HOME LOAN IN SBI - Donutsdocshare01.docshare.tips/files/12276/122765155.pdf · Gulbarga division and development jurisdiction of H.K.D.B, Gulbarga. As per 1991 census the population

Housing Loan in SBI, Bellary.

HOME LOAN IN SBI

Introduction

Owing a piece of land or property is a lifetime dream for every individual. There

are many Home Loans provider in the market to make your dream come true.

But before opt for any home loan provider, need to consider certain factors related

to property that interested in buying and also about the salient and also study

some home loans in applying a home loan in India. Purchasing and moving into a

dream home would generally rank among the top three things on the wish list of

most people.

A few decades ago finding a bank for financing Home Loan was not so easy. But

now taking Home Loan has become very simpler. The RBI has been regularly

stashing interest rates, with the result that Home finance loans that came at an

interest rate of 16.5% to 18% four years ago are now available at 11.5% to 13%

or lower. Each year the finance minister’s generosity during the budget seems to

be slowly concentrated for the Home sector and construction sector.

In their quest for attracting more and more customer for Home Loans most of the

banks have sanctioned loans without taking applicant’s capacity to repay loan into

consideration. The result: banks have to initiate legal process under securitization

act. To avoiding legal complication a few private banks have embarked on to

create awareness among the prospective application for Housing Loans.

Sree Guru Thipperudra College, Bellary. 1


Title of the study:

I have undertaken this project entitled “A study on Home Loans in State Bank of

India, Main Branch, Bellary”.

Scope of stud

The fact that finance is the life blood of the every home finance company’s and

it lies in the effective management to finance in organization. It is the largest

source of mobilization of the resources makes it crucial that the funds are used

effectively.

This study helps to assess the effectiveness of the home loan system and the process

of loan. And also assessing safeguarding of the interest of the both parties.

Objectives of the study

To study the home loan practices in state bank of India

To study the home finance with reference to evaluating the process of loan

in state bank of India.

To know the various schemes and types of home loans

To know the benefits of state bank of India home loans

Methodology of study

The value of any systematic and scientific research lies in its methodology

giving a clear idea of the forms of the study and procedure adopted in conducting

it and stating the purpose becomes essentials part of every study. Both primary

and secondary sources of data are employed in this project report.



• Primary data

• Primary data is collected through interaction with the official at state

bank of India

• Primary data were collected by will prepared questionnaire by the

respondents

• Secondary data

• Bank profile were made use

• Through newspapers and magazines

• Through internet

Limitation of the study

• The study was based on interaction with the officials at state bank of India main branch, Bellary.

• The study was based on available information and documents.

• Due to time limitation in depth study has not been carried in relating to few areas.

• The study not based on the questionnaire.



POFILE OF THE REGION

Bellary district takes its name from the word Balari which refers to goddess

Durugamma as this goddess had marijested herself in the town. Some of the events

in the great epic Ramayana are related to this historical place. It is said that Rama

while searching for Sita met Sugreeva and Hanuman at a place which is very near

to Hampi, the celebrated capital of Vijayanagara kingdom. The history speaks

volumes about significant role it acquired during Satavahanas, Kadambas,

Chalukyas of Kalyana, Kalachuryas, Sevunas and Hoysalas period. There upon

the Vijayanagara rulers built the “City of Victory “on the bank of Tungabhadra

River at Hampi in Hospet Taluk. This area which had witnessed the prosperity to

its peak fell into political turmoil after the fall of Vijayanagara in 1565. This

district was transferred to the erstwhile Mysore State on 1st October 1953 from

Madras State. With the re-organization of the districts during 1997, the number of

taluks is reduced to 7. The Harapanahalli taluk has been transferred to

Davanagere district.

Bellary district is spread from South-West to north – East and is situated on the

eastern side of Karnataka State. The district is situated between 14o 30’ and



15o50’ north latitude and 75o 40’ and 77o 11’ east longitude. This district is

bounded by Raichur district on the north by Dharwad district on the west,

Chitradurga and Davangere districts on the south and Anantapur, Kurnool

districts of Andhra Pradesh on east. It comes under the administrative control of

Gulbarga division and development jurisdiction of H.K.D.B, Gulbarga.

As per 1991 census the population of the district stood at 16.53 lakhs. The

geographical area is 8447 sq.km. It has 2 revenue sub divisions viz., Bellary Sub-

Division and Hospet Sub-Division which have in all seven taluks. The Bellary Sub-

Division has 3 taluks while there are five taluks in Hospet Sub-Division. There are

27 hoblies, two CMCs one Town Municipality, seven Town Panchayat 542

Revenue villages, 436 Thandas/habitations. The rural populations constitute 70%.

The density of population is 196 per sq.km which is much lower than the State

average of 235 per sq.km.

The major occupation of this district is agriculture and 75 p.c. total labour forces

are dependent on agriculture for its livelihood. The important crops grown are

Cotton, Jowar, Groundnut, Paddy, Sunflower and Cereals. The net irrigated area

is 37 p.c. to the net area sown. The pattern of land utilization in the district is as

under (1997-98):

Sl.No Land classification Area (in hectares)

Percentage total area

1. Forest 97,017 11.9

2. Land not available for cultivation 1,21,972 15.0

3. Other un-cultivated land 33,875 4.2

4. Fallow Land 62,982 7.7

5. Area sown (net) 4,97,346 61.2



Total 8,13,192 100.00

The main source of irrigation is Tungabhadra Dam. The Canal network accounts

for 64 % of irrigated area. The important rivers are Tungabhadra, Hagari and

Chikkahagari. The western taluks of the district are dogged with scarcity

conditions with the failure of rains during successive years. However during the

current year and preceding year heavy rains have created havoc in the district

leaving many in lurch.

Bellary district is rich in natural resources which need to be tapped to a great

extent for overall development of the district. It has both metallic and non-

metallic minerals. The metallic minerals include Iron ore, Manganese Ore, Red

oxide, Gold, Copper and Lead. The non-metallic minerals include Andalusite,

Asbestos, Corundum, Chay, Dolomite, Limestone, and Limekankan, Moulding

sand, quartz, soap stone, granite and red ochre. The metallic minerals are

abundant is only three taluks viz., Sandur, Hospet and Bellary in the order of

mining activity intensity.

There are 23 units of large and medium scale industries in this district with an

investment of Rs.447.76 crores employing around 9,222 persons. At present it

occupies ninth place in the state. However with the commissioning of Jindal

Vijayanagar Steel Limited at Sandur the industry scenario of this district will be

undergoing sea changes. It is understood that Mukund Steels and Kalyani Steels

have plans to start industries in this area. The inflow of investment into these

industries would be around Rs.30, 000 Crores.

HUMAN DEVELOPMENT



Bellary is one of the most backward districts of the State. In terms of the

Human Development Index it is at 17th place among the earlier configuration of

20 districts. Its HDI is 0.429 as compared to State HDI of 0.470.

LITERACY:

Education is the passport to accelerated economic growth. It is the key to

building human capital and human capital is the vital ingredient in building a

nation. The GOK spends 32% of SDP on education. In Bellary District 42% of

Plan and non-plan expenditure is incurred towards salary component alone. Apart

from this, expenditure is also incurred towards building up of infrastructure

facilities in educational institutions

PER CAPITA INCOME :

Per capita income in the district is much lower than the per capita income in the

state as evinced from the following figures:

Reference Bellary Karnataka

Current Prices (1995-96) Rs 8544 Rs 9384

Constant Prices (1980-81) Rs 2143 Rs 2551

Bellary district stands at 7th place in Income Index among 20 erstwhile districts in

the State but stands at 17th place in HDI which clearly indicate that whatever

income generated is not converted into welfare of the people.

INFRASTRUCTURE:

Roads indicate civilization of a nation. They are means to prosperity, progress and

well being of any country. Rural roads may be defined as those roads which

connects villages. During 5th five year plan constructions of road was made a

component of minimum needs programme. The working group on road for 9th five



year plan has estimated that an amount of Rs.14040/- crores would be required for

the construction of rural roads to cover 85% of village population. However

Rs.10540 Crores has been proposed for the 9th plan.

HOUSING

The Govt. of Karnataka has been implementing various rural development

programmes in order to improve the living conditions of rural folk. There is a

substantial increase in the outlay for these programmes in eighth and ninth five

year plans. “Shelter for all" appears to be a distant dream because of its colossal

dimensions with a huge backlog over the period and rapidly growing population.

Shelter is an indication of an individual’s existence, dignity and security. It is

estimated that housing shortage is more than 410 lakh units out of which shortage

in rural areas is more than 265 lakh units. Besides 125 lakh rural houses need up

gradation to make them livable. The National Housing Policy of 1994 clearly

envisages the difference between rural and urban housing. As per survey

conducted during 1994-95, there were 59607 sites less households and 45776

houseless households in the district.

POWER :

At present there are three power generating stations in this region viz,

The Hampi Power House

The Tungabhadra Right Band Power House

The Munirabad Power House

The installed capacity of the above power stations is 99 Megawatts. The Jindal

Vijayanagara Steel Limited Power Generating Plant is expected to be

commissioned shortly with an installed capacity of 260 MW out of which 130 MW

is likely to be available for other users. The Government of Karnataka has

approved setting-up of a Thermal Power Plant of 500 MW capacities near



Kuduthini by the KPCL at an estimated cost of Rs.2, 000 crores. This project

construction is likely to be started during 2000-2001.

INDUSTRY PROFILE

Home loans are usually the largest loans that consumers will ever make. Because

of this, it is important to know how home loans started, the different types of home

loans and the similarities and differences between them. In this way, consumers

can make the best decision on which loan is the best for their purposes.

For many years, the only way in which to obtain money to purchase a home was to

apply for a conventional home loan. This type of loan was obtained through a

bank, credit union or other private, non-government-affiliated financial

institution.

History of Home Loans

In 1938, the Federal National Mortgage Association, better known as "Fannie

Mae," was created and established as a federal agency by then-President Franklin

Roosevelt as part of his New Deal. It made it possible, even during a time when

most people were out of work and had little, if any, income to still be able to afford

a home.

In 1970, the Federal Home Loan Mortgage Corporation, known as "Freddie

Mac," was created to lessen the "monopolization" of home lending that it was felt

that Fannie Mae enjoyed. Both Fannie Mae and Freddie Mac were at one time

considered "government" auspices, but now are considered private

establishments.



