PROJECT REPORT

ON

COMPARATIVE ANALYSIS OF HOME LOANS AMONG DIFFERENT

BANKS

Submitted in partial fulfillment for the requirement of the degree

Of Master of Business Administration

Session: 2005-2006

Under the guidance of: submitted by:

Dr. DINESH KUMAR ANUPAM SHARMA

Institute of management studies M.B.A. (2005-07)
H.P. University Shimla Roll no.444 / 6898

INSTITUTE OF MANAGEMENT STUDIES

H.P. UNIVERSITY SHIMLA - 171005
TABLE OF CONTENT

1. Acknowledgement 3
2. Executive summary 4
3. Introduction 5-7
4. Research Design 8-9
5. Housing Finance 10-21
6. Current Scenario 21-24
7. Company Profile 25-32
ICICI Bank
8 Unique features of home loan schemes of 4 banks 33-44

ICICI Bank
HDFC Bank
SBI Bank
UTI Bank
8. Findings and analysis 45-51
9. Conclusion 52
10. Recommendations 53
11. References 54
12. Annexure

2
 EXECUTIVE SUMMARY
A roof over one's head and ground beneath one's feet count as the
bare necessities of life. There’s nothing quite like owning a home,
however humble, to give one that warm and glowing feeling. But
when one buys a home, one has much more than a feel-good
purchase in mind: it’s also a crucial investment decision, perhaps
the biggest spending decision of one's life. There are ample
opportunities today for young salaried investors to plan their
moves early and buy a house at the right time — and at the right
price. Every individual aspires to own a home. But many either
spend a lifetime saving to purchase a house or exhaust money on
monthly house rents. The project at one level, is about India’s
great housing boom, At another, it is about people with rising
salaries and falling mortgage rates to buy homes. Five years ago,
mortgage rates ranged between 16 percent and 18 percent; today,
the range is 8-15 percent.

The aim of this research project was to analyse the home loans
and HomeSaver loans with a view to arrive at the most popular
loan schemes offered by the banks under study and to conclude
from the analysis the best possible schemes which would keep the
bank ahead of competition.

The purpose of the study is to find the critical factors that are
essential for any housing loan scheme and especially for Homer
Saver Scheme of Standard Chartered Bank to become the most
favored scheme in the Indian scenario. The reasons being the
features that the scheme provides are not being provided by many
of the housing finance companies.

The study encompasses comparing the housing loan schemes of the

major players in the business and deriving out of it the best possible
ideas for the bank to become the leader in the housing loans segment.

3
 INTRODUCTION
"It was Never so easy to build your own house"

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

Take a house loan and let the monthly rent (easily

converted into affordable EMIs) build you your dream
home .

Profitable Proposition

“The overall demand in the residential sector has grown by

about 7-8 per cent annually for the period 99-2005 as
compared to the period 93-99. The growth is on account of
two main factors:

4
 One , income-tax exemption;

 Two , with no similar rebates available for individuals in

the high-income group, they are creating a second asset.

Most banks have changed the way interest is calculated from

annual rests to monthly rests. Under the annual rests
method, the EMIs (equated monthly installments) one pays
through a year are factored in as part-repayment of the
principal component only at the end of each year. In other
words, one has to pay interest even on the installments one
has paid until they’re reduced from the principal at the end
of each year. Under monthly rests, the principal is lowered
by the appropriate amount each month. The thumb rule
being that the more frequently interest is calculated, the
better for the creditor. Recently, HDFC added monthly rests
on its fixed-interest loans apart from annual rests. As a
result, the fall in EMIs on fixed-interest loans (where the
interest rate is constant for the entire tenure of the loan,
irrespective of changes in the lending rates) is more
pronounced than on floating-rate loans (where the loan
interest rate varies with changes in the interest rates). For
example, the EMI on a 15-year, fixed-interest loan for Rs 15
lakhs has come down by Rs 840; the corresponding fall in
the EMI on a floating-rate loan is only Rs 465. Apart from
lowering the cost of one's loan, the switchover to monthly
rests has another advantage: it makes it easier to compare
loans.

With increasing competition, lenders are also lowering and in

some cases, even waiving-service charges (processing fee,
administrative fee and so on). Even a one percent point

5
reduction in the processing fee translates into a saving of Rs
15,000 on Rs 15 lakhs loan for borrowers. No lender has
announced a permanent lowering of service charges, but
they’re offering these at special events or for specific
periods. A decision on whether one should go in for a fixed-
rate or a floating-rate loan is a function of two factors: One's
perception of where interest rates in the economy are
headed, and one's capacity to ride the interest rate changes.
A floating-rate loan lets one take advantage of further falls
in interest rates, but one stands to lose if interest rates rise
again. In other words, floating-rate loans make sense only
when the interest rates are high and are expected to fall. On
the other hand, a fixed-interest loan immunises oneself to
interest rate jumps. If, however, interest rates fall, one can
foreclose one's loan and refinance at a lower rate-either with
another lender or, increasingly, with the same one.

Locking in

Choosing a housing loan is not a straightforward decision.

There are several ways in which interest can be calculated.
Some lenders charge interest on monthly outstanding
balances (or rests), others on yearly rests and still others on
daily rests. So, ones EMIs on the same loan and tenure may
differ greatly, depending on whom one borrows from. Here’s
a tip: ones monthly payment is the lowest when interest is
charged on a daily reducing balance. Processing and other
fees too add to the cost. Also, remember, that lenders allow
one to switch from a fixed rate loan to a floating rate loan,
but not the other way.

