A

PROJECT REPORT

ON
“COMPARATIVE ANALYSIS OF HDFC
WITH OTHER MARKET PLAYERS”

SUBMITTED TO: SUBMITTED BY :

CONTROLLER OF EXAMINATION SHILPI BANSAL
MAHARISHI DAYANAND UNIVERSITY 2K9-MRCE-MBA-057
ROHTAK

Submitted In the Fulfillment of the Degree of

Master of Business Administration, 2009-11 at

MANAV RACHNA
 COLLEGE OF ENGENEERING

INFORMATION SHEET

Name of the Company- Housing Development Finance Corporation Limited

Registered Office - Ramon Office, H.T. Parekh Marg,

169, Backbay Reclamation, Churchgate, Mumbai 400020

Training Branch Address- SCO 184-185, Ground Floor, Sector 17,

Commercial Belt, Near Mini Secretariat,
Jagadhari (Haryana) 135003.

Phone No. of the Branch- 01732-320547, 260024

Date of Internship Commencement- 7th June, 2010

Date of internship Completion- 1, Aug, 2010

Name of the Industry Guide- Mr. Mandeep Singh Sawhney

Designation of the Industry Guide - Officer-Operations, HDFC Ltd, Jagadhari

Student’s Name- Shilpi Bansal

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Student’s E-mail ID- shilpi.bansal20@gmail.com

PREFACE

It has been a learning experience to prepare project report as a part of partial

fulfillment of MBA degree. The six weeks training has made my concepts

regarding home loans advance. This project report on “ Comparative analysis

of HDFC with other market players” is a modest attempt towards the

understanding of the practice of Credit facilities in the present scenario. This

report grows out of six weeks of summer training at HDFC Limited, Jagadhari

as a requirement of partial fulfillment of my degree in Masters in Business

Administration in 2009-2011 from Maharishi Dayanand University (Rohtak).

The report concerns with home loans, financing practices, major documents

attached and lastly in brief projects studied.

Efforts have been made to incorporate the latest changes. Any suggestion or

observation from the reader will be thankfully acknowledged.

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ACKNOWLEDGEMENT

Any job in this world, however, trivial or tough cannot be accomplished without

the assistance of others. I would hereby take this opportunity to express my

indebtedness to people who have helped me to accomplish this task.

I take this opportunity to place my grateful thanks and sincere gratitude to the

HDFC Ltd., Jagadhari for providing me a wonderful chance of working in a

prestigious company.

First of all I would like to thank Mr. Sumeet Suri (Resident Manager) and to

Mr. Mandeep Singh Sawhney (Officer-Operations), my project guide who

helped me throughout my training period, which not only helped me understand

about the home loans but also helped to increase my confidence level. I would

also like to thank the whole staff of the branch for their immense support.

I am also immensely grateful to my esteemed Faculty Guide Ms. Rekha

Sachdeva, for her constant support and continuous and invaluable guidance at

each step of this summer internship program.

Lastly, I would like to thank my family and my friends for giving me their support.

SHILPI BANSAL

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 DECLARATION

I Shilpi Bansal Roll no. 2K9 MRCE MBA 057, the student of
M.B.A, 3rd semester of “MANAV RACHNA COLLEGE OF
ENGINEERING” hereby declare that the summer training
report on “COMPARATIVE ANALYSIS OF HDFC WITH
OTHER BANKS” is an original work and the same has not been
submitted to any other institute for the award of any other
degree.

Faculty Signature of the candidate

(Director Principal of the Institute)

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TABLE OF CONTENTS…

PAGE NO.

Significance of the topic 7-8

Objective Of the Study 9

About HDFC 10-13

Home Loans 14-17

Process of Sanctioning of Home Loans 18-20

Types of Home Loans 21-23

Advantages of Home Loans 24

Home Loans for NRI’s 25-26

Home Loans for Resident Indians 27-37

Home Loans at HDFC Limited 38-42

Research Methodology 43

Data Collection 44,45

Comparative anlaysis of HDFC with other HFCs 47-78

Review of Literature 79-82

SWOT 83,84

Recommendations 85

Bibliography 86

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SIGNIFICANCE OF THE TOPIC

Everyone in this world has a dream of owning a home. Home Loan Financing

helps people make their dream come true.

In India, Housing Loan Sector is growing. The surge in individual home loans,

particularly in the last quarter of the financial year is testimony of the renewed

confidence of individuals. Armed with higher disposable incomes, the desire to

own a home has intensified.

The aspirations of Indians will continue to rise. The projected growth

opportunities in India are translating into mind-boggling numbers. India will

ride the wave of urban expansion. Currently, 28% of India’s population or 300

million people live in urban areas. It is estimated that by 2030, 40% of the

population or approximately 600 million people will be living in India’s cities.

All these people will need homes to live.

Against the milieu of rapid urbanization and a changing socio-economic

scenario, the demand for housing has grown explosively. The importance of the

housing sector in the economy can be illustrated by a few key statistics.

According to the National Building Organization (NBO), the total demand for

housing is estimated at 2 million units per year and the total housing shortfall is

estimated to be 19.4 million units, of which 12.76 million units is from rural

areas and 6.64 million units from urban areas. The housing industry is the

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second largest employment generator in the country. It is estimated that the

budgeted 2 million units would lead to the creation of an additional 10 million

man-years of direct employment and another 15 million man-years of indirect

employment the National Housing Policy has envisaged an investment target of

Rs. 1,500 billion for this sector. In order to achieve this investment target, the

Government needs to make low cost funds easily available and enforce legal

and regulatory reforms.

The trend is already evident as younger people increasingly aspire to become

homeowners. Earlier it was not easy for these aspirants to fulfill their dreams

due to lack of funds but now due to easy availability of loans, their dreams

could be fulfilled.

But giving or sanctioning a proposal of loan is very crucial task. My objective

of selecting the topic “Home Loan Financing” is to see and to know what the

basis of evaluation of these proposals is, because a wrong evaluation of

different

proposals and financing wrong projects was the cause of the global economic

crisis.

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OBJECTIVE OF THE STUDY

The purpose of research is to discover answers to questions through the

application of scientific procedure. The main aim of research is to find out the
truth which is hidden and which has not been discovered yet. Though each
research study has its own specific purpose, I may think of research objectives
as falling into a number of following broad groupings:-

Research objectives of the project are as follows:

1) To study the loan approvals and disbursement by HDFC LTD.

2) To study the perception of the customer about the HDFC LTD.

3) To look the competitor Home Loan Policies

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INTRODUCTION OF THE COMPANY
ABOUT HDFC LIMITED

Housing Development Finance Corporation Limited (HDFC) was incorporated

in 1977 by Hasmukhbhai Parekh with the primary objective of meeting a social

need - that of promoting home ownership by providing long-term finance to

households for their housing needs. HDFC was promoted with an initial share

capital of Rs. 100 million.

The Registered Office of HDFC Ltd. is at Mumbai. To reach out effectively to

customers, the Corporation’s distribution network now spans 279 outlets, which

include 65 offices of the HDFC’s wholly owned distribution company, HDFC

Sales Private Limited (HSPL). To further augment this network, HDFC covers

over 90 additional locations through its outreach programmes. HDFC has

offices in London, Singapore and Dubai

HDFC had 1,505 employees as of March 31, 2010, who are dedicated and

delighted to serve the customers with professionalism and whole heartedly.

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The people holding key positions in HDFC Ltd. are-

Mr. Deepak S. Parekh – Chairman

Mr. Keshub Mahindra – Vice-Chairman

Mr. Keki M. Mistry – Vice-Chairman and CEO

Ms. Renu Sud Karnad – Managing Director

Mr. V. Srinivasa Rangan - Executive Director

Employee productivity:
Net profit per employee increased to Rs.188 Lakhs as of March 2010 from Rs.

153 Lakhs as on March 2009.

Assets per Employee

Assets per Employee rose to Rs. 7,426 lakhs as of Mar’10 from Rs. 6,510 Lakhs

as of Mar’09.

Value of stock of company

Current Price of the stock of HDFC Ltd. (18 June’10, 3:50 pm IST) was Rs.

2923.15.

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 Business Objectives

• The primary objective of HDFC is to enhance residential housing stock in

the country through the provision of housing finance in a systematic and

professional manner, and to promote home ownership.

• Another objective is to increase the flow of resources to the housing

sector by integrating the housing finance sector with the overall domestic

financial markets..

