BESS INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

Subject: Corporate Law

Assignment on

|SBI HOME LOAN}

Submitted To: Prof. Anahat Hulyalkar.

Submitted By: Nikita Jadhav Roll No.: 13

INTRODUCTION If you are planning to buy a home, then it is debatably one of the biggest financial decisions in your life. Taking a home loan can involve lots of stress because it requires a lot of investment of money. Each and every man has a definite goal to become an owner of his own home. This is the most amusing and stirring point of their lives. Therefore there are many people who splurge their time in looking for a home loan but they avoid frittering time for exploring their home loans. In fact getting a home loan is very easy nowadays. There are a lot of public and private financial sectors which provide home loans to different customers based on their credit. There are a variety of home loans which are based on different recent conditions. Different types of home loans include mortgage loans, home equity loans etc. Home equity loans are those loans which keep the home as a surety or a guarantee. In fact, it is also known as second mortgage. There are different advantages involved in taking a home loan. Such advantages include low rate of interest and deduction of taxes. Mortgage loans are classified into two categories. These categories are conventional or government loans and fixed rate loans or adjustable rate loans. The values of homes has doubled sensibly in recent times due to the rise in demand and the rapidly increasing rates of interest for these home loans at the same time. It is really good for those people who are interested in refinancing their home equity loans so that the home equity loans save a lot of money for them. In fact, one more added advantage they get is to pay lower monthly amounts to the concerned bank. You should take enough care before you select the proper channel for home loan. Remember to ask all possible hidden charges involved in a home loan like application, origination and withdrawal fees and hidden interests before taking a loan. This is because you may lose your property or home in case you cannot repay your loan amount.

SBI HOME LOAN

The State Bank of India, or SBI, is one of the earliest banks of our country and still respected by its competitive private counterparts. Like various other companies financing for your Home loans, the SBI has developed its own Home loan policies. The SBI Home loans have been formulated, especially with the knowledge of the basic needs of our nations people and are quite thrifty. The SBI Home Loan is available under various schemes and offers attractive interest rates.

SBI Home loan process

The first and foremost thing that comes in a home loan process is organizing your documents. It is highly recommended that you organize all your income statements before you buy or refinance your home loan. You are required to provide two years W-2 along with one month of paystubs if you are salaried. But if you are self employed, you need to provide two years tax returns along with YTD profit and loss statement. The second most task which you should do in a home loan process is to get qualified. This step can help you in a great deal to understand the amount which you can borrow before you start a home loan process. You should get a pre-approval rather than a pre-qualification before applying a home loan. Make sure that that you find the maximum house you can buy rather than wasting time by looking at properties which you can afford. This also helps you in getting a close quickly as your loan is already approved. One more thing you should keep in mind while in a home loan process is to shop for loan programs and rates. You should compare different programs available with different banks. It is true that shopping for a home loan can be difficult because there are so many programs from which you have to choose. Each of the different programs has different interest rates, points and fees. You can take the help of an experienced loan officer who can help you to make a right decision which is best for you. After the home loan gets approved, make sure to close the loan by properly signing the final loan documents and review them properly. Dont forget to check that the loan terms and interest rates are same on the final documents which you were promised.

SBI Home Loans come to you on the solid foundation of trust and transparency built in the tradition of State Bank of India. SBI provides a Two Home Loan With Different benefits and Schemes. 1. SBI Easy Home Loan - For Loan amount upto Rs. 30 Lacs. 2. SBI Advantage Home Loan For Loan amount above Rs.30 Lacs. Purpose: Purchase/ Construction of House/ Flat Purchase of a plot of land for construction of House Extension/ repair/ renovation/ alteration of an existing House/ Flat Purchase of Furnishings and Consumer Durables as a part of the project cost. Takeover of an existing loan from other Banks/ Housing Finance Companies Features: Interest charged on the daily reducing balance No penalty for prepayments made No hidden costs All the features of our product, including interest rates, are in the public domain. Loan sanctioned within 6 days of submission of required documents. Option to club income of your spouse and children to compute eligible loan amount Provision to club depreciation, expected rent accruals from property proposed to compute eligible loan amount Provision to finance cost of furnishing and consumer durables as part of project cost Repayment permitted upto 70 years of age Free personal accident insurance cover upto Rs.40 Lac. Optional Group Insurance from SBI Life at concessional premium (Upfront premium financed as part of project cost) Plus schemes which offer attractive packages with concessional interest rates to Govt. Employees, Teachers, Employees in Public Sector Oil Companies. Special scheme to grant loans to finance Earnest Money Deposits to be paid to Urban Development Authority/ Housing Board, etc. in respect of allotment of sites/ house/ flat

The procedure of applying SBI HOUSING LOAN : 1) LEGAL OPINION: The legal clearances/ opinion of the flat/property which you are buying / staying /constructing have to be obtained from an advocate from Bank panel.

