RESEARCH

PROJECT REPORT

On

COMPARATIVE STUDY AND ANALYSIS OF

HOME LOAN SCHEMES OFFERED BY

DIFFERENT BANKS IN NCR

Submitted to:

Mr. Gurpreet Walia

Branch Sales Manager

ICICI Home Finance Co. Ltd.

Noida

Submitted by:

VIPUL

MBA

ACKNOWLEDGEMENT

Perfect is a famous saying and when a person gets practical

experience under the guidance of experts of the respective field, the

knowledge gained is priceless.

With a sense of great pleasure and satisfaction, I present this project

report entitled “COMPARISON OF HOME LOAN OFFERED BY

DIFFERENT BANKS IN NCR” completing a task successfully is

never a one-man effort. Similarly completion of this report is a result of

invaluable support and contribution of number of people in direct and

indirect manner.

In the light of the foregoing, first of all my heartfelt gratefulness and

thanks goes to Mr. VIRENDRA as a team manager of ICICI HOME

FINANCE sec-18, Noida for giving me the opportunity to work for his

highly esteemed organization and for being a constant source of

inspiration and guidance throughout the Project. Without his able

support the project would not have seen the light of the day.

At this juncture, I would also like to thanks Mr.YOGESH BHATIYA

(MANAGER OF ICICI HOME FINANCE) NOIDA, without his

indispensable cooperation the project won’t have been completed

within the stipulated timeframe.

Finally, I would like to thank all the people, without whose insights and

opinions, this project would have been impossible.

CONTENTS

1. Introduction

2. Objective

3. Company Profile

4. Industry Scenario

5. Analysis of Different Banks

ICICI

HDFC

IDBI

6. Comparison of Homesaver with Normal Home Loans

7. Comparative analysis of Home Loan and Home Saver

8. Research Methodology

9. Data Analysis

10. SWOT Analysis

11. Conclusion

12. Recommendation

13. Bibliography

OBJECTIVE OF THE STUDY

The objective of this research is to analyse the home loans with a view

to arrive at the most popular loan schemes offered by the banks in

National Capital Region under study and to conclude from the analysis

the best possible schemes which would keep the bank ahead of

competition.

The purpose of the study is to find the critical factors that are

essential for any housing loan to become the most favored scheme in

the Indian scenario. The reasons being the features that the scheme

provides are not being provided by many of the housing finance

companies.

INTRODUCTION

A roof over one's head and ground beneath one's feet count as the

bare necessities of life. There’s nothing quite like owning a home,

however humble, to give one that warm and glowing feeling. But

when one buys a home, one has much more than a feel-good

purchase in mind: it’s also a crucial investment decision, perhaps

the biggest spending decision of one's life. There are ample

opportunities today for young salaried investors to plan their

moves early and buy a house at the right time — and at the right

price. In the process, not only do they fulfill that cherished dream

of owning a house, but also put themselves on the path to

acquiring property that would meet the needs and aspirations of

their growing family, even as it leads to wealth creation. Every

individual aspires to own a home. But many either spend a

lifetime saving to purchase a house or exhaust money on monthly

house rents.

Take a house loan and let the monthly rent (easily converted

into affordable EMIs) build dream home.

Profitable Proposition

“The overall demand in the residential sector has grown by about

7-8 per cent in the past few months as compared to the same

period last year. The growth is on account of two main factors:

One, income-tax exemption;

Two, with no similar rebates available for individuals in the

high-income group, they are creating a second asset.

Add to this the stable property prices over the last year and

plunging interest rates, planning for dream home could not have

been better timed. Rock-bottom interest rates, standardization of

the periodicity of interest calculation across lenders (which makes

it easier to compare loans), lower

interest charges, waiver of loan application processing fees and, a

customer-friendly attitude is reason enough to celebrate the

ascension of the home loan consumer as the king.

In response, private players like ICICI Bank, IDBI Bank,

Standard Chartered Bank and a few others too lowered their

rates. Market leader HDFC also brought down its interest rates to

8.0%, very recently, to participate in the interest rate war. If one is

still not satisfied with the lowered loan rates, there’s more. Some

industry watchers believe the floating home loan rate will slip to 8

per cent for long-term loans in another two to three years.

Most banks have changed the way interest is calculated from

annual rests to monthly rests. Under the annual rests method, the

EMIs (equated monthly installments) one pays through a year are

factored in as part-repayment of the principal component only at

the end of each year. In other words, one has to pay interest even

on the installments one has paid until they’re reduced from the

principal at the end of each year. Under monthly rests, the

principal is lowered by the appropriate amount each month. The

thumb rule being that the more frequently interest is calculated,

the better for the creditor. Recently, HDFC added monthly rests

on its fixed-interest loans apart from annual rests. As a result, the

fall in EMIs on fixed-interest loans (where the interest rate is

constant for the entire tenure of the loan, irrespective of changes

in the lending rates) is more pronounced than on floating-rate

loans (where the loan interest rate varies with changes in the

interest rates). For example, the EMI on a 15-year, fixed-interest

loan for Rs 15 lakhs has come down by Rs 840; the corresponding

fall in the EMI on a floating-rate loan is only Rs 465. Apart from

lowering the cost of one's loan, the switchover to monthly rests

has another advantage: it makes it easier to compare loans.

COMPANY PROFILE

ICICI HOME FINANCE COMPANY LIMITED

-consumer friendly housing finance company

History:

ICICI Home Finance Company Limited was incorporated on May 28, 1999

as 100% subsidiary of ICICI Personal Financial Services Limited (ICICI

PFS). ICICI Home Finance Company Limited, was set up with the objective

of providing long term housing loans to individuals and corporate. The

Company was registered on March 30, 2000 with National Housing Bank

(NHB) under National Housing Bank Act, 1987 in terms of Housing Finance

Companies (NHB) Directions, 1989. With effect from May 3,2002, ICICI

Home Finance has become a 100% subsidiary of ICICI Bank Limited.

Overview:

ICICI Home Loans are at present available to customers in 150 cities/towns

across the country. Loans are offered for purchase of new homes, purchase of

resale homes and home improvement. Besides, the company also offers loans

for commercial property and loans against existing property. The loans are

offered for tenors up to 30 years. The company has also introduced several

customer friendly services such as 'door-step' service, 'know your loan on

phone' facility and 'ICICI Home Search' - free property brokerage services.

ICICI Personal financial services limited (ICICI PFS),

FORMERLY ICICI- CREDIT, was one of the first four

companies to obtain registration as a non-banking financial

company (NBFC) from the Reserve Bank of India (RBI) on

September 10, 1997 under the new section 45 IA of the Reserve

Bank of India Act, 1934.

During the year 1998-99, there was a significant shift in the

company’s operations from leasing and hire purchase to

distribution and servicing of all retail products for the ICICI

Group. It is now a focal point for marketing and distribution of all

retail asset products for ICICI, including auto loans, consumer

durable finance and other financial products. The company has

thus become a critical part of ICICI’S retail strategy aimed at

offering a comprehensive range of products and services to retail

customers.

In view of this reorientation of the business, the name of the

company was changed from ICICI CREDIT CORPORATION

LIMITED to ICICI PERSONAL FINANCIAL SERVICES

LIMITED (ICICI PFS) effective March 22, 1999.

ICICI commenced its custodial services business in 1992 and

played a pioneering role in the business when it accepted the

custodian role for the first ever GDR issue by an Indian corporate

(Reliance Industries Limited). ICICI has a major market share in

the segment and acts as custodian of 41 ADR/GDR issues and, in

the process, has established relationships with all the major

overseas depository banks operating in the Indian Market. After

its success in the GDR segment, ICICI expanded its custodial

operations by offering custodial services to overseas institutional

investors including foreign institutional investors (FII’S) and as

on June 30, 1999, the value of assets held in our custody exceeded

US 2 billion.

At present, ICICI offers a full range of custodial services for

primary and secondary market operations pertaining to debt,

equity, money market instruments GDR/EURO issues conversions

and GDR arbitrage to:

1. Overseas Institutional Investors like

a. FIIs

b. OCBs

c. OFFSHORE FUNDS

d. VENTURE FUNDS

2. Overseas Govermental Agencies

3. Institutions looking for proprietary investments

4. Mutual funds

5. Private investment companies

6. Large corporate

7. High net worth individuals

As a value added service ICICI custodial services division assists

the clients in preparation, submission and follow up for various

applications for regulatory approvals including initial application

by FII’S/OCB with SEBI/RBI.

PERSONAL BANKING

At ICICI BANK, they are commited to making banking a

pleasure. This commitment is manifested in the services they offer

– a wide range of accounts, investment schemes, and facilities.

Each service offers their customers security, flexibility of

operation and maximum returns. The various services provided

under this is as follows:

Maxi Cash – savings Account

Quantum – Fixed Deposits

Quantum optima – Value added Savings Account

Money plus – Current Account

ATM

Phone Banking

Treasure Chest – Locker facility

Power Pay Payroll

Retail Treasury Instruments

CORPORATE BANKING

MOBILE COMMERCE

ICICI Bank now brings Bank Account and ICICI Credit Card to

customers fingertips. With Mobile Commerce , customers can

perform a wide range of query-based transactions from their

OrangeTM (MUMBAI) and AIRTEL (DELHI) Mobile Phone,

without even making a call.

Access multiple accounts

Balance enquiry to the linked accounts

Cheque book requests

Mini statement – Listing of last three transactions

Request for account statements (by mail or fax)

ICICI

Attractive interest rates

Door-step service from enquiry stage till final disbursement

No guarantor required

Can transfer your existing high-interest rate loan

Can transfer your existing high-interest rate loan

Special 100% funding for select properties

Home loan

Customer must be at least 21 years of age when the loan is

sanctioned.

The loan must terminate before or when you turn 65 years of

age or before retirement, whichever is earlier.

