HOME LOANS IN HDFC

ST. GONSALO GARCIA COLLAGE OF ARTS AND COMMERCE.

 HOME LOANS IN HDFC

ST. GONSALO GARCIA COLLAGE OF ARTS AND COMMERCE.

 HOME LOANS IN HDFC

ST. GONSALO GARCIA COLLAGE OF ARTS AND COMMERCE.

 HOME LOANS IN HDFC

ST. GONSALO GARCIA COLLAGE OF ARTS AND COMMERCE.

 HOME LOANS IN HDFC

ST. GONSALO GARCIA COLLAGE OF ARTS AND COMMERCE.

 HOME LOANS IN HDFC

INTRODUCTION.
Home is where the heart is -owning a home is a lifelong dream for most of the
people. Home is more or less a lifetime investment and hence home loans are an
integral part of every person who dreams and wants to have a living space of his
own. Buying a home is probably the biggest purchase most of us will ever make in
our lifetimes. Owning our own home is a watershed event in our life. You are the
master (or mistress) of your own space, your little corner in the universe. But the
process of finding your little nest is a stressful one. A once in a lifetime investment
needs a loan and that is how a home loan comes into the scheme of things in your
life.
Almost all public and private sector banks are offering home loans at attractive
rates for purchasing their dream home. Home loan usually cover a variety of types.
All Banks have come out with home loan products studded with features and value
additions that make the schemes not only attractive but also serve as a substantial
source to the borrowers for owning their dream home.

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1.1 MEANING.

In finance, a loan is the lending of money from one individual, organization or

entity to another individual, organization or entity. A loan is a debt provided by an
entity (organization or individual) to another entity at an interest rate, and
evidenced by a promissory note which specifies, among other things, the principal
amount Of money borrowed, the interest rate the lender is charging, and date of
repayment. A loan entails the reallocation of the subject asset(s) for a period Of
time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money, called
the principal, from the lender, and is obligated to pay back or repay an equal
amount Of money to the lender at a later time.
The loan is generally provided at a cost, referred to as interest on the debt, which
provides an incentive for the lender to engage in the loan. In a legal loan, each of
these obligations and restrictions is enforced by contract, which can also place the
borrower under additional restrictions known as loan covenants. Although this
article focuses on monetary loans, in practice any material object might be lent.
Acting as a provider of loans is one of the principal tasks for financial institutions
such as banks and credit card companies. For other institutions, issuing of debt
contracts such as bonds is a typical source of funding

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1.2 HISTORY

Banking system in the world has emerged many centuries ago and in India it
rooted its seed with the existence of the General Bank of India in the year 1786. In
earlier days banks were the Financial Institutions dealing in day to day services i.e.
accepting deposits and lending money. But now it has spread its wings to various
others sectors like it first started. Lending to big business entities and has also
entered into the retail banking sector i.e. it started lending for purchasing car, for
education, marriage and most importantly for purchasing a house.
In tune with the conservative traditions in lending, commercial banks played a
very limited role in providing housing finance till the early seventies. However,
now as per Reserve Bank guidelines, housing finance is part of priority sector
lending schemes for banks. There has been progressive increase in housing finance
disbursed by commercial banks since 1979.
The housing finance industry is getting increasingly commoditised. Competition
within the sector is ensuring that players offer consumers flexibility and features to
choose from. Features such as adjustable rate plans, lower processing fees/monthly
rest/interest rates/EMI/margin money, no pre- payment penalty have become
common across the industry. There is a growing trend among Banks and FIS to
include the cost of registration, stamp duty, society charges and other associated
costs while sanctioning loans to differentiate and make the home loans products
more attractive. This has resulted in further lowering the threshold limit for buying
a house.

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 HOME LOANS IN HDFC

ST. GONSALO GARCIA COLLAGE OF ARTS AND COMMERCE.

 HOME LOANS IN HDFC

2.1 INTRODUCTION

The sun at home warms better than sun elsewhere.

