INTRODUCTION The roof over ones head and ground beneath ones feet count as the bare necessities

of life. Theres nothing quite like owing a home, however humble to give that warm and glowing feeling. But when one buys a home, one has much more than a feel good purchase in mind! Its also a crucial investment decision, perhaps the biggest spending decision of ones life. There are ample opportunities today for young salaried investors to plan their moves early and buy a house at right time- and at right price. In the process, not only do they fulfill that cherished dream of owing 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.

OBJECTIVE OF THE STUDY: The main objective of the study is to find out the tariff changes charges by other banks in comparison to HDFC bank. The aim of the study is to help HDFC to know where it lacks in loans and how for the performance of other banks is better so that HDFC figure out the common problems

being faced by the customers while dealing in the loan department so that further HDFC can improve its services and schemes offered by them to their customers. PROFITABLE PROPOSITION The overall demand in residential sector has grown by about 7-8% in the past few months as compared to the same period last year. The growth is on account of two main factors: 1. One, income tax exemption. 2.Two, with no similar rebates available for individuals in the high income group, they are creating a second asset. Add to this the stable property prices over the last year and plunging interest rates, planning for dream,] home could not have been better timed. Rock-bottom interest rates, standardization of periodicity of interest calculation across lenders (which make it easier to compare loans), lower interest charges, waiver of loan application processing fee and a customer friendly attitude is reason enough to celebrate the ascension of the home loan consumer as the king. In response, private players like ICICI Bank, IDBI Bank, Standard Chartered Bank and few others too lowered their rates.

Market leader HDFC also brought down its interest rate to 8.75% very recently, to participate in the interest rate war. If one is still not satisfied with the lowered loan rates theres more. Some industry watchers believe that the floating home loan rate will slip to 8% for long term loans another two or three years. Most banks have changed the way the interest is calculated from annual rest to monthly rests. Under the annual rest method, the EMIs (equal monthly installment) one pay 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 are 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. HDFC added monthly rests on its fixed interest loans apart from annul rests. As a result the fall in the EMIs on fixed interest loans (where the interest rate is constant for the entire tenure of the loan, irrespective of the changes in the lending rates) is more pronounced than on floating rate loans (where the loan interest rate varies with the changes in the interest rate). For example, the EMI on a fifteen year fixed interest loan for Rs. 15 lakh has come down by Rs. 15 lakh has come down by Rs. 840, the corresponding fall in the EMI on a floating rate

loan is only 4165. apart from lowering the cost of ones loan, the switchover to monthly rests has another advantage : it makes it easier to compare loans. HOME LOAN Home loans are loans you have access to, depending on whether you want to buy or build a house and can also be used to repair or extend an existing house. Q.1 - Who can avail of these loans? According to lending institutions, any Indian resident who is over 21 years of age at the beginning of the loan and below 65at its maturity can avail of the loan. Salaried Employees as well as Self- Employed citizens can apply. NRI Salaried and RBI Self Employed, under RBI guidelines, can approach only nationalized banks and other HDFC for loans. Q.2 - Why should one option for a loan to buy a house? Taking a loan seems like a good option when the money at hand is insufficient to buy the house of your dreams. Consider couples in their twenties and thirties. They enjoy a good income currently, buy their accumulated capital isnt enough to purchase a house. Whereas a home loan can give them access to capital their current earnings. Also, if you take a 10 years old loan when you are thirty, you could repay it by the time

youre forty. So you dont have to be burdened with the interest and are free to plan your retirement savings. The Quantum of loan that one can avail of : Loan sanctioned depend on your repayment capacity which is based on your current income and your future repayment capacity. You would include your spouses name to enhance the loan amount.The maximum loan can be sanctioned varies with each bank/ institutions and ranges from Rs.10 lakhs to Rs. 1 crore. Benefits of taking a home loan: A home loan is very different from a personal loan like a car loan for instance. You can utilize a home loan for financing an asset that will hold its value and even appreciate over the period of the loan. Though its price could fluctuate in the short terms, Total Estate will show capital appreciation over the years. The value of your house generally while the loan remains constant. If you had opted to wait, save up and buy a house, it would, in the long run cost you much more; home loans also come with many tax benefits. Tax benefits of taking a home loan: The income tax authorities look with favor upon those servicing a housing loan from specified financial institutions. And, it is up to you to be wise enough to take advantage of