Help for Veterans

World War II came along and hundreds of citizens went to war. When it ended,

they returned home to pick up their lives where they had left off, or to start a life.

These people needed places to live, so the Serviceman's Readjustment Act of 1944,

Public Law 78-346, was enacted. This made it possible for veterans borrow money

for the purchase or building of a home. Several major changes in the Act have

been made in the years since 1944, allowing veterans of subsequent wars, such as

Korea, Vietnam and, most recently, the Gulf wars, to have the same advantages in

obtaining home loans.

Home Loans scenario in India

The Home loan sector in India is the pi-vital role player in the growth of the real

estate scenario in India. With tax incentives given to the housing finance sector in

the annual budget of 2001, transactions related to buying and selling of residential

properties increased considerably and was much higher as compared to previous

years.

Since the new class of buyers are relatively younger set of customers who are more

aware about legal documentation and approvals, buyers are now more 'end-users'

rather than investors; the property market in India undergoes transformation to

align itself with global standards with an increased emphasis on quality & cost

control and documentation methods. In the current economy of India, the real

estate sector has the maximum propensity to generate income and demand for

materials, equipment and services. It can be said that housing finance companies

were formed for co-existing with buyer's requirements of housing loans for

investing in properties. Home loans are made available by financial institutions to

both Indian and NRI customers at floating and fixed rate of interest and also at

attractive EMI options.


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For construction or buying a new home

For home repairs and renovations

For purchase of plots

Against mortgage of property

No tax benefits are available for NRI customers unless you file returns and

thereby become eligible to avail of the tax benefits. Earlier the home loan sector in

India was solely dependent on nationalized and public sector banks, but the entry

of public sector banks into the housing finance business marked the beginning of

the first round of interest rate cuts. And this reduction in interest rates has

enhanced the borrowing power of customers. Moreover, HFCs are offering

incentives to attract investors like some companies sanction the housing loan

without requiring you to identify property as a pre-requisite for eligibility.

Free accident insurance & property insurance.

Waiving of pre-payment penalty.

Waiving of processing fee.

Waiving of processing fee

There are a few documents which the finance companies require for setting up

criteria for eligibility of Home loans.


Salaried Employee Self-employed

The latest salary slip showing statutory

deductions

Computation of income for the previous two

years, certified by a Chartered Accountant

Form 16 (showing tax deducted at

source by employer)

Profit & Loss Account and Balance Sheet for

the previous two years, certified by a

Chartered Accountant

Proof of age (birth certificate/voter

identity card/passport/school-leaving

certificate/valid driving license

Proof of age (birth certificate/voter identity

card/passport/school-leaving certificate/valid

driving license)

Proof of residence (phone

bill/electricity bill/ration card).

Proof of residence (phone bill/electricity

bill/ration card).

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The realty boom in India has given a new dimension to the finance sector in India

-both in Home Loans and Home Insurance segments. This has not only given a

competitive edge to the finance companies to provide attractive options to

customers but has also contributed to the increased investments in the real estate

sector. This has resulted in 13 new institutions foraying into the housing finance

business in the last three years.

Major Home Loan Providers

Banks & Public

Sector Housing

Finance

Companies

State Bank of India, Corporation Bank, Punjab

National Bank, Central Bank, Dena Bank, Allahabad

Bank, Bank of Maharashtra, Bank of Baroda Housing

Finance, Can Fin Homes, GIC Housing Finance, LIC

Housing Finance, PNB Housing Finance, SBI Home

Finance, Cent bank Home Finance, HUDCO, LIC, etc.

Financial

Institutions

HDFC, ICICI Ltd, Citibank, HSBC, Standard

Chartered- Grind lays, IDBI Bank, etc

COMPANY PROFILE


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EVOLUTION OF SBI

The origin of the State Bank of India goes back to the first decade of the nineteenth

century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806.

Three years later the bank received its charter and was re-designed as the Bank of

Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of

British India sponsored by the Government of Bengal. The Bank of Bombay (15

April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal.

These three banks remained at the apex of modern banking in India till their

amalgamation as the Imperial Bank of India on 27 January 1921.

Primarily Anglo-Indian creations, the three presidency banks came into existence

either as a result of the compulsions of imperial finance or by the felt needs of local

European commerce and were not imposed from outside in an arbitrary manner

to modernize India's economy. Their evolution was, however, shaped by ideas

culled from similar developments in Europe and England, and was influenced by

changes occurring in the structure of both the local trading environment and those

in the relations of the Indian economy to the economy of Europe and the global

economic framework.

Bank of Bengal H.O.

Establishment:

The establishment of the Bank of Bengal marked the advent of limited liability,



joint-stock banking in India. So was the associated innovation in banking, viz. the

decision to allow the Bank of Bengal to issue notes, which would be accepted for

payment of public revenues within a restricted geographical area. This right of

note issue was very valuable not only for the Bank of Bengal but also its two

siblings, the Banks of Bombay and Madras. It meant an accretion to the

capital of the banks, a capital on which the proprietors did not have to pay any

interest. The concept of deposit banking was also an innovation because the

practice of accepting money for safekeeping (and in some cases, even investment

on behalf of the clients) by the indigenous bankers had not spread as a general

habit in most parts of India. But, for a long time, and especially up to the time that

the three presidency banks had a right of note issue, bank notes and government

balances made up the bulk of the invisible resources of the banks.

The three banks were governed by royal charters, which were revised from time to

time. Each charter provided for a share capital, four-fifth of which were privately

subscribed and the rest owned by the provincial government. The members of the

board of directors, which managed the affairs of each bank, were mostly

proprietary directors representing the large European managing agency houses in

India. The rest were government nominees, invariably civil servants, one of whom

was elected as the president of the board.

Business

The business of the banks was initially confined to discounting of bills of exchange

or other negotiable private securities, keeping cash accounts and receiving deposits

and issuing and circulating cash notes. Loans were restricted to Rs.one lakh and

the period of accommodation confined to three months only. The security for such

loans was public securities, commonly called Company's Paper, bullion, treasure,

plate, jewels, or goods 'not of a perishable nature' and no interest could be

charged beyond a rate of twelve per cent. Loans against goods like opium, indigo,



salt woolens, cotton, cotton piece goods, mule twist and silk goods were also

granted but such finance by way of cash credits gained momentum only from the

third decade of the nineteenth century. The main function of the banks, as far as

the government was concerned, was to help the latter raise loans from time to time

and also provide a degree of stability to the prices of government securities.

Major change in the conditions

A major change in the conditions of operation of the Banks of Bengal, Bombay

and Madras occurred after 1860. With the passing of the Paper Currency Act of

1861, the right of note issue of the presidency banks was abolished and the

Government of India assumed from 1 March 1862 the sole power of issuing paper

currency within British India. The task of management and circulation of the new

currency notes was conferred on the presidency banks and the Government

undertook to transfer the Treasury balances to the banks at places where the

banks would open branches. None of the three banks had till then any branches

(except the sole attempt and that too a short-lived one by the Bank of Bengal at

Mirzapore in 1839) although the charters had given them such authority. But as

soon as the three presidency bands were assured of the free use of government

Treasury balances at places where they would open branches, they embarked on

branch expansion at a rapid pace. By 1876, the branches, agencies and sub

agencies of the three presidency banks covered most of the major parts and many

of the inland trade centers in India. While the Bank of Bengal had eighteen

branches including its head office, seasonal branches and sub agencies, the Banks

of Bombay and Madras had fifteen each



Bank of Madras Note Dated 1861 for Rs.10

Presidency Banks of Bengal

The presidency Banks of Bengal, Bombay and Madras with their 70 branches was

merged in 1921 to form the Imperial Bank of India. The triad had been

transformed into a monolith and a giant among Indian commercial banks had

emerged. The new bank took on the triple role of a commercial bank, a banker's

bank and a banker to the government.

The establishment of the Reserve Bank of India as the central bank of the country

in 1935 ended the quasi-central banking role of the Imperial Bank. The latter

ceased to be bankers to the Government of India and instead became agent of the

Reserve Bank for the transaction of government business at centers at which the

central bank was not established. But it continued to maintain currency chests and

small coin depots and operate the remittance facilities scheme for other banks and

the public on terms stipulated by the Reserve Bank.

The establishment of the Reserve Bank simultaneously saw important

amendments being made to the constitution of the Imperial Bank converting it

into a purely commercial bank. The earlier restrictions on its business were

removed and the bank was permitted to undertake foreign exchange business and

executor and trustee business for the first time.



Imperial Bank

The Imperial Bank during the three and a half decades of its existence recorded

an impressive growth in terms of offices, reserves, deposits, investments and

advances, the increases in some cases amounting to more than six-fold. The

financial status and security inherited from its forerunners no doubt provided a

firm and durable platform. But the lofty traditions of banking which the Imperial

Bank consistently maintained and the high standard of integrity it observed in its

operations inspired confidence in its depositors that no other bank in India could

perhaps then equal. All these enabled the Imperial Bank to acquire a pre-eminent

position in the Indian banking industry and also secure a vital place in the

country's economic life.

Stamp of Imperial Bank of India

When India attained freedom, the Imperial Bank had a capital base (including

reserves) of Rs.11.85 crores, deposits and advances of Rs.275.14 crores and

Rs.72.94 crores respectively and a network of 172 branches and more than 200 sub

offices extending all over the country.



Branches

The corporate center of SBI is located in Mumbai. In order to cater to different

functions, there are several other establishments in and outside Mumbai, apart

from the corporate center. The bank boasts of having as many as 14 local head

offices and 57 Zonal Offices, located at major cities throughout India. It is

recorded that SBI has about 10000 branches, well networked to cater to its

customers throughout India.

Subsidiaries

The State Bank Group includes a network of eight banking subsidiaries and

several non-banking subsidiaries. Through the establishments, it offers various

services including merchant banking services, fund management, factoring

services, primary dealership in government securities, credit cards and insurance.

