Objective of industrial devlopment bank of india[I.D.B.I.]
The primary objective of IDBI is to enhance residential housing stock and promote home ownership. One of IDBI’s major objective is to increase the flow of resources for housing through the integration of housing finance institutions with the domestic capital market during the past decade, IDBI has hurt were the development of the housing finance industry by helping promote housing finance institutions in partnership with commercial Banks and private sector institution.
IDBI’s main goals are to
a) Maintain its position as the premier housing finance institution in the country.
b) Transform ideas into viable and creative solutions.
c) Provide consistently high returns to shareholders,
d) To grow through diversification by leveraging off the existing client base
e) Develop close relationships with individual households,
Housing Finance Sector:
Against the milieu of rapid urbanization and a changing socio-economic scenario, the demand for housing has grown explosively. The importance of the housing sector in the economy can be illustrated by a few key statistics. According to the National Building Organization (NBO), the total demand for housing is estimated at 3 million units per year and the total housing shortfall is estimated to be 17.4 million units, of which 19.76 million units is from rural areas and 8.64 million units from urban areas. The housing industry is the second largest employment generator in the country.
It is estimated that the budgeted 3 million units would lead to the creation of an additional 18 million man-years of direct employment and another 19 million man-years of indirect employment.
Having identified housing as a priority area in the Ninth Five Year Plan (1994-1999), the National Housing Policy has envisaged an investment target of Rs. 1,800 billion for this sector. In order to achieve this investment target, the Government needs to make low cost funds easily available and enforce legal and regulatory reforms. IDBI's loan approvals in FY 04 were Rs.17,516 Crores while disbursements were Rs. 13,697 Crores. At the end of March 2005, IDBI's cumulative loan approvals amounted to Rs. 87,783 Crores financing over 54 lac units across India. Cumulative disbursements amounted to Rs 86,257 Crores.
IDBI has instituted well-defined service standards for both depositors and deposit agents. IDBI has been able to mobilise deposits from over 12 lac depositors. Outstanding deposits grew from Rs. 1,458 crores in March 1994 to Rs. 9,338 crores in March 2004. Much of this success can be attributed to its strong brand image, superior services, security and above all, the significant contribution made by IDBI's deposit agents. IDBI has over 60,000 deposit agents and distributes all its retail savings (deposit) products primarily through this channel.
Organization and management
IDBI is a professionally managed organization with a board of directors consisting of eminent persons who represent various fields including finance, taxation, construction and urban policy and development. The board primarily focuses on strategy formulation, policy and control, designed to deliver increasing value to shareholders.
International Borrowings:
IDBI has the distinction of being the first Indian private sector institution to raise funds under the USAID Housing Guarantee Programme. The amount raised under this programme was US $ 225 million. IDBI subsequently structured innovative currency and interest swaps to lock into rupee funding at fixed rates. The first swap executed by IDBI in 1987 was the first currency and interest rate swap executed in India.
A Snapshot of International Borrowings Unites States’ Agency for International Development (USAID) US $ 125 million. International Bank for Reconstruction and Development (IBRD, World Bank) US $350 million, Commonwealth Development Corporation (CDC) GBP 45 million Asian Development Bank Loan II US $ 100 million Kreditanstalt fur Wiederaufbau (KfW) DM 45 million Syndicated Loan – Yen JPY 12 billion Floating Rate Note US $ 300 million.
· Automatic Repayment of Home Loan EMIs
You can give us standing instructions to repay your Home Loan EMIs directly from your IDBI Bank Savings Account, thus, saving a person from the trouble of procuring, signing and tracking post-dated cheques.
Financial Performance
Statistics at a Glance - IDBI. BO
Share Information
Income Statement
31/03/2007
Latest Quarter - Dec 2006 (Rs. Crore)
Recent Price (Rs)
331.7
Volume
104228
Sales
737.64
Year To Date High (Rs)
394.4
Other Income
2.49
Year To Date Low (Rs)
277.5
Operating Profit
703.57
Face Value (Rs)
10
Interest
514.75
Market Capitalization (Rs Crore)
8106.42
Depreciation
8.57
Shares Outstanding (Lakhs)
1217.1
Market Lot
1
Net Profit
146.65
Valuation Ratios
Profitability
Year End - Mar 2007
Year End - Mar 2007
Price/Earnings
6.96
Operating Profit Margin
96.07%
Price/Book
1.49
Price/Sales
1.5
Net Profit Margin
21.48%
Dividend Yield (%)
7.54
Pre-Share Data
Balance Sheet and Cash Flow
Year End - Mar 2007
Year End - Mar 2007 (Rs. Crore)
Book Value (Rs)
222.07
Equity Capital
121.71
Cash (Rs)
74.29
Reserves and Surplus
2581.13
Dividend (Rs)
25
Long Term Debt
18755.69
Sales (Rs)
221.22
Short Term Debt
N.A.
Earnings (Rs)
47.66
Cash
904.18
Income Statement
Management Effectiveness
Year End - Mar 2007 (Rs Crore)
Year End - Mar 2007
Sales
2692.42
Return on Assets
13.04%
Other Income
7.74
Return on Equity
22.86%
Operating Profit
2594
Financial Strength
Interest
1871.24
Year End - Mar 2007
Depreciation
31.83
Current Ratio
12.69
Net Profit
580.01
Total Debt/Equity
6.74
Objectives of the study
The objectives of my study are:
· To do comparative analysis of IDBI with other housing finance institute and to know why IDBI has an edge over other.
· In light of above objective the following objectives are also covered.
· To have a complete understanding of housing loan procedure and requirement.
· To analyze the value added services offered by IDBI
· To know customer requirements and customer satisfaction.
· To make awareness of IDBI’s products in some selected area
· To do the SWOT analysis of IDBI
· To generate ideas and suggestions for improvement and continuous growth of IDBI
PRODUCTS OFFERED BY CBOP:-
PRODUCTS OF IDBI
Home Improvement Loan
Top-up loan
Home extension loan
Other innovative products
Home construction loan
Balance Transfer loan
Home conversion loan (HCL)
Land purchase loans (LPL)
1. HOME IMPROVEMENT / HOME EXTENSION LOAN:-
A. HOME IMPROVEMENT LOAN:
IDBI home improvement loan facility helps to a customer to undertake internal and external repairs and other structural improvement that will increase the life of your home, contribute towards a healthy living environment and at the same time, add to the value of your house could be financed.
Some of the improvements a customer can undertake with IDBI’s assistance are:-
External repairs
· Waterproofing and roofing
· Internal and external painting
· Plumbing and electrical works
· Tiling and flooring
· Grills and aluminum windows
2. TOP UP LOANS:-
IDBI’s top up loan is a wonder opportunity to cash in on the value or worth of the property by providing funds without selling the property. IDBI will have the property on which a person have an existing housing loan valued and extend a term loan to a person against the security of his property. All existing customers who have a good repayment record and have been repaying the loan for at least one year are eligible for this facility. This loan can be used for any purpose-children’s education, medical expenses, investments, purchase of consumer durables, etc. the funds should not be used for speculation or illegal purposes. A non-residential Indian cannot avail of the top up loan.
