges from the customer for legal
and technical verification of the property.
Delayed payment Charges:
When there is a delay in the payment of your EMI, banks
charge a late payment fee from the borrower which normally
ranges from 2% to 3% of the EMI.
Cheque bounce charges:
Banks charge between Rs. 250 and Rs. 500 for every
bounced cheque towards the loan payment because of lack
of funds in your account.

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POINTS

CONSIDERED

BY

BANK

WHILE

GRANTING

HOME LOAN:
The borrowers eligibility of getting a home loan
depend upon his/her repayment capacity & the banks
establish this repayment capacity by considering various
factors such

income, spouse's income, age, number of dependants

qualifications ,assets, liabilities, stability and continuity of
occupation and savings history.

Example of icci bank:

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Documents Required for Home Loan

Getting a home loan from ICICI Bank is easy and quick. We keep the paperwork and other formalities
to a minimum. Proof of your identity, address and income are some of the key documents that are
required to be submitted for ICICI Bank home loan.

Moreover, if you are an existing customer of ICICI Bank, you can now enjoy the benefit of reduced
documentation.

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Documents

Salaried

Application form with photograph duly signed

Identity, residence and age proof
Last 6 months bank statements
Last 3 months Salary-slips
Processing fee cheque
Form 16 / Income Tax Returns
Proof of business existence
Business profile
Education qualification certificate and proof of
business existence
Last 3 years Income Tax Returns with
computation of Income

Last 3 years CA Certified / Audited Balance

Sheet and Profit & Loss Account

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Self
Employed
Professiona
l

Self Employed Non

Professional

Get Attractive Rates on ICICI Bank Home Loans. Apply Online No

w and Get Instant e-Approval*
1Get Eligibility
2Decide to Apply
3Complete Application
4Upload Documents
Fill form to get a customized quote instantly. (Specify loan amount & loan
tenure on the next page)
City in which property is based

Bhubaneshw ar

Purpose of loan

Where do you live currently?

Date of Birth

DD

MM

YYYY

Type of employment

I want to include Co-applicant income to increase my eligibility

I declare that the information I have provided above is accurate and
complete to the best of my knowledge. I authorize ICICI Bank & its
representatives to call or sms me with reference to my loan application.

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* Provisional approval subject to Terms & Conditions

Loans are the sole discretion of ICICI Bank Ltd.

Disclaimer | Terms & conditions

IMPORTANT POINTERS IN HOME LOAN:

Increase your Loan eligibility

Credit History:
Your chances of getting a home loan are increased if you
have a good credit history which is known by banks by
checking the borrowers Cibil score. Now it is very hard to get
a loan from another bank when you already have a bad debt
with one bank.
Clubbing of income:
Your eligibility to take a home loan will augment when you
club your income with your spouses income, bank in this
case will calculate your eligibility on the basis of the clubbed
income of both the applicants. You can club incomes of
spouse, children & parents staying with you and having
regular income.
Enhance your loan tenure:

Longer is the loan tenure,

lower will be the EMIs which further increases the repayment

capacity of the borrower & in turn enhances the loan
eligibility.
Step-up Loan:

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In this type of loan EMI's remain low in the beginning &

increase gradually as and when the borrowers spending
power increases. Therefore lower EMI's in the initial years
enhances the borrowers ability to pay & further increases
the loan eligibility

Increase the down payment:

You must know that in a home loan bank finances only 85 to
90% for the property & the rest amount has to be funded by
the borrower. You should increase the down payment if you
have more than required amount which will mitigate your
debt considerably.

TAX BENEFITS IN HOME LOAN:

Past record:
The home loan borrower enjoys Tax Benefits on both Interest
paid & the Principal re-paid. Under Section 24(d) of Income
Tax, the deduction of interest payable on the home loan is up
to a maximum of Rs. 1, 50,000.
Under Section 80(c) of Income Tax, Principal amount for the
repayment of loan along with other savings & investments is
eligible for tax deduction up to a
Maximum limit of Rs. 1, 00,000.
Recent changes:
23

According to the new policy changes of the direct tax code

bill introduced in the parliament in the month of august 2010
only upto Rs 1.5 lakh deduction is allowed on the interest
paid on the housing loan and there is no deduction available
on the principal amount. So if your equated monthly
installment is Rs 1.50 lakh, comprising interest and principal
outgo of RS 75000 each, you can avail deduction of only the
interest.

Conclusion;

The home loan market in India has grown at a rapid and

alarming rate of over 40% over the period of the last four
years. And from the reports from some of the industry
experts, it is evident that there is very little chance that
there will be any significant decline in growth rates in the
future. Therefore it becomes important at this point in time
to examine the key factors that have been instrumental in
triggering this high growth period. There are several reasons
that can be considered as having attributed to the growth of
the home loan market. On the demand side, the first and the
most important factor for the growth has been faster rise in

24

incomes as compared to property prices, thus making

housing more affordable.

Most of the housing finance companies in India have

introduced several new home loan products in order to meet
the needs of a wide variety of customers. The various home
loan schemes have their different interest rates in the
market. The customer can choose those schemes which he
feels is good for him and have the capacity to repay it on
that specified time period. If unwavering liability is what suits
your profile, then fixed interest rate home loan should be the
natural choice. On the other hand,

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