A Study on Housing Finance Policies and Appraisal Process of Home Loans in India

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1 International Journal of scientific research and management (IJSRM) Volume 2 Issue 9 Pages Website: ISSN (e): A Study on Housing Finance Policies and Appraisal Process of Home Loans in India Souvik Ghosh MBA in Finance, Future Business School, West Bengal University of Technology, Kolkata, India souvikg.19@gmail.com Abstract: Owning a home is one of life s biggest aspirations of a person. Home loans are the most easily accessible financial supplement to purchase a person s dream home. A resident or non-resident individual who is planning to buy a house in India can apply for a home loan at the banks or Housing Finance Institutions. Once the maximum amount to put into the property has been decided, the Housing Finance Institutions or Banks will let the customer know that how much he/she is eligible for and this helps to plan out the budget. In order to get the housing loan the customer has to go through a Credit Appraisal process. Each bank / Housing Finance Company (HFC) has its own norms and standards to evaluate borrower s ability to repay the loan and the credit worthiness of the customer to be eligible for loan application. Banks / HFCs employ various stringent financial and non-financial tools and techniques to evaluate the credit worthiness of the customer. During this whole process, the loan eligibility and the repayment capacity of the borrower are established on the basis of his/her Disposable Income, Stability and continuity of income, Age, Educational qualifications, Number of dependents, Co-applicant s income, Employer, Nature of employment or business (if self-employed), Experience, Securities proposed, Taxation history, Assets owned, Alternative / additional sources of income, Other loan obligations, Investments, Saving habits, Other present and future liabilities. A prospective borrower has to go through the various stages (i.e. Financial, Legal, Technical etc.) of credit appraisal process as practiced by different banks / HFCs. This study mainly focuses on the guidelines followed by commercial banks and HFCs in India regarding the appraisal process of housing loans. Keywords: Housing Loan, HFC, EMI, Marginal Requirement, CIBIL, Mortgage, CERSAI, Credit Appraisal. 1. Introduction Housing is one of the basic needs of every individual as besides providing shelter and security, it also enables easy access to the credit market by working as collateral comfort / security. The urban population of India has been growing at a rapid pace. As per the Census 2011, per cent of the total population is in the urban areas. According to FICCI s report (October 2011), 900 million people will be added to Indian cities by With the growing population of India, increasing nuclear family structure & urbanization the demand of home is also ever increasing. In addition to it, the present upswing in economic growth of India has caused increasing buying power of Indian consumer, so has boosted the real estate market. Housing also plays an important role in terms of the multiplier effect it has on the economy due to its strong backward and forward linkages with various industries and as a direct and indirect employment generator. In pursuance of National Housing Policy of Central Government, Reserve Bank of India has been facilitating the flow of credit to housing sector. Since housing 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 portfolios of banks. A person can generally seek a first time housing / home loan for buying a house or a flat, renovation, extension and repairing to his/her existing house. Indians with a regular source of income, which includes salaried individuals, selfemployed professionals, self-employed business people, NRI individuals and existing property owners who can pledge it as security for the loan, are all eligible for a home loan. The individual applying for the loan should be above 21 years of age when the loan period begins and should be less than 65 years when the loan period closes. Generally as a thumb rule, banks or financial institutions lend 85-90% of the cost of the property % of the money is expected to be paid as a down payment (Margin requirement) for the loan. By taking a home loan from a bank or a housing finance company the borrower pledges his/her home as the lender s security (Mortgage) for repayment of the loan. The interest rates for Home Loans can be fixed or floating, or partly fixed and or partly floating, suiting the needs of the borrower. Home loans are generally taken for long tenures as the loan amount is usually a huge sum. A home loan can be taken anywhere between 5 and 30 years. The amount of loan one is eligible for depends on the individual s credit profile. The bank or financial institution will hold the title or deed to the property till the loan has been paid back with the interest due for it. The pace of growth for housing loan book of banks increased to 20% (annualised) in H1, FY14 from 14% for FY13 and also outpaced the HFCs & NBFCs home loan growth of 18% in the period. SBI Group (SBI along with Associate Banks), HDFC Group (HDFC Limited with HDFC Bank and Gruh Finance) LIC Housing Finance (LIC HFL) ICICI Group (ICICI Bank along with ICICI Home Finance) and Axis Bank Limited clearly dominate the domestic mortgage market, together accounting for 60% of the total housing credit in India (as of September 30, 2013). Souvik Ghosh IJSRM volume 2 issue 9 September 2014 [ Page 1441

