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A report submitted to Ishan Institute of Management and Technology, Greater Noida as a partial
fulfillment to full time post graduate diploma in management.

Under the guidance of

(Area Manager)

Submitted To : Submitted By:

Dr. D.K.Garg, Abhishek Singh
Chairman Sir ENR No: 19001
IIMT, .Greater Noida Batch: 19th

Ishan Institute of Management & Technology

1A, Knowledge Park-1, Greater Noida, Dist.-G.B. Nagar (U.P)


I the student of Ishan Institute of Management and Technology is pursuing PGDBM course and
towards the partial fulfillment of it I have undergone a summer internship project for period of forty
days. I have put my endeavor to make my objectives accomplished in the stipulated time. Despite all
the limitations, obstacles, hurdles and hindrances, I have toiled my hand to achieve the goal desired.
Being neophytes in the highly competitive world of business I have come across some difficulties to
make my objectives a reality. Anyhow with the kind help and genuine interest formally supported by
extreme guidance of our seniors, faculties, I am presenting this hand carved effort in black and
white. If anywhere something found unacceptable or unnecessary to the theme, you are welcome
with your valuable suggestions.

Thanking you,



At the outset, I offer my sincere thanks to LICHFL for giving me an opportunity to work on the
project titled, ― Study Procedural Aspects for Housing Finance of LICHFL.

It’s a moral responsibility of each individual to acknowledge the help of each individual who has
made your journey smoother for you. I would first like to thank my project guide MR. PRAFUL
MALVIYA (Area Manager) without whose support this report would not have been possible. I
appreciate him of giving me an option of selecting such a wonderful project. The learning has been
immense for me from this project.

I am highly grateful to the management at LICHFL for giving me this opportunity to work on a
dream project and in the process harness myself with the huge learning on all aspects.


The Final project on ― “Study Procedural Aspects for Housing Finance of LICHFL” under the
guidance of MR. PRAFUL MALVIYA (Area Manager) original work done by Jasmeet Kaur.
This is the property of the institute & use of this report without prior permission of the institute will
be considered illegal & actionable.

Date Signature

Abhishek Singh
ENR : 19001
19th Batch

Organisation profile
Company Vison, Mission & Values


Preparing Development Plan
Preparing Projects
Releasing Of Funds


Steps to Sanction
Steps to Disbursement
Document Required
Processing Fees
Eligibility Criteria
Nature of Payment
Settlement Of Loan


Loan for Indian Resident
Loan for Non Indian Resident (NRI)
Loan for Pensioners

Griha Prakash
Griha Sobha
Griha Vikas
Apna Office 1
Apna office 2
Rental Securitisation
New Griha Laxmi
Griha Jestha




Analysis of Services
Home Loans:-
Corporate Loans
Builders/ Developers


Repair / Renovation




My summer training project was basically focused on obtaining the knowledge of administrative
functioning in LICHFL. This report consist the process acquired by LICHFL in appraising the
customer’s creditability and how it finances for houses. The report also covers the challenges
emerging in housing finance sector and gives a clear view to understand the efficiency of the internal
system of LICHFL.


• To understand the measures used for credit appraisal of customers.

• To know about other associated companies which help in appraisal?
• To know the Schemes, terminologies & legal aspects of housing loan in LICHFL.
• To know the whole procedure of financing.
• To understand the efficiency & effectiveness of financing system.


CHAIRMAN: The present chairman of LIC Group is Mr. S. K. Roy. He regulates the whole LIC
group. He has introduced several Competitions especially in the subsidiary of LIC that is LICHFL.

Housing Scenario

India’s housing finance industry comprises of banks and housing finance companies. The average
ticket size of loan as expected has grown by around 11 percent in 2012-13 to Rs.17 lakh, primarily
on account of rise in property prices and increase in the income level of the borrowers

Population growth, increasing trend towards urbanization and nuclearisation of families, increase in
borrowers’ affordability levels, would be key factors impacting market penetration and volume

Over the last few years, the share of housing finance companies (HFC) in total disbursements has
been increasing mainly due to their specialisation, better customer service, and increasing focus on
urban centres which have more high value customers.

Due to the volatility in the market, housing demand could witness phases of spikes and slowing
down, but these should be taken as runs of a cycle and the comfort point for any lender in the
housing industry will be the demand from end users and the huge market potential. In fact the
policies of the Union Government is clearly in the direction to provide encouragement for housing
development by providing incentive in the form of Income tax rebate, more allocation for housing
project and customer’s favourable legislation.


The present Managing DIRECTOR & CEO of LIC group is Ms. Sunita Sharma.
A company is as good as its core team and a good team is one which nurtures a vision that embodies
its dreams and aspirations to take the company on the path of success. And this is demonstrated
through the performance of the Company, where an excellent core team led by Ms. Sunita Sharma is
at the helm of affairs. It shared its vision for driving the Company to new heights, a force to reckon
A team which is powered by innovative, creative thinking and passion to excel has primarily been
the reason that has set LIC Housing apart from rest of other HFCs. It started with embarking on
changes in the names and numbers of cadres in the Company, taking into account rationally, the
future possibilities and to ensure that the employees get regular advancement in their career. This
change was brought in with futuristic vision and to instill in a sense of oneness and belongingness
amongst the employees in order to take the Company to the leadership position.
Innovative thinking gave birth to new ideas with a specific marketing objective in mind, which
emanated from the top, trickled down the line like a stream of river stimulating the entire workforce
to perform thereby culminating into stupendous growth. True to its vision, the Company has
managed to beat all the expectations. It has overwhelmed the industry growth rates in loan disbursals
and is on trails for achieving still greater heights.

The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the
Life Insurance Corporation of India was created on 1st September, 1956, with the objective of
spreading life insurance much more widely and in particular to the rural areas with a view to reach
all insurable persons in the country, providing them adequate financial cover at a reasonable cost.
LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office
in the year 1956. Since life insurance contracts are long term contracts and during the currency of
the policy it requires a variety of services need was felt in the later years to expand the operations
and place a branch office at each district headquarter. Re-organization of LIC took place and large
numbers of new branch offices were opened. As a result of re-organization servicing functions were
transferred to the branches, and branches were made accounting units. It worked wonders with the
performance of the corporation. It may be seen that from about 200.00 crores of New Business in
1957 the corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years
for LIC to cross 2000.00 crores mark of new business. But with re-organization happening in the
early eighties, by 1985-86 LIC had already crossed 7000.00 crores Sum Assured on new policies.
Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8 zonal
offices, 992 satellites offices and the corporate office. LIC’s Wide Area Network covers 109
divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with
some Banks and Service providers to offer on-line premium collection facility in selected cities.
LICHFL is the subsidiary company of LIC OF INDIA.


Incorporated on 19th June 1989 under the Companies Act, 1956, the company was promoted by LIC
of India and went public in the year 1994. The Company launched its maiden GDR issue in LIC
Housing Finance Ltd. is one of the largest Housing Finance Company in India. 2004. The
Authorized Capital of the Company is `1500 Million (`150 Crores) and its paid up Capital is `950
Millions (`95 Crores). The Company is recognized by National Housing Bank and listed on the
National Stock Exchange (NSE) & Bombay Stock Exchange Limited (BSE) and its shares are traded
only in Demat format. The GDR's are listed on the Luxembourg Stock Exchange.
The main objective of the Company is providing long term finance to individuals for purchase /
construction / repair and renovation of new / existing flats / houses. The Company also provides
finance on existing property for business / personal needs and gives loans to professionals for
purchase / construction of Clinics / Nursing Homes / Diagnostic Centers / Office Space and also for
purchase of equipments.
The company enjoys ‘AAA’ rating from CRISIL indicating highest safety with regard to the ability
to service interest and repay capital. The Fixed Deposits of the Company are rated FAAA/stable by

We all need a house to live in. However the choice that needs to be made is, whether one should
stay in a rented house or buy it instead. In the present scenario, the cost of living in a metropolitan
city is rather high. Also, the property prices and home loan rates are moving up sharply. Given that
both buying a house and renting it have their unique set of costs attached, one must evaluate both the
options closely and then make an informed choice.
If an individual stays in a rented house, he could be paying a substantial amount as rent, depending
on the location and the area of the property. On the other hand, if he buys a house by taking a loan
from a housing finance company (HFC), at the end of the stipulated period, he may find that the total
repayments on the loan far exceed the actual value of the house. In this article, we conduct an
evaluation to help you determine whether it’s better to buy or rent a house.

LICHFL would get the subscriber’s Bank account directly debited for monthly installment amount
through the Clearing House of RBI. The scheme is open to all such borrowers who are having an
account in a Bank, which participates in the clearing house of RBI.
Where we are present
Head office in Mumbai, India.
Network across six regional offices, 15 back offices, and 115 marketing offices.
Representative^office in Dubai.
Listed on the Bombay Stock Exchange
Limited and the National Stock
Exchange of India Limited.
An external marketing network comprising 5500 direct safes agents, home loan agents, customer
relation associates.

Who we are
One of India's largest housing finance companies.
Promoted by Life Insurance Corporation of India.
Promoters hold a 39.08 per cent stake in the Company.

What our business is

Direct financing for homes, construction projects and corporate housing schemes.
Almost 94 per cent of loan assets in the retaii category.
Increasing focus on non-core disbursals (project funding and rental income securitisation).

What makes us happy

Rated AAA by CRISIL for the last five years.
Consistent record of dividend payments since 1990.

What we have achieved

Disbursals (to individuals) of approximately Rs. 4,670.08 cr (March
3 1 , 2006) with a CAGR of approximately
24 per cent over last five years.
13.54 per cent growth in CAGR interest income over the last ten years.
Profit after tax growth at a CAGR of (approximately) 14 per cent over the last ten years.

What we achieved in 2005-06

21.65 per cent growth in interest income from housing loans from Rs.977.89 cr in 2004-05 to
Rs.1,189.65 cr.
11.39 per cent growth in net interest income from Rs.300.77 cr in 2004-05 to Rs.335.05 cr.
45.12 per cent growth in profit after tax from Rs.143.72 cr in 2004-05 to Rs.208.57 cr.

13.87 per cent growth in sanctions from Rs.4,415.05 cr in 2004-05 to Rs.5,027.28 cr in 2005 06.
11.00 per cent growth in disbursements from Rs.4,207.22 cr in 2004-05 to Rs.4,670.08 cr in
7.34 per cent growth in funds procured from Rs.4,045 cr in 2004-05 to Rs.4,342 cr in 2005-06.
19.72 per cent growth in total loan portfolio from Rs.12,418.32 cr in 2004-05 to Rs.14,867.19 cr in

138 basis points reduction in administrative expenses to total income from 8.77 per cent to 7.39 per
17.24 per cent growth in provision cover on total assets from Rs.203 cr in 2004-05 to Rs.238 cr in

98 basis point reduction in NPAs from 2.78 per cent in 2004-05 to per cent in 2005-06.
274 basis point increase in net profit margin from 13.69 per cent in 2004-05 to 16.43 per cent in
348 basis point increase in return on equity from 12,02 per cent in 2004¬ 05 to 15.50 per cent in

Product launch
Introduction of the New Griha
Lakshmi scheme for disbursal of loans against liquid securities acceptable to the Company.

Customer service
Design and launch of the I.T.-enabled Appraisal Scorecard system for unbiased appraisal.
Introduction of the concept of multiple due date tor EM!.

Shareholder value
37.67 per cent growth in earning per share from Rs. 17.84 in 2004-05 to Rs.24.56 in 2005-06.
12.59 per cent growth in book value from Rs. 140.70 in 2004-05 to Rs.158.42 in 2005-06.


The Company possesses one of the industry's most extensive marketing networks in India:
Registered and Corporate Office at Mumbai, 6 Regional Offices, 13 Back Offices and 181 marketing
units across India. In addition the company has appointed over 773 Direct Sales Agents
(DSAs), 3400 Home Loan Agents (HLAs) and 615 Customer Relationship Associates (CRAs) to
extend its marketing reach. Back Offices spread across the country conduct the credit appraisal and
administrative functions.
The Company has floated a 100% subsidiary “LICHFL CARE HOMES LIMITED” to conduct the
business of providing ‘Assisted Living Community Centers for Senior citizens.


Housing is a National priority. Housing finance today became a specialized and institutional
activity towards the goal of bridging the gap between demand and supply. With the formation of the
National Housing Policy (NHP). Life Insurance Corporation's (LIC) contribution to the field of
housing development has been substantial. Due to heavy work arising on account of wide range of
activities, LIC could not manage the housing finance effectively in achieving the targets.
Accordingly, LIC Housing Finance Limited (LICHFL) as a subsidiary of LIC was incorporated on
June 19th 1989, to accelerate the development of housing.

The LICHFL started its operations with 8 centers and spread its activities to 43 centers by
1991-92 as Area Offices. As the activities of LICHFL are increasing, the total Area Offices in the
year 2000-2001 have gone up to 212, out of which 6 Offices are in Hyderabad, Andhra Pradesh.

The LICHFL has an authorized capital of Rs.100 crore contributed by LIC, UTI and ICICI.
The subscribed capital of LICHFL is Rs.25 crore in which LIC share is 50.50% and others have 16%
each. The LICHFL commenced its lending operations by setting up its first Area Office at New

1) Objectives of LICHFL:

‘To each one a home of his own’ is the main objective of LICHFL. It renders liberal
financial assistance to policy holders and others for purchase/construction of residential
houses/flats. The following are the other objectives of LICHFL:

(i) To provide loans to public sector/private sector employees to construct residential accommodation
for their employees.

(ii) To mobilize insurance linked long term savings from the public to deploy such funds in long-term
finance in the housing sector.
(iii) To facilitate approval of builders in advance and offer them construction finance to enhance
customer servicing with a real estate market information.

2) Awards to LICHFL:

LICHFL received the ‘Silver Shield’ for the best presented accounts in the category of
Banks and Financial Institutions for the year 2008-2009 from the Institute of Chartered
Accountants of India (ICAI), New Delhi. HDFC has won the same award for eleventh time.

LICHFL emerged as the second ‘Most Highly Rated Company’ in India in December 2009
in the equity rating by Euro Money Magazine.

“Best housing finance company for the year 2010-11” award from CNBC TV 18.

Rated 'AM' by CRISIL for the 9th consecutive time in 2011-12; maiden Fixed Deposit
scheme received an FAAA/stable rating by CRISIL.

3) Organizational Structure of LICHFL:

To enable the organization to achieve its set objectives, it must go on spreading regionally
on some geographical criteria. As it was established in 1989, it was felt that it has to be stretched
to rural areas by making its presence. However, the head office of the LICHFL called ‘Corporate
Office’ is located in Mumbai. To ensure regional business, 6 Regional Offices (RO) were located
at different places in the Country, such as Mumbai, Chennai, Bangalore, Kolkatta, Lucknow and
Delhi. The Regional Office for the South Central Zone is in Bangalore which looks after the Area
Offices including Andhra Pradesh.

After RO, the next link of the LICHFL is Area Office. Generally, there is an Area Office in
every Divisional Centre of the LIC, and at present 212 Area Offices are in operation Nationwide.


Sl. No. Offices Numbers Places

1. Corporate Office 01 Mumbai
2. Regional Offices 06 Mumbai, Chennai, Bangalore,
Kolkata, Delhi & Lucknow
3. Area Offices 212
(Operating Offices, Extention
Counters & Camp Offices

Source: Staff Training Manual of LICHFL-2010

Since LICHFL is in formative stage, the organizational structure at all stages of LICHFL
looks vertical. As there was no subordinate staff in large number as in the initial stages, the
processing of application and clerical assistance was rendered by LIC branch offices. Now the
LICHFL is sufficiently staffed to look after its activities. The structure at corporate level is
shown as under:
ii) Organizational Structure at Corporate Level


General Manager

Deputy General Manager

The Chairman in the hierarchy is assisted by the Managing Director (MD), MD is assisted by
Independent Director and General Manager (GM). They are assisted by Deputy General Manager
(DGM) and other staff at Corporate Office. Mr. D.K.Mehrotra is the present Chairman of LICHFL.

iii) Organizational Structure at Regional Level

Deputy Regional Manager

Assistant Regional Manager

Other Staff

iv) Organizational Structure at Area Office, Hyderabad

Area Manager

Deputy Area Manager

Assistant Area Manager

Manager Credit, Manager Operations, Manager Systems, Manager Recovery,

Manager Marketing, Manager Administration & Manager Legal

Executive Assistant

Junior Executive Assistant

Other Staff

At Regional Office level, the Regional Manager at the helm of affairs is assisted by Deputy Regional
Manager and Assistant Regional Manager with Executive Assistants that look after the affairs of
Regional Office.

The Area Manager who is the top authority at Area Office level is assisted by Deputy Area Manager
and who in turn is assisted by Assistant Area Manager who will carry on the day-to-day affairs of the
office. Each Area Office is well equipped with office equipments like Computers, Printers, which are
connected through Local Area Network (LAN) to speed up the disposal and accuracy in maintaining
the accounts and individual ledgers to render better services to the borrowers.

To cater to the needs of the clients the company, LICHFL had opened 212 Area Offices (Operating
Offices, Extension Counters & Camp Offices). With these the LICHFL had widest network amongst
all the Housing Finance Companies in India. Hyderabad branch of LICHFL was established in the
year 1993 with just 20 employees and today it has a total of 6 branches in Hyderabad and
Secunderabad at various places like Ameerpet, Dilsukhnagar, Gacchibowli, Himayathnagar,
Kukatpally, and Secunderabad. There are about 107 fulltime employees in LICHFL and more than
500 agents working under Hyderabad and Secunderabad branches.

4) National Housing Bank (NHB) Guidelines:

LICHFL is complying with the guidelines with regard to income recognition, provisioning for non-
performing assets and maintaining capital adequacy ratio issued by National Housing Bank (NHB)
from time to time. As on 31st March 2012 capital adequacy ratio stood at 11.26% (as against 10%
prescribed by NHB). NHB Chairman & Managing Director is Mr. RV Verma.

5) Prudential Norms for LICHFL:

The NHB has issued guidelines to Housing Finance Companies (HFCs) on prudential norms for
income recognition, provisioning, asset classification, provisioning for bad and doubtful debts, and
capital adequacy ratio.

LICHFL's capital adequacy is 12% as against the 11% of the minimum requirement.

6) Human Resources:

In the initial periods of its inception, the top management has been represented by the officers of
LIC of India on deputation. Gradually they are replaced with the recruitment of its own. The
Company has qualified and trained employees who are responsive to both customer's needs and
changing economic scenario. The LICHFL in its management has Chairman, four Directors, one
Director and Chief Executive along with seniors.

LICHFL philosophy on corporate governance envisages attainment of transparency, accountability

and equity in all facets of operations and in all interactions with its stakeholders including the
shareholders, employees, government and lenders.

7) Marketing Personnel:
To undertake the business successfully, the LICHFL has large marketing assistance from marketing
people in the form of development officers and agents of LIC of India.

LICHFL is the second largest market leader in the housing finance industry. With financial backing
from its parent organization LIC, the institution which has been cash rich; LICHFL need not
mobilize funds through fixed deposits like other housing finance companies. LICHFL receives its
funds from three major sources, besides its owned funds and internal accrual viz., loans from LIC,
Commercial Banks and refinance from NHB.

The greatest constraint in the rapid development of housing activity in the country is the lack of
financial resources for individuals along with land and infrastructural services. Thus, there is an
immense potential for the housing finance industry to grow and provide financial resources to meet
housing requirements. Hence, there is a tremendous scope for LICHFL to increase its housing
finance activity.

The operations of LICHFL are extensively decentralized and 95% of the loans to individuals are
sanctioned at the level of Area Offices. As the life insurance policy is necessary requirement insisted
upon by LICHFL, the agents of LIC of India are involved in the process and act as liaison between
prospective clients and LICHFL, which further helps LICHFL in converting promising prospects
into clients.

The investment made by LICHFL will be essentially of the nature of parking of funds for a short-
term, temporary duration to avoid loss of interest. LICHFL enjoys ‘brand equity’ among the Indian
public, with the name ‘LIC of India’ being known across the length and breadth of the Country.

LICHFL is the most extensive industry and has a marketing network of Area Offices managed by a
team of senior professionals and LIC agents and able to access Customers across the length and
breadth of the Country. There are many agents working under LICHFL.

LICHFL mostly cater to the needs of common man, in helping them to purchase, construct houses.
LICHFL would like to have their customers well informed so that making a home with the help of
loan from it becomes a pleasant experience to them. LICHFL has made steady progress and
established itself as a leading Housing Finance Institution in the Country.

8) Identification of Customers:

The identification of customers are through direct walk-ins by customers, customers responding to
the paper ads, hoardings, other media, direct sales made by LICHFL agents, references given by the
existing customers, references made by panel members of LICHFL, references made by builders,
references made by employees of LICHFL and other references etc. The operations of LICHFL with
regard to extending loans to the borrowers can be described taking into account of the following
parameters so as to understand the different steps in accessing the finance for housing.

9) Jurisdiction for Sanctioning Loans by LICHFL, Hyderabad:

The property for which loan is applied must be in and around Greater Hyderabad Municipal
Corporation (GMCH) & Airport Development Authority (ADA), Alwal, Qutubullahpur, Kukatpally,
Kapra, Kompally, Malkajgiri, L.B.Nagar, Gaddiannaram, Secunderabad cities and Hyderabad Urban
Development Authority (HUDA) layouts. Outer areas of the city like Shamshabad Airport,
Cyberabad Development Authority (CDA) Uppal and Patancheru will also come under the
jurisdiction of LICHFL.


1) Applicant/Beneficiaries or Borrowers:
Applicant/Beneficiaries or Borrowers here denote the loan applicants of LICHFL who avail the
housing finance for their requirement. Home Loans can be applied for either individually or jointly.
Proposed owners of the property will have to be co-applicants. However co-applicants need not be
co-owners. Generally acceptable combination of applicants are Husband and Wife; Father and Son;
and Mother and Son. There are five schemes under which individual can avail the loan facility from
LICHFL. They must be resident Indians or Non-Resident Indians (NRIs). They are as under:

Housing Loan Schemes of LICHFL for Individuals {Resident

Indians & Non-Resident Indians (NRIs)}

S.No. Name of the Scheme Purpose

01. Griha Prakash Loan for Purchase of new House/Flat.

02. Griha Prakash Loan for Construction of House/Flat
03. Griha Prakash Loan for Extension of House / Flat
04. Griha Prakash Loan for Repairs & Renovation
05. Griha Prakash Loan for Plot Purchase
06. Griha Prakash Loan for Home Entity (Mortgage Loan)

Non –Resident Indians Purpose

Loan for Purchase of

07. Griha Shoba (NRIs) House / Flat for NRI
Loan for Construction of
08. Griha Shoba (NRIs) House /Flat for

Loan for ‘Extension’ for

09. Griha Shoba (NRIs) NRI
Loan for Repairs &
10. Griha Shoba (NRIs) Renovation for NRI
Loan for Plot Purchase for
11. Griha Shoba (NRIs) NRI
Loan for Home Entity
12. Griha Vikas (NRIs) (Mortgage Loan) to

Source: Staff Training Manual of LICHFL-2010

2) Cost of Construction and Proportion of Loan:

Cost of construction and proportion of loan implies that the ratio between the loan facility available
in absolute terms and the total estimated cost of construction including the cost of land. The
proportion of loan to the total cost of construction is maximum 85%.

Generally, the loan amount is determined on the basis of the repayment capacity of the applicants. It
considers the factors such as age, income, dependents, assets, liabilities, stability of the occupation,
continuity of income and savings etc.

LICHFL extend the loan up to 85% of the cost of property value (including stamp duty and
registration charges) under all the schemes except ‘Griha Prakash’ for resident Indians, ‘Griha
Shobha’ and ‘Griha Vikas’ for Non-resident Indians (NRI) under individual category. Generally
loans are meant for residential house. The minimum normal loan amount is Rs.1, 00,000/-.

3) Security for Loan:

In the event of default in repayment of housing loan any instrument must be available with
financing organization in case of any apprehensions so as to make-up the default. The security for
loan under all the schemes is an equitable mortgage of the house/Flat. Equitable mortgage means,
mortgage by way of deposit of title deeds of property. Where in the borrower deposits title deeds of
his house/flat with LICHFL as security for loan.

LICHFL depending upon the situation called upon for equitable mortgage where high stamp duty is

payable if it deem necessary by the borrower, depending upon the position of the title papers. Life
Insurance Corporation (LIC) policy on the life of the applicant for a risk cover equal to the loan
amount sanctioned and deeds of guarantee approved by the company.

4) Tenure / Terms of Loan:

As per the norms of the organization, with regard to employees, the term of the loan should not
exceed their retirement date. For repayment of loan by individuals and other beneficiaries, the
minimum term or period is five (5) years and maximum period is twenty (20) years.

5) Interest Rate Structure:

Interest is the cost of funds to the beneficiary charged by the organization. It also plays an important
role in expanding the housing finance. The demand for loans is very much affected by the interest
rate structure.
The interest rate charged by the Housing Finance Organizations should be within the affordable
limits of the borrowers.

The above rates are applicable with collateral security of LIC Policy. Rate of interest for loans
without collateral security and in case of Mortgage Loan will be 1% more. Interest is charged as per
the rates in force at the time of issue of Loan Offer Letter (LOL) which is final.

6) Additional Interest:

LICHFL charges additional interest on the balance of loan in case of default. The rate of additional
interest is between 0.5% to 1% and if the default is only for twelve months or less, additional interest
is charged only on the instalment due.

7) Repayment Ahead of Schedule:

Part or full repayment of loan is acceptable even before the stipulated period of repayment i.e.,
repayment of loans ahead of schedule is provided. In case of premature closure of loan within a
period of 5 years from the date of first disbursement, on Fixed Interest Loan of Rs.50,000/- and
above a levy (i.e., penalty) of 1% of the amount prepaid as pre-payment charges is made. In the case
of Floating Interest Loan, there is no prepayment penalty as per RBI Circular Report on 5 th Sep

8) Fixation of Equated Monthly Installment (EMI):

Equated monthly installment (EMI) is 1/12th of the equated annual installment. It means a uniform
lump sum amount which includes repayment of a part of the principal and payment of interest which
is payable on every month. It remains uniform throughout the term of loan and by the end of the
term; the loan and interest will be fully repaid. Monthly installment would be of three types viz.,
fixed monthly equated installment, graduated monthly installments and variable monthly
9) Cost of Loan:

(i) Processing fee: LICHFL, before issuing loan offer letter conducts interview with borrower (or)
beneficiary and clarifies all the doubts so as to make it easy for borrower to proceed. Loan Offer
Letter (LOL) contains the various terms and conditions of the loan. Once the loan offer is accepted
the borrower is required to pay non-refundable processing and non-refundable administrative fee.
The non-refundable processing fee charged by LICHFL is 1% of the loan amount applied.

(ii) Administrative fee: In addition to the processing fee an administrative fee which is also non-
refundable is required to be paid by the borrower. To meet various administrative expenses such as a
stamp fee of appropriate amount has to be paid for the purpose of stamps required to be affixed on
Loan Offer Letter (LOL). So, the total upfront fees of processing fees of 1% + administrative fees +
service tax of 12.50% must be paid. The following rates of administrative fee are charged by the
LICHFL for different slabs of loan amount which is payable on sanction of loan.

Non refundable Administrative Fee

Loan Amount Administrative

(in Rs) Fees (in Rs)
Up to Rs.30,00,000 Rs.10,000/-

Rs.30 lakhs to Rs.50 lakhs Rs.15,000 + service tax

Rs.50 lakhs to 1crore 20,000 + service tax

Source: Interest Rates Circular Report of LICHFL 2012

10) Loan Sanction Procedure:

The procedure for sanctioning of loan is divided into different stages. The borrower has to complete
few formalities like filling the application form and paying the required processing fee. Then the
Area Manager or and Official of LICHFL Office interviews the applicant. During the interview, the
LICHFL Officials will make an assessment of the applicant's repaying capacity by seeking relevant
information from the applicant.

The interview is a very important aspect as it gives an opportunity to the applicant to explain his
position regarding his repaying capacity. The very purpose of holding an interview with the
applicant is to cut short the impersonal correspondence which may be necessary to clarify matters
and to make the entire subject a friendly affair. After the interview, LICHFL arrives at the fair
amount of housing loan that can be sanctioned to the applicant.

Stages of Loan Processing:
Depending upon the need of the customer, he chooses a particular scheme in LICHFL and the loan
sanction process at LICHFL takes place in the following manner.

There are 3 different stages in loan process and out of which the stage 1 is as follows:

i) Stage 1- Loan Offer:

a. Application: Application form must be duly filled legibly with photograph affixed on it by the

b. Income certificate: Applicant need to furnish income details like Salary Certificate from employer or
3 years income tax returns certified by Chartered Accountant.

c. Guarantor particulars: Guarantor details like proof of income of guarantor, residential address proof
of guarantor and guarantor’s employment / professional details.

d. Property Certificate: Approved property plan by Municipal Corporation, Town Planning, Panchayat
body, other Government board and copy of parent documents.

e. PAN / Identity card of applicant: Incase if the borrower is income tax payer, he need to furnish his
PAN card copy and proof of residence as well as proof of his office/ business address along with
photo identity.

f. Copy of bank passbook: Borrower need to submit his running bank account statement for the last
two years
g. Vendor/Engineer letter: Borrower needs to furnish builder’s letter, sale/construction agreement for
Flats, and estimate for construction for houses from Engineer’s office.

h. Title documents: Borrower need to furnish copies of title deeds for last 12 years duly attested like
Encumbrance Certificate and Link Document.

i. Report from LICHFL: After scrutinizing the above documents, if LICHFL is satisfied with the above
details, LICHFL’s officer will inspect the property and value the property with its Panel Engineer
and prepares the report.

Additional requirements for NRIs:

a. Employer’s certificate: NRI customer need to submit copy of Employment Contract duly attested by
the Embassy /Notary Public.

b. Income Details: NRI customer need to submit his income details like 6 fortnights Income Certificate
from his employer, his Bank Account Statement both domestic as will as at Foreign Country.

c. Passport and Visa duly attested: NRI borrower need to furnish his Passport & Visa copy documents
duly attested by Indian Embassy or from Attorney.

d. General Power of Attorney: NRI borrower need to furnish General Power of Attorney (GPA) from a
person in India who shall sign on behalf of NRI borrower.

e. NRI Annexure / Letter from bankers: NRI borrower also needs to furnish NRI Annexure in
LICHFL’s format and letter from Bankers in favor of LICHFL.

f. Continuous Discharge Certificate: Incase of persons working in Merchant Navy, they need to furnish
Continuous Discharge Certificate from their employer.

g. Other documents: Apart from the above documents, NRI borrower needs to submit other documents
like 1, 3,6,7,8 and 9 which were mentioned in stage.
After the submission of the above documents, Credit Officer will examine the application and
appraise it. If he finds that the applicant is fit to obtain loan, he will forward the application to the
Panel Valuer to examine the property. If Panel Valuer Report is positive, Credit Officer will inspect
the property before forwarding it to the Credit Manager.

ii) Stage 11- Title Clearances:

a. Examination of Property Documents: LICHFL’s Legal Deparment keenly examines the chain of
documents for last 12 years. This is to examine from whom the property is obtained in the last 12

b. Encumbrance Certificate: LICHFL examines the Encumbrance Certificate for last 15 years to check
if there are any encumbrances.

c. Original sale deed and construction agreement: These 2 documents are to be obtained from the
builder / vendor and need to submit to LICHFL by the borrower.

d. Title Approval Report: LICHFL in this stage after examining the above documents, if it is satisfied
with the above documents, will give ‘Title Approval Report’.

In the second stage after the submission of the above-mentioned documents, Credit Manager will
examine the application thoroughly and if he is satisfied with the application, he will give necessary
inputs and will forward to the Legal Department.
Legal Department will scrutinize the property details and will give their legal opinion for further
formalities to sanction the loan. The 3rd stage and final stage is disbursement of loan on submission
of the following documents by borrower to LICHFL.

iii) Stage 3- Disbursement of Loan on Creation of Equitable Mortgage and on Submission of

the following documents:

a. Memorandum of deposit of Title Deeds

b. Original receipt of margin money by the applicant / proof of payment from NRI /NRO a/c in case of
Non-Resident Indian (NRI)

c. Deed of guarantee.

d. Promissory note.

e. LIC policies duly assigned.

f. Affidavit signed by the borrower.

g. Original title documents for last 12 years

h. Collection postdated cheques / salary deduction forms/ ECS mandate forms.

In 3rd stage, which is a final stage, if the legal department gives positive opinion to proceed further,
Credit Officer will collect the above-mentioned documents from the applicant and will disburse the
loan amount either in lump sum or according to the required installments as preferred by the loan

11) Disbursement of Loan:

Disbursement will be made after the applicant has invested his/her share i.e. total cost minus the
amount of loan sanctioned. The practice of LICHFL is to disburse loan as a form of reimbursement
i.e., the party spends first, and LICHFL reimburses the amount spent by him on the basis of

Generally the sanctioned amount is disbursed in three installments depending upon the progress of
construction. Release of subsequent installment will depend on regularity in payment of interest/EMI
dues and progress of work. For each subsequent installment, valuation and inspection by LICHFL’s
Officer is necessary and for final installment also Panel Value Engineer’s Certificate and LICHFL
Official’s report are required.


1) Mode of Repayment Loan:

The repayment is by equated monthly installment (EMI) as it causes no hardship to the borrowers to
clear their dues. The officials of LICHFL expressed the same views when their opinion was taken in
this regard. This way the recoveries are made prompt by the organization.

i. Payment can also be made through LIC policy proceeds.

ii. Payment by Cash every month at LICHFL’s Office.

iii. Payment by giving post-dated cheques.

iv. Payment by salary deduction from the employer.

v. Electronic Clearing System (ECS) in association with the Reserve Bank of India (RBI), Hyderabad.

Housing finance industry

Home loan market: Estimated Rs.86,000 cr in disbursements (F.Y. 06)

Market share of banks: 85%

Outstanding housing loan: Estimated Rs.2,00,000 cr {as on March, 2006)

Growth in loans to the housing sector: 29.1 %


Housing is perhaps the most important investment decision by any person in India. Acquisition is
often deferred because individuals do not have access to adequate savings at a given moment,
creating an opportunity for financing intermediaries.

More importantly, since people need to buy houses in cities as well as towns and villages, the need
for financing is extensive. However, most finance companies have focused on addressing the
growing demand for housing finance coming out of organised Indian clusters. As the housing
finance industry in India moves into smaller locations, growth could sustain and even accelerate over
the coming years.

Until relatively recently, homebuyers in India were traditionally debt averse. Consequently, the
formal and externa! financing accounted for a small proportion of home purchase.

However, there has been a sea change in attitudes since; not only is mortgage gaining acceptance but
is also easily available.

The result is that the housing financing sector is one of the fastest growing in India. The home loan
market has recorded an impressive 25-30 per cent growth year-on-year over the last five years and is
estimated at Rs.72,000 cr industry in
2005. This sustained growth is attributed to a combination of various factors such as fiscal benefits
available to home finance borrowers, relatively low interest rates, stable property prices, increase in
disposable income levels, increase in the rate of household formation due to progressive urbanisation
and the incidence of nuclear families.

Evolution of India's housing finance industry

LIC of India provided home financing loans to policyholders since 1960s.

1977; Housing Development Finance Corporation formed.

1987: National Housing Bank Act.

1989: LIC Housing Finance Ltd, was formed,

Until 1990s: Industry dominated by HDFC and LICHFL

1998: RBI allowed PSU banks to lend directly in the retail segment.

Housing, real estate and construction contribute 9.6 per cent of GDP

Backward and forward industry linkages; nearly 250 industries affected directly or indirectly by the
housing sector (source: Tenth Five Year Plan 2002-2007).

Ranks third out of 14 sectors in terms of induced effect on the economy (source: Tenth Five Year
Plan 2002-2007).

One of the highest employment generators, providing livelihoods to around 8.5 million persons
(source: The National Housing and Habitat Policy 1998).


Secure financing option: The housing finance industry is considered the most viable of all
financing businesses, secured by the immovable asset itself. The financers keep possession of the
title deeds and other property documents till the liability is completely liquidated.

Growing competition: About two decades ago, the housing finance industry was dominated by a
single private sector , housing finance company (HFC); there are about 383 HFCs in India today
with the entry of banks making the business competitive. Regulated sector: The housing finance
industry is regulated by the National Housing Board (NHB), a subsidiary of the RBI.

The RBI, through the NHB, issues guidelines for the housing finance sector covering key issues,
namely the sourcing of funds, disbursement areas, risk weightage and provisioning norms, among

Tenure o< the loan: The tenure of home loan is among the longest when compared with other
financing businesses. The average maturity of home loan is about 15 years, primarily to make it
Major players

Market share of the major player in the market

The Indian housing finance sector is crowded with government organisations, insurance companies,

The industry comprises nearly 383 SBI, 10 housing finance companies, only 35 being registered
with the LICHFL, 6 NHB and about 26 institutions eligible for refinance from
Dewan Housing, 2 NHB. The leading four players account for more than 70 per
Canfin Homes, 1cent of the country's housing finance market. GIC Housing, & 25 Other banks

Key issues and recent trends

Declining interest rate spreads: In recent years, interest rate spreads have declined following the
entry of banks who enjoy an access to retail deposits, among the lowest cost of funds.
As a result, banks have been able to reduce interest rates faster than MFCs; banks also charge a
tower processing fee than HFCs, squeezing industry margins.

Asset-liability mismatch: According to CRIS INFAC, while the average tenure of loans increased
from five years to more than 15 years, assets in the books of most HFCs have been written for an
average 8-10 years, creating a potential asset-liability mismatch.

High NLPs: The NLP level in the Indian housing finance industry has been increasing in the recent
years due to aggressive lending coupled with poor credit recovery mechanisms. Discerning HFCs
and banks have started concentrating on robust credit appraisal and recovery mechanisms increased
floating rate loans: In a declining interest rate environment, there was a preference for floating rate
interest loans, creating an asset-liability mismatch of fixed rate borrowing versus floating rate loans.
More than 80 per cent of the incremental loans possessed a floating rate of interest (source CR/S
INFAC). An increase in the interest rate could adversely impact the demand for housing loans and

Introduction of foreclosure norms: The implementation of the Securitisation Act and recent
amendments to the National Housing Sank Act, foreclosure of a mortgaged property in the event of a
default is expected to be easier and faster than before.


Home loan disbursal is estimated at Rs.86,000 cr by 2005-06, an annual growth of 25-30 per cent a
year over the last five years.

Highlights, 2005-06

Funds borrowed during the year under review grew 7,34 per cent from Rs.4,045,00 cr in 2004-05 to
Rs.4,342.00 cr in 2005-06. Cost of funds for the Company grew by 0.14 basis points during the year,
the Company's credit rating was maintained at AAA by CRISIL. Treasury income grew 80 per cent
from Rs.7.87 cr to Rs.14.19cr in 2005 - 06 . ' 2003-04 to 16.72 per cent of total outstanding loans (as
on March 3 1 , 2006).

Non-convertible debentures: The Company continued to be rated as an AAA organisation by

CRISIL, a leading Indian rating agency. The Company mobilised Rs.1100 cr in 2005-06 through
non-convertible debentures issued to mutual funds, banks and other financial intermediaries at an
average cost of 7.20 per cent.

A critical driver of the Company's profitability is interest on the income and expenditure sides of its
profit and loss account. This refers not just to the interest that is earned, but also tlie interest liability
on funds borrowed from financial institutions.

The key to profitability lies in its ability to source funds at a cost below the prevailing industry
benchmark, allowing the Company to compete effectively and grow sustainably. In addition to
procurement, deployment is critical, whether in core or non-core functions.

Fund sourcing pattern: The Company draws funds from many sources, comprising parent LIC,
refinancing from National Housing Board, the issue of non-convertible debentures ;and term loans
from commercial banks.

• Life Insunance Corporation of India: The Company reduced it s exposure to LIC for its funds
requirement in an attempt to grow alternative fund sources. It has not taken any fresh loans from its
parent company for the last three years, widening its options for fund requirement. As a result, loa ns
from LIC declined from 32.11 per cent. On an average, more than 60 per cent of the loans taken
were based on a floating rate, corresponding to more than 95 per cent of individual loans being given
on a floating rate.

Interest pattern: The Company maintained a prudent mix between fixed and floating coupon rates on
its borrowed funds. The NCDs and term loans enjoyed fixed and floating coupon rates, while ECBs
enjoyed a floating interest rate. On an average, more than 60 per cent of the loans taken were based
on a floating rate, corresponding to more than 95 per cent of individual loans being given on a
floating rate. During the year under review, the Company re-negotiated interest rates on existing

Treasury operations: The Company's borrowing is future focused. It borrows amounts from market
with the objective to disburse them in the form of long-term / short-term loans. Being primarily
individual centric for the deployment of funds, disbursements are only gradual. The Company needs
to manage its funds in a manner that every rupee earns a return from its judicious deployment. The
Company parks its funds in liquid, safe and remunerative instruments in bank fixed deposits and
liquid schemes of mutual funds.

Over the coming years, the Company expects to widen its access across an increasing number of
banks to fund its growing requirements, de-risking the business from an excessive dependence on
any single financial institution. It expects to grow its exposure in the sourcing of fixed deposits,
which should emerge as a critical fund raising instrument across the medium term.

Highlights, 2005-06
Increase in the number of loans sanctioned every month
New branches opened in 2005-06

Marketing is an essential prerequisite for the success of any business but its scope is amplified in the
housing finance industry due to increased competition, relative decline in brand loyalty, price-
sensitivity and the extension of demand from metros and urban locations to Tier II and III ctttes.

LICHFL's response

At LICHFL, we continued to invest in strengthening our marketing through the following initiatives:

Focus: The Company segregated the marketing function from its other back office operations like
appraisal, sanction, disbursement and recovery. It created a hub-and-spoke set up where the hub,
better known as the back office, conducted all the back-office operations while the local offices
remained the Company's external face, marketing financing schemes.

Strengthening reach: The Company possessed a marketing network of six regional offices, 15 back
offices, 115 marketing offices and a representative office in Dubai. It added marketing offices during
the year under review.

Multiple marketing channels: The Company marketed products through DSAs and
HLAs/HLCs/CRAs across the country; these increased over the previous year.

Convenience: The Company launched a number of client conveniences to attract customers,

comprising the following:

Removal of the mandatory requirement of the customer needing to have an insurance policy taken
from LIC as a collateral prior to loan disbursement Providing a choice of EMI dates to suit the
customer's cash flow

Loan pre-repayment without penalty if done from own sources Rat nominal charge for an increase
in EMIs during loan tenure. The Company possessed a marketing network of six regional offices, 15
back offices, 115 marketing offices and a representative office in Dubai.

Provision for multiple modes of EMI payments (post-dated cheques, salary deductions, electronic
clearing system and collection points; extension of EMI collection points to a number of banks

Introduction of New Grins Lakshmi scheme:

Tile scheme provides finance against the assignment of liquid security instruments like a Life
insurance policy, fixed deposits, NSCs and KVPs among others. Customers wanting to avail of
higher loans or with defective titles can avail of loans under this scheme.

Image building exercise: The Company engaged Lowe Lintas to undertake a nationwide exercise to
refurbish its image in line with industry trend of appearing youthful, energetic and flexible.

Commission restructuring: The Company reorganised the commission structure for its DSAs, linking
it largely to their performance.The Company expects to enhance its share of mind and market
through the following initiatives:

Extending reach: Extension to Tier II cities Innovative financing schemes: Customisation of schemes
for specific categories with special discounts as well as incentives for referral business Intelligent
product development: Prudent leverage of data-mining with an analysis of applications rejected
earlier, reasons for refusal, tracking alternative sources from where they availed of the loan and
using all this data to customise new products. Geographic customisation: Product development based
around the diverse needs of individuals in different regions. Professional distribution chain: A
professional individual-led distribution network supported by intensive training.

Adopted the loan appraisal scorecard system on a pan-lr>dia basis.

The incidence of NPA within the first year of disbursement declined from 3.27 per cent in 2003-04
to 0.07 per cent of sanctions in 2005¬ 06.

Loan appraisal is a key determinant in asset quality, a critical process that assures that the Company
gets back what is promised by the borrower over the tenure of the (oan. This does not just influence
profitability and sustainability for the moment, it also provides the Company with a platform to
mobilise low cost funds from banks and other financial intermediaries. The appraisal process
involves an analysis of asset quality, comprising title clearance, quality of construction and applicant

Appraisal scorecard: The Company created an NPAs out of first year sanction appraisal scorecard
system, an IT-based unbiased appraisal of every application, a first time in India's housing finance
sector. This ensures complete transparency in the appraisal function. Standardisation of system and
procedures: A number of guidelines on different operational matters were issued to streamline
systems and procedures, enhancing operational uniformity across the country and leading to quality
underwriting and a lower turnaround time.

Documentation kit: A new documentation kit was prepared comprising a booklet of all documents
and disclosures required. This initiative helped standardise the Company's pan-Indian loan
application process, shrinking the turnaround time. Over the coming years, the Company expects to
maintain a check on the relevance of assumptions governing the new appraisal system with relevant
adjustments when required.

Number of sanctions
Number of NPAs
NPAs as a percentage of sanctions

Sanctions and disbursement

Individual sanctions grew 13.87 per cent from Rs.4,415.05 cr in 2004-05 to Rs.5,027.28 cr in 2005-
06. Individual disbursements grew 11.00 per cent from Rs.4,207.22 cr in 2004-05 to Rs.4,670.08 cr
in 2005-06. Over 90 per cent disbursement-to-sanction ratio was maintained.

Sanctions and disbursements represent the total volume of business generated by the Company.
Sanctions represent the Company's order book, while disbursements reflect effective deployment.
Sanction marks the approval of the loan application, while the disbursement marks the movement of
funds from the financial intermediary's account to that of the borrower.

Sanctions and disbursements at LICHFL: disbursements are done in the local offices. To enhance
responsibility in line with increasing loan amounts, the Company created layers within its
organisational hierarchy for sanctioning loans of increasing amounts: loans of Rs.60 lakh and above
were sanctioned only at the corporate level.

Client exposure: As a business focus, the Company adopted a prudent long-term policy of funding
individual needs for important reasons: low default prospects and a relative insulation from an
economic downturn. More than 95 per cent of the Company's outstanding portfolio comprised
individual borrowers (as on March 3 1 , 2006). Over the years, the Company increased its funding of
corporate clients and builders, an interesting de-risking initiative.

Corporate clients: While the ticket size is larger, the prospect of default is relatively lower due to a
lien on the salary account of the individual and peer pressure. At LICHFL, our sanctions and
disbursements functions have been segregated for enhanced effectiveness. While sanctions are done
primarily in the Company's back office,

Builder segment: Highest loan disbursements; provides a database of existing clients and a
prospective flow of business through upcoming projects.

Ticket size: At UCHFL, the average ticket size of the loan has increased consistently, attributable to
the following factors:

Improving lifestyles: A home is the most important showpiece of an improving lifestyle; this is
increasing the demand for quality living apartments.

Growing realty rates: Property rates have appreciated significantly over the last three years,
increasing the ticket size of loans,

High-ticket focus: A recent focus on corporate and builder lending has enhanced disbursement size.

At UCHFL, this increase in average disbursements indicates a better coverage of fixed costs and
improving profitability. The Company introduced the concept of a prime lending rate called

'LHPLR' in line with the industry practice. The floating ROl in all housing loan schemes will be
linked to the LHPLR with a fixed spread, a win-win for the borrowers and the Company.

At LICHFL, we strengthened our business during the year under review through the following

Introduction of a fixed-3 ROl on core business: The rate of interest under a Fixed-3 year structure
remains fixed for three years, following which a floating ROl becomes applicable. This provides a
discerning borrower with an option to switch to a different rate in line with an evolving interest rate

Introduction of LHPLR: The Company introduced the concept of a prime lending rate called
'LHPLR' in line with the industry practice. The floating ROl in all housing loan schemes will be
linked to the LHPLR with a fixed spread, a win-win for the borrowers and the Company.

For the borrowers: Transparency in the movement of the ROl; provides an efficiency barometer to
analyse the efficiency in the fund management and cost control.

For the Company: Strict control on overheads and judicious fund management.Makeover of CEHL
scheme: The existing Corporate Employees Housing Loan Scheme was revised; benefits like a
concession in ROl, among others, was introduced in select categories.

At UCHFL, we expect to strengthen our role in sanctions and disbursements through the following

Strengthen builder relations, leading to exponential growth.

Shrink the turnaround time in sanctioning and disbursing funds.

Disburse loans to borrowers directly from the back office.

Historical performance matrix of individual loans


Non-performing assets as a proportion of the total outstanding as on March 31, 2006 declined by 101
basis points from 4.42 per cent at the end of 2004-05 to 3.41 per cent in 2005-06.
An efficient recovery mechanism is a pre-requisite for survival of any financial organisation. We are
not an exception to this.

