A home loan is a product which is offered by every bank. It is one of the most popular loan products offered by banks. It forms a major part of every bank's asset side. It is given by banks to purchase land, for construction of house, as well as construction linked plans. Usually security of equivalent amount or mortgage itself on land or house is created. Loan to value ratio (LTV) is considered by banks to decide margin. After seeing the amount of frauds in home loan, documentation of home loan has become standardized. In granting home loan insurance is must. In every home loan agreed bank clause is attached. There is a cut throat competition among banks in this segment which results to competitive interest rates for the borrowers. Also nowadays switch of home loan facility as well as reduction of pre payment charges is also approved by RBI (Reserve Bank of India), which has given home loan borrowers to switch to bank offering affordable rate of interest as well as repay the home loan before time .This gives me an area to find out are customers awareness about home loan products, it's features, recent changes that have come in home loan. Moreover to find out acceptability of home loan among customers.
With the current property revolution the real estate industry is at an all time high. Thus with the increase in demand for property, the demand for home loans in India has increased simultaneously. Home loans are being drawn by number of people with varied demographics. But, even after having such a large demand for home loans the financial and banking sector haven't come up with a systemized procedure so that they can reach the potential and needy customers. Thus, we at loan in India came up with a dedicated website which works in favor of the user by scrutinizing and weighing the various home loan options available in the market and coming up with the best offer. For reaching to a conclusion home loan in India considers a number of options including home loan interest rates, documentations requires, ease of transaction and many others. Loan in India under home loan requirement of its user and this is the reason that it has been running successfully from past many years. Loan in India has a number of associate home loan banks whom loan in India milks to offer its users not only a cheap home loan but also the best one.
Growth in off take of home loans continued to slow in September despite aggressive marketing by banks.
According to data released on sect oral deployment of credit by the Reserve Bank of India, home loan disbursements came in at 11.2% for September compared with 15.6% in the corresponding month last year.
What exactly is a 'home loan'?
Home loan is basically a monetary assistance offered by a bank or other financial institutions to fulfill your residential needs. In this transaction, the purchased home itself stands as 'security' until you pay back the entire loan amount with interest.
Major players in market:-
1.Birla home finance limited 2.HDFC home loan
3.PNB home loan 4.HSBC home loan
5.BOB home loan 6.SBI home loan
7.ICICI home loan 8.Sundaram home finance
9.Canara bank home loan 10.IDBI home loan
11.LIC home loan 12.Dewan housing home loan
13.GIC home loan
Need for Home Loans:-
Few years back ,buying a home was not a cup of tea for every one as there were very few lenders available to provide loan. with the time as properties price rises ,housing finance market in the country also emerged and made home loans easy and the dream of buying a home possible for common man. The HFC's and banks have come up with so many home loan plans .apart from home loan HFC's & bank provide many reasons to opt for home loan.
Home Loan Advantages
1. Property prices are rising day-by-day. 2. Buying a home make great sense from a long term savings. 3. Tax deduction available 4.if we want to purchase a home in a private real estate project opts for home loan because it provides you authenticity of that project.
Home Loan is available for:
1. Purchase of new/ old dwelling unit. 2. Construction of house. 3.purchase of plot of land for construction of a house 4.Repaying a loan already taken from other Housing Finance Company/Bank 5.Repaying period up to 30 years ( floating rate option)
Features of home loan
Home loans are available on fixed rate of interest as well as floating rate of interest .the type of interest clients opt for will entirely depends on personal prefrance
Fixed rate of interest- in fixed rate loans, the interest rate remains fixed over the life of the loan, irrespective of the interest rates in the open market. Benefit of fixed rate loans is that they remain steady over the years, making at least one aspect of your monthly cash flow predictable. But the biggest disadvantage of fixed rate of loan is that lenders charge a higher rate of interest because if rates shoot up, they lose the opportunity to make more money on the funds they are lending.