2 2. Objective of the Study To review the Housing Finance Policies taken by Govt. of India and role of RBI regarding execution of these policies To understand the Credit Appraisal process of home loans followed by financial institutions in India 3. Evolution of Housing Finance in India Until the 1970s, the government s support to housing was centralized and was directed through State Housing Boards and Development Authorities. In 1970, the central government set up the Housing and Urban Development Corporation (HUDCO) as a wholesale lender to finance housing and urban infrastructure activities. The first retail housing finance company, Housing Development Finance Corporation - India (HDFC) was established in When HDFC was launched, there were no foreclosure norms nor was there much access to long-term finance in India. Nonetheless, given the immense demand for housing finance and HDFC s emphasis on quality customer service, its success as a pioneer of housing finance in India served as a precedent for others to follow. In 1988, the National Housing Bank (NHB) was established as a 100% subsidiary of India s central bank, the Reserve Bank of India (RBI) to exclusively promote housing finance through a refinance mechanism and also to function as the supervisory and regulatory body for housing finance companies. Later in the late 1980s, other housing finance companies (HFCs) were launched by insurance companies, public sector banks and the private sector. In the earlier years, commercial banks were reluctant to lend for housing and other retail loans as they preferred to finance the working capital needs of industry. Though several banks had set up housing finance subsidiaries, they mostly functioned as independent units with little support from their parent bank. The turning point in the housing finance sector came in the late 1990s as commercial banks which had traditionally shied away from housing finance, entered the market. Against a backdrop of low interest rates, industrial slowdown, sluggish credit offtake and ample liquidity, banks recognized that if they had to maintain their asset growth and profit margins, they needed to shift their focus from the wholesale segment and build their retail portfolios. Housing finance in India has traditionally been characterized by low non-performing assets. This together with the fact that there was a vast demand for housing loans resulted in many commercial banks getting into the business of housing finance. Today, banks and HFCs are both key players in the housing finance market, with banks accounting for 70% of the market share. Commercial Banks vs HFCs: There are fundamental differences between Commercial Banks and HFCs regarding taxation treatment, capital adequacy, liquidity requirements, deposit insurance and disclosure requirements. For instance, while banks are mandated to allocate 40% of their advances for priority sector lending, of which housing finance qualifies, HFCs are not bound by sectoral lending limits. In terms of capital adequacy norms, banks are required to maintain a minimum capital adequacy ratio of 9% as compared to 12% stipulated by NHB for HFCs. The advantages that banks have over HFCs is that they have access to low cost current and savings accounts while HFCs are only allowed to access term deposits with a minimum tenor of one year. On the other hand, HFCs typically have lower operating costs viz-a-viz banks. 4. Current Scenario Important Guidelines and Schemes Regarding Housing Finance: Banks could deploy their funds under the housing finance allocation in any of the three categories, i.e. (i) Direct finance: It refers to the finance provided to individuals or groups of individuals including cooperative societies. (ii) Indirect finance: 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. (iii) Investment in bonds of NHB / HUDCO, or combination thereof. Housing Loans under Priority Sector Lending: Loans up to Rs. 25 Lakh in metropolitan centers with population above 10 Lakh and Rs. 15 Lakh in other centres to individuals for purchase / construction of a dwelling unit per family, excluding loans granted by banks to their own employees, w.e.f Loans given for repairs to the damaged dwelling units of families up to Rs. 2 Lakh in rural and semi-urban areas and up to Rs. 5 Lakh in urban and metropolitan areas. Loan To Value (LTV) Ratio: The LTV ratio in respect of housing loans should not exceed 80%. However, for small value housing loans i.e. housing loans up to Rs. 20 lakh (which get categorized as priority sector advances), the