Organizational Goals
HDFC's main goals are to:

• Develop close relationships with individual households,

• Maintain its position as the premier housing finance institution in the

country,

• Transform ideas into viable and creative solutions,

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 • Provide consistently high returns to shareholders,

Key Subsidiaries & Associate Companies

Company Shareholding %
HDFC Developers Limited 100
HDFC Investments Limited 100
HDFC Holdings Limited 100
HDFC Trustee Company Limited 100
HDFC Realty Limited 100
HDFC Property Ventures Limited 100
HDFC Sales Private Limited 100
HDFC Ventures Trustee Company Limited 100
HDFC Venture Capital Limited 80.5
HDFC Ergo General Insurance Company Limited 74.0
HDFC Standard Life Insurance Company Limited 72.6
GRUH Finance Limited 61.4
HDFC Asset Management Company Limited 60.0
HDFC Bank Limited* 23.7
*(Inclusive of shareholding of HDFC Investments Limited and HDFC Holdings

Limited)

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PRODUCT PROFILE
HOME LOANS

Home loan is the sum of money a bank or financial institution lends you to help

you buy your dream home.

By taking a home loan from a bank or a housing finance company you pledge

your home as the lender’s security for repayment of your loan. The bank or

financial institution will hold the title or deed to the property till the loan has

been paid back with the interest due for it.

Home loans are generally taken for long tenures, as the loan amount is usually a

huge sum. A home loan can be taken anywhere between 5 and 30 years. The

amount of loan one is eligible for is dependent on the individual’s credit profile.

Features of Home Loan

Home loans are available on fixed rate of interest as well as floating rate of

interest.

In fixed rate loans, the interest rate remains fixed over the life of the loan,

irrespective of the interest rates in the open market. The plus point of fixed rate

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loans is that they remain steady over the years, making at least one aspect of

your monthly cash flow predictable. However, the flip side is that the lenders

charge a higher rate of interest for fixed-rate loans because if interest rates shoot

up, they lose the opportunity to make more money on the funds they are

lending.

In floating rate loans, the rate of interest changes according to a set formula as

interest rates fluctuate in the open market. The plus point is that lenders charge
a

lower rate for such loans because you are taking on some of the interest-rate

risk. The downside is that interest rates may rise anytime and you can end up

paying more than fixed rate loans. The type of interest you opt for will entirely

depend on your personal preferences.

Characteristics of Home Loans

• The loan amount is based on the repayment capacity of the customer.

• However, it cannot be more than 85% of the cost of the property

(including the cost of the land).

• The minimum term of home loan is 5 years, while the maximum duration

for the loan is 20 years, subject to the retirement age of the applicant.

• Home Loans can be applied either individually or jointly, with spouse,

children (son or daughter) and even earning parents (father or mother),

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 but if staying with the applicant and having regular income.

• Home loan eligibility can be enhanced by repaying the outstanding loans,

clubbing the income, increasing the home loan tenure and opting for a

step-up loan.

• The amount of loan sanctioned varies from bank to bank. Generally, the

maximum loan amount granted for the applicant would be 80% to 85% of

the cost of the home.

Eligibility Criteria
• The minimum age limit for the person applying for loan is 21 years.

• For Government employees and those working at public limited

companies, the maximum age limit for applying for home loan is 60

years, while for salaried individuals, it is 58 years.. For self employed

people, the maximum age limit is 65 years.

• The applicant should be graduate.

Insurance cover (an added cost)

Also, many banks may insist on getting your home insured to safeguard their

interest. There are various kinds of insurance covers available for you. Apart

from getting the mandatory ones you should try to get insurance as per your

circumstances. You also have a choice of getting insured from another company

without any objection from your bank.

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 Other costs
The interest rates and EMIs are not the only cost factor. Administration fee and

processing has to be paid up by the customer. A 1% administration fee and a 1%

processing fee on a Rs.10 lakhs loan, would amount to Rs.20,000. Processing

fees, administration fees, valuation fee, legal fee, is to be paid when you apply

for a loan and other fees paid at closing. Many of these fees are negotiable. You

should ask for zero processing fees and zero-penalty for pre-payment option. If

this were not available, then lowest cost would be better. Make sure you work

out as to how much these other costs add up to. So even though the interest rate

may be lower, it usually adds up to being expensive. If the EMIs may come out

a lot more than what you can afford on a monthly basis; try to redo the math

with changes in the tenure and loan amount (if possible).

Penalties
Once you have received the loan, do your best to pay it back as quickly as

possible. But this early payment might invite a pre-payment clause. Banks make

their money off the interest they charge and the sooner you pay back a loan, the

less money you will have to pay in interest. When it comes to Home loans,

penalties are binding, like if you chose to pay up your entire money before the

tenure, a Pre- payment penalty is charged. So you should know about such

penalties beforehand to avoid future misunderstanding between you and the

bank.

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PROCESS OF SANCTIONING THE HOME LOAN

1. Personal Discussion with the customer- The purpose for which the

customer requires the loan is known. His income, EMI-paying capacity,

Property details, etc are discussed.

2. Customer Application- Customer is provided with the application form

which he’ll submit to any HDFC office after completely filling the form.

3. File logged in or appraisal- Once the application form is received, the

process of appraisal starts. Technical appraisal is done to verify the

location and condition of the property according to which value of

property is evaluated. Customer verification is done, business

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verification is also done. ITR verification is also done.

4. Detailed data entry/ Scanning- Data collected are fed into the system.

File of the customer is created.

5. Recommendation- The case is recommended for the sanction of the loan

after all the relevant data is collected and is fed into the system.

6. Double check- Once the file is recommended, it is double checked by the

authorized person at the head office of HDFC Ltd.

7. Sanction the loan- After double- checking the file, the loan is sanctioned

and the information is sent to the branch.

8. Legal Documents are invited- Once the loan is sanctioned, the original

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 legal documents are invited from the applicant. Applicant has to deposit

with HDFC original sale deed and all other legal papers in original.

9. Disbursement- Once the customer submits original legal documents, he

can take the loan. For this, he has to fill the Disbursement Form

requesting HDFC to disburse the loan amount. When first disbursement is

made, the applicant and the co-applicant have to sign the Loan

Agreement with HDFC Ltd.

The disbursement is done in different stages according to the the type of

the loan taken-

 For Ground floor construction Cases, the disbursement will be

in three stages-

1. Depth Plinth Completion(DPC)

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 2. When Lentering is done.

3. When flooring is done.

 For Ground Floor and First floor construction cases, the loan

amount is disbursed in three stages-

1. Depth Plinth Completion(DPC)

2. When Second floor lentering is done

3. When flooring is done.

 For Purchase cases, disbursement is done in only one stage.

 For loan against property cases, disbursement is done in only one

stage.

 For home improvement, disbursement is based on the work done

so far.

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 TYPES OF HOME LOANS

A person seeking investments for house or a property opts for Home Loans for a

variety of purposes ranging from construction to renovation. The Housing

Finance Companies (HFCs) now offer individuals with various alternatives to

choose from while buying a home loan. And the availability of Home Loans

offered is as varied as their requirements

There are different types of home loans tailored to meet one’s needs:

• Home Purchase Loans

• Home Construction Loans
• Home Improvement Loans
• Home Extension Loans
• Home Conversion Loans
• Land Purchase Loans
• Stamp Duty Loans
• Bridge Loans
• Balance Transfer Loans
• Refinance Loans

Home Purchase Loans:

This is the basic home loan for the purchase of a new home.

Home Construction Loans:

This loan is available for the construction of a new home on a said property.

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The documents that are required in such a case are slightly different from the

ones you submit for a normal Housing Loan. If you have purchased this plot

within a period of one year before you started construction of your house, most

HFCs will include the land cost as a component, to value the total cost of the

property

Home Improvement Loans:

These loans are given for implementing repair works and renovations in a home

that has already been purchased, for external works like structural repairs,

waterproofing or internal work like tiling and flooring, plumbing, electrical

work, painting, etc. One can avail of such a loan facility of a home
improvement

loan, after obtaining the requisite approvals from the relevant building authority.

Home Extension Loans:

An extension loan is one which helps you to meet the expenses of any alteration

to the existing building like extension/ modification of an existing home; for

example addition of an extra room etc. One can avail of such a loan facility of a

home extension loan, after obtaining the requisite approvals from the relevant

municipal corporation.

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Home Conversion Loans:
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 which some extra

funds are required

. Land Purchase Loans:

This loan is available for purchase of land for both home construction or

investment purposes

Stamp Duty Loans:

This loan is sanctioned to pay the stamp duty amount that needs to be paid on

the purchase of property.

Bridge Loans:
Bridge Loans are designed for people who wish to sell the existing home and

purchase another. The bridge loan helps finance the new home, until a buyer is

found for the old home.

Balance-Transfer Loans:
Balance Transfer is the transfer of the balance of an existing home loan that you
availed at a higher rate of interest (ROI) to either to either the same HFC or
another HFC at the current ROI a lower rate of interest.

Re-finance Loans:
Refinance loans are taken in case when a loan for your house from a HFI at a

particular ROI you have taken drops over the years and you stand to lose. In

such cases you may opt to swap your loan. This could be done from either the

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same HFI or another HFI at the current rates of interest, which is lower.