2) VALUATION: The Engineers valuation of the property and estimate for the construction to be obtained with bank panel engineer. In case of takeover loans two panel engineer valuation is required and the least value between them should be more than the takeover amount. (Both Legal Opinion and Engineering Valuation will be done by us)

3) ELIGIBILITY: Minimum age 18 years as on the date of sanction Maximum age limit for a Home Loan borrower is fixed at 70 years, i.e. the age by which the loan should be fully repaid. Example: To compute your eligibility, Take the Net Monthly Income (i.e. take home salary) ADD the expected rental income from the property which you propose to buy - i.e your Total Net monthly income, then take 50%/55% of the total Net Monthly Income from which reduce your all existing loans EMIs if any, and from the balance of amount arrive at your eligibility. Eg: if the 50% of your take home salary plus the expected rental income of the property, i.e your total net monthly income is Rs.75000/- and your existing other monthly loan commitments is Rs.25000/-, we take Rs.50,000/- (75000 -25000) as provision for loan repayment for the present loan and calculate the eligibility. The rate of interest for housing loans upto 50 lakh amount for a period of 15 years for example say if it is 9% p.a. and the monthly EMI is RS.1014/- per lakh. To arrive at the eligibility, we divide 50000/- by 1014/- and arrive at Rs.49.30 lakhs as your eligible amount. Eg: Net Month Income i.e Take home salary : 85,000/Expected rental from proposed property : 15,000/Add any other monthly regular income Total Net Monthly Income : -

: 1,00,000/-

Take 55% of this for total loan EMI provision i.e: 55,000/Subtract all existing loan EMIs being paid now : 15,000/- (other loans) Net EMI available for the present loan Now, for repayment period 15 yrs @ 9 % the EMI/ lakh is : To arrive at your eligibility Divide 40,000/- by 1014/: 40,000/1,014/: 39.44 lakhs

I.E. 39.44 LAKHS OR 80% OF PROJECT COST WHICHEVER IS LOWER

4) FUNDING: SBI funds 80% loan of the project cost which includes the cost of undivided share of the flat /construction cost, Car Parking, KEB & BWSSB deposits, VAT & service taxes, maintenance cost & Registration expenses subject to your eligibility as calculated above whichever is lower. Loan Amount 40 to 60 times of NMI, depending on repayment capacity as % of NMI as under Net Annual Income Upto Rs.2 lacs Above Rs.2 lac to Rs. 5 lac Above Rs. 5 lacs EMI/NMI Ratio 40% 50% 55%

To enhance loan eligibility you have option to add: 1. Income of your spouse/ your son/ daughter living with you, provided they have a steady income and his/ her salary account is maintained with SBI. 2. Expected rent accruals (less taxes, cess, etc.) if the house/ flat being purchased is proposed to be rented out. 3. Depreciation, subject to some conditions. 4. Regular income from all sources 5) INTEREST RATES : The bank charges the interest on its home loan schemes at fixed rate rate of interest and the floating rate of interest on the following basis: 1. Floating interest rate - The floating interest rate is connected to State Bank Advance Rate and the amount of interest charged is 8% at floating rate. 2. Fixed interest rate: The rate of interest under fixed interest rate for the first year is 8% and 9.5% at a fixed rate for subsequent period. Example1: SBI Easy Home Loan For Loan amount upto Rs. 50 Lacs ( WITH MAXGAIN FACILITY) y y Interest rate during the first year (i.e. till first anniversary date from the date of first disbursement) is fixed at 8% p.a. Interest rate during next two years is fixed at 8.5 % p. a

Interest rate after three years may be Fixed or Floating as per the borrowers choice made at the time of sanction. If floating rate option is chosen, then the rate will be 2.75% below SBAR. If fixed rate option is chosen, then the rate will be 1.25% below SBAR prevailing on the third anniversary date from the date of first disbursement, and shall have a reset frequency of 5 years from the third anniversary date of the loan. Fixed interest rate shall be subject to force-majeure clause.

Example2: SBI Advantage Home Loan For Loan amount above Rs.50 Lacs: Interest rate during the first year (i.e. till first anniversary date from the date of disbursement) is fixed at 8 % p.a. Interest rate during next two years is fixed at 9 % p. a Interest rate after three years may be Fixed or Floating as per the borrowers choice made at the time of sanction. If floating rate option is chosen, then the rate will be 1.75% below SBAR. If fixed rate option is chosen, then the rate will be 0.75% below SBAR prevailing on the third anniversary date from the date of first disbursement, and shall have a reset frequency of 5 years from the third anniversary date of the loan. Fixed interest rate shall be subject to force-majeure clause. 6) MAXIMUM REPAYMENT PERIOD : SBI lays down certain rules and regulations pertaining to the repayment of loans. The loan applicants can repay the amount in the form of equated monthly installments and the repayment is allowed up to the age of 70 years. The maximum repayment period for the applicants aged below 45 years is 25 years and for the applicants above the age of 45 years the maximum period is 15 years. For applicants upto 45 years of age: 25 years For applicants over 45 years of age: 15 years first