6
 AIM

The aim of this comparative analysis of home loans is to

study the various schemes offered by various institutes with
a view to arrive at the most favoured or popular scheme for
implementation in our own organization and to affect
changes and improvements to own existing schemes and
policies.

Scope

The scope of this analysis will encompass the following

aspects:-

i. Identification
of loan schemes of various public and private sector banks
for comparative study and analysis.

ii. Identification
and detailed study of home loans for each selected bank.

iii. Advantages or
strong points of each of the schemes of the selected
banks.

iv. Comparative
analysis in tabulated form of all 4 banks at a glance.

v. Identification
of the most popular and favoured loan scheme with
reason.

vi. Recommendati
ons.

7
 Methodology

The analysis and comparative study of home loans and home

saver loans will be undertaken by adopting the below
mentioned methodology:-

i. Personally approaching the

selected banks and obtaining relevant details.

ii. Collection of data from

magazines, journals and other available documents.

iii. Internet data bank.

iv. Professional books on the

relevant topics

v. Guidance from my mentor

vi. Basis for selection of following

banks-:

SBI - India’s largest public sector banks with largest

number of branches across the country.

ICICI - India’s largest private sector bank and also it

has increased its market share tremendously in the
housing loan segment.

HDFC - It has been a leader in the housing loan

segment.

UTI Bank - although presently its market share is quite

low, but today it’s the fastest growing private sector
bank in the country.

8
 HOUSING FINANCE

Product description

Loan amounts extend upto 60%-85% of the value of

property sought to be financed. Amount of loans provided
vary from Rs.210,000 to Rs. 1 crore. Repayment periods
vary from 5 to 20 years and HFCs have many types of
payment structures and schemes. Most Housing Finance
Companies (HFCs) provide loans for home improvement and
home addition as well.

Loans are largely provided to individuals, with some part of

most HFCs portfolio consists of loans to corporate bodies
that in turn either build housing for customers or employees
or pass the loan on to the employee as housing loan. Loans
to others consist of loans extended to Builders/Developers
and Co-operative Societies. Although the margins on these
loans are higher, the risk associated with these loans is also
higher , consequently these form a small part of the portfolio
for any HFC.

Product Process Flow

The process of issuing a housing loan by HFCs involves as

the first step an application that is submitted by the
borrower. A processing fee is charged at this stage to cover
administrative overheads, this varies from 0.5%-1% of the
loan amount. The application goes through an appraisal by
the credit department and a personal interview with the
borrower in some cases and the amount of loan to be
sanctioned is determined. The approval letter is sent to the

9
applicant who has to pay administrative fee again along with
the acceptance letter. A legal appraisal of title related
documents is then carried out before the mortgage is
created and disbursed. Equated monthly instalments (EMI)
including principal and interest components are paid by the
borrower until the period of the loan. Incase of pre-payment
HFCs charge a penalty of about 1% if the prepayment is
done within 5 years of sanction. The process is depicted in
Exhibit 2.3.

10
Exhibit 2.3: Product Process Flow for Housing Finance

Enquiry

Application with processing fee submission

Credit Appraisal

Interview Checking with Verification with employer

guarantor

Recommendation to the Sanctioning Authority

Sanction by
committee

Defer Approval Reject

Letter to
applicants

Acceptance Letter with Administrative fees

Legal title Documents review

Signing loan disbursement documents

EMI Prepayment Penalty Charge

repayment
11
Listed below are the steps involved in availing of a
home loan:

Step 1 A person applies for a home loan.

The executive meets the applicant and briefs him the
Step 2 entire loan process, requirements and the various
options available.
The applicant chooses a Housing Finance Company
Step 3 (HFC) and hands over the income documents to the
executive.
The income documents are handed over to the HFC
Step 4
for eligibility and approval.
The HFC verifies the documents and checks the
Step 5 repaying capacity, saving habits, tenure of service,
etc. of the applicant and approves the loan amount.
After approval, an offer letter is given to the applicant
Step 6 by the HFC, along with a list of original property title
documents that have to be handed over to the HFC.
The applicant gives the original property title
Step 7
documents to the HFC.
The HFC scrutinises the legal and technical aspects of
Step 8
the original title documents.
If the HFC is satisfied as to the legal & technical
Step 9 aspects of the documents then the applicant is called
to sign the loan agreement.
The loan disbursement schedule is decided by the
Step HFC according to the stage of construction (if
10 property under construction)or a one time payment is
made if property is ready for possession

12
 The applicant gets possession of the property
Step
depending upon the level of completion of the
11
property.
Step
The applicant starts paying the EMIs.
12

WHAT ALL CAN ONE TAKE A LOAN FOR:

There are different types of home loans tailored to meet

ones needs. Here’s are some of them:

Home Purchase Loans : This is the basic home loan for the
purchase of a new home.

Home Improvement Loans : These loans are given for

implementing repair works and renovations in a home that
has already been purchased by the client.

Home Construction Loan : This loan is available for the

construction of a new home.

Home Extension Loan: This is given for expanding or

extending an existing home. For eg: addition of an extra
room etc.

Home Conversion Loan: This is available for those who

have financed the present home with a home loan and wish
to purchase and move to another home for which some extra
funds are required. Through home conversion loan, the
existing loan is transferred to the new home including the
extra amount required, eliminating the need of pre-payment
of the previous loan.

13
Land Purchase Loans: This loan is available for purchase
of land for both construction or investment purposes.

Bridge Loans: Bridge loans are designed for people who

wish to sell the existing home and purchase another one.
The bridge loans help finance the new home, until a buyer is
found for the home.