this. Section 24 of the Income Tax: Interest on loan till Rs.1.5 lakhs per annum is exempted form income tax (under section 23/ 24(1) of the Income tax act). Section 88 of Income Tax Act: You get a 20% rebate on repayment of principle during a financial year. Once again, over the years, the principle repayment eligible for rebate has been enhanced from Rs.10,000 to the current limit of Rs.20,000 Stamp duty, registration fee or transfer of such house property to the assesses is also considered under this amount. Financial Institutions, which give, home loans: Leading Banks Housing finance companies FINANCIAL IMPLICATIONS OF AVAILING A LOAN (SMALL OR BIG) There are several expenses involved apart from repayment of the actual loan amount: 1. Processing fees- A processing fee (PF) is charges at the time of submission of the application form and covers expenses incurred for processing the application form. This fee has to be paid upfront by the customer in some cases, it is non-refundable. 2. Administration fees- to meet operating expenses.

3. Pre-EMI- A simple interest calculated on the disbursement amount in case of a plot under construction. 4. EMI- The EMI is an abbreviated form of the equated money installment and is simply referred to as monthly installment in common parlance. And, being a self-explanatory term that is exactly what it is. The amount you will have to pay you financier every month when repaying your loan. Being a monthly payment, at the end of the year, you would have paid 12 EMIs. TYPES OF LOANS AVAILABLE Broadly two types- fixed rate and variable rate loans; while the former deals with a fixed rate of interest over the entire duration of the loan, the latter has the rate of interest changing according to the fluctuations in the market. LOAN THAT ONE CAN AVAIL Up to 85-90% of the total cost based primarily upon the individuals payback capacity. GENERAL CONDITIONS THAT GOVERN A HOME LOAN: These are likely to vary with respect to the different types of housing loans: 1. The maximum period of the loan is normally fixed by HFIs. However, HFIs do provide for different tenors with different terms and conditions.

2. The Installment that you pay is normally restricted to amount 45% of your monthly gross income. 3. You will be eligible for a loan amount, which is the lowest as per your eligibility. This is calculated on the basis of your gross income and payback capabilities. 4. Some HFIs insist on guarantees from other individuals for due repayment of your loan. In such cases you have to arrange for the personal guarantee before the disbursement of your loan tasks place. 5. Most HFIs have a panel of lawyers who go through your property documents to ensure that the documents are clear and are not misrepresented. This is an added benefit that you get when you avail of a loan from an HFI. 6. You repay the loan either through Deduction against Salary, Post dated cheques, and standing instructions or by Cash/DD. WHAT ALL ONE CAN TAKE THE LOAN FOR? There are different types of home loan tailored to meet ones needs heres all some of them. 1. Home purchase loan: This is the basic home loan for the purchase of new home. 2. Home improvement loans: These loans are given for implementation repair works & renovation in a home that has already been purchased by the client.

3. Home construction loan: This is available for the construction of new home. 4. Home extension loan: This is given for expanding or extending an existing home for e.g.: addition of an extra room etc. 5. Home conversion loan: This is for those who have financed the present home with home loan & wish to purchase& move to another home for which some extra funds are required through home on version loan ,existing loan is transferred to the new home including the extra amount required eliminating the pre payment of the previous loan. 6. Land purchasing loan: this loan is available for the purchasing of land for both construction and investment purpose. 7. Bridge loan: these are designed for those people who wish to sell the existing home & purchase another one. The bridge loan help finance the new home, until a buyer is found for the home.

HDFC BANK INTRODUCTION HDFC (Home Development Finance Corporation) Home Loan, India have been serving the people for around 3 decades and providing various housing loan according to their varied needs at attractive and reasonable interest rates. Owing to their wide network of financing, HDFC Home Loans provide services at doorstep and helps you find a home as per your requirements.