The Company has established a recovery mechanism in all its area offices for a follow-up of
defaulting customers in the collection of outstanding dues.

In hard-core default cases, the Company resorts to recover its dues by enforcing security under

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 (SARFAESI Act),

The Company allows its customers to opt for convenient due dates for the payment of monthly loan

Business drivers
Asset quality and provisioning

Gross non-performing assets reduced from Rs.549.63 cr as on March 3 1 , 2005 to Rs.506.23 cr as

on March 3 1 , 2006.

The quality of asset in the housing finance industry is considered superior to that of any other
segment of India's finance industry even as the incidence of non-repayment and prolonged default is
a reality. Over the years, the National Housing Bank specified norms for making provisions for these
non-performing assets to accurately estimate the assets of housing finance companies. These
comprised: Stringent appraisal system coupled with an aggressive recovery mechanism to reduce
NPAs. As a measure of conservatism, the Company provided 0.20 per cent on standard assets for all
retail housing loans, which resulted in an additional provisioning of Rs.27.53 cr in 2005-06. The
Company also created a provision of one per cent on the standard assets for the non-retail business,
which resulted in an additional provisioning of Rs.5.79 cr.
LICHFL's good practices

Over the years, UCHFL strengthened a number

Performance matrix

Total loans (Rs. cr)


Gross non-performing assets {Rs. cr)


Gross NPA to total loans (%)


Provisions (Rs. cr)


Net NPA (Rs. cr)


Net NPA to total loans (%)


Provision cover {%) to total NPAs,

23.93 per cent increase in revenues earned per employee from Rs.1.17 cr in 2004-05 to Rs.1.45 cr in
2005-06. 23.49 per cent increase in average loan portfolio per employee from Rs.12.98 cr in 2004-05
to Rs.16.82 cr in 2005-06.

Financing is a people-centric business, the human-interface being the key element in the conversion
of leads into business. As a result, people form the biggest asset for any financial intermediary;
their'enrichment will translate into enhanced profitability and their loss could result in an erosion of
the Company's knowledge bank followed by periodic training imparted by internal team members
and external faculty {by invitation). In addition, the Company trained employees at external training
destinations, namely the National Housing Bank, ASCI and MICA, among others. Internal training
comprised relevant techniques related to business needs.

Performance: A performance assessment format formed the basis of employee performance

appraisaf, filled by the reporting officer of each team member. This represented the i benchmark for
increments and promotions, among others.

Rewards: High performing individuals were rewarded at an i annual function through recognition
and financial incentives.

LICHFL's people oriented policies

Over the years, the Company implemented policies for improved performance comprising the

Recruitment: The Company continued to be empanelled with employment exchanges, which

provides a huge database of the prospective list of eligible candidates. In addition, the Company also
leverages the expertise and experience of its parent organisation for its recruitment needs.

Training: Training comprised a five-day induction programme Training matrix of the Company

Investment in training (Rs. lakh) 20.72

Number of employees who participated 173
Number of training sessions held 17

To make the workplace more congenial, the Company renovated 25 offices across India and
concluded a wage revision with effect from 2002, increasing employee cost in 2005-06.

The Company is introducing motivational policies for enhancing performance and conducting
renovations in more than 50 offices across the country.
All operational functions of the Company are IT driven.A common IT . platform tunning

across key departments (marketing, credit appraisal, recovery and funds management). All
employees provided with email ids under the Company domain - for improved
communication. Daily MIS faciiitating informed decisions for the senior management.

What was a business support function is now a business driver, helping the Company spread wide
and yet remain proximate, helping accelerate business velocity without compromising accuracy.

At UCHFL, the IT . division comprises of technically qualified professionals controlling various IT

systems and assisted by reputed and experienced vendors. DCHFL has automated all key operations,
converging the benefits of accuracy, speed and clarity for the benefit of quicker decision-ma king

Connectivity: The IT system provide connectivity between the Company's corporate office and its
entire network of offices across the country. This connectivity has provided a seamless information
flow from the Company's network to the corporate office. As a result, all operational details are
available to the corporate office facilitating informed decision-making by the management.

Appraisal: The Company has created a system-driven appraisal system called the 'Appraisal
Scorecard' through the following approach:

The creation of a database comprising borrower categories based on personal profile, carrier vertical,
business group and saving habits, among others.

The assigning of a suitable risk weight age to each borrower category, tne cumulative risk weightage
determining the loan eligibility and the coupon rate for each applicant.

The appraisal function can now be clone seamlos^y. accurately and in an unbiased mr»!-!ner.

Recovery: The Company has created a default database based on a number of parameters that can be
filtered into two categories based on the kind of follow-up required, namely the cases that can be
outsourced and those that can be handled in-house.

This technology-driven recovery module can f=ick day-to-day agent activity, can update them on the
payments made by the defaulting client to avoid embarrassment and provide art updated status to
recovery agents on defaulting oases under their our view.

Fund manaypmeri!.-. !T-driven repayment system arid fund management has altered banking
operations at IJCHR...

This provides the Company with an accurate estimation o* the funds likely to be credited on any
specified day enabling the fund management team to accurately deploy and also track funds that
have not been credited to the account with accompanying reasons.
This system has translated into the following benefits:

Streamlined the Company's banking operations.

Enabled instant access ot amounts deposited at local offices across the county at the corporate office.

Improved fund management and reconciliation.

A robust IT backbone at LICHFL. is expected to create a lean, swift organisation responsive enough
to market requirements, efficient to lead to cost reduction and extending to internal audit and
accounts from 2006-7 onwards.

The optimism that India's housing finance industry will grow significantly is based on primarily on
the growth of the housing sector.

Growth of the housing sector

Increasing government support

Budgetary support: The budgetary support of the Government through its five-year plans has
increased significantly, facilitating the accelerating growth of India's housing sector, a trend that is
expected to continue.

1st Plan (1951-56)

5th Plan (1974-79)

7th Plan (1986-91)

9th Plan (1997-2002)

10th Plan (2002-07)

Source: Ministry of Urban Affairs, Housing Section, 1997

FDI limit: On March 3, 2005, Government of India replaced the integrated township policy to permit
FDI upto 100 per cent in townships, housing, built-up infrastructure, construction and development
projects under the automatic route.

Growing working population

Growth population: The growth of the Indian population at about 1.76 per cent per annum is among
the fastest in the world, which is expected to sustain the increase in the demand for dwelling units.

Reduction in the working age: A few years ago, the proportion of those seeking home loans in the
below 30-year age bracket was 13 per cent and 47 per cent for those over 40 years age. In the recent
past, the share of those below 30 years in the total home loan pie has risen to 24 per cent and that of
the 40-plus age group declined to 34 per cent, widening the market for home loans.
Exponential growth of the IT and ITeS sectors: The demand for space from this sector grew at a
CAGR of 80 per cent over the last four years and this trend is expected to sustain. In the first few
months of 2006 alone, the demand for space from this sector stood at an estimated 25 mn sq ft,
creating a demand for financing at the primary level and also at the secondary level through well
paid employees who may need new homes,

Urbanisation: Centrifugal development is accelerating real estate towards large city fringes. Rise of
suburbia across all large cities, as well as the need for larger space, better living conditions and easy
connectivity from the main city centers is driving real estate expansion and dispersal.

Whitefield in Bangalore, Nerul, Koparkhairane, Kharghar in Navi Mumbai, Pashan Sus Road in
Pune and Gurgaon and Greater Noida in the NCR are certain examples of 'fringe development'.

Growth of mega cities (population in mn)


2025 (E)



New Delhi



By 2016, India's total population is likely to grow to 1.26 bn with 33 per cent residing in its cities,
creating a growing demand for home financing.

Increase in disposable incomes

The average Indian has started earning more, creating an attractive basis for financial investments
and hence, intermediaries. Consider this: In 1995-96, 80 per cent of Indian families earned less than
90,000 per annum; in 2001¬ 02, this declined to 72 per cent and is expected to trend down to about
50 per cent by 2010. This growth in incomes is based on the following realities:

Improved corporate sector performance: The performance of India Inc. in 2005-06 reflects a healthy
picture. An analysis of 531 companies shows that they posted a 23,8 per cent rise in aggregate net
profit to Rs.48,107 cr, while net sales increased 19.5 per cent to Rs.4,91,414 cr in 2005-06. The
divergent growth rates indicates that as companies get more profitable, they would be more inclined
to accelerate recruitments and put a greater income into the hands of employees who, in turn futtire
growth circle. India's middle and upper middle-class households are likely to grow from 54 per cent
in 2001-02 to 74 per cent by 2009-10. Esad aitordabisity: Afforaability increased from 20 times
annual income to five times annual income.

An increasing preference towards nuclear families is driving the demand for the housing sector.
According to ORIS Infac, the average household size in urban India has shrunk from an approximate
5.7 in 1971 to about 5.1 in 2001 improving iiffcst.Sss: Increasing disposable income has influenced
Indian lifestyles, housing being the first visible improvement.

Investment option: The investment options for the individual are limited, comprising the equity
market (increasingly complex), commodities market (new investment genre), the risk-tree
investment securities (low return); housing represents the only investment option to have delivered
superior and risk-free growth.

Tax breaks: The government allows an individual to claim a tax rebate on principal and interest
repayment, making property purchase increasingly attractive.

Optimism in a nutshell
Thf> nrocluclive population (age 25-44) of India will grow to 369 mn by 2013, up 33 percent from
278 mn in 2001,

India is expected to be the second highest urbanised country in the world by 2010 with 30 per cent
living in urban areas.

India will have 107 mn households with an annual income of USS 2000 or more in 2010 compared
to 53 mn househofds today.

By 2010, people earning Rs.1 lakh or more will constitute 48 per cent of the total earning

Approximately 70 per cent of new homes in India are being financed through mortgage, largely due
to a steep decline in interest rates.

Over the next 10-15 years, India will need to build 85 mn housing units to meet the shortfall.

Shortage in the housing sector Industry estimates

According to Housing & Key Building Materials in India: A

Long-Term Perspective (1991-2011), households are expected to grow at a decadal growth rate of
approximately 22 per cent between 2001 and 2011. During this period, more than 40 mn new
households are expected to be formatted

According to an Assocham study, the Indian housing sector faces a shortage of 20 million dwelling
units for its lower middle and low-income groups: this will increase to 22.5 million dwelling units
by the end of the 10th Plan period. Demand is expected to grow by 90 million units by 2020.

Growth of the housing finance sector

According to CRIS INFAC, between 2001-02 and 2006-07, total direct housing disbursements are
expected to grow at a CAGR of 24.1 per cent to approximately Rs.735 bn. Going ahead, the housing
finance industry represents attractive opportunities for growth in India for the following reasons:

Low penetration: Mortgage debt as a proportion of GDP in India is a low 2.58 per cent compared to
50 per cent in developed economies and over 20 per cent in the rapidly growing Asian economies
like Singapore, Taiwan and Malaysia.

Increasing customisation: With increasing competition in the housing finance industry, innovative
products are being customised to meet customer cash flows, loan tenures are increasing, flexibility
between fixed and floating interest rates is rising with flexible switch options.

Extending reach: Demand for housing finance is percolating to the hitherto conservative Tier II

Demand for housing loans: India is going to see the development of more than 85 mn housing units
over the next 1 0 - 1 5 years of which 70 per cent should be financed by mortgage fas per the
industry benchmark), a huge growth opportunity.

Increased financing avenues: In addition to financing the needs of the common man, housing finance
companies are looking to meet the fund requirement of builders for various projects being
implemented across India. The increasing preference towards the projects, as opposed to the earlier
practice of stand-alone buildings, is expected to drive ttie demand for housing loans.

Risk and prospects are inseparable. As a responsible management, our endeavour is to minimise the
risk in our business with the objective to maximise returns. At LICHFL, this is facilitated by a risk
management framework driven by a comprehensive organisationwide culture of risk governance,
supported by effective processes and facilitated by qualified professionals. As a result, only those
business decisions are taken that balance risk and reward, which ensures that the Company's revenue
generating initiatives are consistent with the risks taken.

The Company's risk management revolves around:

Corporate policies that clearly estimate the kind of risk involved.

The vesting of the responsibility for risk management with the senior management.

The Company's professionals manage risk with the help of disciplined risk management process, the
adherence to established risk management standards and the use of effective risk management
processes. This management of risk conforms to the Company's strategic direction, is consistent with
shareholders' desired total returns, the

Company's credit rating and its desired risk appetite.

Risks that are external to the Company

Industry risk

Interest rate hike and the rise in realty rates may affect the demand for housing and hence, housing

Risk mitigation: The share of real estate in India's GDP increased from 5.2 per cent in 2002-03 to
seven per cent in 2005-06.

An estimated shortfall of 22 mn dwelling units as of 2002.

Attractive tax incentives are driving the demand for housing loans.
There is a growing demand for real estate from suburbs of metro cities and Tier II locations.
Mitigation measurement:The housing finance sector recorded a compounded growth of 36 per cent
in disbursements from Rs,18,191 cr in 2000¬01 to Rs.86,000 cr in 2005-06.

Competition risk

An increasing number of banks with access to low cost funds could erode the Company's market

Risk mitigation: The Company reorganised its business around a hub-and-spoke model for organised
growth over the coming years and clarity in the authority-responsibility functions.

It leveraged technology for seamless connectivity to reduce business process and facilitate informed
decision-making. It increased its field personnel to cater to growing business needs.

• It introduced a new marketing line with professionals in the business.

It strengthened builder relations to cater to the growing realty sector.

Mitigation measurement: LICHFL enjoyed a six per cent market share in 2005-06, which is expected
to increase over the coming years.

Interest rate risk

An increase in interest rates could squeeze the Company's margins.

Risk mitigation: A part of the Company's funds are from LIC and are at historically low rates of
interest. Its AAA rating (CRISIL) enables the Company to mobilize funds at competitive rates.

Mitigation measurement: The Company is able to avail loans at competitive rates by leveraging its
brand; average interest rate in 2005-06 was only 7.30 per cent and the introduction of public deposits
from 2006-07 is expected to reduce borrowing costs and protect margins.

Risks internal to the Company

Perception risk: LICHFL is perceived as a government owned company due to the LIC brand being
attached to it.

Risk mitigation: The strength of the LIC brand and its knowledge repository has strengthened the
Company's corporate standing. The Company reduced its dependence on LIC; funds from LIC
declined from over 50 per cent in 1999-2000 to 16.72 per cent of total outstanding loans in 2005-
06.The aggressive introduction of IT as a business process driver is expected to reduce transaction
turnaround time, strengthening the Company's image.

Mitigation measurement: Market surveys carried out in the fourth quarter of 2005-06 revealed that
the Company enjoys the perception of increasing flexibility and customer friendliness

Funding risk

The Company may not be able to mobilise requisite low cost funds to meet growing opportunities.

Risk mitigation: The Company diversified its funding requirements to four sources (term loans from
banks / financial institutions, debentures, LIC and NHB refinancing). The Company maintained
active relationships with more than 25 banks. The Company's unchanged credit rating of AAA
rating over the last five years made it a preferred lending partner among banks and financial
institutions. The Company is examining fixed deposits as a new funding source.

Mitigation measurement: The mobilisation of funds has increased across the each of the last five
years, enabling business growth..

Exposure risk

An increase in the average loan size could increase risk.

Risk mitigation: The Company conducts a detailed and document-based analysis of the borrower
and income profile. A reference to is made CIBIL's comprehensive database to derive borrower
history and repayment record for other debts. A scientific method helps determine an interest rate
customised to the applicant's risk profile. Increasing exposure to the corporate clients, where the
possibility of default is limited due a deduction from salary, self image and peer pressure for
repayment. Focus on financing builders, where the total ticket size is high but payments secure.

Mitigation measurement: Gross non-performing assets reduced during the year under review.

Asset quality risk

A bad quality of assets in the books of the Company may increase NPAs

Risk mitigation: LICHFL combined business insight with technology to create an appraisal
scorecard, a first of its kind in the Indian housing finance industry.

The Company segregated its marketing from appraisal across its entire network for an unbiased
application appraisal. The Company provided aggressively for probabte delinquency to strengthen
the credibility of its financial statements.

Mitigation measurement: The Company has adopted more stringent provisioning norms than what
was prescribed by the regulatory authorities, improving asset quality.

Recovery risk

An inefficient recovery could reduce fiscal efficiency.

Risk mitigation: All loans are protected with original deeds, post-dated cheques (12 months in
advance), an ECS or a lien on the individual's salary. The Company has a guarantor in the case of
corporate loans and collateral security of life insurance policy for a large section of its retail foans.
It shifted asset tracking from default cases to NPA detection for an early signal to facilitate the
conversion of an NPA into a quality asset. It utilises the services of professional recovery agents in
repossession cases. It created a remuneration structure for its marketing chain, linking emoluments
to NPAs.

Mitigation measurement: The Company's net NPAs declined from 2.79 per cent in 2004-05 to 1.80
per cent in 2005-06.

Asset-liability mismatch risk

An asset-liability mismatch may hamper prospective sanctions and disbursals.

Risk mitigation: The new IT-driven funds management system provides a real-time snapshot of the
inflow and outflow. The Company issues long-term NCDs to offset mismatches. Term loans from
banks were negotiated for long term. Despite a 10-15 tenure for the repayment of housing loans,
historical evidence proved that individual borrowers preferred loan tenures of 7-8 years. The
Company possessed an institutionalised periodic tracking of assets-liabilities.

Mitigation measurement: The National Housing Bank stipulated that there should not be a shortfall
in excess of 15 per cent in the asset-liability maturity for the short-term (1-year) bucket which the
Company has been adhering to. Over the medium term, the Company is comfortably placed with
mismatches under control.

Yield risk

A rising interest rate and an inability to pass on this increase to customers due to increasing
competition could impact profitability.

Risk mitigation: More than 91 per cent of the borrower base of LICHFL opted for the floating rate
option allowing the Company to pass on a part of the increase in the coupon rate. Effective fund
management on a technology-driven platform enabled an effective utilisation of funds, improving
yield. Effective cash flow management ensured that funds were not idled for a single day.

Mitigation measurement: Yields expected to improve over the coming years. Overhead costs for the

Liquidity risk

The Company may not have the requisite liquidity to meet a sudden spike in the demand for funds.

Risk mitigation: The Company maintains a seven-day liquidity buffer at all times.Funds are
mobilised through the issue of NCDs and from banks. These are parked in liquid assets for
encashing as and when necessary. At the start of a financial year, limits are obtained from banks and
LIC, with adequate buffers to address any spike in the demand for funds.

Mitigation measurement: The Company has never faced a liquidity crisis in its existence.

Overhead risk

The Company's profitability may be threatened by growing overheads.

Risk mitigation: The Company linked remuneration with performance; individual remuneration
(especially in the marketing department) was variable in character. Deployment of IT across every
function and between its various offices reduced costs and work duplication. The offer of various
options at a cost to borrowers enabled the Company to cover overheads.

Mitigation measurement: Employee productivity is expected to increase, reducing

People risk

In a people-intensive business, attrition can hamper growth.

Risk mitigation: The Company remunerates employees adequately; performers are recognised and
rewarded at open forums. Extensive employee training (technical and soft, internal and external)
helps strengthen their intellectual capital.

Mitigation measurement: People attrition was lower compared to the industry benchmark.

Brief profiles of the Directors

Shri T.S. Vijayan, Chairman of UC Housing Finance Limited, holds a B.Sc (Spl.) degree in
Physical Sciences from Kerala University and management diploma. He took charge as the
chairmanship, Life Insurance Corporation of India (LIC) on 3rd May 2006,Shri T.S. Vijayan joined
LIC as a Direct Recruit Officer in 1977. In an illustrious career spanning 29 years, Shri Vijayan held
various prestigious positions in LIC, prominent among them being Marketing Manager and later
Senior Divisional Manager of two large divisions viz. Ernakulam and Thiruvananthapuram, and
Director S Chief Executive of LICHFL Care Homes Limited. He was instrumental in designing the
systems for the new venture of running community living centres for senior citizens. Before
becoming MD, he was Executive Director (Information Technology / Business Process Re-

He has attended several national & international seminars in the areas of Information Technology,
Strategic Management, Corporate Governance, Financial ManagementA/alue creation in the Service

Industry etc. According to him, the key to creating sustainable competitive advantage is employment
of high-end technology and developing distinct human capital.

Shri Thomas Mathew T. is the Managing Director of LIC Housing Finance Limited, He joined the
Board of the Company on 6th May 2006. He is also the Chairman of the Executive Committee of

He is a post graduate in Economics, Graduate in Law, post graduate diploma in Management

(Marketing) and also an Associate of the Insurance Institute of India. He joined LIC in December
1977 as a Direct Recruit Officer. He took over charge as the Managing Director on March 24 2006.
Mr. Mathew has held various important positions in LIC in different parts of the country. He was the
Zonal Manager of the biggest and most prestigious western zone of LIC, Chief (Marketing and
International Operations), and Senior Divisional Manager- in-Charge of three major divisions.

Mr. Mathew has attended various seminars and training sessions related to life insurance in India and
abroad. He has visited USA, Europe and Africa in connection with the marketing and international
operations of LIC.

Shri G. M. Ramamurthy is a graduate in Science, Law, member of the Institute of Company

Secretaries of India and certified associate of Indian Institute of Bankers (CAIIB), He also holds a
diploma in Labour, Company and Taxation Laws. He is the Executive Director of Industrial
Development Bank of India (IDBI) and has vast legal experience. He has been on the board of the
Company since 10th May 1999. Shri Ramamurthy is a Member of the Executive Committee and
Chairman of Audit and Investors' Grievance Committees of Directors.

Shri Y. B. Desai is an Economics graduate and a Certified Associate of Indian Institute of Bankers
(CA/IB). He was Managing Director of EXIM Bank and has vast experience in banking, finance,
treasury operations and international banking. He joined the Board of the Company on 24th May
2002. He is a member of Audit Committee of Directors.

Shri Dhananjay Mungale is a Chartered Accountant and a Law Graduate by profession, and has
spent the major part of his career in banking and investment banking in India and Europe with Bank
of America and DSP Merrill Lynch Limited. He is presently acting as advisor to select corporations
in India and Europe, He is on the board of various public and private limited companies. He has
been on the board of the Company since 4th June 2004.
He is a member of the Audit and Investors' Grievance Committees of Directors.

Shri K. Narasimha Murthy is a Science graduate and has a brilliant academic record. He is fellow
member of the Institute of Chartered Accountants of India and the Institute of Cost and Works
Accountants of India. A practicing cost accountant, he has expertise in various areas like cost audit,
management audit, strategic planning, critical analysis of performance, SWOT analysis, organisation
analysis and structure, management information and control systems development, productivity and
cost reduction programmes, mergers and acquisitions, manpower planning and development,
recruitment services, designing production incentive schemes, revival of sick units and other
management support services. He has to his credit diverse exposure in audit, investigation, cost
reduction programmes, management development programmes and viability studies. He has been
associated with several high powered committees at both central and state levels (in Andhra Pradesh)
since 1995. He had also chaired the 'Committee on Urban Co-operative Banks' in 2002 constituted
by the Government of Andhra Pradesh. He has held many board level positions in reputed
companies. Presently he is on the Board of IDBI Limited. He joined the Board of the Company on
26th June 2005. He is a member of Executive Committee of Directors.

Shri S. Ravi is a post graduate in Commerce and fellow member of Institute of Chartered
Accountants of India. He is the promoter partner of M/s. Ravi Rajan & Co, Chartered Accountants.
He has to his credit a wide experience in banking and in the specialised fields of accounting,
auditing, financial and management consulting, business valuation, merger, acquisition,
restructuring, business advisory services etc. He is on the Board of Nationalised Banks and Financial
Institutions apart from being on the Board of various listed companies. He joined the board of the
Company on 26th June 2005. He is Chairman of the Audit Committee and Member of Investors'
Grievance Committee of Directors. Shri B, N. Shukla is an M.A. gold medalist and has a Ph.D. from
Patna University on 'A Study of Industrial Relations in Ports & Docks in India with Particular
Reference to Calcutta Port'. Hie has also to his credit experience in three research projects in the
Department of Economics & Industrial Relations while working with Shree Ram Centre for
Industrial Relations, New Delhi. He was a lecturer with the Post Graduate Department of Labour and
Social Welfare at the University of Patna. He was also a Professor and Director in the L. N. Mishra
Institute of Economic Development and Social Change, Patna, for the period from October 1985 to
September 1990.

He has written books on 'Collective Bargaining' and 'Test Your Knowledge In Industrial Relations'
and has also been a speaker on All India Radio on subjects like the Indian population expiosion, law-
making procedures, position of the governor, national integration, the Minimum Wages Act, 1948,
social security etc.

He is presently a member of Bihar Central Standing Labour Advisory Board, Bihar Minimum Wages
Advisory Board and Consumers' Affairs Committee of LIC of India. He was appointed as Director
on 24th January 2006.

Shri S. K. Mitter is the Director & Chief Executive of LIC Housing Finance Limited. He joined
LIC of India as a Direct Recruit Officer in 1978. He has 27 years of experience in holding senior
positions like Senior Divisional Manager, Kolkata Metro - I and Kolkata Suburban Divisional
Office, two of the top 10 divisions in volume and size of business. He was Regional Manager
(Marketing) East Zone before joining LIC Housing Finance Limited.

He has attended various national and international level seminars held at Administrative Staff
College of India in Hyderabad, National Law School in Bangalore and World Bank Conference on
Contractual Savings at Academy of Educational Development, Washington. He was appointed as
Director on 26th June 2005. He is a member of the Executive and Audit Committees of Directors.

Management Discussion and Analysis Report
Overview of macro economy

The Indian economy registered Gross Domestic Product (GDP} growth of over 8 per cent mainly
due to robust growth in the construction and manufacturing sectors. Further, the service sector also
maintained its pace of growth as in the past. Due to sharp rise in global crude prices, imports have
increased by 26.7 per cent in the first ten months of the year. During the year, the capital market
continued to be volatile.

Though the Rupee was range bound against the US S during the year, foreign exchange reserves
were reduced to US S 140.40 billion mainly due to outgo on account of redemption of India
Millennium Deposits, valuation losses from a weakened dollar vis-a-vis other currencies and a
widening deficit in the current account of the balance of payments.

During the year 2005-06 there was considerable slow down in reserve inflows as a result of Reserve
Bank of India (RBI) efforts to control excessive reserve inflows. The reserve inflow fell from Rs.
64,211 e r a s on 31st March 2005 to Rs. 34,852 cr as on 3rd February 2006. The money market was
largely stable during the first half of year. During the year RBI has revised upward by 25 basis points
reverse repo rate thrice during April 2005, October 2005 and January 2006. As a result, interest rates
have increased sharply mainly in short maturity paper; for instance one year GSec increased from
5.84 per cent to 6.54 per cent. Lack of demand for longer maturity bonds and increased central
government's borrowing as in the last year may result into tightening of interest rates. In India,
inflation has declined from 5.7 per cent to 3,96 per cent during the year despite sharp increase in
international oil prices.

The capital market remained bullish during the yea,r and stock index touched a record high in recent
months though the asset allocation of domestic households in equity continues to be as low as 1.5
per cent. The assets under management of mutual funds have shown a growth of 42 per cent during
the year. The year also witnessed an increase in the interest in the commodities market, thereby
taking the volume to Rs. 2,000 cr in the year as against Rs. 1,500 cr in the previous year.

The growth prospects for the Indian economy continue to be bright due to strong fundamentals. This
will boost inflow of foreign investment which will result in further growth of the service sector as
well as the manufacturing sector.

Housing finance industry structure & Development

The housing finance industry continued to show a high growth rate during the year mainly on
account of improved standards of living, urbanisation, a desire for home ownership and easy
availability of credit at affordable rates of interest and opportunity for tax saving in respect of
interest payment on housing loans.

As a result of growth in disbursement of housing loans, its share in GDP has increased from 3 per
cent to 3.5 per cent.
However, as compared to advanced countries, it is still lower.

As per the report of RBI, during the last ten years, housing (oans showed a cumulative growth rate
of 23 per cent p.a, as against 14,8 per cent p.a, in non food bank credit during the same period. As a
result, the proportion of housing loans in total non food credit has been increasing steadily over last
few years, investment in housing during the Ninth Five Year Plan has been Rs. 1,510 billion and the
estimated investment in housing during the Tenth Five Year Plan is Rs. 7,263 billion.

These factors driving the growth in the business are likely to continue in the next year, resulting in
further growth of the Company.

The demand for housing loans is likely to improve further as a result of introduction of section 80C
in the Income Tax Act,

1961 which enables the borrower of housing loans to claim upto Rs. 1,00,000 as eligible deduction
from taxable income in respect of principal repayment of housing loans. This is in addition to the tax
incentives already available to the extent of Rs. 1,50,000 on interest repayments.


The housing finance industry is one of the most keeniy competitive segments of the economy, with
the banking sector forming a significant presence. However, RBI through its credit policy
announcements, has recently amended its guidelines/norms making it mandatory for banks to
increase their provisioning required from 0.4 per cent to 1.0 per cent on housing loans above Rs.
20.00 lakhs, real estate advances etc. This has resulted in banks going slow in housing finance
lending. The Company, through its competitive pricing, wide distribution network and good
customer service, has not only been able to show a good growth in new business, but has shown an
improved retention rate which is reflected in high loan book growth.


The gap between the demand and supply of housing continues to be a great opportunity for housing
finance companies. Industry estimates show that in five years, India will be short of 20 million
homes. The Information Technology

(IT) industry alone will need 150-200 million square feet of space over the next five years {the real
estate sector will continue to derive its growth from the booming IT sector, since an estimated 70 per
cent of new construction is for the IT sector, as per a report by PriceWaterhouseCoopers).

As the retail industry expands, demand for property can only rise. Since the competition in the
market is intense, builders are going out of their way to be different. Specialised malls have become
the order of the day. Gurgaon will soon have an auto mall, while Bangalore is about to get an
exclusive furniture mall. It is a common saying of today that Gurgaon would soon be known as Mall
of India.

The easy availability of housing finance and stability in property prices are strong growth drivers.
Investment in housing is a prioritised item on the national agenda as it contributes substantially in
the country's GDP growth, directly and indirectly. Most builders are trying to woo investors with
interesting features. Closed-circuit television and earthquake proofing are expected as standard
features in most upmarket blocks. Some of the residential projects boast of air-conditioning, club
and recreational facilities and modular kitchens.

Unlike other finance companies, the risk of non-payments is minimal due to the emotional and social
dimension in house ownership which induces the borrower to service the loan.

Tax incentives have increased and so have salaries. So for the first time, the salaried Indian has been
able to leverage current earnings to buy a Juture asset. The average age of a new homeowner is now
32 years compared with 45 years a decade ago. There is also an overall transparency in the sector
which was hitherto missing and as banks and financial institutions are lending heavily both to the
investor and the developer. Relaxation of foreign direct investment (FDi) ceiling has meant more
foreign investment in the sector. New technology has meant faster and better completion of projects,
so return on investments (ROi) is higher.


There are, however, a number of factors that can spoil the party. Land costs, which are a major
constituent of housing costs in metros, have risen much faster than property prices. To offset this,
developers are moving to smaller cities where prices are also rising. This would affect some of the
smaller players, and experts feel that in time there would be a shakeout with private equity deals and
joint ventures.

Listing out the challenges for the real estate market in India, a report by PriceWaterhouseCoopers
said that the Indian government's tax policy was not in tandem with the liberalisation initiatives
being undertaken in the sector.

According to it, 'There are no substantial tax incentives for real estate development except in the
limited circumstances. Even in these situations, the tax incentive windows have a short life left. The
prevailing tenancy laws in India are not in favour of owners of the land."

The Urban Land Ceiling Act and Rent Control Act have distorted property markets in cities, leading
to exceptionally high property prices. Moreover, a high percentage of land holdings do not have
clear titles. This is a sentiment echoed by many industry bigwigs, who feel that the Urban Land
Ceiling Act should be scrapped to encourage more FDI, the Rent Control Act, in existence since
independence, is meant to protect tenancy rights but really is a major irritant for investors. There
seems to be little wilt to repeal it, since commercial tenants are too strong a lobby.

At present, real estate developers are required to obtain as many as 33 clearances before putting up a
township. It is felt that a single window clearance system would mitigate this to great extent.

Land is generally non-corporatised and typically held by individuals or families. This restricts
organised dealing and hinders transfer of titles. Moreover, legal processes for property disputes are
time consuming.

Stamp duties continue to be as high as 10-13 per cent in certain states, rf the government puts into
place land reforms and addresses the challenges facing the real estate and infrastructure, these
sectors have potential to contribute immensely to the country's GDP,

Corporate information

Board of Directors

T. S. Vijayan
(from 08.05.2006)
Thomas Mathew T.

(from 08.05.2006)
Q.M. Ramamurthy

Y. B. Desai

Dhananjay Mungate

S. Ravi

K. Narasimha Murthy

B. N. Shukla

S. K. Mitter
& Chief Executive
A. K. Shukla
K. Sridhar

F.M. Pardiwalla


G'jhtjra! Manager (Taxation] & Company Secretary

Nitin K. Jage

Senior Executives

Sharad Shrivastva

General Manager (Credit Appriasal)

P. K. Rath

General Manager (Marketing)

K. Ramesh

Chief Financial Officer & General Manager (Risk Management)

Smt. Renuka S.

General Manager (Information Technology)

K. S. Kutty

General Manager (Recoveries)

Smt. Y. V. Padmavati

Genera* Manager (HR & Legal)

Surinder Mohan

General Manager (Accounts)

D. Y. Oke

Deputy General Manager (Internal Audit)

Regional Managers
V. Satyakumar
S. M. Balvally
R. K. Sood
P. R. Shankara Raju
South Central Region
A. K. Mahato
Satish Kaul


P. C. Hansotia & Co.

Chartered Accountants, Mumbai

Andhra Bank

Central Bank ot India

Corporation Bank

Syndicate Bank

UTI Bank Ltd.

HDFC Bank Ltd.


Name Last Price Market Cap. Sales Net Profit Total Assets
(Rs. cr.)
HDFC 1,120.50 175,860.46 24,143.01 5,440.24 140,478.98
LIC Housing Fin 365.05 18,422.72 9,181.38 1,317.19 78,983.35
Indiabulls Hsg 450.30 15,990.26 5,224.11 1,510.00 33,818.99
GRUH Finance 216.50 7,860.26 845.69 176.96 6,134.56
Dewan Housing 378.60 4,870.71 4,967.59 529.00 37,465.16
Repco Home 485.30 3,016.68 534.15 110.10 3,206.25
Can Fin Homes 480.15 983.60 578.00 75.71 5,146.99
GIC Housing Fin 171.20 921.93 624.92 97.55 4,708.57
Crest Ventures 57.95 100.66 34.22 1.16 228.76

Compare LIC Housing Fin with another company

Comparison with Competitors

 Balance Sheet
 PHYPERLINK "javascript:void(0);"&HYPERLINK "javascript:void(0);"L Account
 Cash Flows
 Quarterly
 Half Yearly
 9 Monthly
 Yearly

Balance Sheet ------------------- in Rs. Cr. -------------------

LIC Housing GRUH Dewan
HDFCIndiabulls Hsg
Fin Finance Housing

Mar '14 Mar '14 Mar '14 Mar '14 Mar '14

Sources Of Funds
Total Share Capital 101.00 312.10 66.81 36.03 128.42
Equity Share Capital 101.00 312.10 66.81 36.03 128.42
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 7,431.90 27,643.09 5,400.37 571.21 3,446.54
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Networth 7,532.90 27,955.19 5,467.18 607.24 3,574.96
Secured Loans 67,645.02 70,815.47 24,993.12 4,274.02 29,581.69
Unsecured Loans 3,805.42 41,708.32 3,358.68 1,253.30 4,308.51
Total Debt 71,450.44 112,523.79 28,351.80 5,527.32 33,890.20
Total Liabilities 78,983.34 140,478.98 33,818.98 6,134.56 37,465.16
LIC Housing GRUH Dewan
HDFCIndiabulls Hsg
Fin Finance Housing

Mar '14 Mar '14 Mar '14 Mar '14 Mar '14

Application Of Funds
Gross Block 122.22 628.63 86.47 23.02 230.31
Less: Accum. Depreciation 46.61 348.15 40.44 11.99 38.73
Net Block 75.61 280.48 46.03 11.03 191.58
Capital Work in Progress 0.00 0.00 0.00 0.00 796.15
Investments 199.31 13,912.65 3,491.45 52.96 575.90
Inventories 0.00 0.00 0.00 0.00 0.00
Sundry Debtors 68.29 84.52 0.56 0.00 77.45
Cash and Bank Balance 3,022.38 7,715.52 4,299.71 83.17 983.18
Total Current Assets 3,090.67 7,800.04 4,300.27 83.17 1,060.63
Loans and Advances 92,411.45 203,764.22 35,240.42 7,096.06 41,234.97
Fixed Deposits 0.00 0.00 0.00 0.00 0.00
Total CA, Loans &Advances 95,502.12 211,564.26 39,540.69 7,179.23 42,295.60
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 15,717.05 81,224.43 8,033.92 990.67 5,987.59
Provisions 1,076.64 4,053.98 1,225.26 117.99 406.48
Total CL &Provisions 16,793.69 85,278.41 9,259.18 1,108.66 6,394.07
Net Current Assets 78,708.43 126,285.85 30,281.51 6,070.57 35,901.53
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 78,983.35 140,478.98 33,818.99 6,134.56 37,465.16

Contingent Liabilities 145.88 3,356.95 495.28 1.15 105.38

Book Value (Rs) 149.27 179.14 163.67 33.71 278.38

Source : Dion Global Solutions Limited


Total Shareholding Shares pledged or

as a % of total No. otherwise
Total No. of
of Shares encumbered
category of No. of Total NO. Shares held in
As a % of Number of
Shareholder Share-holders of Shares Dematerialized
(A+B) shares
As a % of As a % of Total
(A+B+C) No. of Shares
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Financial Institutions 1 203,442,495 203,442,495 40.55 40.31 - -
/ Banks
Sub Total 1 203,442,495 203,442,495 40.55 40.31 - -
(2) Foreign
Total shareholding 1 203,442,495 203,442,495 40.55 40.31 - -
of Promoter and
Promoter Group
(B) Public Shareholding
(1) Institutions
Mutual Funds / UTI 30 23,706,278 23,694,278 4.73 4.70 - -
Financial Institutions 13 960,873 949,873 0.19 0.19 - -
/ Banks
Central 10 2,705,793 2,698,293 0.54 0.54 - -
Government / State
Venture Capital 6 63,310 63,310 0.01 0.01 - -
Insurance 3 9,243,756 9,243,756 1.84 1.83 - -
Foreign Institutional 369 193,723,421 193,698,421 38.61 38.39 - -
Sub Total 431 230,403,431 230,347,931 45.92 45.65 - -
(2) Non-Institutions
Bodies Corporate 1,381 17,442,093 17,351,593 3.48 3.46 - -
Individuals - - - - - -
Individual 42,931,581 37,527,248 8.56 8.51 - -
shareholders holding
nominal share capital
up to Rs. 1 lakh
Individual 22 4,223,980 4,223,980 0.84 0.84 - -
shareholders holding
nominal share capital
in excess of Rs. 1
Any Others 3,009 3,269,956 3,268,956 0.65 0.65 - -
Clearing Members 308 1,294,063 1,294,063 0.26 0.26 - -
Non Resident 1,975,893 1,974,893 0.39 0.39 - -
Sub Total 168,184 67,867,610 62,371,777 13.53 13.45 - -
Total Public 168,615 298,271,041 292,719,708 59.45 59.10 - -
shareholding (B)
Total (A)+(B) 168,616 501,713,536 496,162,203 100.00 99.42 - -
(C) Shares held by - - - - - - -
Custodians and
against which
Depository Receipts
have been issued-m
(1) - - - - - -
(2) - - - - - -
Sub Total 1 2,949,464 2,949,464 - 0.58 - -
Total (A)+(B)+(C) 168,617 504,663,000 499,111,667 - 100.00 - -

Listing Details - LIC Housing Finance

Key Dates

Year Ending Month Mar

AGM Date (Month) Aug
Book Closure Date (Month) Aug

Listing Information
Face Value Of Equity Shares 2
Market Lot Of Equity Shares 1
BSE Code 500253
BSE Group A

Whether The Company Forms A Part Of The Following Indices -

Sensex No
Nifty No
BSE-100 Yes
BSE-200 Yes
S&P CNX 500 Yes
CNX Midcap No

Listing On

The Stock Exchange, Mumbai, National Stock

Listed On
Exchange of India Ltd., Luxembourg Stock Exchange

To the members of LIC Housing Finance Limited.

The Directors are pleased to present the Twenty Fifth Annual Report
together with the audited financial statements for the year ended 31st
March, 2014.

Financial results

(Rs. in crore)

For the year For the year

ended 31st ended 31st

March, 2014 March, 2013

Profit before Tax 1,825.50 1,373.56

Tax Expense 508.32 350.36

Profit after Tax 1317.18 1023.21


Special reserve & 370.00 270.00

Statutory reserve u/s

29Cof NHB Act

General reserve 200.00 400.00

Proposed dividend 227.10 191.77

Tax on dividend 38.48 32.35

Balance carried forward 481.60 129.09

to next year

1317.18 1023.21
Silver Jubilee Year

On 20th June, 2013 LIC Housing Finance Limited commenced its Silver

Jubilee Year. The Company has over these years demonstrated the
viability and importance of retail housing finance withstanding various
ups and downs in the business cycle. LIC HFL has been one of the major
players in the retail housing finance market in India and despite a
number of new entrants in the industry, your Company continues to be
one of the key player.

The Board of Directors sincerely acknowledges and appreciates the

valuable support and guidance given by the shareholders, customers,
financiers, employees and every other stakeholder who has been
supporting the Company over the successful twenty-five years.


Considering the performance during the year 2013-14, your Directors

recommend payment of dividend for the financial year ended 31st March,
2014 of Rs. 4.50 per equity share of face value of Rs. 2/- per share (225
percent including special dividend of 25 percent, being commemoration
of stepping into 25th illustrious year of operation), as against Rs. 3.80
per equity share of face value of Rs. 2/- per share for the previous

year. The total dividend outgo for the current year would amount to Rs.
265.58 crore including Dividend Distribution Tax of Rs. 38.48 crore, as
Against Rs. 224.12 crore including dividend distribution tax of Rs. 32.35
crore, for the previous year.


Income and profit

The Company earned total revenue of Rs. 9,334.66 crore, registering an

increase of 21.88 percent. The percentage of administrative expenses to
the housing loans, which was 0.36 percent in the previous year, has
come down to 0.34 percent during the year 2013-14.

Profit before tax and after tax stood at Rs. 1,825.50 crore and Rs.
1,317.18 crore respectively as against Rs. 1,373.56 crore and Rs.
1,023.21 crore, respectively, for the previous year. Profit before tax
increased by 33 percent over the previous year while profit after tax
showed same growth of 29 percent as compared to that of previous year.

Lending operations

Individual loans:
The main thrust continues on individual housing loans with a
disbursement growth of 4.56 percent during the year mainly due to
overall slowdown in the economy. During the year, the Company
sanctioned 1,37,753 individual housing loans for Rs. 25,437.20 crore and
disbursed 1,41,107 loans for Rs. 24,289.73 crore. Housing loan to
Individual i.e., retail loans constitute 95.24 percent of the total
sanctions and 96.12 percent of the total disbursements for the year
2013-14 as compared to 93.82 percent and 95.36 percent respectively
during the year 2012-13. The gross retail loan portfolio grew by over
17.85 percent from Rs. 75,147.46 crore as on 31st March, 2013 to Rs.
88,558.58 crore as on 31st March, 2014.

The cumulative sanctions and disbursements since incorporation, in

respect of individual housing loans are:

Amount sanctioned : Rs. 1,52,349.37 crore

Amount disbursed : Rs. 1,39,594.86 crore

More than 16.80 lac customers have been serviced by the Company up to
31st March, 2014 since its inception.

Project loans:

The project loans sanctioned and disbursed by the Company during the
year were Rs. 1,271 crore and Rs. 981.50 crore respectively. These loans
are generally for short durations, giving better yields as compared to
individual loans. The project loan which had shown a positive growth of
24.03 percent in the previous year has achieved a negative growth of 13
percent in the year under review.

Marketing and Distribution

During the year under review, efforts were undertaken to further

strengthen the distribution network. The distribution network of the
Company consists of 131 Area Offices (AO), 72 Business Centres (BC), 1
Extension Counter (EC) and 40 offices of LICHFL Financial Services
Ltd., wholly owned subsidiary company engaged in distribution of
various financial products including housing loan. The Company has
representative offices in Dubai and Kuwait.


During the F. Y. 2013-2014, Rs. 10,884.43 crore was received by way of

schedule repayment of principal through monthly installments as well as
prepayment of principal ahead of schedule, as compared to Rs. 7,978.99
crore received last year.

Non-Performing Assets and Provisions

The amount of gross Non-Performing Assets (NPA) as at 31st March, 2014

was Rs. 609.00 crore, which is 0.67 percent of the housing loan portfolio
of the Company, as against Rs. 471.22 crore i.e. 0.61 percent of the
housing loan portfolio as at 31st March, 2013. The net NPA as at 31st
March 2014 was Rs. 353.58 crore i.e. 0.39 percent of the housing loan
portfolio vis-à-vis Rs. 275.94 crore i.e. 0.36 percent of the housing
loan portfolio as at 31st March, 2013. The total cumulative provision
towards housing loan portfolio as at 31st March, 2014 is Rs. 706.81 crore
as against Rs. 694.55 crore in the previous year. During the year, the
Company has written off Rs. 0.00385 crore of housing loan portfolio as
against Rs. 31.37 crore during the previous year.

Resource Mobilisation

The Company raised funds aggregating to Rs. 29,931.27 crore through term
loans from banks, Non-Convertible Debentures (NCD), NHB refinance and
Public Deposits.

Non Convertible Debentures (NCD)

During the year, the Company issued NCD amounting to Rs. 21,000/- crore
on a private placement basis which have been listed on Wholesale Debt
Segment of National Stock Exchange of India Ltd. The NCDs have been
assigned highest rating of ''CRISIL AAA/Stable''by CRISIL &''CARE AAA''
by CARE. As at 31st March, 2014, NCDs amounting to Rs. 54,004/- crore
were outstanding. The Company has been regular in making payment of
principal and interest on the NCDs.

As at 31st March, 2014, there are no NCDs which have not been claimed
by the Investors or not paid by the Company after the date on which the
said NCDs became due for redemption. Hence the amount of NCD remaining
unclaimed or unpaid beyond due date is Nil.

Subordinate Bonds &Upper Tier II Bonds

During the year, the Company has not issued any Subordinate Bonds and
Upper Tier II Bonds. As at 31st March, 2014, the outstanding
Subordinate Bonds and Upper Tier II Bonds

stood at Rs. 3,000/- crore. Considering the balance term of maturity as

at 31st March, 2014, Rs. 2,500/- crore of the book value of the
Subordinate Bond and Upper Tier II Bonds is considered as Tier II
Capital as per the Guidelines issued by NHB for the purpose of Capital
Term Loan from Banks / LOC, Refinance from NHB

The total loans / LOC outstanding from the Banks as at 31st March, 2014
are Rs. 20,241.41 crore as compared to Rs. 20,482.14 crore as at 31st
March, 2013. The Refinance from NHB as at 31st March, 2014 stood at Rs.
3,384.72 crore as against Rs. 2,470.18/- crore as at 31st March, 2013.
During the year, the Company has availed Rs. 1,458.70 crore Refinance
from NHB under Golden Jubilee Rural Housing Scheme, Rural Housing Fund,
Energy Efficient Housing Refinance Scheme, Urban Housing Fund and
Refinance for Women.

The Company''s long term loan facilities have been assigned the highest
rating of ''CRISILAAA/STABLE''and short term loan has been assigned
rating of ''CRISIL A1 ''signifying highest safety for timely servicing
of debt obligations.

Public deposits

As at 31st March, 2014, the outstanding amount on account of public

deposits was Rs. 1193.97 crore as against Rs. 773.60 crore in the
previous year. The deposit base has increased from 10,038 to 16,401.

CRISIL has for the eighth consecutive year, re-affirmed a rating of

CRISIL FAAA/Stable for the company''s deposits which indicates highest
degree of safety regarding timely servicing of financial obligations
and carries the lowest credit risk.

The support of the agents and their commitment to the Company has been
vital in mobilization of deposits and making the product most preferred
investment for individual households and others.

158 deposits amounting to Rs. 4.52 crore which were due for repayment on
or before 31st March, 2014 were not claimed by the depositors till that
date. Since then, 29 depositors have claimed or renewed deposits of Rs.
1.01 crore. Depositors were intimidated through Company''s agency for
Public Deposits namely Link Intime India Pvt. Ltd., regarding the
maturity of deposits with a request to either renew or claim their
deposits. Where the deposit remains unclaimed, reminder letters are
sent to depositors periodically and follow up action is initiated
through the respective agent.