True isn't it, where else do you find that comfort that makes you feel so special
every day. Undoubtedly owning a house is the most important phase in one's life.
Not long ago, turning this dream into a reality was a daunting task for the common
man with property rates going north all the time. But now, thanks to the
proliferation of home loans and housing finance companies, one can aspire to own
a roof over one's head. Many think it is an expensive affair and beyond reach.
Well, that's not always true. It takes a little planning and awareness to get to that
home you want to call your own.
Buying a home for the first time can be daunting to any person but in today's time
various banks are lending a helping hand to the people to purchase their dream
house. Thus people look forward towards choosing a home loan. The primary
concern of a housing finance company is to determine the loan amount that the
borrower is comfortably able to repay. The most popular method of financing a
home purchase is with a mortgage. This is a loan that is secured over the home.
There are a number of different mortgage suppliers and people will have to shop
around in order-to get the best deal.
Home Loan is one of the fastest growing retail and mass banking area. It forms an
important part of the country's priority in 5 year plans. Almost all public and
private sector banks are offering home loans at attractive rates for purchasing their
dream home. Home loan usually cover a variety of types. All Banks have come out
with home loan products studded with features and value additions that make the
schemes not only attractive but also serve as a substantial source to the borrowers
for owning their dream home.

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2.2 CHARACTERISTICS OF HOME LOAN

1. Home Loans are the consumer loans.

2. Home loans are long term loans provided by various bank.

3. These are large amount loans which provide financial support to the people who want to purchase
their dream home.

4. Home loans are secured loans.

5. The borrowers get to own their dream home and pay for it in easy and affordable instalments.

6. Banks and Financial Institutions offers home loans at cost-effective rates.

7. Tax concessions make home loans more attractive than other loan products.

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2.3 PROCEDURE OF HOME LOAN

Home loan procedure caters to processes right from the time the customer walks
into the bank with a request for home loan till the time the loan is finally repaid by
the customer. The three major phases in the home loan procedure are the
information acquisition, credit appraisal and sanction, and disbursement. Tracking
the performance of the process is an underlying phase that runs across the
application processing cycle and is critical for monitoring and profitability.
The procedure can be explained in the chart below.

SUBMISSION OF TECHNICAL CHECK

APPLICATION ON PROPERTY BY DISBURSEMENT.
FORM. BANK.

PERSONAL LEGAL CHECK ON

DISCUSSION WITH PROPERTY BY REPAYMENT.
CUSTOMER. BANK.

FILE SUBMISSION OF
INTEREST TAX
INVESTIGATION BY PROPERTY/LEGAL
CERTIFICATE.
BANK/FI DOCUMENTS.

CREDIT APPRAISAL ISSUE OF LETTER

REPAYMENT BY
AND LOAN TO THE
CUSTOMER.
SANCTION. CUSTOMER.

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A. Submission of application form:

The application is submitted along with
photographs, credit documents and a cheque for processing, documentation and
administration fees by the customer. The credit documents comprise documents to
establish income, age, residence, employment, investments, etc. During this stage,
the bank/financial institution checks the repayment capacity of the customer. The
repayment capacity is determined by taking into consideration factors such as
income, age, qualifications, number of dependants, spouse's income, assets,
liabilities, stability and continuity of occupation and savings history.

B. Personal Discussion with customer:

Some banks/FIs require the customer be
present at the time of the credit appraisal. Some banks/FIs may insist on a personal
interview with the customer and perform a reference check on the references
provided by the customer on the application form. For the personal discussion the
customer needs to take with him all documents pertaining to the information
provided by him on the application form.

C. Field Investigation by the bank/FI:

The bank/FI validates information
provided by the customer on the application form. This stage revolves around two
key aspects. Critically appraising the credit worthiness of the customer and
analysing the risk in lending. It is necessary to capture all the information required
to cater to these aspects. It is important to verify that the information supplied by
the customer is correct and authentic. Banks achieve this mostly through external
agencies. Also the validity and authenticity of information can be done through
conducting checks on the residential address of the customer, the place of
employment of the customer, and credentials of the employer, verification of
documentary proofs of income, age and other information. To minimize the risk, it

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is necessary to check that the customer is not a fraud or black listed within the
bank or other institutions.

D. Credit Appraisal and loan sanction:

The next phase in the home loan process
IS the credit appraisal and loan sanction. After checking the customer's repayment
capacity, the bank/FI sets norms that define the customers eligibility for a loan
amount. The loan then gets sanctioned along with certain terms and conditions.
evaluating the measurable aspects of home loan requests, an analyst
addresses the following issues: the character of the borrower, the use of loan
proceeds, the amount needed, and the primary and secondary sources of
repayment. Therefore, the bank has to base its decisions more on qualitative
parameters rather than quantitative aspects. Credit analysis therefore is distinct for
each type of home loan scheme. Credit analysis is the most popular methods of
evaluating home loans.