Customer must be employed or self-employed with a regular

source of income.

Loan Amount

A number of factors are taken into account when assessing

repayment capacity. Customers income, age, number of

dependants, qualifications, assets and liabilities, stability/

continuity of customer employment/ business are some of them.

However, there are ways by which you can enhance your

eligibility.

If cusstomer spouse is earning, put him/her as a co-applicant.

The additional income shall be included to enhance loan

amount. Incidentally, if there are any co-owners they must

necessarily be co-applicants.

customer fiancée's income can also be considered for

sanctioning the loan on your combined income? The

disbursement of the loan, however, will be done only after

submit proof of marriage.

Providing additional security like bonds, fixed deposits and

LIC policies may also help to enhance eligibility.

While there is no need for a guarantor, it could be that having one

might enhance your credibility with us. If so, our loan officer

would provide customer with the necessary details.

The final amount to be sanctioned will depend on your repayment

capacity. However, what customer ultimately are entitled to will

have to conform within the limits fixed for each loan.

Also, when the company looks at the total cost, registration

charges, transfer charges and stamp duty costs are included.

HOME LOANS

We at ICICI Bank understand the value of owning your own

home. Our affordable home loans can make all the difference to

their dream of owning home.

0% processing fee for a limited period.

Refer to the table for a loan option that suits their need best

FIND THE RIGHT HOME

Introducing Home Search - Our FREE online property search

facility. A one stop shop for all their real estate needs.

What you get

0% brokerage on first sale properties

Access the entire market under one roof

Site visits to properties short listed by you

Help in negotiating the best price

Help with legal documentation

Documents

Passport size photograph. Age verification: PAN card, Voters ID,

Passport, License. Bank statement for the last six months. Income

Documents e.g. Latest Form 16, Certified IT returns for latest 3

years. Processing Fee cheque. Loan Enclosure letter. These are the

documents required for sanctioning a loan. Customer may be

asked to submit further legal documents if required by ICICI or its

approved lawyers. Do retain photocopies of all documents being

submitted by them.

Disbursement

Customer loan will be disbursed after you identify and select the

property or home that customer are purchasing and on their

submission of the requisite legal documents.

While customer may be under the impression that the list of

documents asked for is rather extensive. Each and every single

document asked for will be verified and checked to ensure their

safety.

This may take some time but the bank want to ensure a clear title

and will complete all the legal and technical verifications to

ensure that they have full rights to their home.

The 230 A Clearance of the seller and / or 37I clearance from the

appropriate income tax authorities (if applicable) is also needed.

On satisfactory completion of the above, on registration of the

conveyance deed and on the investment of your own contribution,

the loan amount (as warranted by the stage of construction) will

be disbursed by ICICI.

The disbursement will be in favour of the builder/seller.

List of documents for disbursement

Standard documents:

Loan Agreements Disbursement Requests Post-dated cheques

Personal guarantor's documents, as the case may be adjustable

Rate Loans

Home Loans/Land Loans: Special offer - 0% processing fee

ICICI Bank Home Loans announces it's Special Interest

Rates.These interest rates are valid for new home loans for a

limited period only. The interest rate on these loans is linked to

the ICICI Home PLR and moves up or down with the ICICI Home

PLR The ICICI Home - PLR for ICICI Home Loans is currently

10.25% p.a.The EMI table for ARHL is given below:

Fixed Rate Loans

Home Loan: Special offer - 0% processing fee

ICICI Bank Home Loans has now brought Fixed Rate Home

Loans at par with Adjustable Rate Home Loans, starting from

January 17, 2003. The EMI table for Fixed Rate Home Loans is

given below:

Fixed rate

Tenure

(yrs)

Rate of

Interest *

EMI per Lac

Upto

5years

8.75% 2064

6 - 10 years 9.25% 1281

11 – 15

years

9.75% 1060

16 – 20

years

9.75% 949

21- 30

years

10.25% 897

The interest rate is calculated on an monthly reducing basis.

0%

Processing Fee.

No fee for part prepayment

Exhibit 2.3: Product Process Flow for Housing Finance

Enquiry

Application with processing fee submission

Credit Appraisal

Checking with

guarantor

Verification with employerInterview

Recommendation to the Sanctioning Authority

Sanction by committee

Approval

RejectDefer Letter toapplicants

Acceptance Letter with Administrative fees

Legal title Documents review

Signing loan disbursement documents

EMI repayment Prepayment Penalty Charge

Listed below are the steps involved in availing of a home loan:

Step 1 A person applies for a home loan.

Step 2

The executive meets the applicant and briefs him the

entire loan process, requirements and the various options

available.

Step 3

The applicant chooses a Housing Finance Company

(HFC) and hands over the income documents to the

executive.

Step 4 The income documents are handed over to the HFC for

eligibility and approval.

Step 5

The HFC verifies the documents and checks the repaying

capacity, saving habits, tenure of service, etc. of the

applicant and approves the loan amount.

Step 6

After approval, an offer letter is given to the applicant by

the HFC, along with a list of original property title

documents that have to be handed over to the HFC.

Step 7 The applicant gives the original property title documents

to the HFC.

Step 8 The HFC scrutinises the legal and technical aspects of the

original title documents.

Step 9

If the HFC is satisfied as to the legal & technical aspects

of the documents then the applicant is called to sign the

loan agreement.

Step 10 The loan disbursement schedule is decided by the HFC

according to the stage of construction (if property under

construction)or a one time payment is made if property is

ready for possession

Step 11 The applicant gets possession of the property depending

upon the level of completion of the property.

Step 12 The applicant starts paying the EMIs.

WHAT ALL CAN ONE TAKE A LOAN FOR:

There are different types of home loans tailored to meet ones

needs. Here’s are some of them:

Home Purchase Loans: This is the basic home loan for the

purchase of a new home.

Home Improvement Loans: These loans are given for

implementing repair works and renovations in a home that has

already been purchased by the client.

Home Construction Loan: This loan is available for the

construction of a new home.

Home Extension Loan: This is given for expanding or extending

an existing home. For eg: addition of an extra room etc.

Home Conversion Loan: This is available for those who have

financed the present home with a home loan and wish to purchase

and move to another home for which some extra funds are

required. Through home conversion loan, the existing loan is

transferred to the new home including the extra amount required,

eliminating the need of pre-payment of the previous loan.

Land Purchase Loans: This loan is available for purchase of land

for both construction or investment purposes.

Bridge Loans: Bridge loans are designed for people who wish to

sell the existing home and purchase another one. The bridge loans

help finance the new home, until a buyer is found for the home.

Amount

This largely depends on a number of factors like ones age,

profession, salary, the city one resides in among other such

factors. It varies between Rs. 2.1 lac to Rs. 1 crore depending on

the lender. As a rule of thumb, depending upon the HFC, one will

have to cough up 15%-20% of the loan amount as a down

payment. For smaller amounts, this may not be much. But for

figures running into lakhs, this could make loads of difference.

For eg. An apartment costing Rs 10 lakh may get 85 per cent

financing. So, one will have to arrange for the remaining Rs 1.5

lakh. If one takes this into account, the additional thousands will

definitely put a strain on ones finances.

Tenure

Generally, the maximum tenure of home loans is 15 years, with a

few lenders offering tenure of 20 years or more (ICICI has

recently launched a 30 year loan). The longer the tenure, more one

pays in total interest, but ones monthly payments will be less. So

depending on ones earning potential and bank balance, one can

choose an appropriate tenure. An important requirement of most

banks/HFCs is that one pays up the entire loan before one retires.

One can always prepay ones entire loan amount before it is due.

There is a trend to do away with the pre-payment penalty being

imposed by some lenders so its best one checks on this as well.

Interest Rate

Without doubt the most important parameter to factor into ones

calculations. The interest rates may vary from institution to

institution and generally range from about 7.0% to around 8.0%.

Repayment is in the form of EMI's (equated monthly

installments). The longer the tenure, the more one pays in interest,

but ones monthly payment will be less.

Refinance

This is a concept that is yet to catch on in the home loan market

but is bound to be a major service in the months to come. Under

this facility, one can take a new loan from another bank/HFC to

pay back an old loan before its natural tenure. It gives one the

opportunity of prepaying ones high cost debt and gets a lower cost

one. In today's falling interest rate scenario one should use this

vehicle to lower ones debt payments as much as possible. The

lender facilitates the shift by paying the outstanding and

transferring the asset to their portfolio.

Miscellaneous charges

A heading that should be ignored at one’s peril! The interest rates

and EMIs are not the only cost factor. Never underestimate how

much the processing and administration fees amount to. A 0 .5%

administration fee and a 0.5% processing fee on, say, a Rs

5,00,000 loan, would amount to Rs 5,000. Other times, it could be

just one fee (either administration or processing) but could yet

work out to be much more if it is considerably higher at, say, 2.5

per cent or 3 per cent. The various other fees, which one is

required to pay along with the margin amount, are:

a) Interest Tax

This is the tax payable on the interest paid on a home loan and not

the principal. This tax is some times included in the interest rate

of the loan, or may be charged separately as interest tax.

b) Processing Charge

It's a fee payable to the lender on applying for a loan. It is either a

fixed amount not linked to the loan or may also be a percentage of

the loan amount. The loan amount received by you can be less

than the processing fee.

c) Prepayment Penalties

When a loan is paid back before the end of the agreed duration a

penalty is charged by some banks/companies, which is usually

between 1% and 2% of the amount being pre paid.

d) Commitment Fees

Some institutions levy a commitment fee in case the loan is not

availed of within a stipulated period of time after it is processed

and sanctioned.

e) Others

It is quite possible that some lenders may levy a documentation or

consultant charge.

