Summer Internship Project Report

ANALYSIS OF CURRENT TRENDS AND PRACTICES IN

HOUSING LOAN AT RELIANCE HOME FINANCE LTD.

Submitted in partial fulfillment of the

Requirements for the award of Post Graduate Diploma in Management

Submitted By

Name: Shruti Shikha

Roll No: PGFB1253

SUBMITTED TO: (Dr. Swati Agrawal)

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 DECLARATION

I hereby declare that the Summer Training Report entitled ("Analysis of current trends and
practices in housing loan at Reliance Home Finance Ltd.”) is an authentic record of my own work
as requirements of 8 weeks Summer Training during the period from 15-04-2013 to 13-06-2013 for the
award of degree of PGDM (Post Graduate Diploma in Management), Jaipuria Institute of
Management, Noida under the guidance of Dr. Swati Agrawal.

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 ACKOWLEDGEMENT

"Gratitude is not a thing of expression; it is more matter of feeling."

There is always a sense of gratitude which one express towards others for their help and
supervision in achieving the goals. This formal piece of acknowledgement is an attempt to
express the feeling of gratitude towards people who helpful me in successfully completing of
my training.

I would like to express my deep gratitude to Mr. Deepak Aggarwal my industry mentor for
their constant co-operation. He was always there with his competent guidance and valuable
suggestion throughout the pursuance of this research project. Special thanks to Mr. Amit
Goyal, Mr. Aqeel Ahmed and Mr. Nikunj Tank who guided me to work and to give
valuable suggestion for improving my work. Last but not least I would also like to express my
sincere thanks to Dr. Swati Agrawal (Faculty, Jaipuria Institute of Management) my
mentor for her valuable support. She gave me the opportunity to do this project and her timely
guidance making this project what it has come out to be.

Above all no words can express my feelings to my parents, friends all those persons who
supported me during my project. I am also thankful to all the respondents whose cooperation
& support has helped me a lot in collecting necessary information.

Lastly would thank almighty God for his blessings showered on me during the completion of
project report.

Shruti Shikha
PGFB1253
PGDM (General)
2012-14

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 TABLE OF CONTENT
CHAPTER – 1 ..........................................................................................................................................8
INTRODUCTION ....................................................................................................................................8
1.1 MORTGAGE......................................................................................................................................9
1.1.1 LOAN AGAINST PROPERTY (LAP)..............................................................................................9
1.1.2 HOUSING LOAN........................................................................................................................9
1.2 ADVANTAGES OF HOME LOAN ............................................................................................10
1.3 DISADVANTAGES OF HOME LOAN ......................................................................................10
CHAPTER – 2 ........................................................................................................................................11
OBJECTIVES OF THE STUDY............................................................................................................11
2.1 OBJECTIVES OF STUDY...........................................................................................................12
2.2 PURPOSE OF STUDY.................................................................................................................12
2.3 SCOPE OF STUDY......................................................................................................................12
CHAPTER – 3 ........................................................................................................................................13
LITERATURE REVIEW .......................................................................................................................13
3.1 RESEARCH PAPERS ..................................................................................................................14
CHAPTER – 4 ........................................................................................................................................15
RESEARCH METHODOLOGY............................................................................................................15
4.1 RESEARCH METHODOLOGY..................................................................................................16
4.1.1 RESEARCH OBJECTIVE............................................................................................................16
4.1.2 TYPE OF STUDY.......................................................................................................................16
4.1.3 SAMPLESIZE...........................................................................................................................16
4.1.4 SAMPLING TECHNIQUE..........................................................................................................16
4.2 DATA COLLECTION .................................................................................................................16
PROJECT-1 ............................................................................................................................................17
HOUSING LOAN IN INDIA .................................................................................................................17
CHAPTER – 5: INDUSTRY PROFILE................................................................................................18
5.1 NATIONAL HOUSING BANK...................................................................................................18
5.2 OVERVIEW OF HOME LOAN ..................................................................................................19
5.3 AFFORDABLE HOUSING .........................................................................................................19
5.4 HOME LOAN MARKET.............................................................................................................21
5.5 TRENDS OF HOME LOAN ........................................................................................................22
5.6 FIVE STEPS TO CONSIDER BEFORE TAKING A HOME LOAN.........................................23
5.7 HOME LOAN PROCEDURE IN INDIA ....................................................................................24

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 5.8 FEES/CHARGES ASSOCIATED WITH HOME LOAN BEFORE AND AFTER THE LOAN
DISBURSEMENT..............................................................................................................................25
5.9 MAJOR HOUSING FINANCE COMPANIES IN INDIA ....................................................27
5.10 INTEREST RATE PROVIDED BY BANKS/HFCs..................................................................29
5.11 TYPES OF HOME LOAN .........................................................................................................31
CHAPTER – 6: COMPANY PROFILE .................................................................................................33
6.1 INTRODUCTION ........................................................................................................................34
6.2 ABOUT THE ORIGINATOR ......................................................................................................34
6.3 TYPES OF HOME LOAN AND SCHEMES OFFERED............................................................35
6.4 CUSTOMER TYPE......................................................................................................................36
6.5 CREDIT APPRAISAL PROCESS ...............................................................................................37
6.6 RELIANCE HOME LOANS - FEATURES & BENEFITS.........................................................39
6.7 REWARDS EARNED BY THE CHANNEL PARTNERS .........................................................39
PROJECT- 2 ...........................................................................................................................................40
ELIGIBILITY OF HOME LOAN ..........................................................................................................40
@.............................................................................................................................................................40
RELIANCE HOME FINANCE LTD. ....................................................................................................40
CHAPTER – 7: ELIGIBILITY OF HOME LOAN................................................................................41
7.1 ELIGIBILTY CALCULATION @ RELIANCE HOME FINANCE LTD. .................................41
PROJECT – 3..........................................................................................................................................44
MARKET ANALYSIS AND INTERPRETATION ..............................................................................44
CHAPTER–8: ANALYSIS AND INTERPRETATION........................................................................45
CHAPTER - 9 .........................................................................................................................................52
CONCLUSION.......................................................................................................................................52
CHAPTER - 10 .......................................................................................................................................54
LIMITATIONS & SUGGESTIONS ......................................................................................................54
ANNEXURES ........................................................................................................................................57
BIBLIOGRAPHY...............................................................................................................................58
QUESTIONNAIRE ............................................................................................................................59

TABLE 1- DEFINITION OF AFFORDABLE HOUSING....................................................21

TABLE 2- MARKET ANALYSIS........................................................................................45
TABLE 3 MARKET ANALYSIS OF AGE DEPENDENCY................................................46
TABLE 4 - PREFERRED PRIMARY ACCOUNT ...............................................................47
TABLE 5 - DESIRED SECTOR ...........................................................................................48

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 EXECUTIVE SUMMARY

INTRODUCTION TO HOME LOAN

A home represents the largest asset that typically people have and this is why home loans have
such a huge impact in the loan market today. Home Loan is a secured loan which is taken for
purchasing or constructing a home or for making improvements in the residential property. It
is offered by the lending institution against the security of the house/property.

INTRODUCTION TO STUDY
My project title is “Analysis of current trends and practices in housing loan at Reliance
Home Finance Ltd”. I selected this topic because the Indian housing finance industry has
grown up by leaps and bound in few years. The objective is to know the Housing Loan
scenario in India as well as the current market practices that are practiced and which will help
in doing Comparative Credit analysis as per current need. The project will cover the
following:

1) Housing scenario in India

2) Market analysis
3) Credit Appraisal Process (Eligibility Calculation) in Reliance Home Finance Ltd.