E. Issue of offer letter to the customer:

The bank/FI sends an offer letter to the customer with the loan sanction details which mentions,

• Loan amount
• Rate of interest and whether it is fixed / variable rate of interest. If variable,
period after which the rate of interest would be reset - annual / monthly
reducing balance
• Loan duration
• Mode of loan repayment
• Scheme of the loan, if a special scheme has been offered to the customer
• General terms and conditions of the loan
• Special conditions, if any, which the customer needs to adhere to prior to
disbursement

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• Submission of the acceptance copy of the offer letter and a cheque for administrative fees by the customer.

F. SUBMISSION OF PROPERTY/LEGAL DOCUMENTS.

After the selection of the property, the customer is required to submit the original documents pertaining to
the proper being purchased or mortgaged (if the purchased is different from the property mortgaged). The
bank/FI keeps proper documents as security for the loan amount given to the customer till the time the loan
is fully repaid.

G. Legal check on the property by the bank:

The bank/ FI sends all the documents to their empanelled lawyer for a thorough scrutiny. On receiving the
lawyers report that the documents are clear, the bank/ FI decides to disburse the loan to the customer. If the
documents sent to the lawyer are not enough to arrive at a judgment, the bank/ FI requests the customer to
furnish additional documents.

H. Technical check on the property by the bank/financial institution:

Prior to disbursement, the bank/FI conduct a site visit to the customer's property to verify
the following:

In case of under construction property:

Quality of construction
• Stage of construction: Whether it is the same as mentioned in the payment notice given to the customer by
the builder
• Progress of work
• Layout of flats and area of property is within permission granted by the governing authority.
• Requisite certificates have been received by the builder to start construction.

In case of ready construction/ resale:

• Age of the structure.
 Quality of construction
 Whether the structure will last the tenure of the loan
 External maintenance of the property
 Internal maintenance of the property

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 Surrounding area (development)

 Required certificates from the governing authority have been received by the
 builder for handing over possession of the flat
 There is no existing lien or mortgage on the property

I. Disbursement:
After verifying that the property is legally and technically clear, the bank/FI disburses the loan amount on
the basis of the stage of construction of the property. The customer needs to pay the margin money from his
own contribution prior to the disbursement.

J. Repayment:
The repayment of the loan by the customer starts only after the full
disbursement of the loan amount has been made by the bank/FI. The loan is
always repaid by way of EMI’s . The mode of repayment, however, differs from
case to case. In case of a loan repayment done through Deduction against Salary
(DAS), Post Dated Cheques (PDCs), Standing Instructions (SI) and cash / Demand
Draft (accepted only by some banks/FIs). The customer can deposit the amount of
his every month at the bank/FI's office.

K. Interest tax certificate:

This certificate is given by the bank/FI to the customer
to avail of tax benefits that accrue through a home loan. The customer can submit
this to his employer or Chartered Accountant to account it while calculating the
customer's tax liability

L. Prepayment by the customer:

The customer can either partly or fully prepay
his loan at any given point of time. The loan could be partly or fully disbursed
when the customer wishes to prepay his loan. Most banks/FIs, however, have a
limit on the number of times that a person can prepay his loan. There is, normally,
also a minimum amount that a customer has to prepay each time he wishes to do

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Whenever a customer makes a prepayment, the customer has an option of

So reducing his EMI by keeping his tenure constant or to reduce his tenure by keeping
the EMI constant.

2.4 TAX BENEFITS

1) For Resident Indians

There are certain tax benefits for the resident Indians based on the principal and
interest component of a loan under the Income Tax Act, 1961. It may help one get
tax benefit up to Rs. 50,490 p.a. (approx.) if interest repayment of Rs. l, 50,000
p.a. is paid. In addition to this, one also is eligible for getting tax benefits under
section 80C on repayment of Rs. 1, 00,000 p.a. that further reduces the tax liability
byRs.33.660 p.a.
These deductions are available to assesses, who have taken a loan to either buy or
build a house, under Section 24(b).
However, interest on borrowed capital is deductible up to Rs. 150,000 if the following conditions are
fulfilled:
1. Capital is borrowed for acquiring or constructing a property on or after April l,1999.
2. The acquisition and construction should be completed within 3 years from the end of the financial
year in which capital was borrowed.
3. The person, extending the loan, certifies that such interest is payable in respect of the amount
advanced for acquisition or construction of the house.
4. A loan for refinance of the principle amount outstanding under an earlier loan taken for such
acquisition or construction.

If the conditions stated above are not fulfilled, then the interest on borrowed
capital is deductible up to Rs 30,000 though the following conditions have to be
satisfied:
1. Capital is borrowed before April 1, 1999 for purchase, construction, reconstruction repairs or
renewal of a house property.
2. Capital should be borrowed on or after April l, 1999 for reconstruction, repairs or renewals of a
house property.