The eight banking subsidiaries are:

State Bank of Bikaner and Jaipur (SBBJ)

State Bank of Hyderabad (SBH)

State Bank of India (SBI)

State Bank of Indore (SBIR)

State Bank of Mysore (SBM)

State Bank of Patiala (SBP)

State Bank of Saurashtra (SBS)

State Bank of Travancore (SBT)



BOARD OF DIRECTORS

List of Directors on the Central Board of

State Bank of India

Sr. No. Name of Director Designation

1 Shri O. P. Bhatt Chairman

2 Shri R. Sridharan Managing Director

3 Dr. Ashok Jhunjhunwala Director

4 Shri Dileep C. Choksi Director

5 Shri S. Venkatachalam Director

6 Shri D. Sundaram Director

7 Shri. G. D. Nadaf Officer Employee Director

8 Dr. (Mrs.) Vasantha Bharucha Director

9 Dr. Rajiv Kumar Director

10 Shri Ashok Chawla Director

11 Smt. Shyamala Gopinath Director



Products and Services

Personal Banking

SBI Term Deposits SBI Loan For Pensioners

SBI Recurring Deposits Loan Against Mortgage Of Property

SBI Housing Loan Loan Against Shares & Debentures

SBI Car Loan Rent Plus Scheme

SBI Educational Loan Medi-Plus Scheme

Other Services

Agriculture/Rural Banking

NRI Services

ATM Services

Demat Services

Corporate Banking

Internet Banking

Mobile Banking

International Banking

Safe Deposit Locker

RBIEFT

E-Pay

E-Rail

SBI Vishwa Yatra Foreign Travel Card

Broking Services

Gift Chequ



Branch profile

Brief history of the branch

Branch was opened on 22-8-1865 as second inland branch of the bank of Madras.

During the initial years, the branch primarily discounted nuisance bills is

connection with movement of AGL produce.

The business of the branch declined during last quarter of the 19th century and

profits were difficult to come by. The directors decided to close Bellary branch on

15-7-1901 as the branch was no longer remunerative. Bellary branch was re-

opened on 18-3-1918 as an Imperial Bank. Present location: station road, bellary-

583101. The branch is housed in spacious own building. In the same campus our

two branches are situated viz commercial branch and Bellary ADB.


Name of the branch Bellary

Category of the branch SCALE IV

No. of divisions Two

personal banking division

development banking divisionDate of opening the branch 18-3-1918

Migration of CBS 24-05-2006

Date of last inspection 17-12-2009

Inspection ratings Branch; A (801 marks)

PBD; A (825 marks)

DBD; A (810 marks)Technology up gradation E-realization, CMP, ATM, Interest banking,

OLTAS, NEFTRTGFs, Mobile banking and

SBI connect.


CONCEPTUAL FRAME WORK OF HOME LOANS

Meaning of loan

An arrangement in which a lender gives money or property to a borrower, and the

borrower agrees to return the property or repay the money, usually along with

interest, at some future point(s) in time. Usually, there is a predetermined time for

repaying a loan, and generally the lender has to bear the risk that the borrower

may not repay a loan (though modern capital markets have developed many ways

of managing this risk).

Meaning of Home Loan

Home loans allow borrowers to purchase a new home. A home loan, or mortgage,

is a secured loan that borrowers obtain in order to purchase a home. Because a

home is the largest purchase many individuals will ever make most borrowers

utilize home loan to assist with their home purchase.

Types of Home Loans

There are different kinds of home loans are available in the market with different

schemes to meet customers needs. They are:

1. Home purchase loans

2. Home improvement loans

3. Home construction loans

4. Home extension loans

5. Home equity loans

6. Land purchase loans

7. Mortgage loans


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1. Home purchase loans

These are the basic forms of home loans used for purchasing f a new home. But

sorting out the best rate can at times, seem confusing if you're a first time buyer or

even an experienced homeowner.

With about a million home lenders and mortgage brokers it's becoming a tough

challenge as the days are progressing. But at the same time, when the sites are

coming up with all the latest gizmos and tools and relevant information for you,

and with all such conveniences, obtaining a home purchase loan or mortgage has

become really pretty simple. However, at the same time though, you may be

flummoxed to look so many attractive rates and offers in the market.

2. Home improvement loans

Home improvement loans are used to finance improvements and add on to the

existing set of credentials of beauty on your owned house, recently purchased

property or rented accommodation. Home improvement loans are used to

maintain or enhance the value of your house.

In general it includes: repairs, remodeling, energy-related items (permanent in

nature), repairs, a new kitchen, a new bathroom, terrace, an extension or general

property improvements. Luxury items and fireplaces are generally not eligible,

though. Many improvements in landscape and even swimming pools are nowadays

considered to be a part of home improvement.

o First Mortgage/Loans : Generally the current lender provides you with

home improvement loans against your first mortgage. In the most common

cases, the loan is extended for the remaining period of the original

mortgage, but one will have to discuss the terms in detail with his/her

mortgage lender. Home improvement loans are usually paid out in



payments in proportion to the work that is being carried out and the

contractor may be paid directly from the lender.

o Second Loans: It may also include: Home Equity Loans and Home equity

line of credit. One may have a decent equity in his/her home, but at the

same time, he/she needs to be vigilant as well to evaluate and compare the

different alternatives in detail to avoid any confusion or problems at the

later stages.

o Home Loans Refinancing: Refinancing of your mortgage or loans may

help you to lower your payments, delay your payments, defer your

payments, or may even help in releasing some cash for your home

improvement.

o Personal, i.e. Unsecured Loan: The best part of personal loan is that it

doesn't require you to have equity in your home, nor does it binds you to

borrow money against your home. Generally the personal loan is disbursed

by either a finance company, or a bank for home improvement project.

o Grants from the Government Bodies: Few Government grants programs

are available for you to offer financial help to low income families to repair

current homes.

3. Home construction loans

Home construction loans are used to finance for the construction of yours newly

acquired home or if you are planning to build a home. But, with so many home

construction loans available in the Indian market,



Factors to be consider for home building

Design of the house

Construction cost

Financing Cost

Buildable site

All the above mentioned costs will help you determine the amount you may need to

borrow. For example, besides calculating the construction costs, you may also be

required to consider the total expenditures to develop the site in order to build.

Each site is unique requiring different expenditures so this specific rupee amount

will vary from site location to site location.

4. Home extension loans

Home extension loans are used by customers to get loans from the banks to extend

their houses, by adding more rooms, kitchens, wash rooms, terraces, or any other

rooms for your growing family. It may also be used to enclose open

balcony/terrace space, or constructing a Puja ghar. Home extension loan thus falls

under the category of Home loans.

If it is not extra bedrooms or balcony or a bigger kitchen, then you might also be

looking to expand your lounge or add an extra bathroom. Perhaps you're thinking

of extra entertaining space for parties with friends or bigger family get together.

You may also be considering adding a conservatory so that there is somewhere for

you to relax away from the rest of the family when everyone is at home.

5. Home equity loans

Home equity loans helps customer to encash the market value of the commodity by

taking a loan by mortgaging the property. So, Home equity loans are availed by

customers, who wish to mortgage his/her property to the bank for taking some



loan for some other purpose. Then, it's up to the bank's discretion to consider the

market value of the property and accordingly decide how much to pay to the

customer. Both the residential as well as non residential property can be

considered for the approval of the loan, provided the mortgager is a licensed title

holder and the land is free form any kind of dispute.

6. Land purchase loans

Land Purchase loans are used by customers who wish to purchase a plot of land

for commercial or residential purpose. Everyone has his/her dream perfectly

sketched in his souls and so is his ambition to get his house erected on the exact

location

Loans that are strictly for land purchase can be as scarce as good residential plots.

While many lending firms around the nation compete to provide mortgages for the

purchase of a house on a lot, only local institutions typically will be interested in

lending for an empty lot.

7. Mortgage loans

Balance transfer loans are used by customers who wish to mortgage their property

on an attractive rate of interest from the banks like Dena Bank, Bank of India,

Citibank etc.. The mortgage loan allows the borrower to apply for loan against a

fixed asset of his/her.

Meaning of interest

A rate which is charged or paid for the use of money. An interest rate is often

expressed as an annual percentage of the principal. It is calculated by dividing the

amount of interest by the amount of principal. Interest rates often change as a

result of inflation and Federal Reserve policies. For example, if a lender (such as a


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bank) charges a customer $90 in a year on a loan of $1000, then the interest rate

would be 90/1000 *100% = 9%.

Types of interest

There are two types of interest rates are there namely

1. Fixed interest rate and

2. Fluctuated interest rate

1. Fixed interest rate

A loan in which the interest rate does not change during the entire term of the

loan. For an individual taking out a loan when rates are low, the fixed rate loan

would allow him or her to "lock in" the low rates and not be concerned with

fluctuations. On the other hand, if interest rates were historically high at the time

of the loan, he or she would benefit from a floating rate loan, because as the prime

rate fell to historically normal levels, the rate on the loan would decrease. Opposite

of adjustable rate.

2. Fluctuated interest rate

Any interest rate that changes on a periodic basis. The change is usually tied to

movement of an outside indicator, such as the prime interest rate. Movement

above or below certain levels is often prevented by a predetermined floor and

ceiling for a given rate. For example, you might see a rate set at "prime plus 2%".

This means that the rate on the loan will always be 2% higher than the prime rate,

which changes regularly to take into account changes in the inflation rate. For an

individual taking out a loan when rates are low, a fixed rate loan would allow him

or her to "lock in" the low rates and not be concerned with fluctuations. On the

other hand, if interest rates were historically high at the time of the loan, he or she

would benefit from a floating rate loan, because as the prime rate fell to

historically normal levels, the rate on the loan would decrease also called

adjustable rate.


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Meaning of margin

The loan amount granted by the banking institution, expressed as a percentage

of the value of property pledged to secure the loan.

In other words, the amount of equity contributed by a customer as a percentage of

the current market value of the securities held in a margin account.

Equated monthly installment (EMI)

A fixed payment amount made by a borrower to a lender at a specified date

each calendar month, Equated monthly installments are used to pay off both

interest and principal each month, so that over a specified number of years, the

loan is paid off in full. The benefit of an EMI borrower is that they know precisely

how much money they will need to pay toward their loan each month, making the

personal budgeting process easier.

Instructions

1. Divide the interest rate by 12 to calculate the interest per month. For example,

10 percent divided by 12 equals 0.00833.

2. Add 1 to the interest per month. For example, 1 plus 0.00833 equals 1.00833.

3. Raise the number calculated in Step 2 by the power of the number of months of

repayments. The number of months of repayments is an exponent. For example,

1.00833 to the power of 24 months, this equals 1.220391.