7) EXPENSES: a) Legal Fee/charges : Rs.1500/- Engineer's Valuation fee : Rs.1,500/b) Processing Fee : 0.50% of loan amount or Max.Rs.10,000/- (waived for loans partially/fully disbursed before 30/09/2009) c) Insurance : Insurance of property building against fire/earthquake etc with New India Assurance company to be done. d) Govt. Stamp duty: 0.25% of loan amount as stamp duty at the time of equitable mortgage
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creation at the Bank. e) Approx Govt. Stamp papers of Rs.1500/-(approx) for execution of loan documents at the time of sanction. (Legal/Engineer/Processing fee cheques to be paid at the time of submission of application form to the bank. Govt Stamp duty of 0.25%( prevailing now ) of the loan amount and Rs750/- approx to be paid at the time of documentation of loan. Insurance will be done after the registration of the property.) 8)PRE-CLOSURE PENALTY No penalty if the loan is precolsed from own savings/windfall gains for which documentary evidence is produced by the customer. In case, such proof is not produced by the borrower, penalty @2% on the amount prepaid in excess of normal EMI dues shall be levied if the loan is preclosed within 3 years from the date of commencement of repayment.

9) DOCUMENTS REQUIRED: y ADVOCATE Check List : ( Prepare separate set )

1) Copies of Mother deed/parent document link deeds, allotment letter, Khatha certificate/endorsement, up to date encumbrance & tax paid receipts. ( In case of flats, if the project is already approved by SBI panel advocate then this is not required). 2) Copies of Agreement for sale, Construction Agreement 3) ORIGINAL Sub Registrar certified copy of the Sale Deed(for takeover loans ) 4) ORIGINAL of upto date encumbrance certificate. 5) Copy of Plan sanction. 6) Copies of latest Khata certificate,Khata extract etc. 7) Upto date Tax paid receipts. 8) Copies of Sanction letter of other bank/institution & Letter of original documents held in their custody ( applicable In case of takeover loans from other banks/institutions) ENGINEER Check List : (Kindly take the Engineer Telephone Nos from the bank to coordinate with him for inspection of your property) 1) Photo copy of Sale Deed. 2) Plan Sanction Copy. 3) Interior Estimate, if any, for approval by Engineer.

Builders/Sellers Check List : 1) Allotment Letter & detail split up cost of the project. 2) In case of completed projects, a letter from the builder stating that the property is ready for registration. 3) Letter from the builder/seller the property is not mortgaged to any bank/ financial institution. If mortgaged then an NOC from the concerned bank/institution.

4) Advance Receipt / Paid Receipts from Builder/Seller, If any. 5) Due diligence on Builders and Seller KYC Norms : Proof of Identity (PAN copy) & Residence proof (Telephone/electricity bill - both self attested and originals verified & attested by the bank) along with the duly filled in KYC form (form to collect from the bank) y Other Bank/Institution Check List ( In case of Takeover Loans) : 1) 2) 3) 4) 5) Sanction Letter of the other bank/institution. Loan account statement from the date of sanction till date. Preclosure letter inclusive of penalty from the other bank/institution. Letter of original documents held in their custody. Receipts for the total amount of the project issued by builder/seller to the purchaser/bank/institution.

PERSONAL DOCUMENTS Check List :

From the Applicant / Co- applicant and Guarantor, if any: SELF ATTESTED COPIES OF DOCUMENTS No.1 to 6 : 1) Proof of Identity (passport/pan card ) 2) Proof of Residence ( telephone/elec bill/ company letter) 3) Salary Slip - last 3 months. (attested by the employer) 4) Salary account bank statement - last 6 months ( bank attested ) 5) Form 16 for the last two years. 6) Income Tax Saral copy for the last two years. 7) Photograph - 2 nos. 8) Application Form 9) Company Profile details of company

IMPORTANT : Kindly bring the ORIGINALS of PROOF OF IDENTITY, PROOF OF RESIDENCE AND INCOME TAX SARAL COPIES for attestation of Originals by the bank. (In case the applicant/co-applicant/guarantor are into business, then last three years Income tax returns/balance sheet with one year bank statement of their business account is required) Documents Required from NRIs applicants:
y y y y y y y y y y y