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3. If the capital is borrowed on or after April 1, 1999, but construction is not completed within 3 years
from the end of the year, in which capital is borrowed.
In addition to the above, principal repayment of the loan/capital borrowed is eligible for a deduction of up to
Rs 100,000 under Section 80C from assessment year 2006-07.

Terms and conditions for availing Tax benefits on Home Loans

1. l. Tax deductions can be claimed on housing loan interest payments, subject to an upper limit of Rs
150,000 for a financial year.

2. 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, if any profit is made,
then a capital gains tax liability arises on 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.

Tax benefits on interest on housing loans are allowable only for the original loan and
according to Section 24

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(1), tax benefits can also be availed for a second loan taken to repay the first loan but not for subsequent
loans. This means that if the borrower have already availed of one loan to refinance the original loan and
want to now avail a third loan to refinance the second loan, tax rebate on interest payments will not be
permissible.

2) For Non- Resident Indians

NRIs cannot claim tax benefits on home loans in India as they have to pay tax in the nation where they work
and earn. Moreover, the borrowers need to file tax returns to become eligible for home loans. However, if
they pay tax in India for income earned in India, they can claim tax rebate for the home loan.

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3.1 Introduction and History Of HDFC.

HDFC Bank is an Indian banking and financial services company headquartered in

Mumbai, Maharashtra. It has about 76,286 employees including 12,680 women
and has a presence in Bahrain, Hong Kong and Dubai. HDFC Bank is the second
largest private bank in India as measured by assets. It is the largest bank in India
by market capitalization as of February 2016. It was ranked 69th in 2016
BrandZTM Top 100 Most Valuable Global Brands.
In 1995 HDFC Bank was incorporated, with its registered office in Mumbai, India.
Its first corporate office and a full service branch at Sandoz House, Worli was
inaugurated by the then Union Finance Minister, Dr. Manmohan Singh.
As of June 30, 2016, the Bank's distribution network was at 4,541 branches and
12,013 ATMs.

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LOANS FROM HDFC

3.2 TYPES
PERSONAL LOANS.
Personal loans from HDFC Bank are quick, competitive and transparent. Whatever be your need,
talk to us and we can customise a personal loan for you. Our seamless loan sanction and disbursal procedure
ensures that availing a personal loan is a hassle-free experience. Unmatched additional benefits, quick
documentation, ease of communication and doorstep service make HDFC Bank a leader in personal loans.

Features
 Highly competitive personal loan interest rates
 Special offers, interest rates and charges for HDFC Bank account holders
 Personal loan eligibility in 1 minute available online and across all branches
 Special personal loan offers* for women employees
 Walk in Loan: Walk in to the branch with your documents and get Persona! Loan in a day.
 Convenience of contacting us through SMS, Webchat, Click2Talk, Phone Banking and across
all branches

Benefits
1. Simplified documentation

2. Competitive pricing

3. Transparency

4. Personal Loans available for various needs

CAR LOAN.
New Car Loans.
1. Up to 100% funding

2. 7 year loan tenure.

3. Faster approvals and doorstep services

Pre-owned Car Loans

1. Widest range of authorized dealers.

2. Up to 100% finance and up to 60 months tenure.

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Loan against Car

 Pre-approved cash loan for existing Car Loan customers.

 No income documents required.

BUSINESS LOAN.
FEATURES
 Convenience of contacting us through SMS, Webchat, Phone Banking and across all
Branches.

 Business Loan eligibility in I minute available online & across all branches.

 Self-employed customers get exclusive higher loan amount.

Best in class offerings on loan amount, interest rates and charges, for HDFC bank A/c customers

Benefits
 No collateral/ guarantor / security required.

 Speedy approvals.

 Funds available for business expansion, working capital, child's education or home
renovation.

LOANS ON CREDIT CARD

HDFC Bank Credit Cardholders can get Pre-approved Loans on Credit Card in just
One Second. Education - be it school fees or college fees, Travel Vacation within
India or abroad, New Car, New Scooter/Bike, Marriage, Home Renovation, Home
& Kitchen appliances (TV, AC, Fridge, Washing Machine, Microwave oven,
etc), Electronic gadgets (Laptop, PC, Tablet, Camera, Smartwatch, etc.), Sports
goods or any emergency needs.