ADVANTAGES OF HOME LOANS

Taking a home loan nowadays has become very simpler. The RBI has been

regularly slashing interest rates, with the result that housing finance loans that

came at an interest rate of 16.5% to 18% four years ago are now available at

11.5% to 13% or lower. Each year the Finance Minister's generosity during the

Budget seems to be solely concentrated for the housing sector and construction

sector. The Revised discussion paper on Direct Tax Code has proposed to

continue with the existing system of deducting interest payment (up to Rs. 1.5

Lakhs) against home loans from total income before calculating the tax liability.

The department has increased the exemption limit to Rs. 3 lakhs from present

level of Rs. 1.1 Lakhs against investments in selected investments. Rs. 1.5 lakhs

interest benefits against home loan will be included under 3 lakhs ceiling. To

top it all, the Housing Finance Companies (HFCs) are aggressively wooing

customers. Now, when the sun shines, it’s the best time to make hay.

HOME LOANS FOR NRI’S

The Non-Resident Indians (NRIs) are recognized under the Foreign Exchange

Regulatory Act, 1973. Every bank and housing finance companies follow the

RBI Guidelines to Define NRI’s."An Indian citizen who holds a valid

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documents like Indian passport and who stays abroad for employment or for

carrying on business or vocation outside

India or stays abroad under circumstances indicating an intention for an

uncertain duration of stay abroad is a NRI."

Broadly categorized, Non-Resident Indians qualifying for NRI housing loans

are:

• Indian citizens who stay abroad for employment or for carrying on

• business or vocation outside India or for any other purpose in

• circumstances indicating an indefinite period of stay abroad;

• Government servants who are posted abroad on duty with the Indian

• missions and similar other agencies set up abroad by the Government of

• India where the officials draw their salaries out of Government resources;

• Government servants deputed abroad on assignments with foreign

• Governments or regional/international agencies like the World Bank,

• International Monetary Fund (IMF), World Health Organization (WHO),

• Economic and Social Commission for Asia and the Pacific (ESCAP);

Officials of the State Government and Public Sector Undertakings deputed

abroad on temporary assignments or posted to their branches or offices abroad.

However, for availing home loans, NRIs have to fulfill certain conditions
according to provisions of the Income Tax Act. They should have stayed in
India for a period of 182 days or more within an assessment year or they should
have stayed in India for at least a total of one year or more.

Last but not the least, NRIs should take due care while selecting their home loan

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provider companies or HFCs. Considering the geographical distances involved,

it is significant that loan seekers associate with a proactive and responsive HFC.

Eligibility

Age: The loan applicant has to be 21 years of age.

Qualification: The NRI loan seeker has to be a graduate.

Income: The loan applicant has to have a minimum monthly income of $ 2,000

(although, this criterion may differ across HFCs).The eligibility is also

determined by the stability and continuity of your employment or business.

Payment options: The NRI also has to route his EMI (Equated Monthly

Installments) cheques through his NRE/NRO account. He cannot make

payments from another source say, his savings account in India.

Number of dependants: The eligibility of the applicant is also determined by

the number of dependents, assets and liabilities.

An NRI applicant is eligible to get a home loan ranging from a minimum of Rs

5 lakhs to a maximum of Rs 1 crore, based on the repayment capacity and the

cost of the property, which although is variable by the priorities of the home

loan provider. Also Home Loan Tenure for NRIs is different from Resident

Indians.An applicant will be eligible for a maximum of 85% of the cost of the

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property or the cost of construction as applicable and 75% of the cost of land in

case of purchase of land, based on the repayment capacity of the borrower.

An NRI applicant is eligible to get a home loan ranging from a minimum of Rs

5 lakhs to a maximum of Rs 1 crore, based on the repayment capacity and the

cost of the property, which although is variable by the priorities of the home

loan provider. Also Home Loan Tenure for NRIs is different from Resident

Indians.An applicant will be eligible for a maximum of 85% of the cost of the

property or the cost of construction as applicable and 75% of the cost of land in

case of purchase of land, based on the repayment capacity of the borrower.

However, a NRI can enhance his loan eligibility by applying for home loans

with a co-applicant who has a separate source of income. Also, the rate of

interest for home loans to NRIs is higher than those offered to Resident Indians.

The difference is to the extent of 0.25%-0.50%. Some HFCs also have an

internally earmarked 'negative criterion' for NRI home loans. As such, the NRIs

who hail from locations that are marked as being 'negative' in the books of

HFCs, find it difficult to get a home loan.

ELIGIBILITY FOR RESIDENT INDIANS

Home loan eligibility for Resident Indians depends upon the repayment capacity

of the loan applicant. The maximum loan that can be sanctioned varies with the

banks and other housing finance companies (HFC) and generally, the maximum

loan amount granted is 80 to 85% of the cost of your home.

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Home loan eligibility corresponding to repayment option is based on the

following factors. Even though, the eligibility criteria may vary according to the

HFCs regulations.

Age (minimum) 21 years

Age (maximum) 58(salaried)

60(Public limited/Government Employees)

65 (self employed)
Qualification Graduation
Income Stable source of income and saving history
Dependents Number of dependents, assets, liabilities
Other income sources Spouse's income

As home loan rates increase, the loan eligibility for a borrower becomes stiffer.

In such a scenario, some home loan borrowers might have to re-evaluate their

options (in terms of loan amount) on account of the new eligibility criteria.

Home loan eligibility can be enhanced by:

i) Increasing the Home loan tenure

One of the basic process of enhancing the home loan eligibility is by opting for

a higher tenure. This is so because the EMI, which an individual has to pay,

starts to decline as the tenure increases while the interest rate as well as the

principal amount remains the same. What changes though, is the net interest

outgo, which rises with a rise in tenure. And since the individual is paying a

lower EMI now, his 'ability to pay' and therefore his loan eligibility

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automatically increase.

ii)Repaying other outstanding loans

There might be adverse effect on home loan eligibility for individuals with

outstanding loans like car loans or personal loans. Industry standards suggest

that existing loans with over 12 unpaid installments are taken into account while

computing the home loan borrower's eligibility. In such a scenario, individuals

have the option of prepaying in part/full their existing loans. This will ensure

that their eligibility for the home loan purpose is unaffected.

iii) Clubbing of incomes

Home loan eligibility can also be enhanced by clubbing incomes of spouse,

children (son or daughter) staying with the applicant and having regular income

and even earning parents (father or mother) living with the applicant. The

eligibility in such cases, will be calculated on the clubbed income of both the

applicants enhancing the individual's eligibility to the extent of the co-

applicant's income.

iv) Step-up loan

Individuals can also enhance their loan eligibility by opting for step-up loans. A

step-up loan is a loan wherein an individual pays a lower EMI during the initial

years and the same is enhanced during the rest of the loan tenure. HFCs usually

consider the lower EMI of the initial years to calculate his loan eligibility while

the initial lower EMI helps increase the individual's 'capacity to borrow'.

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v) Perks
Salaried individuals must ensure that variable sources of income like

performance-linked pay among others are taken into consideration while

computing their income. This in turn will imply that the loan amounts they are

eligible for stand enhanced as well.

However, potential investors and borrowers must work out solutions best suited

for their profile after speaking to their home loan consultant and only then

consider acting on the options discussed. Because, increasing loan eligibility

can have an impact on other aspects of their financial planning.

REPAYMENT OPTIONS
Every housing finance companies or banks have customized repayment options

to suit every individual's requirement and also repaying capacity with some tax

benefits. They have thereby come up with more flexible and Multiple

Repayment Option.

A few among them are:

 Step-up Repayment Facility

The objective of step-up repayment is to provide the borrower with a

repayment schedule, which is linked to expected growth in income. It not

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 only helps a customer get a larger amount of loan as compared to the loan

under the normal housing loan; but the customer can avail of a higher

amount of loan and pay lower EMIs in the initial years, which is

subsequently accelerated proportionately with the assumed increase in his

income.

 Flexible Loan installments Plan

This repayment option offers a customized solution to suit the needs of

customers whose repayment capacity is likely to alter during the term of

the loan. In cases when a borrower is nearing retirement, the loan is

structured in such a way that the EMI is higher during the initial years

and subsequently decreases in the latter part proportionate to the reduced

income of the customer. This option helps such customers combine the

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 incomes and take a long term home loan where in the installment reduces

upon retirement of the borrower.

 Tranche Based EMI

Customers purchasing an under construction property, need to pay

interest (on the loan amount drawn based on level of construction) till the

property is ready. Tranche Based EMI is a special facility offered by

some banks to help customer save this interest. Customers can fix the

installments they wish to pay till the property is ready. The minimum

amount payable is the interest on the loan amount drawn. Anything over

and above the interest paid by the customer goes towards principal

repayment. The customer benefits by starting EMI and hence repays the

loan faster.