RESEARCH METHODOLOGY
In research methodology the project is based on Exploratory as well as Descriptive Study, the
sample size for the project is 50 and the data is collected from various sources that are:

Primary Data: It had been collected through personal interaction with the industry people and
structured questionnaire filled up by the respondent to know their requirement in availing the
loan facility.

Secondary Data: It had been collected from different sources like- websites, newspapers,
research papers etc...

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Based on the scope the study was divided into three parts, namely-

Project 1 – Housing Loan in India – This project covers the industry and company (Reliance
Home Finance Ltd.) profile which includes NHB’s (National Housing Bank) roles and
responsibilities, history of home loan, affordable housing, home loan market, recent trends of
home loan and its procedures in India, different types of home loan and interest rates provided
by financial institutions like banks, HFC (Home Finance Company) and top players in the
home loan market. In company profile (Reliance Home Finance Ltd) introduction of company,
originator of Reliance Capital Ltd. (RCL), types and scheme offered with their types of
customers, credit appraisal process, company’s features, benefits and appraisals are covered.
This project includes the overall study of home loan in prospective of India and focusing on
Reliance way of work in Home finance.

Project 2- Eligibility of Home Loan @ Reliance Home Finance Ltd.(RHFL) – This project
is a quantitative approach to know the eligibility calculation at Reliance which helps to know
the loan amount that can be connoted to the customers and the EMI that has to be paid by the
customers depending on their income and other factors.

Project 3 – Market Analysis and Interpretation – In this project by analyzing the market of
home loan the result which is shown that there is a comparative difference between NBFC’s
(Non Banking Financial Company) and other financial institutions, difference lies between
approaching the customers till the way of providing credit to them.

LIMITATION AND SUGGESTIONS

There are some limitations in the project like -–



The calculations shown are based on assumed data.


The responses of the respondents may be or may not be biased in nature.
Lack of data is also an issue as all relevant data cannot be available to outsiders.

Some of the suggestion can be like-



RHFL can work for untapped areas such as TIER II areas, as competition is also very less.
RHFL provide various personalized schemes to their customers but many a time customers


are not aware of them so RHFL can make them aware through various channels.
To satisfy their customers and for good dealing in future, the RHFL should make prompt
disbursement of loan amount

Thus, the study would be helpful for the all the financial institutions like Banks and NBFCs
(Non-Banking Financial Company). It would be beneficial for the marketer, developers to
make their future strategies in a more informed and updated manner.

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 CHAPTER – 1

INTRODUCTION

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 CHAPTER – 1: INTRODUCTION

1.1 MORTGAGE
Mortgage is a legal agreement that conveys the conditional right of ownership on an asset or
property by its owner (the mortgagor) to a lender (the mortgagee) as a security for a loan.

A home buyer or builder can obtain financing (a loan) either to purchase or secure against the
property from a financial institution, such as a bank or credit union, either directly or
indirectly through intermediaries. Mortgages are used by individuals and businesses to make
large purchases of real estate without paying the entire value of the purchase up front. Features
of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of
paying off the loan, and other characteristics can vary considerably.

1.1.1 LOAN AGAINST PROPERTY (LAP)

The term Loan against Property refers to a situation in which the borrower takes a loan from
a bank or financial institution where the security for the loan is a property that is owned by the
borrower. The nature of the property will determine the amount of the loan that is possible and
the extent of the amount of the loan that is actually available at a certain point of time.
Availing of a loan against property ensures that the necessary borrowing is backed with the
security being created and that the funds are available for the necessary use at a low interest
rate. The interest rate is lower than other loan interest rates because the property element
makes it a type of secured loan.

1.1.2 HOUSING LOAN

In my study, I have used the terms ‘home loan’, ‘housing loan’ and ‘housing finance’
interchangeably. A Housing Loan is a secured loan which is taken for purchasing or
constructing a home or for making improvements in the residential property. It is offered by
the lending institution against the security of the house/property. It means, if the borrower will
default in repayment of loan, the lender will be allowed to retrieve the lent money by selling
the property. One can apply for a housing loan from banks and registered housing finance
companies. There are certain features which should be considered while going for home loan.

SALIENT FEATURES:-



Loans can be availed by salaried, self-employed and Non Resident Indians (NRIs).


One can apply for loan for flats, under construction properties and residential plot.
The housing loan comes along with a flexible repayment option, varying from 1year-


25 years.


Loan repayment can be done with easy Equated Monthly Installments (EMI).


Loan transfer facility is available, if you intend to change your lender.
Prepayment of loan is available in case one is interested in repaying their whole loan
amount, as there will be no penalty charged for it as per the guidelines of RBI in May
2012.

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1.2 ADVANTAGES OF HOME LOAN
The benefits that help people to have their dream home are -

 Attractive interest rates – The various banks offers attractive interest rate to boost and
help their customers. Many banks provide loans on fixed or floating rates or both to
facilitate consumers as per their need.

 Tax Shield - The Income Tax Act offers incentives to attract people to invest in
housing property. Section 24 of the Income Tax Act makes one eligible for deduction
on interest paid on a housing loan. The interest is allowed as a deduction on an accrual
basis, i.e., on due basis, even if it is not actually paid in cash during the year.

 Help in owning a home –The home availed by a person with the help of banks,
because they provide technical and financial assistance to customers for owning their
dream home.

 Door step services –These door to step services are provided from enquiry stage to the
final disbursement takes place such services are beneficial for customers in their present
busy life.

 Loan period –There are many financial institutions which provide maximum loan
tenure based on the loan amount and credibility of customers. This gives relief to the
customers in the repayment of the loan amount.

1.3 DISADVANTAGES OF HOME LOAN

The hurdles for people in their dream home are -

 Delays in processing – Many times, there are huge delays in processing of providing
home loans because various formulation to be fulfilled in this process. Due to these
delays customers feel mentally as well as financially weak.

 Fluctuating interest rates – Some financial institutions give home loans at floating
rates, which fluctuate at different interval due some reasons. These changes sometimes,
may lead to increase in interest rates which will increase the cost of home loans to the
customers.

 High cost – Some financial institutions charge high processing cost for home loan’s
sanctioning. They are forced to pay huge charges at various stages to fulfill the
requirement. The people who are not able to pay these charges could not avail the
benefits home loan schemes.

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 CHAPTER – 2

OBJECTIVES OF THE STUDY

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 CHAPTER –2: OBJECTIVES OF THE STUDY

2.1 OBJECTIVES OF STUDY

The main objective is to know the Housing Loan scenario in India as well as the current
market practices that are practiced. To achieve this objective there are several other objectives
need to be done, they are as follows-

 To study the home loan market for having idea of how it actually works.
 Analyzing the procedures and documentation that are followed by the financial
institutions while granting the home loan.
 To know ideas of the customers about home loan products and services.
 Need assessment of customers for availing the home loan service.
 To learn various aspect of Reliance Home Finance Ltd.

2.2 PURPOSE OF STUDY

The main purpose of the study is to attain the knowledge of the processing system of home
loans. Some of the main reasons for the study are as follows-

 To understand the home loan market with its current practices in context of Indian
scenario.
 To know the ideas of customers about home loan products and services.
 To study the problem faced by the customers in obtaining home loan.
 To learn about various aspects of Reliance Home Finance Ltd.