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If you are looking for a loan that is easy to apply and disbursed quickly, then you
can opt for pre-approved loans on your HDFC Bank credit card - Insta Loan /
Insta Jumbo Loan. Insta Loan is a pre-approved loan within the credit limit of your
HDFC Bank credit card while Insta Jumbo Loan is a pre-approved loan over and
above the credit limit of your HDFC Bank credit card i.e. the availed loan amount
will be blocked against the credit limit of your credit card for Insta Loan while the
availed loan amount will not be blocked against the credit limit of your credit card
for Insta Jumbo Loan.
On the other hand, if you have made expensive purchases with your HDFC Bank
Credit Card, you can take up a loan on credit card that breaks up your purchases
excluding Gold/Jewellery into easily affordable instalments through Smart EMI.
They also offer loan against other bank credit card / loan outstanding through
Balance Transfer on EMI i.e. you can transfer the balance outstanding on other
bank credit card / other bank loan to your HDFC Bank credit card and pay in
EMI’s.
With an expansive portfolio catering to every stage of your needs, applying for an
HDFC Bank credit card loan product will seem like the logical choice to make.

LOANS ON PROFESSIONALS
Features
 Convenience of contacting us through SMS, Webchat, Phone Banking and across all
Branches

 Professional Loan eligibility in I minute available online & across all branches.

 Special loan offers for Doctors.

 Best in class offerings on loan amount, interest rates and charges, for HDFC bank A/c
customers.

Benefits

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1. No collateral/ guarantor / security required.

2. Speedy approvals

3. Funds available for business expansion, working capital, child's education or home
renovation.

LOAN ON SECURITIES
Features
 Widest Range of collateral accepted in the industry.

 Scan based account opening.

 Overdraft Facility available.

 Combines the power of Loan and bank account.

Benefits
1. Anytime, anywhere access.

2. Auto Renewal of loan facility.

3. No Prepayment penalty.

4. Dedicated LAS Helpdesk.

VEHICLE LOAN

Two Wheeler Loan

 2% lower rate and 50% discount on processing fees for account holders.

 Savings up to Rs. 2375/-*.

 Check eligibility in 1 minute. Approval in 15 minutes.

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Super Bike Loan

 Super Bikes of all brands are financed.

 Preferential, rates at 12.90% (reducing) for account holders.

 Savings of Rs 12500/-* on Loan amount of Rs 7 lacs for 60 months tenure.

 Tenure up to 60 months.

 Accessory funding up to 2 lacs.

GOLD LOANS
HDFC bank's Sampoorna Bharosa Gold Loan is available the moment you
step into any of our branches. We help you optimise your investment in gold
because this loan against gold is not only easy to avail but also easy to
repay. Get convenient loan options, affordable interest rates and an
opportunity to liquidate your gold loan at any time.

EDUCATIONAL LOANS
A meritorious student is never far away from their dream career, courtesy of
HDFC Bank's education loans. Students from every discipline can now take their
first steps on the path to success. Every feature of our student loan assists the
process of higher education in a comfortable manner. Tax benefits, post-
graduation EMI schedule and a flexible tenure make higher education both
affordable and convenient as never before.
With rapid loan processing, our student loans have faster disbursal and lower
ancillary expenses. Competitive interest rates also allow students to make stress-
free repayments after moratorium period. These customizable and conducive loan
terms will help bring expensive higher educational courses within the grasp of
every student. So, ready yourself for a bright future with HDFC's student loans

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Education Loan for Indian Education

 Get up to Rs. 10, 00,000 as a study loan.

 Enjoy attractive interest rates.

 Avail flexible education loan package with multiple options of collaterals, tenure &
repayment.

 It's a zero-hassles student loan with minimal processing.

Central Government Interest Subsidy Scheme.

 This scheme supports economically weaker students get study loan for professional
education.

 This study loan is established by the Department of Education, Ministry of Human Resource
Development; Government of India.

 Window opened for all Education Loan cases with Moratorium period during FY 15-16.

Education Loan for Foreign Education

 Avail up to 100% finance for international education loan.

 Receive preferential interest rates for top-ranking universities/ institutes.

 It has light documentation and low processing hassles.

 Get flexible loan terms for co-applicants, repayment, and EMI.

RURAL LOANS
Retail Agri Loans- Kisan Card [Kisan Gold Card]
 Indian farmers can now swipe a Kisan Gold Card to use their loan for meeting agricultural
and production expenses.

 Available with any time banking and hassle free credit options.

 Accident Insurance Cover of Rs. 2 lakh absolutely free with the card.

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Tractor Loans.
 Choose HDFC Bank’s tractor loan to purchase your tractor for farming or commercial
purposes.

 Up to 90% of finance on the tractor that you want to buy.

Consumer Durable Loans.

Features.
 Up to 100% Finance.