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  Accelerated Repayment Scheme

Accelerated Repayment Scheme offers you a great opportunity to repay

the loan faster by increasing the EMI. Whenever you get an increment,

increase in your disposable income or have lump sum funds for loan

prepayment, you can benefit by

• Increase in EMI means faster loan repayment

• Saving of interest because of faster loan repayment

• Or invest lump sum funds rather than use it for loan prepayment.
The return from the investments also gives you the comfort of
paying the increased EMI.

HOME LOAN TENURE

Home loan tenures fixed by RBI are available up to a term of 15 years. Some

financial institutions have home loan tenures in the range extending up to 20, 25

and 30 years if the applicant fulfils certain criteria. However, you cannot opt for

a term that extends beyond your attaining retirement age or 60 years of age

(whichever is earlier).

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TERMS AND CONDITIONS FOR AVAILING TAX BENEFITS
ON HOME LOANS
1. Tax deductions can be claimed on housing loan interest payments, subject

to an upper limit of Rs 150,000 for a financial year.

2. An additional loan for extension/improvement to the same house and the

individual's deductions on the existing loan are less than Rs 150,000; he

can claim further benefits from the additional loan taken, subject to the

upper limit of Rs 150,000 for a financial year.

3. Tax benefits under Section 24 and deduction under section 80C of the

Income Tax Act can be claimed only when the payment is made. If an

individual fails to make EMI payments, he cannot claim tax benefits for

the same.

4. According to the Income Tax Act, tax rebates can only be claimed by the

loan applicant.

5. The interest on home loans taken for repairs, renewals or reconstruction,

also qualifies for the deduction of Rs 150,000.

6. A husband and wife, both of whom are tax-payers with independent

income sources, get tax deduction benefits, with respect to the same

housing loan; to the extent of the amount of loan taken in their own

respective name.

7. If an individual buys a house and sells it within the same year or after 3

years, and if any profit is made, then a capital gains tax liability arises on

35 | P a g e
 the same for which the individual is liable to pay short-term capital gains

tax since the sale took place in the same year. But in case, if the sale had

taken place after 3 years, then a long-term capital gains tax liability

would have arisen.

8. On being proved that the home loan is simply an arrangement between

the loan-seeker and the builder or with a third party for the purpose of

claiming tax benefits, then tax benefits will not be allowed and

benefits,previously claimed, will be clubbed to the income and taxed

accordingly.

9. Tax benefits on interest on housing loans are allowable only for the

original loan and according to Section 24 (1), tax benefits can also be

availed for a second loan taken to repay the first loan but not for

subsequent loans.

DOCUMENTATION
Documentation refers to the specific documents to be submitted by Resident

Indians as they apply for home loan. These documents are very much necessary

for the financial institutions to avoid any dispute and uncertainty.

However, there are some standard documents made mandatory for a loan

applicant to produce such as the loan applicant's profile, earning life of the

applicant and present financial status proof etc.

• The Applicant's Profile refers to the bio-data of the applicant, mentioning

his address, age, family background and detail information.

36 | P a g e
 • The Earning Life of the Applicants' proof clarifies the capability of the
loan payment.

• The Present Financial status gives the present capability of handling the
own contribution and other expenditures. This includes the mortgage to
be deposited against the loan amount.

List of Documents
Salaried Customers Self Employed Professionals Self Employed Businessman
Application form with Application form with Application form with
photograph photograph photograph
Identity and Residence Proof Identity and Residence Proof Identity and Residence Proof
Latest Salary-slip Education Qualifications Education Qualifications
Certificate and Proof of Certificate and Proof of
business existence business existence
Last 3 years Form 16 Last 3 years Income Tax Last 3 years Income Tax
returns returns
Last 3 years Profit /Loss and Last 3 years Profit /Loss and
Balance Sheet Balance Sheet
--

Bank statements(last 6 Bank statements(last 6 Bank statements(last 6

months) months) months)
Processing fee cheque Processing fee cheque Processing fee cheque

Proof of Individual's Identity (any one of the following)

• Passport

• Photo PAN Card

• Defence Identity Card

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 • Voter's Identity Card

• Driving License

• Photo Ration Card

• Government Identity Card

Proof of Residence (any one of the following)

• Passport

• Ration Card

• Telephone (Land/Mobile) Bill

• Electricity Bill

• Driving License

• Society Outgoing Bill

• Voter's Identity Card

• Life Insurance Policy

Only Passport can be used as both Proof of Individual's Identity and Proof
of Residence.

Proof of Age (any one of the following)

• Passport

• Valid Driving License

• Voter's Identity Card

• Birth Certificate

• School leaving certificate

• LIC Policy or Premium Receipt clearly indicating the applicant's age

38 | P a g e
 • Letter from the employer stating the age of the employee

• Photo Ration Card

HOME LOANS AT HDFC LIMITED

The various products offered by HDFC Limited are:

 Housing Loans for Built-up Homes

 Home Improvement Loans

 Home Construction Loans

 Loan against Property (Home –Equity Loans)

 Refinance Loans

 Extended Home Loans

 Top-up Loans

 Deposits

The features of the Home loans provided by the HDFC Ltd. are:

 Attractive interest rates

• Balance Transfer facility

• Doorstep service

• Option to choose from floating rate or fixed rate

39 | P a g e
LOAN PURPPOSES:

You can apply for Home Loans for the following purposes :

• Purchase of a plot of land and construction of a house thereon

• Construction of a house on plot of land already owned

• Purchase of a new house or flat

• Extension or renovation or repair of a house or flat already owned by self

(improvement or extension plan)

• Take-over of existing Housing Loan (Balance Transfer)

• Loan takeover with additional refinance (Balance Transfer + top up)

• Loan to NRI for purchase of ready residential property only

• Purchase of residential plots only.

• Additional loan to existing customers (Top-up).

LOAN AMOUNT:
The loan amount that can be disbursed is based on income of the customer (and

co-applicant in some cases) and his EMI-paying capacity.

The maximum loan amount that can be disbursed is 75% of the total cost of

property. In case of builders, 70% of the cost can be sanctioned.

PROCESSING CHARGES OR ADMISSION FEE

Processing fee equivalent to 0.5% of the loan amount (applied for) will be

collected along with the application form (taxes as applicable).

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MAXIMUM REPAYMENT PERIOD

One can repay the loan over a maximum period of 20 years. Repayment

will not ordinarily extend beyond age of retirement (if you are employed)

or on your reaching 70 years of age, whichever is earlier. However, HDFC

will endeavor to determine the repayment period to suit one’s convenience.

LOAN REPAYMENT

One can repay the loan amount in EMI’s comprising interest and principal.

Repayment by means of EMI commences from the month following the

month in which full disbursement is availed by customer. Pending final

disbursement, one pay the interest on the portion of loan disbursed. This

interest is called Pre-EMI interest. Pre-EMI interest is payable every month

from the date of each disbursement up to the date of commencement of

EMI.

MODE OF REPAYMENT
Customer can repay the loan through direct deduction of monthly

instalments by his employer, issue post-dated cheques from salary account,

or issue standing instructions to his bankers.

SECURITY TO BE PROVIDED
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

41 | P a g e
 security may be required, if the property is under construction.

Interim security could be 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 HDFC.

DISBURSEMENT OF LOAN
Disbursement of the loan can be done after the property has been

technically appraised, all legal documents has been completed and own

contribution has been invested in full. Own contribution is the total cost of

property less HDFC’s loan.

PENALTIES

 If late EMI is paid, then borrower has to pay the penalty of 1.5% on
EMI’s amount not paid on time.

 If customer changes from one plan to other, he has to pay 0.5% of the
outstanding balance as the penalty.

 If customer pre-pays the loan, for the fixed rate of interest, borrower has
to pay 2% of the amount being prepaid. In case of Floating rate of
interest, he can pre-pays 25% of the loan outstanding every year up to 3
years without any charges, but if more than 25% of the outstanding loan
is pre-paid, then he has to pay 2% of the prepaid amount as penalty.

42 | P a g e
  He has to pay no charges to increase or decrease the EMI.

INTEREST RATES

Loan amount Fixed ROI Floating ROI

Up to 30 lakhs 14 8.75
30 lakhs to 50 lakhs 14 9
Over 50 lakhs 14 9.25

**Currently, HDFC offers Dual Rate Home Loan Scheme. Under this scheme,

the ROI for the first year is 8.25%, for the second year it is 9 % and for the third
year, it is floating ROI.

OTHER CONDITIONS
• HDFC reserve the right to reject any application without assigning
reasons thereof.

• The applicant will undertake to inform the HDFC as and when there is a
change in address or employment.

The terms and conditions mentioned above and elsewhere under the scheme are

subject to modification from time to time solely at HDFC’s discretion.