2.3 SCOPE OF STUDY

The study would be helpful for the all the financial institutions like – Banks, NBFCs (Non-
Banking Financial Company). It would be beneficial for the marketer, developers to make
their future strategies in a more informed and updated manner. The study can reveal the
comparative difference between financial institutions which can help them to take necessary
actions at the time of need.

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 CHAPTER – 3

LITERATURE REVI
REVIEW

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 CHAPTER–3: LITERATURE REVIEW

3.1 RESEARCH PAPERS

In the literature review, study of some research papers is done which are done by well
recognized researchers and provided much useful information based on which this report is
prepared. A glimpse is given of those research papers; they are explained as under -

Jones Lang Lasalle – Their research was based on the Affordable housing in India till the
year 2012, in which they were focused on sheltering the bottom of the pyramid people. Their
report was providing information of Indian latest trend on affordable housing in urban areas
where they were discussing about various factors which affect in allotment of these housing.
In this research paper lights were thrown on various issues that affect this kind of housing and
policies to avoid these were also taken into consideration. With this valuable information it
gives a rightful guidance to my study.

Knight Frank India Pvt. Ltd. – This research paper information is based on 2012 data and is
based on market scenario. In the paper important topic like demand and supply of affordable
housing in India, comparison of previous and latest real estate market, growth of market,
opportunities and issues in the market and also some suggestion were discussed to have a clear
cut understanding of the informed topic. It provided my study about latest market nature and
behavior.

KPMG – It is the report based on affordable housing key growth drivers in real estate sectors.
The research paper talks about affordable housing and its indicative potential in the market
with demand and supply constraints. The study also considered stakeholders perspective and
role of PPP (Public Private Partnership) in affordable housing. Overall this report gives the
actual idea of housing connecting with the market.

Thus, there were the research papers which helped me in making my report more
informational and updated.

Other than the research papers, study was also done from other reports with similar
information which can give a clear idea of how the housing works in India.

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 CHAPTER – 4

RESEARC METHODOLOGY
RESEARCH

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 CHAPTER–4: RESEARCH METHODOLOGY

4.1 RESEARCH METHODOLOGY

Research Methodology is one of the important aspects of any project. It is a way to
systematically show the research problem. It may be understood as a science of studying how
research is done scientifically. This section includes the methodology which includes-
research objective, type of study, sample size etc…

4.1.1 RESEARCH OBJECTIVE

The study is titled “Need identification of customers for availing the home loan facility.” The
study involved identifying and analyzing the key issues which influence customer the most
while getting the home loan.

4.1.2 TYPE OF STUDY

The project is based on Exploratory as well as Descriptive Study. It was an exploratory

study when customer need identification was studied to suggest new methods to improve the
services of Reliance Home Finance Ltd. in providing home loans and it was descriptive study
when comparative analysis is done to enhance the quality of research.

4.1.3 SAMPLE SIZE

A sample of about 50 respondents was collected for the study.

4.1.4 SAMPLING TECHNIQUE

Random Sampling Technique was used in the survey conducted.

4.2 DATA COLLECTION

Primary data had been collected through personal interaction with the industry people and
structured questionnaire filled up by the people to know their requirement in availing the loan
facility.

Secondary data had been collected from different sources like- internal source, websites,
newspapers, research papers...

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 PROJECT-1

HOUSING LOAN IN INDIA

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 CHAPTER – 5: INDUSTRY PROFILE

5.1 NATIONAL
L HOUSING
HOUSIN BANK (NHB)
It is under NHB Act 1987, it is to regulate housing finance system of the country to its
advantage or to prevent the affairs of any housing finance institution being conducted in a
manner prejudicial to the interest of the housing finance institution. For this NHB has been
empowered to determine the policy and give directions to the housing finance institution and
other auditors. As per 2013-14
14 union budget, National Housing Bank has to set up Urban
Housing Fund of Rs.2, 000 crore.
crore

OBJECTIVES of NHB

 To promote a sound, healthy, viable and cost effective housing finance system to cater to
NHB has been established to achieve, inter
i alia, the following objectives-

all segments of the population and to integrate the housing finance system with the overall
financial system.
 To promote a network of dedicated housing finance institutions to adequately serve
various regions andd different income groups.
 To augment resources
ources for the sector and
an channelize them for housing.
 To make housing credit
redit more affordable.
 To regulate the activities of housing finance companies based on regulatory and
supervisory authority
uthority derived under the Act.
 To encourage augmentation of supply of buildable land and also building materials for
housing and too upgrade the housing stock
st in the country.

REGULATION
In terms of the
he National Housing Bank Act, 1987, National Housingg Bank Ba is expected, in the
public interest,
rest, to regulate the housing finance system of the country to its advantage or to
prevent the affairs of any housing finance institution
institut being conducted in a manner ner detrimental
to the interest of the
he depositors or in a manner prejudicial
p ial to the interest of the hous
housing finance
institutions.
ons. For this, National Housing
Hous Bank has been empowered red to determine the policy and
give directions
ions to the housing finance
finan institutions and their auditors.

Besides the regulatory provisions of the National Housing Bank Act, 1987, National Housing
Bank has issued the Housing Finance Companies (NHB) Directions, 2001 as also Guidelines
for Asset Liability Management System in Housing Finance Companies. These are
periodically updated through issue of circular and notifications.
notif

As part of the supervisory process,

rocess, an entry level regulation is sought to be achieved
chieved through a
system of registration of housing finance companies. National Housing Bank supervises the
sector through a system of on-site
site and off-site
off surveillance.

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5.2 OVERVIEW
W OF HOME
HOM LOAN
Housing Finance plays a vital role as an engine of equitable economic growth through the
reduction of poverty and prevents slum proliferation in economy. The demand for housing has
increased rapidly day by day. Therefore, to meet with the growing housing demand is the aim
of the government. To achieve
hieve this aim it is required to provide the finance for housing to the
people. The modification of the financial
fina sector of the economy has also become possible by
the housing finance.
Home Loan is the finance; buyer has to borrow usually from a bank or ot other financial
institutions to purchase a property, generally secured, by a registered mortgage to the bank
over the property being purchased. A mortgage loan is a debt owed on a home, the mortgage
rate is the interest rate charged
ed to the borrower of the loan.
lo

Housing finance or Home loan is a broad topic, the concept of which may vary across
continents, regions and countries, particularly in terms of the areas it covers. For example,
what is understood by the term “housing finance” in a developed country maybe
aybe very different
diff
from what is understood by the term in a developing country and because of which as India is
a developing country so throwing light on Affordable Housing will be more appropriate to
know the housing scenario in India.

5.3 AFFORDABLE HOUSING

HOUSIN

It is a term we use for residential units in India's urban areas which are affordably pri
priced with
respect to households that fall within a specific limited income range. There is no ssingle set of
parameters to define what an afforda
affordable housing unit should cost in India. This is because the
pricing and feasibility to developers of affordable housing is a function of the city, location
within the city, and
nd type of project being built and
nd also the construction
c technology empl
employed.

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Affordable housing has to be defined on the basis of four criteria –

 Minimum volume of habitation -As pressure on urban land increases, architecture of

all forms, is it commercial or residential, are going vertical. Whilst most definitions
adopt an area standard, we have an additional volume standard. This provides flexibility
to architects to work on vertical planning of a dwelling unit as well.