4. Subtract one from the number calculated in Step 3. In the example, 1 minus

1.220391 equals 0.0220391.



5. Divide the interest per month by the number calculated in Step 4. For example,

0.00833 divide by 0.0220391, which equals 0.037812.

6. Add the interest rate per month to the number calculated in Step 5. For

example, 0.00833 plus 0.037812 equals 0.046145.

7. Multiply the principal by the number calculated in Step 6 to determine the

monthly payment. For example, $10,000 times 0.046145 equals monthly payments

of $461.45

Eligibility

Home loan eligibility for Resident Indians depends upon the

repayment capacity of the loan applicant. The maximum loan that can be

sanctioned varies with the banks and other housing finance companies (HFC) and

generally, the maximum loan amount granted is 80 to 85% of the cost of your

home.

Home loan eligibility corresponding to repayment option is based on the following

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

regulations.

Home loan Eligibility Criteria

Age (Minimum) 21 Years

Age (Maximum) 58(salaried)

60(Public limited/Government Employees)

65 (self employed)

Qualification Graduation

Income Stable source of income and saving history

Dependents Number of dependents, assets, liabilities



Other income sources Spouse's income

Quantum of Finance:

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

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

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

The amount of loan will be decided after taking into account factors like earnings

and repayment ability of the loan applicant, his assets and liabilities, his age and

property (flat/house) value. For increasing loan eligibility, you are allowed to club:

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

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

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

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

rises with a rise in tenure. And since the individual is paying a lower EMI now, his

'ability to pay' and therefore his loan eligibility automatically increase.

Repaying the outstanding loans There might be adverse effect on home loan eligibility for individuals with

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

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

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

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

their eligibility for the home loan purpose is unaffected.

Clubbing of income



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

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

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

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

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

income.

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

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

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

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

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

Perks Salaried individuals must ensure that variable sources of income like

performance-linked pay among others are taken into consideration while

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

eligible for stand enhanced as well.

Employer-Bank relationship

A lesser interest rate will naturally increase your eligibility. Check with the

banks if there are any schemes running with your employer. Banks usually

categorize companies into A,B,C based on company profiles and run different

schemes like special interest rates, processing fee waiver etc. People working in

MNCs are benefited out of this usually.

Repayment



Every housing finance companies or banks have customized

repayment options to suit every individual's requirement and also repaying

capacity with some tax benefits. They have thereby come up with more flexible

and Multiple Repayment Option.

A few among them are:

Step-up Repayment Facility

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

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

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

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

pay lower EMIs in the initial years, which is subsequently accelerated

proportionately with the assumed increase in his income.

Flexible Loan installments Plan

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

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

In cases when a borrower is nearing retirement, the loan is structured in such a

way that the EMI is higher during the initial years and subsequently decreases in

the latter part proportionate to the reduced income of the customer. This option

helps such customers combine the incomes and take a long term home loan where

in the installment reduces upon retirement of the borrower.

Tranche Based EMI

Customers purchasing an under construction property, need to pay interest

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

ready. Tranche Based EMI is a special facility offered by some banks to help

customer save this interest. Customers can fix the installments they wish to pay till



the property is ready. The minimum amount payable is the interest on the loan

amount drawn. Anything over and above the interest paid by the customer goes

towards principal repayment. The customer benefits by starting EMI and hence

repays the loan faster.

Accelerated Repayment Scheme

Accelerated Repayment Scheme offers you a great opportunity to repay the

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

your disposable income or have lump sum funds for loan prepayment, you can

benefit by

• Increase in EMI means faster loan repayment

• Saving of interest because of faster loan repayment

Or invest lump sum funds rather than use it for loan prepayment. The return

from the investments also gives you the comfort of paying the increased EMI.

Balloon Payment

Balloon Payment is an augmentation tool offered by the financial institutions,

which helps in increasing the loan eligibility of the customer without increasing the

EMI by assigning securities like National Savings Certificate (NSC), LIC policies

etc. The present value of the maturity amount of assigned securities is combined

with the loan amount to arrive at the enhanced loan eligibility. Under this facility,

the EMI is calculated on the net loan amount (i.e. total loan less the present value

of the maturity value of the securities).

Home Loan Tenure

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

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

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



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

(whichever is earlier).

Documentation

Documentation refers to the specific documents to be

submitted by applicants as they apply for home loan. These documents are very

much necessary for the financial institutions to avoid any dispute and uncertainty.

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

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

applicant and present financial status proof etc. The Applicant's Profile refers to

the bio-data of the applicant, mentioning his address, age, family background and

detail information.

List of Documents

Salaried Customers Self Employed Professionals Self Employed Businessman

• Application form with photograph.

• Identity and Residence Proof.

• Latest Salary-slip, Education Qualifications Certificate and Proof of

business existence.

• Form 16

• Last 3 years Income Tax returns (self and business) Business profile.


Type of Property Salaried Self-Employed

Residential 15 years 10 years

Plot of Land 10 years 10 years

Against Existing Plot of Land

15 years 10 years


• Bank statements (last 6 months), for business/self-employed last 3 years

Profit /Loss A/c and Balance Sheet.

• Processing fee cheque.

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

• Photo PAN Card

• Defence Identity Card

• Voter's Identity Card

• Driving License

• Photo Ration Card

• Government Identity Card

Proof of Residence (any one of the following)

• Passport

• Ration Card

• Telephone (Land/Mobile) Bill

• Electricity Bill

• Driving License


• Life Insurance Policy

Proof of Age (any one of the following) • Passport

• Valid Driving License


• Birth Certificate

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

• Letter from the employer stating the age of the employee



• Photo Ration Card

RBI NORMS TOWARDS HOME LOANS

INTRODUCTION

In pursuance of National Housing Policy of Central Government, Reserve Bank of

India has been facilitating the flow of credit to housing sector. During last three

years, the housing sector has emerged as one of the sectors attracting a large

quantum of bank finance. The current focus of RBI's regulation is to ensure

orderly growth of housing loan portfolio of banks.

DIRECT HOUSING FINANCE

Direct Housing Finance refers to the finance provided to individuals or

groups of individuals including co-operative societies.

Banks are free to evolve their own guidelines with the approval of their

Boards on aspects such as security, margin, age of dwelling units,

repayment schedule, etc.

Other Guidelines

1. Bank finance extended to a person who already owns a house in town/village

where he resides, for buying/ constructing a second house in the same or other

town/ village for the purpose of self occupation.

2.Bank finance extended for purchase of a house by a borrower who proposes to

let it out on rental basis on account of his posting outside the headquarters or

because he has been provided accommodation by his employer.

3. Bank finance extended to a person who proposes to buy an old house where he

is presently residing as a tenant.



4. Bank finance granted only for purchase of a plot, provided a declaration is

obtained from the borrower that he intends to construct a house on the said plot,

with the help of bank finance or otherwise, within such period as may be laid

down by the banks themselves.

5. Supplementary finance

Banks may consider requests for additional finance within the overall

ceiling for carrying out alterations/ additions/repairs to the house/flat

already financed by them.

In the case of individuals who might have raised funds for construction/

acquisition of accommodation from other sources and need supplementary

finance, banks may extend such finance after obtaining pari passu or second

mortgage charge over the property mortgaged in favour of other lenders

and/or against such other security, as they may deem appropriate.

INDIRECT HOUSING FINANCE

General

Banks should ensure that their indirect housing finance is channeled by way of

term loans to housing finance institutions, housing boards, other public housing

agencies, etc., primarily for augmenting the supply of serviced land and

constructed units. It should also be ensured that the supply of plots/houses is time

bound and public agencies do not utilise the bank loans merely for acquisition of

land. Similarly, serviced plots should be sold by these agencies to co-operative

societies, professional developers and individuals with a stipulation that the houses

should be constructed thereon within a reasonable time, not exceeding three years.



For this purpose, the banks may take advantage of various guidelines issued by

NHB for augmenting the supply of serviced land and constructed units.

Lending to Housing Intermediary Agencies

Lending to Housing Finance Institutions

(i) Banks may grant term loans to housing finance institutions taking in to

account (long-term) debt-equity ratio, track record, recovery performance

and other relevant factors.

(ii) In terms of NHB guidelines, housing finance companies’ total borrowings,

whether by way of deposits, issue of debentures/ bonds, loans and advances from

banks or from financial institutions including any loans obtained from NHB,

should not exceed 16 times of their net owned funds (i.e. paid-up capital and free

reserves less accumulated balance of loss, deferred revenue expenditure and

intangible assets).

(iii) All housing finance companies registered with NHB are eligible to apply for

refinance from NHB and will be eligible subject to the refinance policy. The

quantum of term loan to be sanctioned to them will not be linked to net owned

fund as NHB has already prescribed the above referred ceiling on total borrowing

of housing finance companies.

Lending to Housing Boards and Other Agencies

Banks may extend term loans to state level housing boards and other public

agencies. However, in order to develop a healthy housing finance system, while

doing so, the banks must not only keep in view the past performance of these

agencies in the matter of recovery from the beneficiaries but they should also



stipulate that the Boards will ensure prompt and regular recovery of loan

installments from the beneficiaries.

Financing of Land Acquisition

In view of the need to increase the availability of land and house sites for

increasing the housing stock in the country, banks may extend finance to public

agencies for acquisition and development of land, provided it is a part of the

complete project, including development of infrastructure such as water systems,

drainage, roads, provision of electricity, etc. Such credit may be extended by way

of term loans. The project should be completed as early as possible and, in any

case, within three years, so as to ensure quick re-cycling of bank funds for

optimum results. If the project covers construction of houses, credit extended

therefor in respect of individual beneficiaries should be on the same terms and

conditions as stipulated for direct finance.

Terms and Conditions for Lending to Housing Intermediary Agencies

(i) In order to enhance the flow of resources to housing sector, term loans may be

granted by banks to housing intermediary agencies against the direct loans

sanctioned/ proposed to be sanctioned by the latter, irrespective of the per

borrower size of the loan extended by these agencies and such term loans would be

reckoned for the purpose of achievement of their housing finance allocation

.

(ii) Banks can grant term loans to housing intermediary agencies against the direct

loans sanctioned/proposed to be sanctioned by them to Non-Resident Indians also.