COMPANY PROFILE HDFC Limited founded in 1997 by Ravi Maurya and Hansmukh bhai Parekh, is an Indian NBFS focusing on home loans. HDFC operates through almost 450 locations throughout the country with its corporate head quarters in Mumbai, India. HDFC also has an international office in Dubai, UAE with service associates in Kuwait. HDFC is the largest housing company in India for the last 27 years. HDFC was amongst the first to receive an in principal approval from RBI to set up a bank in the private sector, as a part of the RBIs liberalization of the Indian banking industry. It was incorporated on 30th august 1994 in the name of HDFC Bank Limited, with its registration

office in Mumbai. HDFC began its operations as a scheduled commercial bank on 16th January 1995. ABOUT THE PROMOTER HDFC, the promoter, is Indias premier housing finance company and enjoy an impeccable track record in India as well as in international markets. Since its inception in 1997, HDFC has maintained a consistent growth in its operation and profitability. Its outstanding loan portfolio covers over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segment and also has a large corporate client base in relation to its housing related credit facilities and its investment in portfolio. With its tremendous brand equity, the strong reputation in the Indian and international financial services market, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. HDFC (together with its fully owned subsidiary HDFC Investment Limited) owns about 31 % of the equity. They had started with a strategic alliance with the Natwest group in UK with 20% equity, which has divested later on. The bank has also signed a memorandum of understanding for strategic business collaboration with chase Manhattan Bank in Feb. 2, 1999.

BUSINESS PHILOSOPHY The mission of the HDFC Bank is to be world class Indian bank. This would imply a bank that would meet various financial needs of its customers in a convenient and cost effective manner at international standard of service. The bank seeks to achieve the status of a preferred organization among its major constituents- customers, shareholders, regulators, employees, suppliers etc. while maintaining the highest level of integrity and corporate governance. The business philosophy at HDFC bank is based on four core values: operational excellence, customer focus, and product leadership and people competitors. The Bank faces the strong competition in all of their principal lines of business. Their primary competitors are large public sector banks, other private sector banks, foreign banks and in some product areas, non-banking financial institutions. LOANS HDFC brings back you a wide range of loans to cater your financial needs. The bank offers the following loans:

1) Personal loans.

2) Consumer loans. 3) Auto loans 4) Loans against shares 5) Loans against RBI bonds 6) Loans against insurance policy 7) E- Instant loans give the facility of loans approval in the 60 second on the internet. 8) HDFC has offices spread all over the country. This extensive network helps HDFC in providing services to large and well spread out clients. This network of interconnected offices (on data circuits) helps HDFC to process application for purchase of property anywhere in India. HDFC has further established an office in Dubai and service associates in Kuwait, Oman and Quarter to make to easier for Middle East based non-resident Indians to apply for loan to HDFC-India. 9) HDFC is pioneer of housing finance in India and has been a leader in business for the last 23 years. HDFC has vast experience and a very committed and skilled staff to handle housing loan applications and solving customer problems.

HDFC LOAN SCHEME PURPOSE

HDFC Limited offers loans for the following purposes:

Land purchase Home construction/purchase Home extension Home improvement loans Short-term bridge loans

Non-resident premises loans for professionals.

LOAN AMOUNT You can avail of maximum of up to 85% of the cost of the property, including the cost of the land. LOAN TENURE You can repay the loan over a maximum period of 20 years under both FRHL and ARHL. Repayment will not ordinarily extend beyond your age of retirement (if you are employed) or on your reaching 65 years of age, whichever is earlier. However, HDFC will endeavor to determine the repayment period to suit your convenience. RATE OF INTEREST The rate of interest of HDFC is 8.75%.under the monthly rest option, interest is calculated on monthly rests. Principal repayment is credited at the end of every month. At HDFC you have the choice between the normal FRHL and the innovative ARHL. Alternatively you can also avail the part of the loan under FRHL and balance under ARHL. HDFC also offers you the option to switch between schemes for the nominal fee. Interest rates on ARHL will be linked to HDFCs Retail Prime Lending Rate (RPLR) which currently is 13.75% .The rate on your loan will be revised every three months from the date of first disbursement, if there is a change in RPLR, i.e. 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 the term of the loan, and vice versa when the interest rate decreases).customer will be provided with an annual statement indicating the details of the interest and principal payment made during the year. SECURITY Security for the loan normally is first mortgage of the property to be financed and/or such other collateral security as may be necessary. Interim security may be required, if the property is under construction. Collateral or interim security could be assigned to HDFC of life insurance policies, the surrender value of which is at least equal to the loan amount, guarantees from sound and solvent guarantors, pledge of shares and such other investments that are acceptable to the HDFC. Loans from HDFC are available even if you are availing a housing loan from your employer. HDFC has already entered into arrangements with several employers enabling employees to avail of loans both from the employer as well as HDFC for the same property. Please do ensure that the title of the property is clear, marketable and free from encumbrance. To elaborate there should not be any existing mortgage, loan or litigation which is likely to affect the title to the property adversely.