LTV ratio should not exceed 90%. Bank will assess applicant s repayment capacity while deciding the home loan eligibility. Repayment capacity is based on his/her monthly disposable / surplus income, (which in turn is based on factors such as total monthly income / surplus less monthly expenses) and other factors like spouse's income, assets, liabilities, stability of income etc. The main concern of the bank is to make sure that borrowers comfortably repay the loan on time and ensure end use. The higher the monthly disposable income, higher will be the amount customer will be eligible for loan. Typically a bank assumes that about % of monthly disposable / surplus income is available for repayment of loan. However, some banks calculate the income available for EMI payments based on an individual s gross income and not on his disposable income. The amount of the loan depends on the tenure of the loan and the interest rate also as these variables determine borrowers monthly outflow which in turn depends on their disposable income. Banks generally fix an upper age limit for home loan applicants. Interest Rates: Banks generally offer either of the following loan options, Floating Rate Home Loans and Fixed Rate Home Loans. For a Fixed Rate Loan, the rate of interest is fixed either for the entire tenure of the loan or a certain part of the tenure of the loan. In case of a pure fixed loan, the EMI (Equated Monthly Installment) due to the bank remains constant. The EMI of a Floating Rate loan changes with changes Souvik Ghosh IJSRM volume 2 issue 9 September 2014 [ Page 1442

3 in market interest rates. If market rates increase, repayment increases. When rates fall, dues also fall. The floating interest rate is made up of two parts: the index and the spread. The index is a measure of interest rates generally (based on say, government securities prices), and the spread is an extra amount that the banker adds to cover credit risk, profit markup etc. The prime lending rate or the base rate ( % presently) is used as a basis for calculating the floating rate and the interest rate charged is the prime interest rate / base rate plus a certain spread. The amount of the spread may differ from one lender to another, but it is usually constant over the life of the loan. If the index rate moves up, so does the interest rate in most circumstances and borrowers will have to pay a higher EMI. Conversely, if the interest rate moves down, EMI amount should be lower. CERSAI: To prevent frauds in loan cases involving multiple lending from different banks / HFCs on the same immovable property, the Government has facilitated setting up of the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002). This Registry has become operational with effect from March 31, The objective of setting up the Central Registry is to provide a database of security interest over property rights to secure loans and advances granted by banks and financial institutions. Availability of encumbrance status, inter alia, help in preventing frauds involving cases where loans are taken from different lenders against the same property by creating multiple mortgages by deposit of title deeds as well as fraudulent sale of property without disclosing the security interest over such property. The operation of CERSAI is currently being managed by NHB partially. Fees: A home loan often requires payment of various fees, such as loan origination or processing charges, administrative charges, documentation, late payment, changing the loan tenure, switching to different loan package during the loan tenure, restructuring of loan, changing from fixed to floating interest rate loan and vice versa, legal fee, technical inspection fee, recurring annual service fee, document retrieval charges and pre-payment charges, if someone wants to prepay the loan. Every lender should be able to give an estimate of its fees. Many of these fees are negotiable / can be waived also. Tax benefit on the loan: Resident Indians are eligible for certain tax benefits on both principal and interest components of loan installments under the Income Tax Act, Section 80C and Section 24B grant income tax rebates to people who have taken home loans. Benefits per annum Section Component (w.e.f ) Up to a maximum 80C Principal Rs. 1,50,000 /- Up to a maximum 24B Interest Rs. 2,00,000 /- 5. Determination of Loan Eligibility Home loans are available from mainly two types of lenders-- Commercial banks and Housing Finance Companies. Different lenders may quote different rates of interest and other terms and conditions, so one should contact several lenders to make sure he / she is getting the best value for money. In order to get the housing loan, the customer has to go through a detailed credit appraisal process. Each bank / Housing Finance Company (HFC) has its own norms and standards to evaluate the credit worthiness of the customer to be eligible for loan application. Factors like age, income, number of dependents, sector & nature of employment, continuity of employment, repayment