As per the provisions of Section 205C of the Companies Act, 1956,

deposits remaining unclaimed for a period of seven years from the date
they became due for payment have to be transferred to the Investor
Education and Protection Fund (IEPF) established by the Central
Government, though as on date no amount has become due for transfer to
IEPF. The depositors are requested to claim their deposit amount and
interest thereon as and when due or renew the same without delay.

Exemption from provision of Section 73(1) of the Companies Act, 2013.

In exercise of the powers under sub-section 1 of Section 73 of the

Companies Act, 2013, read with Companies (Acceptance of Deposits)
Rules, 2014, the Central Government has granted exemption to the public
deposit scheme of a Housing Finance Company registered with the
National Housing Bank established under the National Housing Bank Act,
1987 (No. 53 of 1987).

Regulatory Compliance

The Company has been following guidelines, circulars and directions

issued by National Housing Bank (NHB) from time to time.

Your Company has been maintaining capital adequacy as prescribed by the

NHB. The capital adequacy was 16.38 percent (as against 12 percent
prescribed by the NHB) as at 31st March, 2014 after considering the
loan to value ratio for deciding risk weightage.

The Company has adopted Know Your Customer (KYC) Guidelines, Anti Money
Laundering Standards, Fair Practices Code, Model Code of Conduct for
Direct Selling Agents and Guidelines for Recovery Agents engaged by
HFCs as prescribed by NHB from time to time. During the year NHB has
prescribed that HFCs shall provide ''Most Important Terms and
Conditions''of housing loans which the Company has implemented with the
objective of ensuring a better understanding of the major terms and
conditions of the loan agreed upon between the Company and its

The Company also has been following directions / guidelines / circulars

issued by SEBI from time to time applicable to a listed company.


Joint Statutory Auditors M/s. Chokshi &Chokshi, Chartered Accountants,

Mumbai having Registration No.101872W and M/s. Shah Gupta &Co.,
Chartered Accountants, Mumbai having Registration No.109574W hold
office until the conclusion of the forthcoming Annual General Meeting
(AGM) and are eligible for appointment. The Company has received a
confirmation from them to the effect that their appointment, if made at
the ensuing AGM would be in terms of Section 139 and 141 of the
Companies Act, 2013 and Rules made there under.
The Board proposes to appoint M/s. Chokshi &Chokshi and M/s. Shah
Gupta &Co. as Joint Statutory Auditors of the Company for financial
year 2014-15.


Shri Dhananjay Mungale, Director resigned from the Board of Directors

of the Company with effect from 1st August, 2013 on completion of
directorship for nine years in terms of Code of Conduct for Board of
Directors and Senior Management, adopted by the Company. The Board
places on record its

appreciation of his valuable contributions, commitment and guidance

made during his tenure.

Ms. Savita Singh, Director, retires by rotation at the ensuing AGM and
is eligible for reappointment.

Shri S. K. Roy was appointed as Chairman of the Company by the Board

with effect from 1st August, 2013 consequent upon Shri D. K. Mehrotra
relinquishing his Directorship and Chairmanship on attaining
superannuation. The Board places on record its appreciation of valuable
contributions, commitment and guidance made by Shri D. K. Mehrotra
during his tenure.

Shri V. K. Sharma on being elevated to the post of Managing Director of

LIC of India, relinquished the post of Managing Director &CEO of the
Company. The Board places on record its appreciation of his valuable
contributions, commitment and guidance made during his tenure.

Ms. Sunita Sharma was appointed by the Board of the Company as

Additional Director and Managing Director &CEO with effect from 5th
November, 2013 for a period of three years in terms of nomination
received from Life Insurance Corporation of India, subject to approval
of shareholders at the forthcoming Annual Genral Meeting. As required
under section 160 of the Companies Act, 2013, a Notice has been
received from a Member proposing the name of Ms. Sunita Sharma for the
office of a Director.

Shri T. V. Rao was appointed as Additional Director of the Company by

the Board with effect from 1st August, 2013. As required under section
160 of the Companies Act, 2013, a Notice has been received from a
member proposing the name of Shri T. V. Rao for the office of a
Director. Shri T. V. Rao has submitted a declaration under Section
149(7) of the Companies Act, 2013 confirming that he meets the criteria
prescribed for Independent Director under Section 149(6) of the said
Act. In the opinion of the Board, Shri T. V. Rao fulfils the conditions
specified in the Act, for such appointment.

Shri S. B. Mainak was appointed as Additional Director of the Company

by the Board with effect from 3rd July, 2014 in terms of nomination
received from Life Insurance Corporation of India, subject to approval
of shareholders at the forthcoming AGM. As required under section 160
of the Companies Act, 2013, a Notice has been received from a Member
proposing the name of Shri S. B. Mainak for the office of a Director.

All the above Directors of the Company have confirmed that they are not
disqualified from being appointed as directors in terms of Section
164(2) of the Companies Act, 2013.

Corporate Governance

A certificate from the Joint Statutory Auditors of the Company

regarding compliance of the conditions of Corporate Governance as
stipulated under Clause 49 of the Equity Listing Agreement with Stock
Exchanges is attached to the Corporate Governance Report.

Your Company has been complying with the principles of good Corporate
Governance over the years. The Board of Directors supports the broad
principles of Corporate Governance. In addition to the basic governance
issues, the Board lays strong emphasis on transparency, accountability
and integrity.

Corporate Social Responsibility

In accordance with the provision of Section 135 of the Companies Act,

2013, the Company is required to constitute a Corporate Social
Responsibility (CSR) Committee of Directors comprising atleast three
Directors including an Independent Director.

The Board at its meeting held on 16th January, 2014 constituted the CSR
Committee. The CSR Committee will monitor the implementation of the CSR
Policy and apprise the Board accordingly.

The Company has identified the fields it would like to focus its energy
on Education Health, Livelihood, Infrastructure development and Social

Management Discussion and Analysis Report

Management Discussion and Analysis Report for the year under review, as
stipulated under clause 49 of Equity the Listing Agreement with Stock
Exchanges is presented in a separate section forming part of the Annual

Business Responsibility Report

In accordance with the provisions of Clause 55 of the Equity Listing

Agreement, the Business Responsibility Report (BRR) is presented in a
separate section forming part of the Annual Report.

Depository system

The Company has an agreement with the Central Depository Services

(India) Limited (CDSL) for transactions of its shares in dematerialised
form, in addition to the National Securities Depository Limited (NSDL),
to give a choice to its shareholders in selecting depository
participant. As at 31st March, 2014, 10,558 members of the Company
continue to hold shares in physical form. As per the Securities and
Exchange Board of India''s (SEBI) instructions, the Company''s shares
have to be transacted in dematerialised form and therefore, members are
requested to convert their holdings to dematerialised form.

Particulars Regarding Conservation of Energy, Technology Absorption and

Foreign Exchange Earnings and Outgo

The Company does not own any manufacturing facility. Hence the
particulars relating to the conservation of energy and technology
absorption stipulated in the Companies (Disclosure of Particulars in
the Report of the Board of Directors) Rules, 1988, are not applicable.
The particulars of foreign currency expenditure and foreign currency
earnings during 2013-14 are given at item No.12 and No.13 in the Notes
to the Accounts. There are no employees covered by Section 217 (2A) of
the Companies Act, 1956, read with

the Companies (Particulars of Employees) Rules, 1975, as amended.

Auditors observations

No adverse remark or observation has been given by the Joint Statutory


The Company has an in-house internal audit system for Back Offices
conducted by the Audit department and a reputed firm of Chartered
Accountants as internal auditor for Corporate Office. Continuous
efforts are made to further strengthen the internal audit system to
make it commensurate with the size and the nature of business.
Systems and procedures are being upgraded from time to time to provide
checks and alerts for avoiding fraud arising out of misrepresentation
made by borrower/s while availing the housing loans.

Outlook for 2014-15

The initiatives taken by the Company during the year are expected to
improve its operational and financial performance. During FY 2014-15,
the Company proposes:

- To grow business qualitatively by consolidating our position and

strengthening the competitiveness on service delivery.

- To create brand LIC HFL as a source of trusted partner exuding

consumer confidence.

- Understand the inherent risks to our business and managing it


- Focus on winning and retaining customers.

- Pursue new skills and expand knowledge in other departments or on

competition without being limited by past practices.

- Expand its operations by establishing new business centres.

- Increase its distribution by appointing new agents and activising

more agents.

- Incentivising and motivating the marketing intermediaries

systematically for improving productivity.

- Raising funds through loans at attractive rates of interest and


- Making efforts towards reducing overall cost of funds.

- Steps to improve the recovery ratio and ensuring lowest NPA level.
Improving receivable management through support system.

- Timely review of credit appraisal system to improve the loan asset


- Continuous efforts to upgrade Information Technology platform to

ensure prompt and effective service to the clientele.
- Swift, appropriate and competitive pricing of its existing loan
schemes to attract new customers.

The management perspective about future of the Company

In view of the huge shortage in urban housing units in the country, the
Union government has been providing continued support to make the
sector attractive and giving it due recognition. The technical
committee constituted by the Ministry of Housing and Urban Poverty
Alleviation has estimated housing shortage at 18.78 million during the
12th Five Year Plan period of which over 95 percent of housing shortage
is estimated in the Economically Weaker Sections and Low Income Group
categories. Therefore, the management reasonably foresees good
potential for growth in the business of the Company.

Directors''Responsibility Statement pursuant to Section 217 (2AA) of

the Companies Act, 1956

In accordance with the provisions of Section 217 (2AA) of the Companies

Act, 1956, and based on the information provided by the management,
your Directors state that:

- In the preparation of the annual accounts, the applicable accounting

standards have been followed.

- Accounting policies were applied consistently. Reasonable and

prudent judgement and estimates were made so as to give true and fair
view of the state of affairs of the Company as at the end of 31 st
March, 2014 and of profit of the Company for the year ended on that

- Proper and sufficient care has been taken for maintenance of

accounting records in accordance with the provisions of the Companies
Act, 1956, for safeguarding the assets of the Company and for
preventing/detecting fraud and other irregularities.

- The annual accounts are prepared on a going concern basis.

Human resources

The Company aims to align HR practices with business goals, motivate

people for higher performance and build a competitive working
environment. Productive high performing employees are vital to the
Company''s success. The Board values and appreciates the contribution
and commitment of the employees towards performance of your Company
during the year. To create the leadership bench and for sustainable
competitive advantage, the company inducted / promoted employees during
the year. In pursuance of the Company''s commitment to develop and
retain the best available talent, the Company had organised various
training programmes for upgrading skill and knowledge of its employees
in different operational areas. Apart from fixed salaries and
perquisites, the Company also has in place performance-linked
incentives which reward outstanding performers who meet certain
performance targets. It has been sponsoring its employees for training
programmes / seminars / conferences organised

by reputed professional institutions.

Employee relations remained cordial and the work atmosphere remained

congenial during the year.

Subsidiaries and group companies

The Consolidated financial statements incorporating the results of the

Company''s subsidiaries namely LICHFL Care Homes Limited, LICHFL
Financial Services Limited, LICHFL Trustee Company Private Limited and
LICHFL Asset Management Company Limited for the year ended 31st March,
2014, are attached along with the statement pursuant to Section 212 of
the Companies Act, 1956, with respect to the said subsidiaries. The
review of performance of the subsidiaries is as under:

1. LICHFL Care Homes Limited:

LICHFL Care Homes Limited, a wholly owned subsidiary of LIC Housing

Finance Limited, was incorporated on 11th September, 2001 with an
authorised capital of Rs. 25 crore. The basic purpose of promoting the
Company was to establish and operate assisted community living centers
for the senior citizens.

The Company had a brief turnaround in the financial year 2011 - 12

making a profit of Rs. 241.71 lac. Though for the fiscal 2013-14, there
was a loss of Rs. 276.43 lac. However the Company is confident of posting
profit during financial year 2014-15.

The project in Bangalore Phase II has been completed and handing over
of the keys for Phase II was done on 12th August, 2013. The Bhubaneswar
project is going ahead at full stream and we expect its completion
within a year.

With life expectancy going up and number of elderly citizens rising

year after year, it is expected that demand for care-homes would also
increase. As a result, the Company is set on a growth trajectory
keeping LIC &LIC HFLs''vision for fulfillment of Corporate Social
Responsibility at the main focus.

2. LICHFL Financial Services Limited :

LICHFL Financial Services Limited, a wholly owned subsidiary of LIC

Housing Finance Limited was incorporated on 31st October 2007, for
undertaking non fund based activities like marketing of housing loans,
insurance products (life insurance and general insurance), credit
cards, mutual funds, fixed deposits etc. It has become operational in
March 2009 and at present has got 40 offices all over the country
spread over 10 states.

SARVESHAM POORNAM BHAVATU – the vision of the company is to provide

complete financial solutions to Customers. Towards this, the company
began distribution of Life Insurance products of LIC of India, Housing

of LIC Housing Finance Limited, Mutual Funds of all fund houses,

General Insurance of United India Insurance Company Limited, Credit
Cards of LIC Cards Services Limited and Fixed Deposits of LIC Housing
Finance Limited. More business verticals will be added depending on
market opportunities and customer needs.

LIC HFL FSL has forayed into the field of Pension after The Pension
Fund Regulatory Authority of India (PFRDA) on 23rd July, 2013 granted
the Certificate of Registration and Commencement of Business as Points
of Presence (POP) for NPS, i.e, National Pension System. This new
vertical started operations on 11th October, 2013.

The Company is a Corporate Agent for LIC of India and earned revenue of
Rs. 56.02 Lac from it. As a Corporate Agent for LIC HFL for the Home Loan
products, it earned revenue of Rs. 473.13 Lac from it. The revenue from
General Insurance Business was Rs. 14.25 lac. The retail income from
Mutual Funds, Public Deposits, Credit cards and NPS was Rs. 10.25 lac.

The company provides complete financial solution to secure not only the
present but also the future of the customer and his family. In this
endeavour the marketing officials assist at every step – from financial
planning to manage every aspect of right investment, both for the short
term and for longer terms.

The Company has earned a Profit after Tax of Rs. 2.27 Crore for the
financial year 2013-14 and recommended dividend @ 7 percent for FY
2013-14, for the fifth straight year. The Company during the year under
review consolidated it operations in 40 locations across the country.
The systematic approach along with the new initiatives taken during the
earlier years are expected to drive the revenues in a positive
direction and improve the operational and financial performance.

The Company has plans to expand on a selective basis and concentrate on

strengthening the strong areas in the area of distribution of Home
Loans and Life Insurance. The Company has started to make an impact in
certain locations in the generation of revenue from the Home Loans. The
Company will also focus on expanding the client base in the other
verticals. The Company would evaluate the right opportunities for
growth, profitability and value addition to its share holders.

3. LICHFL Trustee Company Private Limited :

LICHFL Trustee Company Private Limited was incorporated on 5th March,

2008 for undertaking the business of trusteeship. In the year 2010, the
Company has registered LIC HFL Fund with SEBI as Venture Capital Fund
(VCF) under the SEBI (Venture Capital Funds) Regulations, 1996. The
Fund launched its maiden Scheme viz. LIC HFL Urban Development Fund
(Fund) and 30th March, 2013 was declared as Final Closure Date

of the Fund after successfully garnering fund raising of Rs. 529.35 crore
as against the target of Rs. 500 crore. The Fund is managed by LICHFL
Asset Management Company Ltd. as Investment Manager. The Fund has
started investing in the Investee Companies at the project level.

4. LICHFL Asset Management Company Limited:

LICHFL Asset Management Company Limited was incorporated on 14th

February, 2008 for undertaking the business of managing, advising,
administering venture/mutual funds, unit trusts, investment trusts
etc. set up, formed or established in India or abroad and to act as
financial and investment advisor.

The Company has been appointed as Investment Manager to raise and

manage the maiden Fund viz. LICHFL Urban Development Fund. The Company
has successfully raised total commitments of Rs. 529.35 crore to LICHFL
Urban Development Fund through Banks, Financial Institutions,
Corporate and HNIs as against the targeted size of Rs. 500 crore. 30th
March, 2013 was announced as Final Closure Date of the Fund. Investment
proposals of Rs. 136 crore have been approved so far and based on
milestone achievement Rs. 86 crore has been invested till 31st March,
2014 across four portfolio companies in Bangalore and Pune. The second
drawdown of Rs. 46.04 core (8.70 percent of aggregate capital commitment)
has been drawn during 2013-14.

The Directors place on record their appreciation for the advice,

guidance and support given by the Life Insurance Corporation of India
and the NHB and all the bankers of the Company. The Directors express
their sincere thanks to the Company''s clientele, lenders and members
for their patronage. The Directors also record their appreciation for
the dedicated services of the employees and their contribution to the
growth of the Company.


To be the best Housing Finance Company in the country.

Provide secured housing finance at
affordable cost
Maximizing shareholders value with higher customer sensitivity.


Fair and Transparent Business Practices.

Transformation to a Knowledge Organization.
Higher Autonomy in Operations.
Instilling a sense of Ownership amongst Employees.


The Company has set up a Representative Office in Dubai to cater to the Non-Resident
Indians in the GLCC countries covering Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia.
Today the Company has a proud group of over 10, 00,000 prudent house owners who have
enjoyed the Company's financial assistance
In 2005-06, for the fifth year in a row, the Company received the ‘AAA’ credit
rating from CRISIL, indicating the highest level of safety. The Company has been
growing steadily since inception both in terms of business & profits.

Location Details - LIC Housing Finance

Location Type Address

Registered &Corporate Bombay Life Building, 2nd Floor, 45/47, Veer Nariman Road
Office Mumbai - 400001
Maharashtra - India
Phone : 22040006, 22049682, 22049919
Fax : 22049839
Email :
Internet : N.A.
Regional Office Jeevan Prakash, 4th Floor, Sir P. M. Road, Fort
Mumbai - 400001
Maharashtra - India
Phone : 22610286 ,22693675 ,22671151
Fax : 22660534
Email :
Internet : N.A.
Regional Office Hindustan Buildings, Ground Floor, 4, C. R. Avenue
Kolkata - 700072
West Bengal - India
Phone : 22128043, 22126738
Fax : 22128043
Email :
Internet : N.A.
Regional Office Jeevan Deep Bldg, 2nd Floor, 10, Sansad Marg
New Delhi - 110002
Delhi - India
Phone : 28844271, 28844274, 28844277
Fax : 28844278
Email :
Internet : N.A.
Regional Office 4/291, Vivek Khand, Gomti Nagar
Lucknow - 226010
Uttar Pradesh - India
Phone : 2394358, 2396949, 2303229
Fax : 2396949
Email :
Internet : N.A.
Overseas Office LIC Housing Finance Ltd., 102, Carrera Building, P. O. Box no. 60793, Karama
Dubai -
Not Specified - United Arab Emirates
Phone : 3354858
Fax : 3354684
Email :
Internet : N.A.
Regional Office 15/1, II Floor, Hayes Centre, Hayes Road
Bangalore - 560025 78
Karnataka - India
Phone : 22960502, 22960504, 22960505
Fax : 22960503
Email :
Internet : N.A.

The objective of the Company envisages an integrated framework, in which spatial development of
houses goes hand-in-hand with improvement in the quality of living of ordinary people living there
through scaling up of the delivery of civic amenities and provision of utilities with emphasis on
universal access to the urban poor. An important element of the mission has provision of slum
improvement and provision of housing for the poor. To provide catalyst to the mission objectives an
overarching third component of the mission is that of reforms in the governance which will enable
the mission to move forward.

The Home loan Plan is anchored on the Company goals of creating economically productive
efficient equitable and responsive. Towards that goal the Company focuses on the strategies that deal
specifically with those issues that affect the middle class, adopting practices and structural changes
that provide for improved financial management and elimination of legal bottlenecks that
encourages loan investments in the infrastructure and provision of services towards the people.

The objectives of the Company are designed to be met by the following strategies:

(1)Preparing Development Plan:

The surveys will formulate in the city to indicating policies, programmes and strategies, and
financing plans to the people.
(2)Preparing Projects:
The Company would facilitate identification of projects. The Local Bodies and Parasitical
agencies will prepare project reports for under taking projects in the identified spheres. It is
essential that projects for loan are planned in such a manner that optimizes the beneficial projects
for the people. The cost of a Project would cover the capital outlays and the attendant costs to
ensure that assets are in good working condition. A revolving fund would be created to meet the
requirements of assets created, over the planning horizon. In order to seek the assistance, projects
would need to be developed in a manner that would ensure and demonstrate optimization of the
costs over the planning horizon of the project.
(3.)Release of Funds:
The Company would serve to catalyze the flow of investment into the infrastructure sector.
Funds from the people will flow directly to the nodal agency designated by the State, as grants-
invade. The funds for identified projects across cities would be disbursed to the agency as soft
loan or grant-cum-loan or grant.


Preparation of the loan is guided by the principles of:

i) Comfortable Living: The status of living is depending on the quality of life in the society. It is
an important factor for living status. People want to live on such type of the societies where the
services like supply of water, electricity, clean environment. For this the Company tying to meet
his responsibility to ensure providing such services and they should cater to the needs of all
categories of people, should have access to modern technology, home and should create an

ii) Governance: Good governance is an absolute need to ensure sustainability of any services
incorporated. Integrity, accountability, transparency and people participation should be the
integral part of the management.


The Company do this that, before people choose the house which they want to buy, The Company
give people an in-principle approval based on there income and capacity to repay. This makes the
entire process of identifying and buying a house easier and more flexible. People won’t be under
pressure to identify a house as they know how much funds the bank would make available to them.

This in-principle approval is valid for 3 months to give sufficient time to choose a flat/house of their
choice and loan can get sanctioned in a matter of days provided to people have all the documents in

People can be open their account with there spouse, both salaries can be clubbed for the purpose of
calculation of the loan amount. This can be done either when the property is jointly held with the
spouse or the spouse stands as a guarantor. Thus, we ensure a great deal of flexibility in the entire
exercise of financing your house.

The Company requires a mortgage of the property for which the loan is being taken. Where
mortgage can’t be provided, other tangible security would need to be provided. The title of the
property should be clear, for which a certificate would be required from the Bank’s approved
advocate, safeguarding your interests as well as Bank’s interests. Additional security may be
required where the house is under construction. This may be for an interim period, by way of
tangible security or guarantees from sound and solvent individuals. A very nominal processing fee of
0.50% (Max. ` 10, 000/-) is charged by companies.

EMI stands for Equated Monthly Installments. This installment comprises both principal and interest
components. Use Company’s EMI calculator to find out people monthly payments based on the loan
amount, the rate of interest and the repayment period. Choose the combination that best meets
people financial resources and requirements.

People can prepay the loan at any stage. However closure of loan before completion of half of the
loan tenure will attract a penalty of 2%. People can also credit more than there EMI amount into
his/her loan account and bring down there interest burden as and when funds are available with to

The Company has a network that is unmatched in terms of reach. They have also designated special
branches across the country to cater to the housing loan requirements of individual customers.

It is generally advantageous to take a Housing loan as it would enable people to get tax exemptions.
However, if people will consult with his/her CA, income tax advisor to know benefits/disadvantages
in a specific case.

Under the Indian Income Tax Act of 1961, resident Indians are eligible for certain tax benefits on
principal and interest components of a loan. Under Section 24(1), interest repayment of ` 1, 50,000/-
per annum qualifies for tax saving under the new Finance Act, provided the property is acquired or
constructed with capital borrowed after April 1, 1999 and the acquisition/construction is completed
before April 1, 2003 , and the property is self occupied.

An added benefit under Section 80© on repayment of principal amount to the extent of ` 1, 00,000/-
is also available on the same loan subject to compliance with conditions stipulated in the IT Act.

There is total transparency with regard to the rate of interest and the fees charged by the Company.
 Company offer housing loans with the lowest equated monthly installments, i.e. People can
pay substantially less in repayments as compared to others.
 Company has no upper limit. The loan amount is determined by repaying capacity and the
value of property to be financed.
 Company offer loans for the longest tenors (up to 20 years) with the flexibility provided to
reduce the tenor by prepaying the loan without any penalty.
 Company provides finance for both new and old houses/flats and for construction of houses.
Cost of furnishing the house can also be included in the project cost.
 With a Company housing loan people can choose between fixed rates of Interest and floating
interest rates.
 Company levy interest based on daily reducing balance, unlike the annual reducing balance
method used by several other financiers/banks.

On an annual reducing balance method, people will continue to pay interest on amounts and
repay during the coming one year as the interest for the year is determined on the basis of the
balance outstanding at the beginning of the year. In the case of the daily reducing balance,
which is the methodology company employ, people interest is calculated only on the
outstanding loan amount, which reduces every time they pay off his/her EMIs or make any
prepayments. This in essence lowers their effective rate of interest significantly.

Customers who feel they are unable to pay the current EMI option should talk to the bank to
see if they can switch to another scheme. sSome banks allow the customers to switch, provided
they have the credibility of savings and are able to repay the loan according to the new option

Home Loan: The Process

The various stages of a home loan, since application till the actual sanction.

The home loan roadmap

The process of taking a home loan can be daunting, especially if you have never applied for
any loan earlier. And ignorance on your part can not only make it an unpleasant experience,
but also prove to be costly. Here is a step-by-step guide to equip you with the right info, so
you know what to expect.

From applying for a home loan to getting it involves various stages. These are:

Step 1: Application form

Step 2: Personal Discussion

Step 3: Bank's Field Investigation

Step 4: Credit appraisal by the bank and loan sanction

Step 5: Offer Letter

Step 6: Submission of legal documents & legal check

Step 7: Technical / Valuation check

Step 8: Valuation

Step 9: Registration of property documents

Step 10: Signing of agreements and submitting post-dated cheques

Step 11: Disbursement

1. Applying for a loan

Filling up the application form is the first step. The look of an application form may differ
from bank to bank, but nearly 80 per cent of the information they need is similar. Most of
this is basically your personal and professional information, details of your financial assets
and liabilities and the details of the property (if finalised) including the estimated cost and
the means of financing the same.

Documents to submit

While submitting the application form, every bank asks for several documents. And most
banks these days provide doorstep service, so that you don't have to spend time visiting their
office to submit the documents. However, some banks still insist on the customer visiting
their offices at least once.

Proof of income: This will need to be backed up by proof such as copies of last three years'
Income Tax returns (along with copies of Computation of Income/Annual accounts, if any),
Form 16/Form 16A, last three months' salary slips, copies of the last 6 months' statements of
all your active bank accounts in which your salary/business income details are reflected, etc.
Other documents that you need to provide with your application form include age proof,
address proof and identification proof. You may also be asked to give your employment

Age proof: Copy of your school leaving certificate/Driving licence/Passport/ration card/PAN

card/Election Commission's card/etc.

Address proof: Similar documents need to be provided to prove that you are actually staying
at your current address.

Identification proof: Same as above, but with photograph. Sometimes, the same document
if it contains a photograph, the current residential address and the correct age can be the
proof for all 3 things.

Your employment details: If your company is not well-known, then a short summary about
the nature of the company, its business lines, its main customers, its competitors, number of
offices, number of employees, turnover, profit, etc may be needed. Usually, the company
profile that is available on the standard website of the company is enough.

Financial check

All the income-related documents you submit serve a specific purpose. The lending
institution uses them to study your financial status.

The bank statements you submit are scrutinised for:

Level of activity in the case of self-employed persons, this gives a very good clue about the
extent of business activities.
Average bank balance a cursory glance at the average bank balances maintained in a
savings bank account speaks volumes about the spending/saving habits of any individual.

Cheque returns a small charge debited by your bank in the statement indicates that a cheque
issued by you was returned by your bank. Many such cheque returns can have a negative
impact on your loan sanction.

Cheque bounces if cheques deposited by you are returned by the issuer's bank, they will be
visible in your bank statement and again, banks have specific norms as to how many such
returns are acceptable in a period of one year.

Regular periodic payments the existence of periodic payments to other finance

companies/banks etc. indicate an existing liability and you will need to provide full details to
the lender.

Your investments also come under the scanner. This helps the bank to estimate your ability
to pay the down payment as well as your savings habit.

Processing Fee

Along with the application form and the credit documents, banks ask for a processing fee.
This fee varies from bank to bank, but is usually around 0.25% to 0.50% of the total loan
amount. For instance, if you take a loan of Rs 10 lakh, you will have to pay around Rs 2,500
to Rs 5,000 as processing fee. The agent dealing with you earns a commission from the bank,
which to some extent is also affected by the amount of fees paid by you.

Most banks have flexible fee structures, and it is advisable that you negotiate hard to find out
the bank's minimum possible fees though it is unlikely that a bank will agree to provide a
loan without any upfront fee at all. Some banks have zero upfront fee loans, but that
advantage may be negated as their other charges such as "legal charges" and "stamp duty"
are normally higher.

This fee is collected to maintain your loan account, and includes work like sending Income
Tax certificates every year, maintaining post-dated cheques, etc.

Quick tips

When applying for a loan, it will help to keep copies of your income proof handy.
For self-employed persons, if the income has increased dramatically in the past year, have
your explanation ready as to why you think this is a permanent increase in your income
rather than just a one-time aberration which might be reversed in later years. If the bank is
convinced with your explanation, then the loan eligibility can be considered in relation to the
latest income rather than considering the much lower average income.

2. Personal discussion: Face to face

After you've formally and successfully completed the application process, all you have to do
is wait till the home finance institution evaluates your papers. The wait normally lasts only a
day or two or sometimes even less. However, some banks insist on meeting you after
receiving the application form, and before the loan sanction. This is to gather more details
about you that may not be mentioned in the application form and to reassure them of your
repayment capacity.

Again, this stage is insisted upon only in very few cases these days.

Quick tips

While going for the personal discussion, carry all the original documents pertaining to the
information provided on the application form for the personal discussion.
Avoid submitting any fake documents and do not lie about the financial details requested;
banks process home loans only after they are convinced about your credentials.

3. Field Investigation: Checking you out

Thousands of people apply for loans everyday. And however eager a bank is to complete its
targets, every loan is a risk. So, it is only natural that it confirms or validates the details you
provide. The bank checks all your information including your existing residential address,
your place of employment, employer credentials (if you work for a small organisation),
residence and work telephone numbers. Representatives are sent to your workplace or
residence to verify the details.

Even the references you have provided in the application form are checked out. While this
may sound irritating and an invasion of your privacy, banks are forced to undertake
validation in the absence of any credit bureau. Once your credentials are validated, it helps
establish trust between you and the bank.

Quick tips

The address and telephone number verification work is usually outsourced to small firms and
the ability of the representatives is often uneven. Hence, interaction with them may not
always be smooth. When the validation process starts, expect to reschedule some of your
other work for being available to furnish details required.

4. Credit appraisal and loan sanction: Getting the nod

This is the make-or-break stage. If the bank is not convinced about your credentials, your
application may get rejected. If it is satisfied, it sanctions your loan.

The bank or the home financier establishes your repayment capacity based on your income,
age, qualifications, experience, employer, nature of business (if self employed), etc, and
based on these, works out your maximum loan eligibility, and the final loan amount is
communicated to you. The bank then issues a sanction letter. This letter may either be an
unconditional letter, or may have certain terms and conditions mentioned, which you have to
fulfill before the loan disbursal.

Quick tips

Final loan amount and your loan eligibility are two different things. Once you know what
you are eligible to get, you can decide on the loan amount. Just because you are eligible for a
huge sum does not mean you should borrow heavily.
The sanction letter is an important piece of document and you should keep it safely.

5. Offer letter: I do...

Once the loan is sanctioned, the banks sends you an offer letter mentioning the following
 loan amount
 Rate of Interest

 Whether fixed or variable rate of interest linked to a reference rate

 Tenure of the loan
 Mode of repayment
 If the loan is under some special scheme, then the details of the scheme
 General terms and conditions of the loan
 Special conditions, if any

Acceptance copy

If you agree with what is mentioned in the offer letter from the bank, you will have to sign a
duplicate letter of the same for the bank's records. Earlier, banks used to charge
administrative fees along with the offer letter. However, with rising competition,
administrative fees have virtually disappeared from the home loan market.

Quick tips

Check if the rate of interest mentioned and the loan amount on the letter is the same that was
discussed and agreed upon.
home loan rate of interests can be negotiated, use the fact to your advantage.

6. The legal angle: Property and papers

Now, the focus of the bank's activities shifts from you to the property you intend to buy.
Once you select your property, you need to hand over the entire set of original documents
pertaining to your property to the bank so that it can keep them as security for the loan
amount given to you. These normally include:

The title documents of your seller, which prove the seller's title including the chain of title
documents if he is not the first owner.
NOCs from the legal owners such as cooperative housing societies, statutory development
authorities, the lessor of the land in the case of leasehold land, etc. NOCs are not required
where the property is situated on freehold land and the entire land is being transferred along
with the structure.

These documents remain in the bank's custody until the loan is fully repaid.

Legal check

Every bank conducts a legal check on your documents to validate their authenticity. Even the
draft sale documents that you will be entering into with your seller will be scrutinised.

The documents are sent to a lawyer in their panel (either in-house or outsourced) for a
thorough scrutiny. The lawyer's report either gives a go-ahead if documents are clear, or it
may ask for a further set of documents. In the latter case, you are expected to hand over the
additional documents to the bank for a clear title.

So, if a bank decides to disburse your housing loan, you have every right to smile, since you
can safely assume that your property documents are clear and the transaction is safe.

Quick tips

Sometimes the bank may ask you to pay for the legal verification. However, most banks
cover the costs in the upfront (processing) fee that you pay.
Property documentation in India is non-standard and non-transparent. Hence, it helps to buy
property from a reputed developer since they know the process inside out, and keep all the
documents ready.
Due to the heavy transfer charges on sale of property and/or very heavy stamp duties, some
people conduct sale of property by showing "lower consideration" than agreed for, with the
balance being paid either on an amenities agreement or in cash. Also the concept of sale by
executing "irrevocable power of attorney" has gained ground especially in the National
Capital Region. All this could restrict the choice of your lenders and may therefore increase
the cost of the loan, which you might want to keep in mind while finalising such properties.

7. Technical / Valuation check: Making doubly sure

Banks are extremely careful about the property they plan to finance. They send an expert to
visit the premises you intend to purchase. This expert could either be a bank employee or he
could belong to a firm of architects or civil engineers.

Site visit

The site visits to your property are conducted to verify the following:

In case of under construction property

 Stage of construction is the same as that mentioned in the payment notice given to you
by the builder.
 Quality of construction
 Satisfactory progress of work.
 Layout of flats and area of property is within permissions granted by the governing
 The builder has the requisite certificates to start construction at the site.
 Valuation of the property in relation to other deals in the surrounding areas.

In case of ready/resale construction

 External / internal maintenance of the property.

 The age of the building.
 Will the building last the loan tenure? This has a direct bearing on your loan
eligibility, since the loan tenure will be restricted to the maximum age of the property
as decided by the bank's engineer and this will impact your loan eligibility.
 Quality of construction.
 Surrounding area (development).
 Whether the builder has received the requisite certificates for handing over possession
of the flat.

 There is no existing lien or mortgage on the property.
 Valuation of the property in relation to other deals in the surrounding areas.
 These inspections are carried out to protect consumer interests in terms of
construction quality, adherence to local laws, approved building plans, etc. A technical
inspection also lets the bank understand the progress of construction so as to release
the staggered disbursements.

Quick tip

Do not circumvent or skip this stage and ensure that it is completed as early as possible. As a
buyer, it gives you confidence that your property has been inspected by experts and that you
are buying an asset that is legally clear and technically sound. The fee for this service, like
the legal check, may either be built into your upfront fee or be charged separately by the

8. Valuation: Reality check

Since housing loans are cheaper than other loans, there have been cases where individuals
have shown purchase of properties from related entities at inflated prices to obtain cheap

Since the risk associated with diversion of funds is higher than if the loan was used for
genuine purposes, banks carry out an independent valuation to find out whether the
transaction is in line with the existing market price of the area.

Valuation has become a key parameter in determining the loan amount that can be sanctioned
by the bank. The valuation process is quite subjective and depends on the quality and ability
of the person sent by the bank for valuation.

Valuation of real estate as a profession is still in its infancy in India and is still non-
standardised. In many cases, the valuer determines the value of the property at an amount
that is lower than the documented cost of the property and this would result in the loan
amount being lower, since the bank funds a certain percentage of the cost or valuation of the
property, whichever is lower.

This practice has led to severe consumer issues in an increasing number of cases, as the
valuation is normally done only after the consumer takes a sanction (by paying a fee) and
after identifying and committing to buy the property.

The valuation issue rarely arises when a property is purchased through a reputed builder
directly or if the property is pre approved. In both the cases, the banks would have already
completed the valuation and therefore, you can safely assume that there is no difference
between the documented cost of the property and the bank's valuation amount.

Quick tip

Some banks will charge a special fee to cover these costs or may ask you to pay the valuer
directly, though for most banks, the upfront fee covers these fees as well.
Approach banks which are willing to do the valuation even before the sanction process and
before you pay any fee to the bank.

9. Registration: Sealing the deal

After the legal and technical / valuation check, the draft documents as cleared by the lawyer
need to be finalised and signed and the stamping and registration of the documents need to
be done. Also, if any NOCs are pending, these need to be obtained in the format approved by
the bank's lawyer.

10. Signing the home loan agreement: In black & white

All borrowers need to sign the home loan agreement. You also need to submit post-dated
cheques for the first 36 months (if that is the agreed mode of repayment). The original
property documents have to be handed over to the bank at this stage. Some banks also create
a document recording the handing over of the property documents to them as security for the
due repayment of the home loan.

This document is also called a memorandum of entry and attracts significant stamp duty
depending on the amount of the loan in some states. The stamp duty payable on such a
memorandum is naturally recovered from you.

Not all banks create this memorandum and hence the stamp duty may or may not be payable,
depending on the practice of the specific bank. However, even where no such memorandum
of entry is created, the state government concerned may, in the future, demand a stamp duty
on the loan transaction, which naturally is recoverable from you as per the home loan
agreement signed by you.

11. Disbursement: The big payout

After the bank has ensured that the property is legally and technically clear, all the original
documents pertaining to transfer of ownership of property in your favour have been
submitted and all the necessary loan agreements have been executed, finally, it is payment
time! You will now actually receive the cheque in your hand. Time to celebrate! But hold on
a second. Before the big moment arrives, you need to submit documents to prove that you
have paid your personal contribution towards the property, since banks normally finance
only up to 85-90 per cent of the total cost of the house.

In case you are expecting money from other sources to fund your own contribution, you need
to provide sufficient evidence for the same. It is only after submitting this proof that the bank
will release part-disbursement of the loan.

The cheque will be in the name of the reseller (for resale flats), builder, society or the
development authority. It is only in exceptional circumstances, that is, if you provide
documents to support that you have made an excess payment from your own account that the
cheque will be handed over to you directly by the bank.

Quick tips

All banks charge interest on the loan amount from the day on which the cheque has been
made and not from the day on which the cheque is handed over to you/seller. So, take
delivery of the cheque the same day or the very next day to avoid paying extra interest on

Disbursement in stages

Usually, loans are disbursed on the basis of the stage of construction of the property. So, in
case of resale or ready possession properties, the disbursement is full and final. However, in
case of under-construction properties, the payment is made in parts, also known as part-

Each option would have different disbursement processes.

Part disbursement: When a loan is partly disbursed, the bank does not start EMIs
immediately, since it is calculated on the total loan amount at a particular rate of interest and
for a given tenure. Moreover, it normally does not start breaking up the installments into its
principal and interest components until the entire loan amount is disbursed.

To overcome this difficulty, banks charge simple interest on the partly disbursed loan
amount. For instance, if you have a sanctioned loan of Rs10 lakh, but the property is under
construction and the bank has disbursed only Rs4 lakh, you will be charged a simple interest
only on the disbursed amount. This process continues until the final disbursement takes
place. The simple interest paid is called Pre-emi interest or Pre-emi.

At this stage, banks may take only around three to six post-dated cheques on account of Pre-

Quick tips

 Always ensure that the amount of simple interest is available in your bank account to
avoid dishonour of the cheque.
 The systems of most banks do not track Pre-emi payments as effectively as emi
payments. However, as per the loan agreement, your liability to pay Pre-emi is
absolute and without receiving any reminder from the bank. You may have to pay a
delayed payment charge if your Pre-emi is delayed. So, it is in your own interest to
keep track of the number of PDCs given to the bank for Pre-EMI and replenish them,
should the need arise.
 Submit the demand letter from the builder as and when raised, to ensure that the
balance disbursement can take place.
 Collect the receipt from the builder for the part-disbursement and hand it over to the
 Ensure all the above are complied with till the final disbursement of the loan.

Full and final disbursement: If it is a ready-possession property, the bank disburses the
entire loan amount in favour of either the reseller or the builder.

Quick tips

Take time to fill in the loan documents before you sign them. Some columns may have to be
kept blank as the exact amounts may not be known, but this should be limited.
The bank is supposed to return a copy of the loan documents signed by its authorised
signatory but that rarely happens in practice without sustained follow-up.
Keep photocopies of all documents/agreements/letters submitted to the bank to avoid any
misunderstandings later.

The relationship continues...

The final disbursement does not end your relationship with the bank. In fact, it is just the
beginning. And there are various issues / situations that arise in between the beginning of the
relationship and its end.

These include:

 Post-disbursement documents
 Repayment
 Income tax certificate
 Prepayment
 loan preclosure/satisfaction
 Post-disbursement documents

Payment receipt: Once the bank hands over the pay order to you, you in turn are expected
to hand it over to the reseller or the builder. You should get a receipt from them for the
payment and hand it back to the bank, as it will become part of your mortgage
Share certificates: In case your property is part of a society, you will need to get the flat
transferred to your name by asking the society to issue the share certificate in your name and
recording the transfer of ownership in their books.

This normally happens at the first AGM/EGM after the sale transaction. This transferred
share certificate also happens to be a part of the mortgage documentation and has, therefore,
to be handed over to the bank after the transfer takes place.


The loan is generally repaid by equated monthly installments, using post-dated cheques.
Banks usually ask for 12, 24 or 36 PDCs, after which you need to repeat the process until
you have repaid the loan. Some banks may also insist on a cheque for an amount equivalent
to the loan outstanding at the end of PDC period to ensure timely replenishment of PDCs for
the next 12, 24 or 36 months as the case may be.
In case your installments are to be deducted against your salary, you need a letter from your
employer accepting this arrangement and directly remitting the amount to the bank every
month. This is possible only if your organisation has an arrangement with the bank for all
Some banks allow you to give standing instructions to the bank where you have your
savings/current account to deduct money each month crediting your home loan account.
Some banks allow the monthly installments to be paid by convenient ECS facility.
Another possible mode of payment is by cash or demand draft (not all banks offer this). You
can deposit the EMI every month at the bank's office.

Income Tax certificate

Every bank issues an income tax certificate that serves as requisite proof to let you avail of
tax benefits that accrue on repayment of a home loan. This will typically contain the total
amount of interest and capital repaid during the year.
This is mandatory to claim the tax benefit in respect of self-occupied property. You will have
to file this with your tax returns and submit this to your employer or chartered accountant to
calculate your tax liability.


You can prepay a loan either in part or in full at any given point of time. You can also prepay
it even when it is only partly disbursed. However, most banks have an upper limit on the
number of times a person can prepay his loan in a year as well as on the minimum amount
you can prepay each time.
Until recently, banks charged a penalty for part or full prepayment. But increased
competition has forced most banks to allow partial prepayment at nil charge.
Most banks levy a prepayment charge if you make full repayment and ask for release of your
property documents.

Loan pre-closure/satisfaction

You also have the option of completely repaying the loan at any time. Of course, each bank
has its conditions for preclosure. Also, the loan will get completely paid off on the expiry of
the tenure of the loan if you have paid all your installments on time.

Once you have completely repaid your loan, ensure that the entire set of original property
documents is handed back to you.You should also ask the bank for a No-Objection
Certificate saying the account has been cleared. As an option, the bank may issue a consent
letter stating that the property is now free from mortgage.

If you have guarantors, the bank will issue a separate letter for each of the guarantors stating
that their liability has come to an end. Only after you receive these documents can you say
that the property is now completely free of mortgage.

At this stage, in some cases, you may discover that the original documents have yet not been
received by the bank from the registrar. In such cases, you will need to follow up with the
registrar and get the documents from them directly by showing them a copy of the bank's
clearance certificate.

Sometimes, (and we must stress only sometimes) the bank may misplace your original
property documents leading to avoidable stress. In fact, the bank may claim that these
documents were never given to them at all. Hence the importance of insisting on a proper
receipt of title documents while handing them over to the bank.

Remember that receipt will come in very useful when the loan is fully paid off. Also, it is
extremely useful when you want to shift your loan to a new lender.


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Pros and Cons of Home Loan Prepayment

It is an interesting irony with Home Loans. Till the time a person does not have a home loan, he
aspires to take one as soon as possible in order to purchase a home. Once he has taken a home loan,
the first priority in his life becomes to repay his home loan even though it may come with a cost of
his reduced standard of living. It is a prudent decision to repay a loan if one does not require it. After
all why should you pay interest on a loan costing roughly 10% when you have idle funds sitting in
your bank account account earning just 4% interest.

However there are a group of thinkers who do not believe in the philosophy of repaying back their
home loans. Lets discuss the pros and cons of repaying a home loan and I will leave it to the readers
to decide which is the best option suitable for them.

1. Reduction of Interest Payouts – The most obvious benefit out of prepayment is that your interest
payout reduces. Prepayment of home loan results in an immediate reduction of the outstanding
principal on the home loan which results in less interest being accrued on the loan account. For
example, if you have an outstanding loan of Rs. 10 lacs at 10% interest, you would be annually
paying approx Rs. 1 lac interest. If you prepay the loan by Rs. 1lac, your interest would reduce from
Rs. 1 lac to Rs. 90K per year – approx 10 K saving per year for the duration of the loan.

2. Prepay – without reducing the tenure – Generally when you are going to prepay your home
loan, you have two options. Either you can reduce the number of home loan installments or keep the
number of installments same but reduce the monthly mortgage payments (EMIs). For example, if
you prepay your home loan by Rs. 100,000, you may be provided two options :

a) Instead of paying your monthly EMI (e.g. Rs. 10K per month ) for original tenure of 120 months,
reduce the tenure of the same monthly EMI of Rs. 10K to 110 months (illustrative) OR

b) Keep the original number of EMIs the same, e.g. 120 months, but reduce the monthly EMI per
month from Rs. 10K to Rs. 9.5K, i.e. a reduction of Rs. 500 per month in monthly cash outflow.

I prefer the second option, as it results in improving the monthly cash flows by a lesser per month
cash outflow and easing the family budgets. Any further cash savings on a monthly basis can then be
used to further prepay the loan if needed.

3. Impact on Leverage

This is an interesting topic and in order to understand it let me take an example. John has an
investment opportunity which requires Rs. 1 lac investment and it would provide him annually 15%
return. His annual return in this case is Rs. 15,000.

Now lets bring in another situation, say John has just Rs. 20K in his pocket and he still has the same
investment opportunity. John goes to a bank and takes a loan of Rs. 80K at 10% interest. His
situation after end of the year would look like :

His investment – Rs. 20K and Loan to pay Rs. 80K.

Total Income from the investment (Rs. 1 lac @ 15%) – Rs. 15,000

Less Interest paid on Loan (Rs. 80K@10%) – (Rs 8,000)

Net Income for John Rs. 7,000

Return for John on his investment of Rs. 20K = 7K/20K x 100 = 35%.

The example above tried to show how leveraging work. Just like a normal LEVER is used to
multiply the effort to lift heavy loads, financial levers use loans to multiple your returns – if used
correctly. Generally if the interest rate paid out is less than the return earned from your investment,
you would gain from taking a loan.

In case of a home loan, if you perceive that your property is going to give you a return of more than
home loan interest rate, you would perhaps be better off not paying your home loan. This is just a
general statement and each case would need a specific analysis.

4. Debt Equity Ratio – This is one of the classic financial ratios and perhaps one of the first ratios
looked into by analysts to identify how risky a financial decision is and hence determining the
respective financing cost (interest rate). It works opposite to the Leverage example above. While
leveraging mentions that the more your loan is, the better would be your net returns. However, the

contrary aspect associated with it is – the more loan you have (in % terms), the more risky your
investment become to the lenders. For example

John has a property valued Rs. 10 lacs of which only 1 lac has been paid by John from his pocket
and remaining 9 lac (90%)has been taken on loan. John hence has a debt equity of 9:1.