43 | P a g e
RESEARCH METHODOLOGY

The procedure adopted for conducting the research requires a lot of

attention as it has direct bearing on accuracy, reliability and adequacy of results

obtained. It is due to this reason that research methodology, which we used at

the time of conducting the research, needs to be elaborated upon.

Research Methodology is a way to systematically study and solve the

44 | P a g e
research problems.

Research Design Used in this Project

Research Design chosen for this study is Descriptive Research Design.

Descriptive study is based on some previous understanding of the topic.

Research has got a very specific objective and clear cut data requirements.

Sampling Design

Sampling is necessary because it is almost impossible to examine the entire

parent population (i.e. the entire universe) various factors such as time available

cost, purpose of study etc. make it necessary for the researchers to choose a

sample. It should neither be too small nor too big. It should be manageable.

THE sample size of past 3 years is taken for present study due to time

limitation.

DATA COLLECTIONS

45 | P a g e
The process of data collection begins after a research problem has been

defined and research design ahs been chalked out. There are two types of data –

METHODS OF PRIMARY DATA

 OBSERVATION METHOD

 INTERVIEW METHODS

 QUESTIONAIRE METHOD

 SCHEDULE METHOD

PRIMARY DATA -

It is first hand data, which is collected by researcher itself. Primary data is

collected by various approaches so as to get a precise, accurate, realistic and

relevant data. The main tool in gathering primary data was investigation and

observation. It was achieved by a direct approach and observation from the

officials of the company.

SECONDARY DATA - it is the data which is already collected by someone

46 | P a g e
else. Researcher has to analyze the data and interprets the results. It has always

been important for the completion of any report. It provides reliable, suitable,

adequate and specific knowledge.

I took data comprise annual reports and post records. Bank has provided me

annual reports from 2004-05 to 2008-09 by help of which, I prepared my report.

The valuable cooperation extended by staff members contributed a lot to

fulfill the requirements in the collection of data in order to complete the

project

COMPARISION

47 | P a g e
 OF
HDFC WITH HFC

COMPARATIVE ANALYSIS OF HDFC WITH OTHER HFCs

Rate of Interests

Bank Rate of Interest

PNB Years Fixed ROI Floating ROI
Up to 20 Above 20 Up to 20 Above 20
Lakhs Lakhs Lakhs Lakhs
Up to 5 years 9.25 % 10 % 8.75 % 9.50 %
5-10 years 10 % 10.25 % 9% 9.50 %
10-20 years 10.5 % 10.75 % 9.25 % 9.75 %
20-25 years 10.75 % 11 % 9.5 % 10 %

48 | P a g e
BOB Years Fixed Floating
Up to 30 Above 30 Up to 30 Above 30
Lakhs Lakhs Lakhs Lakhs
Up to 5 years 9.5 % 10.25 % 8.5 % 9.25 %
5-15 years 9.75 % 10.50 % 8.75 % 9.5 %
Above 15 years 10 % 10.75 % 9% 9.75 %
Bank of India 9.25 %
SBI 8 % (1st year), 9 % (2nd year), 10 % (variable rate for years after)
HDFC Amount Fixed ROI Variable ROI
Up to 30 lakhs 14 % 8.75 %
30 lakhs to 50 lakhs 14 % 9%
Over 50 Lakhs 14 % 9.25 %

Other Charges

Bank Processing fee Prepaid charges Late EMI charges Switching charges
PNB 0.9 % 2% 2% 2%
BOB 0.35 % 0.5% 2% Nil

Bank of 0.55 % Nil 2% 2%

India
SBI 0.5 % 2% 2% Nil
HDFC 0.5% 2% 1.5 % 0.5 %

COMPARISON OF MAJOR PLAYERS

The markets for home loans have been sizzling in India. The spurt in growth in

49 | P a g e
recent years and the prospect of continued buoyancy in demand have attracted

many players to the industry which till a couple of years back had two major

players- HDFC and LIC Housing Finance. The result is cut-throat competition,

which has benefited the loan seekers. The home loan market has grown at a

compounded rate of over 40% over the last four years. And from what industry

experts believe that there is a little chance that there will be any significant

decline in the growth rates going forward. So what have been the key factors in

triggering of this high growth period?

There are several reasons for the same on the demand side:-

 Faster rise income as compared to property prices, thus making housing

more affordable.

 Decline interest rates, which have greatly reduced the cost of borrowing
(both o0n interest and capital).

Then there are factors on the supply side too which have supported this growth:-

 More competition in the housing finance sector resulted in companies

charging lower interest rates, sometimes even at the cost of spread (i.e.

profit margin)

50 | P a g e
  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 EMI’s 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

51 | P a g e
quarter).

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’.

52 | P a g e
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

53 | P a g e
 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.

54 | P a g e
 4) Bargain for a lower rate of interest. Housing finance will reduce their
‘rack’ rates for customers with the good credit record. A bargain deal
will easily fixed a home loan at significantly lower rates (at times you can
get a discount of as high as 0.50 percent). Here again get a confirmation
of the rate (and for how long it will remain fixed) via a letter.

5) Watch out for a predatory lending. Don’t 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.

55 | P a g e
 ICICI HOME FINANACE COMPANY LTD
Consumer friendly housing finance company

HISTORY

ICICI home finance company ltd was incorporated on May 28, 1999 as 100%
subsidiary of ICICI Personal Financial Services Limited (ICICI PFS). ICICI
finance company Ltd was set up with objective of providing long term housing
loan to individual and corporate. The company was registered on March
30’2000 with National Housing Act, 1987 in terms of Housing Financing

56 | P a g e
Companies (NHB) direction, 1989 with effect from May 3, 2002, ICICI home
finance has become a 100% subsidiary of ICICI bank Ltd.

OVERVIEW

ICICI home loans are at present available to customer in 150 cities/towns across
the country. Loans are offered for the purchase of new homes. Purchase of
resale homes and home improvement. Besides the companies also offers loans
for commercial property and loans against existing property. The loans are
offers foe tenors up to 30 years. The company has also introduced several
customers friendly services such as ‘door step services’, ‘know your loan on
phone’ facility and ICICI home search free property brokerage services. ICICI
Personal Financial Services Limited (ICICI PFS) formerly ICICI credit was one
of the first four companies to obtain registration as non banking financial
banking companies(NFBc) from the reserve bank of India (RBI)on sep 10,
1997 under the new section 45 I A of the RBI act ,1939.

During the year 1998-1999, there was a significant shift in the company’s
operations from leasing and hire purchase to distribution and servicing the all
the retail products for ICICI, including two auto loans, consumer durable
finance & another financial products. The company has become a critical part of
ICICI’s retail strategy aims at offering a comprehensive range of products
&services to retail customers. In view of this reorientation of the business, the
name of the company was changed from ICICI Corporation Limited to (ICICI
PFS) effective march 22, 1999.

1) Overseas institutional investors like

a) FIIS

b) OCBS

c) OFFSHORE FUNDS d) VENTURE FUNDS

57 | P a g e
2) Overseas government agencies.

3) Institutional looking for proprietary investment.

4) Mutual funds

5) Private investment companies

6) Large corporate

7) High net worth individual

APPLICATION PROCESS OF YOUR HOME LOAN

Your search for the perfect home loan ends here at ICICI Bank Home Loans,
even before your have found the perfect property.

The moment you decide to buy a home, you can put in your application for a
home loan. Yes, you can apply for a home loan even before you have selected
the property.

The property need not even be in the same city where you are residing. The only
condition being that ICICI Bank has Home Loans operations in both the cities.

Should there be a change in your financial status or plans, you can withdraw
your sanction within 6 months of approval of your home loan.

However, we are always ready to assist our customers in the event of legitimate
problems. And, we might reconsider this if we find that there are satisfactory
reasons for the delay.

PERSONAL BANKING

58 | P a g e
At ICICI bank they are committed to making banking a pleasure. This
commitment is manifested in services they offer a wide range of account,
investment scheme & facilities. Each services offer their customer security,
flexibility of operations & maximum returns.

The various services provided under this is as follow:

1) Maximum cash-saving account

2) Quantum fixed deposits

3) Quantum optima –value added saving account

4) Money plus-current act

5) ATM

6) Treasure chest –cocker facility

7) Power pay roll

8) Retail treasury instruments

CORPORATE BANKING

MOBILE COMMERSE

ICICI bank now brings back account & ICICI credit card to customers
fingertips .with mobile commerce customer can perform a wide range of query
–based transaction from their orange tm (Mumbai) & Airtel (DELHI) mobile
phone , without even making a call.

1) Access multiple accounts

2) Balance inquiry to the linked account

59 | P a g e
3) Cheque book request

4) Mini statement –listing of last three transactions5) Request for account

statements (by mail or fax)

ICICI

1) Attractive IR

2) Door step service from enquiry stage till the final disbursement.

3) No guarantor required.

4) Can transfer your existing high interest rate loan.

5) Special 100% funding for special properties.