capacity, previous loans, credit cards, etc. are taken into account while appraising the credit worthiness of a person. Every bank or lending institution has its own panel of officials for this purpose. The main factor banks will consider is the proof that shows that the borrower is capable of repaying the loan on time. So determination of a borrower s repayment capacity is the most important task that needs to be done by the lenders before approving a loan application. For this, they will look into borrower s income documents, financial statements, personal credit history, assets and liabilities, education, experience etc. The loan eligibility is usually calculated by applying Fixed Obligations to Income Ratio (FOIR). Most banks restrict FOIR to a maximum 40-50% of monthly income. That means, one needs around 40-50% of his income for his personal expenses. Loan to Value ratio (LTV) is also an important factor in eligibility calculation. Banks finance up to 80-90% of the property value as evaluated by the bank s evaluator. Valuation has become a key parameter in determining the loan amount that can be sanctioned by the bank. The valuation process is quite subjective and dependent on the quality and ability of the person sent by the bank for valuation. In many cases, the valuer determines the value of the property at an amount that is lower than the documented cost of the property and this would result in the loan amount being decreased since the bank funds a certain percentage of the cost or valuation of the property whichever is lower. Banks will also look into customer s 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 Information Bureau (India) Ltd. (CIBIL). Credit score tells the lender how likely the applicant is to pay back loan or credit card dues based on past repayment behavior. The higher is the score, the more is the chance of party s loan application getting approved. Before approving a loan a financial institution always checks with CIBIL on applicant s repayment track record. 6. Credit Appraisal Credit appraisal is a three-fold securitization process that includes financial, technical and legal appraisal of the property. It has two stages. In the first stage i.e. Pre-sanction Credit Appraisal, the credit worthiness of the borrower is assessed by examining his current financial standing. Cross checking of the income with documents like bank statements or initiating credit verifications is also a part of this process. In the second stage i.e. Post Sanction Credit Appraisal, monitoring and follow up of the loan account is done to ensure regular repayment from borrowers. Credit appraisal is sometimes done by the housing finance company itself or outsourced to other firms for a fee. Souvik Ghosh IJSRM volume 2 issue 9 September 2014 [ Page 1443

4 6.1 Financial Appraisal An important part of credit appraisal is financial appraisal, where the applicant's financial position is reviewed. Past repayment records including defaulting, late payments, delinquencies and bankruptcies, earnings potential (including spouse), any outstanding debt, assets, liabilities and stability of income comes under close scrutiny. Financial stability of the borrower and the co-borrower is an important factor not only for credit appraisal but also for increasing applicants creditworthiness. A housing finance company or bank sets a fixed upper limit for the amount of money that can be sanctioned for a particular type of loan. Depending on the creditworthiness of a customer, the amount of money sanctioned to the party can be increased to a certain degree. Age is another factor that can also impact how much amount will be sanctioned and speaks about borrower s repayment capacity. Those earning high salaries and carrying a professional degree with a bright growth potential can definitely strike a great bargain. Age also matters when the tenure is quite long. 6.2 Technical Appraisal Apart from the financial appraisal, the technical appraisal is also an integral part of the credit appraisal process. Here the validity for approvals for construction from local government bodies is verified. Compliance with building laws, like restrictions on the number of floors or height of the building, is also verified and the property to be financed is valuated and its condition is checked. The report of the technical appraisal determines whether the loan can be given for the property concerned. It does not determine the quantum of the loan, which is covered under other appraisal processes. So Technical appraisal judges the property to be financed is viable or not. 6.3 Legal Appraisal Finally, legal appraisal of the property takes place. It requires the borrower to submit Sale deeds (agreement for sell), Development agreement, Khata certificates, Encumbrance Certificate and other property related papers. Then these papers are handed over to lawyers who verify whether the borrower is the absolute owner of the property that needs to be financed. Subsequently, validation of succession of title from earlier owners