INDUSTRY SCENARIO

The housing finance industry, encompassing banks and housing

finance companies (HFCs), has exhibited a 36 per cent growth

between April and December 2004 despite the high prepayment

levels experienced by some HFCs.

Were it not for prepayments, the industry's outstanding assets

would have grown at a higher 43 per cent. Aggressive marketing

efforts of banks and HFCs have further precipitated this trend.

Banks have an inherent advantage in retail finance, especially in

housing loans, because of the lower cost of funds, existing retail

relationships in liability products and large branch network.

It is expected that banks will further increase their market share in

the housing finance sector in the medium term.

It is also expected that the housing finance sector will maintain its

high growth rates in future given that the key growth drivers the

government's thrust on the housing sector in terms of fiscal

incentives for individual housing loans coupled with the demand-

supply gap in housing - would remain strong.

STANDARD CHARTERED BANK

Overview

Standard Chartered is the world's leading emerging markets bank.

It employs 27,000 people in over 500 offices in more than 50

countries in the Asia Pacific Region, South Asia, the Middle East,

Africa, United Kingdom and the Americas.

The Bank serves both Consumer and Wholesale banking

customers. The Consumer Bank provides credit cards, personal

loans, mortgages, and deposit taking activity and wealth

management services to individuals and medium sized businesses.

The Wholesale Bank provides services to multinational, regional

and domestic corporate and institutional clients in trade finance,

cash management, custody, lending, foreign exchange, interest

rate management and debt capital markets.

With nearly 150 years in the emerging markets the Bank has

unmatched knowledge and understanding of its customers in its

markets.

Standard Chartered recognises its responsibility lies to its staff

and to the communities in which it operates.

A brief history of Standard Chartered

Standard Chartered is the world's leading emerging markets bank

headquartered in London. Its businesses however, have always

been overwhelmingly international. This is summary of the main

events in the history of Standard Chartered and some of the

organisations with which it merged.

The early years

Standard Chartered is named after two banks, which merged in

1969. They were originally known as the Standard Bank of British

South Africa and the Chartered Bank of India, Australia and

China. Of the two banks, the Chartered Bank is the older having

been founded in 1853 following the grant of a Royal Charter from

Queen Victoria.

Standard Chartered Bank – Vision and Strategy

Standard Chartered Bank has been established for over 140 years.

Its spans the developed and emerging economics of the world with

a network of over 500 officers in more than 40 countries.

With a mission to build a world class bank, Standard Chartered

has adopted the strategies of:

· Building a world class business: Focus on core business,

provide superior customer service, and generate maximum returns

and benefits for shareholders.

· Staying lean and focused: Is vest in core business, optimal

usage of resource, and manage performance by balancing cost

and risks.

· Recognised as a winning organization: Develop capability to

the fullest, instill global thinking, and inject of pride in to people

to get connected to Standard Charted Bank.

Standard Chartered in the 1990s

Even within this period of apparent retrenchment Standard

Chartered expanded its network, re-opening in Vietnam in 1990,

Cambodia and Iran in 1992, Tanzania in 1993 and Myanmar in

1995. With the opening of branches in Macau and Taiwan in 1983

and 1985 plus a representative office in Laos (1996), Standard

Chartered now has an office in every country in the Asia Pacific

Region with the exception of North Korea. In 1998 Standard

Chartered concluded the purchase of a controlling interest in

Banco Exterior de Los Andes (Extebandes), an Andean Region

bank involved primarily in trade finance. With this purchase

Standard Chartered now offers full banking services in Colombia,

Peru and Venezuela. In 1999, Standard Chartered acquired the

global trade finance business of Union Bank of Switzerland. This

acquisition makes Standard Chartered one of the leading clearers

of dollar payments in the USA. Standard Chartered also opened a

new subsidiary, Standard Chartered Nigeria Limited in Lagos,

acquired 75 per cent of the equity of Nakornthon Bank, Thailand;

and agreed terms to acquire 89 per cent of the share capital of

Metropolitan Bank of the Lebanon.

Today-Standard Chartered

Today Standard Chartered is the world's leading emerging markets

bank employing 30,000 people in over 500 offices in more than 50

countries primarily in countries in the Asia Pacific Region, South

Asia, the Middle East, Africa and the Americas.

The new millennium has brought with it two of the largest

acquisitions in the history of the bank with the purchase of

Grindlays Bank from the ANZ Group and the acquisition of the

Chase Consumer Banking operations in Hong Kong in 2000.

These acquisitions demonstrate Standard Chartered firm

committed to the emerging markets, where they have a strong and

established presence and where they see their future growth.

At Standard Chartered they are committed to the communities and

environments in which they operate. Their Operations are focused

on the emerging markets and they believe that with appropriate

policies and

practices in place they can be a legitimate influence for good by

promoting the highest standards of responsible business.

HOME SAVER FROM STANDARD CHARTERED BANK:

A revolutionary home loan that gives the customer the

potential to save thousands of Rupees in interest on home

loan.

Lets the customer make additional deposits to reduce the

loan outstanding, without any penalties.

Lets use the surplus funds in the account to invest when the

right opportunity arises.

Finally, a home loan that easy access to surplus funds every

day, 24 hours a day through a globally valid ATM-cum-

Debit card

At Standard Chartered, recognize that owning a home is a very

important goal, and probably the largest investment in a lifetime.

That's why the company has created Home Saver.

Home Saver is a revolutionary new concept in home loans

designed to save interest thereby letting to pay off loan faster.

Here's how one can enjoy the Home Saver advantage

Every month, all the customer need is to do is deposit surplus

funds, be it there salary or other savings into Home Saver, instead

of letting them lie idle in different accounts. All this money then

works towards reducing there interest payable because the

deposits automatically reduce the balance outstanding on which

the interest is calculated on a daily basis.

So, more the number of days one place into HomeSaver, greater is

the interest saving!

What's more, the customer continue to have total access to these

funds 24 hours a day through the globally valid ATM-cum-Debit

card!

Unique Features

Freedom to save more

Freedom to reduce your loan period

Freedom to take a break from EMI payments

Freedom to access your money - anytime, anywhere

HomeSaver is currently available in Bangalore, Chennai, Delhi,

Kolkata, Mumbai and Pune.

All the customer have to do is to call Phone Banking or contact us

at any of their branches and they'll assist you with a better

understanding of the products and in taking care of the

formalities.

Still deciding which home loan to take? Choose the one that

sets free.

Terms, conditions and RBI regulations apply. All loans at the

sole discretion of Standard Chartered Bank.

Freedom to save more

With HomeSaver, there is more to save than a normal low-cost

home loan. Because interest is calculated on daily balances,

customer can reduce interest cost substantially even if surplus

savings are in the account for only a day. For each day that

outstanding balance reduces, one pay less interest for that day.

Since that's interest saved not earned, customer save on taxes that

would otherwise pay on interest earned!

HomeSaver gives the flexibility and freedom to make excess

payments so that you can reduce the duration of your loan

anytime, without penalties.

Only HomeSaver gives you the flexibility to defer your EMI

payment. So if at any time, you are faced with an emergency and

find it difficult to pay EMI, customer can take a payment

holiday* once every year- after the first year without any penalty.

You have the flexibility of depositing and withdrawing cash just

as you would with your normal bank account. HomeSaver comes

with a globally valid ATM-cum-Debit Card, which allows you

free* access to your money from over 2000 ATMs across the

country. Anytime, anywhere.

That's not all, customer also get a personalized cheque book,

Phonebanking and Internet banking - to add to the convenience of

banking with us.

The product is a combination of home loan and bank account that

helps reduce the interest and tenure of the loan. HomeSaver

allows the customer to pay back the home loan principal by

utilising the excess funds in the HomeSaver account. This reduces

the overall interest payment and the tenure of the loan.

The product allows customers to pool their salary, savings and

surplus funds lying in other accounts into HomeSaver that goes

towards reducing the balance principal outstanding. Since the

interest is calculated on daily outstanding balance, every rupee

kept in HomeSaver each day goes towards prepaying the loan that

helps the customers pay back the loan faster and save substantial

interest.

One of the key benefits of HomeSaver is that customers need not

consciously work towards making partial prepayment to reduce

interest on the loan. All deposits and excess money lying in

HomeSaver account would automatically be used to reduce the

balance outstanding. At the same time,

customers would continue to enjoy the flexibility and liquidity of

a normal bank account.

Further, the customers also enjoy the privilege of taking a

payment holiday on their equated monthly instalment (EMI) once

a year after the first year for any loan taken under HomeSaver.

This would allow the customer the flexibility to tide over a tight

financial situation without having to pay a penalty for skipping an

EMI. "This is a feature again unique to HomeSaver and not

provided by any traditional home loan,".

HomeSaver offers an opportunity to maximise savings whilst

providing flexibility and convenience to manage personal finances

more efficiently. Customers can pool their salary, savings and

surplus funds lying in other accounts ultimately reducing the

balance principal outstanding.

As the interest is calculated on a daily outstanding balance, funds

kept in the account go toward pre-paying the loan, rather than the

interest component, helping customers pay back faster and save

substantial interest, the bank claims.

The HomeSaver account further offers the same liquidity and

flexibility of a normal bank account and comes with an ATM -

cum- debit card and chequebook facility.

A customer can save up to 43 per cent or more on the interest

component depending on the deposits maintained by him in the

account. Loans from other institutions can be balance transferred

to this account at a cost of 1 per cent of the outstanding loan

amount.

HDFC BANK

The Housing Development Finance Corporation Limited (HDFC)

was amongst the first to receive an ‘in principle’ approval from

the Reserve Bank of India (RBI) to set up a bank in the private

sector, as part of the RBI’s liberalization of the Indian Banking

Industry. It was incorporated in August 1994 in the name of

‘HDFC Bank Limited’, with its registered office in Mumbai.

HDFC began operations as a Scheduled Commercial Bank in

January 1995.