Floating rate loans- in floating rate loans ,the rate of interest changes according to a set formula as interest rates fluctuate in the open markt. Advantage of floating rate of interest is that lenders charge a lower rate for such loans because clients are taking interest -rate risk. and disadvantage is that interest rates may rise any time and clients have to more than fixed rate loans.
General Information
The loan amount is based on the repayment capacity of the customer. However, it cannot be more than 85% of the cost of the property (including the cost of the land).
The minimum term of home loan is 5 years, while the maximum duration for the loan is 30 years, subject to the retirement age of the applicant.
Home Loans can be applied either individually or jointly, with spouse, children (son or daughter) and even earning parents (father or mother), but if staying with the applicant and having regular income.
Home loan eligibility can be enhanced by repaying the outstanding loans, clubbing the income, increasing the home loan tenure and opting for a step-up loan.
The amount of loan sanctioned varies from bank to bank. Generally, the maximum loan amount granted for the applicant would be 80% to 85% of the cost of the home.
The eligibility for the applicant depends upon his/her capacity of repayment. It stiffens with the increase in home loan rates.
Processing charge, pre-payment penalties, commitment fees and miscellaneous costs accompany a home loan, in many of the cases.
Providing additional security, like bonds, fixed deposits and LIC policies, or having a guarantor can enhance your eligibility for a home loan.
Eligibility Criteria
The minimum age limit for the person applying for loan is 21 years.
For Government employees and those working at public limited companies, the maximum age limit for applying for home loan is 60 years, while for salaried individuals, it is 58 years.. For self employed people, the maximum age limit is 65 years.
The applicant should be graduate.
The applicant should have a stable source of income, at the time of availing the loan and should have a saving history as well.
Documents required
1.Salaried Individuals-:
Salary slip/Form 16 A
A photocopy of the first and last pages of Ration card or copy of PAN/Telephone/Electricity bills
A photocopy of Investments (FD Certificates, Shares, any fixed asset etc. or any other documents supporting the financial background of the borrower
A photocopy of LIC policies with the latest premium payment receipts (if any).
Two passport size photographs
A photocopy of bank statement for the last six months
2.Self-Employed/Businessmen-:
A brief introduction of Business/Profession
Balance Sheet, Profit and Loss account and statement of income with Income Tax returns for the last 3 years, certified by a CA
A photocopy of Advance Tax payments (if applicable)
A photocopy of Registration Certificate of establishment under shops and Establishments Act/Factories Act
A photocopy of Registration Certificate for deduction of Profession Tax (if applicable)
Bank statements of Current and Saving accounts for the last 6 months
A photocopy of Certificate of Practice(if applicable)
A photocopy of any bank loan (if applicable)
A photocopy of the first and last pages of the Ration card or a copy of PAN/Telephone/Electricity Bills
A photocopy of LIC policy (if applicable)
A photocopy of investments (FD Certificates, Shares, any other fixed asset
Two passport size photographs
Terms and conditions
Quantum of loan amount
1.In case of Salaried:-
Monthly Income
Modified Criteria
Up to Rs. 20,000/-
36 times of monthly income
More than Rs.20,000/- & up to Rs. 1 lac
48 times of monthly income
More than Rs. 1 lac
54 times of monthly income
2.In case of others viz. professionals / self-employed / businesspersons etc., 5- times of average annual income (last three years).
Margin: it means margin % will be bear by loan applicant
Monthly income
Purpose
Margin
Upto Rs.20000/-
Purchase of plot
20%
House/flat already constructed from own resources
25%
All other cases
20%
Above Rs.20,000/-
Purchase of plot
20%
House/flat already constructed from own resources
20%
All other cases
20%
Clause generally put by the bank in home loan
1. As security against the loan amount, the bank will take an equitable mortgage of the housing property and/or other suitable securities.
2. No Fees will be charged on part prepayment / full prepayment of the loan amount.
3. The loan can be repaid in a maximum period of 30 years taken under floating rate option subject to the period up to age of retirement in case of salaried persons and 70 years in case of others.