 Provision of basic amenities - Whilst most definitions dwell on minimum area and cost
considerations, provision of basic amenities such as sanitation, adequate water supply
and power to the dwelling unit is crucial. Also, provision of community spaces and
amenities such as parks, schools and healthcare facilities, either within the project or in
the neighborhood, are desirable depending upon the size and location of the housing
project.

 Cost of the house - Whilst assessing affordability of the buyer, the cost of the house
should consider not only the purchase costs but also the maintenance costs of the
dwelling unit. Lower operational and maintenance costs using sustainable features is key
to any affordable housing project. While LIG (Lower Income Group) and EWS
(Economically Weaker Section) are likely to get public and private subsidies at the time
of buying a house, high operational costs might lead them again to squatter settlements
and slums.

 Location of the House - An affordable housing project should be located within

reasonable distances from workplaces and should be connected adequately through
public transport. If housing is developed very far away from major workplace hubs in a
city or entails expensive transport costs to the city, whilst price of the residential units
might be low due to lower land costs, the Housing + Transportation (H+T). Affordability
is greatly affected. In the case of affordable housing, key industrial nodes can also serve
as workplace hubs.

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Table 1- Definition of affordable housing

Particulars EWS LIG MIG

Minimum Minimum of 250 300-600 sq feet 600-1200 sq feet
Volume of sq feet carpet area. carpet area. carpet area.
Habitation
Minimum of 2250 270-5400 cu feet 5400-1080 cu feet
cu ft internal internal volume. internal volume.
volume.

Provision of Sanitation, Adequate Water Supply.

Basic Amenities
Provision of community spaces and amenities such as parks,
schools and healthcare facilities, either within the project or in the
neighborhood depending upon the size of the location of the
housing project.
Cost of the House EMI does not exceed 30–40% of gross monthly income of the
buyer.

Reasonable maintenance costs.

Cost of the House Located within 20 Km of a major workplace hub could be sub
urban hubs as well.

Adequately connected to major public transit hubs.

Source - Jones Lang Lasalle Research report.

In India, it is estimated that in 2009-10, approximately 32% of the population was living
below the poverty line and there is huge demand for affordable housing. Some developers
are developing low cost and affordable housing for this population. The Government of
India has taken up various initiatives for developing properties in low cost and affordable
segment. They have also looked at PPP (Public Private Partnership) model for development
of these properties and in the latest Union Budget (2013-14) it has been proposed that the
additional deduction of interest upto Rs.1 lakh is for a person taking first home loan upto
Rs.25 lakh during period 1.4.2013 to 31.3.2014.

5.4 HOME LOAN MARKET

The home loan market in India has grown at a rapid and alarming rate of over 40% over the
period of the last four years. And from the reports from some of the industry experts, it is
evident that there is very little chance that there will be any significant decline in growth rates
in the future. Therefore it becomes important at this point in time to examine the key factors
that have been instrumental in triggering this high growth period. There are several reasons
that can be considered as having attributed to the growth of the home loan market.

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On the Demand Side
Owing to Budget 2013-14's incentive to the housing sector, banks and housing finance
companies are seeing a rise in the demand for home loans. The first and the most important
factor for the growth has been faster rise in incomes as compared to property prices, thus
making housing more affordable. Another important factor that has contributed to the growth
of the home loan market is the declining interest rate. This factor has also been instrumental in
greatly reducing the cost of servicing a loan. An additional factor is that of the Tax benefits,
which have caused a further reduction of the effective cost of borrowing both on interest as
well as the capital.

On the Supply Side

The most important factor is of more competition in the housing finance sector. This has in
fact resulted in the companies charging lower interest rates. The lower interests rates are
offered in fact sometimes even at the cost of the spread or profit margin. Another important
supply factor that has been responsible for the growth of the home loan market is the fee that
is charged by the financial institutions for getting a home loan. This fee has reduced
dramatically over the last couple of years, from over 2% of the loan amount to as low as
0.25%. In fact, some companies are known to waive off the fee entirely.

Most of the housing finance companies in India have introduced

several new home loan products in order to meet the needs of a wide variety of customers.
Another factor contributing to the growth of the home loan market is the increasing
collaboration between housing finance companies and builders. Such partnerships minimize
service and funding related costs.

5.5 TRENDS OF HOME LOAN

A home will always have a deep connection with every individual and buying one’s own
home is fondest dream of almost every Indian. The housing industry in India has been
growing at a robust 14-15 percent and is projected to continue to grow for the next few years.

There is an estimated shortage of around 22million houses by 2014 and the government and
apex bodies like the National Housing Bank (NHB) are playing a vital role in trying to fill this
gap. The growth in this sector as well as the changing profile and consumption behavior of the
upwardly mobile population have also brought about a sea change in many aspects of the
industry, and most notably the profile of today’s home loan buyer. One of the most evident
changes is the decreasing age of the home loan buyer. There has been a trend of reduction in
the average age of the home loan buyer from the mid-40s to the mid-30s over the last two
decades.

The rising income levels of this segment coupled with growing aspirations have been major
causes of this change in profile. Another major contributor to this phenomenon is the easier
access to credit fuelled by banks and housing finance companies (HFCs).An aspect that has
changed is the purpose of a home purchase. While purchasing a house for the purpose of
living in it still remains the major reason, there is a growing segment of home buyers who buy
a second home for investment purpose. They also could take a larger home loan for the same

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as they are aware of the taxation benefits that they can avail of as a result of it. As long as
there is a significant growth in the housing sector and appreciation of prices, this segment will
continue to grow. It is estimated that the Indian mortgage market accounts for 7 per cent of
GDP and about two-thirds of the savings of customers availing home loans are deployed in
payment of EMIs. Attractive interest rates and ease of credit access here too contribute to the
growth of this profile among home loan buyers. As a product segment, the growth has been
seen in ‘affordable housing’; with a loan ticket size in the range of Rs 25-40 lakh. Banks and
HFCs offer their most attractive rates for this range, and this has fuelled its growth.

Today’s home loan buyer is an empowered individual. Not only is he spoilt for choice, both in
terms of properties to buy, but also in terms of home loan providers willing to fund his
purchase. He has access to information, is more financially aware and will have multiple
banking or financial service relationships. To cater to this new profile, banks and HFCs will
have to value-add and provide high levels personalized and dedicated service, both at the time
of sale as well as through the duration of the loan.

5.6 FIVE STEPS TO CONSIDER BEFORE TAKING A HOME

LOAN

Buying a home is an important personal finance decision for every individual. Before applying
for a home loan and paying the processing fees following points must be analyzed: -

1) Knowing one’s maximum loan eligibility – The loan amount to be sanctioned depends
on one’s income and previous track record when it comes to repaying their loans and
credit card dues. Home loan lenders generally provide 80% of the value of the property as
the loan amount, subject to one’s income. While assessing the income criteria, Bank/HFC
do not consider all the salary slips for calculating one’s net monthly income, instead they
only consider the income heads which can be used to repay one’s loan.

2) Checking of CIBIL score – The home loan eligibility depends on the credit worthiness of
the individual. Credit Information Bureau(India) Limited(CIBIL) provides a credit score
on a scale of 300 to 900 based on one’s previous credit card usage, how to maintain their
bank accounts, any cheque bounces, existing loans, loan repayments, number of times one
has applied for loan or credit card. Individuals with a CIBIL score greater than 700 are
more likely to get a home loan. CIBIL rating, net salary excluding some variable heads
and existing loans and EMIs being paid towards existing loans are the vital components
which decide the repayment capacity of the applicants.