 36 months of Tenor.

 Loan amount up to 15 lacs.

 Nominal processing fees.

 No blocking of credit limits.

 Minimal marginal money.

 Transparent pricing.

 Low EMI.

 Less Burden.

Product categories to choose from.

 LED Televisions.

 Refrigerators.

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3.3 INTEREST RATES FOR HOME LOANS & THEIR CALCULATION

Interest rates charged by housing finance companies vary depending upon your
individual status - either resident or non resident in India, the loan amount, scheme
type, and are sometimes even based on the tenure of the loan.
The way banks / FIS charge interest to arrive at the value of EMI can be broadly
classified into 'Flat rate system' and 'Reducing balance rate system'. In the flat
rate system, the rate of interest on the loan amount is calculated over the entire
duration of the loan and the principal plus the interest is divided over the number
of instalments and the value arrived is the EMI. But in case of Reducing Balance
system, the interest is charged on the outstanding balance of the loan, which goes
on reducing.
The reducing balance can be further classified into monthly reducing, quarterly
reducing and annual reducing methods based on the number of times the principal
is reduced/credited in a year. Suppose the principal is reduced 12 times a year, it is
termed as monthly reducing balance method, if the principal is reduced 4 time a
year, it termed as quarterly reducing balance method and if the principal is reduced
1 time a year, it known as annual reducing balance method. Annual reducing
balance method is very common with Indian banks and monthly reducing balance
method is popular among the foreign banks and nationalized banks, engaged in the
activity of housing finance.

RESIDENT NON RESIDENT

INDIANS. INDIANS.

BUYING A NEW BUYING A NEW

HOUSE. HOUSE.

BUYING AN BUYING AN
EXISTING EXISTING
HOUSE. HOUSE.

HOUSE HOUSE
IMPROVEMENT. IMPROVEMENT.

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 HOME LOANS IN HDFC

INTEREST RATES FOR RESIDENT INDIANS.

Banks and FI’s offer resident Indians loans up to rs.10,000,000 for up to 30 years fpr buying a new flat from
the builder. The flat maybe under construction at the time of application.

The table below offers a comparison of loan rangers and corresponding interest rates applicable under this
scheme.

COMPANY. LOAN AMOUNT. FLOATING RATE. FIXED RATE.

HDFC [MONTHLY]. FOR ALL LOAN 11.25 13.25

AMOUNTS.

HSBC. FOR ALL LOAN 12.00 13.50

AMOUNTS.

ICICI. FOR ALL LOAN 13.75 14.00

AMOUNTS.

SBI. FOR ALL LOAN 11.25 12.75

AMOUNTS.

TYPE OF PROPERTY. SALARIED. SELF-EMPLOYED.

RESIDENTIAL 15 YEARS. 10 YEARS.

PLOT OF LAND. 10 YEARS. 10 YEARS.

AGAINST EXISTING PLOT OF 15 YEARS. 10 YEARS.

LAND.

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 HOME LOANS IN HDFC

SURVEY.

3.5 ANALYSIS.

AWARENESS ABOUT HOME LOANS,

NOT AWARE.
14%

AWARE
NOT AWARE.

AWARE
86%

This survey indicates that nearly 86% people are aware about the home loan facilities offered by different
banks. But still there are 13% people who are not much educated and are unaware about the different types
of home loan facilities. For this the banks should also target the lower income groups while also advertising
about their home loan services, there should also be direct market selling concept on marketing, this will
attract the customers. Security and comfort in life is a top priority for everyone. So everyone should be made
aware about the home loan services rendered by the banks and should be educated about the optimum use of
the resources available, these methods are to be used by banks and financial institutions.

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 HOME LOANS IN HDFC

NEED FOR HOME LOAN.

2%
18%

31%

49%

LOW MEDIUM HIGH NOT AT ALL

As shown in the above pictorial representation of the need for home loans, home loan has moderate need in
today’s competitive world.
1. Nearly 31% of the people believe that home loan is very essential and important.

2. 18% people believe that the need for home loans is very low in today’s world.

3. 49% that’s sums up to almost half of the crowd that filled the survey believe that home loans have
moderate or medium need.

4. Only 1% people believe it is not at all needed.

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 HOME LOANS IN HDFC

PURSUING HOME LOAN.

Loan pursuing. 60 40

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Want to pursue Don’t want to pursue.