7 most common Home Loan problems faced by borrowers in India
1.rejection at the first stage- many of home loan applications do not pass even the first stage. They are rejected due to incompatibility between the borrower's qualifications and lenders requirements. like income, age, documents etc, so the best way to avoid being rejected in this way is to check the eligibility requirements of lending banks carefully and apply only to that bank which matches your profile.
2.processing fee not refunded- Banks require about 0.25% to 1% of the home loan amount to be submitted as the processing fees. This processing fees is generally not refundable. So clients feel very disappointed, if loan is not sanction and processing cost bear by clients just to apply for home loan and without availing home loan.
3.desired loan not sanctioned- home loan amount sanctioned is based on mostly on repayment capacity of the borrower.
Bank decides the Repayment capacity of borrower by clubbing following factors- 1.monthly income.
2. financial history,
3.other unpaid loans with the borrower,
4.past repayment record,
5.credit card usage history if any,
6.bounced cheque,
7.average balance with the banks,
8.continuity in present employment, total years in employment, nature of employment etc.
These factors all clubbed together help the bank to decide whether it will be able to recover its money satisfactorily or not. If you get rejected due to any such criteria, you can increase your eligibility by clubbing together your spouse's, father's, son's, relative's income and make them a co-borrower. In addition to it, if you have sufficient funds in NSC's, provident funds, LIC policies etc. you can keep them as collateral and ask the bank to finance your home loan.
4. The interest rate dilemma- Almost every home loan borrower faces interest dilemma whether to go for a fixed rate or floating rate of interest. Even after deciding on a particular loan regime, the home loan terms and condition fine prints can create havoc with your interest rate. Fixed rate of interest doesn't mean that interest will be fixed during the tenure of home loan ,it vary from bank to bank some banks write in their fine prints that fixed interest rate will be fixed for every 2 years and it is depends on bank to bank basis. to avoid such a situation essentially means that you study the terms and conditions of home loan carefully and clearly ask the bank about such things. In case of floating interest rates the facts can be verified by checking how the interest rates on home loan dropped during low interest periods. Ask your bank for some historic floating rate changes.
5. Difference in property valuation- bank has its own way to do the valuation of property. According to bank parameters, bank assigns a value to it which can be significantly less than the price quoted by you for the property. Bank will only lend you only up to the value of property. This cause a significant gap between what clients need and what banks willing to lend. so to avoid this borrowers can get the property valued before appling for home loan from a bank approved valuator.
6.the down payment- Banks require the borrower to fund at least 10% to 20% (varying from bank to bank) of the entire loan amount as the down payment for the home loan. This amount has to be deposited before the disbursal of the home loan. In the absence of such down payment the bank will refuse home loan to the borrower. For a home loan of 10 lacks this could mean anything between 1 to 2 lacks. This amount must be readily available with borrower and bank valued the property less then market price so that gap amount will also bear by the borrower.
7. Title deeds and NOC Documentation Problems-To avoid the rejection and problem in availing the home loan borrower have to furnished the title deeds and NOC documents in proper format as require by the bank.get all the information from bank and take necessart steps to get documents ready within the stipulated time frame.
Chapter-2) Review of Literature
For many millions of Indians, the single greatest achievement in life was to own a home, and thanks to a range of banking services now available, home loans are a simple affair now. In fact loans are now sold as a product and the applicant is treated as the customer. Gone are the days when ordinary folk depended on a lifetime of savings and resorted to the local moneylender to build or buy house. Home loans make it possible to move into your own home, almost as soon as you can afford the down-payment and keep paying for it while you also live in it. But the home loan in case of a repeated default
Home Loan Agreement is a contract entered between the lender and the borrower that regulates the terms of a loan. But a 47 page document which requires more than 72 signatures from the customer is not well read by the customer for the reasons known to him. It is viewed by the customer as a mere formality to get loan and he also believes that nobody reads it. In the hurry to acquire that dream home, various clauses in the loan agreement are often overlooked. However, these clauses have a significant bearing on areas ranging from interest rate to repayment schedules. But the problem is when they start to repay their loans they face numerous problems but there is no avail. In any case, not reading a loan agreement thoroughly can land the consumer in a problem. Here are the some of the clauses in the loan agreements which should be browsed for inside a loan agreement and be clarified with the lender
Chapter-3 (Scope of the study)
I done my dissertation in Sector-27&37 Noida from 13.12.2012 to 28.02.2013.In the project I got exposure and details about this home loan schemes of bank which helped me to increase my existing domain knowledge about the financial products of the bank, and also helped me to judge awareness level of noida residents. But due to limited time frame I was not able to compare this scheme with any other loan products of bank.