Peter has a property valued Rs. 10 lac of which his contribution is Rs. 3 lac and remaining 7 lacs
(70%) has been financed via a loan. Peter has a debt equity of 7:3

If for examples real estate markets tank by 10% and the properties are now valued at 9 lac each,
John’s stake would be reduced to zero and Peter’s stake would be reduced to Rs. 2 lac. If you are a
financer giving a loan to John / Peter, you would rather want to avoid financing John as he is heavily
leveraged and hence a more risky investor than Peter. In this example, John may walk away as he
would not have any incentive to hold his property (considering it is less than the value he purchased
and his entire investment has been wiped out). On the contrary, Peter would still be inclined to hold
on to the property considering he has still 2 lacs of this investment in the property. Hence, even if the
bank would want to finance John, they would charge a higher interest rate for the extra risk in that

The reason why I explained the above – you may want to prepay your home loan to bring it within a
comfortable debt equity ratio. Ideally this ratio is 7:3 to 8:2 i.e. Loan to Value of your property is
70%-80%. You may want to go even higher at 60%, but from there you start to adversely affect your
leverage ratio. Banks in many cases provide a better interest rate deal (specially outside India) if the
Loan to Value is greater 80% or lower.

5. Use Mortgage as an Overdraft Account

This is one of the least used options available in the market. Outside India, the product is generally
called as an Offset mortgage. In India, the product is sold by State Bank of India by the name Max
Gain. In this type of mortgage account, if you have surplus funds, you can deposit the funds in your
bank / mortgage account and interest shall be computed on the balance mortgage loan. You are free
to withdraw the deposit and the interest shall levied on the remaining balance. Hence, when ever you
have surplus funds, you reduce your interest payouts. If you find an investment opportunity, you can
withdraw the funds from your mortgage to fund your investments. By this way, you tend to get a
good mix of putting surplus funds into work (by reducing interest payouts) and at the same time
having the flexibility to get the funds back when needed. It is important to note that any deposits
made in such an account do not end up reducing your mortgage balance permanently. The excess
funds temporarily suspend interest accruals on the deposited amount till such a time these funds are
not withdrawn by the account holder.


In line with above mentioned paragraphs, you may want to revisit your current home loans /
mortgages and analyse which side of the fence you are sitting. You may have a very high leverage
and sitting on excess cash – probably a good idea to repay a bit of your loan. Alternatively, you have
paid a good part of your loan and hence you may want to invest your excess cash in other investment
options to avoid reducing the impact of leverage on your home investment decision. You may also
want to refer to my alternative article Good Loans & Bad Loans and specifically for NRIs – NRIs
– How to Leverage on Low Interest Rates.

Procedure to close a home loan:

Taking a home loan is a long and tedious process, but so is closing it. This can be done either
at the end of the loan tenure or before the specified tenure, if you have some extra funds at
hand. To pre pay the loan, you must make sure you have excess funds to make the pre
payment and for emergencies so that you are always financially secure.

While submitting your documents to the bank, you must get an acknowledgment letter from
the bank stating a list of documents being submitted. This is helpful while closing the loan, if
a few documents get misplaced.

Also, any change of address should be communicated to the bank so that all your documents
are mailed to the correct address while loan closure.

How to close loan at end of tenure?

If the last EMI and all outstanding dues have been paid, then you need to write a letter to the
bank requesting a return of the original documents. If you need any other documents such as
invoice copies etc. include this in your letter. Generally, the bank responds to such letters
within 7 working days.

The bank will return your original documents and issue a closure letter stating that there is
no outstanding amount. It will also give an NOC stating that it no longer has an interest in
the property.

If mortgage has been registered, then the no- objection certificate needs to be taken to the
Registrar’s Office to get the lien removed. The borrower and a representative of the bank
need to be present for this.

However, if the mortgage is not registered, the bank will simply returns the title deeds.

How to Prepay a loan?
To prepay the loan, write a letter to your bank inquiring about the outstanding amount and
state a particular date by which you will pay the entire loan amount. If you decide to close
your loan in the middle of you repayment cycle, you must find out the interest amount you
need to pay. It is best to inform the bank 15 days before your next payment date. If you have
given post dated cheques, make sure the bank returns them along with other documents.

Prepayment fee

Since 2012, the Reserve Bank of India and National Housing Board have banned
prepayment penalty on all floating interest rate home loans. However, you will have to pay a
prepayment penalty if you have a fixed interest rate home loan.

Regarding hybrid home loans, where the first few years the loan is on fixed interest rate and
the remaining tenure is on floating interest rate, prepayment penalty will apply if you prepay
your loan during the fixed rate tenure. But no prepayment penalty is levied if you have
crossed the fixed rate tenure and are now paying a floating interest rate.

However, if you have taken a top up loan on your home loan, you will have to pay a
prepayment penalty, regardless of fixed/floating interest rate.

Here are a few points you MUST keep in mind while closing your loan:

1. Collect Original Property Papers:

Ensure you collect all original papers submitted to bank as a collateral. Match them with the
list of documents received from bank at the time of disbursal.

Typical papers submitted to the bank are :

 Sale Deed
 Conveyance deed
 Builder Buyer Agreement
 Power of Attorney
 Payment Receipts
 Possession Letter
 Transfer Permission
 Tri partite agreement etc.

2. Collect Security Cheques :

When the bank disbursed your loan, it must have taken security cheques in case you
defaulted on your EMI payments. Make sure you take these cheques back, once the loan is
closed and destroy them to prevent misuse.

3. Get No objection certificate from bank (NOC):

NOC is a legal document that serves as proof of full repayment and closure of loan
according to terms of lender. It may also be useful in case you plan to sell off the property.
Thus, it is important to get one from your bank.

4. Get Lien Removed:

Lien is the right to keep possession of property belonging to another person until the debt
owed by that person is discharged. If the lender delays in doing so, you can get it removed
with the help of NOC issued by bank.

5. Update CIBIL (Credit Information Bureau of India Ltd.) Score:

Credit score is the report card of your finances. So once your home loan is closed, you must
ensure that your bank updates this information at CIBIL. If not done, you may face problems
in future financial transactions or loans.

6. Other Documents:
Lastly, don’t forget to collect other important documents from your bank like;

 Complete loan account statement,

 Principal and interest certificates (help filling your Income tax returns)

While closing a home loan brings in relief and financial stability, it is important to complete
all related formalities and procedures with your bank to avoid any complications. Remember,
your loan is not closed until your bank gives you a letter clearly stating it is. Just because you
have paid your last EMI or full prepayment of outstanding amount, it does not imply loan

When to prepay a home loan to avoid penalty

A good way to reduce your home loan

burden, especially when rising interest
rates are bloating your EMIs, is to prepay
it. However, most borrowers are wary of
taking this route as prepayment charges
can be hefty at 2-3% of the prepaid
amount. So, when the RBI announced last
week that banks should not levy such
penalty if floating rate loans are prepaid, it
brought cheer to thousands of borrowers.

Not for long, though. The directive, as they soon realised, is not binding on
banks, at least not yet. Besides, it's not applicable to housing finance companies,
such as HDFC, LIC Housing Finance, Dewan Housing Finance, which come
under the purview of the National Housing Board (NHB), not the RBI.

S Govindan, general manager, personal banking and operations, Union Bank of

India, says, "It is not a directive yet and is purely in the form of desired action,
not a guideline." This will become legally binding only after the banks discuss it
with their respective board members as well as at the Indian Banks' Association.
RK Bansal, executive director at IDBI Bank, says, "The prepayment charge
waiver was discussed at the meeting of the banking ombudsmen. It is not a
decision and the RBI is yet to come out with detailed guidelines."

So, it's advisable to wait if you are planning to prepay your home loan. However,
there are some things you need to keep in mind when, and if, you choose to

Prepayment limits

If you have recently taken a home loan, you may not be eligible for prepayment.
Most lenders have a time frame, usually six months after taking the loan, within
which you cannot prepay. IDBI Bank levies a 2-3% charge on prepayment of
loans if it's done within six months.

If you are not faced with this restriction, check whether the penalty is applicable
for complete or partial prepayment. HSBC does not levy a penalty if you prepay
up to 25% of the sanctioned loan amount, but will be charged 3% if you cross
this limit. In the case of HDFC, the 25% limit is calculated on the opening
balance (that is, the remaining loan) in a financial year. Some lenders, such as
Axis Bank, do not levy any prepayment charge.

Some banks do not levy a penalty on partial prepayments, but this will depend
on when you foreclose the loan. If the loan is partially paid within one year of it
being completely prepaid, you may have to pay a penalty on the earlier amount.
So, if you prepay Rs 2 lakh on 2 May 2011 and close the loan in October 2011,
you will have to pay penalty on Rs 2 lakh. In the case of ICICI Bank and Kotak
Mahindra Bank, a 2% charge is applicable on the outstanding loan as well as the
amount prepaid during the previous year, while HDFC charges this on the
amount prepaid during the same financial year when the loan is foreclosed.

Source of funds

Both the RBI and NHB have been persuading lenders not to levy a prepayment
penalty. Most of them have agreed that borrowers will not be charged if they
prepay from their own funds, as opposed to using borrowed money. However,
this facility is very stringent and lenders are fussy about defining 'own funds.'
So, loans taken from other banks, employers, against an asset, or even help taken
from a relative or children who are not co-borrowers, are considered 'outside

Bhopal-based Sukumar Chatterjee, discovered this when the interest rates shot
up and he borrowed money from his son to pay `5.78 lakh of his outstanding
loan. The 62-year-old was asked by the bank to pay a penalty as the funds were
not his own. For proof, the bank referred to his account, which did not have the
money for the previous six months. If Chatterjee had received a retirement
bonus, sold his stocks or redeemed his investment, the money would have been
considered as his funds and he would have been able to avoid the charges.

Banks ask for proof to substantiate the source of funds. "The borrower has to
prove the availability of funds when he prepays the loan. Usually, they ask for
bank account statement for the previous six months to verify the source of
funds," says an HDFC spokesperson. Even if you cancel the booking and the
builder returns your money, you will have to pay the penalty when you return the
loan to the bank.

However, some nationalised banks offer a little more leeway. "If the builder has
cancelled the project, there is no charge. The customer can't be penalised in such
a case," says Bansal. Also, most public sector banks are not fussy about the
funds. Some non-PSU banks do not make any such distinction and levy the
charges irrespective of the source of funds. "HSBC doesn't distinguish between

the source of funds while accepting prepayment requests. Standard prepayment
charges are applicable," says an HSBC official.


"If the loan is being paid by another institution or bank, you are considered to
have 'not paid using own funds'," says Bansal. Banks are unforgiving if you
prepay by taking a loan from another bank. "As a norm, many PSU banks don't
levy prepayment charges. However, there is no waiver if you refinance it," adds

Axis Bank is one of the few lenders that does not levy a charge if a customer
shifts his loan to another bank to take advantage of a lower interest rate. "The
facility of zero prepayment charge on home loans on floating rate offered by
Axis Bank is unconditional," says Jairam Sridharan, senior vice-president
(consumer lending & payments), Axis Bank.

Experts suggest that if you have had a long relationship with a bank and a good
payment track record, you could negotiate with the bank. You may be lucky and
save on steep charges until the RBI makes it binding on banks not to levy a
prepayment penalty under any circumstance.

Can you afford to ignore LIC Housing’s New Fixed 10

home loan?

LIC Housing Finance Ltd launched two new home loan schemes this week
called Bhagyalakshmi plus and New Fixed 10.

While Bhagyalakshmi Plus is available for women borrowers who are sole
owners or first owners of the property, the rate of interest will be fixed for the
first two years at 10.35 percent for loans up to Rs 75 lakh. Once the initial two
years are over the loan will shift to the floating rate regimen. On conversion to
floating rate, the borrower will get a discount of 25 basis points on the interest
throughout the loan term.

VK Sharma, MD and CEO of LIC Housing told Firstpost, "And internal study of
the credit appraisal system loan book showed that women- borrowers, especially
as sole owners or first owners, have a good repayment history, and a near zero
delinquency rate." And, since the risk with such borrowers is lower, the incentive
is passed on to the women borrower as a 25 basis point discount.
The interest rate of LIC's New Fixed 10 home loan is 11.50 percent for ten years,
while other lenders in the market are offering fixed rate loans in the range of
11.25 percent to 13.75 percent.

But the loan we will discuss in detail today is the New Fixed 10.

What is it: Sharma told Firstpost. "We launched New Fixed 10, wherein it (LIC
Housing) would charge borrowers a fixed interest rate of 11.50 percent for 10
years. And after the first five years the customer has the flexibility to convert his
or her loan into the floating rate prevalent at that time."

Finer details of the scheme: The fixed rate of 11.50 percent is available for
loans up to Rs75 lakh. The processing fee for the loan could be as less as Rs
5,000 to a maximum of 1 percent of the amount. Sharma, says, "The processing
fee can also be waived off depending upon the ticket size of the loan, as well as
the type of customer." If you prepay the loan during the floating rate period of
the loan, you won't have to bear prepayment charges. In fact, even during the
fixed rate period, if you, prepay from your own sources of funds, you won't need
to pay a prepayment penalty. However, Sharma says, "If you prepay the loan
during the fixed rate period with funds which are not from your source (another
lender), you will need to pay a prepayment penalty, which could be a maximum
two percent of the loan outstanding amount."

Analysis: The interest rate of the New Fixed 10 home loan is 11.50 percent for
ten years, while other lenders in the market are offering fixed rate loans in the
range of 11.25 percent to 13.75 percent. But the question here is: should you
really go for a fixed rate loan at this point of time in the market? Floating rate
home loans available in the market today are in the range of 10 -12 percent. A
loan expert we spoke to, who did not want to be named, said: "Currently, SBI is
offering a floating rate loan at 10.25 percent. There is absolutely no point in
paying more than 100 basis points more." In fact, Ranjit Dani, Certified
Financial Planner, told Firspost, "11.50 percent is expensive as compared to
other floating rate options out there. We are almost at the top of the interest rate
cycle, and interest rates are expected to see a fall in a year of so. Why would
anyone want to get locked into a higher rate, when interest rates are expected to

Harsh Roongta, CEO,, says, "It's not about LIC Housing Finance
or HDFC; conceptually you should understand that you are paying a 1 percent
premium over what is available out there to get peace of mind about a

predictable EMI amount. But this 1 percent premium is too big an amount,
considering that for the floating rate loan the rate has to move by more than 100
basis points to justify the premium you would pay for the fixed rate loan."

End note: The truth is no one can be sure when the interest rate cycle will turn.
But looking at the present economic scenario, getting locked for 10 or five years
at 11.50 percent seem a bit too expensive, especially when floating rate loans are
cheaper by more than 100 basis points. The unnamed source mentioned above
also said, "With the new RBI Governor now, who knows what the next monetary
policy will bring in? Still, 11.50 percent is expensive to get locked into for 5-10

But there are some people who could possibly see this premium as worth paying.
Dani says, "The utterly lazy people who are ignorant about money or careless
about money could take this loan. Even now, there are many people out there
who were on the floating rate regime and never bothered to track rates; they now
pay 14 percent when they started their loan with 7.5 percent. So, if you are
someone who simply doesn't want to track floating rate movements, this loan
might just work for you."

Home loan Interest rates from leading Primary Lending Institutions in India

Interest Rates for Home Loans are undoubtedly the most important parameter to factor into your
calculations. And in most cases interest rate is the decisive factor for an investor to narrow down on
a certain Primary Lending Institutions home loan offer. The interest on housing loans in India is
usually calculated on monthly reducing balance basis.

Comparative Chart on Home Loan Interest Rates on offer from few leading Primary Lending
Institutions is given below for the benefit of general public:

Home loan interest rate (20 year loan) as on 25thApril, 2012*

Home Loan Interest Rate(Below 20 lakhs)
Primary Fixed(for Fixed(w clause Markup/Markdo
Lending Floating the entire ith reset after how wn to Benchmark
Rate (for
Institutions tenure) clause) many Rates
Allahabad Bank 12.75% 12.25% NA NA 10.75% BR: 10.2%
Andhra Bank BR + NA NA NA 14.25% NA

Axis Bank 11% 11.75% NA NA NA BR-10%
Bank of India 11% NA NA NA 14.25% NA
DHFL Vyasa 13.50% NA 10.75 12 18.25% NA
Housing Finance
GIC Housing 12.50% NA NA NA NA NA
Gruh Finance 10.75-16% 11.75- 10.75- Linked to 16.25 varied
Limited 17.00% 15.75% the GPLR
HDFC Ltd. 10.75% 16.75% 10.75% 36 18.50% BR 10%
HSBC Bank 11-13% 11-14% 13.25- 36 NA NA
HUDCO 10.50- Floating + 13.25- 36 - -
14.00% 1.00% 15%
ICICI Home 10.50% 14.50% Base+0. 24 17.75% -
Finance Co. Ltd. 5%
IDBI Home 11.00% NA 12.25- 36-60 15.25% BR 10.75%
Finance Ltd. 13.25%
India Infoline 12.5% NA NA NA 16.25% Dependent on
Housing Finance individual rating of
Ltd. each customer,
amount of loan,
tenure, CIBIL
scores etc.
Indiabullls NA NA NA NA 17% Markup NA
Housing Finance Markdown 5.5%
Ltd. ( 14 -8.5 =5.5)
Karnataka Bank 11.75- NA NA NA 15.75% BR:15.50%
LIC Housing 10.8% NA 12.15% 60 14.65% 2.50%
Manipal Housing linked to NA NA NA 15.25% NA
Finance PLR
Micro Housing 12-15% NA NA NA 14% 1-4%
National Trust Rural -11% NA NA NA 15.75% -
Housing Finance - 13%

Ltd General
Orange City NA 10 50%* NA NA NA NA
Housing Finance (ROI 10-
Ltd. 14% for
PNB Housing 11.75% NA 14.00% 36 14.25% BR:10.75%
Finance Ltd.
Reliance Home 12.75% NA NA NA 17.75% 5.50%
Finance Private
Repco Home 12.50% NA NA NA 16.00% 3.25%
Finance Ltd.
Rose Valley 11.50% NA NA% -- --- NA
Corporation Ltd.
State Bank of 10.50% NA 9.75- 12 NA BR:10%
India (SBI) 12%
Sundaram BNP 12-14.25% - - - 15.50% 3%
Paribas Home
Finance Ltd.
Union Bank of 11.75% NA NA NA 15.75% NA
*Source: IL&FS
Note: This is a sample list with no indication of a complete list of all the players in the field of
Banking & Finance.
Most of the banks and HFCs follow the daily or monthly reducing-balance method, by which the
principal on which you pay interest reduces every month as you pay your EMI, resulting in a lower
interest burden. Thereby, the EMI for the monthly reducing system is effectively lesser than the
yearly reducing system of calculating interest.


 Address Proof
 Pan card
 Employment Proof
 Income Certificate

 Photographs of Applicant
 Form-16
 ITR of last 3 years
 Proof of property ownership

Documents for Home Loan

Please note these requirements are for Indian Citizens
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)
* Photographs (as applicable)
* A photocopy of bank statement for the last six months
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
* 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)
If a Flat is Purchased from the Builder:
* Original copy of your agreement with the builder
* 7/12 extract or property register card of the land under construction
* Index II extract of your agreement with the builder
* Copy of NA permission for the land from the collector
* Search and title report (with the details of documents) for the last 30 years
* Development agreement between the owner of land and the builder
* Copy of order under the urban land ceiling act

* Copy of building plans sanctioned by the competent authority
* Commencement certificate granted by corporation / nagar palika
* Building completion certificate (if available)
* The latest receipts of taxes paid
* Partnership deed or memorandum of association of the builders firm
If the Property is being Purchased is in Cooperative Society:
* Original share certificate of the society
* Allotment letter from the society in your name
* Copy of the lease deed, if executed
* Certificate of the registration of the society
* Copy of the byelaws of the society
* No objection certificate from the society
* 7/12 extract or property register card in the society's name
* Copy of NA permission for the land from the collector
* Search and title report(with the details of documents) for the last 30 years
* Copy of order under the urban land ceiling act
* Copy of the building plans sanctioned by the competent authority
* Commencement certificate granted by corporation / nagar palika
* The latest receipts of taxes paid
* Original agreement to assign / deed of assignment
If Constructing on Own Land
* Original sale deed of land and extract of index II
* /12 extract or property register card in your name
* Copy of NA permission for land from the collector
* Search and title report (with the details of documents) for the last 30 years
* Copy of order under urban land ceiling act
* Copy of the building plans sanctioned by the competent authority
* Building permission granted by corporation / nagar palika
* The latest receipts of taxes paid
* Estimate of cost of construction certified by the architect

Current Floating Home Loan Interest Rates of LIC

Home Loan

Loan Schemes - LIC Housing Finance
Upto 3 Crs
10.10% (Fixed for 2 years)

Compare LIC Housing Finance Interest Rates.

Click Here
For more information about the LIC home
Loan Offers Click LIC Housing Finance
AGE 18years to 60years
Income Rs.15000 (p.m) NTH
Loan Amount Offered 5,00,000 - 1,00,00000
Tenure 5 years - 25 years
Current Experience 2 years
Processing Fee 1% of Loan Amount
1) Application form with photograph.
2) Identity &residence proof.
3) Latest 3 months salary slip.
4) Form 16
5) Last 6 months salaried bank statements
6) Processing fee cheque

Griha Prakash (Home Purchase)

Loan Amount Min. Rs. 25,000 - Max.Rs.1,00,00,000.
85% of total Cost of the property including Stamp Duty
Loan to Property Cost
and Registration Charges.
Upto 20 Years or Retirement Age or 70 years of Age,
Loan Term
whichever is earliest.
Repayment Mode Equated Monthly Installments(EMI) - Monthly Rest Basis
1. Equitable Mortgage of House/Flat
2. One Guarantor.
Any existing or new policy under any acceptable plan of
Risk Cover insurance (issued by LIC of India) on the lives of the
applicants, having risk cover to the extent of loan amount.
Front End Charges 1.00% of Loan Sanctioned.

Griha Prakash (Home Construction)

Min. Rs. 25,000 -
Loan Amount
Loan to Property Cost 85% of total Cost of the property
including Stamp Duty and

Registration Charges.
Upto 20 Years or Retirement Age or
Loan Term 70 years of Age, whichever is
Equated Monthly
Repayment Mode Installments(EMI) - Monthly Rest
1. Equitable Mortgage of
Security House/Flat
2. One Guarantor.
Any existing or new policy under
any acceptable plan of insurance
Risk Cover (issued by LIC of India) on the
lives of the applicants, having risk
cover to the extent of loan amount
Front End Charges 1.00% of Loan Sanctioned.

Griha Prakash (Home Extension)

Min. Rs. 25,000 -
Loan Amount
85% of total Cost of the property
Loan to Property Cost including Stamp Duty and
Registration Charges.
Upto 20 Years or Retirement Age or
Loan Term 70 years of Age, whichever is
Equated Monthly
Repayment Mode Installments(EMI) - Monthly Rest
1. Equitable Mortgage of
Security House/Flat
2. One Guarantor.
Any existing or new policy under
any acceptable plan of insurance
Risk Cover (issued by LIC of India) on the
lives of the applicants, having risk
cover to the extent of loan amount
Front End Charges 1.00% of Loan Sanctioned.

Griha Sudhar (Home Repair)

Loan Amount Upto Rs.10,00,000.
Not exceeding 85% of Cost of Repairs or 25% of
Loan to Property Cost
Market Value of Property, whichever is lower.
1 to 15 Years, or Retirement Age, or 70 years of Age,
Loan Term
whichever is earliest.
Repayment Mode Equated Monthly Installments (EMI) - Monthly Rest
1. Equitable Mortgage of House/Flat
2. One Guarantor.
Life Insurance Cover is not required but advisable in
Risk Cover
the interest of the Applicants.
Front End Charges 1.00% of Loan Sanctioned.

Loan for Purchase of Vacant Plots/Sites

Loan Amount Min Rs.50,000 Max Rs. 20,00,000.
Loan to Property Cost 85% of the Cost of Plot/Site.
Upto 15 Years or Retirement Age, or 70 years of
Loan Term
Age, whichever is earliest.
By Equated Monthly Installments (EMI) -
Repayment Mode
Monthly Rest Basis.
1. Equitable Mortgage of House/Flat
2. One Guarantor.
Life Insurance Cover is not required but advisable
Risk Cover
in the interest of the Applicants.
Front End Charges 1.00% of Loan Sanctioned.

Common Document requirements for all applicants.

•Application form duly filled in.
•Copy of sanctioned plan and sanction letter.
•Copy of NA permission/ULC clearence, wherever applicable.
•One guarantor form and his/her salary certificate in our format. If guarantor is in
business or profession, a copy of his/her latest I.T.returns/assessment order.
•Bank Pass-book or statements for the last two years.f) Power of Attorney, wherever

Additional Requirements - For salaried persons

•Employer's salary certificate in our format/and latest salary slip.
•Identity card of applicant/s.
•TDS certificate of applicant/s.
•PF/ESIS slip of applicant/s.

Additional Requirements -For Businessmen / Self-employed

• Three years' income tax returns/assessment orders alongwith computation of income
and statements of accounts certified by C.A.

 Generally the amount of processing – fee is 1% of loan amount + service

 Maximum processing –fee is ` 10,000/- above the loan amount `10,
 ` 1124/- as processing –fee must be paid before sanction.
 Rest amount of processing may be paid at the time of disbursement.
 There is rebate of 0.5% for some approved companies &builders.


Indian Resident
1. Should be Citizen of India above 18 years of age.
2. The borrower should be individual(s).
3. The home loans should be current at the time of selection.
4. The home loans should have a minimum seasoning of 12 months (excluding
moratorium period).
5. The Maximum Loan to Value (LTV) Ratio permissible is 85%. Housing
loans originally sanctioned with an LTV of more than 85% but where the
present outstanding is within 85% of the value of the security, will be
6. The Maximum Installment to (EMI) to Gross Income ratio permissible is
7. The loan should not have overdue outstanding for more than three months,
at any time throughout the period of the loan.
8. The Quantum of Principal Outstanding Loan size should be in the range of `
0.50 Lakhs to ` 100 Lakhs.
9. The pool of housing loans may comprise of fixed and/or variable interest
10. The Borrowers have only one loan contract with the Primary Lending
Institution (PLI).
11. The loans should be free from any encumbrances/charge on the date of
election / securitization.
12. The Loan Agreement in each of the individual housing loans should have
been duly executed and the security in respect thereof duly created by the
borrower in favour of the PLI and all the documents should be legally valid
and enforceable in accordance with the terms thereof.

Determination of Eligible Amount of Loan

 The amount of loan will depend on market value of residential property, as
assessed by the PLI, age of borrower(s), and prevalent interest rate
 The liquid security pledged by borrowing party.
 The PLI may consider ensuring that the equity of the borrower in the residential
property (Equity to Value Ratio - EVR) does not at any time during the tenor of
the loan fall below 10%.

 The PLIs will need to re-value the property mortgaged to them at intervals that
may be fixed by the PLI depending upon the location of the property, its
physical state etc. Such revaluation may be done at least once every five years;
the quantum of loan may undergo revisions based on such re-valuation of
property at the discretion of the lender.

Nature of Payment

Any or a combination of the following:

 Periodic payments (monthly, quarterly, half-yearly, annual) to be decided
mutually between the PLI and the borrower upfront.
 Lump-sum payments in one or more trenches .Committed Line of Credit,
with an availability period agreed upon mutually, to be drawn down by the
borrower Lump-sum payments may be made conditional and limited to
special requirements such as medical exigencies, home improvement,
maintenance, up-gradation, renovation, extension of residential property etc.
The PLIs may be selective in considering lump-sum payments option and
may frame their internal policy guidelines, particularly the eligibility and
end-use criteria. However, these conditions shall be fully disclosed to
potential borrowers upfront.
 It is important that nature of payments be decided in advance as part of the
RML covenants. PLI at their discretion may consider providing for options
to the borrower to change.
Eligible End use of funds
The loan amount can be used for the following purposes:
 Up gradation, renovation and extension of residential property.
 For uses associated with home improvement, maintenance insurance of
residential property

Medical, emergency expenditure for maintenance of family

 Repayment of an existing loan taken for the residential property to be

 Meeting any other genuine need
You can avail of a housing loan for:
 Purchase or construction of a new house/ flat.
 Purchase an existing (old) house/ flat.
 Extension, repair, renovation or alteration of a house/ flat.
 Purchase a plot of land meant for construction of a dwelling unit.

You will need to furnish the following documents along with the completed
application form:
 Passport size photograph.
 Proof of residence (This applies only to new or non-bank customers, and could
be either a PAN identity card, voter identification card or passport)
 Sale Deed/ Agreement of Sale.
 Bank account Statement or passbook, for the last six months.
 For employees or people in service, you also need to provide.
 Salary certificate and other information, if any, about your repayment capacity.
 Form 16 or a copy of the Income Tax Returns for the last 3 years.
 For self employed and other IT assesses.
 IT returns for the last 3 years· Receipts of advance tax paid.
 Any other information about your repayment capacity.
In addition to the above mandatory documents, you are also required to
furnish one or more of the following documents wherever applicable: ·
 Letter of allotment from the housing board or society.
 Copy of the approved plan Permission for construction
 Copy of the relative order in the case of conversion of agricultural land. (not
required where the house/flat has been constructed by an approved builder)

In the case of an old existing house, you will need to get a valuation certificate from
approved valuers as well as a certificate from a government approved architect
/structural engineer regarding the condition of the flat/house as well as it’s remaining
life. This will give you the comfort of knowing that the property you are purchasing is
of sound construction.

Period of Loan: Maximum 20 years.

Interest Rate: The interest rate (including the periodic rest) to be charged on the House
loan to be extended to the borrower(s) may be fixed by PLI in the usual manner based
on risk perception, the loan pricing policy etc. and specified to the prospective
borrowers. Fixed (10.10% for 2 years fixed ) and rate of interest for LOAN AGAINST
PROPERTY is 12.5% for 5 years fixed. Floating rate of interest not exit at present in

The loan shall be secured by way of mortgage of residential property, in a suitable
form, in favour of PLI.

Valuation of Residential Property:

 The residential property should comply with the local residential land-use and
building bye laws stipulated by local authorities, with duly approved lay-out and
building plans.

 The PLI shall determine the Market Value of the residential property through
their external approved valuer(s). In-house professional valuers may also be
used subject to adequate disclosure of the methodology.

 The valuation of the residential property is required to be done at such

frequency and intervals as decided by the PLI, which in any case shall be at
least once every five years.

 The methodology of the revaluation process and the frequency/schedule of such

revaluations shall be clearly specified to the borrowers upfront.

 PLIs are advised not to reckon expected future increase in property value in
determining the amount of RML. Should the PLIs do so in their best
commercial judgment, they may do so under a well defined Policy approved by
their Board and based on professional advice regarding property prices.

Provision for Right to Rescission:

As a customer-friendly gesture and in keeping with international best practices, after

the documents have been executed and loan transaction finalized, Senior Citizen
borrowers may be given up to three business days to cancel the transaction, the “right
of rescission,”. If the loan amount has been disbursed, the entire loan amount will need
to be repaid by the Senior Citizen borrower within this three day period. However,
interest for the period may be waived at the discretion of the PLI.
Loan Disbursement by Lender to Borrower:

The PLI will pay all loan proceeds directly to the borrower, except in cases pertaining
to retirement of existing debt, payments to contractor(s) for the repairs of borrower’s
property, or payment of property taxes or hazard insurance premiums from the
borrower’s account set aside for the purpose.
In case the residential property is already mortgaged to any other institution, the PLI
may, at its discretion, consider permitting use of part proceeds of loan to prepay /repay
the existing housing loan. The loan amount will be paid directly to that institution to the
extent of the loan outstanding with that institution with a view to release the mortgage.

Periodicity: The loan will be extended as regular monthly, quarterly, half-yearly or
annual periodic cash advances or as a line of credit to be drawn down in time of
need or in lump sum.
The PLI will have the discretion to decide the mode of payment of the loan including
fixation of loan tenor, depending on the state and market value of the property, age of
the borrower and other factors. The rationale behind the decision of mode of payment
and fixation of the loan tenor shall be clearly disclosed to the borrowers.

The PLIs will provide in writing, a fair and complete package of reverse mortgage
loan material and specimen documents, covering inter-alia, the benefits and
obligations of the product. They may also consider making available a tool kit to
illustrate the potential effect of future house values, interest rates and the capitalization
of interest on the loan.
The closing costs may include the customary and reasonable fees and charges that
may be collected by the PLIs from the borrower. The cost for any item charged to the
borrower shall not normally exceed the cost paid by the lender or charged to the lender
by the provider of such service(s). Such items may include:
 Origination, Appraisal and Inspection Fees. The borrower may be
charged pro-rata origination, appraisal and inspection fees by the PLI
 Verification Charges of external firms
 Title Examination Fees
 Legal Charges/ Fees
 Stamp Duty and Registration Charges
 Property Survey and Valuation charges
A detailed schedule of all such costs will clearly be specified and provided to the
prospective borrowers upfront by the PLIs.

The loan shall become due and payable only when the last surviving Borrower
dies or would like to sell the home, or permanently moves out of the home for aged
care to an institution or to relatives. Typically, a “permanent move” may generally
mean that neither the borrower nor any other co-borrower has lived in the house
continuously for one year or do not intend to live continuously. PLIs may obtain
such documentary evidence as may be deemed appropriate for the purpose.

 Settlement of loan along with accumulated interest is to be met by the

Proceeds received out of Sale of Residential Property.

 The borrower(s) or his/her/their estate shall be provided with the first right
to settle the loan along with accumulated interest, without sale of Property.

 A reasonable amount of time, say up to 2 months may be provided when

loan repayment is triggered, for house to be sold.
 The balance surplus (if any) remaining after settlement of the loan with
accrued interest shall be passed on to the estate of the borrower.

 Loan Agreement : The PLIs shall enter into a detailed loan agreement setting
out therein the salient features of the loan mortgage security and other terms
and conditions, including disbursement and e payment of the loan, in
addition to the usual provisions, which are ordinarily incorporated in a
mortgage loan document.

 The loan agreement may also include a provision that the borrower shall not
make any testamentary disposition of the property to be mortgaged and even
if it does so, it would be subject to the mortgage created in favour of the
lending institution. In such a case, the borrower shall make a testamentary
disposition of the mortgaged property in favor of any of his/her relatives,
subject to the discharge of the mortgage debt by such legatee and a
statement that the heirs shall not be entitled to challenge the validity of the
mortgage as also the right of the mortgagee to enforce the mortgage in the
event of death of the borrower unless the legal representative is willing to
undertake the responsibility for discharging in full the amount of loan and
accrued interest thereof.
 In addition, the PLI may also consider obtaining a Registered Will from the
borrower stating, inter-alia, that he/she has availed of loan from the PLI on
security by way of mortgage of the residential property in favour of the PLI,
meaning thereby that in the event of death of the borrower (and co-
borrower, if any), the mortgagee is entitled to enforce the mortgage and
recover the loan from the sale proceeds on enforcement of security of the
mortgage. The surplus, if any, has to be returned to the heirs of the deceased
 The PLIs may consider taking an undertaking from the prospective borrower
that the “Registered Will” given to the PLI is the last “Will”, prepared by
him/her at the time of availment of loan facility as per which the property
will vest in his/her spouse name after his/her demise. The borrower will also
undertake not to make any other ‘Will’ during the currency of the loan
which shall have any adverse impact on the rights created by the borrower in
the PLI’s favour by way of creation of mortgage on the immoveable
property mentioned under the loan documentation for covering loan to be
allowed to his/her spouse and interest thereon, even after the borrower’s
 The PLI will ensure that the borrower(s) has insured the property against
fire, earthquake, and other calamities.
 The PLI will ensure that borrower(s) pay all taxes, electricity charges, water
charges and statutory payments.
 The PLIs will ensure that borrower(s) are maintaining the residential
property in good and saleable condition.

 The PLI may reserve the option to pay for insurance premium, taxes or
repairs by reducing the homeowner loan advances and using the difference
to meet the obligations/expenditures.

 The PLI reserves the right to inspect the residential property/premises or

arrange to have the residential property/premises inspected by its
representatives any time before the loan is repaid and borrower(s) shall
render his/her/their cooperation in respect of such inspections.

Counselling and Information to Borrowers

 The PLIs will observe and maintain high standards of conduct in dealing
with the Senior Citizens and their families and treat them with special care.
 The PLIs shall clearly and accurately disclose the terms of the RML without
any ambiguity.
 The PLIs should clearly explain to the prospective borrowers the terms and
conditions of RML, the methodology followed for valuation of the
residential property, the method of determination of eligible quantum of
loan, the frequency of re-valuation and review of terms and all related
aspects of the RML.
 The PLIs may suggest to the Senior Citizens to nominate their ‘personal
Representatives’ usually a close relative who the PLI can contact in the
event of any potentialities.
 The PLIs may counsel the prospective borrowers about the possible impacts
to the borrowers due to adverse movements in interest rates and property
price fluctuations.
 The PLIs shall clearly specify all the costs to the Borrower(s) that are
associated with the transaction
 The PLIs shall in no way assert or imply to the borrower(s) that the
Borrower is/are obligated to purchase any other product or service offered
by the PLI or any other associated institution in order to obtain a reverse
mortgage loan.
 Take reasonable steps to check out the background and procedures of third
parties before accepting referrals of business from them, and refuse to
accept referrals from those that are found unacceptable. Members shall
disclose to clients any third party with a financial interest in the reverse
mortgage transaction.



The concept of securitisation has been adopted more recently from the American
financial system and has been described as processing of acquiring financial asset and
packaging the same for investments by several investors. The term ‘securitisation’ has
not been defined as such, but has been used in certain rules, regulations and
notifications. In the recently enacted the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (for short “the Securitisation
Act”) the term securitisation has been defined as “acquisition of financial assets by any
securitisation company or reconstruction company from any originator, whether by
raising of funds by such securitisation company or reconstruction company from
qualified institutional buyers by issue of security receipts representing undivided
interests in such financial assets or otherwise”.
The Securitisation Act, 2002
The Securitisation Act has been enacted mainly for tackling the growing menace
non-performing assets by securitisation of assets by sale to ARC, which is to issue of
security receipts to the investor and for enforcement of security interest by banks and
financial institutions. Initially, many were delighted to find that the securitisation
process as a class has come to stay in the Indian legal system, and the problem of the
non-performing assets of banks and financial institution would stand resolved since the
banks and financial institutions would be able to enforce its security interest without
intervention of the courts. The quantum of non performing assets has been growing by
leaps and bounds and has been playing havoc on the Indian financial system since as at
the end of the year 2001 the total amount of outstanding NPAs stood at Rs.83,500/-
crores. After enactment of the Securitisation Act, 2002 the wilful defaulters cannot now
hide behind long-winded judicial process but at the same time the bank also cannot
recover dues arising out of underwriting commitments obligations and equity finance
by way of share subscriptions, so also the shares acquired by exercise of option for
conversion of loan into equity. The Securitisation Act, 2002 does not also ensure or
guarantee full recovery of the entire outstanding over dues fully. In the result the
financial health of the banks will not improve because, in absence of adequate assets
not more than 20 percent of NPAs would be recovered by resorting to the provisions of
the Securitisation Act, 2002. The IT Tribunal ruling in case of Vishvapriya Financial
Service and Securities Ltd would jolt development of asset securitisation in autofinance
and housing finance sector. The company was utilising funds obtained from the
investors for deployment in fixed income security and had guaranteed fixed rate of
return. The contention of the company that it was only agent for the investors and has
evolved only a pay-through structure was not accepted by the tribunal, which held that

the company was liable for the withholding taxes on the payments made to the
Growth of Banking Practice in India
In the long run from the concept of ancient money lenders, India march forward to
the realm of banking, which has since branched out in the concept of the development
banking, the narrow banking and the universal banking. So also from simple current
and savings bank accounts, the bank finance has extended to structured finance,
trade finance and export finance and finance for
infrastructure, and the last few years saw emergence of fee based services in form of
merchant bankers, financial advisers and managers to the public issue and private
placement of shares debentures and bonds, syndication of loan facilities, external
borrowings, forex services, treasury management and more recently investment and
portfolio management, e-broking and derivatives, futures and options trading facilities
plus back office services and services in takeover, mergers, acquisitions and
amalgamations, mostly through the bank subsidiaries or associates arms.
Reasons for Growth of NPAs
The development and proliferation in the activities of the bank has led to ever-
increasing non-performing assets that has mounted to an enormous amount during the
last decade or so. The quantum of NPAs has been calculated and put at different figures
mainly due to absence of proper statistics and the method on the basis adopted for
calculating the percentage of NPAs in relation to either the total assets of the bank or
the amount of loan portfolio or on the basis of the number of the accounts or the size of
the outstanding advances. But till recently little attention was paid to the real reasons as
to why and how non performing assets have appeared in the books of the banks and
also the books of many of the financial institutions. For a large number of years, the
banks have been taking credit in its books, on basis of accrued interest income, even for
the amount of periodic interest that was not actually paid by the borrower. This was
done by raising debit in suspense account and crediting amount equal to the periodic
interest in the loan account of the borrower. After objections from the auditors and
income tax authority the banks changed strategy and started giving additional loans to
the defaulting borrowers for the purpose of making payments to the bank for
adjustment of the overdues, in many cases the due dates of payments were postponed
and even the entire duration of the loan was extended further again and again. As if to
add fire to the fuel, ambitious programme for branch development and extension of
banking services led to new recruitments, transfers, relocation and unhealthy competition
amongst offices of the same bank, but at the same time adequate facilities available for training of the
staff were not expanded. In the anxiety to achieve business targets the rules and procedures for prudent
banking were conveniently forgotten. Even the higher management setup conveniently relaxed the
rules for proper appraisal of the loan proposals, the provisions of standard bank sanction letter, errors in
execution of the loan agreements, deeds of hypothecation and mortgages were more often overlooked
for compliance in the hurry for disbursement and achievement of targets for purposes of building up
record of achievements and reporting.

Off Balance Sheet Transactions (OBS)
The Banks in India are long familiar with off balance sheet finance by way of
standby letters of credit, revolving letters of credit, repurchase agreements, backup line
of credit for issue of commercial paper, note issuance facility, interest rate exchange
and swap and hedging transactions. Some of these OBS transactions are intended to
avoid and circumvent regulatory taxes like payment of deposit insurance premium, cash
reserve requirements and capital adequacy norms, but the securitisation and sale of loan
portfolio and receivables as form of OBS transaction tops the list, so much so that even
the income tax, capital gains tax, sales tax, lease tax and tax on transfer of right to use
the property, as applicable are not paid since the OBS transaction is seldom reflected in
the balance sheet of the bank or the borrower company concerned. Further, the OBS
transactions eliminate funding risk and even the credit risk. In India the banks and
institutions and also the investors and the borrowers were too happy to finance off
balance sheet transactions. Even though assets given on hire purchase basis do appear
in the balance sheet of the company, the future receivables in form of hire charges
payable by the hirer are not shown in the balance sheet of the originator. It is very
happy situation for the originator to sell the future receivables and raise finance and
show surge in the case on the balance sheet and raise the bottom line and also the top
line. Further, for the financing bank, it was much more advantageous as the amounts
paid are shown as investments in PTC and not as the loan transaction. This type of
structures of giving finance by investment in PTC and not as a loan, the financing bank
has easy escape from CRR and SLR requirements. As the future receivables are
purchased at discounted value and the banks could easily amount of liability under the
Interest Tax Act, 1974 for the period before the interest tax was withdrawn. The
originator also benefited by securitisation and sale of future receivables on which the
originator need not now pay hire purchase tax. The originator has added advantages
because of sale of receivables, an amount of cash is generated and shown in the balance
sheet even without the removal of any assets. In this way the originator could show
better results, improve balance sheet figures and raise further finance
O Lord forgive them, for they know not what they are doing
The term securitisation was not defined but was used in the year 1994 in the
Maharashtra Government Notification under the Bombay Stamp Act, 1958 dealing with
reduction of stamp duty in respect of “instruments of securitisation of loans or of
assignment of debt with underlying securities” chargeable under the Schedule I,
Article 25(a) of the Bombay Stamp Act, 1958. Subsequently, SEBI amended the SEBI
(Mutual Funds) Regulations, 1996 and the Seventh Schedule dealing with Restrictions
on Investments by mutual funds and allowed mutual funds to make investments within
the prescribed limits “in the mortgaged-backed securitised debt”. More recently, even
the recognized Stock Exchanges have started listing of the PTC (Pass Through
Certificates), without realizing that the PTC is not a “security” within the meaning of
the definition of the term “Security”, as given in Section 2(h) of the Securities
Contracts (Regulation) Act, 1956. Soon thereafter some of the banks and even public
financial institutions started business of securitisation of future receivables. Credit
Rating Agencies started assigning triple-A ratings to the PTCs on basis of feedback and
select information supplied at the instance of the hire-purchase and lease finance
companies. Certain State Governments followed the bandwagon and notified reduction
in stamp duty on securitisation transaction, even though the expression securitisation
was nowhere defined in the relevant Stamp Act provisions as applicable in the State
concerned or in the Indian Stamp Act, 1899.

Why banks could not prevent loan defaults

The banks are required to give loans under the priority sector lending and complete
requisite quota for each of the segments for the reporting year. In case of agriculture
lending the rural borrowers are often under impression that the disbursement is by way
of grant and there is no need for any repayment. Very often the loan documents are not
properly signed by the particular borrower. The amount and the rates of interest are
higher than what was conveyed to the borrower. Most of the time the borrower has not
benefitted and in absence of higher earnings, the repayments of the bank loan cannot be
made. Even in the urban sector and in towns and cities situation is no better. At times
accounts are opened without proper identification and due introduction. This is mainly
due to procedural lapse and inadequate control mechanism and loosening of bank
supervision. Every type of fraud is committed often with connivance with the staff,
perhaps due to absence of proper reporting and due vigilance. The instruments are
stolen in transit and encashed fraudulently. The remittance of cash, money transfers and
issue of demand drafts often fall to fraudulent practices.
Where the buck stops
All the ills for mounting figure of loan defaults and rising amount of NPAs are
invariably put at the door of the legal system and procedural delays, costs and expenses
involved and the lengthy procedures involved in litigation and execution of decrees
obtained from the court. Even provisions contained in law for corrective action by way
of review and appeal against judgments of the trial courts are branded as causes for
delay in recovery of loan from the defaulting borrower. But the same persons when
aggrieved by order for transfer or non-promotion himself approaches the temple of
justice for redress of his own grievance. The Securitisation Act, 2002 seeks to improve
mechanism available to the secured lender for enforcement of the security interest held
by them, but fails to notice the difference between willful defaulter and the borrower
who is unable to make payments on the due dates due to change in market conditions
and regardless of the intention or the reasons leading to such defaults like change in
government policy, competition from new technology, power shortages. No attempt is
made for inducting fresh finance to tide over the difficulty or for diversification,
upgradation or rehabilitation of the defaulting unit. Implementation issues relating to
management and financing of the business of the company are mostly ignored before
taking drastic step for sale of the units by the lenders.
The potential buyers would turn weary as no one wants to pay for the mortgaged
unit in forced sale anything more than its scrap value. Taking over of the defaulting
company, which has unpaid secured over dues will only go to deter the ARC as also the
potential buyers, who would make payments after borrowing from the banks and
financial institutions as the lenders.