DOCUMENTS/SUPPORTING DOCUMENTS TO BE ATTATCHED: FOR ALL THE APPLICANTS: 1) Allotment letter of the o-operative society/association of the apartment owners. 2) Copy of approved drawings of proposed construction/purchase/extension. 3) Agreement for sale/sale deed/detailed cost estimate from architect/engineer for the property to be purchased/constructed/extended/renovated. 4) If you have been in your present employment/business or profession for less than a year, mention an a separate sheet details of the of the occupations for previous five years, giving position held, reason for change and period of same. 5) Applicable processing fees. 6) Proof of residence: attested copy of any one of the following: a) Ration card b) Passport c) Driving license d) Voters identity card e) Current telephone bill/electricity bill/gas bill 7) Proof of identity: attested copy of ay one of the following:

a) Passport b) Driving license c) Voters identity car5d identity card issued by the employer (if employed in state/central government) d) PAN card 8) Certificate of loan outstanding issued by the lender (for refinance cases only) 9) Any other information regarding your repayment capacity that is necessary and will assist HDFC in appraising the loan proposal. ADDITIONALLY IF YOU ARE EMPLOYED: 1) Verification of the employment form with only part I filled in. 2) Latest original salary slip/salary certificate showing all deductions. 3) If your job is transferable, permanent address where correspondence relating to the application can be mailed. 4) A letter from your employer agreeing to deduct the EMI towards the repayment of the loan from your salary. This will expedite the processing of your loan application. 5) Your updated original bank pass book/s or original bank statement/s showing salary

and saving entries for the last six months. 6) A photo-copy of your Form-16 (issued by your employer) for the last assessment year. IF YOU ARE SELF EMPLOYED: 1) Balance Sheets and Profit & Loss Accounts of the business/profession along with copies of individual income tax returns for the last three years certified by the Chartered Accountant. 2) A note giving information on the nature of your business/profession, form of organization, clients, suppliers, etc. 3) Copies of individual tax chalans for the last three years 4) Copy of advance tax chalan (if any) 5) Your updated original Bank Pass Book/s or Original Bank Statement/s showing saving s entries for the last twelve months. TAX BENEFIT You are eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961.

ELIGIBILITY The repayment capacity as determined by the HDFC will help in deciding how much we can borrow (the cost of the property or Rs.1crore whichever is lower). Repayment capacity takes into consideration factors such as income, age, qualifications, number of dependents, spouses income, assets, liabilities, stability and continuity of occupation and saving histor y. And, of course, HDFCs main concern is to make sure you can comfortably repay the amount you borrowed.

ABOUT THE PRODUCT HDFCs Home Loans offers you various unique benefits and are easy to arrange and repayable in easy monthly installments. The terms of the loan can be structured according to the customer requirement. Home loans can be applied for by either individually or jointly. Proposed owner of the property, in respect of which the loan is being sought, will have to be co-applicants. However, the co-applicants need not be co-owners. Loans can avail up to a maximum of 85% of the cost of the property (including the cost of the land). HDFC lends up to a maximum of Rs. 10000000 on a home loan to an individual. You can repay the loan over a maximum

period of 20 years. They determine the loan amount after evaluating the repayment capacity of the individual. HDFCs main concern is to help individuals comfortably repay the borrowed amount. SUPERIOR PROCESSING CAPACITY: HDFC has over the years invested substantially into the computer systems and training. This has enabled HDFC to respond to customer needs and build up capabilities to approve loan on the spot or disburse them fast. BRANCH NETWORK: HDFC has offices spread all over the country. This extensive network helps HDFC in providing service to large and well spread out clients. This network of interconnected offices (on data circuits) helps HDFC to process applications for purchase of property anywhere in India. HDFC has further established an office in Dubai and service associates in Kuwait, Oman, Qatar, Bahrain and Saudi Arabia to make it easier for Middle east based non-resident Indians to apply for the loan to HDFC-India. EXPERIENCED TRAINED STAFF: HDFC is a pioneer of housing finance in India and has been a leader in the business for the last 25 years. HDFC has vast experienced and very committed and skilled staff to handle