3) Type of interest rates – The type of interest rate one chooses has an impact on the
monthly EMIs one pay. It is important that one should know the difference fixed rate or
floating rate of interest on home loan. If one opts for fixed rate home loan, the EMIs do
not vary over the loan tenure. It is beneficial when the interest rates are expected to rise in
the near future. In case of a floating rate home loan, the interest rate is determined based

23 | P a g e
 on the prevailing base rates plus a floating rate. The EMIs vary based on the movement of
base rates. It is beneficial when the interest rates are expected to fall in the near future.

4) Loan tenure – The EMI is calculated on the basis of the amount of home loan, home loan
interest rate, loan tenure i.e. the longer the tenure the lower the EMI, and the shorter the
tenure, the higher the EMI. Know the impact of one’s EMI payments on their finances
before deciding on loan tenure.
5) Proper reading of documents by applicant before signing – Applicant should check the
documents to ensure that the terms are the same as what they have negotiated and agreed
upon and also know the different charges applicable.

Thus, these all points are needed to be considered while applying for home loan. In this
scenario the points covered are related to amount of loan that can be sanction by the financial
institutions and EMIs that has to be paid by the applicant and this can be known by calculating
the Eligibility of individual.

5.7 HOME LOAN PROCEDURE IN INDIA

With the increasing competition in the market for offering Home Loans, the otherwise tedious
process of availing loans has gone a tremendous change in the recent years. However, there is
still some process involved in the procurement of Home loan. It is advisable for one to first
look at the different stages required for obtaining a Home Loan. The followings are the step by
step procedure of getting home loan:

STEP 1: Application Form - The first step involved in applying for home loan is the
procurement of application form from the HFC of one’s choice. The Performa of application
every of HFC (Housing Finance Companies) is different from the other but about 80%
information required to be furnished is the same. Along with the application form necessary
documents like address proof, age proof, proof of income, bank balance etc. are also to be
attached with the application form before it is submitted to the HFC. Along with all these
documents HFCs also ask for processing fee of the home loan that varies 0.25% to 0.50% of
the total loan amount.

STEP 2: Personal Discussion - After successfully filling the application form and submitting
it to the authority the next step is face to face with bank or HFC where one has applied for the
home loan. The bank/HFC first evaluates the papers submitted and summons the applicant for
the personal discussion regarding the home loan applied for. It is advisable that one should
carry all its original documents which were submitted with the application form.

STEP 3: Bank’s/HFC’s Field Investigation – The next step is the field investigation done by
the HFC or banks. They sent their representatives to the existing residence of the applicants or
their offices for the validation of the documents submitted. This is the essential part for the
banks/HFC to establish the trust with the applicants.

STEP 4: Credit Appraisal By The Bank/HFC and Loan Sanction - This is the make or
break stage of the process. The bank or HFC will establishes repayment capacity based on
one’s income, age, qualifications, experience, employer, nature of business etc. to access their
credential. The bank can refuse the loan application if any discrepancy is found at this stage.
24 | P a g e
But if everything goes according to the conditions negotiated by the parties, then the bank or
HFC sanction the loan that may be unconditional or with some conditions levied.

STEP 5: Offer Letter - After the sanction of the Home Loan, the applicant gets offer letter

 Loan amount
from the bank or HFC with the following details:

 Rate of Interest
 Fixed or variable ROI
 Tenure of the loan
 Mode of repayment
 General terms and conditions of the loan
 Special conditions, if any
If the terms and conditions are agreed the applicant has to sign the duplicate copy of the offer
letter and that is to be submitted to the Bank/HFC.

STEP 6: Submission of Legal Documents and Legal Check - The bank or the HFC now
asks for the legal documents of the property involved for applying home loan. All the legal
documents of the property involved have to be submitted. The bank does all the legal checks
on the property. The documents remain with the bank until the repayment of the Home loan.

STEP 7: Technical/ Valuation Check - The Banks or HFC then go about the technical
valuation of the property. The experts of the bank visit the site that has to be purchased and
value it as per the existing rules and regulations. The valuation of the property is the most
important aspect that the bank/HFC considers before financing any property.

STEP 8: Registration of Property Documents - After the legal and technical valuation of
the property the draft documents has to be cleared by the lawyer and stamping and registration
of the documents is needed.

STEP 9: Signing of Agreements and Submitting the Post-dated cheques - Now it is time
of signing the final agreement of the home loan. After the signing of the agreement a bunch of
Post dated cheques are to be submitted as agreed on the agreement paper.

STEP 10: Disbursement - It is time for the final Disbursement of the Home Loan. After the
bank or HFC ensures financing the property is involves no risk they pay the final amount that
is agreed upon. The mode of payment varies from full to part payment. In the case of under
construction property the mode is part payment and in the case of ready possession properties
disbursement is full and final.

5.8 FEES/CHARGES ASSOCIATED WITH HOME LOAN

BEFORE AND AFTER THE LOAN DISBURSEMENT
Before the loan disbursement
1. Processing fee- Most of the lending institutions would charge home loan processing fee
along with the application fee, which is non-refundable.

2. Legal & Technical charge - Before approving the home loan, lenders do the legal and
technical verification of the property. The cost involved in it can be recovered by lender
from the applicant.

25 | P a g e
3. Stamp duty- One would be required to pay stamp duty to the government on the
purchasing of house. Many lenders also recover stamp duty from the applicant which is
paid at the time of registration of the agreement.

After the loan disbursement

1. Foreclosure charges- Foreclosure charges will be applicable when one will repay the
entire home loan amount before the actual tenure. Nowadays, banks are levying these
charges only when one is doing the home loan balance transfer from one lender to other
and not when they are foreclosing out of their own funds.

2. Duplicate loan statement charges- Every year, the lending institution will send applicant
a statement detailing the loan amount that one has paid during the year. The amount can be
broken into interest paid and the principal amount. However, if applicant loses this
statement then their lender might charge them for issuance of the duplicate statement.

3. Delayed EMI payment and cheque bounce charges- The lender can levy delayed EMI
payment charges if one will make the payment after the due date. If any of the post-dated
cheques get bounced then applicant may be required to pay cheque bounce charges also.

26 | P a g e
5.9 MAJOR HOUSING
OUSING FINANCE
FI COMPANIES
PANIES IN IN
INDIA
Find below a list of some of the top housing finance
f companies of India:

MAJOR PLAYERS
YERS DESCRIPTION

Housing Development Finance Corporation

Housing Development
nt Finance Corporation
Limited (HDFC)
Ltd (HDFC) is one of the leaders in the
Indian housing finance market with almost
17% market share as on March rch 2010. Serving
more than 38 lakh Indian customers as on
March 2011, HDFC also offers customized
solutions that fit to the need of the customer.
In the FY 2010-11, it registered a net profit of
Rs.4528.41 crore. It also registered a net
profit ofRs.971 crore in the quarter ended
September 30, 2011.

State Bank of India is another maj

State Bank of India Home (SBI)
major player in
the Indian housing finance market with 17%
of the market share, same as HDFC's
DFC's share as
on March 2010. The SBI Housing Loan
schemes are specifically designed to meet the
varied requirements of the customers. It
offers home loan for various purposes
including new house/flat, purchase of land,
renovation/alteration/extension
lteration/extension of existing
house/flat etc. SBI Home Finance registered a
net profit ofRs.24.63 crore in the year ended
March 31, 2009.