Amount

This largely depends on a number of factors like ones age,

profession, salary, the city one resides in among other such
factors. It varies between Rs. 2.1 lac to Rs. 1 crore
depending on the lender. As a rule of thumb, depending
upon the HFC, one will have to cough up 15%-20% of the
loan amount as a down payment. For smaller amounts, this
may not be much. But for figures running into lakhs, this
could make loads of difference. For eg. An apartment costing
Rs 10 lakh may get 85 per cent financing. So, one will have
to arrange for the remaining Rs 1.5 lakh. If one takes this
into account, the additional thousands will definitely put a
strain on ones finances.

Tenure

Generally, the maximum tenure of home loans is 15 years,

with a few lenders offering tenure of 20 years or more (ICICI
has recently launched a 30 year loan). The longer the
tenure, more one pays in total interest, but ones monthly
payments will be less. So depending on ones earning
potential and bank balance, one can choose an appropriate
tenure. An important requirement of most banks/HFCs is
that one pays up the entire loan before one retires. One can

14
always prepay ones entire loan amount before it is due.
There is a trend to do away with the pre-payment penalty
being imposed by some lenders so its best one checks on
this as well.

Interest Rate

Without doubt the most important parameter to factor into

ones calculations. The interest rates may vary from
institution to institution and generally range from about
9.25% to around 10.75%. Repayment is in the form of EMI's
(equated monthly installments). The longer the tenure, the
more one pays in interest, but ones monthly payment will be
less.

Refinance

This is a concept that is yet to catch on in the home loan

market but is bound to be a major service in the months to
come. Under this facility, one can take a new loan from
another bank/HFC to pay back an old loan before its natural
tenure. It gives one the opportunity of prepaying ones high
cost debt and gets a lower cost one. In today's falling
interest rate scenario one should use this vehicle to lower
ones debt payments as much as possible. The lender
facilitates the shift by paying the outstanding and
transferring the asset to their portfolio.

15
Miscellaneous charges

A heading that should be ignored at one’s peril! The interest

rates and EMIs are not the only cost factor. Never
underestimate how much the processing and administration
fees amount to. A 0 .5% administration fee and a 0.5%
processing fee on, say, a Rs 5,00,000 loan, would amount to
Rs 5,000. Other times, it 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 per cent
or 3 per cent. The various other fees, which one is required
to pay along with the margin amount, are:

a) Interest Tax

This is the tax payable on the interest paid on a home loan

and not the principal. This tax is some times included in the
interest rate of the loan, or may be charged separately as
interest tax.

b) Processing Charge

It's a fee payable to the lender on applying for a loan. It is

either a fixed amount not linked to the loan or may also be a
percentage of the loan amount. The loan amount received by
you can be less than the processing fee.

c) Prepayment Penalties

When a loan is paid back before the end of the agreed

duration a penalty is charged by some banks/companies,
which is usually between 1% and 2% of the amount being
pre paid.

d) Commitment Fees

16
Some institutions levy a commitment fee in case the loan is
not availed of within a stipulated period of time after it is
processed and sanctioned.

e) Others

It is quite possible that some lenders may levy a

documentation or consultant charge.

PEST ANALYSIS

Political
 Real estate sector is a major focus since 2002 – 2003
budget.

 Withdrawal of NOC on transfer of immovable properties to

improve buoyancy in the housing market.

 Enhancement of tax exemption of interest payment on

housing loans from Rs. 1 lakh to Rs. 1.5 lakh would
promote larger investment in ownership housing.

 Center has taken steps to boost housing sector like rural

Housing schemes and tax benefit schemes etc

 100% FDI in housing sector

 the government also planned to unlock huge land

resources currently lying unused under railways, defense,
communication and PSUs, and use them commercially.

17
 Comprehensive legislation for enabling framework for
securitisation to boost financing.

 Repeal of land ceiling regulation act provides a major

push in the housing sector

 Tardy process of planning approvals in the Indian politics

 High stamp duty , property tax and

 Minimum acreage area allowed for development by FDI

ventures at 100 acres

 The current laws regarding foreclouser make it difficult for

the housing finance companies to acquire the asset in
case of any default by the borrowers.

Economical
 4.2% growth in construction industry in past 4 years

 According to estimate of the Rakesh Mophan Committee

total requirement for urban infrastructure development
covering backlog, new investments and O & M costs for
next ten years is Rs. 2,50,000 Crores.

 Funds for urban Infrastructure development fall short by

more than 10 times the requirement.

 Joint ventures coming up between domestic and foreign

players

 Government double its equity in HUDCO from Rs.1250

crores to Rs 2500 crores

 Modifications of rent control act

18
 NPA’s are as low as 0.8% in housing finance which attract
more and more finance companies to enter in to housing
finance sector.

 RBI recently agreed to reduce the risk wattage for housing

finance from 100% to 75 % .

 Housing construction in India accounts for just 1% of GDP

 ADB provides dollar 300 million housing loans for India for
a repayment of 25 years plus a grace period of 5 years

Social
 Housing demand is basically generated by low-income
groups that have no or only limited financial resources to
house themselves.

 The majority of funding for housing relies on informal

means.Foemal finance for new housing in urban areas
represents only 22% meanwhile that in the rural ones the
share is about 7%.

 Community Finance Institutions, and NGOs are proven

financially sustainable and have expanded their networks
because of the reliability and lower interest rate.

 With the manpower insensitive services industry likely to

continue outperform manufacturing in the years to come it
is expected that need for employees and housing for them
is likely to continue to grow. These employees are the
major customers of the housing finance companies.