housing loan applications and solving customer problems. FREE COUNSELLING: HDFC believes that it is in the business of providing solutions to an individuals need for owing a house, and not just in the business of providing finance. Keeping this in mind HDFC will provide free counseling to on how and where to buy a house in India (property services) or what are the prices and trends in the real estate market or what precautions one should take before buying a house. This service is offered at any of the HDFCs offices. LEGAL AND TECHNICAL GUIDANCE: HDFC has qualified legal and technical staffs who liaise with developer to collect and scrutinize the property documents and permissions. We have master files of most projects being developed by the reputed developers. It has always been HDFCs endeavor to protect the interest of the borrower, as we believe that the buying a house is one of the most Important decisions in this life. FLEXIBLE (CUSTOMIZED) REPAYMENT SCHEMES: Keeping in mind the fact that each individual has unique problem requiring unique solution, HDFC has developed various repayment options like Step Up Repayment Facility (SURF), Flexible Loan Installment Plan (FLIP) Balloon Payment plan and Structured Repayment Plan.

STEP UP REPAYMENT FACILITY HDFC Ltd has a hitherto with you, right through .This statement HDFC proves time and Again by developing close relationship with individual customers and by constantly Developing and marketing in the market new and innovative products that increase the Comfort level of the customers. Along the same philosophy HDFC came up with Step Up Repayment Facility which once again reassures customers that HDFC helps you achieve your dream. This facility is especially helpful to those customers who want to get a loan on an amount that is not falling within the permissible limit of their repayment capacity. It also is in line with HDFCs aim to provide greater degree of personalization in service and the tools. Hence there can be the situation wherein the applicant is not in the position to pay the required EMI which is calculated by the ILPS (Individual loan processing system).HDFC in this case offers to let the applicant use one of the two plans to repay the loan amount. The EMI Chooser 1 In this plan the applicant gets the advantage from HDFC to select the amount that he wants to pay as his fist EMI. This means that HDFC will let the applicant decide what amount he can comfortably pay to HDFC in the first term of his Loan Repayment

Schedule. The system will calculate the next two EMIs for the next two terms The customer can hence decide when he wants to repay the maximum amount of the Loan to HDFC and when he wants to repay minimum leftover or remaining amount of the loan in the form of still smaller EMIs. The EMI Chooser 2 This plan is an extension of the aforementioned plan .In this plan HDFC helps the Applicant by letting him choose two EMIs .This means that the Applicant can select the amount that he wants two pay for both the First and the Second terms of his repayment schedule. This translates into more help and more convenience to the applicant. However the benefits of these plans dont stop here. The Applicant can also allocate the term length for which he wants to pay what amount This translates into a great advantage to the Applicant .He can now link 1. His current salary 2. The rate of average increment, 3. His existing and expected obligations, 4. His existing and expected expenses 5. The length of the term among others.

HDFC can hence assist the Applicant in developing a much more personalized loan plan as compared to its competitors in the Housing Loan market. The Applicant can also save money by using these plans .This is because the total Outflow in case of a regular plan is more as compared to these special plans. The Applicant will hence obtain more benefit in case of Prepayment and elsewhere.

C. All Loans from HDFC Ltd are subject to Tax exemption and be treated as Rebate. Hence HDFC lets the customer save their hard earned money. FLEXIBLE LOAN INSTALMENT PLAN (FLIP) Another First of its kind product from HDFC .This is also to assist the Applicant to easily secure a loan in the following condition. FLIP is used when the applicant and coapplicant want to jointly repay the loan. There is however a problem in the situation which would otherwise not allow the loan to be sanctioned. There are two applicants hence two incomes .Therefore in the joint payment they can combine their income to repay the loan .Let there be Mr. A and B who want to take a loan for 14 years .A is the father and B is the son of

A .Now consider the situation in which A and B want to take a loan and jointly repay it .But A is 52 years old and B is only 25 .Hence A will retire after 8 years and will not be repaying the EMI but B can continue to repay the loan. In that case although there will be a problem at other places but in HDFC this is solved by taking different incomes in the terms. Hence the income that will be considered earlier will be the fathers income and at his retirement or at any other selected stage of repayment we will begin to consider only the income of the son. The advantage of FLIP in terms of the Applicant is that of joint payment, personalization, easy repayment, and freedom from many possible problems. In the Illustration the father is going to pay only for 105 months and after that we are to consider the sons salary only for the next remaining 60 months. PARI PASSU/SECOND MORTGAGE ARRANGEMENT: HDFC has a tie-up with a large number if public sector organizations and banks which enable us to offer loans to your employees with the flexibility of their spouse also availing a loan from his/her own employer. SAFE DOCUMENT STORAGE FACILITIES: HDFC has state of art storage facilities which are theft and fire proof, at various locations where loan and property documents are stored. In this way valuable documents are stored

safely over the period of the loan and are released almost immediately after a customer repay his loan.