Through its ‘Niwas’ scheme, HUDCO offers

Housing Urban Development
nt Corporation housing loans for the buying/construct
buying/constructing
(HUDCO) house/flat. Loans are also offered for
renovation/extension/alteration
xtension/alteration of existing
house/flat. In the financial year 2009-10
(ended on March 31, 2010), HUDCO
registered a net profit of ` 495.31 crore,
comparing to Rs.400.99 crore of the previous
year.

27 | P a g e

LIC Housing Finance Limited
ICICI Home Finance
nance Company Limited
PNB Housing Finance
Limited
LIC Housing Finance is another major player
in housing finance sector in India with about
8% of market share. Promoted by Life
Insurance Corporation of India, LICHFL has
an extensive distribution network with a
strong brand presence. Recently, the
company has been awarded “Consumer
Consumer Super
brand 2009/10 Status” by Super brands
Council. In the last financial year (ended on
March 31, 2011). It also registered a net
profit of Rs. 256.50 crore in April- June
quarter of 2011.
ICICI is the third largest housing finance
company in India with almost 13% market
share. It offers various types
pes of home loans
for its customers which may have tenure up
to 20 years. The home loan interest rate is
connected to the ICICI Bank Floating
Reference Rate (FRR). The net profit of the
company rose 45.19% to Rs 233.29 crore in
the year ended March 2011 compared to
Rs160.68 crore profits it earned during the
previous year.
PNB Housing Finance Limited offers a wide
range of loans for purchase/const
e/construction of
property to resident Indians as well as NRIs.
It also offers housing finance for renovations,
repairs and enhancement of immovable
properties. In the last
st financial year (ended on
March 31, 2011), PNB Housing Finance
Limited registered a net profit of Rs. 69.37
crore, whichh is 3.93% more than the net profit
of its previous financial year of Rs. 66.75
crore.
28 | P a g e
Dewan Housing
ousing Finance Corporation Limited Dewan Housing Financee Corporation Limited
(DHFL) is one of the largest housing fina
finance solution
providers in India with an extensive network
of 74 branches, 78 service centers and 35
campus spread across the nation. For the year
ended March 31, 2011, DHFL registered a
net profit of Rs. 265.13 crore which is a
growth of 75.9% over net profit
rofit of Rs. 150.69
crore in the previous fiscal.

5.10 INTEREST RATE PROVIDED

PRO BY BANKS/HFCs
Financial Private/Public/ Floating Processing Fees Prepayment
Institution HFC Interest rate Charges
SBI Bank (Public) Upto Rs.30 Rs.5000 + Service NIL
Lacs – 9.95% Tax (Upto 30 Lacs)
p.a Rs.10000+ Service
Above Rs.30 Tax (Above 30 Lacs)
Lacs – 10.10%
p.a
ICICI Bank (Private) Fixed 2 year Not
Less than Rs.30 0.50% of the loan Applicable
Lacs – 10.25% amount up to 1
p.a Crore.
Above Rs.30
Lacs – 10.50%
p.a
Fixed 3 Year
Less than Rs.30
Lacs – 10.50%
p.a
Above Rs.30
Lacs –10.75%
p.a
Fixed 5 Year
Less than Rs.30
Lacs – 10.75%
p.a
Above Rs.30
Lacs – 11.00%
p.a
DHFL HFC 11.25% p.a 0.5% of the loan NIL
amount.
PNB Bank (Public) 10.25% p.a 0.5% of the loan NIL
amount.
HDFC Bank (Private) Less Than 0.5% of the loan NIL
Rs.30 Lacs – amount or

29 | P a g e
 10.15% p.a – Rs.10000+Service
10.65% p.a Tax
Above Rs.30
Lacs – 10.50%
p.a -11.50% p.a

Reliance HFC Less than Rs.25

Capital lacs – 11.49%
Ltd. p.a
Above Rs.25 0.75% of the loan
Lacs up to Rs.1 amount or NIL
Crore – 12.50% Rs.10000+Service
p.a Tax
Above Rs.1
Crore to Rs.3
Crore – 12.75%
p.a
IDBI Bank (Public) Below Rs.30 Upto 1% of the loan If Balance
lacs – 10.25% amount. Transfer 2%,
p.a otherwise NIL
Rs.30 Lacs and
above –
10.50% p.a
Axis Bank Bank(Private) Less than Rs.25 1% of the Loan 2% for
Lacs – 10.75% Amount. Scheme 1 and
p.a NIL for
Rs.25 Lacs- Scheme 2
Rs.75 lacs –
11% p.a
Above Rs.75
Lacs – 11.25%
p.a
IndiaBulls HFC Less than Rs.25 Upto Rs.25 Lacs – NIL
Lacs – 10.50% Rs.2500+Service tax
p.a Above Rs.30 Lacs –
Rs.25 Lacs- Rs.1.5 Crore –
Rs.75 lacs – Rs.5000+Service tax
10.75% p.a Above Rs.1.50 Crore
Rs.75 Lacs – – Rs.10000+Service
Rs.1.50 Crore – tax
11.25%
Above Rs.1.50
Crore – 11.50%
p.a

30 | P a g e
5.11 TYPES OF HOME LOAN
Lenders provide home loans not only for buying houses but for a variety of related purposes.
The home loans market is brimming with diverse home loan products which cater to different
needs of individual customers. The following are some popular types of home loans available
in the Indian housing finance market:

 Land Purchase Loans -Land purchase loans are taken to buy a plot of land on which a
borrower wishes to construct his house. Most banks offer up to 85 percent of the price of
the land. These loans can be availed for residential as well as for investment purposes.
Almost all leading banks/HFCs offer this loan.

 Home Purchase Loans -The home purchase loans are the most popular and the most
commonly available home loan variants. These loans can be used to finance the purchase
of a new residential property or an old house from its previous owners. In this type of loan
also, lenders usually finance up to 85 percent of the market value of the house. These loans
are provided either on fixed interest rates or floating interest rates or as hybrid loans. All
banking institutions and housing finance companies provide this type of loan.

 Home Construction Loans- These loans can be availed by those individuals who want to
construct a house according to their wishes rather than purchasing an already constructed
one. The plot of land on which the borrower wishes to construct the house should have
been bought within a year for the cost of the land to be included as a component for
calculating the total price of the house. The borrower has to make a rough estimate of the
cost that will be incurred for the construction of the house and then apply for the loan with
the same amount. The lender then takes over from their and analyses the application to
decide whether or not to sanction the loan.

 Home Expansion/Extension Loans - Home expansion or extension loans are useful in

situations when people want to expand their existing house. Expansion includes alteration
in the current structure of the residence to add extra space such as constructing a new
room, a floor, a bigger bathroom or enclosing a balcony. Though many banks provide
loans for these purposes as part of home expansion loans, some banks lend for the same
purposes as part of their home improvement loans.

 Home Conversion Loan -Those borrowers who have already purchased a house by taking
a home loan but now want to buy and move to another house opt for the home conversion
loans. Through these loans, they can fund the purchase of the new house by transferring
the current loan to the new house. There is no need to repay the loan on the previous
home. Though useful, this segment of home loans is accused of being quite expensive and
is not practiced in practical market and is not provided by the financial institution.