The survey conducted by me shows that of the people want to pursue home
facility in the future if required. This shows there is an increase in the demand
for home loans. The reason behind this could be the boom in the home loan sector
in India. The real estate boom has added new dimensions to the housing finance
sector. The new class of young buyers, whose affordability are high, is spending a
little more on paying Equated Monthly Instalments (EMIs) rather than spending
huge amounts on the rents, thereby, owns a house. Hence the reasons for the
growth of the home loans market has been mainly fuelled by certain fiscal, social
and regulatory drivers such as:
1. Changes in demographic profile including increase in the rate of household formation due to
structural shift from joint family system to nuclear family.

2. Ever increasing middle class, migration of population and increasing urbanization resulting in acute
shortage of housing units.

3. Increase in disposable income levels due to decrease in marginal tax rates and increase in total
income levels.

4. Tax benefits and other fiscal incentives announced in the Union Budgets thereby encouraging the
sector.

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 HOME LOANS IN HDFC

5. Increasing affordability of housing property purchase due to declining interest rates and stable
property prices.

6. Decline in the average house cost to annual income ratio to around 4-5 from 11-14 during the last
decade resulting in an affordable EMI as a percentage of monthly income Aggressive lending by
banks to the housing sector due to lower credit off take by the corporate sector, attractive spread and
lower non-performing assets.

PREFERED MODE OF INSTRUMENT.

9%
7%

84%

BANKS. MERCHANT BANKS.

FINANCIAL INSTITUTIONS,

According to the survey 84% people would prefer to get loan from a Bank rather than any other mode of
instrument. Whereas 7% people feel merchant bank is the way to go. 9% people believe that financial
institutions are more convenient and easy. Out of the many other instruments people choose banks as banks
are more safe, more convenient, more rate of interest at times, and hence the survey portraits the preference
for loan from banks rather than financial institutions or merchant banks.

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 HOME LOANS IN HDFC

PREFRENCE FOR THE TYPE OF LOAN.

60

50

40

30

20

10

0
LONG TERM LOAN. SHORT TERM LOAN. LINE OF CREDIT. ALTERNATIVE
FINANCING.

LONG TERM LOAN:

 A loan that is to be paid back over a period of time between three and ten years, and sometimes for
as long as twenty years is known as long term loan.

 According to my survey 43% people would opt for long term loan.

 Depending upon the advantages and disadvantages loan term loans are said to be convenient and
secure

SHORT TERM LOAN:

 A loan with maturity period for 1 to 5 years is known as short term loan.

 52.5% people would like to get a short term loan in the mere future.

 Short term loan saves you from burdening your finances for so many years as
happens in longer duration loans.

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 HOME LOANS IN HDFC

LINE OF CREDIT.
 A line of credit is a credit facility extended by a bank or other financial
institution to a government, business or individual customer that enables the
customer to draw on the facility when the customer needs funds.

 The survey portraits that 22% people would opt for line of credit in the future.

 A line of credit offers a lot of flexibility to the consumer.

PREFERED TYPE OF BANK.

FOREIGN BANK.

PUBLIC SECTOR BANK.

PRIVATE SECTOR BANK

0 5 10 15 20 25 30 35 40

As per the survey 60% of the people preferred to go for public sector banks, 30% for private sector banks
while the remaining for foreign banks. In the booming home loan segment, it is the public sector banks
(PSBs) which are now having a clear-cut advantage over their private and foreign counterparts. Some of the
big PSBs, including State Bank of India, Bank of Baroda and Canara Bank, are offering both fixed and
floating home loan products almost 75-100 basis points cheaper than private and foreign banks. After the
recent rate hike by the Reserve Bank of India (RBI), the private sector and foreign banks like ICICI Bank
and Standard Chartered have also raised rates to manage the rising cost of funds. However, their public
sector counterparts are yet to join the bandwagon and are unlikely to react before the quarterly review of the
RBI Annual Policy. As a result, public sector banks, now following the same marketing model like the
private sector and foreign banks, are now offering competitive rates in home loan segments. To make life

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 HOME LOANS IN HDFC

further tough for the private and foreign banks, PSBs have beefed up their marketing campaign to sell home
loan products. For example, BOB has launched a pilot project in Mumbai, named Project Parivartan, in
which BOB Officers are going door-to-door to sell home loans. This move is probably for the first time that
a public sector bank is initiatives normally associated With going door-to-door to sell their products started
concentrating on retailing sector particular in home loan sector in India so there is still a lot of scope for
them to catch the Indian In of public sector banks the rise in home loan rate is not as steep.

PREFERED TYPE OF HOME LOAN.

Chart Title

OTHER TYPE.

HOME EXTENSION

LAND OURCHASE.

HOME PURCHASE.