HOME CONVERSION LOAN:

HDFC offer the option of a home conversion loan to its existing customer who are interested in moving to a new house. Through this scheme the customer can apply to have their existing loan transferred towards the purchase of the new home. Customers may also apply for an additional loan amount for the purchase of the new house. This gives the customers the option of selling t6heir existing house if they wish to, without having to repay their old loan

APPLICATION CAN BE MADE BEFORE SELECTING THE PROPERTY:

Individuals may make an application for the loan even if the property has not been selected or the construction has not commenced. HDFC can provide assistance in locating an appropriate house to such customers.

HOME IMPROVEMENT LOANS:

As an exclusive offer to its existing customers HDFC offers Home Improvement Loan up to 100% of the improvement cost as compared to the home improvement loans up to 70% of the improvement cost offered to the general public.

FEE:

A processing fee of 0.5% of the loan amount applied for rs.5 per rs.1000 of the loan applied for is payable when the application form is submitted to HDFC. This fee is in the respect of costs incidental to the application. For example:

Loan applied for

Rs.20000 Rs.100000

On approval of the loan, a loan offer is made to you on acceptance of the offer. You have to pay an administrative fee of Rs.0.5% of the loan approved. You can also pay the processing fee and administrative fee upfront i.e. 1% of the loan at the time of submission of the loan application itself. This fee is in respect of the costs incidental to the application. Taxes as applicable will be charged on the fees collected.

CHARGES:

For Fixed Rate Home Loan (FRHL) an early redemption charge of 2% of the amount being prepaid is payable, if the amount being repaid is more than 25% of the opening balance. However under Adjustable Rate Home Loan (ARHL) option early redemption charges of 2% is payable only in case of commercial refinance. You may be required to submit the copies of your Bank Statements or any other documents that HDFC deems necessary to verify the source of prepayment. You can make payment for fees and charges by cheque marked payees account only drawn on a bank in a city where HDFC has an office or by demand draft (payable at par to HDFC).

fees

Rs.100 Rs. 500

HOW TO APPLY

Customer can either download (in PDF format) the application form or get the application form by E-mail. Alternately the customers can collect the application form from any of your nearest HDFC offices. Customer need to submit it along with supporting documents and processing fee at any HDFC office that is convenient to the customer. Customers can make payments by the cheque marked payees account only drawn on a bank in a city where the HDFC has an office, by demand draft (payable at part to HDFC) or by cash. Customer can make an application at any time after they have decided to acquire a house even when the house has not been selected or construction has not commenced. HDFC will consider your application, make enquiries as it deems necessary and convey its

decision to you. On acceptance of the offer, you will have to pay an administrative fee for the loan approved. Customer can take the disbursement of the loan after the property has been completed and you have invested your own contribution in full (own contribution is the total cost of the property less HDFCs loan). The loan will be disbursed in full or in suitable

installments (normally not exceeding three in number)taking into account the requirement of the funds and the progress of the construction, as assessed by HDFC and not necessarily according to the builders agreement.

STAGES OF

HOME LOAN

Application

Munirka HUB

Login

Scanning

DISBURSE The Loan http://freembaprojects.com/finance-project-on-comparison-of-home-loan-scheme/ Double Checking Over (DCOVR)

Fix Chrg es

Recommendation Over (ROVR)

PROCESS

First of all documents are collected

CHAPTER - 2

RESEARCH MYTHODOLOGY

Research methodology is an important part of every project. Because it helps in knowing how to select the representative sample from the world or the general population, the right research tools and techniques to complete the research. The study of the consumer behavior is important because he is the king. The research process is based upon survey method, so in order we go to service provider and services user which is the customers. The research involves the following steps:

Define the problem and research objective: The problem and objective is to assess the services offered by the various service providers and what the customer wants. Developing the research plan: The second stage of the research methodology is to develop a research plan. The research plan designed to take the decision on the data sources, research approaches, research instruments, sampling plan and contact

methods. Survey research: It was a descriptive research. Research instrument: The use of an effective research instrument is very important because through this instrument we collect data in this project through observations and personal interview were conducted. Personal interview: as we were doing direct selling we interacted with my customers and asked about their views in selecting a service and what are their wants and expectations from a service provider. Sampling plan: After finalizing the research approach and instruments a sampling must be designed. Sampling unit: Data have been collected from banks. Sampling size: It has been collected from four banks.