FACTORS AFFECTING YOUR LOAN AMOUNT

With ICICI Bank Home Loans, you can get a home loan suited to your needs.
The home loan amount depends on your repayment capability and is restricted
to a maximum of 80% of the cost of the property or the cost of construction as
applicable. A number of factors are taken into account when assessing your
repayment capacity. Repayment capacity takes into consideration factors such
as income, age, qualifications, number of dependants, spouse's income, assets,
liabilities, stability, continuity of occupation and savings history.

However, there are ways by which you can enhance your eligibility.

If your spouse is earning, put him/her as a co-applicant.

The additional income shall be included to enhance your
loan amount. In case of any co-owners they must The final amount to
necessarily be co-applicants. be sanctioned will

60 | P a g e
depend on your repayment capacity. However, what you ultimately are entitled
to will have to conform within the limits fixed for each loan.

Documents required for Home Loan Sanction

ICICI Bank Home Loans, India’s leading Home Loans Provider, offers

attractive interest rates and unbeatable benefits to ensure that you get the best

deal. Keeping your convenience in consideration, we ask you for minimal

mandatory documents for the sanctioning of your home loan, to keep the

process totally hassle-free.

We require the following documents to sanction your home loan:

Sanction Documents Completed application form

Photograph

Fee Cheque

Photo Identity Proof

Age Proof

Signature Verification Proof

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Residence Address Proof

Document for the Salaried

Last 3 months’ Salary Slip

Form 16

Bank Statement for the last 6 months from Salary Account

Repayment Track record of existing loans / Loan closure letter

Document for the Self-employed

Income Tax Return / Computation of Total Income / Auditors Report / Balance Sheet / Profit & Loss
Account certified by Chartered Accountant for last 2 years (3 years for Home Equity) (both for
business and personal of partners/directors)

Bank statement for the last 6 months from operating account

Repayment Track record of existing loans / Loan closure letter

Board Resolution in case of a company

Proof of existence

Office Address Proof

LISTINGS BELOW ARE THE STEP INVOLVED IN AVAILING OF A

HOMELOAN

 A person applies for a home loan

 The executive meets the applicant & briefs him the entire loan process,
requirements & the various options available.
 The applicant chooses a housing finance company (HFC) & handover
the income
 Document to the executive are the income documents are headed over to
the HFC for eligibility & approval.

62 | P a g e
  The HFC verifies the documents & checks the repaying capacity, saving
habits, tenure of services etc. of the applicant & approves the loan
amount.
 After approval an offer letter is given to the applicant by the HFC, along
with list of original title documents that have to hand over to the HFC.
 The applicant gives the original property title document to the HFC
 The HFC scrutinizes the legal & the technical aspects of the original title
document.
 If the HFC is satisfy as to the legal & technical aspect of the document
then the applicant is called to sign the loan agreement
 The loan disbursement schedule is decided by the HFC according to the
stage of construction (If property under construction) or a onetime
payment is made if property is ready for Possession.

Disbursement Documents

Property documents (as per P&D for respective states and as asked by empanelled lawyers for
individual cases)

Facility Agreement

Disbursal Request Form

Cheque Submission Form – for Pre EMI and EMI cheques

ECS or Auto Debit for ICICI Bank account holders or Post Dated Cheques for EMI / Pre EMI

Personal Guarantor’s Documents (PG Form, Photograph, Identity Proof, Address Proof, Signature
Verification and Income documents, if applicable)

In case of property is owned by a company

 Memorandum of Entry
 Form 8

63 | P a g e
  NOC

AMOUNT

This largely depend on a no. of facts like ones age ,profession, salary, the city
one reside is among other such factors. it varies between 2.1lakh to 1crore
depending on the lender- as the rule of the thumb, depending on HFC one have
to cough up 15% - 20% of the loan amount as the down payment. For smaller
amount, this may not be much. But for figure remaining into lakh this could
make loads of difference. For e.g. an apartment of costing Rs 10 lakh may get
85% financing, so one will have to arrange for remaining Rs 15 lakh. If one
takes this into amount the additional thousands will definitely put a strain on
ones finances

INTEREST RATE

Without doubt the most important parameter to factor into ones calculations.
The interest rates may vary from institution to institution. Repayment is in the
form of EMI’s (equated monthly installment). The longer the tenure, the more
one pays in interest, but ones monthly payment will be less. The interest rate of
ICICI is

Tenure Interest Type Interest Rate

.15 -20 Fixed 13.75 %

10 -15 Fixed 16 %

5 - 10 Fixed 16 %

1-5 Fixed 16 %

1-5 Floating 16 %

5 - 10 Floating 11.25 %

10 - 15 Floating 16 %

64 | P a g e
15 - 20 Floating 16 %

MISCELLANEOUS CHARGES

The interest rates and EMI’s are not only the cost factor. Never underestimate
how much the processing fee and administration fees amount to. A 0.5%
administration fees and 0.5% processing fee on say, a Rs.500000 loan would be
Rs.5000. other timesit could be just one fee (either administration or processing
but could yet work out to be much more if it is considerably higher at, say, 2.5%
or 3%. The various other fees, which one is required to pay along with the
margin amount are:

INTEREST TAX:

This is tax payable on the interest paid on a home loan and not the principal.
This is sometimes included in the interest rate of the loan, or may be charged
separately as interest tax.

PROCESSING CHARGE

It is the fee payable to the lender on applying for a loan. It is either a fixed
amount not linked to the loan or may be a percent of the loan amunt. The loan
amount received by you can be less than processing fee.

PREPAYMENT PENALTIES

When the loan is paid back before the nd of the agreed duration a penality is

charged by some banks or companies, which is usually between 1% and 2% of

the amount being prepaid.

65 | P a g e
 PUNJAB NATIONAL BANK

INTRODUCTION

PNB has over 4500 branches and offices bringing the Punjab National Bank to
your doorstep. Around 2400 offices come under the network of Centralized
Banking Solution or CBS. A need for centralized banking system prompted
PNB to go computerized and what followed was the establishment of CBS in
Punjab National Bank branches in all the leading cities like Delhi, Pune,
Chennai, Mumbai, Ahmedabad, Chandigarh, Gurgaon, Hyderabad, Jalandhar,
Kolkata, Ludhiana, Nodal and Bangalore. Internet Banking Services are
provided to all customers in the CBS branches. A branch and ATM locator is
also available on the official website of Punjab National Bank. For an overview
of the annual report or the bank profile, the site can be resourceful. The website
also provides info on the careers and recruitments at PNB and the exam results.
The careers at nationalized banks like PNB are the most sought after one and
candidates are selected on the basis of their exam result. PNB topped the Best

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Paying Commercial Bank category with an overall rating of 87.45% as
evaluated by the SSS Retirement, Death & Funeral Benefits Program.

PROFILE OF PNB

The profile of the PNB shows superior banking services in corporate, personal
and international banking, industrial and agricultural finance and finance of
trade. Punjab National Bank boasts of a varied clientele consisting of small and
medium industrial units, exporters, multi-national companies, Indian
conglomerates and NRI The objectives of the Company are in line with
objectives laid down by RBI for the Primary Dealers:

 Strengthen the infrastructure in the government securities market in order to

make it vibrant, liquid and broad based.

 Ensure the development of underwriting and market making capabilities for

Government Securities

 Improve secondary market trading system, which would contribute to price

discovery, enhance liquidity and turnover and encourage voluntary holding of
Government securities amongst a wider investor base

REGULAR HOUSING FINANCE SCHEME FOR PUBLIC

PNB reaches out to you with fast, friendly and most convenient home loans for:

 Construction or purchase of house/ flat.

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  Purchase of house/ flat on First Power of Attorney basis from the original
allottee
 Carrying out repairs/ renovations/ additions/ alterations to existing house/
flat
 Special Feature- To cover the loan outstanding, life Insurance cover is
also available on payment of one time premium which can also be
financed by the Bank.

PRODUCTS

PNB Apna Ghar Yojana home loans are meant for construction or for
acquisition/purchase of house/flats. The minimum loan amount would be
Rs.50000 and maximum loan amount depends on the repayment capacity of the
borrower. In case of joint application, income of borrowers /co-borrowers is
clubbed together for calculation of loan eligibility. The loan repayment is in
Equated Monthly Installments (EMI) over a maximum period of 20 years.

PNB Ghar Sudhar Yojana home loans are offered for up gradation, renovation
or repair of house/flat. It includes among others, internal and external repairs,
water proofing, roofing, flooring, electrical, woodwork etc. The loan amount
ranges from a minimum of Rs 50,000 to a maximum of Rs. 1000000.

INDIVIDUAL
For construction/purchase of house/flat: - 75% of the cost of construction of
house or purchase of house/flat. Cost of car parking up to the maximum extent
of 5% of the cost of flat/house can also be included in the cost of the project.