Chapter-4 (Objectives of the study)
The proposed research study is to be centered on fulfilling the following objectives:
To check the awareness of home loan among sector 27&37 residents of noida.
To identify the factors influencing awareness levels.
To develop the strategy to increase the awareness level.
Chapter-5 (Research Methodology)
Hypothesis: - 1) H0-The residents of Sector 27&37 Noida are fully aware of home loan scheme.
H1-The residents of Sector 27&37 Noida are not fully aware of home loan scheme.
Ho-The level of awareness is independent of the age of the respondent.
H1-The level of awareness is dependent on age of the respondent.
H0-The level of awareness is independent of educational background of the respondent.
H1-The level of awareness is dependent on educational background of the respondent.
H0-The level of awareness is independent of income of the respondent.
H1-The level of awareness is dependent on income of the respondent.
H0-The level of awareness is independent of gender of the respondent.
H1-The level of awareness is dependent on gender of the respondent.
Research Design: - Exploratory Research
Sample Size and Design:-
Target Population-Universe or the whole mass under study will be Sector 27&37 residents of Noida.
Sample Frame- will be educational qualifications, working and non-working males and females, professionals, students and business class.
Sampling Unit-Individuals.
Sampling method -Non Probability method under which convenient Sampling method.
Sample size -will be around 200.
Method of Data Collection- Primary data
Tools of Data Collection- Questionnaire
Period: the primary data is proposed to be collected through various means of communications, i.e. In person, by telephone, e-mail , between 10.01.2013 to 25.01.2013 the period and mode of collecting data shall be reviewed suitably at the appropriate times so as to make it meaningful and closest possible to the objectives set for the research study.
Chapter-7
Data Analysis and Interpretation
Gender of the respondents
1
male
102
2
female
98
In the survey conducted by me there was quite equal proportion of gender i.e. males and females participated virtually equally 51% males and 49% females
Chi-Square Test
Observed Frequency (O)
Expected Frequency (E)
(O-E)
(O-E)^2
(O-E)^2/E
102
100
2
4
0.04
98
100
-2
4
0.04
{O-E^2/E= 0.08 Significance Level=5% Confidence Level=95%
Degrees of Freedom=1 Tabulated value of chi-square=3.84
Since the calculated value of chi-square is less than the tabulated value (3.84) we accept the null hypothesis (Ho) that level of awareness is independent of gender of the respondent.
Education
1
upto 10th
13
2
12th
5
3
graduation
117
4
post graduation
65
In the survey conducted most of the respondents i.e. 59% were graduates , 33% were post graduates, 6% were educated till class 10th and 2% till 12th standard.
Chi-Square Test
Observed Frequency (O)
Expected Frequency (E)
(O-E)
(O-E)^2
(O-E)^2/E
13
50
-37
1369
27.38
5
50
-45
2025
40.5
117
50
67
4489
89.78
65
50
15
225
4.5
{O-E^2/E= 162.16
Significance Level=5% Confidence Level=95%
Degrees of Freedom=3 Tabulated value of chi-square=7.82
Since the calculated value of chi-square is more than the tabulated value (7.82) we reject the null hypothesis (Ho) and accept the alternative hypothesis that level of awareness is dependent of gender of the respondent.