About the Promoter

HDFC, the promoter, is India’s premier housing finance company

and enjoys an impeccable track record in India as well as in

international markets.

Since its inception in 1997, HDFC has maintained a consistent

growth in its operations and profitability and over the past 5 years

has achieved annual growth rate of 25 – 30 %.

Its outstanding loan portfolio covers over a million dwelling units.

HDFC has developed significant expertise in retail mortgage loans

to different market segments and also has a large corporate client

base in relation to its housing related credit facilities and its

investment portfolio.

With its tremendous brand equity, strong reputation in the Indian

and international financial services market, large shareholder base

and unique consumer franchise, HDFC was ideally positioned to

promote a bank in the Indian environment. HDFC (together with

its fully owned subsidiary HDFC Investments Ltd.) owns about

31% of the equity.

They had started with a strategic alliance with the NatWest group

in UK with 20% equity, which was divested later on. The bank

also signed a memorandum of understanding for strategic business

collaboration with the Chase Manhattan Bank in February 2nd

1999.

Business Philosophy

The mission of HDFC Bank is to be world class Indian bank. This

would imply a bank that would meet various financial needs of its

customers in a convenient and cost effective manner at

international standards of service.

The bank seeks to achieve the status of a "preferred organization"

among its major constituents- customers, shareholders, regulators,

employees, suppliers etc.-while maintaining the highest levels of

integrity and corporate governance.

The business philosophy at HDFC Bank is based on four core

values :Operational Excellence, Customer Focus, Product

Leadership and People.

Competitors

Bank faces strong competition in all of their principal lines of

business. Their primary competitors are large public sector banks,

other private sector banks, foreign banks and, in some product

areas, non-banking financial institutions.

Wholesale Banking: Principal competitors in wholesale banking

are public and new private sector banks as well as foreign banks.

The large public sector banks have traditionally been the market

leaders in commercial lending. Foreign banks have focused

primarily on serving the needs of multinational companies and

Indian corporations with cross-border financing requirements

including trade, transactional and foreign exchange services,

while the large public sector banks have extensive branch

networks and large local currency funding capabilities.

Retail Banking: In retail banking, their principal competitors are

the large public sector banks, which have much larger deposit

bases and branch networks, other new private sector banks and

foreign banks in the case of retail loan products. The retail deposit

shares of the foreign banks is quite small by comparison to the

public sector banks, and have also declined in the last five years,

which we attribute principally to competition from new private

sector banks. However, some of the foreign banks have a

significant presence among non-resident Indians and also compete

for non-branch-based products such as auto loans and credit cards.

They face significant competition primarily from foreign banks in

the provision of debit cards and also expect to face competition

from foreign banks when we begin offering credit cards. In mutual

fund sales and other investment related products, their principal

competitors are brokers and foreign private banks.

Treasury: In treasury advisory services for corporate clients, they

compete principally with foreign banks in foreign exchange and

derivatives trading, as well as the State Bank of India and other

public sector banks in the foreign exchange and money markets

business.

Loans

HDFC Bank brings you a wide range of loans to cater your

financial needs.

The bank offers the following loans-

· Personal Loans

· Consumer Loans

· Auto Loans

· Loans against shares

· Loans against RBI Bonds

· Loans against Insurance policy

. E-instant loans-gives the facility of loan approval in 60

seconds on the internet.

HDFC has offices spread all over the country. This extensive

network helps HDFC in providing service to large and well spread

out clients. This network of interconnected offices (on Data

Circuits) helps HDFC to process applications for purchase of

property anywhere in India. HDFC has further established an

office in Dubai and Service Associates in Kuwait, Oman and

Qatar to make it easier for Middle East based Non-Resident

Indians to apply for a loan to HDFC - India.

HDFC is the pioneer of housing finance in India and has been a

leader in the business for the last 23 years. HDFC has vast

experience and a very committed and skilled staff to handle

housing loan applications and solving customer problems.

HOME LOAN SCHEMES

PURPOSE

HDFC Ltd. offers loans for the following purposes:

Land Purchase

Home Construction/Purchase

Home Extension

Home Improvement loans

Short-term Bridge Loans

Non-Residential Premises Loans For Professionals

2-in-1 Home Loan scheme

A home-loan scheme that’s twice as good!

Confused whether to opt for an Adjustable Rate or Fixed Rate Loan?

HDFC brings you the best of both options with 2-in-1 Home Loan.

2-in-1 Home Loan provides customers with a choice of breaking up the loan requirement into Adjustable and Fixed Rate loans.

Customers benefit both ways, as it helps them hedge their interest rate risk against rising interest rates to the extent of the fixed rate portion of the loan and take the advantage of falling interest rates, with the Adjustable Rate portion.

2-in-1 Home Loans can be taken in any proportion. With no prepayment charges under the Adjustable Rate Home Loan, customers planning to make part prepayments can take a portion of the loan intended for prepayment under Adjustable Rate loan option; the rest can be taken under Fixed Rate Loan option.

LOAN AMOUNT

Loans can be availed up to a maximum of 85% of the cost of the

property (including the cost of the land). HDFC lends up to a

maximum of Rs. 1,00,00,000 on a Home Loan to an individual.

LOAN TENURE

You can repay the loan over a maximum period of 20 years.

RATE OF INTEREST

Interest is calculated on annual rests. Principal repayments are

credited at the end of HDFC's financial year. The effective rate of

interest varies depending on the term of the loan. For a loan with a

term of 15 years, the effective interest rate would be higher by

0.37% per annum than the indicated rate of interest.

SECURITY

Typically the security for the loan is a first mortgage of the

property to be financed, normally by way of deposit of title deeds

and/or such other collateral security as may be necessary.

Interim security may be additionally required, if the property is

under construction. Collateral or interim security could be

assignment to HDFC of life insurance policies, the surrender

value of which is at least equal to the loan amount, guarantees

from sound and solvent guarantors, pledge of shares and such

other investments that are acceptable to HDFC.

The title to the property should be clear, marketable and free from

encumbrance. To elaborate, there should not be any existing

mortgage, loan or litigation which is likely to affect the title to the

property adversely.

Interim security may be additionally required, if the property is

under construction. Collateral or interim security could be

assignment to HDFC of life insurance policies, the surrender

value of which is at least equal to the loan amount, guarantees

from sound and solvent guarantors, pledge of shares and such

other investments that are acceptable to HDFC.

DOCUMENTATION

Following documents should be produced for approval of loan:

a) Common for all applicants:

1. Allotment letter of the co-operative society / association of

apartment owners.

2. Copy of approved drawings of proposed construction /

purchase.

3. Agreement for sale/sale deed/detailed cost estimate from

architect/engineer for the property to be purchased /

constructed.

4. If you have been in your present employment / business or

profession for less than a year, mention 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 your repayment capacity that

is necessary and will assist HDFC in appraising the case.

b) Additionally,

If borrower is Employed:

1. Latest salary slip/salary certificate showing all deductions.

2. If your job is transferable, permanent address where

correspondence relating to the application can be mailed.

3. A letter from your employer agreeing to deduct the monthly

installment towards repayment of the loan from your salary.

This will expedite the processing of your loan application.

If borrower is Self-Employed:

1. Balance Sheets and Profit & Loss Accounts of the

business/profession along with copies of Individual Income

Tax Returns for the last three years certified by a Chartered

Accountant.

2. A note giving information on the nature business/profession,

form of organization, clients, suppliers, etc.

ELIGIBILITY

The repayment capacity as determined by HDFC will help in

deciding how much one can borrow (the cost of the property or

Rs. 1 crore, whichever is lower). Repayment capacity takes into

consideration factors such as income, age, qualifications, number

of dependants, spouse's income, assets, liabilities, stability and

continuity of occupation and savings history. And, of course,

HDFC's main concern is to make sure customer can comfortably

repay the amount they borrow

TAX BENEFIT

Resident Indians are eligible for certain tax benefits on principal

and interest components of a loan under the Income Tax Act,

1961. Interest repayment of Rs. 1,00,000 p.a. (for a loan on or

after April 1, 2000) can get borrower a tax saving up to

approximately Rs. 33,000 p.a. Moreover, customer can get added

tax benefits under Sec 88 on repayment of principal amount up to

Rs. 20,000 p.a. which can further reduce borrower’s tax liability

by Rs. 2,000 p.a.

About the product

HDFC's Home Loans offers you various unique benefits and are

easy to arrange and repayable in easy monthly installments. The

terms of the loan can be structured according to customer unique

requirements.

Home Loans can be applied for by either individually or jointly.

Proposed owners of the property, in respect of which the loan is

being sought, will have to be co-applicants. However, the co-

applicants need not be co-owners.

Loans can be availed upto a maximum of 85% of the cost of the

property (including the cost of the land). HDFC lends upto a

maximum of Rs. 1,00,00,000 on a Home Loan to an individual.

You can repay the loan over a maximum period of 20 years . They

determine the loan amount after evaluating the repayment capacity

of the individual. HDFC's main concern is to help individuals

comfortably repay the borrowed amount.

Get in touch with your nearest HDFC office today. We will be

pleased to discuss and help you realise your plans for a house

USP

Superior Processing Capacity: HDFC has over the years

invested substantially into computer systems and training. This

has enabled HDFC to respond to customer needs and build up

capabilities to approve loans on the spot or disburse them fast.

Branch Network: HDFC has offices spread all over the country.

This extensive network helps HDFC in providing service to large

and well spread out clients. This network of interconnected offices

(on Data Circuits) helps HDFC to process applications for

purchase of property anywhere in India. HDFC has further

established an office in Dubai and Service Associates in Kuwait,

Oman, Qatar, Bahrain and Saudi Arabia to make it easier for

Middle East based Non-Resident Indians to apply for a loan to

HDFC - India.