For carrying out repairs/ renovations/ additions/ alterations: - 75% of the

estimated cost subject to maximum of Rs. 20 lacs.

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Loan is available up to Rs. 20 lacs for purchase of Land/ Plot.
Loan is available maximum up to Rs. 2 lacs for furnishing

PRODUCT RANGE OF COMPANY/INDUSTRY:

The products and services provided by the PNB are in various fields, such as:

• NRI services

• International banking

• Corporate banking

• Agricultural banking

• International banking

ELIGIBILITY

Age of the applicant must be less than 60 years.

Existing home loan borrower can also apply provided their loan account is
regular and no IR irregularity persist.

DOCUMENTS NEEDED

1. Proof of identity
2. Proof of income
3. Proof of residence
4. Bank statement or Pass Book where salary or income is credited.

5. Education Certificate

6. Photos

7. Salary slips & form 16

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8. Income tax return last 3 years along with balance sheets.

9. Assets liabilities statements.

10. Documents of property.

11. Estimate of construction.

12. Guarantor

EXTENT OF LOAN

For construction/purchased of house/flat 75% of the cost of construction or

purchase of house/flat.

For carrying out repairs/renovation/additions/alternation: - 75% of the estimated

cost subject to maximum of Rs. 20 lacs.

Loan up to Rs. 20 lacs for purchase of land/plot

Loan is available maximum up to Rs. 2 lacs for furnishing

CHARGES

Pre payment charges 2%

Balance Transfer Charges

2%
(incase of refinance)

Part-payment Charges Nil

Switching Charges
Nil
(Fixed to Floating or vice-a-versa)

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SPEED OF SANCTION OF LOAN

The loan will be sanctioned within 7 working days.

TENURE:

You can repay the loan over a maximum period of 25 years under both FRHL
and ARHL in SBI . Repayment will not ordinarily extend beyond your age of
retirement (if you are employed) or on your reaching 65 years of age, whichever
is earlier.

RATE OF INTEREST

Floating Option Floating Option

Fixed Option for Fixed Option for
for for
For repayment period loans(Upto 20 loans(Above 20
loans(Upto 20 loans(Above 20
lac) lac)
lac) lac)

i) Upto 5 years 9.25 10.00 8.75 9.50

ii) Above 5 & upto 10

10.00 10.25 9.00 9.50
years

iii) Above 10 & upto 20

10.50 10.75 9.25 9.75
years

iv) Above 20 yrs & upto 25

10.75 11.00 9.50 10.00
yrs.

DOCUMENTATION CHARGES

Rs. 1350 + Service Tax

UPFRONT FEE

For loans up to Rs. 300 lacs = 0.50% of the loan amount with a cap of Rs. 20,000/-
For loans above Rs. 300 lacs =0.90% of the loan amount

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REPAYMENT

1. Loan is to be repaid in equated monthly installments within a period of 25

years or before the borrower attains the age of 65 years.

2. Repayment of loan for repair/ renovation/ addition/alteration has, however

been restricted to 10 years. Father/Mother can also be made co-borrower in
cases property is in single name of his /her son and also clubbing of their
income is permitted for determining eligibility criteria. Minimum 24 advance
cheque should be obtained as and when, 6 cheques remain, fresh lot to be
obtained out of 24, 23 cheques should be of the amount equal to the balance.
Loan is to be repaid in EMI within a period of 25 years or before the borrower
attains the age of 65 years.

SECURITY

Mortgage of property for which finance is being given

In case of purchase of house/ flat from housing board/ society where mortgage
cannot be created immediately, a tripartite agreement shall be executed amongst
the housing board/ society, borrower and the Bank

In case of purchase of house/ flat on first power of attorney, additional security

equal to 125% of the loan amount by way of mortgage of some other property
or pledge of bank's FDR/ LIC policy/ Govt. Securities, NSCs, KVPs, IVPs, /
PSU Bonds etc. has to be provided

IMPORTANT CONDITIONS LOAN CANNOT BE GRANTED:

 For construction in Un-authorized colonies.

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  If property is to be used for commercial purpose.
 Without approved Map.

PRE- PAYMENT CHARGES

 Nil- In cases where the loans are prepaid by the borrower from their own
sources
 Nil- In cases where the borrower shifts to other bank within 30 days from
the date of issuance of circular for upward revision in the rate of interest
to be charged in his account or change in other terms of sanction.
 2 % - In cases where the account is taken over by some other Bank/
Financial institutions by way of a ailment of loan from such bank/
financial Inst

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STATE BANK OF INDIA

INTRODUCTION

State Bank of India (SBI) is India's largest commercial bank. SBI has a vast
domestic network of over 9000 branches (approximately 14% of all bank
branches) and commands one-fifth of deposits and loans of all scheduled
commercial banks in India. The State Bank Group includes a network of eight
banking subsidiaries and several non-banking subsidiaries offering merchant
banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance. The eight banking
subsidiaries are: State Bank of Bikaner and Jaipur (SBBJ),State Bank of
Hyderabad (SBH).State Bank of India (SBI),State Bank of 13

Indore (SBIR),State Bank of Mysore (SBM),State Bank of Patiala (SBP),State

Bank of Saurashtra (SBS) and State Bank of Travancore (SBT). Today, State
Bank of India (SBI) has spread its arms around the world and has a network of
branches spanning all time zones. SBI's International Banking Group delivers
the full range of cross-border finance solutions through its four wings - the

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Domestic division, the Foreign Offices division, the Foreign Department and
the International Services division

PROFILE

The SBI’s powerful corporate banking formation deploys multiple channels to

deliver integrated solutions for all financial challenges faced by the corporate
universe. The Corporate Banking Group and the National Banking Group are
the primary delivery channels for corporate banking products.

The Corporate Banking Group consists of dedicated Strategic Business Units

that cater exclusively to specific client groups or specialize in particular product
clusters. Foremost among these a specialized group is the Corporate Accounts
Group (CAG), focusing on the prime corporate and institutional clients of the
country’s biggest business centers. The others are the Project Finance unit and
the Leasing unit. The National Banking Group also delivers the entire spectrum
of corporate banking products to other corporate clients, on a nationwide
platform. The bank is also looking at opportunities to grow in size in India as
well as internationally. It presently has 82 foreign offices in 32 countries across
the globe. It has also 7 Subsidiaries in India – SBI Capital Markets, SBICAP
Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a
formidable group in the Indian Banking scenario

Main SBI Home Loan Schemes

 SBI Realty : Purchase of plot of land

 SBI Optima : Loan to existing home loan borrowers
 SBI Green Home Loan : For homes that fight against the adverse
climate change, SBI offers 0.25% concession in interest rate and waiver
of processing fees
 SBI Flexi : Combination of floating and fixed interest rate, in a pre
determined ratio

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  NRI Home Loans : Loans for NRIs and PIOs
 SBI Freedom : Pledging other financial security than mortgaging the
house
 SBI Max Gain : Operate your home loan account like your SB or
Current Account

SBI HOUSING LOAN

Features

 SBI Home Loan provides no cap on maximum loan amount for the
purchase/construction of house/flat.
 There is an option to club the income of the applicant's spouse and
children to compute the eligible loan amount.
 The bank provides free personal accident insurance cover.
 A complimentary international ATM cum Debit card is also provided by
SBI.
 On the spot "in principle" approval is a special provision for the
applicant.
 If all the required documents are submitted by the applicant, SBI Home
Loan is sanctioned within 6 days of the date of submission.
 The applicant can also consider SBI's Home Loan as a Term Loan or as
an Overdraft facility, in case he/she wants to save on interest and
maximize gains.
 SBI Home Loan also provides free personal accident insurance cover up
to Rs 40 Lakhs.

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  Repayment is permitted up to 70 years of age, which is an added
advantage of SBI Home Loan.

SCHEMES PROVIDED BY SBI

The Most Preferred Home Loan provider SBI Bank offers a Home Loan with
Attractive Interest Rates with Latest Schemes and Benefits. SBI also provides a
Housing loan with different schemes. Schemes Are:-

1. SBI Easy Home Loan

2. SBI Advantage Home Loan
3. SBI Housing Finance Scheme
4. SBI Happy Home Loans
5. SBI Life Style Loan
6. SBI Green Home Loan
7. SBI Home Plus
8. SBI Home Line
9. SBI MY HOME CAMPAIGN

ELIGIBILITY

The minimum age of the applicant is 18 years, on the date of the sanction of the
loan.

The maximum age limit for a Home Loan applicant is 70 years. It is the
maximum age limit, within which the loan should be fully repaid.

The applicant should consist of sufficient, regular and continuous source of

income for repaying the loan.

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DOCUMENTS

Completed Application Form with one Passport Size Photograph

Identity Proof - the applicant can make use of his/her PAN Card/Voter ID/
Passport/Driving License, for the purpose.