Sampling procedure: what process should be used to collect the sample. So, representation sample, convenience sampling is used. Collect the information: After completing all the steps, the data are collected from different sources.

 Analyze the information: After the data is collected they are analyzed to know the findings. The data is then tabulated to develop the frequency distribution. Present the findings: As the last step, the findings are presented that are relevant to the major marketing decisions.

CHAPTER - 3

ANALYSIS OF DATA

The home loans provided by the banks are more or less same at the basic level. The banks generally try to go ahead of other banks in terms of attracting number of customers to their countries. For this they are trying to offer some unique services as per the unique requirements of the unique important customers.

COMPARITIVE STATEMENT OF HOME LOAN

PARTICULARS

ROI(FIXED)

HDFC

14%

ICICI

1 -5 Yrs. -16% 5 - 10 Yrs. 16 % 10 -15 Yrs. - 16% 15 -20Yrs13.75%

PNB

Up to 5yrs- Year 1 - 8% 9.25% (up to 20 Year 2 & 3 lakh)

9% & 10% (above 20 lakh)

5 to 10yrs-10% (up to 20 lakh) & 10.25% (above 20 lakh )

SBI

ROI(FLOATING)

Up to 30lakh8.75%

30 lakh50lakh-9% Above50lakh9.25%

1-5 16 % 5 - 10 11.25 % 10 - 15 16 % 15 - 20 16 %

Yrs.-

Yrs.-

Yrs.-

10 to 20 yrs10.50% (up to 20 lakh) & 10.75% (above 20 lakh) Up to 5yrs8.75% (up to 20 lakh) & 9.50% (above 20 lakh) 5 to10yrs-9%

(up to 20 lakh) & 9.50%(above 20 lakh ) 10 to20yrs9.25% (up to 20 lakh) & 9.75% (above 20 lakh)

Yrs-

Year onwards -

up to 50 lakh9.25%

over 50 lakhs9.75%

PROCESSING FEE PENALTY TENURE MINIMUM AGE MAXIMUM AGE

0.5% 2% 25 years

21 60

0.5% 2% 15 years 25 55

0.5% 2% 20 years 25 55

0.5% 2%

25 years 25 55

COMPARISON OF MAJOR PLAYERS

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

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

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

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

More competition in the housing finance sector resulted in companies charging lower interest rates, sometimes even at the cost of spread (i.e. profit margin) The fee for getting the home loan has reduced dramatically over the last couple of years. From over 2% of the loan amount to as long as 0.25% (some companies are known to wave of the fee entirely). Housing Finance Companies have introduced several new products to meet the needs of wide variety of customers. One such scheme, the Step up Loan, where EMIs increases as the income of the individual increases has been a big hit with the individuals just starting off with their careers. One other factor is increasing collaboration between Housing Finance Companies and builders. Such partnership minimizes the service and funding related issues significantly thus making it easier to buy property.

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

Ideally loan seekers should opt for a floating rate home loan when it is expected that the interest rate will decline going forward. Fixed rate loans should be preferred when the interest rates are expected to rise.

But is the choice that simple? In todays environment when there is a lot of talk about rising interest rate, should investor shun floating rate home loan. Altogether is there still some merit in this instrument? In the last one year, there was a trend of floating rate home loans being more popular as compared to the fixed rate loan. As of now, this trend is continuing says Mr. Suresh Menon , GM (Mumbai region), HDFC Limited.