Experienced and Trained Staff: HDFC is the pioneer of housing

finance in India and has been a leader in the business for the last

25 years. HDFC has vast experience and a very committed and

skilled staff to handle housing loan applications and solving

customer problems.

Free Counselling: HDFC believes that it is in the business of

providing solutions to an individuals need for owning a house,

and not just in the business of providing finance. Keeping this in

mind HDFC will provide free counselling to on how and where to

buy a house in India (Property Services) or what are the prices and

trends in the real estate market or what precautions one should

take before buying a house. This service is offered at any of

HDFC's offices.

Legal and Technical Guidance: HDFC has qualified Legal and

Technical staff who liase with the developers to collect and

scrutinise the property documents and permissions. We have

Master Files of most projects being developed by reputed

developers. It has always been HDFC's endeavor to protect the

interest of the borrower, as we believe that buying a house is one

of the most important decisions in his life.

Extension Products: Over the last 25 years, HDFC has developed

various products in response to the needs of our customers. Today

we offer Home Loans, Adjustable Rate Home Loans, Home

Extension Loans, Home Improvement Loans, Home Equity Loans,

Short Term Bridging Loans and Land Purchase Loans.

Flexible (Customised) Repayment Schemes: Keeping in mind

the fact that each individual has a unique problem requiring

unique solutions, HDFC has developed various repayment options

like Step Up Repayment Facility, Flexible Loan Instalment and

Balloon Payment Scheme.

Pari Passu/ Second Mortgage Arrangements: HDFC has a tie-

up with a large number of Public Sector Organizations and banks

which enables us to

offer loans to your employees with the flexibility of their spouse

also availing a loan from his/her own employer.

Safe Document Storage Facilities: HDFC has state of art storage

facilities, which are theft and fire proof, at various locations

where loan and property documents are stored. In this way

valuable documents are stored safely over the period of the loan

and are released almost immediately after a customer repays his

loan.

Post disbursement services:

a) The exemption in respect of interest on borrowed capital is Rs

1,50,000 under section 24 (b) of the Income Tax Act. Further

interest on housing loans can now be taken into account by an

employer while computing the tax to be deducted from an

employee's salary.

b) HDFC sends interest certificates to its customers well in

advance which enables them to take advantage of the tax

exemption in their monthly salary

c) We can transfer files of customers from one location to

another in case of transfer of the customer in course of his job.

d) A customer, after availing of a loan can approach HDFC

anytime thereafter to increase the Equated Monthly

Installment which will help him repay the loan faster. This

facility is offered free of charge to our customers.

Electronic Mail: HDFC through its e-mail service can promptly

respond to queries. In addition, HDFC can promptly send it is

application form cum brochure and other details on its loan

products by e-mail to interested individuals. For Non-Resident

Indians, our interactive Website offers another means for

contacting us. In our effort to reach out globally dispersed Non-

Resident Indians, we will continuously enhance our Website.

Home Conversion Loans: HDFC offers the option of a Home

Conversion Loan to its existing customers who are interested in

moving to a new house. Through this scheme customers can apply

to have their existing loan transferred towards the purchase of the

new home. Customers may also apply for an additional loan

amount for the purchase of the new house. This gives the

customer the option of selling their existing house, if they wish to,

without having to repay their old loan.

Applications can be made before selecting property:

Individuals may make an application for a loan even if the

property has not been selected or the construction has not

commenced. HDFC can provide assistance in locating an

appropriate house to such customers.

Home Improvement Loans: As an exclusive offer to it's existing

customers HDFC offers Home Improvement Loans upto 100% of

the improvement cost as compared to Home Improvement Loans

of upto 70% of the improvement cost offered to the general

public.

Fee

A processing fee of 0.5% of the loan amount applied for i.e. Rs. 5

per Rs. 1000 of the loan applied for is payable when the

application form is submitted to HDFC. This fee is in respect of

costs incidental to the application.

For example :

Loan applied for Fees

Rs. 20,000

Rs. 1,00,000

Rs. 100

Rs. 500

On approval of the loan, a loan offer is made to you. On

acceptance of the

offer, you will have to pay an administrative fee of 0.5% of the

loan approved. You can also pay the processing and

administrative fees upfront i.e. 1% of the loan at the time of

submission of the loan application itself.

Rate of Interest

Adjustable rate of Interest

The interest rate on your ARHL is linked to HDFC's Retail Prime

Lending Rate (RPLR). The rate of interest is revised every three

months from the date of first disbursement, if there is a change in

RPLR. However, the EMI on the ARHL will not change. For

instance, if the interest rate increases, the interest component in

EMI will increase; the principal component would reduce,

resulting in an extension of the term of the loan and vice-versa

when the interest rate decreases. customer will be provided with

an annual statement indicating the details of the interest and

principal payments made during the year.

Annual Rest Option

Term of Loan (No. of Years) Rate Per Annum (%p.a)

1 – 20 8.00

Monthly Rest Option

Term of Loan (No. of Years) Rate Per Annum (%p.a)

Upto 5

6 - 10

11 – 20

9.00

9.25

9.75

Rate of interest under ARHL is linked to HDFC's RPLR (Retail

Prime Lending Rate) which currently is 8.00% per annum.

customer repay the loan in EMIs comprising principal and

interest. Pending final disbursement, you pay interest on the

portion of the loan disbursed. This interest is called pre-EMI

interest .

EMI per Rs.1,00,000 for Annual Rest

Option

Term of loan (No. of years)Rupees

20 979

EMI per Rs.1,00,000 for Monthly Rest

Option

Term of loan (No. of years) Rupees

5 2,076

10 1,281

20 949

There is no early redemption charge on repayment of a loan ahead

of schedule.

Fixed rate of interest

The current applicable fixed rate of interest in respect of the total

loan approved is are as follows:

Annual Rest Option

Term of Loan (No. of Years) Rate Per Annum (%p.a)

Upto 5

6 - 10

11 – 20

9.25

9.25

9.75

Monthly Rest Option

Term of Loan (No. of Years) Rate Per Annum (%p.a)

Upto 5

6 - 10

11 – 20

9.25

9.50

9.75

You repay the loan in Equated Monthly Instalments (EMIs)

comprising principal and interest.

EMI per Rs.1,00,000 for Annual Rest

Option

Term of loan (No. of years) Rupees

5 2,157

10 1,313

20 963

EMI per Rs.1,00,000 for Monthly Rest

Option

Term of loan (No. of years) Rupees

5 2,088

10 1,294

20 966

Pending final disbursement, customer pay interest on the portion

of the loan disbursed. This interest is called pre-EMI interest .

An early redemption charge of 2% of the amount being prepaid is

payable on repayment of a loan ahead of schedule.

How to Apply

customer can either download (in a pdf format) the application

form or, get the application form by email or normal mail.

Alternately, customer can collect the application forms from any

of your nearest HDFC Offices.

customer need to submit it along with supporting documents and

the processing fees at any HDFC office that is convenient to the

customer. customer can make payments by cheque marked

"Payee's account only" drawn on a bank in a city where HDFC has

an office, by demand draft (payable at par to HDFC) or by cash.

Customer can make an application at any time after they have

decided to acquire a house, even if the house has not been selected

or the construction has not commenced.

HDFC will consider your application, make enquiries as it deems

necessary and convey its decision to you. On approval of the loan,

a loan offer is made to you. On acceptance of the offer, you will

have to pay an administrative fee for the loan approved.

customer can take disbursement of the loan after the property has

been technically appraised, all legal documentation has been

completed and you have invested your own contribution in full

(Own contribution is the total cost of the property less HDFC's

loan). The loan will be disbursed in full or in suitable instalments

(normally not exceeding three in number) taking into

account the requirement of funds and progress of construction, as

assessed by HDFC and not necessarily according to a builder's

agreement.

Supporting Documents to be attached :

For approval of loan

a) Common for all applicants:

1. Allotment letter of the co-operative society / association of

apartment owners.

2. Copy of approved drawings of proposed construction /

purchase.

3. Agreement for sale/sale deed/detailed cost estimate from

architect/engineer for the property to be purchased /

constructed.

4. If you have been in your present employment / business or

profession for less than a year, mention 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 your repayment capacity that

is necessary and will assist HDFC in appraising the case.

b) Additionally,

If You Are Employed:

1. Latest salary slip/salary certificate showing all deductions.

2. If job is transferable, permanent address where correspondence

relating to the application can be mailed.

3. A letter from employer agreeing to deduct the monthly

instalment towards repayment of the loan from the salary. This

will expedite the processing of your loan application.

If You Are Self-Employed:

1. Balance Sheets and Profit & Loss Accounts of the

business/profession along with copies of Individual Income

Tax Returns for the last three years certified by a Chartered

Accountant.

2. A note giving information on the nature of

business/profession, form of organisation, clients, suppliers,

etc.

IDBI

IDBI, the tenth largest development bank in the world has

promoted world class institutions in India. A few of such

institutions built by IDBI are The National Stock Exchange

(NSE), The National Securities Depository Services Ltd.(NSDL),

Stock Holding Corporation of India (SHCIL) etc. IDBI is a

strategic investor in a plethora of institutions which have

revolutionized the Indian Financial Markets.

IDBI promoted idbi bank to mark the formal foray of the IDBI

Group into commercial Banking. This initiative has blossomed

into a major success story. idbi bank, which began with an equity

capital base of Rs.1000 million (Rs.800 million contributed by

IDBI and Rs.200 million by SIDBI), commenced its first branch at

Indore in November 1995. Thereafter in less than seven years the

bank has attained a frontranking position in the Indian Banking

Industry.

idbi bank successfully completed its public issue in February 99

which led to its paid-up capital expanding to Rs.1400 million. The

promoters holding consequent to this public issue stood reduced

to 71% with IDBI holding 57% and SIDBI 14% of the paid up

capital of IDBI Bank. This is in line with the requirement of RBI

which stipulates that eventually the promoters holding should be

brought down to 40%.