 Earthquake awareness among general masses.

 Demand for pollution free environment.

19
 More preference for outskirts locations.

 Demand for all the infrastructure requirement and

amenities for the housing

 Building his own home is a dream for every Indian

 Poor service provided by housing finance companies.

 Annual Growth rate of population Urban 3.1% & Rural

1.8%

Technology

 New financing instruments in housing

 New construction techniques

 Rating of real estate and construction projects

 New design mechanism for earthquake resistance

 New technology in construction materials production.

20
 Interest rates over last few years

In te r e s t R a te s in L a s t fe w ye a rs
20
interest rates

15
10 in te re s t ra te s
5
0
99
00
01
02
03
04
05
06
19
20
20
20
20
20
20
20
y e a rs

We can see from the graph that interest rates have

consistently fallen from 1999 to 2003, and have
stabilized around the 10% mark. But from 2005 the
interest rates have once again started moving in
northward direction

21
ICICI BANK

Profile Of The Company

ICICI Personal financial services limited (ICICI PFS),
FORMERLY ICICI- CREDIT, was one of the first four
companies to obtain registration as a non-banking financial
company (NBFC) from the Reserve Bank of India (RBI) on
September 10, 1997 under the new section 45 IA of the
Reserve Bank of India Act, 1934.

During the year 1998-99, there was a significant shift in the

company’s operations from leasing and hire purchase to
distribution and servicing of all retail products for the ICICI
Group. It is now a focal point for marketing and distribution
of all retail asset products for ICICI, including auto loans,
consumer durable finance and other financial products. The
company has thus become a critical part of ICICI’S retail
strategy aimed at offering a comprehensive range of
products and services to retail customers.

In view of this reorientation of the business, the name of the

company was changed from ICICI CREDIT CORPORATION
LIMITED to ICICI PERSONAL FINANCIAL SERVICES
LIMITED (ICICI PFS) effective March 22, 1999.

ICICI commenced its custodial services business in 1992 and

played a pioneering role in the business when it accepted
the custodian role for the first ever GDR issue by an Indian
corporate (Reliance Industries Limited). ICICI has a major
market share in the segment and acts as custodian of 41
ADR/GDR issues and, in the process, has established
relationships with all the major overseas depository banks

22
operating in the Indian Market. After its success in the GDR
segment, ICICI expanded its custodial operations by offering
custodial services to overseas institutional investors
including foreign institutional investors (FII’S) and as on
June 30, 1999, the value of assets held in our custody
exceeded US 2 billion.

At present, ICICI offers a full range of custodial services for

primary and secondary market operations pertaining to debt,
equity, money market instruments GDR/EURO issues
conversions and GDR arbitrage to:

2. Overseas Institutional Investors like

a. FIIs

b. OCBs

c. OFFSHORE FUNDS

d. VENTURE FUNDS

3. Overseas Govermental Agencies

4. Institutions looking for proprietary investments

5. Mutual funds

6. Private investment companies

7. Large corporate

8. High net worth individuals

As a value added service ICICI custodial services division

assists the clients in preparation, submission and follow up
for various applications for regulatory approvals including
initial application by FII’S/OCB with SEBI/RBI.

23
PERSONAL BANKING
At ICICI BANK, they are committed to making banking a
pleasure. This commitment is manifested in the services
they offer – a wide range of accounts, investment schemes,
and facilities. Each service offers their customers security,
flexibility of operation and maximum returns. The various
services provided under this is as follows:

• Maxi Cash – savings Account

• Quantum – Fixed Deposits

• Quantum optima – Value added Savings Account

• Money plus – Current Account

• ATM

• Phone Banking

• Treasure Chest – Locker facility

• Power Pay Payroll

• Retail Treasury Instruments

CORPORATE BANKING
MOBILE COMMERCE
ICICI Bank now brings Bank Account and ICICI Credit Card
to customers fingertips. With Mobile Commerce , customers
can perform a wide range of query-based transactions from
their OrangeTM (MUMBAI) and AIRTEL ( DELHI) Mobile
Phone, without even making a call.

• Access multiple accounts

24
 • Balance enquiry to the linked accounts

• Cheque book requests

• Mini statement – Listing of last three transactions

• Request for account statements (by mail or fax)

ICICI

Attractive interest rates

Door-step service from enquiry stage till final disbursement

No guarantor required

Can transfer your existing high-interest rate loan

Can transfer your existing high-interest rate loan

Special 100% funding for select properties

25
Home loan

• You must be at least 21 years of age when the loan

is sanctioned.

• The loan must terminate before or when you turn 65

years of age or before retirement, whichever is earlier.

• You must be employed or self-employed with a

regular source of income.

Loan Amount

A number of factors are taken into account when assessing

your repayment capacity. Your income, age, number of
dependants, qualifications, assets and liabilities, stability/
continuity of your employment/ business are some of them.

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. Incidentally, if there are any
co-owners they must necessarily be co-applicants.

• Did you know that your fiancée's income can also be

considered for sanctioning the loan on your combined
income? The disbursement of the loan, however, will be
done only after you submit proof of your marriage.

• Providing additional security like bonds, fixed

deposits and LIC policies may also help to enhance
eligibility.

26
While there is no need for a guarantor, it could be that
having one might enhance your credibility with us. If so, our
loan officer would provide you with the necessary details.

The final amount to be sanctioned will depend on your

repayment capacity. However, what you ultimately are
entitled to will have to conform within the limits fixed for
each loan.

Also, when the company looks at the total cost, registration

charges, transfer charges and stamp duty costs are included.