Property:
The property should be freehold or a leasehold dwelling unit in selected cities, having a clear marketable title and no encumbrances in the form of any other loan except an existing IDBI loan.
Valuation is the assessment of the fair market value of the dwelling unit undertaken by an account the latest market trends in that locality, will undertake valuation.
Fees and loan amount:
Processing and administrative fee of 0.5% +S.TAX of the loan amount applied for, is payable upfront on application.
One can avail of a loan of upto 85% of the market value of the dwelling unit. The loan eligibility under this facility will be determined after reducing the current outstanding loan availed from IDBI.
Security:
The security for this loan will be an extension of the mortgage already created on the property financed. IDBI may require additional/interim collateral security such as shares, fixed deposits, personal guarantees, etc.
Early repayment of loan:
In case of early repayment of loan, in part or full there is a charge of 2% on the amount that is being prepaid on a fixed rate loan. Under adjustable rate home loan option early redemption charges of 2% is payable only in case of commercial refinance of the loan.
B. HOME EXTENSION LOAN:
Once a person is in his dream house, there is always room for extension especially with growing families; the extra space is always welcome. IDBI’s home extension loan is designed to meet this requirement. Such an extension could be an additional room on the same floor, an additional toilet, an extra room on the terrace, or even enclosing an open balcony.
Repayment options:
A customer has the option of selecting between a fixed rate home loan and the innovative adjustable rate home loan (ARHL). Interest rates on the ARHL will be linked to IDBI’s retail prime lending rate (RPLR). The rate on loan will be revised every 3 months from the date of first disbursement, if there is change in the RPLR.
Security:
The security for this loan will be mortgage of the dwelling unit/extension of mortgage already created on the property financed. In case the current value of the security is not adequate, then additional security may be required.
Documentation:
The complete application form and income documents may be submitted along with a copy of the plan approved by the competent authority and a detailed estimate of the cost of the work proposed to be carried out, duly certified by the architect/contractor on his letterhead.
Fees and loan amount:
Processing and administrative fee of .05%+S.TAX of the loan amount applied for, is payable upfront on application. As a special offer, existing customers of IDBI can avail of a loan of upto 100% of the cost of the improvement subject to a maximum of Rs. 1 crore.
Early repayment of loan:
In case of early repayment of loan, in part or full there is a charge of 2% on the amount that is being prepaid on a fixed rate loan. In adjustable rate home loan option early redemption charges of 2% is payable only in case of commercial refinance of the loan.
3. OTHER INNOVATIVE PRODUCTS:-
A. NON-RESIDENTIAL PREMISES LOANS (NRPL)
These are loans exclusively for professionals for construction, purchase, extension or renovation of their office or clinic. Under this type of loan, a maximum amount of upto Rs. 1 crore or 85% of the cost of construction, purchase or extension, whichever is provided for a maximum period of 10 years.
B. SHORT TERM BRIDGING LOAN (STBL)
With the IDBI STBL a person can have the convenience of moving out of his present house and buy a bigger and better house even before selling the present house. The STBL is specially designed to help a person in the interim period between the sale of his old house and the purchase of a new house. It provides funds when required and avoids a situation.
C. HOME CONVERSION LOAN (HCL)
A person can avail of home conversion loan to acquire another dwelling unit, through sale of existing unit. The existing loan can be transferred to the new dwelling unit with an increase in loan amount based on current eligibility. This saves a person from the hassles of prepaying the first loan and availing of a new loan and at the same time reduces your processing fees.
D. LAND PURCHASE LOANS (LPL)
IDBI Land purchase loan is a convenient loan facility to purchase land. This loan comes with all the flexibility and repayment options of a normal home loan. A person can also approach IDBI later on for a loan to construct the house on the land.
PROCESS OF IDBI:
IDBI offers loans for homes-for buying or construction the dream house, refinance a home loan availed from other institutions or even to extend or improve the existing house. IDBI also finance purchase of land, from approved agencies to help in constructing the house of a choice. With IDBI a person can acquire a self-contained flat in an existing or proposed cooperative society, in an apartment owners’ association or even an independent single family or multi family bungalow or row house. Housing loan is easy to acquire. There are annual and monthly installments for taking loans.
Procedure of applying for loan
When can one make an application:-
One can make an application at any time after he has decided to acquire or construct a property, even if the property has not been selected or the construction has not commenced.
Application procedure
He has to complete the application form, which he can collect from any of the IDBI office or download from IDBI website www.idbi.com.
After the inquiry process an application form is given to interested person free of cost to fill up the various details:
· Personal and employment details
· Loan requested
· Type of loan
· Loan details
· Financial information
· Bank details
· Details of property (to be purchased / constructed / extended / improved /offered as security).
· General (applicable to applicant and co-applicant)
· References (names and addresses of two references who are not related to applicant)
· Declaration
Maximum loan one can avail
One can avail of a maximum of upto 85% of the cost of the property including the cost of the land. IDBI lends upto a maximum of Rs. 1,00,00,000 to an individual the maximum period of repayment of loan is 20 years. Repayments will not ordinarily extend beyond the person’s age of retirement (if employed) or reaching age is 60 whichever is earlier.
Basis of sanctioning loan/eligibility
The repayment capacity as determined by IDBI will help in deciding how much a person can borrow. Repayment capacity takes into consideration factors such as income, age qualification, number of dependents, spouse’s income, assets, liabilities, stability and continuity of occupation and saving history. IDBI’s main concern is to make sure that a person can comfortably repay the borrowing amount.
Technical visit
A) Valuation of property to decided the amount of loan to be sanctioned
B) For deciding the amount of loan to be disbursed at different stages of construction/improvement/extension.
This technical visit is done free of cost as per the progress of construction work.
Disbursement of the loan
One can take disbursement of the loan after the property has been technically appraised, all legal documentation has been completed and own contribution have been completed and own contribution have been invested in full. Own contribution is the total cost of the property less IDBI’s loan.
Own contribution: an estimate of total cost is given by the applicant and then the estimate is to be made by IDBI, which is to be financed by IDBI and the difference between them is termed as own contribution.
Own contribution = total estimated cost – IDBI’s estimation
Number of installments in which loan is disbursed-
The loan will be disbursed in full or in suitable installments (normally not exceeding three in numbers) taking into account the requirement of funds and progress of construction, as assessed by IDBI and not necessarily according to a builder’s agreement.
The customer’s are advised in their own interest to enter into such agreements with builders whereby payment is dependent upon the progress of work not on the basis of time-based schedule.