There are three important issues which one needs to consider before opting for one type of a loan over the other: First, an important determinant of what you go in for should be the long term expectation of interest rate. For example if you (or the experts) expects the rates to rise for the next one year, but then decline gradually over the next several years a floating rate product may be preferable. The other option for going in for a fixed rate product and then switching at the end of the year will entail costs (there could be penalty of 1%-2% of the outstanding loan amount) and may not make financial sense. Moreover floating rate home loans do not change the rate of interest every quarter (even though they review the rate every quarter). Mr. Menon points out The attraction of a floating rate home loan is that it does not attract a part prepayment charge. This could appeal to individuals who get lump sum bonuses which they can use to reduce their loan exposure. Second, the issue whether fixed rate home loan are actually fixed rate. When considering a fixed rate home loan over floating rate of home loan a strong selling point is that if interest rate were to rise dramatically you will be protected. Apparently the reality is some what different. It seems that companies that have given

out fixed rate home loans can revise their rates upwards in exceptional circumstances (significant rise in interest rate for one) so if you think interest rate will remain rage bound over the near term and decline over the long term, you are still better off with the floating rate product. Third, a fixed rate loan is generally priced higher as compared to the floating rate product. This holds true in the current environment where the fixed rate loan is at a higher interest rate as compared to the floating rate loan. The difference is currently about 0.25% to 21%. So if you expect that interest rate are likely to move up, but only to the extent of this differential, then you should ideally be in different between the

two types of loan. The deciding factors then should be when you think the rates will increase and also the long term expectations of interest rates.

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

Five steps to take a right loan:-

1) Gather data on interest rate. Get interest rate information from morethan one source and get the same information from each so you can compare the offers. 2) Get information on fees. Find out about processing fees, administration charges and other costs that may be involved in taking the home loan. A written statement of all the fees from the housing finance companies will ensure that there will be no surprises later on. Use the lowest amount of fees to negotiate with the other lenders. 3) Get pre-approval letter. This gives you substantial leverage as you are then seen as serious buyer by the seller of the property. Also, having the letter in your hand will set a limit to the amount of money you can commit to the property. This will help in identifying the right property. 4) Bargain for a lower rate of interest. Housing finance will reduce their rack rates for customers with the good credit record. A bargain deal will easily fixed a home loan at significantly lower rates (at times you can get a discount of as high as 0.50 percent). Here again get a confirmation of the rate (and for how long it will remain

fixed) via a letter.

5) Watch out for a predatory lending. Dont include false information on your home loan application to get quick approval. Also do not borrow more money than you need or can afford.

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

If they are looking for a home loan, be prepared to cough up a pretty sum as down payment. The RBI, in a recent meeting with the bankers cautioned banks against lending 100% of the property value. That is because of increasing competition in home loan some banks have been funding even 110% of the agreement value. This means your loan not only pay for the property, it helps with the stamp duty and registration charges and even furnishing. Its being

sweet deal so for, as borrower not only need have no access to other funds, they also get tax breaks.

The RBIs position is that lending such sums will remain additional risk for the bank. In case of default, the bank may not have sufficient collateral security to recover dues and may have to write off the additional borrowings. However, the bankers do not seen unduly worried. Non performing assets in the housing segment are quite low below 1% and that, say bankers, is due to the higher asset quality.

CHAPTER 4
Limitations of study:

The MBA Banking Project Report on Study on Home Loans of ICICI Bank study was restricted in understanding the home loan as concept so the practical implications of the study have been difficult. The innovative features of the various HFIs as part of their home loan schemes but is not a comprehensive study of their home loan schemes. The Take Over home loans of high interest rate for low interest rates and their inherent risks on the banks lending profile has not been undertaken in the study. The mortgage home loans and its scope on the home loan lending portfolio were not studied as this would lead into a relatively new kind of home loan segment. CONCLUSION: 1. The home loan segment can be extended to the lucrative NRI segment; this would provide the bank a cutting edge and larger share of the home loan market. 2. The bank can provide the benefits like SMS alert and other features so as to make the home loans more attractive. 3. The bank can contemplate on decentralizing the operations however taking into consideration the experience and expertise of the members at Loan Department enters.

Scope of study: The study covers a period of five years from 2003 to 2008. There are several reasons for selecting this period. During the past 5 years the Bank has gone global as a result the company has witnessed many economic and political changes. Company has undergone rapid changes in the past 5 years due to many policy decisions relating to capital markets, banking sector & licensing policy. The study is limited to only ICICI Bank This study is mainly related to the individuals who are interested in taking home loans from banks to fulfill their dreams. The study is mainly related to all the loans provided by ICICI bank only.