HOME LOANS

We at ICICI Bank understand the value of owning your own

home. Our affordable home loans can make all the difference
to your dream of owning your home.

0% processing fee for a limited period.

Refer to the table for a loan option that suits your need best

FIND THE RIGHT HOME

Introducing Home Search - Our FREE online property search

facility. A one stop shop for all your real estate needs.

What you get

0% brokerage on first sale properties

Access the entire market under one roof

Site visits to properties short listed by you

Help in negotiating the best price

Help with legal documentation

Sanctioning

27
Documents

Passport size photograph. Age verification: PAN card, Voters

ID, Passport, License. Bank statement for the last six
months. Income Documents e.g. Latest Form 16, Certified IT
returns for latest 3 years. Processing Fee cheque. Loan
Enclosure letter.

These are the documents required for sanctioning a loan.

You may be asked to submit further legal documents if
required by ICICI or its approved lawyers.

Do retain photocopies of all documents being submitted by

you.

Disbursement

Your loan will be disbursed after you identify and select the
property or home that you are purchasing and on your
submission of the requisite legal documents.

While you may be under the impression that the list of

documents asked for is rather extensive, please note that it
is for your own good. Each and every single document asked
for will be verified and checked to ensure your safety.

This may take some time but we want to ensure a clear title
and will complete all the legal and technical verifications to
ensure that you have full rights to your home.

The 230 A Clearance of the seller and / or 37I clearance

from the appropriate income tax authorities (if applicable) is
also needed.

On satisfactory completion of the above, on registration of

the conveyance deed and on the investment of your own

28
contribution, the loan amount (as warranted by the stage of
construction) will be disbursed by ICICI.

The disbursement will be in favour of the builder/seller.

Standard documents:

Loan Agreements Disbursement Requests Post-dated

cheques Personal guarantor's documents, as the case may
be

Adjustable Rate Loans

Home Loans/Land Loans: Special offer - 0% processing fee

IC IC I B ank Home L oans Disbursement

F Y 03 86 595

F Y 02 22 370

F Y 01 6 770

0 20000 40000 60000 80000 100000

Rs . In Mn

29
Unique features of HDFC housing loan schemes

• Maximum loan
85% of the cost of the property (including the cost of the land)
and based on the
repayment capacity of the customer.

• Maximum Term
20 years subject to your retirement age.

• Applicant and Co- Applicant to the loan

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

• Adjustable Rate Home Loan

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

• Fixed Rate

*Conditions Apply

• 2-in-1 Home Loans

Purpose

• Purchase of
o Flat, row house, bungalow from developers
o Existing freehold properties

30
 o Properties in an existing or proposed co-operative housing
society or apartment
owner's association
o First Power of Attorney purchases in Delhi for DDA flats
allotted before 1992.

• Self Construction

Processing Fees

1% of the loan amount applied plus applicable service taxes and cess.

No Charges for

• Part or Full Prepayment of loan under Adjustable Rate (except in

case of prepayment through a refinance from other bank or
institutions prepayment charges will be applicable)
• Fixed Rate - Part prepayment upto 25% of opening loan
outstanding in a financial year
• Replacement of cheques
• Income Tax Certificates
• Accelerated Repayment Option

Multiple repayment options

Step Up Repayment Facility

Helps young executives take a much bigger loan today based on an

increase in their future income, this helps executives buy a bigger
home today!

Flexible Loan installments Plan

Often customers, parents and their children, wish to purchase

properties together. The parent is nearing retirement and their
children have just started working. This option helps such customers
combine the incomes and take a long term home loan where in the

31
installment reduces upon retirement of the earning parent.

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 . To help customer save this interest, we have
introduced a special facility of Tranche Based EMI. Customers can fix
the installments they wish to pay till the time the property is ready for
possession. 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.

Accelerated Repayment Scheme

Accelerated Repayment Scheme offers you a great oppourtunity to

repay the loan faster by increasing the EMI. Whenever you get an
increment, increase in your disposable income or have lumpsum funds
for loan prepayment, you can benefit by

• Increase in EMI means faster loan repayment

• Saving of interest because of faster loan repayment
• You can invest lumpsum funds rather than use it for loan
prepayment. The return from the investments also gives you the
comfort of paying the increased EMI.

Documents required-:

Salaried Self Employed Self Employed

Customers Professionals Businessman
Application form Application form with Application form with
with photograph photograph photograph
Identity and Identity and Residence Identity and Residence
Residence Proof Proof Proof
Education Qualifications Education Qualifications
Latest Salary-
Certificate and Proof of Certificate and Proof of
slip
business existence business existence
Form 16 Last 3 years Income Tax Business profile

32
 returns (self and
business)
Last 3 years Income Tax
returns
Last 6 months Last 3 years Profit /Loss (self and business)
bank statements and Balance Sheet
Last 3 years Profit /Loss
and Balance Sheet
Last 6 months bank
Last 6 months bank
Processing fee statements
statements
cheque (self and business)
Processing fee cheque Processing fee cheque

Unique features of SBI home loan schemes-:

-: No cap on maximum loan amount for

purchase/ construction of house/ flat

• Option to club income of your spouse and

children to compute eligible loan amount
• Provision to club expected rent accruals
from property proposed to compute eligible
loan amount
• Provision to finance cost of furnishing and
consumer durables as part of project cost
• Repayment permitted upto 70 years of
age
• Free personal accident insurance cover
• Optional Group Insurance from SBI Life at
concessional premium (Upfront premium
financed as part of project cost)
• Interest applied on daily diminishing
balance basis
• ‘Plus’ schemes which offer attractive
packages with concessional interest rates,
margins and processing fee to Govt.
Employees, Teachers, Scientists,
Employees in Oil sector, Journalists (in
select cities) etc.