The loan will be disbursed in full or suitable installments as per the purchase/construction/extension/renovation.
a. In case of purchase of house/flat/plot
In this case disbursement is done in full either to borrower or directly to the seller of that property as per the option he has chosen option available to purchaser/borrower are-
· Interim security – the applicant can deposit some interim security such as documents of any other property etc. with IDBI and IDBI provides him funds on that property basis for the primary property.
· Refinance option – the applicant can avail loan or arrange funds from his relatives or friends or though some personal sources and after getting the property registered in his name, he can get loan on that property from IDBI, thus to repay his loan which he has take an earlier.
· Through penal lawyer – in this option IDBI’s panel lawyer acts as a middleman between the seller and the purchaser. Lawyer assures seller regarding payment of his property either by showing the original cheque, which is drawn in his name or by giving him photocopy of that cheque. After registration in favor of purchaser (borrower), the payment is made to seller by IDBI and the property is kept mortgage with IDBI till repayment of loan amount.
b. In case of construction/extension/renovation:-
In this case disbursement is done in installments (normally not exceeding three in number) and in some cases in full taking into accounts the requirement of funds and progress of construction as assessed by IDBI and not necessarily according to the borrower/applicant.
At the time of getting disbursement of the loan agreement form is to be signed by the applicant, which is provided at IDBI’s office.
Fees and Charges Payable
Fees:
Fees
Processing Fees Administrative Fees
On sanctioning of a loan, a loan offer is made to a person. On acceptance of the offer, an administrative fee of 0.0% loan sanctioned is payable.
A processing fee of 0.5% +S.TAX loan amount applied is payable when the application form is submitted to IDBI. This fee is in respect of costs incidental to the application.
One can pay the processing and administrative fees upfront i.e. 0.5% the loan at the time of submission of the loan application itself.
At IDBI a person has choice between the normal FRHL and the innovative ARHL. Alternatively a customer can also avail part of the loan under FRHL and balance under ARHL.
One can make payments for fees and charges by cheque marked “payee’s account only” drawn on a Bank in a city where IDBI has an office or by demand draft (payable at par to IDBI) or by cash.
Supporting documents along with the application form:
For all applicant
1. Allotment letter of the cooperative society/association of apartment owners.
2. Copy of approved drawings of proposed construction / purchase / extension.
3. Agreements for sale/sale deed/detailed cost estimate from architect/engineer fir the property to be purchased / constructed / extended / renovated.
4. If a customer has been in his present employment/business or profession for less than a year, mention a separate sheet details of occupation for previous 5 years, giving position held, reasons for change and period of the same.
5. Applicable processing fees.
6. Any other information regarding to the customer’s repayment capacity that is necessary and will assist IDBI in appraising the loan.
7. Certification of loan outstanding issued by the lender (for refinance cases only).
Maximum loan given by Banks and HFCs
Table and chart depicts that the maximum loan is provided by IDBI, SBBJ and Central Bank is Ts. 142 lakhs. Cooperation Bank provides 75 lakhs. BOB HFL, UCO Bank, central Bank of India, Oriental Bank of Commerce, UTI, PNB, CBOP, Indian Overseas Bank provides maximum loan of Rs. 50 lakhs, United Bank of India provides maximum loan of Rs. 30 lakhs, and 25 lakhs loan amount is provided by SBBJ, INDIAN BANK, VIJAYA BANK, UNION BANK, BOI. 20 lakhs is provided by Syndicate Bank and BOR, Urban central Bank and Rajsamand cooperative Bank provide maximum loan is Rs. 10 lakhs, 5 Mahila Urban Cooperative Bank lakhs is provided by 3 Lakhs is provided by ICICI HFL.
Graph 4.1.1
Loan repayment period
Table and chart depicts that the highest repayment period is of PNB and Indian Overseas Bank i.e. 25 years. Maximum Banks having repayment period of 20 years. Central Bank of India, Union Bank, BOR has repayment period of 15 years. 5 year is the repayment period of Urban Cooperative Bank.
I observe that the maximum financial institutions are providing repayment period of housing loans are twenty year. Whereas some Banks are financing housing loan for a short period i.e. 5 to 15 years only. PNB and Indian Bank are financing housing loan for 25 years span.
The table 4.1 depicts that mostly Banks and HFCs have monthly rest option at FRHL basis and ARHL few Banks having annual rest option and daily rest option. IDBI is the concern, which has monthly rest option and annual rest option at FRHL and ARHL basis. IDBI is the only concern which provides loan for non-residential Indians: Non-residential premises loans for professionals (doctors, engineers and chartered accountant) Home equity loans (loan against property).
Graph 4.3.2
Minimum income on which loan is given
Table and graph depicts that United Bank of India requires minimum salary of Rs. 7000/- which is highest among all Banks and HFL. ICICI is the HFL, which requires minimum salary of Rs. 6000/-. Mahila urban cooperative Bank is the only Bank, which requires minimum salary of Rs. 7500/-. IDBI, BOB HFL, UTI, CBOP, Indian Bank, Rajsamand cooperative Bank requires minimum salary of Rs. 7000/-. OBC, PNB, Syndicate Bank, Corporation Bank, Vijaya Bank, Union Bank, BOR, BOI and Indian Overseas Bank requires 3500/-. Canara Bank is the only Bank requires minimum salary of Rs. 8200/-. Other Banks provide loan on minimum salary of Rs. 5000/-.
Procedure of calculating loan amount:
Table 4.4
Name of Institution
Procedure of calculation loan amount
IDBI
65 times of gross salary, 55 times of net salary
ICICI
60 times of gross salary, 45 times of net salary
BOB HFL
42 times of gross salary
SBI
48 times of net salary
SBBJ
48 times of net income
UCO Bank
48 times of net income
Canara Bank
36 times of gross salary
Central Bank of India
20 times of net salary
Oriental Bank of Commerce
48 times of net income
PNB
48 times of net salary
UTI
48 times of net salary
Syndicate Bank
60 times gross salary
CBOP
60 times of net income
Cooperation Bank
3 times annual income
Indian Bank
60 times of gross salary, 45 times of net salary
United Bank of India
60 times gross salary
Vijaya Bank
60 times gross salary
Union Bank of India
36 times of gross salary, 3 times of annual salary
BOR
48 times of net income
Urban central cooperative Bank
42 times of gross salary
Rajsamand cooperative Bank
10 times of basic salary
BOI
42 times of gross salary
Mahila urban cooperative Bank
36 times of gross salary
Indian overseas Bank
48 times of net salary
4.6
Time taken in sanctioning to disbursement
Maximum time is taken by UCO Bank in sanctioning to disbursement i.e. 15 days; Central Bank, PNB, Indian Bank, Union Bank of India takes 7 days in sanctioning to disbursement, mostly banks take 3 – 5 days whereas IDBI, Syndicate Bank, Corporation Bank, BOR, BOI take least time i.e. 1 day only. Thus, the processing of these banks & HFCs are very fast as compare to other Banks and HFCs.