to the present one is done. 6.4 Credit History Checking A Credit History is basically a record of an individual's or a company's past borrowing, repayments of loans and credit card bills including information about late payments & bankruptcy. There is a central database available with the Credit Information Bureau (India) Limited (CIBIL) which collects and maintains records of an individual s payments pertaining to loans and credit cards. These records are submitted to CIBIL by member banks and credit institutions, on a monthly basis. The CIBIL TransUnion Score is a 3 digit numeric summary of a person s credit history which indicates applicant s financial & credit health. The Score is derived from the credit history as detailed in the Credit Information Report [CIR] and ranges from 300 to 900 points. The CIBIL TransUnion Score plays a critical role in the loan application process. After an applicant fills out the application form and hands it over to the lender, the lender first checks the credit score and credit report of the applicant. If the credit score is low, the lender may not even consider the application further and reject it at that point. If the credit score is high, the lender will look into the application and consider other details to determine if the applicant is credit-worthy. The credit score works as a first impression for the lender- the higher is the score, the more is the chance of party s loan application getting approved. The decision to lend is solely dependent on the lender and CIBIL does not in any manner decide if the loan/credit card should be sanctioned or not. An individual s Credit Score provides a Credit institution with an indication of the probability of default of the individual based on their credit history. What this means in simple English is that the score tells a credit institution how likely an individual is to pay back a loan (should the credit institution choose to sanction his/her loan?) based on his/her pat pattern of credit usage and loan repayment behavior. The closer is the score to 900, the more confidence the credit institution / bank will have in that person s ability to repay the loan and hence, the better chances of one s application getting approved. 6.5 Credit interview As a part of the credit appraisal process, the applicant may be required to visit the bank branch for a credit interview. If the applicant is found to be financially sound with a good credit history and the property is financially viable and legally clear of hassles, then there could be no hiccups for obtaining a sanction of the loan application. 7. EMI (Equated Monthly Installments) When customer takes a loan, he has not only to pay back the amount of money he has borrowed, but also the cost of borrowing, which is the interest rate on the loan. The cost of the loan will vary depending upon the number of years. Customers usually opt for a longer-term loan which is more expensive than a shorter loan because the lending institution is taking a risk over a longer period of time. An EMI's amount is dependent on the principal amount borrowed and the interest that is levied. The number of EMIs on the other hand, will depend on the tenure of the loan. The longer the loan period, the more number of EMIs customer needs to pay. As per the policy of most of the banks, the loan must be liquidated before/at 65 years of age or age of retirement, whichever is earlier. Banks fix the maximum number of EMIs that a borrower can avail by considering this factor. The EMI usually remains constant throughout the period of the loan. However, what of this is used to pay off interest and what part to pay off the principal varies. In the beginning of the loan repayment period, the interest component of an EMI is higher and the principal amount is lower. Later on, as the years go by, the principal amount becomes higher and the interest becomes lower. Souvik Ghosh IJSRM volume 2 issue 9 September 2014 [ Page 1444

5 Calculation of EMI: Where, P = Principal loan amount r = Annual interest rate in fraction / 12 n = Number of monthly installments EMI of a loan should not exceed 50% or 60% of the average monthly income. (Average annual gross salary is calculated from last 3 or 4 years Income Tax return). 8. Property Inspection Inspection of the property is a very important step in the credit appraisal process. Inspection is carried out by bank officials at the pre-sanction as well as at the post-sanction stage. During Pre-sanction inspection, the branch official cross verifies the information submitted by the applicant with respect to his identity, residence, employment / business and property to be purchased. Post Sanction activities mainly emphasize on verification of the end use of funds after disbursement of the loan by physically verifying the assets created out of bank finance. Valuation of the Property must be done in every three years by Bank s empanelled valuer / engineer. Lastly Proper Monitoring and follow up of credit by bank are required to ensure that it remains a standard asset. 