The potential buyers has become weary and can therefore offer only the scrap value,
for purchase by the same management in the name of new promoters, with moneys
raised from the same lender bank, which initiated steps for enforcement of security
against the borrower concerned. Take over of the defaulting unit with large amounts of
overdues would only go to deter the ARC and potential purchaser. It seeks to improve
mechanism available to secured creditors for enforcement of the security available to
Securitisation Versus Securitisation
The Securitisation Act has been enacted for dealing with and solving problem of
NPAs, but look at the manner in which perfectly healthy accounts with AAA ratings are
now being securitised for raising finance that is free from regulatory requirements
prescribed by the Reserve Bank or SEBI. Mostly the hire-purchase and loan receivables
generated by non-banking finance companies, hire purchase finance companies,
housing finance companies and even commercial bank loans receivables are purchased
in the guise of securitisation by an SPV established in the form of a trust, set up by the
non-banking finance company itself, and thereafter receivables are sold to mutual funds
as the Investors by issue of Pass Through Certificates (PTC). By device of issuing
PTC, the SPV merely undertakes to pass on the receivable to the PTC holder, only after
and on condition that the loan receivables are paid by the hirer or the borrower
concerned and received by the non-banking finance company as the originator. There is
no independent obligation or any assurance by the SPV or the Trustees of the SPV to
independently make any payments, unless the regular payment is made on due dates by
the hirer or the loan borrower to the originator. There is absolutely no indemnity or any
guarantee or even an assurance provided to the holder of PTC regarding due and timely
payment of the periodic payments falling due to the PTC holder, as the investor. The
PTCs are not negotiable instruments and are not transferable by endorsement and
delivery. There is no statutory register of PTC holders and therefore there is no
question of transfer of PTC by execution of duly stamped and registered formal transfer
deed, as in the case of shares and debentures. These are also not approved securities for
the purpose of investments by a banking company, a financial institution or by public or
charitable trust or by LIC, GIC and its subsidiaries. Further, the amounts due and
payable under the PTC cannot be recovered even by the bank or financial institution as
the holder thereof by application made to the Debt Recovery Tribunal. The benefits
available under Section 88 of the Income Tax Act for repayment of housing loans for
construction or acquisition of residential house would no longer be available after the
housing loan portfolio along with the security interest therein stands transferred and
assigned by way of securitisation by the housing finance company. While adopting
securitisation of mortgage debt as a new tool for financing the banks have failed to
appreciate that MBS is the same instrument as a secured non convertible debentures.
There is no legal basis for securitisation of the mortgage loans and the holder of the
MBS will be unable to enforce the mortgage or to sue for sale of hypothecated movable
Unfair Advantages

The bandwagon of securitisation concept was readily adopted one after the other by
not number of non banking finance companies, housing finance companies and some of
the banks for their own advantages and benefits, especially because the concerned
regulatory authorities failed to comprehend the precise nature of securitisation
transaction in the context of the financial market in India. Unnecessary and vague
comparisons were made with securitisation transaction in America and with the
practices and procedures followed by Fannie Mae, Freddie Mae and Ginnie Mae in
America for financing of growth of housing finance in that country, without look at the
statutory provisions the federal structures and system of insurance for housing loans
prevailing in USA.
On its part SPVs are mostly organized as a trust and as such indeed they escape all
the regulatory requirements as applicable to the companies the non-banking finance
companies, the mutual funds and cooperative banks or cooperative societies. When the
trust receives income on behalf of the beneficiary, the provisions of Section 161 of the
Income Tax Act 1961 would be attracted, and as representative assesses the Trustee
would be liable to pay tax in like manner and to the same extent as the beneficiary. The
Income Tax Act imposes the liability to tax on the trustee as the representative assesses
on all income.
Banking Utopia
For the ages the banks have been living in its own utopia and taking for its finance
security by way of hypothecation and mortgage by way of deposit of title deeds. The
banks looked to savings in payment of stamp duties and registration charges and avoid
botheration of investigation of title, but the banks did not realise that hypothecation can
hardly be called a charge on the movable assets of the borrower. The term
hypothecation has not been defined either in the Indian Contract Act, 1872 nor in the
Transfer of Property Act, 1882. The hypothecation is often loosely described as pledge
without possession, and it creates only a floating charge on the movables whose
possession remains with the borrower, who can use the movables for the purposes of
his business. The courts do not recognise right of the bank either to attach the stocks
or sell them inspite of clauses in the hypothecation agreement executed by the
borrower. The Supreme Court in case of K.L. Johar has held that the hypothecatee has
no right to take over possession of the goods. The bank has to file suit and obtain orders
for sale of the goods by public auction for recovery of the defaulted amount. The bank
will have to bear the loss in case the goods had deteriorated or lost or sold in the
meanwhile by the borrower. Justice Ameer Ali had pointed out that the use of the word
hypothecation should be abandoned. It is equivocal and therefore dangerous word. Mr.
J.C. Shah, former Chief Justice of India has opined that a creditor who has advanced
monies on hypothecation of goods has no property in goods hypothecated and that it
would be misnomer to call him a secured creditor. The now famous case of C.T.
Sentianathan, after going deep through the concept underlying hypothecation
agreements, it was held that there is no transfer of interest in the goods and the right of
the hypothecatee is only to sue on the debt and proceeds in execution of the

hypothecated goods only, use the goods are in possession and available with the
The correct position in the case of hire purchase and vehicle finance is even worse.
The vehicles are registered in the name of the customer, as owner of the vehicle with
the RTO under provisions of the Motor Vehicles Act, 1988 and the finance company is
never registered nor regarded as owner of the vehicle, but mere entry is made to the
effect that the vehicle is acquired under a hire-purchase arrangement. The Supreme
Court of India in the case of Sundaram Finance Ltd. v. the State of Kerala, while
dealing with payment of sales tax under the Travancore Cochin General Sales Tax Act
has decided that the clauses appearing in the hire-purchase agreement for option to take
possession of the vehicle by the financer is only license to seize to facilitate recovery of
loan advanced for purchase of the vehicle. The Hire-Purchase, 1972 was in terms of the
Government Notification dated 31st May, 1973 to come into force from 1st September,
1973, but the said notification was subsequently rescinded by the Government
Notification dated 30th August, 1973. Thereafter, the Hire-Purchase (Amendment) Act
was passed but the amendment has not been brought into force, due to court decisions
as to true nature of the hire-purchase and deferred installment payments transactions.
In addition after the Constitution 46th Amendment Act, 1982 for amendment of Article
366, the hire purchase transactions as such involve payment of sales tax under the
relevant sales tax law as applicable in the particular state concerned.In the state of
Kerala in terms of the notification under the revenue recovery Act, 1820 the
nationalised banks are entitled to recover their dues by simple requisition to the district
collector as arrears of land revenue.
Adoption of Different Forms of Security Devices
There is no reason to believe that non-banking finance companies, banks and
financial institutions are helpless as against the borrower. As lenders they are all
equipped with a number of legal remedies and rights for speedy recovery of amounts
due from defaulting borrower. But the banks in general and of their own volition are
either ignorant or not willing to take benefit of provisions of the law or the relevant
legislation for various reasons including defect in the loan documentation signed by the
borrower. For example, the erstwhile IFCI Act, 1948 which established the very first
financial institution in India and the State Financial Corporations Act, 1951 contained
special provisions for speedy recovery of due from the defaulting borrower. The
erstwhile IRBI Act for establishment of the Industrial Reconstruction Bank of India
contained provisions for creation of charge by execution and filing mere declaration
into prescribed format. Such declaration is not required to be registered under Section
17 of the Indian Registration Act, 1908. This declaration creates mortgage interests on
immovable property and is deemed to be treated as creation of simple mortgage by the
borrower and accordingly all rights and remedies available to a simple mortgage were
made available to IRBI. Some of the State Governments have passed special
legislation akin to law for revenue recovery for speedy recovery of its dues by the
banks as arrears of land revenue. The provisions of Section 69 of the Transfer of
Property Act, 1882 deals with powers and rights for recovery of its dues by the
mortgagee by private sale and without intervention of the courts. Further Section
69A of the Transfer of Property Act provides for appointment of receivers and
management of the property of the borrower without intervention of the courts. Nearly
100 year-old enactment the Code of Civil Procedure, 1908 in the Order 37 Rule 40
provides for summary procedure for recovery of dues by the bank.The shares,
debentures and government securities dematerialised format can now very easily be
pledged by filing necessary details in the Form No W. with the Depository Participant
concerned in accordance with the terms of the Depositories Act,1996.
In spite of the various statutory provisions mentioned above, it is wonder of all
wonderers as to how the banks have been able to build-up mountains of NPAs. Further,
very often the banks are not able to recover amounts due on a simple demand
promissory note or even from the Government under the Government Guarantee. The
blame is thereafter put at the door of defective legal system, procedural delays and on
the judiciary. At times the usual care is not taken just to verify and ensure that the
documents are duly signed by the authorised official of the borrower and that proper
stamp duty and registration charges have been paid as per applicable law prevailing in
the particular city or the State in which the documents have been executed. No doubt
that the attention was concentrated on avoidance of stamp duty and escape from
payment of Income Tax and Interest Tax as applicable.
Ignorance is not always bliss
The banks and financial institutions have been adopting practice of taking
memorandum of hypothecation of movable assets and creation of equitable mortgage
by deposit of title deeds on the immovable assets of the borrower , instead of taking
registered legal mortgage in English form over all the assets of the borrower. The
banks started taking equitable mortgage by deposit of title deeds and hypothecation of
movable assets merely in order to save on stamp duty and botheration for registration of
the mortgage deed with the concerned sub-registrar of assurances under the provisions
of Section 17 of the Indian Registration Act, 1908. The banks did not take note of the
fact that an equitable mortgage can be enforced by filing a money suit in the court and
that receiver of the assets of the borrower can be pointed only with and under orders of
the court of competent jurisdiction. In their anxiety to save on stamp duty and
registration charges the banks have in their own wisdom conveniently overlooked
provisions of Section 69 of the Transfer of Property Act,1882 which gives them right of
private sale without intervention of the court and right for appointment of receiver of its
choice. In short, registered legal mortgage in English form gives to the banks right to
appoint receiver of its own choice and sell the mortgaged property at its own option
without intervention of the courts.
The Deposit Insurance and Guarantee Corporation of India Ltd. guarantees the
repayment of the amounts of account holder upto the sum of rupees one lakh to the
bank depositors, but even after decades of its existence no insurance or guarantee is
made available to the banks against default by the borrower. Exporters are made
available different types of insurance cover and guarantee for recovery of the dues on
failure of the foreign buyers to make payment of the purchase price of the goods
exported by an exporter in India. The Export Credit and Guarantee Corporation of India
Ltd (ECGC) covers not only the finance risk, but also foreign currency remittance risk
and the political risk in the event of change in the policy and political structure of the
foreign country to which the goods have been exported.
The banks often take personal guarantee even in case of professionally managed
companies from the individual directors, but they are not able to recover anything from
the guarantors, as obligation under the personal guarantee is not secured by mortgage of
assets of the guarantor concerned in favour of the bank.
Each bank should evolve structured letter of sanction, a detailed loan agreement and
elaborate security documents including deed of pledge of securities, undertakings,
declarations and deeds of registered mortgage deed, deed of further mortgage and
additional charge, as also debenture trust deed, all duly supported by drafts of relevant
resolutions to be passed by the general body meeting and at the meeting of the board of
directors of the borrower company. These documents can be evolved under ages of the
Indian Banks Association or by bodies like the Institute of Bankers in India.
A word for non-performing Banks
The banks concerned must, rather than relying on panel of lawyers at different
centers, have the post of chief legal adviser with the rank of an Executive Director, in
full charge and control of drafting, stamping, registration, execution of security interest
created by the borrower in favour of the lending bank.
It is high time that the banks must learn the need for non-recourse lending, where
repayments are based and made out of profits generated by the business activity
financed by the bank and not by enforcement of security and sale of assets leading to
the closure of the manufacturing capacity. The bank should necessarily modify its
approach and disburse finance on basis of projections and viability of the project and
the cash flow generated out of the business activity.

The purchase or sale of a home or investment property is not only one of the
mostimportant financial events in peoples’ lives, but also one of the most
complextransactions. As a result, people usually seek the help of real estate agents
andbrokers when buying or selling real estate.Real estate agents and brokers have a
thorough knowledge of the real estatemarket in their community. They know which
neighborhoods will best fit clients’needs and budgets. They are familiar with local
zoning and tax laws, and knowwhere to obtain financing. Agents and brokers also act as
an intermediary in pricenegotiations between buyers and sellers. Real estate agents are
usuallyindependent sales workers who provide their services to a licensed broker on
acontract basis. In return, the broker pays the agent a portion of the commissionearned
from the agent’s sale of the property.Property Service Division of LIC Housing Finance
Limited deals with the samebusiness of real estate. The need of entering in this field
was felt by LIC HousingFinance Ltd due to increasing prospects in Real Estate
business. There are manybig brands namely ICICI realty, HDFC Realty, Axis Bank
Realty etc.A new line of business by the name Property services Division is being
launchedacross the country in selected centers. The function of the Property
servicesDivision includes all activities involved in enabling a prospective
homebuyerselect the property up to taking the possession of the same. It is thus
conceived tobe a one-stop-shop for all the advisory services related to the above.
Propertyservices division, which offers investors and builders a single transparent
platformto buy/sell office and commercial spaces and residential apartments/flats.

Scope of Property Service Division: The Real Estate Investment Scope In India-
A Lucrative And SafeOptionRealty sector is one of those sectors that have always
yielded high percentage ofcapital gain for the investors. Whether be it in the case of the
developed countriesor developing nations, each and every economy tries to maintain its
financialinfrastructure as sound as possible so that they can easily attract more number
ofinvestors and business personnel to involve with their economy. Real estate
sectordepicts the true economic development of a particular nation. India, one of
thefastest developing nations in this world since independence; has
successfullyemerged as one of the lucrative destinations to reap assured benefits on real
estateinvestment in almost all the states and cities of the nation. The modern
amenitiesand infrastructural facilities as good connectivity roads, green environment,
bettertransport; secured power supply are some of the standout features that have
luredthe attentions of investors from all across the globe towards India real
estateproperties.In India real estate properties can be broadly categorized mainly into
two distinctgroups, namely the commercial property and the residential property.
Theunderlying line of distinction between a commercial property and
residentialproperty is noticed while noticing the use and purpose of that
property.Commercial properties are commonly used as office buildings, malls,
retailoutlets, etc. and residential property is mainly used for personal use only.Due to
the development of industries in the NCR region, more and more numberof people have
started to earn huge amounts of return from their jobs andbusinesses. Now they want to
invest their earnings in more lucrative as well as less riskier investments that would
give them more benefits as compared to the other options. The Indians look at the
business as the more profitable option withgreater dividends on investments. This in
turn has led to the increase in theamounts of foreign investments in business in India.
And real estate markets inIndia are growing continuously at the rate of 30% each
year.Turning our looks towards the state of the residential properties in Gurgaon andthe
neighboring NCR cities, with the fast expansion of population in northernIndia aided by
the recent boom in the jobs sector, the demand for residentialproperty for such a large
population has seen a good amount of surge. The recentsurveys that have been
conducted India have strongly indicate India has thesecond largest population in the
world and china has the largest population in theworld. The study also reveals that with
in the next decade India will cross Chinesepopulation and will be on the top for having
largest population.Commercial as well as real estate sector has witnessed a real boom in
the NCRregion in India. Since the liberalization of the Indian economy, real
estatebusiness has seen an upward trend in the last fifteen two decades. The advent
ofthe multinational companies to India in order to set up a viable industrial
base,especially the IT sector, which has seen a phenomenal growth, the demand
forspace has risen up and with that the prices have also been touching sky heights.The
major source of the thrust is mostly due to favorable economic policies, theconstant rise
in the purchasing power, new growth of customer friendly banksprofessionalism in real

1994 - 3,00,57,900 No. of equity shares were issued at a premium of Rs 50 pershare

through public issue on 15th November 1994. The allotment was asfollows; 10,82,000
shares to LIC on firm allotment basis and the balance189,75,900 shares to public (all
were taken up).
1996 - The Company has decided to carry out fund based and one-fund basedactivities,
viz., debt securitisation, lease and hire purchase, renting of propertiesand giving
guarantee to co-operate bodies.
2000 - Crisil has assigned a AAA rating to the issue of mortgage backed passthrough
certificate backed by mortgages orginated by the company. 2001 - The Company has
launched its new scheme, Griha Vikas.
2002 - LIC Housing Finance Ltd has informed BSE that the Company hasforfeited
1,25,300 equity shares due to non payment of allotment/call monies. -LIC Housing
Finance has approved for the take over of Individual Housingloan portfolio of GLFL
Housing Finance. -Around 25 investors subscribed to the issue of confidentially placed
debenturesfor a total amount of Rs.392 cr of LIC Housing Finance Ltd. -LIC Housing
Finance Ltd has decreased its interest rates on housing loans by25-50 basis points.
Financial Institutions have increased their stake from 0.01% to 1.96% and Mutual Fund
companies have increased their stake from 0.35% to 1.06% in LICHousing Finance.
-LIC Housing Finance Ltd has decreased the floating rate of interest underindividual
loan scheme to 9.5% from 11%. -LIC Housing Financee signed a deed of assignment to
take over individualhousing loan portfolio of Citibank N A. -UTI and IFCI has been
removed from the list of promoters of LIC HousingFinance. 2003 - LIC Housing
Finance has unveiled a new project for elderly peoplecalled LIC HFL Care Homes
.-LIC Housing Finance Ltd has sanctioned 84,126 loans worth Rs.3265.78cr
anddisbursed 76,663 loans worth Rs.2941.24cr under its Individual Loan Scheme.-
LICHFL has mobilised Rs.280cr for 15 years at 7% rate of interest throughprivate
placement.-Lic Housing Finance Ltd has informed that the shares of the company
havebeen delisted from The Stock Exchange - Ahmedabad w.e.f December 08,
2003.2004 -Merill Lynch Capitat acquires LIC housing stake of 0.39%-Templeton
Asset Management buys 37,52,362 equity shares, representing5.01% of LIC Housings
total paid-up capital of Rs 74.9 crore.

LIC Housing Finance Ltd has informed that the shares of the Company hasbeen
voluntarily delisted from the Delhi Stock Exchange (DSE) w.e.f. January23, 2004.-LIC
Housing Finance shares delisted from Madras Stock Exchange-Mr D Krishnan
appointed as Chief Executive Officer- LIC Housing Finance Ltds (LICHFL) one-crore
global depository receipts(GDR) issue opened on August 27.- Lists its maiden global
offerings worth .85 million at the Luxembourg StockExchange successfully.
-Introduces new product that starts as a fixed rate loan but contains an option toconvert
it to a Floating rate loan at the end of five years, at the then prevailingrate.2005 -Delist
from The Calcutta Stock Exchange Association Ltd (CSE) witheffect from December
09, 2004.-LIC Housing Finance launches loan product that eliminates the requirement
ofcharge on house financed.-Goldman Sachs acquires share in LICHFL2007 -LIC
Housing Finance to launch FD scheme -LIC Housing Finance toenter into reverse
mortgage product.

2008 - LIC Housing Finance Ltd has informed that the Board has appointed
thefollowing persons as Directors on the Board of the Company on May 20, 2008-
Name of the Director : Shri. D K Mehrotra For the Position of :
ManagingDirectorChange effective from : May 20, 2008.- LIC Housing Finance Ltd
has informed that the Board of Directors of theCompany has appointed following
person as Director on the Board of theCompany on July 01, 2008.- Name of the
Director : Shri A S Narayanamoorthy- For the position of : Additional Director- Change
effective from : July 02, 2008-LIC Housing Finance launches Reverse Mortgage for
senior citizens2009 - LIC Housing Finance cut interest rates for new loans by 0.5%
where forcustomers opting for floating rate loans between Rs 30 lakh and Rs 75 lakh,
thenew rates will be 8.755 against 9.25%.

Loans aimed at professionalsDeposit schemes: Deposit schemes were first launched by

the company on 10thMay 2007 and may be accepted as both cumulative as well as non-
cumulativedeposit schemes. Terms of deposit may range from 1 year; 18 months; 2
years; 3years as well as 5 years.Interest under non-cumulative deposit schemes would
be distributed twice a year;whereas interest on cumulative deposit schemes would be
calculated as per bi-annually compounding.Loans:Housing Finance By LIC :Loan-
schemes available with lic housing finance are customized to suit variedrequirements as
per individual borrower-profile. As per official website andlichousing finance news
following loans are available:Home loans: Are offered at easy rates to both residents as
well as non-residentIndians. Step-up facility in terms of amount of EMI amount is also
available forthose who wish to opt for a steady increase in their repayment capacity
duringtenure if loan.Corporate loans: Aimed at corporate employees who have been
approved byLIC and include employees of PSUs, reputed public as well as private
limitedcompaniesHousing finance by LIC loans to professionals: Aimed at non-

Taking a home loan is a major decision, involving a large investment. Though the
availability of easy financing, innovative products and other value-added services by
Home Loan companies have made the home buying process relatively easy, for a
customer it is still a challenge to decide which home loan works best for him.LICHFL
is the best choice because:• LIC HOUSING FINANCE LIMITED is one of the largest
Housing Financeproviders in India, which has provided finance for almost 9,50,000
houses inthe country.• LICHFL is a single-product company with its core business
being HomeLoans, and has about two decades of experience and in-depth knowledge of
thereal estate market dynamics. 16• LICHFL provides:
Lowest Interest Rates• Easy application, quick approvals.• Largest Network.• No
Hidden Costs.• The Company has been rated as FAAA/Stable by CRISIL.Reasons to
buy from LICHFL?They operate in the Financial Services industry with you as the
center of Weoperate in the Financial Services industry with you as the center of focus.
Weprovide complete, holistic financial solutions to meet all your financial needs.
Weensure well-trained, professional financial planners at your service, as well
asprovide you with personal finance education and money management tools, tohelp
you make the right decisions for your secure future. Competitors in the MarketState
Bank of India: 17SBI offers its customers exclusive packages of mortgage loans at
lowest rates. PageOne such service includes Reverse Mortgage Loan that enables

Senior Citizens having inadequate income to meet their financial needs

forrenovation/repairs to house, medical & other personal purposes.Bank of Baroda :The
Bank of Baroda is reputed for providing very high quality financialproductspertaining
to home loans and loans for household purposes. It offers a flexibleapproach to the
customers to deposit , withdraw and repay installments as perneed and enjoy low
mortgage rates combining it with the loan and over draftfacility.United Bank of
India :United Bank Of India has been around in the financial sector from more than
50years and the mortgage scheme offered by the bank is one of the most importantpart
of its financial portfolio. The loan caters the basic need of the borrower tomeet any
personal/ business requirement at affordable rates.

Part of the ICICI Group , ICICI HFC is one of the leaders in the Indian
mortgagefinance and realty space following just after HDFC. Its various business
offeringsinclude, Home loans, Loan against property, Home search, Construction
Financeand so on.PROPERTY SERVICE DIVISION Property Service Division is a
new division which was introduced two years back in LIC HFL. Property services
division, which offers investors and builders a single transparent platform to buy/sell
office and commercial spaces and residential apartments/flats. A new line of business
by the name Property services Division is being launched across the country in select
centers. The function of the Property 19 services Division includes all activities
involved in enabling a prospective Page homebuyer select the property up to taking the
possession of the same. It is thus conceived to be a one-stop-shop for all the advisory
services related to the above. Said C J George, managing director, Geojit, "Real estate
has emerged as an important asset class for retail investors. Through this initiative,
Geojit plans to move up the service-value ladder to include new asset classes that
require advice and service." PSD is mostly found in metros. According to the Head of
PSD in LIC HFL, Lucknow, property services is an unexplored profitable field whose
value has not been yet recognized. At Home Search, one have access to the entire real
estate market, under one roof. When the customer choose to avail LICHFL’s PSD
Home search service, they are assured themselves a relaxed search experience. PSD
assist them at each step, irrespective of whether the customer want to buy, sell, lease or
even take property on rent. Quite simply, it is the attempt at simplifying the process of
buying that dream home by ensuring that the customer doesnt need to run from pillar to
post. . It focuses on providing customers with a one-stop shop for acquiring their new
home or finding a buyer or lessee for their property.Brief Introduction: Brokers are
independent business people who, for a fee, sell real estate owned by others; they also
may rent and manage properties for a fee. When selling real estate, brokers arrange for
title searches and for meetings between buyers and sellers where details of the
transactions are agreed upon and the new owners take possession. A broker’s
knowledge, resourcefulness, and creativity in arranging favorable financing for the
prospective buyer often mean the difference between success and failure 20 in closing a
sale. In some cases, brokers and agents assume primary responsibility for closing sales;
in others, lawyers or lenders do this.Brokers supervise agents who may have many of
the same job duties.Brokers also manage their own offices, advertise properties, and
handleother business matters. Some combine other types of work, such as
sellinginsurance or practicing law, with their real estate business.There is more to an
agent or broker’s job than just making sales. Theymust have properties to sell.
Consequently, they spend a significantamount of time obtaining listings—owner
agreements to place propertiesfor sale with the firm. When listing a property for sale,
agents and brokerscompare the listed property with similar properties that have recently
soldto determine its competitive market price. Once the property is sold, theagent who
sold the property and the agent who obtained the listing bothreceive a portion of the
commission. Thus, agents who sell a property theyalso listed can increase their
commission.Most real estate agents and brokers sell residential property. A
smallnumber, usually employed in large or specialized firms, sell
commercial,industrial, agricultural, or other types of real estate. Every specialtyrequires
knowledge of that particular type of property and clientele.Selling or leasing business
property requires an understanding of leasingpractices, business trends, and location
needs. Agents who sell or leaseindustrial properties must know about the region’s
transportation, utilities,and labor supply. Whatever the type of property, the agent or
broker mustknow how to meet the client’s particular requirements.Before showing
residential properties to potential buyers, agents meet withbuyers to get a feeling for the
type of home the buyers would like. In thisprequalifying phase, the agent determines
how much buyers can afford tospend. In addition, they usually sign a loyalty contract
which states theagent will be the only one to show them houses. An agent or broker
uses a 21computer to generate lists of properties for sale, their location and
Pagedescription, and available sources of financing. In some cases, agents and brokers
use computers to give buyers a virtual tour of properties in which they are interested.
Buyers can view interior and exterior images or floor plans without leaving the real
estate office. Agents may meet several times with prospective buyers to discuss and
visit available properties. Agents identify and emphasize the most pertinent selling
points. To a young family looking for a house, they may emphasize the convenient floor
plan, the area’s low crime rate, and the proximity to schools and shopping centers. To a
potential investor, they may point out the tax advantages of owning a rental property
and the ease of finding a renter. If bargaining over price becomes necessary, agents
must carefully follow their client’s instructions and may have to present counteroffers
in order to get the best possible price. Once both parties have signed the contract, the
real estate broker or agent must see to it that all special terms of the contract are met
before the closing date. For example, if the seller agrees to a home inspection or a
termite and radon inspection, the agent must make sure this is done. Also, if the seller
agrees to any repairs, the broker or agent must see they are made. Increasingly, brokers
and agents handle environmental problems by making sure the properties they sell meet
environmental regulations. For example, they may be responsible for dealing with
problems such as lead paint on the walls. While loan officers, attorneys, or other
persons handle many details, the agent must check to make sure that they are
completed.Working Conditions Increasingly, real estate agents and brokers work out of
their homes 22 instead of real estate offices because of advances in telecommunications
Page and the ability to retrieve data on properties over the Internet. Even with this
convenience, much of their time is spent away from their desk— showing properties to
customers, analyzing properties for sale, meeting with prospective clients, or
researching the state of the market. Agents and brokers often work more than a standard
40-hour week; nearly 1 out of every 4 worked 50 hours or more a week in 1998. They
often work evenings and weekends, and are always on call to suit the needs of clients.
Business is usually slower during the winter season. Although the hours are long and
often irregular, most agents and brokers also have the freedom to determine their own
schedule. Consequently, they can arrange their work so they can have time off when
they want it.Employment Real estate agents and brokers held about 347,000 jobs in
1998. Many worked part time, combining their real estate activities with other careers.
More than two-thirds of real estate agents and brokers were self- employed. Real estate
is sold in all areas, but employment is concentrated in large urban areas and in smaller,
but rapidly growing communities. Most real estate firms are relatively small; indeed,
some are a one-person business. Some large real estate firms have several hundred
agents operating out of many branch offices. Many brokers have franchise agreements
with national or regional real estate organizations. Under this type of arrangement, the
broker pays a fee in exchange for the privilege of using the more widely known name
of the parent organization. Although franchised brokers often receive help training
salespeople and running their offices, they bear the ultimate responsibility for the
success or failure of their firm. Real estate agents and brokers are older, on average,
than most other 23 workers. Historically, many homemakers and retired persons were
Page attracted to real estate sales by the flexible and part time work schedules
characteristic of this field. They could enter, leave, and later reenter the occupation,
depending on the strength of the real estate market, family responsibilities, or other
personal circumstances. Recently, however, the attractiveness of part time work has
declined, as increasingly complex legal and technological requirements raise startup
costs associated with becoming an agent.Training, Other Qualifications, and
Advancement In every State real estate agents and brokers must be licensed.
Prospective agents must be a high school graduate, at least 18 years old, and pass a
written test. The examination—more comprehensive for brokers than for agents—
includes questions on basic real estate transactions and laws affecting the sale of
property. Most States require candidates for the general sales license to complete
between 30 and 90 hours of classroom instruction. Those seeking a broker’s license
need between 60 and 90 hours of formal training and a specific amount of experience
selling real estate, usually one to three years. Some States waive the experience
requirements for the broker’s license for applicants who have a bachelor’s degree in
real estate. State licenses typically must be renewed every one or two years, usually
without reexamination. However, many States require continuing education for license
renewal. Prospective agents and brokers should contact the real estate licensing
commission of the State in which they wish to work to verify exact licensing
requirements. As real estate transactions have become more legally complex, many
firms have turned to college graduates to fill positions. A large number of agents and
brokers have some college training. College courses in real estate, 24 finance, business
administration, statistics, economics, law, and English Page are helpful. For those who
intend to start their own company, business courses such as marketing and accounting
are as important as those in realestate or finance.Personality traits are equally as
important as academic background.Brokers look for applicants who possess a pleasant
personality, honesty,and a neat appearance. Maturity, tact, trust-worthiness, and
enthusiasm forthe job are required in order to motivate prospective customers in
thishighly competitive field. Agents should also be well organized, detailoriented, and
have a good memory for names, faces, and business details.Those interested in jobs as
real estate agents often begin in their owncommunities. Their knowledge of local
neighborhoods is a clearadvantage. Under the direction of an experienced agent,
beginners learnthe practical aspects of the job, including the use of computers to locate
orlist available properties and identify sources of financing.Many firms offer formal
training programs for both beginners andexperienced agents. Larger firms usually offer
more extensive programsfor both beginners and experienced agents. Larger firms
usually offermore extensive programs than smaller firms do. Over 1,000
universities,colleges, and junior colleges offer courses in real estate. At some, astudent
can earn an associate or bachelor’s degree with a major in realestate; several offer
advanced degrees. Many local real estate associationsthat are members of the National
Association of Realtors sponsor coursescovering the fundamentals and legal aspects of
the field. Advancedcourses in mortgage financing, property development and
management,and other subjects are also available through various affiliates of
theNational Association of Realtors.Advancement opportunities for agents may take the
form of highercommission rates. As agents gain knowledge and expertise, they
becomemore efficient in closing a greater number of transactions and increase 25their
earnings. Experienced agents can advance in many large firms to Pagesales or general
manager. Persons who have received their broker’s license may open their own offices.
Others with experience and training in estimating property value may become real
estate appraisers, and people familiar with operating and maintaining rental properties
may become property managers. (See the statement on property, real estate, and
community association managers elsewhere in the Handbook). Experienced agents and
brokers with a thorough knowledge of business conditions and property values in their
localities may enter mortgage financing or real estate investment counseling.Job
Outlook Employment of real estate agents and brokers is expected to grow about as fast
as the average for all occupations through the year 2008. However, a large number of
job openings will arise due to replacement needs. Each year, thousands of jobs will
become available as workers transfer to other occupations or leave the labor force. Not
everyone is successful in this highly competitive field; many beginners become
discouraged by their inability to get listings and to close a sufficient number of sales.
Well- trained, ambitious people who enjoy selling should have the best chance for
success. Increasing use of electronic information technology will increase the
productivity of agents and brokers as computers, faxes, modems, and databases become
commonplace. Some real estate companies use computer-generated images to show
houses to customers without leaving the office. Internet sites contain information on
vast numbers of homes for sale, available to anyone. These devices enable an agent to
serve a greater number of customers. Use of this technology may eliminate some
marginal agents such as those practicing real estate part time or between 26 jobs. These
workers will not be able to compete as easily with full time Page agents who have
invested in this technology. Changing legal requirements, like disclosure laws, may also
dissuade some that are not serious about practicing full time from continuing to work
part time. Another factor expected to impact the need for agents and brokers is the
ability of prospective customers to conduct their own searches for properties that meet
their criteria by accessing real estate information on the Internet. While they won’t be
able to conduct the entire real estate transaction on-line, it does allow the prospective
buyer the convenience of making a more informed choice of properties to visit, as well
as the ability to find out about financing, inspections, and appraisals. Employment
growth in this field will stem primarily from increased demand for home purchases and
rental units. Shifts in the age distribution of the population over the next decade will
result in a growing number of persons in the prime working ages with careers and
family responsibilities. This is the most geographically mobile group in our society, and
the one that traditionally makes most of the home purchases. As their incomes rise, they
also may be expected to invest in additional real estate. Employment of real estate
agents and brokers is very sensitive to swings in the economy. During periods of
declining economic activity and tight credit, the volume of sales and the resulting
demand for sales workers falls. During these periods, the earnings of agents and brokers
decline, and many work fewer hours or leave the occupation altogether.EarningsThe
median annual earnings of salaried real estate agents, including commission,in 2011
was around Rs. 15,28,020. The middle 50 percent earned between11,9,060 and
6,46,360 a year. The lowest 10 percent earned less than 1,13,800and the highest 10
percent earned more than Rs.8,36,330 a year. Commissions on sales are the main source
of earnings of real estate agentsand brokers. The rate of commission varies according to
agent and brokeragreement, the type of property, and its value. The percentage paid on
thesale of farm and commercial properties or unimproved land is usuallyhigher than the
percentage paid for selling a home.Commissions may be divided among several agents
and brokers. Thebroker and the agent in the firm who obtained the listing usually
sharetheir commission when the property is sold; the broker and the agent in thefirm
who made the sale also usually share their part of the commission.Although an agent’s
share varies greatly from one firm to another, often itis about half of the total amount
received by the firm. Agents who both listand sell a property maximize their
commission.Income usually increases as an agent gains experience, but
individualability, economic conditions, and the type and location of the property
alsoaffect earnings. Sales workers who are active in community organizationsand local
real estate associations can broaden their contacts and increasetheir earnings. A
beginner’s earnings are often irregular because a fewweeks or even months may go by
without a sale. Although some brokersallow an agent a drawing account against future
earnings, this practice isnot usual with new employees. The beginner, therefore, should
haveenough money to live on for about six months or until commissionsincrease.
Types of services that a PSD can provide:Since each states laws may differ from others,
it is generally advised thatprospective sellers or buyers consult a licensed real estate
professional.Some Examples:Comparative Market Analysis (CMA) — an estimate of
the homes valuecompared with others. This differs from an appraisal in that property
currently forsale may be taken into consideration (competition for the subject
property).Exposure — Marketing the real property to prospective buyers.Facilitating a
Purchase — guiding a buyer through the process.Facilitating a Sale — guiding a seller
through the selling process.FSBO document preparation — preparing necessary
paperwork for "For SaleBy Owner" sellers.Full Residential Appraisal — but only, in
most states, if the broker is alsolicensed as an appraiser.Home Selling Kits —guides to
how to market and sell a property.Hourly Consulting for a fee, based on the clients
needs. 29Leasing for a fee or percentage of the gross lease value. PageProperty
Management. Exchanging property.Auctioning property.Preparing contracts and leases.
(Not in all states.)These services are also changing as a variety of real estate trends
transform theindustry.Services provided to both buyers and sellers In addition to the
services to sellers and buyers described below, most real estate agents coordinate
various aspects of the closing. Real estate brokers (and their agents) typically do not
provide title service such as title search or title insurance, do not conduct surveys or
formal appraisals of the property such as those required by lenders, and do not act as
lawyers for the parties, although they may "coordinate" these activities with the
appropriate specialists. Some real estate brokers may be associated with loan officers
who may help to finance buyers to make their purchase. For ex: LICHFL Regardless of
whether a real estate agent assists sellers or buyers of real estate, negotiating skills and
knowledge of financing options are important.Services provided to seller as client Upon
signing a listing contract with the seller wishing to sell the real estate, the brokerage
attempts to earn a commission by finding a buyer for the sellers property for highest
possible price on the best terms for the seller. In Canada, most provinces laws require
the real estate agent to forward all written offers to the seller for consideration or
review. 30 To help accomplish this goal of finding buyers, a real estate agency Page
commonly does the following:[citation needed]
Listing the property for sale to the public, often on an MLS, in addition to any other
methods. Based on the law in several states, providing the seller with a real property
condition disclosure form, and other forms that may be needed. Preparing necessary
papers describing the property for advertising, pamphlets, open houses, etc. Generally
placing a "For Sale" sign on the property indicating how to contact the real estate office
and agent. Advertising the property. Advertising is often the biggest outside expense in
listing a property. In some cases, holding an open house to show the property. Being a
contact person available to answer any questions about the property and to schedule
showing appointments Ensuring buyers are prescreened so that they are financially
qualified to buy the property; the more highly financially qualified the buyer is, the
more likely the closing will succeed. Negotiating price on behalf of the sellers. The
sellers agent acts as a fiduciary for the seller. This may involve preparing a standard
real estate purchase contract by filling in the blanks in the contract form. In some cases,
holding an earnest payment cheque in escrow from the buyer(s) until the closing. In
many states, the closing is the meeting between the buyer and seller where the property
is transferred and the title is conveyed by a deed. In other states, especially those in the
West, closings take place during a defined escrow period when buyers and sellers each
sign the appropriate papers transferring title, but do not meet each other.Several types
of listing contracts exist between broker and seller. These may 31be defined as:
PageExclusive right to sell
In this type of agreement, the broker is given the exclusive right to market the property
and represents the seller exclusively. This is referred to as seller agency. However, the
brokerage also offers to co-operate with other brokers and agrees to allow them to show
the property to prospective buyers and offers a share of the total real estate
commission.Exclusive agency An alternative form, "exclusive agency", allows only the
broker the right to sell the property, and no offer of compensation is ever made to
another broker. In that case, the property will never be entered into an MLS. Naturally,
that limits the exposure of the property to only one agency.Open listing This is an
agreement whereby the property is available for sale by any real estate professional
who can advertise, show, or negotiate the sale. Whoever first brings an acceptable offer
would receive compensation. Real estate companies will typically require that a written
agreement for an open listing be signed by the seller to ensure the payment of a
commission if a sale should take place. Although there can be other ways of doing
business, a real estate brokerage usually earns its commission after the real estate
broker and a seller enter into a listing contract and fulfill agreed-upon terms specified
within that contract. The sellers real estate is then listed for sale, frequently with
property data entered into an MLS in addition to any other 32 ways of advertising or
promoting the sale of the property.
Net listings: Property listings at an agreed-upon net price that the seller wishes to
receive with any excess going to the broker as commission are not legal in most, if not
all, states.Brokerage commissions In consideration of the brokerage successfully
finding a satisfactory buyer for the property, a broker anticipates receiving a
commission for the services the brokerage has provided. Usually, the payment of a
commission to the brokerage is contingent upon finding a satisfactory buyer for the real
estate for sale, the successful negotiation of a purchase contract between a satisfactory
buyer and seller, or the settlement of the transaction and the exchange of money
between buyer and seller. The median real estate commission charged to the seller by
the listing (sellers) agent is 6% of the purchase price. Typically, this commission is split
evenly between the sellers and buyers agents, with the buyers agent generally receiving
a commission of 3% of the purchase price of the home sold. Local real estate sales
activity usually dictates the amount of commission agreed to. Real estate commission is
typically paid by the seller at the closing of the transaction as detailed in the listing
agreement.RESPA Real estate brokers who work with lenders may not receive any
compensation from the lender for referring a residential client to a specific lender. To
do so would be a violation of a United States federal law 33 known as the Real Estate
Settlement Procedures Act (RESPA). Page Commercial transactions are exempt from
RESPA. All lender compensation to a broker must be disclosed to all parties. A
commission may also be paid during negotiation of contract base on seller and
agent.Lockbox With the sellers permission, a lockbox is placed on homes that are
occupied and, after arranging an appointment with the home owner, agents can show
the home. When a property is vacant or where a seller may be living elsewhere, a
lockbox will generally be placed on the front door. The listing broker helps arrange
showings of the property by various real estate agents from all companies associated
with the MLS. The lockbox contains the key to the door of the property and the box can
only be opened by licensed real estate agents (often only with authorization from the
listing brokerage), by using some sort of secret combination or code provided by the
brokerage or the issuer of the lockbox.Shared commissions with co-op brokers If any
buyers broker (or any of his/her agents) brings the buyer for the property, the buyers
broker would typically be compensated with a co-op commission coming from the total
offered to the listing broker, often about half of the full commission from the seller. If
an agent or salesperson working for the buyers broker brings the buyer for the property,
then the buyers broker would commonly compensate his agent with a fraction of the co-
op commission, again as determined in a separate agreement. A discount brokerage may
offer a reduced commission in the event no other brokerage firm is involved and no co-
op commission is paid out.
If there is no co-commission to pay to another brokerage, the listing brokerage receives
the full amount of the commission minus any other types of expenses.Potential points
of contention for agents Controversy exists around how commissions paid to real estate
agents are disclosed to buyers and the effect additional seller incentives may have on
the negotiation process and final purchase price. If a listing agent sells a property above
the listed price, they make additional income. In theory, this motivates them to get top
dollar for the seller. However, if an agent representing a buyer obtains a lower sales
price for their client, then they make a lower commission. Thus, it could be considered
to be in the agents best interest to advise his client to purchase the property at a higher
price. Another potential conflict of interest exists when a listing agent in a very active
real estate market sells properties quickly at low prices to benefit from high sales
volume.Buyers as clients. Some brokerages represent buyers only and are known as
exclusive buyer agents (EBAs). Consumer Reports states, "You can find a true buyers
agent only at a firm that does not accept listings." The advantages of using an Exclusive
Buyer Agent is that they avoid conflicts of interest by working in the best interests of
the buyer and not the seller, avoid homes and neighborhoods likely to fare poorly in the
marketplace, ensure the 35 buyer does not unknowingly overpay for a property, fully
informs the Page buyer of adverse conditions, encourages the buyer to make offers
based on
true value instead of list price, which can sometimes be overstated, and works to save
the buyer money. A buyer agency firm commissioned a study that found EBA
purchased homes were seventeen times less likely to go into foreclosure.A real estate
brokerage attempts to do the following for thebuyers of real estate only when they
represent the buyers withsome form of written buyer-brokerage agreement: Find real
estate in accordance with the buyers needs, specifications, and cost. Takes buyers to and
shows them properties available for sale. When deemed appropriate, prescreens buyers
to ensure they are financially qualified to buy the properties shown (or uses a mortgage
professional, such a banks mortgage specialist or alternatively a Mortgage broker, to do
that task). Negotiates price and terms on behalf of the buyers and prepares standard real
estate purchase contract by filling in the blanks in the contract form. The buyers agent
acts as a fiduciary for the buyer. Due to the importance of the role of representing
buyers interests, many brokers who seek to play the role of client advocate are now
seeking out the services of Certified Mortgage Planners, industry experts that work in
concert with Certified Financial Planners to align consumers home finance positions
with their larger financial portfolio(s).Buyers as customers In most states, until the
1990s, buyers who worked with an agent of a real estate broker in finding a house were
customers of the brokerage, since the 36 broker represented only sellers.
Today, state laws differ. Buyers and/or sellers may be represented. Typically, a written
"Buyer Brokerage" agreement is required for the buyer to have representation
(regardless of which party is paying the commission), although by his/her actions, an
agent can create representation. Find real estate in accordance with the buyers needs,
specifications, and affordability. Take buyers to and shows them properties available for
sale. When deemed appropriate, prescreen buyers to ensure they are financially
qualified to buy the properties shown (or uses a mortgage professional to do that task).
Assist the buyer in making an offer for the property.The impact of globalization on real
estate brokers activities Globalization has had an immediate and powerful impact on
real estate markets, making them an international working place. The rapid growth of
the Internet has made the international market accessible to millions of 37 consumers. A
look at recent changes in homeownership rates illustrates this. Minority homeownership
jumped by 4.4 million during the 1990s, reaching 12.5 million in 2000, according to the
Fannie Mae Foundation.Foreign direct investment in U.S. real estate has increased
sharply from$38 billion in 1997 more than $50 billion in 2002 according to U.S.
2000Census data.Most local real estate agents view the foreign market as a
significantrevenue potential and may have already worked with international clientsin
their local market, new immigrants or more sophisticated investors fromdifferent
cultures and from other countries. For example, they providevalue-added services that
help overseas relocation employees figure outwhich inoculations their children need
and how to register a car in theUnited States. Real estate brokers want to keep central to
the transaction,protect the best interests of their members and address the unique needs
ofeach multicultural global client by acquiring specialized training anddesignations.In
2007 the Mexican Association of Real Estate Professionals in Mexico,AMPI, and the
NAR, National Association of Realtors in the UnitedStates, signed a bilateral contract
for international real estate businesscooperation. Also at the local level, many other
state and localassociations are helping other countries achieve the same result.
Forinstance, in New Mexico, a historically multicultural state, under theRANM,
Realtor Association of New Mexico and the Presidents AdvisoryCouncil, is looking
into forming an ambassador association to help aforeign country into signing a bilateral
agreement with the NAR. In NewMexico, there are 4500 licensed real estate
professionals and only 14 or 15CIPS designees, out of whom, only six speak a language
other thanEnglish.A "Management Guide For Real Estate Associations" exists, which is
apublication of the International Real Property Foundation (IRPF), which 38was funded
by the National Association of Realtors (NAR) and the PageReaume Foundation.The
IRPF, in its Web site, regarding The Caux Round Table (CRT) principles, states that:
"Ethical perceptions and internationalbusiness is highly influenced by cultural
differences. Because of culturaland ethical relativism, real estate business that is
conducted acrossnational boundaries may discover ethical conflicts. Major ethical
issuesthat complicate international business activities include sexual and
racialdiscrimination, price discrimination, bribery, harmful products,
andtelecommunications (enforcement of country-specific laws, copyrights,and
questionable financial activities). A good document for reference indeveloping an
association Code of Ethics in conjunction with suchprinciples is "The Caux Round
Table Business Principles of Ethics"(1995).Because of the particularities and the nature
of international transactionsbetween real estate agents of different countries, the Real
Estate Code ofEthics of each country are excellent to regulate the ethics of each
memberin its own jurisdiction, but in the case of complex international real
estatetransactions were sometimes ethical conflicts arise, there is a need to havea group
of principles more adjusted to international transactions were twoor more real estate
agents of different countries participate in real estatebrokerage businesses. For example,
in the NAR-FECEPAC memorandumof understanding of February 2003, a commitment
was set to promote andadopt the respective code of ethics,standards and norms, but
there isnothing specific mentioned for complex ethical matters in
internationaltransactions. There was surely a commitment to cooperate with a
foreignagent to work in local markets different from the foreign agents market.As an
example, it can be noticed that the NAR-CSBR BilateralCooperation Agreement of
November 12, 2001 also created a commitmentto promote and enforce mutually
acceptable codes of ethics (Code ofEthics meaning those that been promulgated by the
cooperating 39associations for use in their respective countries, each of which is
Pageacknowledged to be acceptable to the other). Again, as the IRPF says "Ethical
perceptions and international business is highly influenced bycultural differences.
Because of cultural and ethical relativism, real estatebusiness that is conducted across
national boundaries may discover ethicalconflicts". There is also nothing specific
mentioned for complex ethicalmatters in international transactions, whilst the
agreements do provide toseek to facilitate business opportunities for members of the
cooperatingassociations who may be working in each others markets, and alsoinitiating
and hosting trade missions. The bilateral agreement betweenNAR and CSBR also states
that both parties agree to enforce theirrespective codes and advice the other of
subsequent modifications to itscode of ethics.Some association members of Central
American Real Estate Associationswho are practicing agents and are involved in real
life transactions on adaily basis have expressed their concern in the sense that at the
moment ofethical conflicts with foreign colleagues, they have not had at hand
anypractical instrument that can serve to resolve ethical conflicts (even
thoughagreements that make reference to code of ethics do exist).Because the Caux
Round Table principles are designed by corporateleaders and provide a model of how a
good corporate citizen behaves inthe countries and markets where it penetrates being a
foreign entity, thisprinciples could serve to reduce the fear of local brokers to
foreigncompetition, provide an ethical framework against asymmetry ofparticipants in
free trade of services in our industry, and will permit thatCentral American association
members that see an advantage in openingtheir country markets to competition, and that
see advantages in havingforeign strategic partners to work our their own local markets
(e.g.: localCentral American brokers partnering with United States brokers to
workCentral American Markets), keep promoting competition, globalization of
40business, and free trade of services. A person may attend a pre-license course lasting
60 hours and then betested by the state for a real estate agents license. Upon passing,
the newlicensee must place their license with an established real estate firm,managed
by a broker. Requirements vary by state but after some period oftime working as an
agent, one may return to the classroom and test tobecome a broker. Brokers may
manage or own firms. Each branch officeof a larger real estate firm must be managed
by a broker.States issue licenses for a multiyear period and require real estate agentsand
brokers to complete continuing education prior to renewing theirlicenses. Many states
recognize licenses from other states and issuelicenses upon request to existing agents
and firms upon request withoutadditional education or testing however the license must
be granted beforereal estate service is provided in the state. A Day in the life of a Real
Estate Agent/BrokerBuying or selling a house or apartment is one of the biggest
decisions of aperson’s life, and real estate agents and brokers help people negotiate
what can bea confusing process. Though both are often called real estate agents, agents
andbrokers have different roles. The broker has more administrative
responsibility.There is usually one broker per estate, but often many agents are working
withclients who are interested in the property. When someone wants to sell or rent
hisproperty he usually calls a real estate agent. A large chunk of the agent’s day maybe
spent on the phone obtaining listings for her agency. The agent also arranges toadvertise
the properties she is showing, and may visit each property before it isshown to clients.
She needs to know about everything from floor plans to heatingsystems to cesspools-
she’s a matchmaker, and she’s got to know both sides of theequation. It’s also important
for an agent to be familiar with the neighborhoodsshe works in, so she can counsel her
clients about a property’s fair market value.A good real estate agent is informed about
things like schools, tax rates, andpublic transportation systems, and should be aware of
going mortgage rates. Areal estate agent must manage delicate price negotiations when
an interestedbuyer and seller hook up. ―Negotiating skills are not just important but
critical forreal estate agents,‖ as one respondent put it. The agent also coordinates
the―closing‖ when a property is sold, which means the actual signing of papers
andtransfer of a property’s title. Networking is a big part of the job-most real
estateagents develop a group of attorneys, mortgage lenders, and contractors to
whomthey refer their clients. Finally, a real estate agent should be able to discern and
besensitive to a client’s needs during what may be an uncertain time. In order to
beavailable when their clients have free time, real estate agents work many eveningsand
weekends. An experienced agent will sometimes avoid some of the weekendhours by
having an ―open house‖ and drafting a new agent to go and answerpotential buyers’
questions. Commercial real estate agents’ jobs involve more 42research on market
trends and an even more detailed attention to the needs of buyers. Since they work
longer on each deal, commercial agents and brokersmake fewer sales than residential
agents but receive higher commissions.About the only things real estate agents have in
common in terms of preparationare high school diplomas and communication skills.
More and more people areentering the field with college degrees, however, and some
colleges even offercourses in real estate. These may be helpful, as would other business
courses, butmost of the learning takes place after you’ve entered the field. In fact many
realestate agents come to the field from other, unrelated careers, attracted by theflexible
hours or the potential for part-time work. Before you can use the title―Realtor‖ or
become a member of the National Association of Realtors you musthave a real estate
license. Every state requires that a broker or agent undergo aseries of examinations and
log some experience before she is granted this license.Many real estate boards offer
preparatory classes. Once you have the license, it’susually renewed yearly without your
having to repeat the tests. But each state hasits own test, so if you want to work in a
different state you’ve got to pass theirexam.Associated CareersCareers associated with
real estate often involve working with realtors. On themortgage end, loan officers
arrange the conditions for financing home purchasesand act as liaisons between buyers
and banks. Another possibility is the field ofreal estate law, which requires going to law
school. Agents seeking furtheropportunities within the field have a few options, most of
which involve settingup shop independently of brokers. Appraisers, for example, assess
the fair marketvalues of properties. Real estate counselors, likewise, are independent
advisorswho offer advice to buyers about the suitability of properties they are
interestedin. 43 PageWhat Real Estate Brokers and Sales Agents Do Real estate brokers
and sales agents help clients buy, sell, and rent properties.Brokers and agents do the
same type of work, but brokers are licensed to managetheir own real estate businesses.
Sales agents must work with a broker.Work EnvironmentA majority—about 57 percent
—of real estate brokers and sales agents were self-employed in 2010. Although they
often work long and irregular hours, many areable to set their own schedules.How to
Become a Real Estate Broker or Sales AgentIn every state and the District, real estate
brokers and sales agents must belicensed. To become licensed, candidates must be high
school graduates, be atleast 18 years old, and complete a particular number of hours of
real estatecourses.Functions of PSDThough there are different types of
consultants/intermediaries for propertyservices, there is no integrated approach to the
various ancillary services that acustomer needs. There is thus a need for an integrated
player and to bridge thatgap, LIC Housing Finance Ltd have opened its Property
Services Division, whichshall be a "one-stop-shop" to provide RELIABLE advice,
services and assistanceto prospective property buyers in an INTEGRATED,
CUSTOMISED and TIME-BOUND manner. LICHFL Property Services will provide
its services for the 44following :- Assisting the customer in selecting the property
(Marketing & Sales of properties;either residential or commercial).Organising site
visits and Booking of Properties.Assisting the customer in completing the
documentation and legal formalities likedrawing up the agreements, registration
etc.Assisting the customer in obtaining a home loan from a financial institutiondealing
with Home Loans.Assisting the customer in possession/registration/housewarming of
the property.Assisting the customers in selection of professionals/sourcing of materials
forinteriors.Organizing site visits and meeting with the developers/builder to complete
thetransaction.Assisting the customer in obtaining a home loan from LICHFL or from a
lenderof their choice.Assisting the customers in selecting the property which suits their
requirementsand budget.Assisting the customer in completing documentation & legal
formalities likeagreements, registration, etc.Monitoring the stage of construction and
advising the customer for makinginstallment payments.Assist in placing the property on
rent, if the customer so desires.Assist in selling the property if desirous.Assisting the
customer in selection of professionals/ sourcing of materials forinteriors.Assisting the
customer in possession / housewarming.Tips for Customers 45 PageThere are two
aspects of Home Buying: Property Search and Home Loan Property searchSome of the
primary concerns of Home Buyers are matters pertaining to thepropertys title, its
pricing, the developer’s track record, and so on.2. Home Loan After spending time and
effort to research and find your dream home, selection of a Home Loan company and
the loan product should not be a hasty decision. The main issues besides the rate of
interest offered, would be the company’s loan procedure, product range, quality of
services offered and safe retrieval of the Title Deed of the property deposited as a
security for the housing loan, on completion of the loan tenure. You should also be
aware of how you can enhance your loan eligibility without the burden of a higher
EMI. LICHFL offers flexibility to customers, enhances their loan eligibility, helps them
optimize tax benefits and customize EMIs according to their repayment capacity, so the
customer is able to repay the loan comfortably. Further, when you take a home loan you
enter into a long-term financial commitment, as home loans are long-term loans where
the commitment is for a period of 15 to 20 years. In case of any unforeseen event
during this period, it is better to make sure that your family is not burdened with the
loan liability. Hence, to take care of uncertainties during such a long period, it is better
to take a Home Loan Insurance. And finally, it is best to go with companies that have
established 46 themselves over the years, as they are more flexible and will be able to
Page offer you customized services. The other advantage is this will also help you to
encash on the vast pool of knowledge that comes with their experience.The LICHFL
AdvantageOrganized, Integrated and Professional Approach.Strong Brand -
Synonymous with Transparency, Trust and Credibility.Experience in the field of real
estate and financing.Vast Network of Agency Force and Branch Network.Large pool of
experienced staff.Additional in-house facility & expertise to provide home finance to
customers.Reliable advice as per requirements and budget of customer at the best terms
andprice.Highly experienced team of Over 773 Direct Sales Agent (DSA’s),3400
HomeLoan Agents (HLA’s) and 615 Customer Relationship Associates.Existing
network & relationship with service providers.In-house facility to provide home
finance.Expertise in Legal and Technical Scrutiny of PropertyRelationship with leading
Developers across the country.Thorough understanding of processes.Punchline - "Are
you sure that you will get the desired loan, after you have 47booked the property? Now,
book your property through LIC HFL Property Services and have peace of mind." All
services - from booking of property till possession; under one roof. Fair and transparent
deal. Reasons for Choosing LICHFL PSD Home Search Facility: • Employ a
comprehensive database of builders, development projects and available real estate to
identify properties that will meet your individual requirements. • Regularly update our
database to ensure that you are constantly filled in real estate opportunities. • In depth
cognizance of various builders & real estate projects empowers us to fine tune your
search. We work within the budget and area specified by you. • Offer unbiased advice. •
Offer special schemes and attractive rates, help you negotiate the best price and advise
you on payment schedules. • Assist to get the best deals on Home Loans. The working
of Property Service Division depends on the following three steps:1. Tie up with the
builders.2. Customer make-up3. Documentation A 7-step Process of Identifying a
Property for Purchase or Rent 48 • Step 1: Register with them, free of cost Step 2:
Describe your requirement, budget and preferred locality• Step 3: They will match your
requirements with properties in our database.• Step 4: Their counselor would then fix
an appointment with you and take you to the property sites short-listed by you.• Step 5:
After visiting the sites if one finalise a property, they would assist to negotiate the best
terms and price• Step 6: They will also assis in completing the registration formalities
for acquiring your property• Step 7: And also assist to get the best deals on home loans.
The company would not enter into property development and construction of buildings
but would take care of all the requirements of the customers including valuation,
arranging loan, and registration. LICHFL-A one-Stop –Shop for services Assistance in
analyzing the requirements. Selection of property at reasonable/ affordable price.( for
Individual/ Group) Completing the Transaction. Guiding for Best Home Loan and
assistance in providing loan. Help in arranging Legal and Technical Services. Help in
Selection of Professionals/ material/ interior. Help in taking Possession. Help in letting
out the property.
Services Offered:Select the property of your choice.Obtain a home loan from the lender
of your choice.Assistance in completing the documentation and legal
formalities.Monitoring the stage of construction and advising the customer in
makinginstallment payments.Assistance in selection of professionals/sourcing of
materials for interiors.Possession/housewarming of the property.Letting out the
property on rent.