Chart 4.7
Guarantor required by various Banks and HFCs
Mostly Banks like, ICICI, BOB HFL, SBBJ, SBI, UCO Bank, Canara Bank, Oriental Bank, PNB, UTI, Syndicate Bank, Corporation Bank, Indian Bank, United Bank of India, Vijaya Bank, Union Bank of India, BOR, BOI, Indian overseas Bank requires only 1 guarantor whereas CBOP Central Bank of India, Urban central cooperative Bank, Rajsamand cooperative Bank, Mahila urban cooperative Bank requires only 2 guarantor but IDBI is the only institution which requires not a single guarantor.
FORMALITIES RELATED TO GUARANTORS:-
Banks/HFCs formalities for guarantors
Income tax return Income proof Pay certificateIDBI
ICICI
v Income proof,
v Resident proof
v Photo of the guarantorBOB HFL
SBI
SBBJ
UCO Bank
v Worth of the guarantor should be double the quantum of loan,
v Salary certificate
v Photo
v Resident proofCanara Bank
Central Bank of India
Indian Bank
Union Bank of India
BOR
v Income tax payee
v 10/- rs. Stamp
v Photos
v Income proof
v Resident proof
v Photos
v Assets and liability statement is required
Oriental Bank
PNB
UTI
Syndicate Bank
Rajsamand Cooperative Bank
v Income proof
v Resident proof
v Photos
v Letter of guarantee
v Bank Statement
Corporation Bank
Vijaya Bank
Urban central cooperative Bank
Indian overseas Bank
BOI
Mahila urban cooperative Bank
United Bank of India
FEES STRUCTURE:
Processing and Administrative Fee:
Table 4.8
Name of the Institution
Processing Fee
Administrative Fee
IDBI
0.50%+S.TAX
.00%
ICICI
Nil
0.5%+S.TAX of the loan amount
BOB HFL
1% of the loan applied
1%+S.TAX of the loan amount
SBI
Nil
Nil
SBBJ
Above Rs. 25001 to Rs. 2,00,000: minimum Rs. 500/-, above rs. 2,00,000 : 50 % of the loan sanctioned
Nil
UCO Bank
.5% of the loan amount
Nil
Canara Bank
.5% of the loan amount and maximum 1%
Nil
Central Bank of India
1% of the loan sanctioned
1% of the loan sanctioned
Oriental Bank of Commerce
Nil
Nil
PNB
.5
Nil
UTI
1% of the loan amount
Nil
Syndicate Bank
1% of the loan applied
Nil
CBOP
1%NON REFUNDABLE
Nil
Cooperation Bank
1% of the loan applied
Nil
Indian Bank
.25% of the loan amount
0.25%
United Bank of India
1% of the loan applied
Nil
Vijaya Bank
.50% of the loan amount
Nil
Union Bank of India
1% of the loan applied
Nil
BOR
Upto 2 lacs nil, above Rs. 2 lacs Rs. 500/- per lacs
Nil
Urban central cooperative Bank
.01% of the loan sanctioned
Nil
Rajsamand cooperative Bank
1% of the loan applied
Nil
BOI
1% of the loan applied
2% of the loan applied
Mahila urban cooperative Bank
.5% of the loan amount
Nil
Indian overseas Bank
A flat rate of .75% with a minimum of Rs. 1000/-
Nil
Other fees:
Table 4.9
Name of the Institution
LAWYER FEE
ARCHITECT FEE
IDBI
Nil
Nil
ICICI
Nil
Nil
BOB HFL
800
800
SBI
Nil
Nil
SBBJ
Nil
Nil
UCO Bank
750/-
500/-
Canara Bank
500/-
NIL
Central Bank of India
750/-
NIL
Oriental Bank of Commerce
Nil
NIL
PNB
1000/-
NIL
UTI
Nil
NIL
Syndicate Bank
500/-
Nil
CBOP
Nil
Nil
Cooperation Bank
Nil
Nil
Indian Bank
250/-
Nil
United Bank of India
Nil
Nil
Vijaya Bank
750/-
Nil
Union Bank of India
Nil
Nil
BOR
Nil
Nil
Urban central cooperative Bank
Nil
Nil
Rajsamand cooperative Bank
Nil
Nil
BOI
Nil
Nil
Mahila urban cooperative Bank
500/-
500/-
Indian overseas Bank
500/-
500
The table depicts that BOB HFL charges lawyer fee 800/- and architect fees is Rs. 800/- which is higher than others UCO Bank charges 750 as lawyer fee and 500 as architect fee, Canara Bank charges only lawyer fee i.e. 500 and central Bank of India also charges lawyer fee i.e. 750/- PNB has 1000/- as lawyer fee there is no architect fee. Syndicate Bank has 500/- as lawyer fee. Indian Bank charges 250/- as lawyer fee, Vijaya Bank charges 750/- as lawyer fee only, Mahila Urban cooperative Bank and Indian overseas Bank charges lawyer fee as 500/- and architect fee as 500/-. IDBI, ICICI, SBI, SBBJ, Oriental Bank of Commerce, UTI, IDBI, Corporation Bank, United Bank of India, Union Bank of India, BOR, Urban central cooperative Bank, Rajsamand cooperative Bank at BOI charges no lawyer fees or architect fees.
Charges on prepayment
Table 4.10
Name of the Institution
PREPAYMENT
IDBI
NIL
ICICI
NIL
BOB HFL
2%
SBI
Nil
SBBJ
NIL
UCO Bank
Nil
Canara Bank
2%
Central Bank of India
NIL
Oriental Bank of Commerce
2%
PNB
2%
UTI
2%
Syndicate Bank
Nil
CBOP
2%
Cooperation Bank
Nil
Indian Bank
2%
United Bank of India
Nil
Vijaya Bank
1%
Union Bank of India
Nil
BOR
1%
Urban central cooperative Bank
Nil
Rajsamand cooperative Bank
Nil
BOI
NIL
Mahila urban cooperative Bank
NIL
Indian overseas Bank
NIL
CBOP,HDFC, BOB HFL, Canara Bank, Oriental Bank of Commerce, PNB, UTI, Indian Bank
2% of the amount outstanding
IDBI, SBI, SBBJ, UCO Bank, Central Bank of India, Syndicate Bank, ICICI, Corporation Bank, United Bank of India, Union Bank of India, Urban Central Cooperative Bank, Rajsamand Cooperative Bank, BOI, Mahila urban cooperative Bank, Indian overseas Bank.
NIL
Vijaya Bank, BOR
1% of the amount outstanding
Chart 4.10.1
Prepayment Charges
Table and diagram depicts that CBOP, BOB HFL, Canara Bank, Oriental Bank of Commerce, PNB, UTI, Indian Bank charges 2% of the amount outstanding. Vijaya Bank, BOR Charges 1% of the amount outstanding and ICICI, SBI, SBBJ, UCO Bank, Central Bank of India, Syndicate Bank, IDBI, Cooperation Bank, United Bank of India, Union Bank of India. Urban central cooperative Bank, Rajsamand cooperative Bank, BOI, Mahila urban cooperative Bank, Indian overseas Bank charges no prepayment.