9. Disbursement The best part is when customer actually received the cheque. This happens once the bank has ensured that the property is legally and technically clear and after customer has handed over all the original documents pertaining to the transfer of ownership of property in customer favour, having executed the necessary loan agreements with the bank. But at this stage, customer should also provide documents to prove that customer have paid customer personal contribution towards the property, since banks normally fund only up to per cent of the total cost of the house. In case customer are expecting money from other sources to fund customer own contribution, customer need to provide sufficient evidence for the same. It is only after submitting this proof that the bank will release part disbursement of the loan. The cheque will be in the name of the reseller (for resale flats), builder, society or the development authority. It is only in exceptional circumstances, that is, if customer provides documents to support that customer have made an excess payment from customer own account that the cheque will be handed over to customer directly by the bank. Usually, loans are disbursed on the basis of the stage of construction of the property. This would mean that the disbursement could either be full and final (in the case of resale or ready possession properties) or part disbursement (in the case of under-construction properties). Each option would have different disbursement processes. 10. Creation of Mortgage Security for a housing loan is typically a first mortgage of the property, normally by way of deposit of title deeds. Banks also sometimes ask for other collateral security as may be necessary. Collateral security assigned to bank could be Life Insurance policies, the surrender value of which is set at a certain percentage to the loan amount, guarantees from solvent guarantors, pledge of shares / securities and investments like KVP / NSC etc. that are acceptable to the banker. Banks would also require the borrower to ensure that the title to the property is free from any encumbrance. (i.e., there should not be any existing mortgage, loan or litigation, which is likely to affect the title to the property adversely). Most popular method in India is Mortgage by Deposit of Titles which is commonly known as Equitable Mortgage. As per Transfer of Property Act, Equitable Mortgage is a mortgage by Deposit of Title Deeds of Immovable Property with the mortgagee or his agents with an intention to create a security thereon. The three basic requirements for creating Equitable Mortgage are as follows: The place of deposit of the Document of Title to the Property with the creditor or his agent must be one among the notified areas under Section 58 (f) of Transfer of Property Act # (Refer Appendices) The deposit of title is necessarily made to secure a debt. Deposits of title deeds must be made with an intention to create a security on the property intended to be mortgaged CERSAI Registration of Mortgaged Property The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), a government company licensed under section 25 of the Companies Act-1956, has been incorporated to operate and maintain the Central Registry of all properties against which loans have been advanced under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). CERSAI was promoted by central government to prevent frauds involving multiple lending by different banks on the same immovable property. It became operational from March 31, With the setting up of the central registry of mortgages, it would be virtually impossible for any borrower to raise loans twice or more against the same property or raise loans using forged documents. The Registration would be applicable to transactions of security interest over property created to secure loans and advances from the banks and financial institutions as defined under the SARFAESI Act. The Central Government has made it mandatory for all banks and financial institutions to register the mortgage created (security interest over property to secure loans) with CERSAI, within 30 days of creation of mortgage. CIBIL and CERSAI have partnered together in an effort to help Banks and Financial Institutions mitigate risk and prevent frauds in the mortgage sector. 11. Findings There are a variety of home loans available in India, they are, Loan for Construction, Loan for Purchase of House, Home Souvik Ghosh IJSRM volume 2 issue 9 September 2014 [ Page 1445