Research MethodologyStatement of The ProblemThis Study will help us to

understand the consumer’s satisfaction about LIC HFLservices and products. This
study will help the company to understand, how aconsumer selects, organizes and
interprets the Quality of service and productoffered by them.
The market is more aware and realistic about investment and returns fromfinancial
products. In this background this study tries to analyze the customersatisfaction towards
services in general and LICHFL in particular.Need for The StudyThe deeper the
company understands of consumer’s needs and satisfaction, theearlier the product or
service is introduced ahead of competition, the greater theexpected contribution margin.
Hence the study is very important.This study will help companies to customize the
service and product, according tothe consumer’s need.This study will also help the
companies to understand the experience andexpectations of the existing
customers.Scope of the StudyThis study is limited to the consumers with in Lucknow
city. The study will beable to reveal the preferences, needs, satisfaction of the
customers regarding thereal estate, It also help them to know whether the existing
products or servicesthey are offering are really satisfying the customer’s
needs.Objective Of The Study To have an insight into the attitudes and behaviors of
customers. To find out the differences among perceived service and expected service.
52 To produce an executive service report to upgrade service characteristics. Page To
understand consumer’s preferences. To access the degree of satisfaction of the
consumersResearch Methodology A descriptive study tries to discover answers to the
questions who, what, when, where, and, sometimes, how. The researcher attempts to
describe or define a subject, often by creating a profile of a group of problems, people,
or events. Such studies may involve the collection of data and the creation of a
distribution of the number of times the researcher observes a single event or
characteristic (the research variable), or they may involve relating the interaction of two
or more variables. Organizations that maintain databases of their employees, customers,
and suppliers already have significant data to conduct descriptive studies using internal
information. Yet many firms that have such data files do not mine them regularly for the
decision-making insight they might provide. This descriptive study is popular in
business research because of its versatility across disciplines. In for-profit, not-for-
profit and government organizations, descriptive investigations have a broad appeal to
the administrator and policy analyst for planning, monitoring, and evaluating. In this
context, how questions address issues such as quantity, cost, efficiency, effectiveness,
and adequacy. Descriptive studies may or may not have the potential for drawing
powerful inferences. A descriptive study, however, does not explain why an event has
occurred or why the variables interact the way they do. Sample size denotes the number
of elements selected for the study. For thepresent study, 100 respondents were selected
at random. Out of these 100 some ofthem were LIC’s Leading agents, development
Officers, teachers, staff of LIC etc.Sampling MethodA sample is a representative part of
the population. In sampling technique,information is collected only from a
representative part of the universe and theconclusions are drawn on that basis for the
entire universe.A convenience sampling technique was used to collect data from the
respondents.Method OF Data Collection To know the response, the researcher used
questionnaire method. It has been designed as a primary research instrument.
Questionnaires were distributed to respondents and they were asked to answer the
questions given in the questionnaire. The questionnaires were used as an
instrumentation technique, because it is an important method of data collection. The
success of the questionnaire method in collecting the information depends largely on
proper drafting. So in the present study questions were arranged and interconnected
logically. The structured questionnaire will reduce both interviewers and interpreters
bias. Further, coding and analysis was done for each question’s response to reach into
findings, suggestions and finally to the conclusion about the topic.
Every decision poses unique needs for information, and relevant strategies can be
developed based on the information gathered through research. Research is the
systematic objective and exhaustive search for and study of facts relevant to the
problem Research design means the framework of study that leads to the collection and
analysis of data. It is a conceptual structure with in which research is conducted. It
facilitates smooth sailing of various research operations to make the research as
effective as possible. Primary Data Primary data are those collected by the investigator
himself for the first time and thus they are original in character, they are collected for a
particular purpose. A well-structured questionnaire was personally administrated to the
selected sample to collect the primary data. Limitations of the Study Although the study
was carried out with extreme enthusiasm and careful planning there are several
limitations, which handicapped the research viz,1. Time Constraints: The time
stipulated for the project to be completed is less and thus there are chances that some
information might have been left out, however due care is taken to include all the
relevant information needed.2. Sample size: Due to time constraints the sample size
was relatively small and would definitely have been more representative if I had
collected information from more respondents. Accuracy: It is difficult to know if all the
respondents gave accurate information; some respondents tend to give misleading
information.4. It was difficult to find respondents as they were busy in their schedule,
and collection of data was very difficult. Therefore, the study had to be carried out
based on the availability of respondents.The working of Property Service Division
depends on the followingthree steps:1. Tie up with the builders.2. Customer make-up3.
DocumentationTie up with the builders:PSD of LICHFL have tie ups with many known
and unknown builders. They have avery good relationship with Ansal –Api shushant
City, DLF, Parsvanath, VirajConstructions, Omaxe, Eldeco.Before tying up with the
builder or a customer a memorandum of understanding issigned between both the

Report on the construction companiesCompany Name: ANSAL APIProject: Sushant

Golf CityAddress: Sahid Path, Sultanpur Road, Lucknow.Details: Providing Villas,
2BHK, 3BHK, 1BHK flatsPresent Condition: Construction on phase one is still going
on.Availability: Almost all the sites are sold out, presently the construction is goingon
Sushant Media Enclave but there are availabilities.Rate: Ranging between Rs 2400 per
square feet to Rs 2700 per square feetdepending upon the floors.Total Cost: About 42
lacs for a 3 BHK, 35 lacs for a 2 BHK, 30 lacs for 1BHK For villas it starts from 52
lacs o 1 crorePossessions: For Media Enclave, its about 4 yrs to 5 yrs and 3 yrs for
celebritiescities and others.Analysis: Ansal city on Sahid Path is going to start soon. As
per now there is notany kind of work or development in their nearby surroundings but
there are fullchances of possible development in recent years. There Media Enclave in
57Sultanpur Road presently no construction work is going on but going to start
Pagesoon. There is a great chance of development in that surrounding as U.P.
Government has proposed an I.T. Park in Gajaria Farm which is adjacent to
thesites.Possible Demerits: Any of the phases is fully completed, only construction
workis going on in phase one and two. Railway line is going through the city. Thewhole
site is situated in high flood prone area due to the presence of Indira Canaland Gomti
River.Financial Tie-ups: Their main financial tie-up is with LICHFL and they are
ingreat favor of LIC. They are providing 80% to 85% finance and they are giving1%
discount on the total cost to the customers.
Company Name: ELDECOProject: EterniaAddress: Sitapur, Lucknow-Details: 2BHK,
3BHK, 4BHK flatsPresent Condition: Construction on all the three towers is going and
up to 6thfloor it is completed.Availability: Tower no 2 is sold out, some flats are
available in tower 1 and 3Rate: Ranging between Rs 3500 per square feet to Rs 3700
per square feetdepending upon the floors.Total Cost: About 44 lacs for a 3 BHK, 35
lacs for a 2 BHK, 52 lacs for 4BHKPossessions: They will give the possessions in 2 yrs
to 3 yrs.Analysis: Eldeco Eternia on sitapur road is going to start soon.
Nearbysurroundings are fully developed as eternia is in city only. One of the advantage
isvery near to engineering college and L.U.Financial Tie-ups: Their main financial tie-
up is with Banks Mainly SBI andother govt. banks. They are not favoring LIC HFL or
any other housing financialcompany as in case if we take loan from housing finance
then they will notprovide 4% discount to the customers ( they provide 4% discount if
we take loanfrom banks). They are providing 80% and they were ready to give 4% +
approx 596% discount on the total cost to the customers.
Company Name: ELDECOProject: Eldeco CityAddress: IIM Road, Lucknow-Details:
Duplex and simplex villas + 2bhk and 3bhk flats.About: Eldeco city is spread over 113
Acres with a large portion dedicated togreenery more than 1000 independent villas and
1500 apartments.Present Condition: Construction on phase 1 is going on almost
50%completed, work on apartments is yet to start. Construction on phase 2 will bestart
in 1 year. Now they are booking for phase 1 onlyAvailability: All duplex are sold out, 5
simplex villas are available. Out of 165apartments 65 are sold out.Rate: Ranging
between Rs 1700 per square feet to Rs 2200 per square feet forvillas and Rs 3100 per
square feet for apartments depending upon the floors.Total Cost: About 63 lacs to Rs 1
Crore for a duplex villas (vary as per thelocation and size), approx 47 lacs to 67 lacs for
a simpex villas (vary as perlocation and size), 35 lacs for 2BHK and about 43 lakh for
3bhk (vary as perfloors)Possessions: They will start their possessions from august
2012. And forCurrent booking (villas) they will give the possession in 1 year. For
Apartments 60they will give the possessions in 2 to 3 years.
Eldeco City is on IIM road is going to start soon. As per now there isnot any kind of
work or development in their nearby surroundings but there arefull chances of possible
development in upcoming years. City is located nearbyIIM lucknow.Possible Demerits:
There major drawback is that site is located very far fromcity.Financial Tie-ups: Their
main financial tie-up is with Banks Mainly SBI andother govt banks. They are not
favoring LIC HFL or any other housing financialcompany as in case if we take loan
from housing finance then they will notprovide 4% discount to the customers ( they
provide 4% discount if we take loanfrom banks). They are providing 80% and they
were ready to give 4% + approx6% discount on the total cost to the customers.
Company Name: OMAXE Ltd.Project: Omaxe Residency LucknowAddress: Gomti
Nagar Extension , Shaheed PathDetails: Providing 2BHK,2BHK+ Servant room and
3BHK,Present Condition: Construction is still going on and may be complete in theone
year.Availability: Many flats are sold out only few are remaining .flats are alsoavailable
in resaleRate: Rs 2400 per square feet .Total Cost: About 26 lacs for 2 BHK, 28 lacs for
a 2 BHK + Servant room, 33lacs for 3BHK ( These are cost if we are purchasing on
Cash down Payment) . Incase of Installment Plan Cost will be 6% more.Possessions:
Possession time 18 months to 36 months.Analysis: Omaxe residency is on Sahid Path,
gomti nagar extension is going tostart soon. As per now there is not any kind of work or
development in theirnearby surroundings but there are full chances of possible
development in recent 62years. Presently a small village is adjacent to the site.
Possible Demerits The whole site is situated in high flood prone area due to thepresence
of Indira Canal and Gomti River.Financial Tie-ups: Their main financial tie-up is with
all the Banks and housingfinance companies. They are providing 80%. They are giving
2% discount on thetotal cost to the customers. Discount may be more in further
stage.Company Name: RG Infracity (p) ltd.Project: RG EUPHORIA
LICKNOW.Address: Vrindavan Youjna , Shaheed PathDetails: Providing 2BHK,
3BHK and 4BHK,Present Condition: No construction work is going on. Only land is
there.Availability: Few are sold out . Many flats are remaining.Rate: Rs 2500 per sqft
.Total Cost: About 24 lacs to 27 lakh for 2 BHK, 32 lacs to 35 lacs for a 3 BHK,44 lacs
to 47 lacs for 4BHK ( These are cost if we are purchasing on Cash downPayment) . In
case of Installment Plan Cost will be 10% more.Possessions: Possession time 36
months.Analysis: Euphoria is on Sahid Path, Vrindavan youjna of awas vikash.
Noconstruction work is started till now. As per now there development in theirnearby
surroundings and there are more chances of possible development inrecent years
because of nearness of airport and Kanpur road.
Financial Tie-ups: Their main financial tie-up is with all the Banks and housingfinance
companies. They are providing 80%. They are not providing any type
ofdiscount.Company Name: DLF India Ltd.Project: Garden city, LucknowAddress:
Raibarelly road , purseni , Lucknow.Details: Providing plots, Apartment work will start
in one year.Present Condition: Construction is going on in building infrastructure
likeroads etc.Availability: plots are sold out in phase A and B only few plots are
remaining inphase C and D .Rate: Rs 1500 per square feet .Total Cost: Its Started From
44 lakh to 1.5 crore.Possessions: Possession 24 months.Analysis: Garden City is on
Raibareely road, Purseni lucknow is going to startsoon. As per now there is not any
kind of work or development in their nearby 64surroundings but there are full chances
of possible development in recent years as Pagethat road is going to convert in 4 lane.
Sgpgi is 5 k.m away from the site.
Their main financial tie-up is with Hdfc , ICCIC and theother private and govt. banks.
They are not in favor of LIC HFl.Company Name: RohtasProject: Rohtas
PlumeriaAddress : Shaheed path , vibhuti khand, gomti nagarDetails: 2BHK, 3BHK,
4BHK flatsPresent Condition: Construction is going on all the 18 blocks.Availability:
Many flats are sold out .only few flats are available on 4 towers.Rate: Rs 3650 per
square feet it changes from time to timeTotal Cost: About 46.5 lacs for a 2 BHK and
they had flat till 85 lakh for 4 bhk.Possessions: Possessions will be start from December
2014.Analysis: Shalimar dwelling going to start soon. The Site is on very
gooddeveloped area. Construction work is also going in a very fast pace. They are
68Providing good facilities also.
Their main financial tie-up is with all the banks. At presentthey are not in any contact
with licCompany Name: Lakshya Realinfra Pvt. LtdProject: Lakshya HeightsAddress :
Shaheed path , Sushant golf cityDetails: 2BHK, 3BHK, And in both there is option of
servant room.Present Condition: Construction is going on.Availability: Availability is
50-50.Rate: Rs 2450 per square feet it changes from time to timeTotal Cost: About 25
lacs to 35 lacs .Possessions: Possessions will be start within 36 months.Analysis:. :
Lakshya Heights on Sahid Path is going to start soon. There site is inAnsal city. As per
now there is not any kind of work or development in their 69nearby surroundings but
there are full chances of possible development in recent Pageyears. The site is also open
from sultanpur road. As per our analysis there was no coordination between their staff
as they don’t know about many major things of their project. Financial Tie-ups: Their
main financial tie-up is with all the banks. They are ready to give 80% finance. They
are also giving 2% discount to us. Customer Making: For attracting more customers
LICHFL (PSD) conducts surveys and organizes adatabase of their customers. So that
they can update their customers about the newupcoming projects.



The house loans are categorized into mainly three stages. The main three
Categories of house loan are:
1.) Loan for Indian Resident
2.) Loan for Non Indian Resident (NRI)
3.) Loan for Pensioners

House Loan for Indian Resident

1.) In case of Salaried person

 The loan shall be held in account and lien
marked in employee favor.
 The copies of the last three month pay slip of the employee.
 Copy of latest submitted Form16 and Income Tax Return (ITR).
2.) In case of Business/ Professional
 The loan shall be held in account and lien marked in employee favor.
 Company the copies of the last three month pay slip of the employee.
 Copy of latest Income Tax Return (ITR), Income Computation Statement.
 Copy of full set of financials for last three Assessment years.
 A note on a business/professional activity.


Loan for Purchase of Vacant Plots/Sites

Loan Amount Min. ` 25,000 - Max. `1, 00, 00,000.

Loan to Property Cost 85% of total Cost of the property including Stamp Duty and Registration

Loan Term Up to 20 Years or Retirement Age or 70 years of Age, whichever is earliest.
Repayment Mode Equated Monthly Installments(EMI) - Monthly Rest Basis

Security 1. Equitable Mortgage of House/Flat

2. One Guarantor.
Risk Cover Any existing or new policy under any acceptable plan of insurance (issued

by LIC of India) on the lives of the applicants, having risk cover to the

extent of loan amount.

Front End Charges 1.00% of Loan Sanctioned.


Loan for Construction

Loan Amount Min. ` 25,000 - Max. ` 1, 00, 00,000.
Loan to Property Cost 85% of total Cost of the property including Stamp Duty and

Registration Charges.
Loan Term Up to 20 Years or Retirement Age or 70 years of Age, whichever is

Repayment Mode Equated Monthly Installments(EMI) - Monthly Rest Basis
Security 1. Equitable Mortgage of House/Flat

2. One Guarantor.
Risk Cover Any existing or new policy under any acceptable plan of insurance

(issued by LIC of India) on the lives of the applicants, having risk

cover to the extent of loan amount.

Front End Charge 1.00% of Loan Sanctioned.


Loan for Extension

Loan Amount Min. ` 25,000 - Max. ` 1, 00, 00,000.
Loan to Property Cost 85% of total Cost of the property including Stamp Duty and

Registration Charges.
Loan Term Up to 20 Years or Retirement Age or 70 years of Age, whichever is

Repayment Mode Equated Monthly Installments(EMI) - Monthly Rest Basis
Security 1. Equitable Mortgage of House/Flat

2. One Guarantor.
Risk Cover Any existing or new policy under any acceptable plan of insurance

(issued by LIC of India) on the lives of the applicants, having risk

cover to the extent of loan amount.

Front End Charges 1.00% of Loan Sanctioned.


Loan for Repair/Renovation

Loan Amount Up to ` 10, 00,000.

Loan to Property Cost Not exceeding 85% of Cost of Repairs or 25% of Market Value

of Property, whichever is lower.

Loan Term 1 to 15 Years, or Retirement Age, or 70 years of Age, whichever

is earliest.
Repayment Mode Equated Monthly Installments (EMI) - Monthly Rest Basis.
Security 1. Equitable Mortgage of House/Flat

2. One Guarantor.

Risk Cover Life Insurance Cover is not required but advisable in the

interest of the Applicants.

Front End Charges 1.00% of Loan Sanctioned.

House Loan for Non Indian Resident (NRI):-

House loan for Non Indian resident is divided into five main categories. They are:-

Non Resident Indian

a) Purchase
b) Construction
c) Extension

d) Repair/Renovation
e) Plot Purchase

Requirement in case of salaried person

 The loan shall be held in account and lien marked in employee favor.
 Company the copies of the last six month pay slip of the employee.
 Employer’s Certificate.
 Bank Statement reflecting salary credit for at least six month.
 Copies of bank passbook/statements of bank account in India for at least past six
 Verification by Company officers.

Additional Requirements for NRIs

 Copy of Passport along with copy of VISA or permanent residential card or photo card
duly attested.

 Copy of appointment letter.

 Bank Statement reflecting salary credit for at least six month.

 Copies of bank passbook/statements of bank account in India for at least past six

 Verification by Company officers.



1. Staff Quarters
Purpose : Construction/purchase of Staff Quarters.

Applicant : Reputed Listed Public Limited or PSUs.

Repayment :
Equated Monthly

Security : Equitable Mortgage and any other security.

Rate of :
Quoted on Application.

2. Line of Credit "To" Scheme

For the organizations having Housing Finance schemes for their employees, LIC HFL is providing
loans under Line of Credit scheme. The scheme is to make available Line of Credit to the
Borrower Organization to fund its Housing Finance scheme for employees

Mode of : On the basis of periodical statement of housing loansanctioned to its

Advance employees. The Borrower company shall disburse the loan to its employee
within 15 days of availing disbursement from LIC HFL

Security for : 1) Deed of Guarantee by the Beneficiary employee to the extent of the loan
the Loan advanced to him by the employer company
2) Equitable Mortgage of the individual units financed under the LOC in the
form of Deposit of title deeds to be submitted to the borrower company on
behalf of LIC HFL

Repayment :
Loan repayment will be made directly by the Borrowing Company to LIC HFL.
of the Loan

3. Line of Credit "Through" Scheme

For an Organization where direct HBA facility is not available, the Line of Credit - "Through"
scheme will help the organization fulfill the needs of their employees for availing the housing
loan. Under this scheme, LIC HFL will make available funds to their employees, as recommended
by Company to enable employee-beneficiaries ´ (borrowers) to avail loan

Mode of :
Linked to the construction

Security for : 1) Security of the mortgaged property financed

the loan 2) Borrowers will have to execute mortgage of their properties in favor of LIC
3) Employee borrower will have to execute a Loan Agreement which will have
to be countersigned by the employer guaranteeing the repayment
4) Guarantee from the employer for repayment of entire loan with interest and
other dues, if any.

Repayment :
Through salary deduction
of Loan

Builders and Developers

1. Construction Finance Loan

Object : Loans to Builders/Developers for developing and constructing Residential /
Commercial Premises.

Loan term : Minimum-6 Months
Maximum-5 years

Security & : Mortgage of the land over which the building is proposed along with super
Title structure. Personal Guarantee of the Partners / Promoters Corporate
Guarantee (if required)

Disbursement : Installments depending on the progress of work in the project, its funding
of loan requirements and availability of sufficient security cover.

Repayment of :
Through Escrow Account.

2. Term Loan
Object : To Builders/Developers for business purpose.

Loan term : Minimum - 6 Months

Maximum – 3 years

Security & : Mortgage of the Security of adequate Value acceptable to LICHFL as may be
Title deemed necessary. The Receivables from various ongoing Projects to be
assigned in favour of LICHFL. Personal Guarantee of the Promoters of the
Company. Any other security as may be considered necessary by LICHFL

Disbursement : In single tranche or in Installments based on the requirement of the

of loan Applicant Company as agreed mutually.

Repayment of :
Through Escrow Account.


Loan against Property (LAP)-for Individuals

Purpose : Loan against Mortgage of Residential House / Flat.

i) Children´s Education / Marriage
ii) Children´s Education / Marriage
iii) Purchase of another Property.
iv) Business Expansion.

Loan Amount : Min Rs.2,00,000/-

Loan Term : Maximum 15 years

Disbursement :
Equated Monthly Installments (EMI) - Monthly Rest Basis.
Of Loan

Security : 1. Equitable / Registered Mortgage of Residential Property - Age of property

not more than 35 years.

2. Demand Promissory Note.

Upfront Fees : 1.00% of Loan Amount + Service Tax, as applicable.

This scheme is applicable to Resident Indians only.

Loan against Securities such as LIC Policies etc. – for Individuals

1. Loans against Fixed Deposit of Nationalized Banks, Life Insurance

Policies having surrender value and Post office instruments like
National Savings Certificates, KisanVikasPatra

2. Loan up to 95% of face value of liquid security or surrender value in

case of Life Insurance Policies.

3. Minimum Loan Rs.50,000/-.

4. Maximum Term up to 20 Years

5. This loan can be clubbed along with Home Loans

Loans to Professionals for office for their Professional Practice

Loans to Professional
Purpose : Purchase/ Extension/ Modification / Renovation of Commercial Premises for
carrying on own Professional Practice & Purchase of Equipments.

Eligibility : Resident Indian Professionals. Loans can also be Sanctioned to Company or

Partnership firm of such Professional.

Loan Term : 10 Years.

Repayment :
Equated Monthly Installments (EMI) - Monthly Rest..

Security : 1. Equitable/ Registered Mortgage of the Premise for which the Loan is raised.
2. Demand Promissory Note.
3. Personal Guarantee of Directors / Partners, as Applicable.
4. In case of Companies, Registration of Charges in R.O.C.

Addl. :
Hypothecation of Equipment, if financed

Rate Of :
Contact nearest Area Office for details on the Interest rate

Loan against the Property (LAP – Non retail Loan) – For

Listed/Unlisted Companies
1. Under this scheme, the financial assistance is provided for companies-
Listed/Unlisted against the security of Commercial property – Office
premises - already owned/to be purchased with the help of the loan
2. The loan amount may be utilized for repayment of existing loans
(including takeover)/ Purchase of fixed assets etc.
3. Loan is provided for the properties which is completed in all respects.
4. Maximum Term offered :- 10 Yrs

Loan against Rental Securitization

1. Under this scheme, the financial assistance is provided for companies –

Listed/Unlisted against the security of Commercial property – Office
premises – already owned/to be purchased with the help of the loan.

2. The loan amount may be utilized for repayment of existing loans

(including takeover)/ Purchase of fixed assets etc
3. Loan is provided for the properties which is completed in all respects.
4. Maximum Term offered :- 10 Yrs

Interest Rates

RATE OF : The Company has revised the rates of interest on Public Deposits with effect
INTEREST from 3rd November, 2014 as under.


Revised ROI per Revised ROI per annum Revised ROI per annum
annum on Deposits on Deposits From Senior on Deposits From Senior
from General Public Citizens up to RS.50,000/- Citizens RS.51,000/- and
w.e.f. from 3.11.2014 w.e.f. from 3.11.2014 above w.e.f. from 3.11.2014

1 YEAR 8.90% 9.00% 9.15%;

8.90% 9.00% 9.15%

2 YEAR 9.00% 9.10% 9.25%

3 YEAR 9.20% 9.30% 9.45%

5 YEAR 9.40% 9.50% 9.65%

Interest is Payable/Compoundable Half Yearly.


In case any investor intends to make a public deposit for more than Rs. 5 crore, he has to get the
rate of interest and brokerage rate, if applicable, confirmed from the Company in writing before
depositing the cheque.

Splitting of deposit/s is/are not allowed.

In case any investor makes multiple deposits having denomination of less than or equal to five
crore, but aggregate deposit amount(all the deposits placed together by the same investor) in 60
days, irrespective of the location of the deposit, exceeds rupees five crore amount, then it is
considered as bulk deposit of more than five crore and the Company will apply the rate of interest
on deposit and brokerage rate as they are applicable to bulk deposit on the day on which the
aggregate amount of deposits exceeds five crore. If there is a gap of 60 days between two deposits
having denomination of less than five crore, then such deposits will be treated as independent
deposits and they will not be considered together.

Housing finance methods in India Presentation Transcript

Housing finance types
 i. Home Purchase Loans
 ii. Home Construction Loans
 iii. Home Extension Loans
 iv. Home Conversion Loans
 v. Land Purchase Loans.
 vi. Stamp Duty Loans
 vii. Bridge Loans
 viii.Balance Transfer Loans
 ix. Re-finance Loans
 x. Loans to NRIs

Home Purchase Loans: Home Purchase Loans are the basic home loanyou can opt for
purchasing new home. This type ofHome Loan is offered by all kinds of Banks and

Home Construction Loans: Home Construction Loans are especiallymeant for the
construction of a new home. Formality ofavailing this loan has a little different from the
normalHousing Loan. The plot on which the construction is beingerected is purchased
within a period of one year, the costof the plot is then also included as the component
for thevaluation of total cost of the property.

Home Extension Loans: Home Extension Loans is offered formeeting the operating
cost of alteration to an existingbuilding. Extension here means addition of an extra

Home Conversion Loans: Home Conversion Loans areoffered to those who want
finance for the purchaseof another home by converting the already existinghome and on
which loan is already sanctioned.Through this loan, the existing loan is transferred
tothe new home including the extra amount requiredand there is no need for pre-
payment of theprevious loan.

Land Purchase Loans: Land Purchase Loans can beavailed for purchasing land for
both homeconstruction as well as investment purposes.

Stamp Duty Loans: Stamp Duty Loans is offered forthe payment of stamp duty in the
transaction of theproperty.

Bridge Loans: Bridge Loans are offered for selling theexisting home and purchasing of
another. The bridge loanassists in the finance of new home, until a buyer is foundfor the
old home.

Balance-Transfer Loans: Balance Transfer of the loan is thetransfer of the balance of

an existing home loan at ahigher rate of interest (ROI) to either the same companyor

Re-finance Loans: Refinance loans are availed when aloan from an organization at a
particular ROI is droppingleading to a loss. Then the option of swap of the loan canbe
availed. One can avail this from either the same HFI orother at the current rates of

NRI Home Loans: NRI Home Loans are meant for Non-Resident Indians who wish to
build or buy a home .

Housing Market

Short Supply of residential Category Housing shortage (Mn) dwellings, existing since
post independence EWS 21.78• In 2005 estimated demand is 209.5 million, supply is
189.7 LIG 2.89 Million• Demand – Supply gap is narrowing MIG + HIG 0.04As per
11th 5 year plan• - Shortage of 24.71 million Total 24.71 dwellings• - Close to 99 % of
shortage in EWS & LIG segment (Bill Longbrake Anthony T. Cluff Senior Policy
Advisor Financial Services Roundtable February 2008)

Housing Finance

The value of total residential mortgage debt moved up from USD 1.84 billion in 1994
to USD 12.26 billion in 2004, as in 2007 there were 7.1 million subprime loans
,constituting 13.3% of total loans serviced.• Interest rates on housing loans have fallen
from a peak of 17% in 1996 to 7.5% last fiscal making owning a home more
affordable.• Traditionally housing finance was dominated by a handful of private sector
institutions.• Salaried borrowers constitute the bulk of the clientele for the financier in
comparison to the self-employed borrowers• Traditionally housing finance was
dominated by a handful of private sector institutions. These Housing Finance
Companies (HFCs) commanded 70% market share in FY99, which has subsequently
fallen to 50% in FY04.• Banks now control 40% of this market

Government Policy & Objectives

In the Tenth-Five-Year-Plan; a CAGR of 45%. Prior to that, the Government of India

was generally not supportive of housing finance through its policies.• Larger allocation
of public funds, fiscal incentives and tax rebates on principal repayment and Equated
monthly instalments (EMIs) .• A welcome move recently announced by the government
is that 100% Foreign Direct Investment (FDI) in India would be allowed in townships,
housing, built-up infrastructure and construction-development projects.• A lot remains
to be achieved with regard to issues surrounding regularization of land records, urban
land ceiling act, rent control act etc.,


Supply of credit• Housing credit portfolio• Continuity of new lending• Market shares•
Loan amounts + periods of redemptionCredit availability• Collateral requirements•
Income ratios• Number of customers• Third party lendingCredit affordability•
Mortgage rates and fees• Spreads and real interest rates• Liquidity• Interest rate risks


Investment attractiveness• Maturity of investment• Share of institutional investors•

Yields• Spreads and real interest ratesSecurity of funds• Inflation and reinvestment risk•
Solvency• Credit risks• Capital adequacyProfitability for shareholders• Cost efficiency•
Net income and margins• Return on equity assets• Cost-income ratios


Achievable indirect benefits• Housing outcomes and national income• Financial

depthEconomic prerequisites• Macro-economic stability• WillingnessInstitutional
prerequisites• Legislation• Regulation and supervisionSector – specific prerequisites•
Degree of financial development• Quality of residential infrastructure, construction
sector and rent level• Efficient Housing Finance System Home- ownership promotions

Credit Crisis in housing industry

Stagflation =Recession + Inflation• Recession= General slowdown in economic

activity.• Inflation = Prices go up , since worth of money is less.


LIC HOUSING FINANCE LTD. Offers loan under the following loan schemes:
1. Griha Prakash
2. Griha Shobha
3. Griha Vikas
4. Apna Office-1
5. Apna Office-2
6. Rental Securitisation
7. New Griha Laxmi
8. Griha Jestha


a) Purchase of residential plots/house/flat.
b) Construction of residential house/flat.
c) Renovation/extension/repairs to residential house/flat.
d) Takeover of housing loan.

2. ELIGIBILITY: Residential INDIAN individuals.

a) Maximum Loan: `100 Lakhs.
b) Minimum loan: `1 Lakhs.
c) L.T.V.: Purchase: 85%of cost of property.
d)Construction/renovation/extension: 85% of cost of Construction/Renovation/

4. REPAYMENT TERM: Maximum 20 years.

In plot purchase cases, maximum 10 years.
However, in case of purchase from GOVERNMENT bodies/statutory bodies,
maximum 15 years.
a) Residential house/flat/plot.
b) Demand promissory note.
1. MODE OF REPAYMENT : E.M.I. to be paid by way of ECS/P.D.C./salary
Collecting bank.
2. UPFRONT FEES : 1% of loan amount (subject to maximum ` 10,000/-) +
service tax, as
4. INTEREST RATES: As specified from time to time.

1. PURPOSE: a) Purchase of residential plot/house/ flat.
b) Construction of residential house/ flat.
c) Renovation /extension/ repairs to residential house/flat.
2. ELIGIBILITY: Non Residential Indian /person of Indian origin. The
applicant(s) must
be in service.
3. QUANTUM OF LOAN: a) Maximum Loan: ` 100 lakhs.
b) Minimum Loan: ` 5 lakhs (For additional
loan ` 1 lakhs).
c) L.T.V.: Purchase: 85% of cost of property.
Construction /renovation /extension: 85% of cost
of construction
/renovation/ extension.
d) Installment to income ratio (Monthly Loan
servicing charges):
Non professional: 35%
Professional: 45%
4. REPAYMENT TERM: Non professional: Maximum 10 years.
Professional: Maximum 15 years. In Plot Purchase cases,
maximum 10 years,
except in case of purchase from GOVERNMENT BODIES.
(maximum term to
be restricted to Attainment of 55 years).
5. SECURITY: a) Residential house /flat /plot.
b) Demand promissory notes.
6. MODE OF REPAYMENT: E.M.I. to be paid by way of ECS/P.D.C.
7. UPFRONT FEES: 1% of loan amount (subject to
maximum ` 10,000/-) + service tax, as applicable.
9. INTEREST RATES: As specified from time to time.
10. SPECIAL CONDITION: All condition
including payment of margin money as per
RBI guidelines.
11. ADDITIONAL SECURITY : To be taken if required by Sanctioning
(including Insurance Policy).

a) Loan against mortgage of residential house /flat /plot.
b) Children’s education /marriage.
c) Foreign travel.
d) Purchase of another property.
e) Business expansion.
2. ELIGIBILITY: Indian resident individuals.
f) Maximum loan: ` 50 lakhs.
g) Minimum loan: ` 2 lakhs.
h) L.T.V.: 60% of valuation of the property.
i) Installment to income ratio (M.L.S.C.): 50%
(REGIONAL MANAGER may consider up to 60%).
4. REPAYMENT TERM: Maximum 15 years. Restriction
regarding age As per GRIHA PRAKASH SCHEMES.
a) Equitable /registered mortgage of residential
property –age of the property not more than 35 years.
b) Demand promissory note.
6. MODE OF PAYMENT: E.M.I. to be paid by way of –
ECS/PDC/ Collecting bank/salary deduction.
7. UPFRONT FEES: 1% of loan amount (subject to
maximum `10,000/-) + Service tax, as applicable.
9. INTEREST RATE: As applicable to non-core business from time to time.
a) House /flat given for security must preferable be self –
b) If the property is not self-occupied the proposal can be
considered only by an authority not below the rank of
c) Even if the property is partly Let out (say > 25%)
d) All applicants may be co-owners except in case of spouse of
applicant No income of any applicant, who is not a co-owner,
should be added for calculation.
e) Income of spouse of an applicant can be considered for IIR
(MLSC) calculation even though spouse is not co-owner.
f) Joint applicants from father/mother with son(s), daughter(s)
may also be considered without insisting on co-ownership
&their income can also be considered for calculation, but the
sanctioning authority in such cases shall be one step above
the authority as per FPSO.
g) In case property is residential cum commercial only
residential port is should be taken for the purpose of
if required (including Insurance Policy).
12. GRIHA VIKAS (FACELIFT): In case the borrower
(Resident Indian Individual) is an existing customer of
LICHFL with two years default free Seasoning period & he
wishes to take loan for a purpose which is not covered under
GRIHA PRAKASH SCHEMES, against the same property.
a) Maximum loan: 75% of valuation of the property, LESS
O/S/balance of existing loans against the same property.
b) Interest rate: As specified from time to time.
c) Fees to be restricted to 0.5% of loan amount or ` 5000/-
whichever is less + service tax as applicable.
d) Minimum loan amount: ` 1lakhs.
e) If existing LOAN is under joint application, the income
of all existing joint applicant can be considered for IIR
13. GRIHA VIKAS ( TOPUP ) : In case TOP-UP loan to be
considered at the time of takeover of a loan from another
financial institute:
a) Loan in excess of amount of housing loan to be taken
over from another FI /bank should be considered under top-
b) The borrower should have completed default-free
seasoning period of at least two years with the financial
c) The total loan (takeover +top-up) should not exceed 75%
of valuation of the property.
d) Property must preferably be self-occupied by the
e) Minimum loan amount: ` 1 lakhs.
f) Interest rate: floating ROI as specified from time to time.

1. PURPOSE: Loan to individuals against liquid security such as

life insurance policies, post office instrument, or fixed deposits
with nationalized banks for purchase /construction /extension
/repairs &renovation /modification of residential property
/mortgage loan /construction of clinic or office premises. This
loan can be combined with GRIHA PRAKASH or any other
schemes. If the amount eligible as per schemes is combined
with any other schemes then area of operation , rate of interest
&upfront fees shall be as per the schemes to which it is
combined with.
Customer who want higher quantum of loan or are having
defective title to the property can also avail loans under this
2. ELIGIBILITY SECURITIES: Life Insurance Policies /Post
Office Instrument /Fixed deposits with Nationalized bank
a) Must be assignable or lien can be marked against the same.
b) Should not contain any condition which prohibits surrender or
prematurity of the same.
c) Should not be linked to market condition (E.G.Bima Plus,
future plus, jeevan plus etc. Issued by LIC Of INDIA).
a) Minimum loan: ` 1 lakhs.
b) Maximum loan- 95% of surrender value of the policies
assigned or face value of post office instrument/fixed deposits
with nationalized banks which have our lien marked on them.
a) As per convenience of the customer but not more than 20 years.
b) If the applicant desires lesser term, i.e. before maturity of
security, then repayment has to be by way of EMI.
c) If the maturity is beyond maturity date of the security, the
maturity proceeds have to be adjusted against the principal.
5. SECURITY: Assignment /hypothecation of liquid security such
as life Insurance policy, NSC, KVP, FD of nationalized bank
a) Loan agreement.
b) Demand promissory note.
shall be done by way of- PDC
/ECS/Salary deduction.
7. UPFRONT FEES: ` 1000/- + service tax, as applicable irrespective of loan
8. AREA OF OPERATION: All areas offices.
9. INTEREST RATES: Floating ROI as specified from time to time.
10. VERIFICATION: Residence verification of
borrower &verification of Security for the loan to be
done &found satisfactory.
There are some other loan schemes are which are by the Company they are:-
1. Loans against liquid securities
2. Loans against securitization of rental to builders or cooperators.
3. Loan for Builder or constructor for the housing project and for construction or
purchase anyone with regular income from employment business or in certain
cases even from property can apply for a housing finance from LICHFL.

The loan processing is done in two steps. They are:-

Steps 1:- SANCTION

This section contains the loan requirement for the salaried person as well as the
business or self employed person or professional.


Due to the rapid growth and increasing competition in the housing finance
sector, the chances of procedural lapses have also been increasing. The probability
of misuse and taking of advantage of the system by unscrupulous elements have
also risen. It is very important to take urgent remedial and proactive steps so that
incidents of defaults or other frauds taking place can be avoided.
It is because of this reason; standard guidelines are required which cover
lending to individual borrowers against their residential properties. Every caution
must be taken to ensure that a sound, profitable and healthy portfolio is acquired by
us, which is a must to establish reliable earnings and safeguard capital.
Some of the most significant risks which LIC Housing Finance face today can
be broadly classified into two categories:-


Credit Risk is risk resulting from uncertainty in respect of a borrower’s

ability or willingness to meet his contractual obligations. Credit risk is the risk from
a borrowers failure to meet the terms of contract with LICHFL to perform as
agreed, hence depends on the borrower performance.
Some of the credit risks that we face may arise due to:
1. Irregular Income
2. Closure of the firm / company where the borrower is employed
3. Lose his / her job
4. Prolonged illness
5. Business not able to generate enough cash flow
6. Willingness to pay
7. Customer taking advantage of his position / contacts to avoid payment of EMI /
8. Involved in illegal activities.

The most important stage of the appraisal process is to assimilate the credit and
other information and arrive at a decision to lend or not. This involves not merely
calculations, but more importantly qualitative assessment of the borrower.


Fraud risks are the risk arising from false declaration and documents submitted
by the customer based on which decisions are taken. It is essential to ensure the
stability of the borrowers employment and hence regularity of income throughout
the loan term and the genuineness of the documents relating to income.


The prime indicators for establishing the borrower’s ability to pay are as under:
1. Applicant’s job stability

Job stability gives a comfort to the credit manager on the stability of the
applicant’s job and also his chances of getting alternate job in future based on his
total work experience.

2. Reputation of employer

The employer’s reputation gives an added security that the income is going to be
consistent and there will be no break in income or that the salary will be regular The
security would be higher incase the applicant is working for a company, which is in
the top 100 companies in the country than working for a company which is a small
time proprietorship, partnership or Pvt. Ltd. Company.
3. Employed vs. Self-employed

Income for a salaried person is usually fixed and it will grow only marginally
based on salary increments. In the case of self-employed individual, the income
would not be consistent and would fluctuate every year. Further, it is possible that
the applicant makes various adjustments in his books of accounts. Also all the
income does not reflect in the books of accounts. A good portion of income would be
in cash and it goes unrecorded.

4. Qualifications

Higher the qualification, higher is the chance of the applicant finding another job
in case of loss of current job. A less qualified individual may have to compromise on
the total earnings at the expense of having a regular income. Based on the
knowledge and/or skills of the borrower, he could earn some minimum income if he
loses the current job.