31 | P a g e
 NRI Home Loans - NRI home loans is a specialized home loan variant which has been
developed to assist non-residents in acquiring housing finance to buy residential property
in India. These loans are meant exclusively for the non-resident Indians. The formalities of
availing this segment of home loans is similar to the regular home loans which are offered
to residents, only the paperwork is a bit elaborate.

 Balance Transfer Loans - Balance transfer option can be availed when an individual
wants to transfer his home loan from one bank to another bank. This is usually done to
repay the remaining amount of loan at lower interest rates or when a customer is unhappy
with the services provided by his existing lender and wants to switch to another lender.

32 | P a g e
CHAPTER – 6: COMPANY PROFILE
HOME LOAN
@
RELIANCE HOME FINANCE LTD.

33 | P a g e
 CHAPTER – 6: COMPANY PROFILE

6.1 INTRODUCTION
Reliance Home Finance Limited (RHFL) started as a separate HFC in July’10. It was
floated as a separate private sector company under the Reliance Capital family, with the
approval of National Housing Bank (NHB).It is amongst leading lenders in Indian Non-
banking space. RHFL do not think themselves as a loan company but they rather act as a
partner in fulfilling one’s biggest ambition of stepping into their dream home. It focuses on
secured lending
nding and creating good quality
quali loan portfolio.

The focus of the company lies in aiding customers; create assets through personal as well as
commercial property mortgages in the form of Home Loans, Loans against property, Lease
Rental Discounting and Commercial property purchase loans. Disbursals are done only in
quality asset backedd loans. Reliance Home Finance Ltd. has a loan book size of over Rs. 2,600
crore (US$ 565 million), spread
pread across over 120,000 customers, as on June 30, 2010 wi
with total
ngth of approx 1000+ iin 26 location across India as on 31st Mar’11.
employee strength

6.2 ABOUT THE

E ORIGINATOR
ORIGINA

Reliance Capital Limited (RCL) is a part of Reliance Group by Mr.Anil Dhirubhahirubhai Ambani.
RCL supports its group companies
compani in the form of equity or debt apart from managing a
proprietary investment book. RCL’s subsidiaries are engaged in the business of managing a
mutual fund, general & life insurance business, commercial & home financ finance and online
equity broking.
RCL started its commercial ial finance
finan business in May 2007 with a focus on secured
lending and currently,
ly, mortgage, auto,
aut commercial vehicleses and business loans form bulk
of the portfolio. In 2009 RCL formed two NBFCs- Reliance Commercial ercial Fin
Finance Private
Limited (RCFPL) and RHFL for undertaking taking consumer funding business operations
operations. However,
w.e.f.(With effective from) April
Apri 2010, RCFPL has been merged with RCL and all
incremental business (exceptt home loans) is being booked at RCL. Home Loans are
incrementally being booked at RHFL. RCF/RHF is one of the few institutions utions who provide
funding options to listed limited
ted companies
comp for Home Loan and other commercial
ercial pur
purchase.

On standalone basis, RCL reported a net profit of Rs. 519 crore on a total income of Rs. 3,268
crore inFY12 as compared to nett profit
profi of Rs. 229 crore on a total income
come of Rs.1,878 crore
cror in
FY11. On a consolidated
idated basis,, RCL reported a net profit
profi of Rs. 458 crore on a total
tota income of
Rs. 6,578 crore in FY12 as compared to a net profit of Rs. 291 crore on a total income of Rs.
5,433 crore in FY11.The short-term
term debts of both RCL and RHFL currently ha have ratings
outstanding of [ICRA]A1+
]A1+ from ICRA.
I

34 | P a g e
6.3 TYPES OF HOME LOAN AND SCHEMES OFFERED

Reliance provides home loans not only for buying houses but for a variety of related purposes.

 Purchase of Residential and Commercial Property

Some of the types of home loan products are as under-

 Plot + Construction Loan

 Balance Transfer + Top Up
 Existing Customer + Top Up

Reliance also offer customized loan schemes based on individual needs and requirements. The
offerings are as follows –

Income Based Program

 It is applicable for the salaried as well as self employed customers.

 Income assessment is done based on the declared income as per the salary slips, salary
certificates, Form-16 etc...(For salaried professionals) while Profit and Loss A/C, Balance
Sheet etc… (For self employed professionals).

Gross Turnover Method

 This scheme is designed for the self employed professional and self employed non

 Margins specific to industry type are considered for calculating the income.
professional.

Banking Surrogate

 It is specially designed considering Profit and Loss A/C and Balance Sheet may not reflect

 It is designed for the self employed professional and self employed non professional with
the actual income.

strong and consistent banking history.

Repayment Track Record (RTR)

 This scheme is designed for the self employed professional and self employed non
professional with a consistent repayment track record.

Banking Turnover Surrogate Program (BTS)

 It is specially designed for the self employed non professional category where the Profit
and Loss A/C and Balance Sheet do not reflect the actual income.

No Income Program (NIP)

 This scheme is designed for the self employed customers who are availing the loan with the

35 | P a g e
 Income documents of thee customer are not required.
higher own contribution leading to low LTV (Loan to Value).

 LTV to be restricted at 40% under this scheme.

Liquid Income Program

ram (LIP)

 LIP is designed exclusively

 In this scheme Profit and Loss
ly for se
self employed non professional.

 Financials of the companyy would be re-constructed by an authorized CA firm appointed by

oss A/C
A/ and Balance Sheet does not reflect thee actua
actual income.

the company and eligibility

ility to be established.

6.4 CUSTOMER
ER TYPE

Reliance Home Finance Ltd. or any other financial institutions handle differ different types of

 Salaried – Individuals having fixed

customers for availing the home loan facility. They are as follows –

 Self Employed Professional

fixe salary for every month are classified as salar
salaried.
ional (SEP) – Individual practicing with the professional

 Self Employed Non-Professional

qualification such as – Doctors, Engineers,
E Architects, CA etc…
essional (SENP) – Individuals/ entities as retailers
ailers, wholesalers,
manufacturers, servicee providers etc…
et

36 | P a g e
6.5 CREDIT APPRAISA
PPRAISAL PROCESS

A credit appraisal for a home loan is an important part of a loan eligibility evaluat
evaluation process.
The appraisal is undertaken by a bank/HFC. Each bank/HFC has set its own paramete parameters and
standards for evaluating the credit worth of a potential borrower. The eligibility
ligibility fo
for a loan that
a person can availl of depends on his creditworthiness.
credit

A bank evaluates the repayment capacity of a borrower considering factors such as income,
age, qualifications , experience, employer , nature of business (if self employed ), security of
tenure, tax history, assets owned, additional sources of income, other loan obligations ,
investments etc. and all these can be known by having the proper documentation
ntation process by
the bank/HFC.

Reliance Home Finance Ltd. also has its own sets of parameters in credit appraisal process
with respectt to eligibility criteria and
an documentation process.

Eligibility Criteria


Minimum Age of Applicant: 21 years


Business/Service Continuity


Residency Stability


Minimum Gross Annual Income of Rs 200,000


Salaried/Self employed
mployed professional and Self employed
em non professional.
All loanss will be at the sole discretion
discreti of Reliance Capital Limited.

There is also a method

hod to calculate eligibility under different cases whichh helps to know tthe
amount of loan that can be granted and EMI
EMI (Equally Monthly Installment) has to be pa paid by
the customer.

37 | P a g e
Documentation

Application form filled completely with photographs of applicant and

co-applicant duly signed. Age proof, signature proof, photo ID proof
and residence proof of applicant and co-applicant
Latest 4 months salary slips with reflection in Bank statement.
Salaried
Latest 6 months bank statement from salary a/c

Latest Form-16 and copy of property documents – if property is

finalized

VAT (Value Added Tax) / service tax, registration certificate .