However, banks should ensure that housing finance intermediary agencies being

financed by them are authorized by RBI to grant housing loans to NRIs as all

housing finance intermediaries are not authorized by RBI to provide housing

finance to NRIs. Further, such finance granted by banks to housing finance



intermediary agencies against the letters’ on-lending to NRIs will not be treated as

housing finance for the purpose of scheme of yearly allocation of housing finance

applicable to banks.

(iii) Banks have freedom to charge interest rates to housing intermediary agencies

without reference to Benchmark Prime Lending Rates (BPLR)

Term Loans to Private Builders

In view of the important role played by professional builders as providers of

construction services in the housing field, especially where land is acquired and

developed by State Housing Boards and other public agencies, commercial banks

may extend credit to private builders on commercial terms by way of loans linked

to each specific project. The period of credit for loans extended by banks to

private builders may be decided by banks themselves based on their commercial

judgment subject to usual safeguards and after obtaining such security as banks

may deem appropriate. Such credit may be extended to builders of repute,

employing professionally qualified personnel. It should be ensured, through close

monitoring, that no part of such funds is used for any speculation in land.

It is advised that banks adhere to the National Building Code (NBC) formulated

by the Bureau of Indian Standards(BIS) in view of the importance of safety of

buildings especially against natural disasters. Banks’ may consider this aspect for

incorporation in their loan policies.

HOME LOANS UNDER PRIORITY SECTOR

The following housing finance limits will be considered as Priority Sector

Advances:



Direct Finance

Loans up to Rs. 15 lakh in rural, semi-urban, urban and metropolitan areas

for construction of houses by individuals, with the approval of their Boards.

Loans up to Rs.1 lakh in rural and semi urban areas and Rs. 2 lakhs in

urban areas for repairs to damaged houses by individuals.

Loans granted by banks in rural areas under the Special Rural Housing

Scheme of NHB will also be considered as part of priority sector advances

subject to the limits specified under (i) and (ii) above i.e. upto Rs. 15

lakhsfor acquiring/ construction of a new house and upto Rs. 1 lakh for

repairs/ up gradation of an existing house.

Indirect Finance

Assistance given to any governmental agency for construction of houses, or

for slum clearance and rehabilitation of slum dwellers, subject to a ceiling of

Rs.5lakh of loan amount per housing unit.

Assistance given to a non-governmental agency approved by the National

Housing Bank for the purpose of refinance for reconstruction of houses

orfor slum clearance and rehabilitation of slum dwellers, subject to a ceiling

of Rs. 5lakh of loan amount per housing unit.



CONSTRUCTION ACTIVITIES NOT ELIGIBLE FOR BANK CREDIT

Banks should not grant finance for construction of buildings meant purely for

Government/Semi-Government offices, including Municipal and Panchayat

offices. However, banks may grant loans for activities, which will be refinanced by

institutions like NABARD.

Projects undertaken by public sector entities which are not corporate bodies (i.e.

public sector undertakings which are not registered under Companies Act or

which are not Corporations established under the relevant statute) may not be

financed by banks. Even in respect of projects undertaken by corporate bodies, as

defined above, banks should satisfy themselves that the project is run on

commercial lines and that bank finance is not in lieu of or to substitute budgetary

resources envisaged for the project. Thus, in the case of a housing project, where

the project is run on commercial lines, and the Government is interested in

promoting the project either for the benefit of the weaker sections of the society or

otherwise, and a part of the project cost is met by the Government through

subsidies made available and/or contributions to the capital of the institutions

taking up the project, the bank finance should be restricted to an amount arrived

at after reducing from the total project cost the amount of subsidy/capital

contribution receivable from the Government and any other resources proposed to

be made available by the Government.

REPORTING



Banks should compile the data relating to Housing Finance at half-yearly

intervals on the lines of format given in Annexure 1 and keep it ready for

being made available to the bank’s internal inspectors/RBI’s inspectors.

For the purpose of monitoring the macro-level performance of the

commercial banks in disbursement of housing finance banks should submit,

on a quarterly basis, details of disbursements made by them towards

housing finance to Department of Banking Supervision, RBI, Central

Office, World Trade Centre, Cuffe Parade, Mumbai 400 005, as per the

format given in Annexure 2 within 20 days from the close of the respective

quarter.

Housing loans taken over from other banks should not be included in the

quarterly statement as disbursements.

RISK WEIGHT ON HOUSING FINANCE

Banks extending housing loans to individuals against the mortgage of residential

housing properties are required to assign risk weight of 75% on such loans which

are fully secured by mortgage of residential properties and investments in

Mortgage Backed Securities (MBS) of Housing Finance Companies (HFCs)

recognized and supervised by NHB. In the case of MBS of Housing Finance

Companies to be eligible for 75% risk weight, securities issued by the SPV should

be backed only by assets qualifying for 75% risk weight. In all other cases, it will

be 100%. However the risk weight for commercial real estate exposure has been

raised to 125% on July 26, 2005 and further to 150% on May 25, 2006.



Credit Appraisal

Credit appraisal is an important exercise for building up of a quality credit

portfolio and avoiding bad loans at the beginning itself. It is nothing but

meticulous understanding of various aspects like:

Need for the Home

Sources of income

Applicants previous credit dealing

Repaying capacity

Enforcement of securities etc.

Credit appraisal is an impartial and crucial exercise than disbursement or

abstention of security as already stated, recovery of loan depends much on the

quality of appraisal. Since the Home Loans are long term in nature spread over a

period extending 15-20 years, there is every reason to be vigilant and foresee the

repaying capacity of the prospective applicant and take appropriate measures at

the time of initial appraisal itself to ensure safety of the advance.

Credit Appraisal is the process followed by banks to determine the borrower’s

ability to repay his loan as well as his trust worthiness. A prospective borrower has

to go thorough the stages of credit appraisal as practiced by different banks.

Is sanctioned can be calculated as below: The main factor banks will consider is

“proof” that shows that the borrower is capable of repaying the loan on time. For



this, they will look into your income documents, personal credit history, current

assets and liabilities, education, experience etc. Old generation banks and co-

operative banks to certain extent rely upon existing relationship or the previous

experience with a client. A common pattern they follow is the sanctioning of a loan

amount which will be a fixed multiple of the annual income. However, the new

generation banks strictly follow their parameters.

The loan eligibility is usually calculated by applying Fixed Obligations to Income

Ratio (FOIR). Most banks restrict FOIR to a maximum 45-50% of monthly

income. That means, considering that one needs around 45- 50% of his income for

his personal expenses, all fixed obligations including the home loan applied for,

should be restricted to a maximum 45-50% of his gross monthly income. The loan

amount.

Loan Eligibility = Gross monthly income * 45-50% – all other obligations / per lakh

EMI (EMI calculated on the basis of applied tenure and rate of interest).

For the business class, banks will analyze the financial statements to see how the

business has been faring for the past 2-3 years considering the ITRs, Balance

Sheets, P & L Accounts (audited and certified). Banks look into your credit

history like existing loan repayments, mishandled accounts or delinquent credit

cards. This can be checked through a database of past loans and repayments

available with the Credit Bureau of India Ltd (CIBIL). Cross checking of the

income with documents like bank statements or initiating credit verifications is

also part of the process. LTV is also a factor in eligibility calculation. Banks

finance up to 70-80% of the property value as evaluated by the bank’s evaluator.

For those who have not yet decided on the property, there is an option to sanction

an in-principle amount, which helps to know the amount a bank would be able to

give out.



HOME LOAN PRACTICES IN SBI

The most preferred Home Loan provider voted in “Awaaz Consumer Award”

along with the “Most Preferred Bank Award” in a survey conducted by TV 18 in

association with AC Nielsen-ORG Marg in 21 cities across India.

SBI Home Loans now offers Interest Rates concessions on Green Homes in

accordance with SBI's commitment to Environment protection.

SBI Home Loans come to you on the solid foundation of trust and transparency

built in the tradition of State Bank of India. Best Practices followed in SBI

mentioned below will tell you why it makes sense to do business with State Bank of

India. SBI housing loan is one of the most simple and customer friendly home

loans across the India. The housing loan offers many facilities to the customers

that help them materialize their dream home plans better. The SBI housing loan

comes with attractive packages and exclusive benefits.

State bank of India housing loans are available with attractive interest rates and

repayment terms that are suitable for the borrowers. These loans are offered by

the personal banking division of SBI.

Types of Home Loans offering by SBI

SBI offering various types of home loans to fulfill the customers needs.



1. SBI easy housing loan

2. SBI advantage housing loan

3. SBI premium housing loan

4. Housing loan product variants

SBI maxgain

SBI realty

SBI home plus

NRI home loan

SBI tribal plus

Sahyog niwas

SBI green home loan

5. Related home loan products

Earnest money deposits(EMD) scheme

SBI reverse mortgage loan

6. New products

SBI surakshit home loan

SBI yuva home loan

SBI home loan PAL

7. Gram nivas scheme

1. SBI Easy home loan:

Getting your dream home has become easier with SBI Easy Home Loan. With low

interest rates for home loan under Rs. 30 lakhs category, SBI Easy ensures that

you are not burdened with high interest for your home loan. Plus with over 13700



SBI branches nationwide you can get your Home Loan account parked at a

branch nearest to your present or proposed residence.

Processing Fee

The revised processing fee structure (including service tax) is as under:

Loan Amount Processing Fee

Upto Rs.5 Lac Rs.1000/-

Above Rs.5 Lac and upto Rs.10 Lac Rs.2000/-

Above Rs.10 Lac and upto Rs.20 Lac Rs.5000/-

Above Rs.20 Lac and upto Rs.30 Lac Rs.7,000/-


Name SBI Easy Home Loan

Facility Type

Term Loan or OD as in SBI MaxGain. (OD facility will be available for loans above Rs.5 Lacs.)

Loan amount

Upto (and including) Rs.30 Lacs

Interest Rate

Card Rate applicable for the tenor of the loan – 1.50% above Base Rate, Present effective rate being 9.75% p.a.

Ist Year 1% discount over Card Rate, present effective rate being 8.75% p.a.

2nd and 3rd year

0.25% discount over Card Rate, present effective rate being 9.50% p.a.

4th year onwards

Card Rate

No Fixed Interest Rate option.


