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Home Loan Advantages
The need for home loans arises not because property prices are heading
upwards all the time but because home loans make great sense from a long-
term savings perspective. Not only are home loans a handy tool for the
common man to own a roof over his head but they also help save money in
the long run.
With skyrocketing real estate prices, people are increasingly opting for
housing loans to acquire their dream home. Interest rates are coming down
all the time and the housing finance companies are literally falling over each
other to lure the prospective home-seekers.
Not with standing the tax breaks and generous lending rates, a lot of people
still can't arrange resources for the down-payment, which comes out to be at
least 15 per cent of the property value. Taking cognizance of the situation,
HFCs are coming up with home loan products called ’zero down payment
loans,’ wherein 100 per cent funding is provided for select properties. These
lucrative offers are other major reasons for why people are opting for home
loans.
Even if one can afford to buy a home with one's own money, home loans
should be availed because they act as good savings instrument. According
to industry estimates, the long term average return in investing in a home is
about 20% p.a. while the average cost of borrowing funds in the market
today is about 10% p.a. (considering all tax breaks).
For salaried employees, housing loans are the best way to avail tax benefits.
Many people simply go for the home loans in order to avail these benefits.Interest payments up to Rs 1.5 lakh on housing loans are deductible from
the taxable income and there is a further tax deduction of Rs 4,000 against
repayment of principal. In case a person stays in a rented house, the cost of
the loan will be nearly zero per cent since he will be saving a decent amount
on rent.
NEED FOR HOME LOANS
Few decades back, buying a home was not a very easy task as there were hardly any lenders available to loan the
ever increasing astronomical lump sum of money. However, with time, the rising property prices and the burgeoning
housing finance market in the country, made the phenomenon of the home loans easy and the dream of buying a
home possible. Also, the HFC’s (Housing Finance Companies) and banks have come up with so many home loan
plans that they have become an answer to every customer’s necessity. Apart from this, the changing equation of
market has also provided customers with several reasons to opt for a home loan. Here are few reasons to why home
loans have gradually became a necessity in the society.
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Eligibility
Individual(s ) of 18 years and above with steady sourse of income including persons
engaged in agriculture & allied activities.
Individual(s) should have to be the saving account holder in the bank
Any Individual(s) can apply for loan based on their Income and repayment capacity.
The priority is being given to the person(s) who are the employees of government or
semi-government firm.
Purpose:
1. To purchase /construct a new house/flat.
2. To purchase an existing(old) house/flat.
3. To extend an existing house.
4. To repair/renovate an existing house/flat.5. Reimbursement of investment made in housing [for items 1-4] from own resources.
Maximum tenor: The maximum loan tenure is 15 years.
Loan amount: Loan upto RS 20,00,000 for purchase of land or plot/construction of house.
Loan upto RS 1,00,000 for repair and renovation of house.
Loan upto RS 1.5 lacs is being sanctioned at branch level by branch manager. More than 1.5 lacs
is being sanctioned at the head office by the General manager.
Moratorium Period: For construction of new house/ flat or purchase of house/ flat on
installments, a Moratorium Period(repayment holiday) till 2 months after completion of
construction or 18 months from the disbursement of 1st
installment of loan, whichever is
earlier, may be permitted at the request of the borrower.
Rate of Interest: The Reserve bank of India has all the rights reserved with it to make changes
in rate of interest charged by the bank . And banks has to follow the interest rates decided by
the bank. The Apex bank gives loan for 10 years or 15 years.
At present the Rate of interest is:
1. For the period of 10 years: 8.75%
2. for the period of 15 years: 9.25%
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For the employess/staff of bank:
1. For the period of 10 years: 8.50%
2. For the period of 15 years: 9.00%
The calculation of interest will be done on EMI basis.[EMI or Eqadated monthly installmentsrefers to the fixed sum of money that you will be paying to the bank every month. The EMI
comprise of both interest and principal repayment.
The calculation of rate of interest will done on half yearly basis ,in the case of loan of
employees/staff of bank.
Margin money
In the cases of House loans margin money of 20% is fixed.