The Bank

The birth of idbi bank took place after RBI issued guidelines for

entry of new private sector banks in January 93. Subsequently,

IDBI as promoters sought permission to establish a commercial

bank and retained KPMG a management consultant of

international repute to prepare the groundwork

for establishing a commercial Bank. The Reserve Bank of India

conveyed it's in principle approval to establish idbi bank on

February 11th, 1994. Thereafter the Bank was incorporated at

Gwalior under Companies Act on 15th of September 1994

(Registration No. 10-08624 of 1994) with its Registered Office at

Indore. The Certificate for Commencement of Business was

received on 2nd of December 1994.

Management Team - The Core Strength of The Bank

Since August 2000 idbi bank has witnessed a transformation in

the top management structure with top talent from foreign banks

and private banks coming together to create a world-class

management team. Mr Gunit Chadha joined idbi bank as its

Managing Director & CEO after spending 16 years with Citicorp

in New York and India, on 22nd August 2000. He laid out the

bank's immediate priorities, amongst them being building up a

performance driven customer focused organization. Existing

talented people within the bank were re-aligned to a functionally

driven Product & Sales organizational structure. Also, to align

employee interests with shareholder interests founder Stock

Options (ESOPs) in October 2000 covering 75 % of the existing

employees of idbi bank were distributed.

Key recruits into the top management team were:

In January 2001, Janak Desai joined in as Country Treasurer after

an outstanding innings at Standard Chartered Bank and ABN

Amro.

In February 2001. Ajay Bimbhet joined as Head-Retail Banking to

lead retail banking at idbi bank. Ajay comes after a strong and

brilliant 25 year career at ANZ Grindlays.

In December 2000, Neeraj Bhushan Bhai joined idbi bank as the

Chief Technology Officer. Neeraj has been a major success story

in the

assignments handled by him earlier as Chief Information Officer

of Sharekhan.com and Chief Technology Officer of ICICI

Infotech in their technology initiatives.

In April 2001, Subramanian Kumar joined idbi bank as Head -

Operations after earning accolades during his stint at Standard

chartered Bank, Dubai and previously at HDFC Bank.

In May 2001, Ulhas Deshpande joined as Head - HRD. He has

more than 18 years of rich human resource experience, of which

over 10 years has been in heading the HR function in premier

organizations- Hindustan Ciba Geigy, Merind, Parke Davis and

most recently as Head-HR at Tata-AIG.

In August 2001, Susheel Kak joined as Head - Corporate Banking

after a 25 years of varied banking experience in SBI and Deutsche

Bank in Singapore and India.

Idbi bank is growing at a very fast pace. Recently, the no. of

employees have crossed 1000 mark from 777 employees as on 1st

April 2001 and it is expected to cross 1200 by the end of this

financial year. The Bank also has a state-of-the-art training centre

at Belapur and every employee receives on an average at least 40

hours of training in a year.

Technology and Tech Initiatives

Keeping in line with its policy of leveraging technology to drive

its business, idbi bank deployed Finacle, the e-age banking

solution from Infosys to consolidate its position, meet challenges

and quickly seize new business opportunities. Entire Finacle

rollout was remarkable considering the fact that it was

implemented across all branches in a record time-frame of 5

months. Finacle will provide the critical technology platform to

propel the bank's new thrust and direction.

The bank has also implemented Kondor+ - a treasury Front Office

software from Reuters and ITMS- treasury back office software

from Synergy Login. Achievement of these significant milestones

is consistent with idbi bank's continued focus to create customer

and shareholder value through deployment of superior technology.

Investments in technology is part of the plan to put in place

building blocks for creating the right organisational infrastructure

which will help idbi bank in consistently delivering superior

products, convenient access channels and efficient service to our

retail and corporate customers. Of the total investments of over

Rs. 75 crs, large investment has been made in back-end

technology to strengthen processes, systems and control. This, in

the long run, propelled by a top quality management team will

clearly set idbi bank apart from its competitors.

Strategic Retail Initiatives

idbi bank in the previous calendar year initiated its formal foray

into retail banking. idbi bank's depository services product E-Sec

is a major success story and the bank today is in the top three

league in India in this segment. A spate of retail products were

introduced such as home finance, loans against shares, educational

loans, car loans, Sweep in account, SMS/WAP mobile banking

etc. on very competitive terms.

Retail Bank has acquired software for its Retail Assets products.

Also, on its way is Internet Banking with Bancaway, from

Infosys. idbi bank has recently launched its upgraded, state-of-

the-art telebanking product across 17 centres with latest software

from BK Systems. Mobile banking

(WAP/SMS) from Hexaware, which is mobile service provider

independent, launched during FY01. We have also migrated to an

Open Architecture "Oasis" ATM Switch capable of providing

features like Bill Presentation Payment and personalised

messaging.

The bank has recently announced its strategic alliance with TATA

AIG General Insurance Company for selling General Insurance

Products through select branches & ATMs of idbi bank.

The bank announced a landmark strategic alliance to make

available widely, both organisations' products through each others'

distribution channels. Now you can buy coveted savings Products

like the National Savings Certificates and Kisan Vikas Patra on

Internet .

The New products which are going to be announced shortly are

Credit Cards, Debit Cards etc.

Idbi bank is continuously looking for ways to leverage its

technical strengths and bring to the retail customer convenience

products at reasonable cost.

Corporate Banking and Credit

Idbi bank has launched its Cash Management Services in the 2nd

quarter of FY02 with powerful software from Cash Teck. The

bank has also invested in Credit Rating System software from

CRISIL to strengthen its corporate risk assessment mechanism.

This goes live from the first quarter of 2001-2002. Morevover, the

bank is in the process of investing in more back-end systems for

Fixed Assets, Payables, FTP and ALM.

Stronger Capital Adequacy

Capital Adequacy ratio of idbi bank is well above the RBI norm

of 9% and as on 30th June 2001 stood at 12.01%.-->

idbi bank has adopted Governance standards based on best

practices prevalent internationally. It has a structure of

governance which meets with the requirements prescribed by the

Kumarmangalam Birla panel and fully meets the

recommendations by internationally acclaimed and recognised

norms of governance addressed by the Cadbury, Greenbury and

Meryn King committees.

Employee Contribution

idbi bank has more than 1000 talented and highly motivated

employees as on date.

The average age of the employee at idbi bank is 31 yrs.

85% of the employees are MBAs/CAs/ Professionally Qualified

Bankers.

The bank has rolled out broad based grant of stock options

covering 75% of the employees to align their interests with those

of its shareholders.

Buying a home of one's own is every individuals first stop in

life. . Which is precisely why, we at idbi bank, have pulled out all

the stops to sew together a home loan product that has flexibility

as its very foundation. Bank have created a product that is

competitively benchmarked, that is amply affordable and one that

is customer-sensitive. Only because when it comes to buying a

house, the first thing customer need to do is to feel at home with

their bank.

Advantage

Interest Rate on Monthly Reducing

Balance

Home Loan services at Door Step

Simple Documentations

Personalized Service

Legal and Technical Assistance

Housing Loan Rates :

Floating rate loans have been institutionalized as the standard

offering, making it simple for new customers to benefit from

favourable interest rate changes in the future too.

SL#

Tenure (yrs) Rate of

Interest *

EMI per Lac

Upto 5years 9.25 % 2088.00

6 - 10 years 9.75% 1308.00

11 – 20 years 10.00% 982.00

Pre-payment Fees

Pre-payment Fee of 2% on principal outstanding if the

prepayments are through institutional / HFC s Cheque / pay

order.In case of customer premature closing his home loan

account with his own funds no prepayment will be levied

COMPARISON OF HOME SAVER WITH

NORMAL HOME LOAN

Let’s suppose that the customer have a home loan of Amount RS.

10 lakhs Repaid in 16 years (192 months) at an interest rate of

11.25% p.a. (monthly rests)

Some Interesting facts about you home loan

Imaging how much the value of their home will have to appreciate

to just be worth the value you finally paid for it!

COMPARATIVE ANALYSIS OF

HOME LOAN AND HOMESAVER

Home Loan HomeSaver

A fixed repayment structure

with high interest & low

principal recovery

The interest customer pay

may be substantially reduced

& consequently repayment

towards principal can be

high. The interest you pay

depends on their loan balance

each day. When you loan

balance is reduced the

interest component comes

down.

Inflexible repayment plan Customer have option to

make excess payment over &

above your EMI to reduce

their balance daily. Payment

holiday also available.

Prepayment may be subject

to many constraints including

penalties.

No prepayment hassle & no

penalty is chargeable on any

excess customer use to

reduce their loan principal.

They can also with draw any

surplus at your convenience

anytime & anywhere.

Interest is calculated on a

monthly balance & applied

monthly

Interest is calculated daily on

net loan balance & applied

monthly

Their home loan A/C in kept

separate from their bank A/C.

Saving & other surplus reside

in a separate current/saving

account where money is

earning either Zero or low

interest.

HomeSaver is one single A/C

where home loan & deposits

or surplus funds is integrated

together. Every rupee they

pay goes to repaying the loan

rather than repaying interest.

So they can use their surplus

cash to save there as much

interest as in charged on

homesaver A/C.

HOW DOES HOMESAVER COMPARE WITH

A NORMAL HOME LOAN ?

Normal home loan HomeSaver

A fixed repayment structure

with high interest and low

principal recovery

The Potential to

substantially reduce interest

and consequently repayment

towards principal can be

high

Inflexible repayment plan Flexible repayments

including Payment Holidays

Prepayment are subject to

many constraints, including

prenalties

No part prepayment hassle

or penalty

Interest is calculated on

monthly balance and applied

monthly

Interest calculated on daily

balances and applied

monthly

Their home loan account is

separate from bank account

One single account where

home loan principal is

integrated with their

deposits and credits

THE HOMESAVER ADVANTAGE

RESEARCH METHODOLOGY

Research Methodology is an important part of every project. Because it help

in knowing how to select representative sample from the world or the general

population, the right research tools and techniques to complete the research.