2. SBI Advantage home loan

Name SBI Advantage Home Loan(Above Rs.30 Lacs and upto Rs.75 Lacs)

Facility Type

Term Loan or OD as in SBI MaxGain.

Loan amount

For Home Loans above Rs 30 lacs and upto Rs. 75.00 Lacs

Interest Rate Card Rate applicable for the tenor of the loan – 1.75% above Base Rate, Present effective rate being 10.00% p.a.

Ist Year 1.25% discount over Card Rate, present effective rate being 8.75% p.a.

2nd and 3rd

year0.50% discount over Card Rate, present effective rate being at 9.50% p.a.

4th year onwards

Card Rate

No Fixed Interest Rate option.

Processing Fee:


Above Rs.30 Lac and upto Rs.50 Lacs Rs.7,000/-

Above Rs. 50 Lacs and upto Rs. 75 Lacs Rs. 8,000/-

3. SBI Premium home loan

Name SBI Premium Home Loan – Above Rs.75 Lacs



Facility Type

Term Loan or OD as in SBI MaxGain up to Rs.1 Crore.

Loan amount

For Home Loans above Rs 75.00 lacs

Interest rate

Card Rate applicable over the tenor of the loan is 1.75% over the Base Rate, present effective rate being 10.00% p.a.Concessions including discretionary concessions will be available over the tenor of the loanNo Fixed Interest Rate option.

Processing Fee

The revised processing fee structure (including service tax) is as under:


Above Rs.75 Lacs and upto Rs.1 Crore Rs. 8,000/-

Above Rs. 1 Crore and upto Rs. 5 Crores Rs. 10,000/-

Above Rs. 5 Crores Rs. 20,000/-

4. Home loan product variants

The various home loan product variants are:

SBI Maxgain

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. 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

Maximum Loan Amount: Rs.1 Crore



SBI Realty

A unique product if you are on the lookout for a loan to purchase a plot of land

for house construction. The loan is available for a maximum amount of Rs.1 crore

and with a comfortable repayment period of up to 15 years.

House construction should commence within 2 years from the date of availment of

‘SBI-Realty’ Housing Loan. Customers 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. (Other terms and conditions – as applicable

to regular Home Loans).

Name SBI Realty

Max amount

10 cror

Margin 20% up to 75 lakhs.25% above 75 lakhs and up to Rs. 1 crore.50% above 1 crore.

Features Properties to be valued by two independent empanelled valuations to be consider. AndTwo title search reports to be obtained one before loan sanction another before disbursement.

NAI

30% up to Rs.2 lakh40% NAI above Rs.2 lakh and up to Rs.5 lakh 450% NAI above 10 lakh 5% NAI above Rs.5 lakh and up to Rs.10 lakh(may be relaxed by 10% sanctioning authority if customer Undertakes to complete construction of house by own source).

SBI Home Plus



SBI Home plus is scheme is launched for granting personal loans to the banks

home loans customers against the security of their house property. All home loans

customers with a satisfactory repayment record of at least one year and who

maintain a Savings bank or current account with us.

The loan can be used for any purpose, viz. extension/repair of house, purchase of

car/ consumer durables, education / medical expenses of family members, personal

expenses, etc. There will be no need to obtain documentary evidence for the end-

use of funds. However a certificate from the customer in the application to the

effect that the loan will not be used for speculative purposes would be obtained.

Name SBI home plus

Min amount Rs.25,000

Max amount Rs.10 lakh

Margin 15%EMI 60%

Repayment If EMI extended to cover the loan max 120 months including moratorium.If EMI not extended, lower of remaining HL tenure or 120 months including moratorium.

NRI Home Loans

State bank of India provides SBI NRI home loan for building a new

house/flat, buying an old house/flat or repair and reconstruction of house.

However, SBI lays down certain pre-conditions for NRI to avail home loan. The

conditions are:

• The loan seeker should have stayed in India for at least 182 days or more.

• The loan seeker should be at least 21 years old/

• The loan seeker should have valid Indian passport.



• Should have been working abroad for at least 2 years with valid job

contract.

• The loan seeker should have a steady flow of monthly income with stable

employment/business to ascertain the repayment capacity.

• Non Resident Indians (NRIs) should have a valid Indian passport.

Loan Amount

The loan amount is to be determined on the basis of repayment capacity taking

into account income, age, assets and liabilities, qualifications, stability of

occupation, and employment prospects on return. The loan amount is subject to

the following:

Minimum: Rs. 3 lacs

Maximum: Maximum permissible loan amount would be determined by

EMI/NMI ratio criteria as applicable to regular Home Loans scheme for Resident

Indian customers, which is 30% for Net Annual Income (NAI) up to Rs.2 Lac,

50% for NAI above Rs.2 Lac and up to Rs.5 Lac, 55% for NAI above Rs.5 Lacs

and up to Rs.10 Lacs, 65% for above Rs.10 Lacs.

SBI Tribal Plus

'SBI-Tribal plus’ Home Loans, a Special Scheme designed for Hill/Tribal

areas for extending financial assistance to individuals in such areas to:

a. Purchase or construction of a new house / flat (without mortgage of land)

b. Purchase of an existing house / flat which is not more than 10 years old.

c. Repair /Renovation/extension of an existing house or flat.

d. Loans given against Third Party Guarantee

Features/conditions



For employees:

• Age min 21 years, loan to be fully repaid by the age of 65 years.

• Min 5 years of service4

• 36 times NMI’s

• Min liquid security- 30% of loan amount (AGM region/branch may reduce

it to 15% of the loan amount in respect of tie-up with government

departments reputed corporate with availability of bulk business potential

of less than Rs.2 crore.

For professionals, self-employed, businessman, and agriculturists:

• Min 5 years of experience.

• Maintaining deposit account with average balance of Rs.500/- for last 2

years or

• Maintaining loan account for a minimum period of 2 years (without any

instance of overdue and bouncing of cheques etc).

• Classified as standard assets.

• Loan: 2 times of average NAI for the last 3 years.

• Min liquid security 50% of loan amount.

• Max repayment- 15 years.

• Margin: If construction/purchase: 15%, if repairs: 20%

Sahyog Niwas

The Sahyog Niwas scheme has been instituted to finance the self help groups

with a good track of payment record for 2 years, for on lending to members for

housing in rural areas, covering the following purposes.



• For the purchase or construction of a house exclusively or including the

housing needs of activities carried by them. (Dairy shed, tailoring shed/shop,

grocery stores etc.)

• For the renovation or repair of an existing house / shed

• For the purchase of a plot of land for the purpose of house construction.

• For the extension of existing house / work space to existing house /shed.

Loan amount:

Loan amount 10 times the savings the corpus of SHG including limits already

sanctioned.

SBI Green Home Loan

State Bank of India has adopted a Green Banking Policy with an objective of

contributing towards the fight against the adverse climate change. One of the

initiatives approved by the Board for this purpose is incentivizing customers who

go in for Green Projects, i.e. those projects which reduce Carbon Emissions and

promote Renewable Energy. “Green Housing” or “Green Home” is one of the

types of projects identified for this purpose.

Special concessions:

• 5% waiver in margin.

• 0.25% concession in interest rate.

• Waiver of processing fee.

• Other terms and conditions – as applicable to regular Home Loans.

5. Related Home Loan products:

Earnest Money Deposit (EMD) Scheme



Many Government agencies, like Urban Development Authorities and Housing

Boards, periodically come out with schemes for sale of plots/houses, wherein

applicants have to submit 10-20% of the cost of plot/house as Earnest Money

Deposit (EMD) and allotments are made by draw of lots.

The SBI EMD scheme is designed for financing against earnest money for

allotment of a house/plot. Individuals above 21 years of age and with a steady

source of income are eligible to avail loans under this scheme.

Salient Features of the Scheme:

• No minimum income criteria.

• Margin waived in al cases.

• Eligible for 100% of application money, subject to maximum loan amount

of Rs.10 Lacs.

• Waiver of security in all cases irrespective of the loan amount.

The above mentioned features of the scheme are applicable subject to the

following conditions:

• Allotment letters/refund orders should be routed through SBI.

• Lump sum amount equal to 6 month’s interest to be taken upfront.

• PDCs one for the principle amount of EMD and another towards interest

for the next 6 months should be taken to meet the eventuality of refund

getting delayed.

Repayment:

• By refund in case of non-allotment

• By regular HL in case of allotment but not more than 12 months from the

date of disbursement of the loan.



SBI Reverse Mortgage loan

SBI Reverse Mortgage Loan enables house-owning Senior Citizens having

inadequate income to meet their financial needs for renovation/repairs to house,

medical & other personal purposes. There is no compulsion for the borrower to

repay a RML during his or her lifetime or till such time he or she continues to stay

in the house.

The borrower continues to retain ownership of the house. Also, the borrower will

have the option to prepay the loan at any time during the loan tenure and there

will be no pre-payment penalty. The min amount is Rs.3 lakh and max amount is

Rs.1 crore.

Features/conditions

Age: above 60 years(first borrower), when loan jointly with spouse, age above 58 years should not have more than one securing spouse undertaking to not re-marry during loan term.

Loan availed jointly with spouse: Loan tenure: 15 years if age of younger

borrower up to 68 yeas and 10 years if age of younger borrower above 65 years.

Loan availed in single name: 15 years if age of borrower up to 68 years and

Loan tenure 10 years if age of borrower above 68 years.

Loan amount: 90% of value of property (it includes interest still maturity).

Loan may be disbursed in monthly/quarterly installments or 50% in lump sum

and remaining 50% though periodic payments.

6. NEW PRODUCTS

These home loans are lunched recently in order to provide better service and

modern services to consumers. The new products are:



SBI Surakshit Home Loan:

A separate product for customers who opt for home loan with life insurance

cover. Other features like tenure, loan to value, eligibility as per the standard

schemes.

SBI yuva home loan

Features/conditions

Type of loan :Term loan only

Eligibility : Salaried employee of companies form the private sector,

MNC’s, Government undertakings, PSU’s Government

employees. Age : Between 21 years to 35 years.

YUVA couple : Min contribution of 25% to combined EMI by each

of husband and wife then upper age limit stands

relaxed to 40 years YUVA family : Contribution of 75% to combined EMI by Yuva or

Yuva couple, then parents may join as co-borrowers Min NMI : Rs.50,000/- expected rental income from proposed

property not o be added.