Residence Proof - the applicant can make use of his/her Recent Telephone Bill/
Electricity Bill/Property tax receipt/Passport/Voters ID

Proof of business address in respect of businesspersons/ industrialists

Sale Deed, Agreement of Sale, Letter of Allotment, Non Encumbrance

Certificate, Land/Building Tax paid receipt etc.

Copy of Approved Plan and approval from the Local Body

Statement of Bank Account/ Pass Book for last 6 months

INTEREST RATE (SBAR is currently 11.75%)

Year 1 - 8% fixed
Year 2 & 3 - 9% fixed
Year 4 onwards - For loans up to 50 lakhs, 9.25% floating.

For loan amount over 50 lakhs, 9.75% floating

Eligibility Criteria & Documentation required for SBI Home Loan

Salaried Self employed

Age 21years to 60years 21years to 70years

Income Rs.1,20,000 (p.a.) Rs.2,00,000 (p.a.)

Loan Amount
5,00,000 - 1,00,00000 5,00,000 - 2,00,00000
Offered

Tenure 5years-20years 5years-20years

Current Experience 2years 3years

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

Other Products from SBI (State bank of India)

1) SBI Personal Loan

2) SBI Card
3) SBI Home Loan
4) SBI Housing Loan

LOAN TENURE

You can repay the loan over a maximum period of 25 years under both FRHL
and ARHL in SBI . Repayment will not ordinarily extend beyond your age of
retirement (if you are employed) or on your reaching 65 years of age, whichever
is earlier.

PROCESSING FEE

FEES RUPEES

Upto 5 lakh Rs. 1000

5lakh-10lakh Rs. 2000

10lakh-20lakh Rs. 5000

20lakh-50lakh Rs. 7000

50lakh-1crore Rs.8000

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1crore-5crore Rs.10, 000

Above 5 crore Rs.20, 000

REVIEW OF LITERATURE

1)Ben R. Craig had studied about the Federal Home Loan Bank Lending to
Community Banks, are Targeted Subsidies Necessary? The Gramm-Leach-
Bliley Act of 1999 amended the lending authority of the Federal Home Loan
Banks to include advances secured by small enterprise loans of community
financial institutions. Three possible reasons for the extension of this selective
credit subsidy to community banks and thrifts are examined, including the need
to: subsidize community depository institutions, stabilize the Federal Home
Loan Banks, and address a market failure in rural markets for small enterprise
loans. They empirically investigate whether funding constraints impact the
small-business lending decision by rural community banks. Specifically, they
estimate two empirical models of small-business lending by community banks.
The data reject the hypothesis that access to increased funds will increase the
amount of small-business loans made by community banks.

2) In May 18, 2007 Michael LaCour-Little had studied about the Economic
Factors Affecting Home Mortgage Disclosure Act Reporting. The public release
of the 2004-2005 Home Mortgage Disclosure Act data raised a number of
questions given the increase in the number and percentage of higher-priced

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home mortgage loans and continued differentials across demographic groups.
Here we assess three possible explanations for the observed increase in 2005
over 2004: (1) changes in lender business practices; (2) changes in the risk
profile of borrowers; and (3) changes in the yield curve environment. Results
suggest that after controlling for the mix of loan types, credit risk factors, and
the yield curve, there was no statistically significant increase in reportable
volume for loans originated directly by lenders during 2005, though indirect,
wholesale originations did significantly increase. Finally, given a model of the
factors affecting results for 2004-2005, we predict that 2006 results will
continue to show an increase in the percentage of loans that are higher priced
when final numbers are released in September 2007.

3) In December 2002 Melissa B. Jacoby had studied about the Home Ownership
Risk beyond a Sub prime Crisis: The Role of Delinquency Management. They
studied that Public investment in and promotion of homeownership and the
home mortgage market often relies on three justifications to supplement shelter
goals: to build household wealth and economic self-sufficiency, to generate
positive social-psychological states, and to develop stable neighborhoods and
communities. Homeownership and mortgage obligations do not inherently
further these objectives, however, and sometimes undermine them.

4) In October 14, 2008 David P. Bernstein had studied about the Home Equity
Loans and Private Mortgage Insurance: Recent Trends & Potential Implications.
They studied about the impact of increased use of home equity lines and
decreased private mortgage insurance (PMI) on mortgage markets. The data
confirms that in the years leading up to the mortgage crisis home buyers and
lenders have aggressively used piggyback loans to avoid taking out PMI on first
mortgages. Multiple-mortgage financing packages as a percent of newly
originated mortgages (mortgages originated within the previous five years) went
from 14.8% in survey year 2001 to 21.5% in survey year 2007

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5) In August 2007 Michael LaCour-Little had studied about the Home Purchase
Mortgage Preferences of Low- and Moderate-Income Households. Housing
policy in the United States has long supported homeownership, yet variation
persists across income groups. This article employs recent mortgage origination
data to focus on the revealed preferences of low- and moderate-income (LMI)
households in home purchase mortgage choice. I identify the factors associated
with conventional conforming, FHA, nonprime and specially targeted programs.
Empirical results show that individual credit characteristics and financial
factors, including pricing, generally drive product choice, with some variation
evident when loans are originated through brokers. Results also indicate that
targeted conventional programs effectively compete with government-insured
products in the LMI segment.

6) In 24 October 2008 David C. Wheelock had studied about the Government

Response to Home Mortgage Distress: Lessons from the Great. They studied
about the Great Depression was the worst macroeconomic collapse in U.S.
history. Sharp declines in household income and real estate values resulted in
soaring mortgage delinquency rates. According to one estimate, as of January 1,
1934, fully one-half of U.S. home mortgages were delinquent and, on average,
some 1000 home loans were foreclosed every business day. This paper
documents the increase in residential mortgage distress during the Depression,
and discusses actions taken by state governments and the federal government to
reduce mortgage foreclosures and restore the functioning of the mortgage
market.

7) In 10 December 2007 Irina Paley and Chau Do had studied about the
Explaining the Growth of Higher-Priced Loans in HMDA: A Decomposition
Approach. The period 2004-2005 showed a significant increase in Home
Mortgage Disclosure Act (HMDA) rate spread reporting. Following the Oaxaca
(1973), Blinder (1973), and Fairlie (2005) decomposition techniques, this study

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identifies the fraction of the increase due to the flattening of the yield curve.
Even after controlling for changes in borrower risk characteristics, the findings
reveal that during 2004-2006, the flattening of the yield curve explains a
significant amount of the increase in rate spread reportable loans. This is the
case for both prime and sub prime originations.

8) In Feb. 1 2009 Vincent W. Yao and Eric Rosenblatt and Michael LaCour-
Little had studied about the unique paired loan dataset containing information
on multiple conventional conforming mortgage loans of households to examine
home equity extraction decisions over the period 2000-2006. The main question
addressed is how much households borrow when refinancing their current
mortgage debt in a cash-out transaction. We also provide estimates of the
marginal effect of certain borrower characteristics. Results contribute both to
the literature on refinancing behavior and the role of house price appreciation in
providing funds that may be used for consumer spending or other purposes.

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SWOT ANALYSIS

STRENGTHS-

• Several schemes for every kind of customers are provided. Variation in

amount of loan is provided for different income groups.

• Good repayment capacity of customers

• Loans provided in large quantity and of large amount improving HDFC’s

strength and customer’s confidence towards HDFC.

WEAKNESSES-

• Risk involves this type of projects.

OPPORTUNITIES-

• Increasing number of people running for loans like young youth

and service class.

• Rising inflation

• Government incentive also promotes lending.

• More interest in businesses and leading towards union trade.

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 • More craze towards owning a home.

THREATS-

• All private banks due to high ratings and because people have more
confidence on private banks rather than the public banks.

• Market trends are varying in such a way that moving with the same
is quite difficult..

• RBI policies and instant changes brought in by them are big threat.

• Other private financial institutions are big competitor for stealing

its customers by giving them some profitable schemes.

• Customers are more satisfied with the services of private banks

because of good customer dealings.

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RECOMMENDATIONS

More stress on advertising: Some more stress should be given on

advertising.

To provide incentive: HDFC should provide incentive or gifts to

customer who is giving their EMI on time so that other customer also
encourages repaying its loan.

Increase number of branches: HDFC has already started efforts

towards this and many new branches have opened or going to be opened in near
future .Plan for opening of new branches has already sanctioned.

Liberalize policies: HDFC should liberalize its policies according to

demand of customer. As sometime customer is authenticated and investment in

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his/her project could be profitable but due to policy norms, HDFC is unable to

invest in that ,so some flexibility should be there.

BIBLIOGRAPHY

www.hdfcindia.com as on 19 June, 2010

www.apnapaisa.com as on 15 June, 2010

www.nhb.com as on 12 June, 2010

www.wikipedia.com as on 11 June, 2010

Annual Report of HDFC Limited 2009-2010

Manuals of HDFC Limited

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