To satisfy the customer the study of comsumer behavior is important because

he is the king. The Research Process is based on survey method, so in order

to implement the survey we go to Service Provider and the Services user

which is the customers.

The research involves the following steps :-

Define the problem & research objective - The problem and objective is

to assess the services offered by various service provider and what the

consumer wants.

Developing the research Plan - The second stage of research

methodology is to develop a research plan.The research plan desigined to

take decesion on the data soruces, research approaches, research, instruments,

sampling plan and contact methods.

Survey Research – It was a descriptive research.

Research Instrument – The use of an effective research instrument is very

important. Because through this instrument we collect data. In this project

through observations & personal interviews were conducted.

Personal Interview – As we were doing direct selling. we interacted with

my customers are asked about there views in selecting a service and what

are there wants and expectations from a service provider

Sampling Plan - After finalizing the research approch and instruments a

sampling must be designed.

Sampling Unit –data have been collected from banks

Sample size – It has been collected from four banks.

Sampling Procedure :- What process should be used to collect the

sample. So, representation samples, convenience sampling is used.

Collect the Information :-After completing all the steps, the data are collected from different sources.

Analyze the Information:-After the data is collected they are analyzed to Know the findings. The data is then tabulated to develop frequency distribution.

Present the findings:-As the last step, the findings are presented that are

relevant to the major marketing decisions.

DATA ANALYSIS

The home loans provided by various banks are more or less same

at a basic level. The banks generally try to go ahead of other

banks in terms of attracting number of customers to their

countries. For this they are trying to offer some unique services as

per the unique requirements of the unique and important

customers.

In the next page various data’s have been shown which shows that

are the home loans provided by various banks and SCB have also

tried to compare the services offered by the banks,.

TRENDS IN INTEREST RATES OF HOUSING LOANS

Interest Rates Have Dropped

And Housing Loan Disbursement Have Soared

MARKET SHARE OF MAJOR PLAYERS

Source: http://indiaproperties.com

PROPERTY RATES IN NCR

COMPARISON OF MAJOR PLAYERS

The market for home loans has been sizzling in India. The spurt in

growth in recent years and the prospects of continued buoyancy in

demand have attracted many players to the industry, which till a

couple of years back had two major players - HDFC and LIC

Housing Finance. The result - cut throat competition, which has

benefited the loan seeker.

The home loan market has grown at a compounded rate of over

40% over the last four years. And from what industry experts will

have us believe, there is little chance that there will be any

significant decline in growth rates going forward. So what have

been the key factors in triggering of this high growth period?

There are several reasons for the same. On the demand side -

Faster rise in incomes as compared to property prices, thus

making housing more affordable

Declining interest rate, which has greatly reduced the cost of

servicing a loan.

Tax benefits, which further reduced the effective cost of

borrowing (both on interest and capital)

Then there are factors on the `supply side' too which have

supported this growth -

More competition in the housing finance sector resulted in

companies charging lower interest rates, sometimes even at the

cost of the spread (i.e. profit margin)

The fee for getting a home loan has reduced dramatically over the

last couple of years, from over 2% of the loan amount to as low as

0.25% (some companies are known to waive off the fee entirely!)

Housing finance companies have introduced several new products

to meet the needs of a wide variety of customers. One such

scheme, the step up loan, where the EMIs increase as the income

of the individual increases has been a big hit with individuals just

starting off with their careers.

One other factor is the increasing collaboration between housing

finance companies and builders. Such partnerships minimise

service and funding related issues significantly, thus making it

easier to buy property.

One innovation in the housing finance sector has been the

introduction of `floating rate' home loans. Simply put, the cost of

such loan, or the interest rate, is not fixed during the tenure of the

loan. Instead the interest rate is benchmarked against some

index/indicator. So as the benchmark rate moves up/down, the

cost of your loan too changes, at some predetermined frequency

(usually once a quarter).

Ideally, loan seekers should opt for a floating rate home loan

when it is expected that interest rates will decline going forward.

Fixed rate loans should be preferred when interest rates are

expected to rise.

But is making a choice that simple? In today's environment, when

there is a lot of talk about rising interest rates, should investors

shun floating rate home loans altogether? Or is there still some

merit in this instrument? “In the last one year, there was a trend of

floating rate home loans being more popular as compared to the

fixed rate loan. As of now, this trend is continuing.” says Mr.

Suresh Menon, GM (Mumbai Region), HDFC Ltd.

There are three important issues which one needs to consider

before opting for one type of a loan over the other.

First, an important determinant of what you go in for should be

the long term expectation of interest rates. For example, if you (or

the experts) expect rates to rise for the next one year, but then

decline gradually over the next several years, a floating rate

product may be preferable. The other option of going in for a

fixed rate product and then switching at the end of the year will

entail costs (there could be a penalty of 1% - 2% of the

outstanding loan amount) and may not make financial sense.

Moreover, floating rate home loans do not change the rate of

interest every quarter (even though they may review the rate every

quarter). Mr. Menon points out “The attraction of a floating rate

home loan is that it does not attract a part prepayment charge.

This could appeal to individuals who get lump sum bonuses which

they can use to reduce their loan exposure”.

Second, the issue whether fixed rate home loans are actually

`fixed rate'. When considering a fixed rate home loan over a

floating rate home loan a strong selling point is that if interest

rates were to rise dramatically you will be `protected'. Apparently

the reality is somewhat different. It seems that companies that

have given out fixed rate loans can revise their rates upwards in

exceptional circumstances (significant rise in interest rates for

one). So if you think rates will remain range bound over the near

term and decline over the long term, you are still better off with a

floating rate product.

Third, a fixed rate loan is generally priced higher as compared to a

floating rate product. This holds true in the current environment

where the fixed rate loan is at a higher interest rate as compared to

a floating rate loan. The difference is currently about 0.25% to

1.00%. So if you expect that interest rates are likely to move up,

but only to the extent of this differential, then you should ideally

be indifferent between the two types of a loan. The deciding

factors then should be when you think the rates will increase, and

also the long term expectations of interest rates.

As always, there is no one answer to whether you should go in for

a floating or a fixed rate home loan. If you are person with very

little appetite for risk or negative surprises, opt for the fixed rate

home loan. But in case you can take on some risk, a floating rate

home loan is worth a look!

Five steps to picking the right loan

1. Gather data on interest rates

Get interest rate information from more than one source, and get

the same information from each so you can compare the offers.

2. Get info on fees

Find out about processing fees, administration charges and other

costs that may be involved in taking the home loan. A written

statement of all fees from the housing finance companies will

ensure that there are no surprises later on. Use the lowest amount

of fees to negotiate with the other lenders.

3. Get a pre-approval letter

This gives you substantial leverage as you are then seen as a

serious buyer by the seller of the property. Also, having the letter

in your hand will set a limit to the amount of money you can

commit to a property. This will help in identifying the right

property.

4. Bargain for a lower rate of interest

Housing finance companies will reduce their `rack' rates for

customers with a good credit record. A bargain deal will easily

fetch a home loan at significantly lower rates (at times you can get

a discount of as high as 0.50%). Here again, get a confirmation of

the rate (and for how long it will remain fixed) via a letter.

5. Watch out for predatory lending

Don't include false information on your home loan application to

get quick approval. Also do not borrow more money than you

need or can afford.

A floating interest rate allows customer to take advantage of

interest rate movements --they get immunity from adverse

movements and reap the benefits of any fall in interest rate. But a

floating rate loan makes sense only when interest rates are high,

so that they can take advantage of a possible fall. But predicting

interest rate movements could confound even seasoned market-

watchers.

If they are looking for a home loan, be prepared to cough up a

pretty sum as down payment. The Reserve Bank of India, in a

recent meeting with bankers, cautioned banks against lending 100

per cent of the property value. That’s because given the increasing

competition in home loans, some banks have been funding even

110 per cent of the agreement value. This means your loan not

only pays for the property, it helps with stamp duty and

registration charges, and even furnishings. It’s been a sweet deal

so far, as borrowers not only need have no access to other funds,

they also get tax breaks.

The RBI’s position is that lending such sums will mean additional

risk for the bank. In case of default, the bank may not have

sufficient collateral to recover dues, and may have to write off the

additional borrowings. However, bankers do not seem unduly

worried. Non-performing assets in the housing segment are quite

low--below 1 per cent--and that, say bankers, is due to the high

asset quality.

As per officials of IDBI Bank: "For a house to become a home,

there are additional costs incurred by the borrower, which he

meets by borrowing from friends or family members. Also, the

default risk in housing loans is

quite low, so they think that with proper checks, there’s nothing

wrong in lending more." IDBI Bank was the first to see this and

slashed the interest on its 15-year. They want to achieve a serious

leadership position in home loans, so they thought of giving the

best possible rate to the customers.

Housing finance companies like HDFC, however, lend only up to

85 per cent of the agreement value. There has to be some equity

and commitment from the house buyer, so we ask for at least 15

per cent down payment from the house buyer. They try to make

sure that their risks are well-covered.

For the moment, however, banks can continue lending more than

100 per cent of the property value. But if push comes to shove,

and if RBI makes its suggestion a rule, this sweet deal may not

last long.

More proof that home is indeed sweet home. Bimal Jalan’s latest

announcement of a cut in bank rate is a clear sign that the soft

interest rate policy is all set to continue. The 25 basis points

decrease in the bank rate means the central bank has reduced the

rate at which banks borrow from it. This means that banks, in

turn, could reduce the interest rates they charge on housing

mortgages.