Loan term : Maximum 300 months

Repayment : Fixed loan term of 240 months

First 36 months only interest applied during the

month will be recovered. 37th month onwards 204 EMI’s

Loan amount : 20% extra i.e., 1.2 times the loan as per regular HL

based on EMI/NMI ratio Benefit under corporate salary package if Employee Company covered under

CSP if not under CSP, then festival loan (DL) equivalent to 3 months NMI

repayable within 36 months permitted.



Features/conditions, other then those mentioned above will be the same as

those applicable to SBI home loan scheme.

SBI Home Loan PAL ( Pre-Approved Limit )

Benefits of this product:

1. Under this, your Eligible Loan Amount is assessed before finalization of

property deal and a Pre-Approved Loan Arrangement Letter (PLAL) is issued to

you.

2. Customer can confidently negotiate with the builder/seller after getting a

sanction.

Features

Minimum age: 18 years as on the date of sanction

Maximum age: 70 years. i.e. the age by which the loan should be fully repaid,

subject to availability of sufficient, regular and continuous source of income for

servicing the loan repayment.

Loan Amount: Actual loan amount will be determined taking into consideration

such factors as applicant’s income and repaying capacity, age, assets and

liabilities, cost of the proposed house/flat etc. To enhance loan eligibility you have

option to add:

1) Income of your spouse/ your son/ daughter living with you,

provided they have a steady income and his/ her salary account is

maintained with SBI.



2) Expected rent accrual (less taxes, cess, etc.) if the house/ flat were

being purchased is proposed to be rented out.

3) Depreciation, subject to some conditions.

4) Regular income from all sources.

Security: Equitable mortgage of the property.

Margin/ LTV Ratio:

Loan Amount Margin (Min.) Maximum LTV Ratio

(Max.)Upto Rs. 20 Lacs 10% 90%Above Rs. 20 Lacs. 20% 80%

7. GRAM NIVAS SCHEME

This customized offering is an extension of the social responsibility that we have

shouldered since the very inception of the Bank. The objective of this scheme is to

comprehensively cater to the needs of the village community with special focus on

poorest of the poor for Housing Loans keeping in view the peculiarity of the

ownership title in rural areas, social habits, type of construction and other related

needs.

Features

Operational Area

The Scheme will cover all rural and semi-urban centres. 'Rural Area' for the

purpose of the Scheme is the area comprised in any village including the area

comprised in any town, the population of which does not exceed 50000 as per 1991

census.

Eligibility

• The applicant should be between 21 years and 50 years of age



• Individuals having satisfactorily conducted deposit accounts for two years,

or

• Individuals whose existing loan account is satisfactorily conducted and is

Standard Asset, or

• A member of a Self Help Group having savings/ loan accounts with us

Applicants above 50 years may be considered for sanction of loan with all the legal

heirs joining as guarantors or after obtaining a suitable no objection agreement/

power of attorney from the legal heirs

Loan Amount

• The loan amount will be:

• 5 times the Average Annual Income from agriculture including income

from ancillary agricultural activity, or

• 5 times the Net Annual Income in case of employees, or

• 5 times the Average Annual Income from the business/ profession

• To enhance the loan eligibility you have the option to add:

o Income of your spouse

o Regular income from all sources

• The loan amount is, however, subject to the following limits

• For construction/purchase of house: Rs.2.00 lacs

• For repairs/renovation: Rs.1.00 lac

• For purchase of land: Rs.0.30 lac

Margin

10% of the project cost



Assessment of Eligibility

• For loans upto Rs.0.50 lacs – on the basis of simple estimates

• For loans above Rs.0.50 lacs – on the basis of unit costs for different types of

houses as fixed by the Bank

Security

• For loans upto Rs.0.50 lacs – only third party guarantee is required

• For Loans above Rs.0.50 lacs:

• Equitable/ Registered mortgage of the House/ Flat, or

• Any other tangible security including agricultural land to cover 100% of

loan amount

Repayment

Maximum repayment period of upto 15 years with option to repay in equated

monthly/ quarterly/ half yearly/ yearly installments, decided upon the merits of

each case

Processing Charges

Nil. (Lawyer’s fee, not exceeding Rs.500, to be paid by the borrower)

(Other terms and conditions – as applicable to regular housing loans)

MOST IMPORTANT TERMS AND CONDITIONS

These terms and conditions are applicable to all Home Loan customers:

Purpose for which home loan can be availed:

1. The loan will be sanctioned for the purpose of purchase / construction /

extension / repairs/renovation of new/second-hand residential house/flat/plot of



land/purchase of consumer durables/furnishings (hereinafter referred to as the

‘project’)

2. Premium of Home Loan Insurance cover (Optional) : The premium for the

optional Home Loan Life Insurance cover (if availed) will be added to the loan

amount.

Eligibility

You should be at least 18 years of age to qualify for a state banke of India home

loan. The maximum age limit for a loan applicant is 70 years by which the loan

has to be paid in full. However, this is dependint on availability of adequate,

constant and steady source of earnings for paying off the loan.

Loan to Value Ratio (LTV):

For loan amount less than Rs.20 Lacs, maximum permissible LTV ratio is 90% of

the assessed value of the property. For loan amount less than Rs.20 Lacs,

maximum permissible LTV ratio is 80%.

Rate of Interest:

Floating Rate of Interest :

Interest on the loan will be charged at prevailing floating rate of interest on a

daily reducing balance at monthly rests. The rate of interest is subject to revision

from time to time due to (i) changes in Base Rate or (ii) revision even without

change in Base Rate the Bank has the option to reduce or increase the EMI or

extend the repayment period or both consequent upon revision in interest rate.

Fixed Rate of Interest:



Interest on the loan will be charged at the prevailing fixed rate of interest on

daily reducing balance at monthly rests, subject to interest rate reset at the end of

every two years on the basis of fixed interest rates prevailing then. State Bank of

India (SBI) may at its discretion stipulate the periodicity of computation of

interest. Further, SBI may at its sole discretion alter the rate of interest suitably

and prospectively in the event of major volatility in interest rates during the

period of the agreement. Thenceforth the rate of interest varied as aforesaid shall

be applicable to the Loan. SBI shall be the sole judge to determine whether such

condition exists or not. If the Borrower is not agreeable to the revised interest rate

so fixed, the Borrower can request SBI, within 15 days of receipt of the notice

intimating change in interest rates from SBI, to terminate the loan and the

Borrower shall repay the Loan and any other amount due to SBI in full and final

settlement in accordance with the provisions of the Agreement relating to pre-

closure.

Calculation of interest:

Interest on the amount of the loan will be applied at the prevailing rate per

annum on daily reducing balance with monthly rests.

Intimation of change in Interest Rate:

The borrower shall be deemed to have notice of changes in the rate of interest

whenever there are changes in Base Rate or increase in interest rates where there

is no change in Base Rate are either displayed on the Notice Board of the Branch

or published in news papers or made through entries of the interest rate charged

in the passbook/statement of account furnished to the borrower and the borrower

is liable to pay such revised rate of interest.

Penal interest:



In the event of a default in payment or any irregularity in the account, the Bank

reserves the right to levy a higher rate of interest as it deems fit. Enhanced rate of

interest @2% p.a on the irregular amount for the period of irregularity, over and

above the applicable rate will be charged if the Equated Monthly Installment

(EMI) remains unpaid for a period of 30 days from the due date, for any reason,

including a bounced cheque.

Bounced cheque/ECS or SI dishonors:-

A penalty of Rs 250/- will be charged for every bounced cheque/ECS or SI

dishonors. The rate may vary from time to time.

Repayment:

The loan is to be repaid in Equated Monthly Installments over the tenure of the

loan. The repayment installment commences

(a) 2 months after completion of construction of house/flat or after eighteen

months from disbursement of first installment, where loan is released in

installments, whichever is earlier or

(b) From the next month after the date of full disbursement in respect of outright

purchase of land/house/flat/extension, repairs or renovation of an existing

house/flat. The liability to the bank will be extinguished only when the outstanding

in the loan account becomes Nil, on payment of residual amount, if any.

Loan Tenor:

Maximum 25 years (or) up to the age of 70 years (the age by which the loan

should be fully repaid) of the borrower, whichever is early.

Pre-closure Charges:



Loans on Fixed and Floating rate of interest:

Pre-closure charge of 2% of the amount pre-paid in excess of normal EMI

dues will be levied in case of pre-closure of loan within 3 years from the stipulated

date of commencement of repayment. If the loan is pre-closed from own resources

other than borrowings, for which proof is submitted to the satisfaction of the

Bank, pre-closure charges shall not be levied irrespective of the period for which

the loan account has run.

Security

Primary:-

The loan will be secured by Equitable / Registered mortgage/extension of

mortgage of the land and building/flat for which the loan is to be sanctioned.

Collateral:

If mortgage of the property being financed is not possible, Bank may accept, at

it discretion, security of adequate value in the form of Life Insurance policies,

Government Promissory Notes, shares/ debentures, gold ornaments or such other

tangible security as may be deemed appropriate.

Interim Security Pending Mortgage:-

Wherever creation of mortgage is likely to be delayed for any valid reason,

suitable security including third party guarantee, as considered necessary, may be

taken for the interim period.

Utilization of the loan:

The amount of the loan shall be utilized strictly for the purpose detailed in the

borrower’s application form and in the manner prescribed. The construction of

the house/flat or the modification/extension proposed by the borrower in the



existing house/flat should be strictly according to the plan approved by the Local

Authorities/Town Planning and Development authorities. Any modification

desired in the plan as originally approved, can be undertaken only after express

sanction for it has been obtained from the appropriate authority.

Insurance:

The house/flat shall be insured comprehensively for the market value covering

fire, flood, Earthquake etc. in the joint names of the Bank and the borrower. Cost

of the same shall be borne by the borrower.

Inspection:

The Bank will have the right to inspect, at all reasonable times, the borrower’s

property by an officer of the Bank or a qualified auditor or a technical expert as

decided by the Bank and the cost thereof shall be borne by the customer.

Fees and charges:

Processing fee: Is to be paid upfront at rates laid down by the Bank from time

to time. Entire processing fee would be refunded if application is rejected after

initial scrutiny. If loan application is rejected after site inspection and/or

abstention of legal/valuation report, 75% of the processing fee will be reimbursed.

