PROJECT REPORT ON CONVERGENCE OF BANKING SECTOR TO HOUSING FINANCE
Earlier it was very difficult to take a loan from the
financial institutions. Interest rates were high and a lot of documentation
was there. But today when there are a large number of financial institutions
in India, who are providing credit facility, it has become very easy to take
Terms and conditions are
liberal i.e. low interest rates, less documentation etc. Interest rates are
becoming globally competitive and declining continuously. Now a day just
think of purchasing a car and car-financing companies will start knowing at
your door and ringing your phone.
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Financial institutions have
adopted liberal credit policies. They enquire less about end use of funds.
Various types of loans are there and easily available at cheap rates.
When we take the case of home loans, it is a very safe area of loans from
the point of view of financial institutions. They are easier to increase
their share in the home loan sector. So they are coming with the attractive
schemes. Customers can have the benefit of liberal terms and conditions as
well as tax benefits if they choose to take a home loan. So the use has gain
attention. The increasing number of home loans available today as
strengthened the middle class individual to venture forth and fulfill his
Today, the demands of the current social status necessitate that varied
means are tapped into in order to achieve the ultimate goal-better living
Home loan proposals are thus gaining popularity due to their
easy-installments schemes, low interest rates and high returns on the
standards of living. While a home loan generally includes financial for home
extension, home improvement loans are well as loans for property medication;
the terms are more commonly applied to finance schemes for purchasing
Home loans are loans you have
access to, depending on whether you want to buy or build a house and can
also be used to repair or extend an existing house.
Who can avail of these loans?
According to lending
institutions, any Indian resident who is over 21 years of age at the
beginning of the loan and below 65at its maturity can avail of the loan.
Salaried Employees as well as Self- Employed citizens can apply. NRI
Salaried and RBI Self Employed, under RBI guidelines, can approach only
nationalized banks and other HDFC for loans.
Why should one option for a
loan to buy a house?
Taking a loan seems like a good option when the money at hand is
insufficient to buy the house of your dreams. Consider couples in their
twenties and thirties. They enjoy a good income currently, buy their
accumulated capital isn’t enough to purchase a house. Whereas a home loan
can give them access to capital their current earnings.
Also, if you take a 10 years old loan when you are thirty, you could repay
it by the time you’re forty. So you don’t have to be burdened with the
interest and are free to plan your retirement savings.
The Quantum of loan that one can avail of :
Loan sanctioned depend on your repayment capacity – which is based on your
current income and your future repayment capacity. You would include your
spouse’s name to enhance the loan amount.
The maximum loan can be sanctioned varies with each bank/institutions and
ranges from Rs.10 lakhs to Rs. 1 crore.
Benefits of taking a home loan:
A home loan is very different from a personal loan like a car loan for
instance. You can utilize a home loan for financing an asset that will hold
its value and even appreciate over the period of the loan. Though its price
could fluctuate in the short terms, Total Estate will show capital
appreciation over the years.
The value of your house generally while the loan remains constant. If you
had opted to wait, save up and buy a house, it would, in the long run cost
you much more; home loans also come with many tax benefits.
Tax benefits of taking a home loan:
The income tax authorities
look with favor upon those servicing a housing loan from specified financial
institutions. And, it is up to you to be wise enough to take advantage of
Section 24 of the Income Tax:
Interest on loan till Rs.1.5
lakhs per annum is exempted form income tax (under section 23/24(1) of th
Income tax act).
Section 88 of Income Tax Act:
You get a 20% rebate on repayment of principle during a financial year. Once
again, over the years, the principle repayment eligible for rebate has been
enhanced from Rs.10,000 to the current limit of Rs.20,000 Stamp duty,
registration fee or transfer of such house property to the assesses is also
considered under this amount.
Financial Institutions, which
give, home loans:
Financial implications of
availing a loan, small or big.
There are several expenses
involved apart from repayment of the actual loan amount:
A processing fee (PF) is charges at the time of submission of the
application form and covers expenses incurred for processing the application
form. This fee has to be paid upfront by the customer – in some cases, it is
to meet operating expenses.
A simple interest calculated on the disbursement amount in case of a
plot under construction.
The EMI is an abbreviated form of the equated money
installment and is simply referred to as monthly installment in common
parlance. And, being a self-explanatory term that is exactly what it is. The
amount you will have to pay you financier every month when repaying your
loan. Being a monthly payment, at the end of the year, you would have paid
Types of loans available
Broadly two types- fixed rate
and variable rate loans; while the former deals with a fixed rate of
interest over the entire duration of the loan, the latter has the rate of
interest changing according to the fluctuations in the market.
Loan that one can avail
Up to 85-90% of the total cost based primarily upon the individual’s payback
General conditions that
govern a home loan:
These are likely to vary with
respect to the different types of housing loans:
The maximum period of
the loan is normally fixed by HFIs. However, HFIs do provide for different
tenors with different terms and conditions.
The Installment that
you pay is normally restricted to amount 45% of your monthly gross income.
You will be eligible
for a loan amount, which is the lowest as per your eligibility. This is
calculated on the basis of your gross income and payback capabilities.
Some HFIs insist on
guarantees from other individuals for due repayment of your loan. In such
cases you have to arrange for the personal guarantee before the disbursement
of your loan tasks place.
Most HFIs have a
panel of lawyers who go through your property documents to ensure that the
documents are clear and are not misrepresented. This is an added benefit
that you get when you avail of a loan from an HFI.
You repay the loan
either through Deduction against Salary, Post dated cheques, and standing
instructions or by Cash/DD.
3. Research Methodology
4. Home Loan Scheme of Various Bank
SBI Home Loan Scheme
PNB Home Loan Scheme
BOB Home Loan Scheme
HDFC Home Loan Schemes
5. Analysis & Finding
7. Recommendations and Conclusion
8. Annexure :-
Project Description :
Category : Project Report for MBA
STUDY OF CONVERGENCE OF
BANKING SECTOR TO HOUSING FINANCE
Pages : 70
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