5. Stability of residence

If the borrower has been staying at the same address for a long period, he can be
easily contacted.

The primary method of ascertaining willingness to pay is by careful establishment

and review of the credit history of the borrower. A key factor in underwriting an
application for a housing loan is to know, how the applicant has handled credit in the
past. Some indicators are:
Repayment pattern of other obligations
A clean repayment history reflects the willingness to pay of the borrower. The
obligations include following: -
1. Other loans from bank or non banking company
2. Payment of utilities such as school fees, bills etc
A repayment track record that includes a late payment on one or two instances of
poor credit can still be considered acceptable as long as: -
1. Any critical information can be satisfactorily explained and
2. The borrower has otherwise excellent record of maintaining


If the Bank account shows regular average, adequate balance, this will clearly
mean the borrower’s intention to meet contingencies on his own without resorting to
other borrowings. Bank Account is a reflection of the personality of the individual.
Truthfulness of information provided in the application
Relevant information provided in the Application has to be verified to be true.
Untrue statement if any found on verification must be thoroughly examined.
Additional Security
Additional security is sometimes required to establish and reinforce the
borrower’s willingness to repay. Additional Security can be by way of pledge of
acceptable additional collaterals, such as LIC policies or other securities like NSCs,
FDs, Kisan Vikas Patra, etc.


1. Application form, with two photograph and signature.
a) Salary certificate of latest 3- months with form- 16.
b) Persons working in Pvt. / Public Ltd. Co.3 years annual return of the
company is also required.

c) Incase of self employed last 3 years INCOME TAX RETURN (ITR) duly filled in
time and also computation of income & assessments orders, tax paid challan,
P/L account balance sheet duly certified by C.A.
3. ONE GUARANTOR: If applicable.

4. Bank statement or pass book copy of last 6-months.

5. Address proof and photocopy of PAN Card/ Voter card/Identity card/Passport.

6. Non-refundable UPFRONT fees@ 1% of loan amount.

After maintaining the file PERSONAL DISCUSION (PD) to be done by
Sanction Authority. In PD process Sanction Authority asked all necessary
information to the customer.
In case of NRI
 The loan shall be held in account and lien marked in employee favor.
 Company the copies of the last six month pay slip of the employee
 Employer’s Certificate.
 Bank Statement reflecting salary credit for at least six month.
 Copies of bank passbook/statements of bank account in India for at least
past six months.
 Verification by Company officers.

Additional Requirements for NRIs

 Copy of Passport along with copy of VISA or permanent residential card
or photo card duly attested.
 Copy of appointment letter.


This step comes after completing the Sanction Process. In comparison of

Sanction process, Disbursement process is long.

The Disbursing Authority has to ensure before disbursement of loan:-

1. Whether Loan is sanctioned by the Competent Authority (or is duly ratified by
the Competent Authority).
2. The requirements as per sanction letter have been obtained.
3. The Loan offer letter validity has not expired.
4. Upfront fees have been collected.
5. All the original title deeds as well as the documents pertaining to revenue
records have been obtained.
6. Due diligence of the property with respect to approval from Competent
Authorities (regarding plan, layout and environmental clearance), valuation, title
investigation and inspection has been carried out.
7. The eligibility of the property with respect to title, value, marketability etc. has
to be approved by Disbursing Authority in this regard.
8. The applicant has invested his margin money as per the provisions.
9. Search report by legal advisor has to be latest (not more than 10 days before
disbursement of first installment).
10. Inspection report by official has to be examined as per guidelines in respect of
11. All the requirements have been obtained as per the checklist at the
Disbursement Stage.
12. Documents such as Loan Agreement, Power of Attorney and Deed of Guarantee
etc are properly executed.
13. The Official approving the title should mention the list of documents to be
14. The details of the property as per agreement, title report, inspection report,
valuation report, application form and Loan masters has to be same.


If the Valuation Report and The Title Reports are found in order and the
borrower has complied with other relevant requirements as stated above, a
disbursement note should be prepared for payment of first installment of loan. The
note has to be approved by the Competent Authority in this regard.


The total estimated cost of the property less the loan amount is the own
contribution of the borrower.
Normally, it should be ensured that the applicant invests his share in the property
before we release the first installment of our loan.
However, in deserving cases, Manager (Operation) is authorized to consider
splitting of the applicant's share proportionately into installments. While doing so, it
must be ensured that the difference is fully invested by the applicant before the final
installment of sanctioned loan is disbursed.

Since the security is to be created out of the funds which would be advanced by
the Company, we have to satisfy ourselves regarding the genuineness of the purpose
of the loan applied for.


It is necessary that the applicant put some construction on the land owned by
him. Where, however, the applicant has invested his full share in the purchase of
land only, he should be asked to put up some construction (i.e. at least up to plinth
At the time of disbursement, the disbursing authority may use suggestive table
for determining the Percentage of work carried out as given herein below:-


AFTER Completion of Cumulative AFTER Completion of
Plinth 25% Plinth
Walls 40% RCC
Plastering(interior) 65% Plastering(interior)
(Exterior) 70% (Exterior)
Flooring 75% Flooring
Plumbing 80% Plumbing
Other Finishing items 100% Other Finishing items

Illustration of amount disbursable

1. Land Cost: ` 1, 00,000
2. Estimate of construction: ` 3, 00,000
3. Material at Site: ` 50,000
4. Loan Amount: ` 3, 00,000
5. Expenses incurred on site: ` 60,000 (20% of Estimated cost assuming
that the Plinth
Level is reached).
6. LTV = 300000 / 400000 = 75%

Then the disbursement can be done as follows:

(In this illustration it is assumed that land cost is equal to 100% of the Own
Disbursable amount = (Cost of Land + Actual Expenses incurred on the site at the
time of Visit + 50% of material at site) X LTV
Disbursable amount = (100000 + 60000 + 25000) X 75 % = 1, 38,000 Say ` 1,

The disbursable amount could be taken as the % of completion – own contribution
from the borrower.
Completion of work up to Plinth level at least shall be insisted upon.

NOTE: For 2nd & subsequent disbursements same formula is applicable but the
earlier disbursed amount should be deducted from the disbursable amount.
Material at site will be considered only for own Construction cases.
Material at Site may be considered 100% at the time of 2nd Disbursement.

Amount to be disbursed in case of House/ Flat Purchase under construction

In case of flats to be purchased from builder or Cooperative Group Housing
Society or Government/Statutory Authority which are yet to be constructed or are
under Construction, the applicant is called upon to make initial payment towards the
tentative cost of the house/flat and the balance is payable in installments as and when
called for or as per demand letter. The installments are linked to the progress of
In such cases, the margin money should be invested by the borrower in full,
however Regional Manager may decide for disbursement to be made on pro rata basis
in specific projects. However in any case, borrower should have invested minimum
15% from his sources initially.

Amount to be disbursed in case of Purchase of House / Flat

Where the loan is for the purchase of an existing house/flat, it should be ensured
that the borrower has paid the margin money to the vendor. The receipts thereof are
submitted to us. The balance payment left to made is the loan amount which is to be
paid in one go.
The Sale Deed draft should be put up to the office and approved by us. The sale
consideration as per the Agreement of sale should tally with that indicated in the Draft
Sale Deed.


Disbursement of the subsequent installments should be made similarly as and
when construction progresses on getting the Valuation Reports. The total amount
disbursed (including the current disbursement) should not exceed permissible
percentage of value of construction at the time of disbursement of that installment.


Payment of the final installment of the loan will be made after the completion of
the building. The disbursing authority, on the specific request of the applicant, in
deserving cases, may release the full balance without insisting on Completion
Certificate from the Municipal authorities/Completion Report provided the
construction at site has progressed above 90% as per the original plan & estimate as
certified by our Panel Valuer.


After observing all the relevant procedures as applicable to the case, payment of
Loan Installments shall be made as follows:
a) In respect of loans for Purchase, cheque shall be issued in the name of the
b) In cases of Construction / Extension / Renovation, issuance of cheque shall be in
the following manner:
 In the name of the applicant.
 If there are 2 or more applicants, it has to be issued in the joint names; or in
one of their names on the specific request of the other applicant/s.
 In respect of NRI applicant/s also, the cheque has to released as per above
system. It should not be issued in the name of the power of attorney holder.
In cases of Purchase of property from the Builder / Developer, cheque will be
issued in the name of the Builder, as per the following guidelines:
A. Payment shall be made to the Builder on specific request by the applicant individual the
status of construction, expressing his satisfaction on the progress of construction,
specifying the amount to be disbursed.
B. Receipts for the previous payments made to the Builder should be obtained and
verified. If the borrower has made the payment to builder by
cheque, then the same should be verified from the bank statement of the
borrower. In case the payment has been made by the borrower by cash, it is desirable to
verify the same from the builder’s records.
C. The bank account number of the Builder must be mentioned in cheque.
In case of Griha Vikas Loan, the full & final payment may be released in favour
of applicant/s unless there is some clause in sanction letter for releasing the
disbursement in installments (such as after closure of some personal or car loan
In case of take over loans, the cheque has to be prepared in favour of concerned
FI or Bank as per the guidelines for “Take over Cases”.
In all cases, it the cheque should be issued with the bank name and account
number written on the cheque with the name of the person in whose favour, the
cheque is being issued.

The loan sanctioning authority or one step lower has the powers to disburse the
first installment as per Financial Power Standing Order.
Manager (Operations) can approve all cases sanctioned by D&CE and General
Manager for disbursement. Regional Manager can approve the cases sanctioned by
Executive Committee and Board for disbursement.

Any officer not below the rank of Asst Manager duly authorized by Manager
Operation can disburse the second and subsequent installments.
Regional Manager has to approve disbursement of project loans, Rental Tie-up,
Rental Securitization and Apna Office sanctioned by corporate office.

In addition to security, on a case to case basis, collaterals such as personal
guarantees, FDs, property papers of other properties etc may be taken.
The valuation, property inspection and title verification, in respect of title
documents of additional security should be done in the same manner as for the main
security. Generally residential or commercial property should only be accepted as
additional security. The verification of other securities will be done as explained in
this note under heading Checklist of documents for New Griha Lakshmi Scheme.

When an applicant has made minor deviations in the construction from the
sanctioned plan and if the Panel Valuer is of the opinion that such deviations are
very minor in nature and they are compoundable as per rules of the Municipality
and that such deviations would not materially affect the value of the property, the
disbursing authority may not insist on the applicant submitting a revised sanctioned
plan in such cases.
Wherever deviations in constructions are not compoundable, revised approved
plan has to be obtained.


Loan should be disbursed only after receipt of Life Insurance policies duly
assigned in favour of LICHFL, if the loan is against assignment of Life Insurance
policies. If the loan is against hypothecation of NSC and / or F.D, disbursement to
be made on receipt of NSC and / or F.D. receipt of Nationalised Banks after
marking of our lien on the same. Area Office should ensure that under no
circumstances the loan amount is disbursed without assignment or marking of lien.
The procedure to be followed for assignment of Life Insurance Policy or
marking of our lien on NSC / FD will be as under :
Area Office will obtain the acceptable securities from the applicant alongwith
the letters / papers required for completing the formalities of assignment of policies
and / or marking of lien on FD / NSC.
The staff from Area Office will go to respective branch of Insurer / post Office /
Nationalised Bank and will complete the formalities of assignment and / or marking
of lien. The concerened staff member will verify the security and will submit
assigned instruments as per Annexure.
Loan should be disbursed only after receipt of verification report in standard
format, and the concerned staff member will submit letter as per standard format.
Life Insurance policies duly assigned in favour of LICHFL, if the loan is against
assignment of Life Insurance policies; and if the loan is against hypothecation of
NSC and / or F.D, on receipt of NSC and / or F.D. receipt of Nationalised Banks
after marking of our lien on the same.

At Area Office Level
Collect balance upfront fees.
Allocate case to legal advisor and panel valuer for respective reports.
Get title report along with title approval note and valuation report.
 Obtain Loan Agreement duly stamped and executed by the applicant and get it
countersigned by the authorized official of LICHFL.
Obtain Power of Attorney by the applicant duly stamped and notarized.
 Collect all original documents as required. Give acknowledgement of original
Submit the documents to back office for disbursement.
 Delivery of cheque to the applicant after confirming that the requirements have
been received.
 Collect PDC/ECS mandate and send the same to back office for servicing of the
 At the time of subsequent disbursement, sending request to back office along
with fresh valuation report and other required documents.
At Back Office Level
 Preparation, Examination and Approval of title note.
 Verification of documents received.
 Call for requirements if any from area office.
 Approval of disbursement note and preparation of disbursement cheque.
 Sending cheque along with payment schedule to area office.
 Reconciliation of the outstanding cheques.
 Arrange for safe custody of original documents.


The Manager (O)
Dear Sir,

Re: File No. _______________

Name of the Applicants _____________________________
Loan Amount Rs.

I hereby confirm that I have visited
____________________________________( Address of the Insurer’s Branch issuing
policy or post office issuing NSC or Branch of the Nationalised Bank issuing F.D.) on
___________ (date) and have verified from the branch following securities

In respect of Life Insurance Policies :

Policy No. Plan / Term Name of the Sum Assured Surrender Value

In resepct of NSC
NSC No. Name of the Denomination Date of Issue Date of Maturity
Certificate of Certificate

In respect of F.D. from Nationalised Bank

F.D. NO. Name of the Face value of Date of Date of Maturity
depositor the FDR commencement

I have got the assignment done / lien marked in the branch.

Signature with Name and Designation


There are mainly two types of Interest rates which may be classified as under:
Fixed Rate:
Here the rate of interest is fixed for 2 or 5 years. It is generally more than the
current floating rate of interest. Current Fixed Rate is 10.10%for 2 years fixed.
Floating Rate:

Where the loan is under Floating Rate of Interest, the Rate of Interest are at
present reviewed every three months ( January, April, July, October ) based on the

prevailing market conditions as judged by the Company and LHPLR. The revised
Floating Rate of Interest could increase, decrease or remain the same.

However, the Rate of interest will be reviewed every 6 months (January, July) for
old Customers as per their loan agreements.
Here the rate of interest changes as per the norms of R.B.I. (Reserve Bank of
India).R.B.I. changes the C.R.R. (Cash Reserve Ratio) and REPO rates time to time
which affects the floating rate of interest.

Chapter 7

(Approved at the Special Board meeting held on 06.05.2012)

The following loan facilities will be available to the members:

1. Unsecured loans (surety loans and bill purchase within the limit prescribed by
RBI or Board)

2. Secured Loans (within the max. limit wherever prescribed by RBI or Board)
i) Housing loans
ii) Transport, Business, DCG, Plant and Machinery loans
iii) OD limits in current accounts
iv) Real estate loans
v) Education loans
vi) Loans against deposits
vii) Loans against NSC, IVP, KVP, LIC policies

3. Loan sanctioning authorities

i) Board
ii) Loan Committee
iii) Loan Sub-Committee

Loan Committee, Loan Sub-Committee will sanction loans up to the power

delegated by the Board.

4. A member interested to take loan has to apply on the prescribed form duly filled
in along with all papers required to be attached.

5. Each and every loan request will be examined at three stages. At stage one DM /
Loan Officer will provide the necessary information on the credit appraisal form
and will give his comments/observations. Thereafter it will be examined by
Member Secretary of the Loan Sub-Committee / Loan Committee on the basis
of the information provided in the credit appraisal form/loan application along
with comments/observations of BM / DM before placing at the sanctioning
Committees. Loans of Rs. 20/- lacs and above will be examined by CEO or
some other official authorized by the Board before placing at the loan
Committee and Board. Physical verification of property, stock will be done by
Area Director accompanied by BM/DM or any other official.

6. CEO/ Other authorized official / Member Secretaries of the Loan Committees
will put up a statement of eligibility of loan with other observations / analysis, if

7. All mortgaged properties will be physically verified once in two years and report
to this effect will be written on the register maintained for this purpose. At the
time of ODL renewal also physical verification of the properties will be done, if
the earlier done was more than six months old.

8. The maximum credit limit of a member will be determined by the Board annually
as per the guidelines of RBI after finalization of the Balance Sheet.

9. The maximum repayment period of loan will be decided by the Board subject to
RBI guidelines.

10. The rates of interest on loan will be decided by the Board of Directors from time
to time or as per the directive of RBI. The penal interest will be charged on the
overdue amount @ 3% pa. However, on unauthorized debit balance in OD
limits it can be higher as decided by the Board. These rates of interest will be
displayed on the notice boards in the branches.

11. Power to give rebate in loan and other dues will be vested in BOD. However,
Board can delegate some power to the “Loan Committees” and “Grievance and
Settlement Committee”.

12. Normally every unsecured loan will be given against the surety of one or more
regular paymaster members and limit for standing sureties will be decided by
the BOD from time to time. However, for loan against the security of property
owned by the applicant loanee member, personal surety will not be required.

13. At the time of applying for loan/advance the member should not carry any
overdue in the existing loans taken by him and there should not be any
unauthorized debit balance in the current account being maintained by him. In
case the loanee member has stood surety to the loan of any member who carries
overdue in loan/advance then at the time of release of the loan to the member
sureties will have to clear the entire overdue amount.

14. Processing charges will be taken as per the rates decided by the Board from time
to time which will also be conveyed to the loanee member in advance.

15. Revaluation of property will be accepted after three years of the previous

16. For valuation and search report a panel of valuers and advocates will be approved
and reviewed by the Board annually. Valuation and search report will be
arranged by the Bank directly from the valuers/advocates on the approved panel
of the Bank. The fee to be charged will also be fixed by the Board.

17. The unsecured loans will be given as per RBI stipulations. Diversification of
loans will be made to avoid concentration in one segment. It will be ensured
that major percentage of loans should be against tangible security.

18. Wherever required end-use verification will be done within one month after the
release of loan or as decided at the time of sanctioning the loans. Road
worthiness of vehicles will be done once in two years for regular paymaster
members and every year for others.

19. In case of default the following actions can be taken against the defaulting

i) To initiate arbitration proceedings.

ii) To file case under section 138 of Negotiable Instruments Act
iii) To file case under SARFAESI Act.
These actions will be taken as per the guidelines laid in the recovery policy.

20. The CEO, CMs and BMs will have power to discount govt./semi
govt./autonomous bodies bills and to give short term TOD as per the power
delegated to them by the Board.

21. No loan will be given against the security of gold and against shares of the

22. The Board will prescribe parameters to judge repaying capacity of a member on
the basis of reliability of source of income and other aspects.

23. No loan to Director of the Board will be given except loan against his own
deposits as per RBI guidelines.

24. The percentage of security coverage of property will be decided by the Board
from time to time.

25. The holiday period will be decided by the Board from time to time.

26. The defaulter members whose dues were recovered either through action under
SARFAESI Act or through Office of RCS under arbitration process or through
action u/s 138 of N.I. Act will not be eligible for any loan up to five years from
the date of clearance of loan. He will also be debarred from standing surety for
the same period.

27. The defaulter member on whom arbitration case is filed but he clears the dues
during arbitration case under process will be debarred for loan and for standing
surety for one year after full repayment.

28. If a member is found to have submitted false information to get loan, he will be
debarred from loan for a period of five years.

29. Defaulters except mentioned at 26, 27 and 28 above will be eligible for loan after
six months.

30. Half percent rebate in interest to members belonging to SC/ST category.

31. When there is a very quick mortality of an advance within the first 12 months of
taking the loan the reason thereof to be specifically examined and remedial
steps to be decided to avoid any such re-occurrence in future. In case some
laxity was found in the required follow-up the BM/other concerned officials will
be held accountable.

32. In all transport loans and other secured loans, if required, end use verification
will be done through a visit to the business place of the loanee member and a
report to this effect to be kept in the file.

33. The Board of Directors will have power to make any relaxation in the loan policy
keeping in view the special merits of a specific case.

1. Unsecured loan / advance

Up to Rs. 1,00,000/- term loan / OD limit

2. The following types of secured loans can be considered :

i) Consumer Durables - Loan for consumer durables such as Computers, TV, VCR, AC etc
up to 80% of the cost or Rs. 1,00,000/- whichever is less. Loan amount to be disbursed
direct to the vendor/supplier after taking the margin money. Advance payment will not be

Loan will be recovered in 48 equal monthly instalments. At least one surety from a regular
paymaster member of the Bank is required. Item to be purchased will remain hypothecated
to the Bank. 5% of the loan is taken as security for giving post loan disbursement papers.
This amount will be returned immediately on receipt of papers.

ii) Vehicle Loans - Up to 100% of the ex-showroom price of the new vehicle. Maximum
repayment instalments 60 for LMV and 80 for HMV. At least one surety from a regular
paymaster member of the Bank. Loan will be paid direct to the vendor/supplier/dealer.
The loan will be considered on the proforma invoice in favour of the member. Margin
money and loan processing charges will be taken. Name of the bank will be written on the
RC and the vehicle will be insured jointly with the bank during the continuation of the loan.

Security – Hypothecation of vehicle in favour of the Bank.

For the purchase of second hand HMVs and LMVs up to three years old model, loan up to
70% of the value for three years old model and up to 75% of the value for 2 years old
model and up to 80% of the value for one year old model.

Repayment period for second hand LMVs will be 60 – age of the vehicle and for HMVs 80
– age of the vehicle.

Advance payment up to 25% of the cost is allowed subject to providing satisfactory proof.

For total transport loans above Rs. 20/- lacs, collateral security may be required. In case of
mortgage of property as security, coverage can be taken up to 100% of the valuation and no
personal surety to be taken.

A good paymaster member will be eligible for maximum six transport loans apart from
entitlement for ODL.

iii) OD limits - OD limit upto Rs. 1.00 lac to be sanctioned against the security of stock and
minimum one surety from house owner / govt. servant member. This OD limit to be given
to shopkeepers and other small businessmen who maintain regular stock. For OD limits
above Rs. 1/- lac collateral security is required. ODL is considered up to 60% of the
value of the stock or up to maximum 50% of the realizable value of the property as per the
prevalent parameters approved by the Board or 25% of the turnover, whichever is the
least. Quarterly stock statements to be received regularly. Stock and property to be
insured separately and jointly with the bank. Annual accounts for all OD limits above Rs. 1
lac are required but for limits above Rs. 3/- lacs, these should be certified from a Chartered
Accountant. Unsecured OD limit up to Rs. 1 lac will be sanctioned for one year and
thereafter to be renewed on yearly basis. Limits secured through property can be
sanctioned / renewed up to three years at one time and to be reviewed every year and in
case of any deficiency, non-transaction limit can be reduced / cancelled.

iv) Loan for plant and machinery - If the loan has to be for the purchase of new machinery,
proforma invoice to be provided and loan limit will be up to 60% of the cost or Rs. 2/- lacs
whichever is less without collateral security but with one or two house owner/govt.
surety(ies). Above Rs. 2/- lacs with collateral security of property duly evaluated from the
approved valuer and with search report from the advocate on the approved panel. In case
of old machinery the valuation of machinery from the approved valuer required. The loan
limit for old machinery shall be 50% of the value. For loans up to Rs. 2/- lacs security will
be hypothecation and joint insurance of machinery. For old plant and machinery security
will be hypothecation of machinery and mortgage of property. Joint insurance of
machinery and property required separately.

v) Housing loans - For house purchase and house construction the following requirements to
be fulfilled.

a. Housing Loan for building construction :

i) In cases where the applicant owns a plot/land and approaches the bank for a credit
facility to construct a house, a copy of the sanctioned plan by competent authority in
the name of member applying for such credit facility must be obtained before
sanctioning the home loan.

ii) An affidavit-cum-undertaking must be obtained from the member applying for

such credit facility that he shall not violate the sanctioned plan, construction shall be
strictly as per the sanctioned plan and it shall be the sole responsibility of the
executants to obtain completion certificate within 3 months of completion of
construction, failing which the Bank shall have the power and the authority to recall
the entire loan with interest, costs and other usual bank charges.

iii) An Architect appointed by the bank must also certify at various stages of
construction of building that the construction of the building is strictly as per sanctioned
plan and shall also certify at a particular point of time that the completion certificate of the
building issued by the competent authority has been obtained.

b. Housing Loan for purchase of constructed property/built up property:

i) In cases where the member approaches the bank for a credit facility to purchase a
built up house/flat, it should be mandatory for him to declare by way of an affidavit-cum-

undertaking that the built up property has been constructed as per the sanctioned
plan and/or building bye-laws and as far as possible has a completion certificate also.

ii) An Architect appointed by the Bank must also certify before disbursement of the
loan that the built up property is strictly as per sanctioned plan and/or building bye-laws.

c. No loan will be given in respect of those properties which fall in the category of
unauthorized colonies unless and until they have been regularized and development and
other charges paid.

d. No loan should also be given in respect of properties meant for residential use but
which the member intends to use for commercial purposes and declares so while applying
for loan.

e. i) After construction/purchasing two photographs of the house duly signed by the


ii) Location plan duly signed by the member (self made to show the exact location).

Note : Wherever property is proposed to be given as security for any type of loan/advance,
two photographs duly signed and location plan has to be given invariably.

The maximum limit of housing loan is Rs. 70 lacs or as decided by RBI from time to time.
Maximum repayment period 240 months. For repairs and renovation maximum limit will
be Rs. 2/- lacs.

In case loan for purchase of DDA flat mortgage permission in favour of bank is invariably
required and the payment to be made direct to the DDA. In case of loan for construction
of house a physical verification of the plot is done and thereafter the loan is sanctioned by
the Board of Directors/Loan Committee and it is released in max. three instalments. Each
instalment is released after physical verification.

vi) Education loan - Up to Rs. 3 lacs to be given against the personal surety of two
government employees. Insurance of life for minimum equal to the loan amount. Policy
to be assigned to the Bank. Premium to be paid annually to keep it alive. On the contrary,
Bank will get it renewed and the premium to be debited to loan. However, if for this loan
also collateral security is given, personal surety and life insurance conditions to be
waived. Loan above Rs. 3 lacs to be given against the collateral security of property. The
limit is upto Rs. 10 lacs in India and up to Rs. 20 lacs abroad. Repayment in 60 EMI
within six months after completion of the course or getting employment whichever is
earlier. Loan for regular professional courses from recognized institutions. No
margin money. Interest to be paid every month on the released instalment. Member can
also start payment of EMI (of full loan) immediately after taking loan.

vii) Real Estate loan - Up to Rs. 50 lacs against collateral security of property other than the
property under construction. No loan will be given against the mortgage of the property
under construction.

viii) Loan against deposits

Up to 90% of the deposits.

ix) Loan against NSC/KVP/IVP/LIC

Up to 75% of the face value in case of NSC/KVP/IVP and in the case of LIC policy 75% of
the surrender value.

3. Limit of maximum security cover for loan against the mortgage of property

will be as given below : Nature of property Ownership Limit of loan

1. Sale Deed / Conveyance Self / spouse Loan up to maximum 50%

Deed / Relinquish Deed / of the realizable value (RV)
Partition Deed of the property

2. Sale Deed / Conveyance Father / mother / son / Loan up to maximum 40%

Deed / Relinquish Deed / daughter of the realizable value (RV)
Partition Deed of the property

3. Sale Deed / Conveyance Brother or any other Loan up to maximum 40%

Deed / Relinquish Deed / person of the realizable value (RV)
Partition Deed of the property

No loans will be given to members against the mortgage of property situated in NCR.

4. For loans/advances of Rs. 25/- lacs to Rs. 50/- lacs two valuations and one search report
from the valuers on the approved panel of the Bank. For loans/advances above Rs. 50/-
lacs two search reports and two valuations. Charges for second valuation and second
search report to be borne by the Bank. These two valuations have to be done before the
sanction of loan.

5. Maximum repayment period for term loan except transport loans will be maximum 240

6. Combined general and DCG loans can be sanctioned up to max. `1.75 lacs.

7. Rebate to regular paymaster members if they are regular in all loans including OD limit
will be given as decided by the Board from time to time.

8. If a member resides in NCR and employed on regular basis in Delhi then for hypothecation
loans he will have to provide surety from a government servant employed in Delhi or
having his own residential house in Delhi.

9. For general loan above `75000/- two latest ITRs or two latest salary certificates would be

10. On TOD/overdrawn debit balances in current account 5% additional intt. to be charged.

11. Newly enrolled members will be eligible for one transport loan and for second transport
loan he will have to wait for six months so that the sanctioning Committees may consider
the request on the basis of the repayment record of the previous loan. However, this
condition will not apply when the member provides property as collateral security. Surety
loan will be considered after six months of the membership.

12. For transport loans, registration of vehicle has to be done invariably in Delhi. If a member
wants to get the vehicle registered in NCR, he will have to provide collateral security of
property at Delhi.

13. In transport loans the delivery of the vehicle will be given to the loanee members through
dealers on the panel of the Bank.

14. The processing charges will be 0.3% of the loan/advance subject to max. ` 15000/-.

15. The share linkage will be 2.5% for secured loan and 5% for unsecured loan subject to
maximum Rs. 20,000/-. Minimum amount of share money will be Rs. 1,000/-.

16. The SDM linkage with loan amount will be similar to share money with the condition that
the minimum SDM will be Rs 5,000/- subject to maximum of Rs. 1,00,000/-. Member
at his own can deposit amount in SDM even without seeking any loan facility from the
bank with the condition that SDM cannot be withdrawn during the period of his/her
membership. This amount will be given only on resignation.

17. Loan against SDM up to 90% can be sanctioned with 2% higher rate of interest if same is
free and there is no linked loan against it. However loans against SDM already given when
maximum SDM limit was Rs.25,000/- be continued as it is and fresh loans to these
members will be given as per revised rules i.e. Loan up to 90% of the SDM amount which
is over and above revised requirement of loan linkage i.e. minimum 2.5% or 5% as per
loan category (subject to maximum Rs. 1,00,000/-).

18. If loan request of the member is not considered the reason thereof will be conveyed to him.

19. In joint loans compliance to SM and SDM ratio will have to be done only in one account.

20. More than one secured loan within the overall MCL of the member and within security
coverage from the property and with separate EMIs can be availed within the repaying
capacity. A member will be entitled for max. four loans and one ODL at one time.

21. Against the security of one property maximum three loans can be considered to only one
member. However, in the case of transport loans there will not be any such restriction on
the number of loans.

22. Loan to a defaulter member who is debarred for loan for a specific period will be
considered only by the Board.

23. Loan sanctioning power of LSC and LC will be as given below :

LSC : Up to ` 10 lacs (total)

LC : Up to ` 1/- crore (total)

24. The power to consider loan against the mortgage of rented property or against vacant plot
will lie only with the Board.

25. Clubbing of income will not be permitted except where spouse is befittingly employed in
govt./semi-govt./PSU/autonomous bodies/reputed private companies and having separate
and regular source of income. Latest three salary slips or three ITRs are also required.

26. A good paymaster member who has taken loan against the mortgage of property can stand
surety for six transport loans at a time. In general, a member can stand four sureties.

27. The following will be holiday period :

i) Transport loans 2 months

ii) Housing loans 3 months

iii) Business loans 2 months

iv) Education loans 6 months after the completion of the

study or getting employment, whichever is


v) Loan for Coop.Group 12 months or taking over the possession

Housing Flats whichever is earlier

vi) DDA Self finance flats - do -

28. The CMs and BMs will have power to sanction bill purchase or TOD up to 10% of the
sanctioned limit or ` 1/- lac whichever is the minimum for maximum six days. The CEO
will have power to sanction bill purchase up to 10% of the sanctioned limit for maximum10
days. This power will be exercised when a bill is presented in clearing but sufficient credit
is not available to clear the bill. The Board can increase the power of CMs and BMs for
the convenience of the account holder.

29. BOD will have power to make departure from the rules in exceptional circumstances.

30. Sanctioned loans have to be taken by the members within 60 days of the sanction.
Thereafter up to 90 days, re-validation will be permitted on written request. After 90 days
the sanction to be cancelled and fresh application to be given for loan.

31. When a loan has been sanctioned against the security of the property the member can
neither give that property on rent nor part with the possession in any way without the
written permission of the Board of Directors.

32. If loan request is up to Rs. 5/- lacs against the security of property, no valuation would be
required if the face value is more than the requested loan. However, as usual search report
would be required.

33. After the clearance of transport loan no dues certificate and form no. 35 can be sent to the
member through post.

34. The L.C. / Board can sanction TOD up to 20% of the sanctioned OD given against
collateral security of property for a maximum period of two months at one time. This
sanction can be extended by one month on the written request of the member. This TOD
has to be cleared invariably after the due period of 2/3 months. Thereafter request for OD
for the second time can be considered with a gap of full one month. It should be ensured
that the TOD sanctioned meets the percentage of turnover, security coverage of the
mortgaged property and also insurance cover. SM and SDM linkage has to be maintained.
Processing charges also to be paid proportionately.

Home|| Back


Housing Loan)

Application No. :

Loan A/c No.


Major Terms and Conditions of the housing loan agreed to between

(the borrower/s) and LIC Housing Finance Limited are as under:

1. Loan:
a) Loan Amount Sanctioned * Rs._______________
(Rupees in words only)

b) Purpose of Loan *

c) Rate of Interest *

d) Tenure of Loan *__________ Months.

(However during the pendency of loan, the tenure
get changed depending on increase/decrease in
rate in case of loan under floating rate of interest)

2. Fee and Other Charges:

 Under floating rate period, prepayment charges
a) Pre payment Charges are
not applicable
 Under fixed rate period, the prepayment charges
will be Nil if paid from own sources else 2% on
the loan amount prepaid plus Service Tax
 The company reserves the right to call r
necessary documents as an evidence of source of

b) Conversion Charges Not applicable

c) Cheque Bouncing Charges 1. Cheque Dishonour Charges Rs. 350/-

2. ECS Dishonour Charges Rs. 200/-
d) Document retrieval charges Rs. 1,000/- plus Service Tax

e) Providing List of Documents Rs. 500/- Plus Service Tax

Providing Photocopies of
f) Title Rs 1,000/- Plus Service Tax

g) Statement Charges Nil

h) Late EMI Payment charges 1.50% per month on the defaulted installments uptod

* Will vary from case to case

inclusive of 12 months default and 2% per month on the

defaulted installments beyond 12 month default.

i) Recovery Charges Costs, Charges, Expenses, Incidental Charges and other

monies that may have been expended by LICHFL in
connection with recovery.
j) CERSAI Charges Rs. 250/- plus Service Tax for original filing and every
 For loans upto Rs. 5 lakhs
subsequent modifications, (if any)

 For loans above Rs. 5 lakhs Rs. 500/- plus Service Tax for original filing and every
subsequent modifications, (if any)

LICHFL retains the right to alter any charges or fees from time to time or
to introduce any new charges or fees as it may deem appropriate with due
intimation to the borrower

3. Security for the Loan:

a) Mortgage (Mention details of the *
property to be mortgaged as
security for the loan)

b) Guarantee (mention the name of *
Guarantors, if any)

c) Other Security (mention the details *

of other securities, if

4. Insurance of the Property / As per Loan Offer Letter and Loan Agreement.

5. Conditions for As per conditions precedent to disbursement of Loan specified in Loan

Disbursement of the Loan Offer Letter and Loan Agreement

6. Repayment of the Loan & Interest:

a) Amount of EMI # Rs.________________

b) Number of EMI (No. of # _____________


c) Any other details for payment As per Loan Offer letter

of principal amount of loan and
interest including due date/s
d) Procedure for advance Intimation about the changes in the rate of interest / EMI wi

* Will vary from case to case

intimation of the change in the be given by way of Letters / Emails /SMSs as per the terms
rate of interest / EMI and conditions of the Loan Offer Letter.

# (The amount of EMI and/or number of EMI may get changed, due to change in
interest rate / actual disbursed amount as per the terms and conditions of Loan Offer

7. Brief procedure for  Follow upto 30 days from the due date through SMS alerts
Recovery of
Overdues (mention  Monthly default notices to the defaulters upto 3 months defaults
briefly the notice etc.

to be given to the  Beyond 3 months & upto 12 months; Default follow up letters
borrower for recovery
of overdues before  Letters to guarantors (if any) if the notice sent to the defaulters yields no
proceeding under the results
applicable law)

 Letters to Employer of the defaulting borrower, should the borrower

continue to default for more than 2 months.

 Allotment of default cases of more than 1 month to Direct Recovery

Agents (DRA)

 Personal follow up with Borrowers in addition to DRAs wherever


 If default continues for more than 6 months, then SARFAESI action will
be initiated.

8. Customer Service:
a) Visiting Hours at the Office Business Hours

) Details of the person to be Officer In charge of the concerned Area Office / Business Centr
contacted for customer service

c) Procedure to obtain the following including time line therefore:

I. Loan Account Statement Within 2 working days after customer’s request

II. Photocopy of the title Within 30 days from the date of written request along wit
documents requisite fees

III. Return of original document Within 30 days from the date of receipt of request letter from
on closure / transfer of the the Borrower subject to clearance of fund
9. Grievance Redressal:
a. Email Id and other contact The customer may approach concerned Area Office/ Busines
details at which complaint can Centre for his/ her grievance and may submit the complaint i
be lodged writing, through email or by post / courier. The address & Mail Id

* Will vary from case to case

of Area Offices are available in “contact us” Men

b. Turnaround time for resolving Seven Working Days

the issue

c. Matrix for escalation for If customer is not convinced with the redressal of complaint then
lodging the complaints customer can call or write a mail to our Customer Relation Officers
(CROs). Customer Relation Officers have been designated for Back
Office / Regional Office for the redressal of the customer’s
grievance. The name and contact details of the CROs are displayed
on our company’s website. After examining the matter, they would
be sending their final response within 6 weeks.
In case the complainant is still dissatisfied with the response
received/ or where no response is received, the complainant may
approach the Complaint Redressal Cell, Department of Regulation
& Supervision, National Housing Bank, 4th Floor Core 5A, India
Habitat Center, Lodhi Road, New Delhi – 110 003 or em


LICHFL is authorized to disclose from time to time any information relating to

the loan to any credit bureau (Existing or Future) approved by Government of
India or any authority as may required from time to time without any notice to
the applicant. LICHFL is also authorized to make inquiries with the Credit
Information Bureau of India (CIBIL) and get the applicants Credit Information
Report. The most Important Terms and Conditions mentioned above are an
indicative list of terms and conditions of our loan products. These terms and
conditions are further described in our loan agreement under relevant
sections/schedules and therefore should be read in conjunction with those
mentioned in the loan agreement.

It is hereby agreed that for detail terms and conditions of the Loan, the
parties hereto shall refer to and rely upon the loan and other security
documents executed / to be executed.

The above terms and conditions have been read by the borrower/s / read over
to the borrower/s by Shri / Smt. / Km.______________________ (by our
official) of the Company and have been understood by the borrower/s.

(Signature or thumb impression (Signature of the authorized person

Of the Borrower /s)


Home is where the heart is! People know this better than most - the toil and sweat
that goes into building/buying a house and the subsequent pride and joy of owning one.
This is why Company’s Housing loan schemes are designed to make it simple for
customer to make a choice at least as far as financing goes! The Company loans have
the longest tenors and there repayment terms are amongst the most flexible. They offer
customer a totally transparent process and yes, there is no fine print! They even give
customer an in-principle approval prior to identifying a house/flat, relieving customer
for the tension of anticipating the approved amount!
Today in addition to loans for purchase of house, flats, plots it also provides for
renovation and repairs for purchasing or consulting offices or nursing homes to
professional or doctors. The Company also provides loan for personal needs like
marriage, educations of children and fulfill business requirement against mortgage of
property. The Company’s has a spiral Loan Scheme for its customers for buying a
property in India is as follows: Loans.

Home Loans
Resident Indian
 Purchase
 Construction
 Extension
 Repair/Renovation
 Plot Purchase

Non Resident Indian

 Purchase
 Construction
 Extension
 Repair/Renovation
 Plot Purchase

 Before Retirement
 After Retirement

 Green Channel
 Step-up EMI
 For NRI’s in Gulf

1.) Corporate Loans

 Corporate Employees
 Staff Quarters
 Office Premises
 LOC to Corporate
 Co-op. Societies
 Public Agencies

2.) Builders/Developers

3.) Others
 Home Equity
 Consumer Durables
 Loans to Professionals


People are an increasing component of the Indian society. While on the one
hand, there is significant increase in longevity and low mortality, on the other hand cost
of good health care facilities is spiraling and there is little social security. People need a
regular cash flow stream for supplementing other income and addressing their financial
needs. Secular increase in residential house prices has created considerable “home
equity “wealth. For most people, the house is the largest component of their wealth.
Conceptually, LIC seeks to monetize the loan as an asset and specifically the
owner’s equity in the house. The scheme involves the home loan, corporate loan, loan
for builders or on other side personal loan like loan for marriage, for education etc. The
Corporate loan involves the loan schemes for corporate employees, staff quarters, office
premises as well as loan for cooperative societies


Home loan includes loan for Indian resident, non Indian resident as well as
retired person who are getting pension from the company as we called as pensioners.
People borrower(s) mortgaging the house property to a lender, who then makes periodic
payments to the borrower(s) during the latter’s lifetime. The Pensioners borrower is not
required to service the loan during his lifetime and therefore does not make monthly
repayments of principal and interest to the lender. On the borrower’s death or on the
borrower leaving the house property permanently, the loan is repaid along with
accumulated interest, through sale of the house property. The borrower(s)/heir(s) can
also repay or prepay the loan with accumulated interest and have the mortgage released
without resorting to sale of the property.
The Tenth Five Year Plan document on urban development has estimated as
additional requirement of about 4.5 million houses each year during the Plan period
Investment in housing has grown from ` 11.5 million in the First Five Year Plan
to approximately ` 1510 billion in the Ninth Five Year Plan. The estimated investment
in housing for the Tenth Five Year Plan is ` 7,263 billion. The demand for housing loans
would further increase mainly on account of tax incentives, increased urbanization,
evolution of nuclear family system, increasing per capita income, a desire for
independent home ownership, increase in the percentage of population in the age group
of 25 to 44 years, increase in loan tenures and the availability of finance at a lower
interest rate. Positive regulatory measures like regularization of land records would
further propel housing finance industry. I am highly optimistic that trends mentioned
above would translate into an increased demand for housing finance. The housing
finance market has recorded a cumulative growth of over 30% in the last five years.
The disbursals for the industry during 2005-06 stood at around` 860 billion. It is
expected that housing finance market may reach ` 1,347 billion by 2008 -09.


LIC Housing Finance FY 2014 net profit up 29% to Rs 1317.19 crores Q4 Net
Profit up by 17% to Rs. 370.02 crores Q4 Total Income up 19%; Q4 Net Interest
Income up by 16% FY 2014 Individual Loan portfolio grows 18% to 88559 crores
Board proposes 225 % dividend

Mumbai, April 21, 2014

LIC Housing Finance announced its audited results for the year ended March 2014,
following its approval by the Board of Directors in a meeting held in Mumbai on April
21, 2014.

Performance Highlights-Q4 FY 2014

(Figures in Rs. crores)

Quarter Ended March 2014 Quarter Ended March 2013 Variation

Revenue from operations 2407 2028 19%
Total Income 2478 2075 19%
Net Interest Income 533 461 16%
Profit before tax 521.58 416.32 25%
Net Profit after Tax 370.02 316.16 17%

1 crore =10 million

The company's recorded total income for Q4 FY14 was Rs. 2478 crores as against
Rs.2075 crores during the same period previous year, a growth of 19%. Revenue from
operations grew 19% from Rs. 2028 crores to Rs. 2407 crores. Net Interest Income was
Rs 533 cr, registering a growth of 16% over the same period last year. Profit before Tax
for the quarter was Rs.521.58 cr a growth of 25% over the same period in the previous
year year.

Net profit after Tax for the Q4 FY14 was Rs. 370.02 crores as compared to Rs.316.16
crores in the corresponding period previous year, thus showing a growth of 17%. Net
Interest Margins for the Q4 FY14 stood at 2.40% as against 2.16% for Q3FY14.


Performance Highlights –FY 2014

(Figures in Rs. crores)

Year ended March 2014 Year ended March 2013 Variation
Revenue from operations 9073 7459 22%
Total Income 9335 7659 22%
Net Interest Income 1899 1535 24%
Profit before tax 1825.50 1373.57 33%
Net Profit after Tax 1317.19 1023.21 29%
Dividend 225% 190%
Gross NPA% 0.67% 0.61%
Net NPA% 0.39% 0.36%
Outstanding Mortgage Portfolio 91341 77813 17%
EPS (Rs 2 paid-up) 26.10 20.28

1 crore =10 million

For the year ended March 2014, the company's total income was Rs.9335 crores as
against Rs. 7659 crores during the same period previous year, a growth of 22%.
Revenue from operations grew 22% from Rs. 7459 crores to Rs.9073 crores. Profit
before Tax for the year stood at Rs 1825.50 cr registering a growth of 33% over the
previous year.

Net profit after Tax during this period was Rs.1317.19 crores as compared to
Rs.1023.21 crores in the corresponding period of the previous year, a growth of 29%.

The outstanding mortgage portfolio as on March 31, 2014 was Rs. 91341 crores as
against Rs. 77813 crores on March 31, 2013, thus registering a growth of
17%.Individual Loan Portfolio stood at Rs 88559 cr as on March 31, 2014 a growth of

The Gross NPAs of the company stood 0.67% on March 31, 2014 as against 0.61% as
on March 31, 2013. Net NPAs were Rs 0.39% as against 0.36% for the corresponding
dates. Gross NPAs in the individual loan segment stands at 0.27% as on March 31,
2014 as against 0.32% as on March 31, 2013. Net Interest Margins for the full year was
2.25% as against 2.18 % for the FY 2013.

The Board of Directors have recommended dividend of 225%, including Silver Jubilee
dividend of 25 %.

LIC Housing Finance, Managing Director & CEO, Ms. Sunita Sharma, said"This was a
year where the macros have been very challenging. In spite of the difficult environment
we have delivered yet another year of strong performance in all the areas of operations-
portfolio growth, margin expansion and continue to maintain industry best asset quality.
We are stepping into our 25th year of operation and would like to make it memorable
by achieving greater heights".

About LIC Housing Finance Ltd

LIC Housing Finance Ltd is one of the largest housing finance companies in India
having one of the widest networks of offices across the country and representative
offices at Dubai & Kuwait. In addition, the Company also distributes its products
through branches of its subsidiary LICHFL Financial Services Ltd. LIC Housing
Finance Ltd was promoted by Life Insurance Corporation in 1989 and a public issue
was made in 1994. It launched its maiden GDR offering in 2004. The company enjoys
the highest rating from CRISIL & CARE indicating highest safety with regard to the
ability to service interest and repay principal



Purchase of House and Flats

Loan to Property : 80 to 85% total Cost of the property including Stamp Duty
Cost and Registration Charges.
Loan Term : Maximum term - For Salaried - 30 years, for self employed 20 Years.
Repayment Mode : Equated Monthly Installments (EMI)- Monthly Rest Basis.
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates.
Upfront Fees : As applicable from time to time.

Construction / Extension
Loan to Property :
80 to 85% of total Estimation.
Loan Term : Maximum term - For Salaried - 30 years, for self employed 20 Years.
Repayment Mode : Equated Monthly Installments (EMI) - Monthly Rest Basis.
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates.
Upfront Fees : As applicable from time to time.

Plot Purchase &
Loan to Property : 80 to 85% of total Cost of the property including estimate
Cost for construction.
Loan Term : Maximum term - For Salaried - 30 years, for self employed 20 Years
Repayment Mode : Equated Monthly Installments (EMI) - Monthly Rest Basis
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Repairs / Renovation
Loan to Property :
80 to 85% of cost of the renovation estimate.
Loan Term : Maximum term - For Salaried - 30 years, for self employed - 20 Years
: Equated Monthly Installments (EMI)- Monthly Rest Basis
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Plot Purchase
Purpose : Loan for purchase of DTCP / CMDA / BMDA approved plots.
Loan to Property :
75% of the property value (Including stamp duty)
Loan Term : Maximum term - 10 Years
: Equated Monthly Installments (EMI)- Monthly Rest Basis
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Take over from other Institutions / Banks + Top up

Takeover of existing loan from other Financial Institution/Banks with
Purpose :
Topup loan
Term : Maximum 30 Years for Salaried and Maximum 20 Years for Business
Loan Term : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.


Purchase of House and Flats

Loan to Property : 80 to 85% total Cost of the property including Stamp Duty
Cost and Registration Charges.
Loan Term : 10 years for Non Professional / 15 years term for professionals.
Repayment Mode : Equated Monthly Installments (EMI)- Monthly Rest Basis.
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates.
Upfront Fees : As applicable from time to time.

Construction / Extension
Loan to Property :
80 to 85% of total Estimation.
Loan Term : 10 years for Non Professional / 15 years term for professionals.
Repayment Mode : Equated Monthly Installments (EMI) - Monthly Rest Basis.
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates.
Upfront Fees : As applicable from time to time.