Market Share of HFCs and Banks in housing sector
Table 4.11
Name of the Institution
MARKET SHARE
IDBI
12%
ICICI
17%
BOB HFL
7%
SBI
17%
SBBJ
5%
UCO Bank
2%
Canara Bank
2%
Central Bank of India
1%
Oriental Bank of Commerce
2%
PNB
5%
UTI
1%
Syndicate Bank
1%
CBOP
2%
Cooperation Bank
2%
Indian Bank
1%
United Bank of India
1%
Vijaya Bank
3%
Union Bank of India
1%
BOR
3%
Urban central cooperative Bank
5%
Rajsamand cooperative Bank
2%
BOI
2%
Mahila urban cooperative Bank
2% ONLY LADIES
Indian overseas Bank
1%
Graph 4.11
Market share in Udaipur
Table and chart depicts that IDBI has Second highest market share in Udaipur i.e. 12% as compare to other private & public sector Banks & HFCs, SBI has 17% of market share, ICICI and BOB HFL have only 17% market share. Mahila Urban Cooperative Bank is the only Bank which provides loan only to the ladies & it has 2% share in Udaipur while other Banks having market share is in between 1% to 5%.
Expected market size in Udaipur on the basis of application:
Table 4.12
Name of the Institution
EXPECTED MARKET SIZE IN UDAIPUR ON THE BASIS OF APPLICATION
IDBI
980
ICICI
600
BOB HFL
600
SBI
900
SBBJ
200
UCO Bank
30
Canara Bank
34
Central Bank of India
12
Oriental Bank of Commerce
50
PNB
300
UTI
200
Syndicate Bank
95
CBOP
65
Cooperation Bank
75
Indian Bank
300
United Bank of India
10
Vijaya Bank
150
Union Bank of India
600
BOR
45
Urban central cooperative Bank
50
Rajsamand cooperative Bank
9
BOI
200
Mahila urban cooperative Bank
60
Indian overseas Bank
100
Graph 4.12
Expected market size in Udaipur
The graph and table depicts that IDBI has highest expectations. IDBI expected market size in Udaipur is 980 applications per year SBI have 900; ICICI, BOB HFL and Union Bank of India have expected 600 applications. Other Banks and HFCs expected market size is in between 300 to 9 applications.
Average customer base in Udaipur:
Table 4.13
Name of the Institution
AVERAGE CUSTOMER BASE
IDBI
650
ICICI
200
BOB HFL
154
SBI
600
SBBJ
58
UCO Bank
20
Canara Bank
15
Central Bank of India
10
Oriental Bank of Commerce
40
PNB
30
UTI
70
Syndicate Bank
45
CBOP
122
Cooperation Bank
30
Indian Bank
50
United Bank of India
10
Vijaya Bank
92
Union Bank of India
70
BOR
28
Urban central cooperative Bank
60
Rajsamand cooperative Bank
25
BOI
100
Mahila urban cooperative Bank
58
Indian overseas Bank
80
Graph 4.13
Average customer base in Udaipur
From the analysis it is interpreted that highest customer base is of IDBI i.e. 650. SBI having 600-customer base in Udaipur. ICICI has 200 customer base in Udaipur. BOB HFL has 154 customer base in Udaipur. While other banks ranges it in between 1 to 100.
Accomodation of Choice:
4.15
Organization, which helps person in accommodation of their choice-
IDBI CBOP
ICICI Canara Bank
BOB HFL
Online registration:
4.16 ICICI
IDBI
Only ICICI and IDBI are the two concerns, which provide facility of on-line registration.
Documentation:
Once a person has identified a property that he wish to purchase, he may approach any housing finance company or bank with a loan application. The following information and documents have to be submitted at that time.
· Application form duly filled in.
· Processing fee (which may be fixed or a percentage of the loan amount requested)
· Photographs of the applicant and co-applicant.
· Proof of Income
For a Salaried Individual –
· Employment form issued by employer OR
· Copies of Pay-Slips for Last few months OR
· Latest form 16 issued by employer.
For the Self-Employed or Business Class –
· A brief note on the nature of business, year of establishment, present bankers, form of organization and the capacity in which the applicant is engaged.
· Statement of total income and income tax assessment orders and returns for the last few years.
· Balance Sheet and Profit and Loss Account for last few years.
· Copy of Partnership deed if it is a partnership firm or copy of Memorandum of Association and Articles of Association, if it is a company.
Other documents that may be required –
· Net worth statement of applicant/co-applicant.
· Copies of LIC Policy, if any.
· Particulars of family member in the prescribed format; Name, Age, Relationship, Occupation, Income.
· Particulars of Guarantor/s in prescribed format with proof of income of guarantor or guarantors.
The following documents have to be submitted in respect of the property you propose to finance –
· Original agreement with the builder/developer.
· Tripartite agreement from builder/developer.
· A certificate by the legal advisor of the builder to the effect that the builder has a good reputation and it is free from encumbrance and other charges.
· A certificate from builder’s Chartered Accountant certifying that the builder has not mortgaged the property anywhere else.
· Certified copies of all documents pertaining to the property along with upto date no-encumbrance certificate.
· Certified true copy of approved plan.
Copies of receipts of payments made to builder/developer.
Strength are basically those factors of the company in which the company has a total command. These Strengths may be termed as the areas where the company is better than its competitors and even the best in the market.
1. IDBI provides free counseling to its customers because it has the right experience to guide them on these issues. IDBI has counseling and advisory services group, which helps customers in selecting property of their choice in different locality.
2. IDBI has a large network of over 130 offices and also covers over 80 locations through its outreach programme. A customer can apply for a loan form any of these CBOP offices or outreach locations for a property located anywhere in India.
3. The customer has an option to switch between schemes because IDBI is the only company, which calculates interest on monthly and annual rest basis.
4. Sanctioning of proposed loan amount can be made within a day provided the required formalities are fulfilled.
5. The Sole objective of IDBI is to give its customers the best. Keeping this in mind IDBI has devised customized repayment options to Suit every individual.
6. IDBI provides the facility of approving the loan even though the property to be purchased may not have been selected/finalized. This helps a customer in planning the purchase of the property. Since the customer is now aware of the funds available to him he can buy a property in keeping with his budget. It makes the entire experience of owning a house free and expeditious.
7. IDBI offer specialized financial services to our customer base through partnerships with some of the best financial institutions worldwide.
8. IDBI management has demonstrated high quality standards in all managerial functions. IDBI has an efficient and automated and it is highly regarded for customer responsiveness and professionalism in service.
9. IDBI has a strong retail orientation with high quality customer service being the driving force for its activities. This expertise and service orientation has developed and strengthened over the last 22 years.