33
 • Special scheme to grant loans to finance
Earnest Money Deposits to be paid to
Urban Development Authority/ Housing
Board, etc. in respect of allotment of sites/
house/ flat
• No Administrative Charges or application
fee
• Prepayment penalty is recovered only if
the loan is pre-closed before half of the
original tenure (not recovered for bulk
payments provided the loan is not closed)
• Provision for downward refixation of EMI
in respect of floating rate borrowers who
avail Housing Loans of Rs.5 lacs and
above, to avail the benefit of downward
revision of interest rate by 1% or more
• In-principle approval issued to give you
flexibility while negotiating purchase of a
property
• Attractive packages in respect of loans
granted under tie-up with Central/ State
Governments/ PSUs/ reputed corporates
and tie-up with reputed builders

Package of exclusive benefits:

• Complimentary international ATM-Debit

card
• Complimentary SBI Classic/ International
Credit Card with waiver of joining and first
year’s fees
• Option for E-banking
• Concessional package under ‘Credit
Khazana’ for prospective car loan
borrowers whose accounts are conducted
satisfactorily
• 50% concession in charges in respect of all
personal remittances/ collection of
outstation cheques

Purpose
Purchase/ Construction of new House/ Flat
Purchase of an existing House/ Flat

34
 Purchase of a plot of land for construction of
House
Extension/ repair/ renovation/ alteration of an
existing House/ Flat
Purchase of Furnishings and Consumer Durables
as a part of the project cost
Takeover of an existing loan from other Banks/
Housing Finance Companies

Eligibility

Minimum age 21 years as on the date of

sanction
Steady source of income
Loan Amount

 Applicant/ any one of the applicants are aged

over 21 years and upto 45 years – 60 times Net
Monthly Income (NMI) or 5 times Net Annual
Income (NAI), subject to aggregate repayment
obligations not exceeding 57.50% of NMI/ NAI
 Applicant(s) aged over 45 years of age– 48
times NMI or 4 times NAI, subject to aggregate
repayment obligations not exceeding 50%of
NMI/ NAI
To enhance loan eligibility you have option to
add:
 Income of your spouse
 Income of your son/ daughter living with you,
provided they have a steady income and his/ her
salary account is maintained with SBI
 Expected rent accruals (less taxes, cess, etc.)
if the house/ flat being purchased is proposed to
be rented out
 Regular income from all sources

Margin

Purchase/ Construction of a new House/ Flat/ Plot of

land: 15%
Purchase of an existing House/ Flat: 15%

35
Repairs/ Renovation of an existing House/ Flat: 20%

Processing Fee

0.50% of Loan amount (including Service Tax)

Prepayment Penalty

2% of the loan prepaid if the prepayment is

made before expiry of half the original tenure.

Security

 Equitable mortgage of the property

 Other tangible security of adequate value like
NSCs, LIC policies etc., if the property cannot be
mortgaged
Maximum Repayment Period
 For applicants upto 45 years of age: 20 years
 For applicants over 45 years of age: 15 years
Moratorium

Upto 18 months from the date of disbursement

of first instalment or 2 months after final
disbursement in respect of loans for construction
of new house/ flat (moratorium period will be
included in the maximum repayment period)
Disbursement

 In lump sum direct in favour of the builder/

seller in respect of outright purchase
 In stages depending upon the actual progress
of work in respect of construction of house/ flat
etc.

36
Documents

 Completed application form

 Passport size photograph
 Proof of Identity – PAN Card/ Voters ID/
Passport/ Driving License
 Proof of Residence – Recent Telephone Bill/
Electricity Bill/ Property tax receipt/ Passport/
Voters ID
 Proof of business address in respect of
businessmen/ industrialists
 Sale Deed, Agreement of Sale, Letter of
Allotment, Non encumbrance certificate, Land/
Building Tax paid receipt etc. (as applicable and
subject to satisfaction report from our
empanelled lawyer)
 Copy of approved plan and approval from the
Local Body
 Statement of Bank Account/ Pass Book for
last 6 months

‘SBI-Flexi’ Home Loans

A customized product designed to enable

borrowers to hedge their Home Loan against
unfavourable movement in interest rates. The
product gives you a one time irrevocable option
to choose one of the three customized
combinations of fixed and floating interest rates
and also to choose the order in which the fixed
and floating rate will be availed.

Minimum Loan Amount: Rs.5 lacs

(Other terms and conditions – as applicable to

regular Home Loans)

‘SBI-Maxgain’ Home Loans

An innovative and customer-friendly product to

enable you to earn optimal yield on your savings
and minimize interest burden on Home Loans,
with no extra cost.

37
The loan is granted as an Overdraft facility with
the added flexibility for you to operate your
Home Loan Account like your SB or Current
Account.

The product serves to minimize your interest

cost by enabling you to park your surplus funds
in ‘SBI-Maxgain’ (with the benefit to withdraw
the surplus funds whenever you require),
specially in the wake of low yields from other
deposit/ investment avenues.
Minimum Loan Amount: Rs.5 lacs

(Other terms and conditions – as applicable to

regular Home Loans)

‘SBI-Realty’ Home Loans

A unique product if you are on the look out for a

loan to purchase a plot of land for house
construction. The loan is available for a
maximum amount of Rs.20 lacs* and with a
comfortable repayment period of upto 15 years.