0 10 20 30 40 50 60

Column1

1. Home purchase being the top priority of the young generation today the survey depicts that nearly
53% people want home loan for house purchase.

2. Due to property hike rates the decision for the purchase of land varies or fluctuates, according to the
survey 27% people would like to take the risk of buying a land.

3. People who have already live in houses want to go for home extension loan in order to extend or to
do improvements in the house, the survey portraits that nearly 20% people want a home extension
loan.

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 HOME LOANS IN HDFC

PREFRENCE FOR FIXED OR FLOATING RATES.

2%
17%

FIXED RATE.
FLOATING RATE
MARKET DEMAND

81%

Going by the trend, it should surprise no one if interest rates on home loans rise as a consequence of the
rising interest rate scenario. This being the case, home loan seekers considers opting for a fixed rate loan
(i.e. fixed for 3-5 years). This protects them from a potential interest rate hike in the near term. At the end of
the said 3-5 year term, they have the option of considering either to continue with the 'fixed' rate (if interest
rates continue to rise) or migrate to a floating rate loan However, in case an individual does not have the risk
appetite to take the interest rate fluctuations in his stride, he may consider selecting the 'truly' fixed rate
loans. Such loans have a fixed rate throughout the tenure of the loan. However, if interest rates were to
decline going forward, the truly fixed rate loan will not reflect the fall in interest rates and the consumer will
forfeit any chance of benefiting from a decline in interest rates.

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 HOME LOANS IN HDFC

AWARENESS ABOUT HDFC HOME LOANS AND THE HOME LOAN PROCESS.

AWARE NOT AWARE

45

40

35

30

25

20

15

10

0
S S S T. T. ED
. E .
ES CE EN EN PL
O C O NI NI AT IM
PR PR VI IC S
T VE N PL
W S CO CO M
S LO FA T CO
NO

According to the survey 45% of the people feel that home loan process is convenient. Maximum number of
people say that the process is convenient and slow as banks requires time for processing the loan application,
verification of various documents, appraising the credit and other formalities takes a longer time in
sanctioning of the loan. The remaining crowd i.e.39 | P a g e 3 9 | P a g e 3 9 nearly 20% people say that
this process is fast but at the same time not convenient.

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 HOME LOANS IN HDFC

PROPERTY HIKE RATE AWARENESS AND ITS EFFECT ON HOME LOANS.

42
NOT AWARE

58
AWARE

0 10 20 30 40 50 60

2%

35% EFFECTS HOME LOAN.

DOES NOT EFFECT HOME
63% LOAN.
NOT AWARE ABOUT THE
EFFECT

EFFECTS OF PROPERTY HIKE RATES ON HOME LOANS.

The home loan sector has been drastically affected by the hike in the property rates. The property prices
have been rising and touching unprecedented heights. In fact so much so, that property are again becoming
out of reach of common man. Whether the price rise is justified or is it just a manipulated bubble remains to
seen. Reserve Bank of India, in its policy statements has time and again cautioned the banks to be extra
cautious before taking exposure. In fact RBI went to the extent of increasing the risk weight age on real
exposure and hiked the risk weight for lending to the estate sector. The RBI has cautioned the banks to be
extra careful while going all out to fund and finance the real estate sector. According to reports, the property
prices have come to their situation and there is scope for further increases. The hike rate has been quite fast
and unrealistic. The growth in infrastructure has not been able to keep pace with the increase in property in
prices. Hence property rates have led to an increasing importance to home loans but bankers have to be extra
cautious on their part.

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CONCLUSION.
In view of its backward and forward linkages with other sectors of the economy, finance in developing
countries is seen as a social good. In India, growth housing of housing finance segment has accelerated in
recent years. Several supporting policy measures (like tax benefits) and the supervisory incentives instituted
had played a major role in this market. The housing finance industry is getting increasingly commoditized.
Competition within the sector is ensuring that players offer consumers flexibility and features to choose
from. Features such as adjustable rate plans, lower processing fees/monthly rest/interest rates/ENII/margin
money, no pre- payment penalty have become common across the industry. There is a growing trend among
Banks and FIS to include the cost of registration, stamp duty, society charges and other associated costs
while sanctioning loans to differentiate and make the home loans products more attractive. This has resulted
in further lowering the threshold limit for buying a house. For differentiation of their home loan products,
banks are also resorting to offering of free add-ons such as life insurance, credit cards and consumer loans at
reduced rates for furnishing the house.
HDFC has long achieving its target of providing people with roof under their head.

ST. GONSALO GARCIA COLLAGE OF ARTS AND COMMERCE.