Processing fee
Processing fee will be charged upto RS 0.75% of loan amount or minimum of 500. The
processing fee will not be charged for bank employees/staff.
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Loan Through Apex Bank
Cons. Loan (for other) 12.00% 12.00% 12.00% 12.50% 12
Cons. Loan (for Staff) 10.50% 9.00% 9.50% 9.50% 9
House Loan (Upto 10 yrs forother)
8.50% 8.50% 9.00% 10.00% 8
House Loan (above 10 yrs for
other)9.50% 9.50% 9.75% 10.50% 9
House Loan (above 15 yrs for
other)- - - - 9
House Loan (Upto 10 yrs for
Staff)8.50% 8.00% 8.50% 8.75% 8
House Loan (above 10 yrs for
Staff)9.00% 8.50% 9.00% 9.00% 9
House Loan (above 15 yrs for
Staff)- - - - 9
HOUSE LOAN
Top
Purpose or purchases/construction of Houses, ModernisationMax. Loan
Amount
Rs. 15.00 lacs
Margin Money 20.0% up to Rs. 25,000
25.0% up to Rs. 50,000
0.0% above Rs. 50,000
Interest Rate Up to 5 years Above
5years
Up to 2.00 lacs 9.50% 10.00%
Above 2.00 lacs 10.00% 10.50%@ 9.5% (in case of Employees*)
Insurance Insurance of house
Repayment
Period
15 years on monthly basis including moratorium up to 18
months
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Security:-
i) Salaried
ii) Non Salaried
Mortgage of assets + Letter of Employer /AdvanceCheques
Mortgage of assets/ Advance Cheques
(Rs. in Crores)
S.No. PARTICULARS 2007-08 2008-09 2009-
1. Share Capital 110.93 122.02 122.9
2. Reserves 458.48 477.23 387.77
3. Deposit 2440.89 2923.21 3290.7
4. Borrowings 1116.76 1457.27 1861.4
5. Loans & Advances
O/S2450.12 2293.42 2503.4
6. Working Capital 4269.67 5057.18 5873.1
7. Investment 1227.10 2295.12 2856.8
8. Per EmployeeBusiness
7.44 8.15 9.11
9. NET PROFIT 26.39 29.97 17.98
S.No. PARTICULARS Percentage of growth over preyear
1 Share Capital 0.79 %
2 Reserves - 18.75 %
3 Deposit 12.57 %
4 Borrowings 27.74%
5 Loans & Adv. O/S 9.16 %
6 Investment 24.47%
7 Per employee business 11.78 %
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Consolited Financial Status of District Central Co-operative Bank
Rs.in Crores
Sr.
No.PARTICULARS 2007-08 2008-09
2009-10
Tentative
1 No. of DCCB 38 38 38
2 Share Capital 342.77 392.23 451.06
3 Reserves and Other Funds 1409.08 1568.16 1725.65
4 Deposits 5226.25 6041.53 7050.35
5 Borrowings 1883.37 1810.75 1919.40
6 Loans & Adv. O/S. 5262.44 5422.75 5802.34
7 Working Capital 8823.44 9846.34 11027.90
8 Profit for the year (Amt.) 82.85 121.64 175.70
9 No. of Banks 37 37 38
10 Loss for the year (Amt.) 1.54 4.49 0
11 No. of Banks 1 1 0
12 Accumulated Profit (Amt.) 45.13 65.45 94.90
13 No. of Banks 15 17 19
14 Accumulated Loss (Amt.) 406.24 330.53 287.73
15 No. of Banks 23 21 19
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Growth rate during the year by DCCB
Sr.No. PARTICULARS Growth Rate during the Year
1 Share Capital 15 %
2 Reserves and Other Funds 10.04 %
3 Deposits 16.70 %
4 Borrowings 6.00 %
5 Loans & Adv. O/S. 7.00 %
FINANCIAL STATUS OF PACS
Membership in lakhs
Rs.in Crores
*(Tentative)
S.No PARTICULARS 2006-07* 2007-08* 2008-09*
1. N0. OF SOCIETIES 4526 4526 4526
2 MEMBERSHIP 57.87 58.71 59.39
3 BORROWING MEMBERS 32.99 33.58 34.18
4 SHARE CAPITAL 306.95 307.79 341.29
5 RESERVES & OTHER FUNDS 83.15 84.32 86.84
6 DEPOSITS 452.82 599.66 665.24
7 BORROWINGS 3314.04 3579.17 3397.71
8 LOANS & ADV. O/S 2904.88 3224.41 3415.14
9 WORKING CAPITAL 4204.20 4372.37 4509.54
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10 PROFIT FOR THE YEAR :-
(A) No.of Societies 1879 1923 1945
(B) Amount 43.63 45.95 57.76
11 LOSS FOR THE YEAR :-
(A) No.of Societies 2647 2603 2581
(B) Amount 182.49 181.10 173.53
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Home Equity Loans
RBI Directives for Home Loans in India
The Reserve Bank of India (RBI) has given a recent and elaborate directive to Indian banks. The Reserve Bank of
India has asked the banks to be fair and transparent while signing their home loan agreements with the consumers.