You are also eligible to avail another Housing

Loan for construction of house on the plot
financed above with the benefit of running both
the loans concurrently.

(House should be constructed within 5 years

from the date of availment of ‘SBI-Realty’
Housing Loan)

(Other terms and conditions – as applicable to

regular Home Loans)

(* relaxation considered on case to case basis)

‘SBI-Freedom’ Home Loans

A revolutionary product designed for customers

38
who are on the look out for a source of finance
for a property they want to invest in without
mortgaging the same. All you have to do is
pledge any financial security that you have and
you will get a Home Loan for your dream home.

A must-take for those who do not want to pay

stamp duty for mortgage of their property or go
through the hassles of creation of mortgage.

You also have an option to take the loan by way

of mortgage of the property and pledge financial
securities in lieu of margin money.

Repayment is highly customized, giving you the

option to repay through regular EMIs or through
maturity proceeds of the securities pledged.

(Other terms and conditions – as applicable to

regular Home Loans)

Unique features of UTI home loans

• Attractive Interest Rates

• Balance Transfer facility available
• Doorstep Service
• Option to choose from Floating rate or Fixed
Rate
• Free Fire & Personal accident insurance

Reach us

To apply for a Home Loan, just

• Apply online
• SMS <UHL City Name> to 4646
• Write to us at:
homeloan@utibank.co.in (Please specify
your City & contact numbers with STD code)

39
 • Contact any of our Branches / Offices

Products offered

Home Loans for

• 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 / flat
• Purchase of old house / flat which is not more
than 15 years old (Home Acquisition Plan)
• Extend /Renovate/Repair of a house or flat
already owned by self (Improvement/Extension
Plan)
• Take-over of existing Housing Loan (Balance
Transfer)
• Pre-allotment Booking finance
• Loan takeover with additional refinance (Balance
Transfer + Top up).

Documents Required

Purpose Salaried Others

Proof of Voter's ID Card / Voter's ID Card /
Identity Driving License / Driving License / PAN
PAN card / Photo card / Photo Credit
Credit Card / Card
Employees ID card
OR Defense /
Police /
Government
Department ID
card
Proof of Latest salary slip IT Returns for the last

40
Income showing all 2 years and
deductions or Computation of
Form 16 along income for the last 2
with recent salary years certified by a CA
certificate.
Proof of Bank account Bank account
Residence statement / Latest statement / Latest
Electricity Bill / Electricity Bill / Latest
Latest Mobile OR Mobile OR Telephone
Telephone Bill / Bill / Latest Credit
Latest Credit Card Card statement /
statement / Latest Latest LIC policy /
LIC policy / Insurance Premium
Insurance Receipt / Latest NSC /
Premium Receipt / other similar
Employers letter instruments indicating
certifying the the address
current mailing
address / Latest
NSC / other similar
instruments
indicating the
address / Existing
House Lease
agreement
Bank Last 6 months Last 6 months
Statement /
Pass Book
where
salary/income
is credited
Guarantor Optional Optional
Form

41
Loan amount

Home Loan

· Minimum - Rs.1 lakh

· Maximum - Rs.50 lacs

Margin

· 15% in the case of Home Loans.

· 25% in case of Improvement/ renovation loans

Terms and Conditions

Repayment

• Repayment period for Home Loans shall not

exceed 20 years.
• Repayment period of pre allotment bookings
of housing loans shall not exceed 1½ year.
• Repayment period of Improvement /
renovation / extension of existing property
shall not exceed 10 years.

Security

Equitable Mortgage of the property to be financed,

by way of deposit of title deeds.

Where the individual building is built on a plot of

land, which is already charged, to the Bank, there is
no further requirement of collateral security.

Insurance

We are offering free Fire & Personal Accident

insurance cover to our Power Home Customers

Disbursement

42
The loan will be disbursed in full or in suitable
installments, taking into account the requirement of
funds and progress of construction, as assessed by
the Bank directly to seller / builder / local
development authority / supplier of materials etc.

Processing Charges / Admission Fee

Processing fee equivalent to 1% of the loan amount

(applied for) will be collected along with the
application form (taxes as applicable).

Penalty for early closure

2% of the principle outstanding in case of takeover

by other bank / HFC, otherwise Nil.

Other Conditions

• Bank reserves the right to reject any

application without assigning reasons
thereof.
• The applicant will undertake to inform the
Bank as and when there is a change in
address / employment.

The terms & conditions mentioned above and

elsewhere under the scheme are subject to
modification from time to time solely at Bank's
discretion

Switching Cost: Switching from the Floating rate

scheme to the Fixed rate scheme and vice versa is
permissible. If a fixed rate customer wants to
reschedule the loan to a lower interest rate, the
same is also permissible

43
 Comparison of interest rates of the four banks-:

Floating interest rates in case of loan Tenure of 5 Years

Procressi
ng
Annual or Prepaymen
Name of Rate of EMI per Fee &
Type Loan Slab Monthly t
the Bank Interest lac (Rs) Administr
Rent Fee
ation
Fee
Floating 3 lac to Monthly
ICICI 9.50% 2102 0.5% 2%
crore
1 lac to 50 Monthly
HDFC Floating 9.25% 2089 1% 2%
lac
1 lac to 50
UTI Floating lacs Monthly 9.00% 2076 1.0% 2%