Completed Application Form 2 passport size photographs of each applicant Proof of Identity - Copy of Passport/IC/PIO card (Passport with Visa stamped thereon) Valid work permit Employment contract. An English translation duly attested by employer/consulate/SBIs foreign branches/offices, Embassy in case of any other language Last salary certificate/slip in original and copy of identity card issued by the current employer/proof of income in case of self employed professionals/businessmen Details of previous employment Bank Account statement/passbook for the previous six months. Overseas Bank Account Statement/Passbook showing salary and savings, if any Proof of residence (driving license / utility bills etc.) Copy of Continuous discharge Certificate (CDC)- for applicants employed in the merchant navy Notarized Power of Attorney in respect of applicants who propose to authorize a third party to execute the documents/complete the mortgage formalities/avail the loan instalments. other documents as required by the Bank

IMPORTANT: All the above documents to be self attested. Also bring the originals of the above documents for additional attestation by bank. (verification of originals by bank) Guarantor: The bank insists on a Guarantor till the property is registered/title transferred on your name and Equitable Mortgage registered in favour of the bank. Guarantor details in the application with Assets & Liabilities duly filled in along with the above mentioned documents are required. y FOR TAKEOVER LOANS FROM OTHER BANKS GUARANTOR IS A MUST

Eligibility criteria of guarantor is: 80% of the net credit worthiness of the guarantor should be more than the loan amount (takeover amount). Important Note : The Title holders of the property should ONLY be the borrowers. If the agreement is on the joint names (maximum three persons), then the Sale deed also should be on the joint names and the loan also will be on the joint names. The same is also applicable for take
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over loans. i.e. Joint Owners then Joint name in the loan application / Single Owner then Single name in the loan application.

10) SBI HOME LOAN CUSTOMER CARE In order to entertain and listen to the customer grievance and complaints on home loan process prescribed by the bank the SBI bank provides wholesome of options to the customers. For further details and to post your query on SBI Home loan you can call on the SBI customer care toll free number - 1800 180 1290

Types of Home Loans from SBI The different forms of SBI Home loans under which the bank may provide finance to the individual are: 1. SBI-Maxgain Home Loan: The SBI Maxgain Home Loan enables the borrower to avail the loan as an overdraft.

Features:
y y y y y y

Park your surplus funds and withdraw the same whenever required. Earn optimal yield on your savings, at no extra cost. Get a Home Loan as an overdraft on your account. Minimize interest on the home loan. Maximize income in the wake of low yields from other deposits and investments. Enjoy flexibility to operate your Home Loan account like a Savings or Current account. SBI-Freedom Home Loan: SBI Freedom Home Loans are meant for Non Resident Indians and offer the borrowers with the option to pledge securities such as bank deposits for taking the loan.

2.

Features: y y Get a loan to invest in property without mortgaging the same. Pledge any of the following liquid securities in lieu of mortgage on property: o Term Deposits (including SBI NRE / FCNB Deposits) in own name / in the name of third party. o NSCs / KVPs in own name / in the name of third party. o Life insurance policy in own name (to the extent of surrender value).
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y y y

Choose to repay with regular EMIs or through maturity proceeds of the pledged securities. Hedge your Home Loan against risk of unfavorable swing in interest rates. Choose customized combinations of floating and fixed interest rates as a one time irrevocable option.

Enjoy the added advantage to select the order in which the fixed and floating rates will be availed. 3. SBI-Realty Home Loan: SBI Realty Home Loans are aimed at meeting the fund requirements of borrowers for purchasing a plot of land. Features:
y y y y y y

Get a Home Loan to purchase a plot of land. Enjoy low margin, high loan eligibility with a maximum of Rs.20 lacs* Avail easy repayment period of up to 15 years. Avail another Home Loan to construct a home on the plot. Enjoy the benefit of running both the loans concurrently. Ensure that you construct the house within 2 years from the date of availing the Home Loan.

(*Relaxation considered on case-to-case basis) 4. SBI-Flexi Home Loan: SBI Flexi Home Loans offer the option of a one time irrevocable option comprising a combination of fixed and floating interest rates. The schemes that are provided by SBI Home loans allow full transparency among the bank and the customer and are conducted in such a manner, in which the individuals do not have to go through much of a hassle. The most interesting aspect about SBI Home loans is that they do not have any upper boundary on the maximum amount, with which we would be able to build or buy a new house for ourselves. Even the eligibility criteria is broadened in case of SBI Home loans, as to apply for it you simply have to be an adult, i.e. above 18 years, or you must be having a income source that is steady. The SBI Home loans generally cover up to 90% of the total amount that we have to pay for having a new house, and it enables us the liberty to repay the entire loan and the interest till we are of 70 years. Like many other home loan policies the SBI Home loans also provide the Free Personal Accident Insurance cover for their clients. Along with all such facilities, the SBI Home loans provide us with exclusive benefit packages that may cover several things, ranging from the ATM-Debit card to be used internationally to
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SBI Classic or International Credit card. There are also other features along with these, which may include 50% concession on the remittance charges or for outstation cheques being collected and the option of doing online banking. Thus, many individual prefer to go for SBI Home loans than any other services, because of the smooth functioning assured.

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