10. IDBI is a professionally managed company. IDBI management has demonstrated high quality standards in all managerial functions. IDBI has an efficient and automated environment and it is highly regarded for customer responsiveness and professionalism in service. Management has demonstrated dynamism in raising resources.
11. Rates of interest being charged are reasonable. IDBI has widest range of flexible home loan products.
12. The company has sound infrastructure of working. Experienced and qualified team handles to the customers.
13. It has a strong liaison and commercial tie up with leading industries of the country.
14. There are no hidden charges which customer has to pay afterwards.
15. IDBI also provide top up loans to the existing customers.
16. The process of documentation work for loan agreement is done here itself that reduces the tensions of the customers.
17. IDBI give option to the customers for taking loan on fixed rate home loan or on adjustable rate home loan.
18. IDBI provides home loan upto 100% of the cost of home improvement and home extension to existing and past loan customers.
19. Top up loans (loan against property) of upto 70% of the market value of the property to the existing or past loan customers.
20. Senior authorities monthly visits to branch office of Udaipur for guiding them.
21. There is regular improvement in quality of the product and services. The functions of the IDBI office are related to the development of business and its administration including supervision of branches. The branch offices are directly involved in development of business.
22. Wide spread of offices of all over the country has made the company one of the most common name in the housing sector.
23. The loans will go a loan way in propping up IDBI’s re-vitalized focus on the middle and lower income segment with attractive housing schemes.
24. IDBI has strong brand equity; a well spread network’ superior quality of assets and an excellent management team.
25. Mouth publicity acts as a powerful promotional activity.
WEAKNESS
Through the SWOT-ANALYSIS the company tries to find out the major weakness prevailing, which are acting as the hindrance in the development of the company the company management tries to overcome these weakness as quickly as possible so that the company may not suffer much both in short-term as well as the long-term.
1. Lack of staff, which proves inefficiency and dissatisfaction to the customers because sometimes customers have to wait and this, are not in the favor of concern.
2. In the present scenario many new competitors are entering into the market and there is low focus on advertisement and promotional activities of the company.
3. In few Banks the adjustment are done on daily rest option but in IDBI it is done on the monthly rest option and annual rest option.
4. They are conservative in nature so they are not able to approach to the customer easily.
5. IDBI neglecting its competitors’ which is not the right approach in the company’s growth.
6. Services are not provided at the distant corner of the country, which is a very big weakness of the concern.
7. IDBI has higher administrative fee and processing fee.
8. Concern ignores its competitors, which is not the right approach.
OPPORTUNITIES
For development of company and to have a maximum share in the market the company management may be far-sighted and they should always be seeking the new opportunities so that the company can develop in every field.
1. It has opportunity to develop housing finance industry by helping promote housing finance institutions in partnership with commercial Banks and private sector institutions.
2. IDBI has the opportunity to enhance and develop a network of institutions to serve its customer base with specialized financial services through partnership with the best institutions in their particular field of activity worldwide.
3. It has opportunity to achieve higher growth by introducing interest on daily rest basis instead of annual rest basis and monthly rest basis that will help in lowering down its interest rates and fight the commercialized and other financial institutes who have comparatively lower interest rate.
4. To add value and life to a house through its home loans to finance any improvements that will increase the value of a home contribute to a better living environment add value to a house.
5. For its existing customer to avail loan for extension purpose, Home extension loan is a convenient loan facility to extend or add space to house. The potential lies since it has easy and comfortable re-payment options. Home extension loans are quick to arrange repayable in easy installment.
6. To top the segment that is planning to more into a bigger, better and more convenient house. The problems that lies here is that people do not have fund to pay for it. The answer lies with IDBI, which has short term bridging loan that helps to arrange funds during the interim period.
7. IDBI has wide range of products, which attract more consumers.
8. T help people to locate and acquire land for their dream house, then it can help them to build their dream house by advancing them the land and purchase loan and later on for construction purpose also.
9. IDBI can increase its market share by introducing franchises all over the Udaipur.
1. The biggest players today would include IDBI, ICICI Bank, SBI and LIC Housing Finance. In addition, regional players are strong in particular states/areas. Public sector Banks have also been marketing this product actively. The relatively lower level of off-take in the non-retail sector has led Banks to shift their focus on retail assets for deployment of funds. With mortgages seen as the “safest” in the retail asset category, a large number of Banks have decided to concentrate on this sector. As a result, this sector has seen a much higher level of activity in recent times.
2. Competitive pressures have also resulted in housing finance companies facing operational risks such as staff turnover, procedural lapses in credit and legal appraisals, documentation issues etc. The customers have also become aware of the intense competition and have started bargaining with the companies resulting in the relaxation of various norms.
3. The market is also witnessing a spurt in the products being offered. With a view to lure customers and offer an attractive price, the HFCs and Banks have also started offering loan products which amortize the loans on a monthly reducing balance product as against the industry norm of annual reducing balance loans. The trend has also been seen towards loan products linked to a floating rate of interest.
4. In case of rural areas, the repayment capacity is less. Due to this fact, there is less emphasis on rural markets. Most of the people are only agriculture based and if the crops are not performing well, they may not be able to repay the loans. Already corporate Banks are providing a lot of facilities in the rural market. So there is minimum potential in the rural areas of HFCs and more focus is on urban areas.
5. IDBI is a professionally managed company. IDBI management has demonstrated high quality standards in all managerial functions. IDBI has an efficient and automated environment and it is highly regarded for customer responsiveness and professionalism in service. Management has demonstrated dynamism in raising resources.
6. IDBI follows a single window concept. Unlike some of the other Housing loan providers who do not provide the legal and technical services and customers are made to get legal and technical approvals from outside agencies, IDBI provides them all in-house. The process is so seamless that the customer does not even realize that there was some legal and technical process he had undergone. This saves the customer a lot of time and hassle of visiting different people to obtain these clearances and what’s more it also saves him money. IDBI’s processing and administrative charges cover all these expenses. While some organizations make special offers of “NO processing Fees” the customers need to understand whether they are really getting a free offer.
7. IDBI and ICICI are the organizations, which provides the on loan facilities to the customers.
8. Documentation of all the Banks and HFCs are almost same.
9. The processing of IDBI is the fastest among all thus it takes only one day in application to sanctioning and sanctioning to disbursement.
10. IDBI provides widest range of products to its customers.
11. IDBI is the only Bank, which requires no guarantor while other requires it.
12. IDBI, BOB HFL, Canara Bank, Oriental Bank of Commerce, PNB, UTI, Indian Banks charges 2% on prepayment of loan and Vijaya Bank, BOR charges 1% on prepayment of loan whereas ICICI, SBI, SBBJ, UCO Bank, Central Bank of India, Syndicate Bank, IDBI, Corporation Bank, United Bank of India, Union Bank of India, Urban Central Cooperative Bank, Rajsamand Cooperative Bank, BOI, Mahila Urban Cooperative Bank, Indian Overseas Bank do not charge anything on the prepayment of loan amount.