This latest RBI Directive for Home Loans for resident Indians have followed the hue and cry raised by various
consumer sections regarding home loans. RBI directive for Home Loans has stressed on the fact that while giving a
home loan the banks should not combine their loans with their own prime lending rates (PLR) which often culminates
in pro-bank and against consumer interest.
The recent RBI directive for home loans has also emphasized that the consumer should get proper credit counseling
before signing any loan agreement. The banks themselves can provide the credit counsellings or it can also be
provided by non-governmental organizations too. Consumers often cry foul about of not receiving benefits of falling
interest rates as banks tie their floating rate loans with their prime lending rates or PLR and thus and even when
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rates dive downwards the banks kept the PLR unchanged.
On the other hand when interest rates are sky rocket, the banks increase the benchmark rate, thus making
customers pay a higher rate and consequently increase the number of EMIs too. The RBI ordered th banks to amend
such illogical rules.
Thus the elaborate RBI directives for home loans aim at making the home loan process more logical and transparent.The detailed RBI guideline for Home loan has underlined the fact that the individual borrowers should ask for the
exact tenure and EMI while taking a fixed rate loan. The RBI has also promised to probe into all consumer complaints
if it is bought to the regulator's notice.
1. What is banking?2. Basic Definition: A system of trading money which:
provides a safe place to save excess cash, known as deposits.supplies liquidity to the economy by loaning this money out to help businesses grow and to allow consumers topurchase consumer products, homes, cars etc.
3. What are banksInstitutions which deals in money and credit.An intermediary, which handles other people’s money both for their advantage and to its own profits.A financial institution that links the flow of funds from savers to the users.Plays an important role in the economy of any country as they hold the saving of the public.
4. Types of banks in India
o Central Bank: The Reserve Bank of India is the central Bank that is fully owned by the Governmento Public Sector Banks: State Bank Group, Regional rural bankso Private Sector Banks: Foreign Banks, Scheduled and Non- Scheduled Bankso Co-operative Sector: State Co-operative Banks, Central Co-operative Banks, Primary Agriculture Credit
Societieso Development Banks/Financial Institutions: IDBI, ICICI, NABARD
5. Commercial Role of BankingIssue of banknotes (promissory notes issued by a banker and payable to bearer on demand)Processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other meansIssuing bank drafts and bank chequesAccepting money on term depositLending money by way of overdraft, installment loan or otherwise
6. Commercial Role of BankingProviding documentary and standby letters of credit (trade finance), guarantees, performance bonds, securitiesunderwriting commitments and other forms of off-balance sheet exposuresSafekeeping of documents and other items in safe deposit boxesCurrency exchangeActing as a 'financial supermarket' for the sale, distribution or brokerage, with or without advice, ofinsurance, unit trusts and similar financial products
7. Economic Role of BankingIssue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer'sorder.Netting and settlement of payments.Credit intermediationCredit quality improvementMaturity transformation
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