1 lacs to 1
SBI Floating Monthly 8.75% 2063 0.5% 2%
crore

44
Fixed interest rates in case of loan Tenure of 5 Years

Procressi
ng
Annual or Prepaymen
Name of Rate of EMI per Fee &
Type Loan Slab Monthly t
the Bank Interest lac (Rs) Administr
Rent Fee
ation
Fee
3 lac to 1 Monthly
ICICI Fixed 10.75% 2162 0.5% 2%
crore
1 lac to 50 Monthly
HDFC Fixed 10.50% 2150 1% 2%
lac
1 lac to 50
UTI Fixed lacs Monthly 11.00% 2175 1.0% 2%

1 lacs to 1
SBI Fixed Monthly 9.50% 2100 0.5% 2%
crore

45
Floating interest rates in case of loan Tenure of 10 Years

Procressi
ng
Annual or Prepaymen
Name of Rate of EMI per Fee &
Type Loan Slab Monthly t
the Bank Interest lac (Rs) Administr
Rent Fee
ation
Fee
Floating 3 lakh to 1 Monthly
ICICI 9.50% 1293 0.5% 2%
crore
1 lac to 50 Monthly
HDFC Floating 9.25% 1280 1% 2%
lac
1 lac to 50
UTI Floating lacs Monthly 9.00% 1267 1.0% 2%

1 lacs to 1
SBI Floating Monthly 9.25% 1280 0.5% 2%
crore

46
Fixed interest rates in case of loan Tenure of 10 Years

Procressi
ng
Annual or Prepaymen
Name of Rate of EMI per Fee &
Type Loan Slab Monthly t
the Bank Interest lac (Rs) Administr
Rent Fee
ation
Fee
3 lac to 1 Monthly
ICICI Fixed 10.75% 1364 0.5% 2%
crore
1 lac to 50 Monthly
HDFC Fixed 10.50% 1351 0.5% 2%
lac
1 lac to 50
UTI Fixed lacs Monthly 11.00% 1378 1.0% 2%

1 lacs to 1
SBI Fixed Monthly 9.75% 1310 0.5% 2%
crore

47
 THE MARKET SHARE OF DIFFERENT BANKS IS

GIVEN BELOW-:

SWOT ANALYSIS

STRENGHTS:

• ICICI HFC has bought about a

33%
paradigm shift in the way the industry
now markets Home Loans

48
• Shift from ‘Walk-in’ to ‘Doorstep
Service’

• In ICICI HFC, products are marketed

almost like consumer goods

• Discounts on Rates or Fees or Special

Gifts

• Cross-sell Initiatives – Home Loan-

home Search-pl

• Exhibitions – Bring in ‘Touch and Feel’

to Our Product

• With Builders, Other Products

• Property Shows

• Road Shows /Rallies – Create

Awareness and Bring Visibility

• ‘In-shop’ Promotions – Worksite

Helpdesks, Builder Camps, at Govt.
Offices, Shopping Arcades

• Distribution reach

• Geographical expansion – adding larger

numbers of spokes and outreaches to
existing hubs

• Penetration of distribution networks

• Increased contact points

• Alternate channels – more fulfillment

channels, more lead generation
channels

49
• Counselor network

• I-Bank

• Insurance agents

BRANDING

• Logo

• ‘I-Man’ – 1:1.08

• Colors

• Blue, Maroon, Grey, Orange, Yellow

• Fonts

• Zurich, Arial or the Universe family of

fonts may be used

• Brand Values – Authority, Modernity,

Solidity and Professionalism

• Corporate Baseline –

• Safer . Simpler . Smarter .

Some marketing initiatives

• Tie Ups With Consumer Durables and

Manufacturers for Discounts to
Customers

• Free Personal Accident Insurance

• Cross Sell Activities

50
WEAKNESSES :

OPPORTUNITIES:

• Ample scope for financing flats and

apartments for the salaried class in the
higher income group.

THREATS:

• Nationalized banks like SBI, Union

Bank and PNB

• Market leader HDFC and other

upcoming private banks.

51
 RECOMMENDATIONS

The following suggestions are strongly

recommended:

1. To broaden the customer base the vast

middle income strata should be fully exploited

2. Simplify the procedure, reduce service

charges, and demand only the basic essential
proof.

3. Adoption of flexible and more lenient penalty

should the customer fail to deposit the
payment on time. The penalty should be on
case to case basis rather then the same for
the entire customer base.

4. Restriction to be reduced to bare minimum

for loan advances and for repayment. For e.g.
offer long-term repayment facilities and have
no age restriction to choosing repayment.

5. The maximum age for repayment could be

52
 increase to 65-70 years of age. Such facility
will help grow fast retail segment of the bank.

6. Offer multiple repayment loans.

7. Service class to be exploited by offering

special reduced rates and linking the
repayment from the source from where the
pay-cheque to the employee is issued. This
needs to undergo special contract with
government organisation to ensure
implementation.

CONCLUSION

The Indian customer has come a long way from

purchasing to fulfilling their needs from buying a
house. Customers now grab everything that
comes their way but they do their own survey of
optimum loans; same is the case with banks,
and housing loans. With innumerable choices
before him, the customer is indeed the king. It
is therefore imperative that if a bank has to
succeed in the competitive world, it should be

53
technological savvy, customer centric
progressive driven by highest standards of
corporate governance and guided by sound
ethical values and above all should be cordial
and should have personalize customer services.

There is scope of exploiting the vast middle

income group by releasing loans with special
interest rate which would be beneficial to both
parties.

54
 REFERENCES

1) www.icicibank.com

2) www.hdfc.com

3) www.utibank.com

4) www.sbi.co.in

5) www.google.co.in

6) www.realestateinfo.com

7) www.apnaloan.com

8) Financial Management -:By Van

Horne

55