No refund of processing fee is permissible in case of sanction/rejection by

sanctioning authority.


Up to Rs.5 Lac Rs.1000/- Above Rs.5 Lac and up to Rs.10 Lac Rs.2000/- Above Rs.10 Lac and up to Rs.20 Lac Rs.5000/- Above Rs.20 Lac and up to Rs.50 Lac Rs.7,000/- Above Rs.50 Lac and up to Rs.1 Cr Rs.8,000/- Above Rs.1 Cr and up to Rs.5 Cr Rs.10,000/-

Above Rs.5 Cr Rs.20,000/-



SBI Ho me loan interest rates

When you’re searching for the most affordable home loan interest rates from

the market, you should give State Bank of India a thought. State Bank of India

home loan interest rates are one of the best rates that are available to you in India.

About State Bank of India Home Loan Interest Rates

State Bank of India home loan interest rates are one of the most competitive rates

that you will get in the market. The rates are subject to change as per the sole

discretion of SBI.

SBI EMI calculator

State Bank of India comes up with a unique SBI home loan calculator to enable

its customers an easy and simple way to calculate their monthly installments and

get an estimate of the amount for successive payments in settlement of their debt.

The SBI home loan EMI calculator is a convenient way for the

individual applying for the home loan to determine the amount to be paid as an

installment. For this the person must be aware of following details:-

• The amount he/she requires

• The applicable interest rate

• The duration for which you want to acquire.

The seeker can also examine the monthly installments for diverse periods and

select and choose the more suitable option using this tool. The SBI home loan

calculator is applicative to Indian residents.



SBI on its website offers its clients a free of cost online SBI Home loan EMI

calculator which helps them to make a calculation of their respective EMI amount

and capacity to avail and repay the amount thereafter. This minimizes the task of

the customer and makes the whole banking procedure simple and easy to

understand. This also gives an option to the client to get a rough idea about his

monthly payments vis-a-vis the amount of home loan he/she has availed from the

bank.

SBI Home loan insurance

The State Bank of India comes up with the SBI Home loan insurance product

providing a shield to the customer's home loan in wake of any unexpected

occurrence. In such circumstances the deceased's family members will have the

backing of the insurance cover to pay for the remaining amount of the home loan

without any stress of monthly loan installments in order to repay the loan amount.

In absence of such an insurance cover paying the EMIs would become a Herculean

task for the family members of the loan taker.

People seeking home loan often encounter such worries like what if anything

happens to them in that case what would happen to the home loan? Naturally,

their main concern is that should something happen to them their folks would

have to encounter the problem of facing the impact of repaying the loan debt.

The premium amount broadly relies on few conditions:-

• Age of the person availing the loan (the younger the person, the lower the

premium amount)

• Loan amount (the lesser the loan amount, the lower the premium)

• Period of the loan (the more the loan repayment period, more is the

premium)



• Health of the loan taker (the premium amount would be low in case of good

health of the individual)

DOCUMENTS

List of papers/ documents applicable to all applicants:

Completed loan application

3 Passport size photographs

Proof of identify (photo copies of Voters ID card/ Passport/ Driving

license/ IT PAN card)

Proof of residence (photo copies of recent Telephone Bills/ Electricity Bill

Property tax receipt/ Passport/ Voters ID card)

Proof of business address for non-salaried individuals

Statement of Bank Account/ Pass Book for last six months

Signature identification from present bankers

Personal Assets and Liabilities statement

For guarantor (wherever applicable):

Personal Assets and Liabilities Statement

2 passport size photographs

Proof of identification as above

Proof of residence as above

Signature identification from his/her present bankers

Proof of business address as above

Additional documents required for salaried persons:



Original Salary Certificate from employer

TDS certificate on Form 16 or copy of IT Returns for last two financial

years, duly acknowledged by IT Deptt.

Additional documents required for Professionals/self- employed/ other IT

assesses:

Photocopies of challans evidencing payment of Advance Income Tax.

Acknowledged copies of three years I.T. returns/ Assessment Orders.

Tax benefits

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. 1,50,000 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 by Rs.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:

Capital is borrowed for acquiring or constructing a property on or after

April 1, 1999.

The acquisition and construction should be completed within 3 years from

the end of the financial year in which capital was borrowed.



The person, extending the loan, certifies that such interest is payable in

respect of the amount advanced for acquisition or construction of the house

A loan for refinance of the principle amount outstanding under an earlier

loan taken for such acquisition or construction.

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

Tax deductions can be claimed on housing loan interest payments, subject

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

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.

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.

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

loan applicant.



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

also qualifies for the deduction of Rs 150,000.

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.

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

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

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.

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 (1), tax benefits can also be availed for a

second loan taken to repay the first loan but not for subsequent loans.



ANALYSIS AND INTERPRETATION OF DATA

Graph showing total Housing Loans disbursement

Amount in Lakhs

2008-0936%

2009-1034%

2010-1130%

Inference:

The above chart shows the ratio of total disbursement of three years. The total

disbursement ratio for three years 2008-09, 2009-10 and 2010-11 was 36%, 34%

and 30% respectively.


Years Amount in Lakhs

2008-09 667.99

2009-10 627.47

2010-11 551.10


Classification based on loan amount

1. Bellow Rs.5 lakh

0

10

20

30

40

50

60

70

80

2008-09 2009-10 2010-11

Loans Below Rs.5 Lakhs

No. of loans given

Amount in lakhs

Inference:

According to the above chart the amount of Housing Loan is fluctuating every

year from in Rs.68.73 Lakh 2008-09 to Rs.70.19 in 2009-10 and Rs.20.80 in the

year 2010-11.



2. Rs. 5 lakh and up to Rs.10 lakh

Years No. of loans given Amount in Lahks

2008-09 30 227.96

2009-10 34 258.70

2010-11 15 115.60

0

50

100

150

200

250

300

2008-09 2009-10 2010-11

Loans from Rs.5 to Rs.10 Lakhs

No. of loans given

Amount in Lahks

Inference:



year 2010-11.



3. Above Rs.10 lakh and up to Rs.15 lakh

Years No. of loans given Amount in lakh

2008-09 18 241.50

2009-10 19 254.36

2010-11 5 72.30

0

50

100

150

200

250

300

2008-09 2009-10 2010-11

Loans Above Rs.10 Lakh and upto Rs.15 Lakh

No. of loans given

Amount in lakh

Inference:



year 2010-11.



4. Above Rs.15 lakh and up to Rs.20 lakh

Years No. of loans given Amount in Lakhs

2008-09 3 52.43

2009-10 1 18.50

2010-11 4 75.00

0

10

20

30

40

50

60

70

80

2008-09 2009-10 2010-11

Loans above Rs.15 Lakhs and upto Rs.20 Lakhs

No. of loans given

Amount in Lakhs

Inference :



year 2010-11.



5. Loans above Rs.20 Lakhs

Years No. of loans given Amount in lakhs

2008-09 3 77.37

2009-10 1 25.00

2010-11 10 267.40

0

50

100

150

200

250

300

2008-09 2009-10 2010-11

Loans above Rs.20 Lakhs

No. of loans given

Amount in lakhs

Inference:



year 2010-11.



Findings

Housing loans disbursed for the last three financial years i.e., 2008-09, 2009-

10 and 2010-11 is constant. The percentages of loans disbursed from last

three years are 36%, 34% and 30% respectively.

SBI Home Loans now offers Interest Rates concessions on Green Homes in

accordance with SBI's commitment to Environment protection.

Interest rates are very low compared to other private banks and Housing

finance institutions.

There is no default housing loans from last three years.

Competition in the housing finance industry has intensified, especially after

banks renewed their trust on this business because of its high yields and low

NAPs. Competition has contributed to a sharp decline in housing finance

rates and improvement in service. Standards, which in turn has led to

expansion of the market.

Most public and private sector banks are aggressive in this segment because

of the low default rates and longer tenure of the loan which helps keep

profitability impact of longer time.

For home loans the interest with all banks are nearly the same. But SBI

Housing Loans interest rates are very low compared to other banks and

HFC’s. The SBI interest rate for first year is 8.5%. It will change for

second year according to the terms and conditions.



To effectively market their specialized finance products, housing finance

companies are resorting to various segment like employee’s class,

professional class and business.

Banks are fast restructuring their business activities. No longer confined to

traditional corporate clientele, they are reaching out to individual

consumers directly.

The most of the borrowers consider the rate of interest and service offering

by the institutional to select the institution.

The most of the borrowers prefer the mixed rate of interest.



Suggestions

Though the interest rates are attractive to the customers, they are posing a

problem of banks, HFCs, they are not generating adequate return for their

shareholders.

The regulatory bodies need to streamline their policies and norms so as to

come with bold procedure to recover to loans in case of defaults.

Bank need to reduce the time taken for sanction of loans i.e., between

receive of application and disbursement of loan amount.

The bank needed to concentrate on middle income group people and also

economically weaker sections.

The maximum disbursement of SBI main branch, Bellary is Rs.30 lakh. In

recent years the earning capacity and standard of living of Bellary people is

rapidly increased. So bank can provide maximum loan amount up to Rs.50

lakh.

Changes in advertisement, which appeals to the borrows, would be a

positive factor in increasing the market share.

As the organization undertakes many fairs, it should continue with this to

improve the awareness regarding its new products and schemes launched.



Conclusion

SBI offers a variety of banking products with its huge network and overseas

branches which includes products targeted at Non-resident Indians. The bank is a

public sector banking behemoth with the biggest branch network in India.

When you’re searching for the most affordable home loan interest rates from the

market, you should give State Bank of India a thought. State Bank of India home

loan interest rates are one of the best rates that are available to you in India

The bank offers some unique SBI Home Loan facilities like free personal

accidental insurance cover and optional group insurance form SBI Life. The SBI

Home Loan offers you the facility to club your income with the income of your

spouse and children to get th maximum loan amount. You can also club the

expected accountable rent from the mortgaged property to get the correct loan

amount.



BIBLIOGRAPHY:

Books

Banking theory, law and practice - Gordon & Natarajan 21st Revised

Edition

Annual Report SBI Annual Report 2010-11

Internet www.statebankofindia.comwww.guide2homeloan.comwww.bankbazer.com


http://www.bankbazer.com/

http://www.guide2homeloan.com/

http://www.statebankofindia.com/