Plot Purchase &

Loan to Property : 80 to 85% of total Cost of the property including estimate
Cost for construction.
Loan Term : 10 years for Non Professional / 15 years term for professionals.
Repayment Mode : Equated Monthly Installments (EMI) - Monthly Rest Basis
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Plot Purchase
Purpose : Loan for purchase of DTCP / CMDA / BMDA approved plots.
Loan to Property :
75% of the property value (Including stamp duty)
Loan Term : Maximum term - 10 Years
: Equated Monthly Installments (EMI)- Monthly Rest Basis
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Take over from other Institutions / Banks + Top up

Takeover of existing loan from other Financial Institution/Banks with
Purpose :
Topup loan
Term : 10 years for Non Professional / 15 years term for professionals.
Loan Term : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.


Purchase of House and Flats

Loan to Property : 80 to 85% total Cost of the property including Stamp Duty
Cost and Registration Charges.
Loan Term : Maximum term - For Salaried - 30 years, for self employed 20 Years.
Repayment Mode : Equated Monthly Installments (EMI)- Monthly Rest Basis.
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates.
Upfront Fees : As applicable from time to time.

Construction / Extension
Loan to Property :
80 to 85% of total Estimation.
Loan Term : Maximum term - For Salaried - 30 years, for self employed 20 Years.
Repayment Mode : Equated Monthly Installments (EMI) - Monthly Rest Basis.
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates.
Upfront Fees : As applicable from time to time.

Plot Purchase &

Loan to Property : 80 to 85% of total Cost of the property including estimate
Cost for construction.
Loan Term : Maximum term - For Salaried - 30 years, for self employed 20 Years
Repayment Mode : Equated Monthly Installments (EMI) - Monthly Rest Basis
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Repairs / Renovation
Loan to Property :
80 to 85% of cost of the renovation estimate.
Loan Term : Maximum term - For Salaried - 30 years, for self employed - 20 Years
: Equated Monthly Installments (EMI)- Monthly Rest Basis
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Plot Purchase
Purpose : Loan for purchase of DTCP / CMDA / BMDA approved plots.
Loan to Property :
75% of the property value (Including stamp duty)
Loan Term : Maximum term - 10 Years
: Equated Monthly Installments (EMI)- Monthly Rest Basis
Rate of Interest : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Take over from other Institutions / Banks + Top up

Takeover of existing loan from other Financial Institution/Banks with
Purpose :
Topup loan
Term : Maximum 30 Years for Salaried and Maximum 20 Years for Business
Loan Term : Contact nearest Office for details on the Prevailing Interest Rates
Upfront Fees : As applicable from time to time.

Challenges in Housing Finance Sector

 India still has a long way to go in building a robust institutional/regulatory
framework from a risk management perspective in the housing finance sector.
 Housing finance lies at the intersection of three priority areas for the
development of emerging economy like India – The strengthening of domestic
financial system, the financing of a one of the largest asset classes in the
economy, and the provision of a critical social good.
 Policy makers not only in India but in other emerging economies are challenged
to build sound housing finance system due to an increasing number of middle
class people, and growing urban population demanding home ownership.
 The policy framework has to be carefully structured on a solid foundation
including laws, property rights, foreclosure procedures & mortgage markets.
 Risk management has to be an integral part of such a framework.
 There are various legal and administrative impediments in India, which are
hindering the growth of the mortgage securities market in India.
 These impediments are in the nature of archaic laws such as Urban Land Ceiling
(and regulation) act, Rent Control act, varying and high rates of stamp duty
across different states, restrictive foreclosure process etc.
 Management of credit and operation risk is the foundation of any strong housing
finance system. This is because, regardless of the source of funding, or the
macro economic and legal conditions, effective lending techniques and strong
loan management skills are the first line of defense against loss.
 The historically low default Rate is also a function of low loan to value ratio,
which has been an account of low loan sizes, an outcome of high interest rates
reducing the loan’s eligibility at the given income level.
 As a result of which the loss to a defaulting customer could have been much
higher due to the high amount of equity involved in the transaction.
 However going forward the default rates could increase as decreasing interest
rates and higher cost to income ratios is reducing the loan to value ratio.
 The total project cost is estimated at U.S. $ 40 million in paid – up capital.
 This would help the banks for speedier foreclosure of home loan accounts in
 Finishing touches are being given to IMGC, which is expected to formally come
into existence in September of this year.
 NHB is also operationalising the foreclosure laws, which will enable the HFCs
to foreclose the defaulting account and apply to the recovery officer for sell of
mortgage property.
 The Indian housing finance industry has one of the lowest credit loss rates as a
retail customer rarely defaults on the payment of loans, which is the largest
investment for an individual.
 Easier foreclosure laws coupled with the proposed mortgaged credit guarantee
scheme of the NHB are expected to release nonperforming funds of HFCs for

Product & Services of Housing Finance Industry

The housing finance industry is getting increasingly commoditized. Competition with
in the sector is ensuring that in case of inadequate credit appraisal or recovery systems.
The defense strategies for managing increasing default rates fall into 3 basic categories:

i. Borrower Strength
ii. Collateral Strength
iii. Lender Techniques & various forms of insurance

The first line of defense against loss is making good loan decisions; the second is
managing the asset effectively with risk sharing entities coming last. Credit risk
insurance is only activated after the lender has done everything possible to avoid a loss
on the loan.

Credit risk management in the Indian context means the housing finance companies
have to develop certain in house/local standards for measurement of borrower’s ability
and willingness to repay the loan for the long term, apply those standards, measure the
performance and continually make adjustment to the standards based on results.

In this context the proposed Mortgage Guarantee Company (MGC) could have a
significant influence on the housing finance market provided if the MGC is able to
offer reasonable risk pricing for credit and default risk. With MGC in place offering
attractive credit risk mitigation, the housing finance could see many more new players
offering home loans with the market becoming more competitive.



 To enhance the loan origination process for housing through out the country.
 To develop an institutional network that would facilitate these origination
 To identify a potential resource base for the system as a whole.
 To codify & simplify the legal system with respect to risk management of
housing finance institutions (Liquidity, Interest rates and default risks in
 To rationalize and reorient the fiscal system to reallocate funds to the housing
sector by providing incentives for house hold thrift is the vexing question as
well as institutional growth.
 To link formal network with informal networks which are the measure source of
financial and economic activity for the rural and urban poor.

Enabling Affordable Housing for All – Issues &Challenges
(Inaugural address delivered by Harun R Khan, Deputy Governor, Reserve Bank of
India at International Conference on Growth with Stability in Affordable Housing
Markets organized by the National Housing Bank and the Asia Pacific Union for
Housing Finance on January 30, 2012 in New Delhi)

. It is a pleasure to address such a distinguished gathering of delegates at the

international conference and the well-known experts from the sector who have
assembled here. It is my pleasure to be here not only as a representative of the Reserve
Bank of India but also as a member of the Board of the National Housing Bank (NHB).
Over the years, the Reserve Bank and the NHB have committed to the cause of
improving the condition of the Indian housing sector considering that housing
constitutes one of the four basic requirements for human survival roti (food), kapada
(clothing), makan (housing) and izzat (dignity). Our experience shows that housing
tends to serve as a catalyst for a change in socio-cultural milieu and also aids in
economic development. More importantly, housing lays the foundation for a life of
dignity. By investing in homes, people, in particular, the low-income groups,
accumulate equity that can then be used as collateral, making them more credit-worthy
for accessing finance through formal channels and also for generating income. Against
this background, addressing housing shortage and improving affordability remains an
integral part of our national policy towards poverty alleviation.

Dilemmas for the policy makers

2. The recent housing bubble in the US which in many ways contributed to global
financial market crisis is still fresh in the minds of all the stakeholders in the financial
markets. The housing crisis in the US has yet again proved that the mission of social
objectives, if not driven with regulatory caution, can lead to financial instability. Such
events not only cause severe structural damages to the financial system but also lead to
further intensification of the problem that the mission originally was seeking to
overcome. Therefore, dilemma for policy makers is to choose either a policy which
aims at affordable houses for all without compromising the stability of the financial
sector or a policy which enables all to afford houses with focus on inclusive growth for
the people at large.

3. The mandate of Reserve Bank of India, whether stated explicitly or otherwise, is for
promotion of inclusive growth without undermining financial stability. The dilemma is
all the more significant in the context of housing sector initiatives as they involve
framing policies on affordability of housing and also harnessing and promoting markets
so as to serve the entire spectrum of customers, irrespective of their levels of income
and the phase of business cycle.

The extent of problem

4. Housing shortage has always been a major problem over the years in our country
since independence. Such shortage estimated as excess households over houses
including houseless households, congestion (number of married couples requiring
separate house), and replacement/ up-gradation of kutcha/ unserviceable kutcha houses
and obsolescence/ replacement of old houses, etc. had grown over the decades.

5. The Working Group on Rural Housing for the Eleventh Five Year Plan (2007- 12),
has estimated the total housing shortage in rural areas at 47.43 million units at the end
of 2012. As per Government estimates, the total housing shortage in the urban areas, at
the beginning of the 11th Plan period was around 24.71 million units and is likely to go
up to 26.53 million units by 2012. The urban situation is equally appalling with 99 per
cent of the housing shortage pertaining to the Economically Weaker Section (EWS) and
Low Income Group (LIG) categories. It is also of major concern that 90 per cent of the
rural housing shortage (approximately, 42.69 million units) are in respect of Below the
Poverty Line (BPL) categories.

6. According to a report of ICRA†, housing loans as a percentage of GDP have

remained at around 7 per cent, significantly lower than the levels achieved in most of
the developed countries. It indicates the extent of opportunity for deeper penetration of
such market. With improving demographics and economies of scale, the mortgage to
GDP ratio is likely to increase. The stakeholders, however, need to reckon with
problems and impediments in the process which may arise from changes in the
economic cycle, uncertainties surrounding land acquisition policies, changes in the
policy framework and systemic risk that could arise out of rapid credit expansion with
lax due diligence standards.

Concept of affordability

7. “Affordability” as a concept is very generic and could have different meanings for
different people based on differences in income levels. Different countries have defined
affordable housing to present the economic potential of an individual buying a house.
In developed countries like the US and Canada, a commonly accepted guideline for
affordable housing is that the cost of housing should not exceed 30 per cent of the gross
income of the household. Affordable housing and low-cost housing are often
interchangeably used but are quite different from each other. Low-cost housing is
generally meant for the Economically Weaker Sections (EWS) categories and
comprises bare minimum housing facilities while affordable housing is mostly meant
for the Low Income Groups (LIG) and the Middle Income Groups (MIG).

8. Defining affordable housing in India is a difficult task given that for every square
kilometer of the country the dynamics of the market are different. Keeping in mind that
the housing shortages affect mostly the EWS and LIG, and the younger group of urban-
urban migrants changing cities in search of better prospects, affordable houses, for the
purpose of such schemes, are taken as houses ranging from about 300 square feet (super
built up area) for EWS, 500 square feet for LIG and 600 to 1200 square feet for MIG, at

costs that permit repayment of home loans in monthly installments not exceeding 30
per cent to 40 per cent of the monthly income of the buyer.

9. A major issue involving the affordable low cost housing is the quality of housing. As
per the 2001 census data, only 51.62 per cent of Indian households stay in pucca
(concrete) houses. As on end-June 2009, 55 per cent of the rural households and 92 per
cent of the urban households lived in pucca structures (Table I).

Table I: Distribution of households with respect to Kutcha(non-concrete)

&Pucca(concrete) categories

(In per cent)

1991 2001 2009

Pucc Kutch Pucc Semi- Kutch Pucc

Semi-Pucca Semi-pucca Kutcha
a a a Pucca a a

Urban 85.7 10.6 3.7 88.0 9.1 2.9 91.7 6.2 2.1

Rural 48.8 28.7 22.5 49.8 21.4 18.8 55.0 28.0 17.0

(Source: Report of National Sample Survey Office – Housing Condition &Amenities in India)

The Challenges in India - Reasons for low affordability

10. Although India has been registering a fast paced growth during the first decade of
the 21st century there is still a significant population below the poverty line (BPL),
irrespective of the parameters defining the line. This requires economic and social
support to get above the poverty line. The levels of unemployment also remain
significantly high, thereby rendering housing unaffordable to many. It is also important
to reckon the fact that even today there is a large population which remains financially
excluded from the formal banking/financial systems and, in the process, is deprived of
access to housing finance.

Rural housing

11. The vulnerabilities to the rural housing sector are often thought to be limited to the
delivery system for housing materials, services and finance. The sector, however, is
deeply affected by infrastructure deficit – roads, electricity supply, drinking water and

sanitation. The housing finance which played a key role in the urban housing
revolution, if I may say so, is rather conspicuous by its absence in the rural setting. To
aggravate the situation further, there is a real paucity of common or non-agricultural
land for meeting the housing needs of the poor; whatever little is available is pre
empted by the demands from other sectors. The lack of vibrancy in the market for
village properties and the marked volatility in agricultural incomes combine to dampen
the prospects of this nebulous sector.

Challenges from urban migration

12. The other challenge emanates from the economic condition of our rural areas which
leads to migration of population. The number of people in urban cities and towns has
gone up substantially primarily as a by-product of demographic explosion and poverty
induced rural-urban migration. This situation has resulted in tremendous pressure on
urban infrastructure and consequent increase in the number of homeless people living
on the streets. As per the 2001 census, the total urban homeless population was 0.78
million, which would be much more currently given the inadequate availability of
affordable/low cost housing. As per the 2001 census, the country’s urban land mass (2.4
per cent of total land mass) housed approximately 28 per cent of the population,
excluding people who live on the streets (Chart I).

13. If we look deeper into the extent of availability of basic amenities, the position is all
the more disturbing. As per the Report of Housing Condition &Amenities in India
(2009), 65 per cent of rural and 11 per cent of urban households do not have adequate
sanitation facilities. 34 per cent of the rural and 4 per cent of the urban households did
not have the facility of electricity. Only 18 per cent of the rural households had all the
three facilities (drinking water within premises, sanitation &electricity) whereas in
urban areas, all the three facilities were available to 68 per cent households.

Constraints to housing sector

14. Any sector is likely to be influenced by both demand and supply constraints. On the
demand side, mainly income levels of the people, overall cyclical condition of the
economy and affordability of housing play the most important role and availability of
land, finance at reasonable price, infrastructure, legal and regulatory framework are
some of the major constraints from the supply side.

Constraints of land availability

15. Amongst the four constraints, land bears particular relevance in the Indian context.
The continuous tussle between agriculture and industry in a country with a vast
segment employed in agriculture and with a policy attempting to boost the
manufacturing sector has its undesired effects on sectors like housing. But the required
policy support to the housing sector cannot be ignored since construction has direct
linkages with the manufacturing sector and any boost in this sector is likely to boost the
manufacturing sector as well. On the other hand, with growth in the rural sector,
demand for low-cost and affordable housing is expected to increase. The recent bill on
Land Acquisition and Rehabilitation &Resettlement has proposed to fix the
compensation for rural and urban land at four and two times the market value
respectively. It also stipulates a specified period for the completion of projects. Many
feel that the law is likely to increase prices of land and property and also further
constrain land availability. If this happens, it may increase the proportion of land cost in
the total cost.

16. As mentioned earlier, urban land mass is under severe constraint to meet the
housing requirement of the country’s urban population which is growing rapidly. This
implies that the vision of “Affordable Housing for All” will require acquisition/supply
of large land parcels on a regular basis. At the same time, we need to ensure proper
development of the housing sector; otherwise we may be seeing increasing number of
slums and unauthorised settlements.

Financial constraints

17. Another important constraint that has been existent all along for the housing sector
is finance for the developers as well as finance for the households, particularly for the
low cost/affordable housing category. The current financing mechanism prevalent in the
country mostly targets middle and high income sections of the society while the
households falling under low income and economically weaker sections category find it
difficult to secure formal housing finance. Commercial banks and traditional means of
housing finance typically do not serve low-income groups, whose income may vary
with crop seasons or is below the ‘viable’ threshold to ensure repayment or those who
cannot provide collateral for loans. In India, as mentioned earlier, the mortgage to GDP
ratio is estimated at around 7 per cent. This contrasts with mortgage to GDP ratio of
over 51 per cent in USA. However, even if one were to benchmark with more
comparable counterparts, the ratio ranges between 15 and 20 per cent for South East
Asian countries. The penetration level of mortgages is miniscule when compared with
the shortage of housing units. This problem is more acute for low income families
seeking affordable houses.

Need for long-term debt market

18. Housing constitutes a long term asset for a large segment of population in rural and
urban areas. As debt markets are not very deep, access to long-term funding for housing
finance institutions is difficult. Most banks use their shortterm funds from deposits and
deploy these funds in long-term housing loans, thereby creating an asset liability
mismatch. Reserve Bank of India has cautioned banks of the dangers of borrowing
short and lending long. To mitigate such problem, in some countries, banks have been
permitted to float long-term mortgage bonds to match their mortgage assets. To tackle
the interest rate risks, most assets and liabilities are on a floating rate basis. In India,
there has been a long-standing demand to allow pension and provident funds to invest
in housing finance. These funds are suppliers of long-term capital. They typically have
a low risk tolerance but do crave for diversification. The mutuality of interest is strong
between homeowners and long-term institutional investors. Going forward, to tide over
the paucity of funds, it is imperative to develop the secondary mortgage market.
Securitisation ensures recycling of funds. While some countries in South Asia have
issued mortgage-backed securities, most transactions are sporadic and ad-hoc.
Rigidities in the legal framework, high stamp duties and lack of uniformity in
underwriting norms are recognized as some of the hindrances in the development of
mortgage market. Of course, regulatory concerns for unbridled securitization and
massive growth in home loan portfolio with very lax underwriting standards which
caused considerable damage to the financial markets, particularly in the context of the
advance economies like the US, have to be kept in view. Drawing upon the lessons
from imprudent securitization of mortgages which contributed to a larger extent to the
recent global financial crisis, Reserve Bank of India is reviewing the regulatory
framework for securitization in India. It is expected that the market for residential
mortgage backed securities (RMBS) will develop on safe and sound lines under the
new regulatory framework.

Loan products

19. A housing loan is inherently different from any other retail loan. This is because a
house is probably the single largest investment a person makes in his/her lifetime. It has
been noticed that a customer seeking a housing loan does not just require finance – they
may also need ancillary services like loan counselling or legal advice to ensure the title
of the property is clear or technical advice to ensure that the structural aspects of the
property are in order. It is these add-on services that distinguish the good quality of
services from not so good. The typical mortgage borrower of South Asian countries,
including India belongs to the upper or middle class, is of an average age of 35-40
years, usually a first time home buyer and by and large a salaried employee.

20. Most loan products are fairly standardised – plain vanilla home loan products, loans
for home improvement and extension, land loans, loans for non-residential premises
and the newer breed of loans include home equity and topup/ personal loans. Against
the backdrop of lower interest rates seen across the region, most home loans are on
floating rate loans. In India, the floating rate of some banks and housing finance
institutions is benchmarked to prime lending rate. It has been noticed that several
customers opt for floating rate loans without understanding the inherent risks involved.
Even most of the existing fixed rate loans have been converted into floating rates. To
tide over the dilemma of whether to opt for a fixed or floating rate loan, blended
options are being offered wherein the customer can hedge part of the interest rate risk
by opting for a combination of fixed and floating rates. The major issue, however, is
that most individual borrowers find it difficult to manage the interest rate risk under
pure or semi floating interest rate regime. Hence, there is greater need for fixed interest
rate loan products for individual borrowers. Coming to currency risk, fortunately, home
loan borrowers in the Asia-Pacific region and India, in particular, are not exposed to
exchange rate risks as borrowings are in domestic currency. Another area of product
innovation could be deposit linked home loan products. This would be very useful for

low income groups as they can build equity and establish payment capability track
record for availing of home loans.

Legal constraints

21. A major feature of the Indian urbanization process is its non-uniform geographical
spread. While smaller cities and towns are fast emerging as centre of demand, the
pressure on existing four metros remains enormous. A crucial factor behind this
tendency is the barrier for major players in real estate in tapping the vast land potential
in rural areas reinforced by poor enforcement of laws against encroachment of public
lands as well as lack of clear titles to private lands causing an artificial scarcity of land
in rural areas. Another major issue is absence of large scale digitization of land records
and the easy access to such records for checking titles/encumbrances.

22. The dynamics between rural and urban housing demand is also different with
housing in rural India still largely for own use rather than for sale and resale. A possible
reason for this, among other things, could be the problem of transferring ownership
rights. As we reach limits to urbanization in metros, rural areas should increasingly
come under the focus of real estate development and we would require strong legal
framework to prevent the bottlenecks.

Role and responsibilities of stakeholders

23. Given the dimensions of the problem and various constraints that affect a viable and
sustainable solution, well-coordinated and concerted effort on the part of all the
stakeholders, including the private sector, is required. This will ensure that all segments
of the population genuinely aspiring to own a house are effectively catered to without
of course compromising on financial stability and ecological balance. Efforts of
regulators and government/ government bodies to tackle this colossal housing shortage
will have limited impact until and unless the private sector joins hands to meet the

Commercial banks and HFCs

24. The Indian banking sector has an expansive reach and is well geared to serve all
segments of the society, including the underprivileged. The banking sector has been
actively involved in lending to the housing sector with an outstanding of Rs. 3786
billion as on December 30, 2011, which is an increase of Rs. 410.10 billion (12.10 per
cent) over the previous corresponding year. The housing loan portfolios of HFCs
registered a growth of 21.71 per cent during 2010-11. This was comparatively higher
than 15 per cent growth reported by commercial banks (Tables II&III).

Table II: Comparative position of housing sector credit by commercial banks and HFCs

(in per cent)

Share of Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11

HFC 25.84 25.03 24.64 26.50 27.31 29.61 31.16

Housing Credit
Bank 74.16 74.97 75.36 73.50 72.69 70.42 68.84

HFC 32 28 23 24 21 21 21
Credit Growth
Bank 50 33 25 13 16 8 15

(Source: Reserve Bank of India &ICRA)

Table III: Outstanding housing loans of HFCs‡

(as on March 31) (Rs. Billion)

2009 2010 2011

Outstanding loans 1268.23 1531.88 1864.38

(16.12%) (20.79%) (21.71%)

(figures in bracket reflect the year on year percentage


25. The housing loan portfolio of any financial institution is a product of two variables
– number of accounts and loan outstanding per borrower. It has been observed that
there has been a noticeable slowdown in the growth of the portfolio (Tables IV&V).
One plausible reason is that post-crisis, banks have realised that while the demand for
housing loans is tremendous, there is no substitute for prudent lending policies. This
probably explains the slowdown in the growth rate of number of accounts. Another
reason which has affected the demand has been the rising prices of property and
prevalence of relatively high rate of interest in the context of high inflation rates.

Table IV: Outstanding gross bank credit§

(Rs. Billion)

Dec Mar.26, Dec Mar Dec

18,2009 2010 31,2010 25,2011 30,2011

Gross Bank Credit 28019.3 30885.7 35681.3 41304.7

(27.3%) (15.8%)
Food Credit 475.0 485.6 633.0 641.1 846.9

(33.3%) (33.8%)
Non-food Credit 27544.3 30400.1 35048.2 40457.8

(27.2%) (15.4%)
Housing (Including Priority Sector
2936.5 3009.3 3376.0 3461.1 3786.0

(15.0%) (12.1%)
(figures in brackets reflect the year on year percentage change)

Table V: Growth rate of number of accounts and

outstanding amounts in the housing sector portfolio
of commercial banks

(in per cent)

Accounts Outstanding

Mar-08 9.05 9.25

Mar-09 13.03 15.55

Mar-10 11.53 8.72

(Source: Statistical Tables Relating to Banks in India,

26. It is encouraging to note that the share of HFCs in the Indian housing market has
been exhibiting a rising trend. Looking ahead, HFCs are likely to gain sufficient
experience in the sector and would be able to maintain their market share on the
strength of their focused approach, targeting of special customer segments and
relatively superior customer service. This in a way would pave for constructive
competitive environment as traditional lenders like banks would need to tap their
extensive network and broad customer base more effectively and at the same time
maintain the priority sector lending targets.

27. In order to remain competitive, both commercial banks and the HFCs need to
realize that a customer seeking a housing loan does not just require finance – they also
need ancillary services and hand-holding like loan counseling, legal advice, etc. Selling
a loan product is a small step in the process of making affordability of housing a reality;
bigger leaps by way of encouraging deeper financial inclusion coupled with financial
literacy is the need of the hour.

28. Re-engineering of the existing business models is extremely essential given the fact
that a large number of the targeted and potential customers are possibly financially
excluded. Assessment of the customers and their credit requirement can be achieved
more effectively by adopting a field based approach, such as, using surrogates,
triangulation and building up knowledge about the customer. Banks and HFCs have to
provide innovative products to the sector and work in close collaboration with the other
stakeholders in the industry. They also need to adopt different appraisal and risk
management methods for low ticket housing loans.

Micro Finance Institutions (MFIs)

29. In the wake of micro-finance revolution in India, housing micro-finance has

assumed a lot of importance and has potential of having notable impact on the
stakeholders engaged in the mission for affordable housing. Microfinance has the
potential to enable small borrowers to start planning for a house and arranging requisite
resource for it. At the same time, these institutions can have an impact on the household
decision making, portfolio diversification of lenders, expansion of housing sector and
growth of the local economy as a whole.

30. Microfinance for housing is believed to progressively upgrade poor families'homes.

Such upgradation would include improving existing rooms, adding a room, or installing
water or electricity. Based on their credit history microfinance for housing should be
designed for the low-income households who wish to expand or improve their
dwellings or build a home in incremental steps, relying on small loans raised over a
period of time. It has to be a sustainable approach suited to the needs of the low-income

31. MFIs are considered to be the next best alternative for financing the EWS and LIG
category. MFIs, however, face challenges which prevent them from extending housing
loans. The challenges are primarily due to the longer period of housing loans (typically
between five to seven years minimum, if not more) as against usual micro loans of one
to two years duration and due to the larger amount of loan compared to usual micro
loans extended by MFIs. Typically, a house, particularly in the urban areas, will be
about `1 lakh, whereas when MFIs extend livelihood finance, between ` 10,000 to `
35,000. If they have to lend to a significant number of people, the amount to be loaned
has to increase substantially. This can lead to problem for MFIs. Another problem with
the MFIs is of availability of finance and ensuring regular collection of larger
installments from the borrowers. Recognising the importance of community-based
financial institutions as delivery mechanisms for housing finance to the financially
excluded, the NHB has initiated a housing microfinance programme by way of
financial assistance to the MFIs. The programme is based on an integrated habitat and
partnership approach with customised product intervention aimed at supplementing
various other financial sector interventions.

Private sector stakeholders

32. Today, technological innovations have transformed the conventional style of trade
and commerce. There are numerous examples which reflect that with adoption of
technology, the end-product can be highly improvised and made affordable to all
segments of customers. Some of the best examples would be the rapid technological
innovation in the mobile telephone industry, marketing innovation in consumer non-
durable sector, etc. It is high time that the real estate sector also invests resources for
more research and development to enable construction of environment friendly, low
cost houses. It is important to realize that the terrain of our country, climatic conditions
of regions, economic conditions of people and the intensity of the problem changes as
we traverse across the country. A search for one technology fits all would not be viable
and practically feasible.

33. One model which could be considered and developed is the hub and spoke model
for enhancing rural housing construction. The ‘hub’ of the service could be located in a
district/taluka headquarters and the services into rural/interior areas are provided by
local rural centres i.e. the ‘spokes’. The hubs will be the centre, say, for pre-fabrication
of semi-finished structures for housing and skilled labour and will provide men
&material to the spokes. This will ensure scale of economies in technologically
innovative and homogenous low cost housing to the rural centres.

National Housing Bank (NHB)

34. NHB was setup with an objective of channelizing long-term finance to individual
households, thereby proving the much needed impetus to the housing sector. NHB acts
as a principal agency to promote housing finance institutions both at local and regional
levels and also provides financial and other support to such institutions. The year 2010-
11 has been an important year for the NHB as it had crossed Rs. 120 billion loan
disbursements, of which approximately 50 per cent was for rural housing, during the
financial year. Since inception, NHB has been supporting the housing finance
companies and during the year 2010-11, over 50 such companies had a portfolio of over
Rs. 1100 billion**. One of its flagship projects is the Golden Jubilee Rural Housing
Finance Scheme which aims at the rural households. The scheme offers a platform for
easier access to housing finance to enable an individual in the rural area to either build
a house or improve the existing house††. The initial success of the scheme can be
gauged from the fact that over 3 million dwelling units have been financed.

35. NHB is also playing a significant role in creating market infrastructure for housing
finance and has made efforts in plugging the demand supply gaps, particularly for the
low and moderate income households in urban and rural areas. It had led initiative in
developing the secondary mortgage market and the standards for securitisation market
in the country. The Bank is also leading the initiative for setting up a Government-
sponsored Credit Guarantee Trust Fund for low income housing in close collaboration
with the Ministry of Housing, Govt of India, and for setting up a Mortgage Guarantee
Company in partnership with other Internatial Financial Institutions.

Government/Government bodies

36. The Government policies have remained geared towards alleviating poverty with a
host of direct intervention programmes. The early eighties was the period of shift in the
policy orientation from the exclusive focus on nutrition based approach towards
poverty to cover broader perspectives of providing affordable housing to all. The
Scheme of Affordable Housing in Partnership promotes various types of public-private
partnerships – of the government sector with the private sector, the cooperative sector,
the financial services sector, the state para-statals, urban local bodies, etc. It has the
potential to provide a major stimulus to economic activities through affordable housing
for creation of employment, especially for the construction workers and other urban
poor who are likely to be amongst the most vulnerable groups in during the economic

37. Government bodies can consider single window clearance mechanism for the
purpose of further simplifying the approval processes for low cost affordable housing
alongwith reconsideration of the taxation policies. The public agencies and the state and
local governments should work to bring efficiency in land market, approval processes,
provision of efficient infrastructure and egovernance viz. introducing electronic record
for land and bringing in more transparency in the record of land and houses, etc. It will
add good value if the financing agencies can also connect into these developments and
together drive the reforms at the state and local levels. In order to meet the enormous
needs of the housing sector, short cuts through the subsidy approach are no longer
sustainable over the long period. As subsidy based approach cannot be stretched beyond
a point, a more viable and sustainable strategy has to be evolved. There is, therefore, a
need for having a market oriented mechanism to meet the challenge of the affordable
housing sector.

State Governments

38. In the entire process for creating an enabling environment for affordable housing,
the role of State Government is extremely critical. State Governments may contemplate
forging Public-Private Partnerships to ensure a fair return on investment to the private
land owners/developers through guided development and availability of serviced sites
for allotment to low income families at affordable prices. Incentives and provision of
infrastructure can induce private sector entrepreneurs to invest in housing including that
for the poor. It can consider measures to control the spiralling increase of land prices
and curb speculative activities for developing land and also check unregulated and
environmentally damaging land development activities. Another aspect which may be
considered is the promotion of high density housing in selected areas in cities through
appropriate amendments to zoning and land use regulations. This may obviate the
necessity of costly land acquisition and avoid high infrastructure costs. State
Governments may also revisit the current provision of tenancy rights and promote
rental housing by creating a balance between the interests of the landowner and the
tenant. This will pave the way for supply of rental housing at affordable rents and act as
an incentive for people to build houses for themselves and for others.

Reserve Bank of India

39. The supportive policy of the Reserve Bank of India and enabling fiscal regime has
together contributed to the growth and expansion in the housing market. As regulators
of the banking system, it is, however, important for the Reserve Bank of India to remain
cautious against imprudent practices for short term gains. The current focus of its
regulations is to ensure orderly growth of housing loan portfolios of banks. The policy
orientation of the Reserve Bank, simply put, is to ensure and promote inclusive growth
without adversely impacting the equilibrium of financial stability. Reserve Bank
remains supportive of initiatives of the stakeholders as long as the programmes of
affordable houses for all do not lead to structural damages to the financial eco-system.

40. Alongwith the Government, SEBI, Reserve Bank’s endeavors have been to develop
a deep and vibrant debt market including for mortgage securities in a calibrated manner
so as to ease financing pressures on the banks and also to provide an alternate avenue
for raising long term resources. Reserve Bank has permitted investments by banks in
mortgage backed securities subject to certain conditions. We are also constantly
reviewing existing policy framework including those governing the priority sector
lending to ensure that the bank credit to these sectors remain growing, smooth and

41. Reserve Bank has been using pre-emptive countercyclical provisioning and
differential risk weights - supplemented by varying loan to value (LTV) ratios - to
contain excessive credit growth to sectors which show signs of risk build-up. In order to
prevent excessive leveraging, the Reserve Bank had advised banks in December 2010
that the LTV ratio should not exceed 80 per cent in respect of housing loans. However,
for small value housing loans, i.e., housing loans up to `2 million LTV ratio was
prescribed at a higher maximum level of 90 per cent. Further, the risk weight for
residential housing loans of higher amounts, i.e. `7.50 million and above, irrespective of
the LTV ratio, has been prescribed at 125 per cent to prevent excessive speculation in
the high value housing segment.

42. In the recent past, it was observed that some banks were following the practice of
sanctioning housing loans at teaser rates, i.e., at comparatively lower rates of interest in
the first few years, after which rates are reset at higher rates. This practice raised
concern as some borrowers may find it difficult to service the loans once the normal
interest rate, which is higher than the rate applicable in the initial years, becomes
effective. It was also observed that many banks, at the time of initial loan appraisal,
were not taking into account the repaying capacity of the borrower at normal lending
rates. Therefore, in view of the higher risk associated with such loans, the standard
asset provisioning on the outstanding amount had been increased from 0.40 per cent to
2.00 per cent with effect from December 23, 2010. The provisioning on these assets
would revert to 0.40 per cent after one year from the date on which the rates are reset at
higher rates if the accounts remain 'standard'. Since restructuring of an account is
normally indicative of some problem in the account, it was decided in November 2008
that restructured housing loans should be risk weighted with an additional risk weight
i.e. 25 percentage points over the risk weights normally applicable to the account.

43. Although some of these prudential norms appear to be restrictive for growth of the
housing finance sector, it needs to be kept in view that they are essential for sustainable
and orderly development of the sector as they are meant to address macro-prudential
concerns of financial stability.

Way forward

44. The desire for a safe and secure home is timeless and universal. The twin problems
of affordability and accessibility that impede the progress of housing in our country
need to be addressed on a sustainable basis. For this, it would be desirable for the
governments to withdraw from direct participation in the housing and housing finance
sector and instead they need to take on the role as facilitators to create the enabling
environment to encourage greater private sector participation. Further efforts of the
government are required to strengthen foreclosure laws, land records need to be
computerised and archaic land laws, especially rental laws, need a complete overhaul.
Steps, such as, digitization of land records, linking of central regulations with state
regulations, encouraging credit bureaus, introducing mortgage insurance, allowing real
estate mutual funds and creating a favourable environment to facilitate foreign direct
investment in housing for genuine and needy customers will help stimulate the housing
finance sector.

45. Currently, the real estate sector is largely unregulated with consumers often unable
to procure complete information or enforce accountability on builders and developers in
the absence of effective regulation. In order to plug the gap, the Central Government
has proposed to establish the Real Estate Regulatory Authority in each state with
specified functions, powers, and responsibilities. The objective is to ensure regulation
and planned development in the real estate sector. Once these authorities are
established, they should act as the nodal agency to co-ordinate efforts regarding
development of the real estate sector and render necessary advice to the appropriate
government agencies to ensure growth and promotion of a transparent, efficient and
competitive real estate sector and also establish resolution mechanisms for settling
disputes between the builders/promoters and the allottees/ buyers.

46. There is also a felt need for the institutions involved in the financing of housing
sector to consider developing segment specific credit products to enable more people to
afford a house. One such product could be savings induced home loan or a home loan
deposit. The willing consumers may be induced to generate a savings balance by way
of monthly or periodic deposits. This will enable creation of a track record for
repayment of a future home loan product. Once the customer reaches a threshold
balance, the financial institutions can consider sanctioning of a housing loan. The
balance in the account could act as collateral or the margin. The amount deposited
every month would act as the base to assess the repayment capacity of the customer for
the purpose of calculating the monthly repayment installments.

47. The credit risks originating in the housing sector, particularly low ticket housing
segment, should also be internalized through proper insurance schemes for banks and
other lenders. The various stakeholders should aim at timely completion of projects,
delivery of houses/flats to target segments without cost escalations and with valid titles
and all necessary clearances.

48. In short, a comprehensive and holistic approach involving easy availability of land,
accessible financing, supportive legal framework and innovative technology is required
for making housing affordable for all. I am sure that this conference will generate
meaningful discussions and pave way for innovative thinking and policy inputs to make
housing affordable and available to all.

* Inaugural address delivered by Harun R Khan, Deputy Governor, Reserve Bank of

India at International Conference on Growth with Stability in Affordable Housing
Marketsorganized by the National Housing Bank and the Asia Pacific Union for
Housing Finance on January 30, 2012 in New Delhi. The speaker acknowledges the
contribution of Shri. M P Baliga, Shri. S C Dhal and Shri Surajit Bose of Reserve Bank
of India and the valuable comments of Shri. R V Verma, Chairman, National Housing

ICRA Report - Industry Outlook and Performance Review of Housing Finance
Companies and the Indian Mortgage Finance Market for 2010-11.

Source: National Housing Bank
Source: Reserve Bank of India Report on Sectoral Deployment of Bank Credit –
December 2011
Source: Annual Report of the National Housing Bank
Source: Annual Report of the National Housing Bank

 The increment in Revenue from operations from year march ended 2013 to year
march ended 2014 is 19%.
 The Profit before tax increased by 25%.
 Total Income has increased by 19%.
 The Profit after Tax is raised by 17% within a year.
 Increment in Net Interest Income is 16%.

Data of Area Office, HAZRATGANJ, LUCKNOW –

No. of cases Sanctioned per month = 200 to 250
Average amount Disbursed per month = Rs. 32 crores
Thus the annual Disbursement from this branch is = Rs. 375 crores (Approx.)
Average Default Amount occurs in an year = Rs. 15 crores
Thus the ratio may be calculated between Disbursed & Default Amount for last 5
years as under-
= 375*5/15*5
= 1875 / 75
Ratio = 25: 1
The above Ratio itself shows the Accuracy of the Appraisal & Financing of


I did my training at ‘Administrative End’. And the time was too few to analyze
the system from all angles properly. There may be several terms which are not covered
in this report due to lack of time. Financing is a broader term. I tried to cover maximum
terms and process which I’ve seen during the training. Still department in LICHFL as
‘Recovery’ has not been covered because of limitation of training – period.


A New
New Scheme
Scheme Especially For Working
Working Women
In India Women are running towards jobs. So if we make a special scheme for
working women then it will definitely raise the market of the company. According to
data in Lucknow 103355 women are main worker and if out of these if only 50000
do not have their own home. Out of these if 10000 meet our criteria out of these
10000, 8000 take loan of minimum 1 lacs then we have 80 crores in our hand just in
1 year.

More Focus on Ads
LICHFL should focus on advertisements also. It should mainly try to take
sponsorship of popular T.V. programs & cricket match. It should take advantage of
being a Semi Govt. company which makes it more reliable. LICHFL may use the
following Tag – Lines:

 Higher Satisfaction at Lower Interest

 Easy Application, Quick Approvals
 Transparent Services with No Hidden Cost
 The Largest Network To Make U’R Dream True

Thus it may widen its area of marketing and can easily reach the persons who are
unaware about the company and its frequent services.

In present Mobile Phones are the best mediums of establishing interaction. So
the company should give adds on mobiles and should provide desired information on
customer’s fingure tips. Mobile Marketing can be used for following purposes:

 Response fulfillment
 Sales Promotion
 Direct Sales
 Customer Service Support
 Research & data collection
 Advertising
 Customer Relationship Management

Feedback from Customer
Feedback is much essential especially for those companies who deal with
customers directly. Actually this is the way to provide customized services and to
have view of customers about the services being provided to them.
The feedback from helps to understand the weakness/strengths of the internal
system of company and enables to work on better service delivery.

Making a New Post
In order to improve the quality of services the company must have a better
Dispatch system.
The information must be delivered to the customers at right time. It is finance
company so There, various fluctuations take place in rate of interest due changing
inflation rate and C.R.R. (Cash Reserve Ratio). The new post can speed up to
provide following information:

 Status of Loan
 Revised EMI
 Status of Cheques
 Changed rate of Interest
 Any new scheme

Generate Ideas from Employees
Many companies are using this strategy because an employee can analyze
better the gap between policies and its implementation. These ideas may be
obtained by providing an idea generation form individually or by making an “Idea
Box” in which employees can put their idea along with name & identification
number issued by company.
The employee giving the best idea should be awarded. Such criteria of
generating new ideas will form a mutual trust between the employees & company
and will be profitable from the company’s perspective also.


As we have studied the criteria of appraising the customer’s creditability & steps
to financing in LICHFL. Simultaneously we’ve also determined the ratio between
disbursed amount and default amount of last 5 years (Main Area Office,
Lucknow) that is 25: 1. Total



The above figure itself reflects the efficiency of the ‘Appraisal – System’ &
‘Financing Criteria of the company’.


 Marketing Management – “Philip Kotler”
 Research Methodology – “C.R. Kothari”
 Dr. Maheshwari. S.N, Principle and practice of Accounting
 Vishwakarma.R.K, Urban and Regional Planning Policy in India, Uppal
Publication House, New Delhi.



SWOT analysis is a tool for auditing an organization and its environment. It is

the first stage of planning and helps marketers to focus on key issues. SWOT
stands for strengths, weaknesses, opportunities, and threats. Strengths and
weaknesses are internal factors. Opportunities and threats are external factors.

S: - Things the company does well.

W: - Things the company does not do well.
O: - Conditions in the external environment that favor strengths.
T: - Conditions in the external environment that do not relate to existing strengths or
favor areas of current weakness.
 Its transparent services.
 No hidden costs.
 Better customer dealing.
 Record revenues and increasing market share.
 Company has brand equity among customers.
 Door step services through its huge network throughout the country.
 The whole process of financing takes time about 15 to 20 days which must
be reduced.
 Boom in real estate sectors.
 Increasing trend of multiplex & shopping malls.
 Huge fluctuation in share market.
 Increasing rate of inflation.
 Increasing competition.

LIC Housing Finance FY 2014 net profit up 29% to Rs 1317.19 crores Q4 Net
Profit up by 17% to Rs. 370.02 crores Q4 Total Income up 19%; Q4 Net Interest
Income up by 16% FY 2014 Individual Loan portfolio grows 18% to 88559 crores
Board proposes 225 % dividend

Mumbai, April 21, 2014

LIC Housing Finance announced its audited results for the year ended March 2014,
following its approval by the Board of Directors in a meeting held in Mumbai on April
21, 2014.

Performance Highlights-Q4 FY 2014

(Figures in Rs. crores)

Quarter Ended March 2014 Quarter Ended March 2013 Variation

Revenue from operations 2407 2028 19%
Total Income 2478 2075 19%
Net Interest Income 533 461 16%
Profit before tax 521.58 416.32 25%
Net Profit after Tax 370.02 316.16 17%

1 crore =10 million

The company's recorded total income for Q4 FY14 was Rs. 2478 crores as against
Rs.2075 crores during the same period previous year, a growth of 19%. Revenue from
operations grew 19% from Rs. 2028 crores to Rs. 2407 crores. Net Interest Income was
Rs 533 cr, registering a growth of 16% over the same period last year. Profit before Tax
for the quarter was Rs.521.58 cr a growth of 25% over the same period in the previous
year year.

Net profit after Tax for the Q4 FY14 was Rs. 370.02 crores as compared to Rs.316.16
crores in the corresponding period previous year, thus showing a growth of 17%. Net
Interest Margins for the Q4 FY14 stood at 2.40% as against 2.16% for Q3FY14.


Performance Highlights –FY 2014

(Figures in Rs. crores)

Year ended March 2014 Year ended March 2013 Variation

Revenue from operations 9073 7459 22%
Total Income 9335 7659 22%
Net Interest Income 1899 1535 24%
Profit before tax 1825.50 1373.57 33%
Net Profit after Tax 1317.19 1023.21 29%
Dividend 225% 190%
Gross NPA% 0.67% 0.61%
Net NPA% 0.39% 0.36%
Outstanding Mortgage Portfolio 91341 77813 17%
EPS (Rs 2 paid-up) 26.10 20.28

1 crore =10 million

For the year ended March 2014, the company's total income was Rs.9335 crores as
against Rs. 7659 crores during the same period previous year, a growth of 22%.
Revenue from operations grew 22% from Rs. 7459 crores to Rs.9073 crores. Profit
before Tax for the year stood at Rs 1825.50 cr registering a growth of 33% over the
previous year.

Net profit after Tax during this period was Rs.1317.19 crores as compared to
Rs.1023.21 crores in the corresponding period of the previous year, a growth of 29%.

The outstanding mortgage portfolio as on March 31, 2014 was Rs. 91341 crores as
against Rs. 77813 crores on March 31, 2013, thus registering a growth of
17%.Individual Loan Portfolio stood at Rs 88559 cr as on March 31, 2014 a growth of

The Gross NPAs of the company stood 0.67% on March 31, 2014 as against 0.61% as
on March 31, 2013. Net NPAs were Rs 0.39% as against 0.36% for the corresponding
dates. Gross NPAs in the individual loan segment stands at 0.27% as on March 31,

2014 as against 0.32% as on March 31, 2013. Net Interest Margins for the full year was
2.25% as against 2.18 % for the FY 2013.

The Board of Directors have recommended dividend of 225%, including Silver Jubilee
dividend of 25 %.

LIC Housing Finance, Managing Director & CEO, Ms. Sunita Sharma, said"This was a
year where the macros have been very challenging. In spite of the difficult environment
we have delivered yet another year of strong performance in all the areas of operations-
portfolio growth, margin expansion and continue to maintain industry best asset quality.
We are stepping into our 25th year of operation and would like to make it memorable
by achieving greater heights".

About LIC Housing Finance Ltd

LIC Housing Finance Ltd is one of the largest housing finance companies in India
having one of the widest networks of offices across the country and representative
offices at Dubai & Kuwait. In addition, the Company also distributes its products
through branches of its subsidiary LICHFL Financial Services Ltd. LIC Housing
Finance Ltd was promoted by Life Insurance Corporation in 1989 and a public issue
was made in 1994. It launched its maiden GDR offering in 2004. The company enjoys
the highest rating from CRISIL & CARE indicating highest safety with regard to the
ability to service interest and repay principal.


Coordinating Agencies of LICHFL

Mainly there are three agencies which coordinate the LICHFL in appraising and
It has a large network through out the country which helps the LICHFL in “Field –
Investigation”. Authenticate members of ONICRA do field investigation of the site of
borrower and prepares report. If the report is positive then LICHFL forward the file
towards Sanction otherwise the application is cancelled.
It has also a large network through out the city which helps the LICHFL in “Field-
Investigation”. Authenticate members of DLF do field investigation of the site of
borrower and prepare report. If the report is positive then LICHFL forward the file
toward Sanction otherwise the application is cancelled.

CIBIL: {Credit Information Bureau of India Limited}

CIBIL provides the financial information of the borrowing party. It discloses all the
liabilities, whether these are made at different places & belong to different banks /
financial institutions. Thus it helps in assessing the creditability of the party and
LICHFL decides loan limit of the party accordingly.


It is very essential to check the creditworthiness of an applicant and the credit

history of borrower for consumer or commercial loans. CIBIL provides this information
to its Members in the form of credit information reports (CIR). As a member of CIBIL,
we can use this report for taking a decision on credit sanction by gaining access to the
credit history of a borrower for the previous 36 months. This report provides both
positive data such as the address of the customer and loan repayment records as well as
negative data like penalties and defaults. The CIR includes the following information:

 Basic borrower information like:

 Name
 Address

 In case of individuals:

 Identification numbers
 Passport ID
 Voters ID
 Date of Birth.

 In case of non-individuals

 D-U-N-S® Number
 Registration Number
 Legal Constitution

 Records of all the credit facilities availed by the borrower

 Past payment history
 Amount overdue
 Number of inquiries made on that borrower, by different Members: - This will
help in knowing whether applicant is shopping around.
 Suit-filed status.

The CIBIL reports must be accessed for all the applicants in an individual loan case of `
5 lakhs and above. This report must be accessed for all take over cases positively.
Note of caution: CIBIL report is only indicative. It is possible that entire credit history
of an applicant may not be shown, at present this report is to be treated as a precaution
only, it is not conclusive.


I take the opportunity to pay hearty regards to Dr. D. K. GARG sir (Chairman), for
lending me their kind support for completion of my project thank all those who directly
or indirectly supported me morally, financially and through providing knowledge by
which I could complete my training. Last but not least, I am thankful to the
management and Mr. Praful Malviya (LIC Housing Finance Ltd.) & especially to my
guide manager whose co-operation and guidance was a milestone in completion of my