13. IDBI, ICICI, SBI, SBBJ, Oriental Bank of Commerce, UTI, IDBI, Corporation Bank, United Bank of India, Union Bank of India, BOR, Urban central cooperative Bank, Rajsamand cooperative Bank and BOI charges no lawyer fees or architect fees.
14. The maximum time period for availing housing loan for an individual is 15 to 20 years in all HFCs and Banks.
1. The Banks and HFCs have predominantly been targeting the salaried segment and the business class for home loans. However, of late HFCs have also started designing specific products keeping in mind niche markets and varied segments of the society.
2. There is definitely a shift in the focus of the customer with lower and lower interest rates being the most attractive part of a housing loan. So IDBI should reduce the rate of interest.
3. IDBI should give loan on agricultural land or at least on those lands/plots, which are undergoing the conversion process.
4. IDBI should focus on advertisement through newspaper, pamphlets, television, hoardings, etc though which it can easily run in the competitive environment.
5. The key to success in the future will depend upon not only being able to offer the most competitive rates, but also the best possible service, and in structuring products to meet customer requirements. In the longer term, as smaller markets grow and account for a larger proportion of incremental growth in the sector, the distribution strength and the reach of the Bank/HFCs will also play an important role in determining their success.
6. IDBI should also consider the worth or value of personal guarantors.
7. In the present scenario HFCs are mushroomed over the market so IDBI should bring an attitudinal change in its operation from conservative to an aggressive approach.
8. They should emphasis on promotional efforts to attract the customers.
9. Concern should be more towards promotion of DSA’s/franchisee.
10. IDBI should introduce loans on daily rest option.
11. In present scenario they should adopt strategy of marketing agent.
12. There should be increase in staff to deal with rapid rise in number of customers.
13. They should come over with their traditional approach.
14. IDBI should maintain contacts with builders and construction companies.
15. IDBI should also increase in the value added facilities like free insurance Company should reduce the prepayment charges, which is 2% of the amount outstanding.
Magazine –
Ø Economic & Political Weekly – New Delhi
Ø Commerce – New Delhi
Ø Business India – New Delhi
News Papers –
Ø Times of India – New Delhi
Ø Economic Times – New Delhi
Ø Hindustan Times – New Delhi
Ø Rajasthan Patrika – Udaipur, Jaipur, Jodhpur, Ajmer
Ø Dainik Bhaskar – Udaipur, Jaipur, Jodhpur, Ajmer
Ø Dainik Navjyoti – Ajmer
Web Sites –
Ø www.idbi.com
Ø www.indiainfoline.com
Ø www.google.com
Ø www.housingloan.com
METHOD DATA COLLECTION:
Data Collection:
Secondary / observation
Primary / Interrogation
Internal Data External Data Communication Questionnaire
i) Annual reports i) Newspapers
ii) Official reports ii) Internet Survey
Communication:
The project worker has personally interviewed knowledgeable persons and authorities in the respective fields with help of an unstructured schedule.
Survey:
The survey technique used in this project are personal interview, telephone survey, mail survey.
Questionnaire:
The questionnaire prepared is given to:
Ø Managers of HFC’s, Banks to assess their strategy
PRESENTATION OF DATA:
Various types of tables, charts and figures have been used.
ANALYSIS AND INTERPRETATION OF DATA:
For analysis of data, statistical and ratio techniques have been used.
TOOLS OF RESEARCH:
Ø Unstructured interview schedule
Ø Questionnaire
Ø Graphical presentation
Ø Statistical analysis
CHAPTERISATION:
1. Company Profile
2. Research Methodology
3. Data analysis and interpretation
Ø Competitive Analysis
4. SWOT Analysis
5. Conclusion and Suggestion
6. Annexure
7. Bibliography
EXPECTED CONTRIBUTION OF THE STUDY:
The study will help IDBI that where it stands in the market it will help and facilitate the IDBI in making better decision which have become imperative in present times. Today HFC’s and Banks are mushroomed over financing and this research will help IDBI to know the opinion of customer about their requirement and satisfaction which will help IDBI to survive in market in better way.
Questionnaire
1. Your organization is operating in housing finance since _____
2. Major products of your organization
Products
Yes/no
Term of Loan
EMI
Fee
Maximum Loan
ROI
Processing
Administrative
Land Purchase
YES
Home Construction
YES
Extension
YES
Improvement
YES
Personal Loan
YES
Home Equity Loan
YES
Others
3. How you contact or approach the market?
4. Brief your process of handling applications.
5. The basic requirements to get housing loan
A)
B)
C)
D)
E)
6. What is the minimum income required on which your organization provides housing loan?
7. What is procedure of calculating loan amount?
A) Gross Salary
B) Net Salary
C) Annual Salary
8. What is your current lending rate?
Fixed rate home loan ____________
Adjustable rate home loan ____________
9. How many days your organization takes to complete the loan process?
Application to sanction
Sanction to disbursement
10. When does your EMI start?
11. Your loan interest calculation is on
Annual rest basis
Monthly rest basis
Daily rest basis
12. What are your policies in dealing with legal cases?
13. How many guarantors are required and what formalities are to be fulfilled?
14. Do you charge any prepayment charges?
Yes
No
15. Do you provide any?
Yes/No
Fee
Legal Advisor
Technical Advisor
Customer directly approach to Legal advisor/Technical advisor
16. What are the products you offered to your existing customers and at what rates?
17. What are the strengths of your organization?
18. Who do you think your biggest competitors?
19. What is your market share?
20. How much market size do you expect in Udaipur?
21. What is your average customer base in Udaipur?
22. What is your limit of sanctioning loan? ____________
23. What is your quantum of loan/% of margin? _________
24. What are your monthly targets?
On the basis of amount
On the basis of applications
25. Does your organization assist the customers in selecting accommodation of the choice?
Yes
No
26. Do you provide facility of on line registration?
Yes
No
Glossary
Adjustable Rate Home Loan – An Adjustable rate home loan is a loan where the rate of interest is linked to the Prime Lending Rate (PLR). If you have opted for adjustable rate home loan, than you stand to gain if interest rate drop. Likewise you need to be prepared to take the risk when interest rate increase. Therefore, in this case the gain/loss of interest rates fluctuation is borne by the borrower. The rate on loan is generally revised on regular intervals. If there is a change in RPLR (Retail Prime Lending Rate), although the EMI on the home loan disbursed to the customer will not change, but the tenor will increase or decrease depending on whether the interest rates rose or fell from their previous level.
Agreement to Sell – A preliminary agreement, secured by an earnest money deposit, through which the buyer offers to purchase the property.
Application – A form used to apply for a loan, on which you’ll put relevant information about yourself. Also refers to the whole process of applying for a loan.
Balloon (or Payment) Mortgage – Usually a short-term fixed-rate loan which involves small payments for a certain period of time, and one large payment for the remaining amount of the principal at a time specified in the contract.