Already, State Bank of India, one of the biggies in the housing

finance business, has announced a rate cut of 25 basis points. Its

rates for loans up to 10 years have been reduced to 8.75 per cent

from 9 per cent, and for loans over 10 years to 9.25 per cent from

9.5 per cent. The cost of funds has come down; therefore, they

have decided to reduce their home loan rates.

When interest rates fall, lenders lower not the EMI amount but the

number of months that you pay those EMI’s. The table shows the

number of months

by which your loan tenure is cut when interest rates are lowered by 0.25 to 1 percentage

point.

% cut -0.25 -0.5 -0.75 -1

20 yrs 11 20 29 37

15 yrs 5 10 14 18

10 yrs 2 4 6 8

On a 9 per cent Rs 1 lakh loan

There's good news for those wanting a home loan. Over the past

few months, lenders have been cutting interest rates on home

loans by 25-50 basis points. Banks like HDFC, ICICI Bank, and

State Bank of India have cut rates by 0.75 per cent in the last two

weeks to 9.75 per cent for 15-year loans.

One reason for the rate cut is that borrowing costs have come

down, which is a result of a cut in interest rates in the general

economy.

The general economy apart, lenders have been forced to cut rates

to keep up with competition. More players want to enter the home

loan market, and existing players are fighting for a larger share.

HDFC has also felt the heat. It has decided to reduce the review

time of its variable interest rate from 6 months to 3 months, so

that existing variable rate borrowers can benefit faster in the

falling interest rate scenario. ICICI too has kept pace with its

peers. While interest rates on fixed mortgages tend to be higher,

ICICI has decided to offer the same rate it charges floating rate

borrowers.

Fixed rate products are not widely available now; lenders like

IDBI and Citibank do not offer fixed rate home loans. Others like

Corporation Bank

are not extending fixed rates loans beyond a 10-year period. This

is good in the short-term, but if rates go up, floating rate

borrowers may be in for a tough time.

SWOT ANALYSIS OF THE HOUSING FINANCE INDUSTRY

STRENGTHS

The industry has been witnessing a very fast growth rate, which is

6% growth in the first quarter of 2002-2003 as against 3.5 %

growth recorded in the first quarter of 2001-02.

The market faces a high demand curve, thoroughly mismatched by

a low supply curve

Investment is based in assets that are securities and those that have

historically appreciated rapidly.

Tax benefits and other facilities provided on loan repayments

WEEKNESSES:

The foreclosure rules of court of law such as provision regarding

the ownership of not more than one house (In Delhi) binds the

industry.

The health of an HFC depends upon its ability to mob up low cost

funds.

An HFC is unable to tap the rural market due to lack of proper

retrieval procedures, so whilst the rural market offers a higher rate

of return, it has a higher risk and default rate.

Many legal impediments exist, deferring purchase of certain types

of property beyond a certain extent thereby negatively impacting

the housing finance industry. Weak mortgage laws, resulting in an

increase in risk compound this

OPPORTUNITIES:

The housing industry faces a severe shortage of houses. The total

demand for houses is expected to touch around 19.40 million units

by  the year 2003. Of these 12.8 million dwelling units (65.98 per

cent) would be in rural areas and 6.6 million dwelling units (34.02

per cent) in urban areas.

While the loan facility is backed by the security of the property this

sector represents a low margin but on same line low risk segment.

To address this market the ones lies on the HFCs to device bold and

innovative alternatives like mortgage based securities, use of

methods such as door to door collection of installments, assessing

the creditworthiness of the prospective client and providing for

group security.

The roles of NHB in refinancing and providing regulation of housing

finance system.

The government's initiative to promote the sector and its

contribution in uplifting the sector

THREATS:

The industry faces increased competition as more and more

foreign backs and housing finance companies are providing loan

facility.

SWOT ANALYSIS OF ICICI HOME FINANCE

STRENGTHS:

Save substantial interest

Prepay whenever the customer wants

Reduce their loan outstanding without any penalties

Access the surplus funds anytime

Use surplus funds to invest when the right opportunity arises

WEAKNESS:

Product is very good but it is mainly suitable for the higher

income group and is not suitable for the middle income group.

OPPORTUNITIES:

Ample scope for financing flats and apartments for the salaried

class in the higher income group.

THREATS:

Nationalized banks like SBI, Union Bank and PNB

Private Banks like HDFC and Standard Chartered and Citibank

with its Home Credit scheme.

CONCLUSIONS

The Indian customer has come a long way from purchasing to fulfilling their

needs from buying a house. Customers now grab everything that comes their

way but they do their own survey of optimum loans; same is the case with

banks, and housing loans. With innumerable choices before him, the

customer is indeed the king. It is therefore imperative that if a bank has to

succeed in the competitive world, it should be technological savvy, customer

centric progressive driven by highest standards of corporate governance and

guided by sound ethical values and above all should be cordial and should

have personalize customer services.

There is scope of exploiting the vast middle income group by releasing loans

with special interest rate which would be beneficial to both parties.

RECOMMENDATIONS

The following suggestions are strongly recommended:

1. To broaden the customer base the vast middle income strata should be

fully exploited

2. Simplify the procedure, reduce service charges, and demand only the

basic essential proof.

3. Most banks are reluctant to advance loan to the service class e.g. lawyers,

police officers etc.. This aspect must be exploited.

4. Adoption of flexible and more lenient penalty should the customer fail to

deposit the payment on time. The penalty should be on case to case basis

rather then the same for the entire customer base.

5. Restriction to be reduced to bare minimum for loan advances and for

repayment. For e.g. offer long-term repayment facilities and have no age

restriction to choosing repayment.

6. The maximum age for repayment could be increase to 65-70 years of age.

Such facility will help grow fast retail segment of the bank.

7. Offer multiple repayment loans.

8. Service class to be exploited by offering special reduced rates and linking

the repayment from the source from where the pay-cheque to the

employee is issued. This needs to undergo special contract with

government organisation to ensure implementation.

GLOSSARY

 

Equal Monthly Installment (EMI) :

Loan repayments are usually in Equal Monthly Installments over the tenure of the loan. Some banks also offer a Variable Installment Scheme were in repayments are higher in the beginning of the loan period. This is beneficial for those individuals who are trying to maximise their tax breaks in the initial years and expect future tax breaks to fall (we believe that the opposite is more likely!)

Fixed /Floating rate:

Under a floating rate loan, the interest rate on the loan varies from time to time depending on the Prime Lending Rate fixed by the Reserve Bank. This change can happen as frequently as one in six months. If the PLR falls, you benefit as the effective interest rate on your remaining loan falls. However, your payments every month stay the same. The Finance Company will refund some of your EMI cheques and effectively compensates you by reducing the tenure of the loan. The reverse happens if the PLR rises, much to your disadvantage.

Choosing between fixed and floating loans:

In the last 2-3 years the PLR has fallen as the Indian economy had slowed down and demand for money was low. If you expect this trend to continue, you stand to benefit from a floating rate loan. If interest rates begin to rise again, you can prepay your floating rate loan and lock in to fixed rate loan. You must them choose a floating rate loan with no repayment charges (one is offered by HSBC). However, if you do not want to speculate on interest rates and need a stable loan to help planning the future, then go for a Fixed rate loan.

Rest:

Interest rates are quotes on a daily rest, monthly rest or annual rest basis. The annual rest quote implies that the company gives you the credit for the monthly principal repayments only at the end of each year. Such loans are therefore more expensive than a

monthly /daily rest loan. The shorter the tenure of the loan, the greater the effective interest rate difference will be. AbodesIndia.com has standardised all interest rate quotes from companies on a MONTHLY REST basis ( rates will therefore look different from Company brochure quotes which maybe on a annual rest basis)

Processing Fee:

A one time fee which is normally non-refundable and payable along with your initial loan application. Rates can vary from 1-2% of the loan amount.

Administrative Fee:

A one time fee which is normally non-refundable and payable before your loan is disbused. Rates can vary from 1-2% of the loan amount.

Commitment fees:

This interest is charged if you do not draw the sanctioned loan within a period of 6-9 months. The rate of interest is usually about 1-2% a months.

Interest Tax:

Housing Finance companies have to pay a tax on the interest income they receive from you. They sometimes pass this on to the customer. Always check with the company if the interest rate they are quoting includes interest tax or not. This tax normally about 2% of the interest rate charged. E.g if the interet rate quoted is 14% then the actual interest rate including interest tax is about 14.28%. AbodesIndia.com has standardised all rates AFTER Interest Tax, on a monthly rest basis to aid comparison across companies.This rate is called the Effective rate.

Prepayment charge:

Most Housing Finance companies charge a fee for prepaying your loan before its full tenure is over. This helps them plan their finances, at your expense. Your earning capacity will normally increase with age and a prepayment fee can be a big cost. This fee also limits your ability to refinance the loan if interest rates fall after a few years. The fee is normally in the range of 1-2% of the

prepaid amount.

Refinance Charge:

Some Housing Finance companies do not charge you for prepayments from your own savings. However, if you retire a loan using money borrowed from another Finance Company, you will have to pay a Refinance charge of 1-2% of the loan outstanding.

Down payment:

Housing finance companies would normally give a loan up to 80-85% of the value of the property. The remaining amount would have to paid by the buyer (to the seller), as a down payment before the he draws on the loan.

Tenure of the loan

Normally, loans are given for a period of 1-15 years. Some companies also give loans upto 20 years at an additional interest cost of 0.25% -0.5%. Most companies do not allow loans for a fraction of a year.

BIBLIOGRAPHY

www.indiaproperties.com

www.apnaloan.com

The Economic Times, 15 February 2005

The Financial Times, 06 December 2004

Philip Kotler, Marketing Management, 9th edition

Akkar ;Marketing Research

Business Today, July 20 2004 issue