6 Improvement and Extension Loan, Land purchase loan, Loan for Take Over from approved institution, Refinance Loan, etc. At the time of sourcing the loan, banks are required to provide information about the interest rate applicable, the fees / charges and any other matter which affects customer s interest and the same are usually furnished in the product brochure of the banks. Complete transparency is mandatory. A bank cannot reject a loan application without furnishing valid reason(s) for the same. To increase the loan eligibility the following can be considered, Clubbing income- Income of spouse also can be considered (if he/she is a permanent employee) if applied jointly. Increasing Tenure- When EMIs are high, eligibility will become less. The more the tenure is, less the EMI will be. So, one should opt for a higher tenure. Usually banks offer a maximum of years tenure. Additional Income Applicant s consistent additional incomes like rental income qualify. Expected rental income from the property purchasing, performance linked pay can be considered to enhance loan eligibility. Pre-closure of Existing Loans- Outstanding loans like car loans or personal loans may reduce one s loan eligibility. As per norms, only existing loans with over 12 unpaid installments are taken into account while computing home loan eligibility. So, prepaying the existing loans in full or part will help. [1] Dash, S.K. (2005). Tit Bits of General Advances & Financial Services. Bank House Publication, Bhubaneswar. [2] Karnad, R.S. (2010). Housing Finance in India: An Overview. Housing Finance International Journal (IUHF). September 2010, Pages [3] Indian Mortgage Finance Market update for H1, FY 2014, Performance Review of Housing Finance Companies and Industry Outlook. ICRA Rating Feature, January 2014 [4] Report on Trend and Progress of Housing In India (2012). National Housing Bank [5] RBI Master Circular on Housing Finance- DBOD. No.DIR.BC.18 / / dated 1 st july 2014 [Internet]. Available from: [6] FAQs on Home Loans [Internet]. Available from: [7] Home Loan FAQs [Internet]. Available from [8] FAQs on Home Loans [Internet]. Available from: [9] Are you loan eligible? (September 2011) [Internet]. Available from Employer-Bank relationship- A lesser interest rate will naturally increase one s eligibility. Customer should check with the banks if there are any schemes running with his/her 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. 12. Conclusion The housing sector is one of the major contributors to the economy and provides growth impulses to the broader economic development of the country. The role of the financing institutions viz. Banks and Housing Finance Companies has grown significantly over the years in the housing sector. While appraising a home loan, lenders look for personal details such as a good credit history, annual and monthly income, existing EMIs of the consumer, a clean title to the house / property and the location of the house before approving a home loan application. It should always be kept in mind that taking too many loans would restrict customer s credit worthiness. Also maintaining credit score in good shape and Good and steady repayments keep one out of debt traps and will enhance applicant s credit worthiness in future. 13. References Souvik Ghosh IJSRM volume 2 issue 9 September 2014 [ Page 1446

7 Appendices Figure 1: The Process Diagram Application to Sanction Table 1: Interest Rates on Home Loans in Different Indian Banks & HFCs Bank / HFC Name Floating Interest rate Per lakh EMI State Bank Of India ICICI Bank 10.10% (For Women), 10.15% (For Others) 10.10% (For Female), 10.15% (For Others) Rs.972 (For Women), Rs.975 (For Others) Rs.972 (For Female), Rs.975 (For Others) HDFC Ltd 10.15% Rs.975 HSBC Bank 10.15% % (Salaried), 10.25% % (Self Employed) Rs Rs.988 (Salaried), Rs Rs.995 (Self Employed) AXIS Bank 10.25% Rs.982 IDBI 10.25% Rs.982 Punjab National Bank 10.25% Rs.981 ING Vysya 10.75% % Rs Rs.1049 Standard Chartered 10.26% Rs.982 Citibank 10.15% % Rs Rs.978 Deutsche Bank 10.50% Rs.998 Federal Bank 10.83% Rs.1021 Bank of Maharastra 10.70% (Upto 25 lacs), then 10.90% Rs.1012 (Upto 25 lacs), then Rs.1025 Allahabad Bank 10.25% Rs.982 Central Bank of India 10.25% Rs.982 Corporation Bank 10.25% Rs.982 Bank of India 10.20% Rs.978 Souvik Ghosh IJSRM volume 2 issue 9 September 2014 [ Page 1447

8 Union Bank of India 10.25% Rs.982 United Bank of India 10.25% Rs.981 UCO Bank 10.20% Rs.978 Bank of Baroda 10.25% Rs.982 Canara Bank 10.20% Rs.978 Oriental Bank of Commerce 10.25% Rs.982 Kotak Bank 10.25% Rs.982 Dena Bank 10.25% Rs.982 Vijaya Bank 10.30% Rs.985 Syndicate Bank 10.25% Rs.982 Indian Overseas Bank 10.25% Rs.982 Development Credit Bank 11.50% Rs.1066 State Bank of Travancore 10.25%-10.50% Rs Rs.998 Dhanalakshmi Bank 11.50% % Rs Rs.1084 Indian Bank 10.25% Rs.982 LIC Housing DHFL 10.10% (Fixed for 2 yrs) 10.50% (for salaried), 10.75% (For SEMP) Rs.972 (Fixed for 2 yrs) Rs.998 (For salaried), Rs.1015 (For SEMP) PNB Housing Finance 10.15% Rs.975 Tata Capital Housing Finance ltd India Bulls 10.25% % (Salaried), 10.75% % (SEP/SENP) 10.15% (Upto 25Lacs), then 11% Rs Rs.1025 (Salaried), Rs Rs.1066 (SEP/SENP) Rs.975 (Upto 25Lacs), then Rs.1032 (EMI calculation is based on Loan amount INR 20 lakhs to 30 lakhs and Loan tenure 15 to 20 years) # [Section 58(f): Mortgage by deposit of title-deeds- Where a person in any of the following towns, namely, the towns of Kolkata, Chennai, and Mumbai, and in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.] Souvik Ghosh IJSRM volume 2 issue 9 September 2014 [ Page 1448