Clear Title – A title that is free of liens.
Construction Loan (or Interim Loan) – A loan to provide the funds necessary to pay for the construction of buildings or homes. The lender advances funds to the builder at periodic intervals as the work progresses.
Equated Monthly Installment – Every Housing Company charges an Equated Monthly Installment from the borrower. This EMI is calculated on the basis of loan amount and the interest rate charged for the same. It comprises of principal and interest. Repayment by way of EMI generally commences from the month following the month in which one takes disbursement. It can be calculated either on the basis of annual reducing rest, monthly rest or daily rest. In the annual rest, interest is calculated on an annual basis on the outstanding at the beginning of the year. In this case EMI becomes 1/12th the Equated annual installment. In the monthly rest, principal repayments are credited at the end of every month and interest is calculated on the outstanding principal at the end of every month. In the daily reducing principal repayments are credited at the end of the day an installment is paid.
Equitable Mortgage – In this case, the customer has to just pledge the documents with the HFC and he can get a loan against them. He is not required to get the mortgage registered.
First Mortgage – The Mortgage, which is the primary lien against a property.
Fixed-Rated Mortgage – A mortgage on which the interest rate is set for the term of the loan, regardless of future interest rate fluctuations. This makes payments precisely predictable, but it is not always the cheapest alternative.
Fixed Rate Plan – In fixed rate plans, the rate of interest remains the same through the tenure of the plan.
Flexible Rate Plan – In the flexible or floating rate plan, the interest rate is pegged to the Bank’s retail prime lending rate (RPLR), and varies with fluctuations in the RPLR. Since the risk of such fluctuations is borne by the borrower, flexible rate plans quote lower interest rates as compared with fixed rate plans.
–
a. Some Housing Finance Companies follow annual rest for taking into account the reduced principal whereas other Housing Finance Companies follow the monthly rest. It goes without saying that the customer stands to gain in case of monthly rest.
b. There are certain processing, overhead and administrative charges involved that are charged to the borrower. These are one time payments made for initiating the process of housing loan. Administrative charges levied, are generally taken as a percentage of the loan amount, subject to a maximum and minimum amount.
c. Some Housing Finance Companies levy a pre-payment charge. This is so because the idea of repayment does not really appeal to the HFC due to the difficulty in the re-investment of funds being pre-paid as the financial planning by the Housing Finance Company is done keeping in mind the initial payment plan of the borrower. Moreover, this is also done to dissuade borrowers from pre-paying their loans when interest rates are on a decline.
d. Then there might be certain commitment charge as well. This charge is levied on the un-drawn amount of the loan. The period for which it is levied commences after a breathing period of a few months from the date of sanction. The charge is levied after this period till the borrower withdraws the funds. The reason is that once the Housing Finance Company has made a commitment it has to maintain the liquidity to lend you the funds when you desire. This charge helps them cover this cost of liquidity.
e. Finally the borrower might be asked to bear the insurance premium expenses of the property being funded.
Therefore the interest charges are not the only outflow that the borrower has to shell out for a housing loan. There are other charges also which have to be taken into consideration by the borrower, which ultimately affects the effective rate of interest charged to the borrower. The borrower should do a comparative analysis of the different schemes else he might you might end up shelling out higher money from your pocket in lieu of that money.
IIR (Income to Installment Ratio) – This ratio signifies the percentage of the income that can be set aside for repayment of the loan under the assumption that 50-60% of the income is required by the person for his own sustenance.
Interest – The amount of money, expressed as a percentage of the principal, charged for the use of the money borrowed.
Interest Rest – Interest Rest can be defined as the principal outstanding on the date, which is considered to calculate the interest. For eg. When we say Monthly Reducing Balance, it would mean that interest is calculated on the principal outstanding at end of every month after taking into consideration payment of the EMI. As a result, for a loan of an identical amount, tenure and interest rate, the EMIs for monthly rests are lower than they are for a plan with annual rests.
Loan Against Property – Loan against property is when you want to borrow money against your existing property. In this case too, the property is mortgaged with the lender. The rate of interest for loan against property is generally higher than the interest on home loan as the end use of the funds cannot be monitored.
LTV (Loan to Value Ratio) – This ratio denotes the percentage of value of the property that is financed by the company. This ratio usually ranges between 80-85% of the property.
Market Value – The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.
Mortgage – A legal contract that is registered against the title to a property in order to guarantee that a loan will be repaid. It is the first charge on the property, that the housing finance company (HFC) funds. This funding could be either for construction, purchase or renovation. If the borrower defaults in paying the installment on the home loan and he has filed for Bankruptcy, the HFC’s claims will lie in precedence to other creditors’ charges. However sometimes the HFC might settle for a Pari-Passu second charge in case of Central/State Government/Public Sector/Nationalized Bank employees and other similar bodies.
Net Income – The borrower’s gross income minus income tax and other deductions.
Power of Attorney – A legal document authorizing one person to act on behalf of another.
Prepayment – A privilege in a mortgage which permits the borrower to make payments in advance of their due date.
Prepayment Penalty – Money charged for an early repayment of debt. Some players levy prepayment penalties, while other allow you to pre-pay without any penalty. The penalty is usually calculated as a percentage of the outstanding principal.
Principal – The amount of debt, not counting interest, left on a loan.
Refinance – Obtaining a new mortgage loan on a property already owned, often to replace existing loans on the property.
Retail Prime Lending Rate – It is the rate being offered to the prime borrower (retail) by the HFC. HFC cannot lend at a rate lower than this rate.
Second Mortgage – A mortgage made subsequent to another mortgage and subordinate to the first one.
Tenure – The period in which the loan has to be repaid.
Title – A document that gives evidence of an individual’s ownership of property.
Title Deed – A statement, which confirms that the current owner legally holds the title to the house. This is important, because you don’t want to buy something from someone who doesn’t really own it, now do you?
Executive Summary
The research project done was about the competitive analysis of the housing finance concern in Udaipur.
The primary data was collected through survey using both open ended & close-ended questionnaires. The secondary data was collected through newspapers, business magazines and the net.
In the analysis it was found that:
§ IDBI is the only concern which provides loan on annual rest basis & monthly rest basis at FRHL & ARHL option.
§ IDBI & ICICI are the two concerns which provides on line application facility.
§ IDBI & Vijaya Bank are the concern which have broucher cum application form.
§ The maximum loan is provided by ICICI i.e. 3,00,00,000.
§ The highest repayment period is of PNB and Indian Overseas Bank i.e. 25 years. Maximum Banks having repayment period of 20 years.
§ United Bank of India requires minimum salary of Rs. 7000/-, which is highest among all Banks and HFL.
§ The processing of IDBI is very fast & quick in market.
§ IDBI requires no guarantor.
§ Mahila Urban Cooperative Bank is the only Bank which provides loan only to the ladies.
§ IDBI highest market share i.e. 12%.
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