Income level
Upto 3 lac
24
3-5 lac
59
5-8 lac
87
above 8
30
In the survey conducted by me the income of respondents were varying.44% respondents were from 5-8 lac income group.29% were from 3-5 lac income group.15% were from above 8 lac category and remaining 12% were from upto 3 lac category.
Chi-Square Test
Observed Frequency (O)
Expected Frequency (E)
(O-E)
(O-E)^2
(O-E)^2/E
24
50
-26
676
13.52
59
50
9
81
1.62
87
50
37
1369
27.38
30
50
-20
400
8
{O-E^2/E= 50.52
Significance Level=5% Confidence Level=95%
Degrees of Freedom=3 Tabulated value of chi-square=7.82
Since the calculated value of chi-square is more than the tabulated value (7.82) we reject the null hypothesis (Ho) and accept the alternative hypothesis that level of awareness is dependent of gender of the respondent.
2. Type of bank a/c you are having?
1
saving
106
2
current
44
3
both
40
In the survey conducted I came to know that 56% respondents were having saving bank a/c's. 23% were having current a/c's with bank.21% respondents had both the accounts.
3.Bank a/c with -:
1
private bank a/c
45
2
public bank a/c
85
3
both
60
45% respondents were having accounts with public sector bank a/c and 24% respondents were having a/c with private sector banks.31% respondents were having a/c with both public as well as private sector banks.
4.Since how long you have been associated with this bank
1
0-5years
37
2
5-10years
38
3
10-15years
55
4
15-20years
32
5
above 20 years
40
In the survey conducted I came to know that27% respondents were associated with their respective banks from 10-15 years, 20% were for more than 20 years. 19% respondents were associated with bank for 5-10 years and 16% were associated with 15-20 years.18% respondents are with bank for 5-10 years.
5.Your awareness about home loans
1
good
87
2
fair
68
3
poor
45
43% respondents feel that there awareness level is good whereas 34% feel that there awareness level is fair and 23% felt there awareness level is completely poor.
Chi-Square Test
Observed Frequency(O)
Expected Frequency (E)
(O-E)
(O-E)^2
(O-E)^2/E
87
66.66
20.34
413.71
6.20
68
66.66
1.34
1.79
0.02
45
66.66
-21.66
469.15
7.03
{ O-E^2/E= 13.85
Significance Level=5% Confidence Level=95%
Degrees of Freedom=2 Tabulated value of chi-square=5.99
Since the calculated value of chi-square is more than the tabulated value (5.99) we reject the null hypothesis (Ho) and accept the alternative hypothesis that residents of sector 27& 37 Noida are not fully aware of the scheme.
Residence is
1
Owned
119
2
rental
81
In the survey conducted I came to know that 59% respondents had there owned residence and 41% had rental residence.
10.Mode of payment
1
Self
39
2
from bank
55
3
from other finance institution
25
In the survey I came to know that 46% respondents have availed home loan facilities from bank .21% availed this facility via financial institutions and 33% respondents have arranged from their respective sources
11.if ans of above question is " 2 "or "3" then what is your opinion about the product
1
Strongly agree.
23
2
agree
19
3
neutral
9
4
disagree
12
5
strongly disagree
17
Of the respondents who have availed home loan facility 29% respondents are strongly agreeing about the nature of product and are very satisfied .24% also agree that home loan is a good product for them.11% were having indifferent opinion about the product.15% disagree that the product was good and according to the needs whereas 21% were completely dissatisfied with the product.
12. Factor influences the awareness level about the home loans.
1
News paper advertisement
72
2
adds on T.V
43
3
Hoardings
25
4
neighbour
32
5
relatives
28
In the survey conducted I found out that 36% respondents feel that there awareness level is mainly influenced by news paper advertisement.21% feel that there awareness is influenced by television adds. 16% were influenced by there neighbours .14% are influenced by there relatives whereas 13% by the hoardings they see from bank.