Latest 3 year ITR (Income Tax Return), Balance Sheet, Profit and
Loss A/c and schedule
Self Employed
La t est 12 mo nt hs ban k sta te me nt of a l l o pe ra t in g
a cco un t

For partnership firm partnership deed or certificate or registration

from registrar of firms in case the firm is registered.

Application Form filled completely with photograph of applicant and

co-applicant duly signed.
Partnership Firm
Age proof, signature proof, photo ID proof and residence proof of
applicant and co-applicant.

Latest 2 years filled ITR along with computation of income, Balance

Sheet, Profit and Loss A/c and schedules.

For companies MOA (Memorandum of Association) and AOA

(Articles of Association) along with certificate of incorporation.

Application form filled completely with photographs of applicant and

co-applicant duly signed.
Private Firm
Age proof, signature proof, photo ID proof and residence proof of
applicant and co-applicant

Latest 2 years filled ITR along with computation of income, Balance

Sheet, Profit and Loss A/c and schedules.

Customer segment- All customer constitutions like individual, sole proprietor, partnership
firm, private/public ltd. / listed companies are eligible.

38 | P a g e
6.6 RELIANCE HOME LOANS - FEATURES & BENEFITS


Get Maximum loan amount for purchase of one’s dream home.


Higher loan eligibility.


Reliance caters to all one’s need whether one is salaried or Self Employed.


Customer can enjoy the flexibility of choosing their loan tenure.


Easy repayment option by way of simple EMIs.
Special 'No income document' program.

6.7 REWARDS EARNED BY THE CHANNEL PARTNERS



Foreign trips at exotic locations like- Thailand and Singapore.
Channel partners’ meets at destination such as Goa, Udaipur, Jaipur, Kochi etc. where


various talented artists are invited to perform.


Goods like – TV, music system, home theatre, washing machine etc.
Gift vouchers.

39 | P a g e
 PROJECT- 2

ELIGIBILITY OF HOME LOAN

RELIANCE HOME FINANCE LTD.

40 | P a g e
 CHAPTER – 7: ELIGIBILITY OF HOME LOAN

7.1 ELIGIBILTY CALCULATION @ RELIANCE HOME

FINANCE LTD.
For knowing the eligibility of the applicant Reliance has to go through certain steps so that
amount of loan that can be sanctioned and EMIs that can be paid by applicant are known.
Following are the steps –

STEP 1: Identification of customer type - Firstly the credit analyst has to identify the type
of customer i.e. whether he/ she is Self employed professional (SEP) or Self employed non
professional (SENP) or Salaried.

STEP 2: Calculate the monthly income of the applicant – After knowing the customer
calculate their monthly income, if the customer is salaried then their monthly salary and other
allowances is taken and if he/she is SENP/SEP then their net profit is taken from the financials
provided by them.

STEP 3: Calculate PAT (Profit after tax) – After calculating the net profit or EBIT (
Earnings before interest and tax) analyst has to deduct the monthly tax paid by the customer
which will give PAT.

STEP 4: Deduction of non-cash items (If any) – Non-cash items are those items where there
are no cash inflows or outflows like- depreciation on fixed assets, interest on unsecured loan,
salary of director etc… These are deducted from PAT to know the Actual cash profit when
the customer is SENP or SEP else for Salaried PAT is the Actual cash profit.

STEP 5: State the FOIR (Fixed obligation to income ratio) – FOIR is the ratio of all the
obligations to the income. It is used to determine eligibility of the customer and it varies from
different lenders. In Reliance Home Finance Ltd. 60% is taken as income of SENP/SEP
customer and for salaried FOIR varies depending on customer’s income on the basis of which
customer credit ability is measured and remaining is taken as customer’s personal expense.

STEP 6: Deduct other obligations (if any) – From actual cash profit calculate the FOIR of
income and then deduct the other obligation like other interest on loans (if any) to know the
Real Income.

STEP 7: Calculate assumed EMI – For assumed EMI, minimum amount of loan that can be
taken is assumed as 1lakh for the required tenure with rate of interest varies between 10.75%-
11.75% depending on customers profile. For calculation excel sheet is used, and the formula
is EMI per lag / EMI Factor = PMT (Rate/12, Tenure (months),-1lakh). Using this formula
assumed EMI will be known which is considered to be the minimum.

STEP 8: Calculate amount of loan that can be sanctioned – To know the amount of loan
that can be granted to the customer, Real income has to be divided by EMI Factor. Formula is
– Real Income / EMI Factor.
Using this formula amount of loan that can be sanctioned is known based on which actual
EMI is calculated.

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STEP 9: Calculate actual EMI – After knowing the amount of loan that can be granted
analyst has to calculate actual EMI based on that amount of loan, and this has to be paid by the
customer. Using the same formula of EMI Factor it can be calculated only assumed amount of
loan of 1lakh has to be replaced by the actual calculated amount of loan. Formula that can be
used is - EMI per lag / EMI Factor = PMT (Rate/12, Tenure (months), - actual amount of
loan).

STEP 10: Knowing the customer eligibility – Knowing the amount of loan that can be
granted by Reliance and EMI that has to be paid by the customer, credit analyst knows the
customer eligibility based on which further procedure are done.

Thus, these are the steps which know the customer credit worthiness and sometimes there are
other criteria also which helps in knowing the eligibility like field investigation, personal
discussion based on which it is analyzed that whether the customer is in a position to take
home loan and pay the EMI.

For understand it better an example in form of case is taken, which will give the idea how
eligibility is calculated on excel sheet.

Example –
Mr. Sanjeev Bansal is 30 years age salaried person working in an educational consultant
company name Maple Leaf Pvt. Ltd., located at Huaz Khas, New Delhi. He wants to purchase
a home and for that he wants a loan of Rs. 20lakhs for 20 years of tenure.

The excel sheet is being attached with the related details and calculated eligibility using the
excel formula discussed before.

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 This is the
eligibility of
Mr. Sanjeev

Loan Period –
240 months

Rate of Interest
-11% p.a

EMI =
Rs.20,644

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 PROJECT – 3

MARKET ANALYSIS
SIS AND INTERPRETATION

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 CHAPTER–8: ANALYSIS AND INTERPRETATION

In doing the market survey for knowing the need identification of customer regarding home
loan I used questionnaire so as to approach the people in the market. After finishing the
survey, the result has to be analyzed for achieving the set objective. As per the questionnaire
following analysis and interpretation can be done with the SPSS usage.

Table 2- Market analysis

Hypothesis 1
Ho – Age depends on choice of sector you prefer.

H1 – Age does not depend on choice of sector you prefer.

ONEWAY

ANOVA

What is your age?

Sum of df Mean Square F Sig.
Squares

Between Groups 12.541 2 6.270 4.644 .014

Within Groups 63.459 47 1.350

Total 76.000 49

Post Hoc Tests

What is your age?

Duncan
Which sector you prefer for taking N Subset for alpha =
home loan ? 0.05
1
Private Sector 19 1.58
NBFC 2 2.00
PSU 29 2.62
Sig. .183

Means for groups in homogeneous subsets are displayed.

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a. Uses Harmonic Mean Sample Size = 5.110.
b. The group sizes are unequal. The harmonic mean of the group sizes is
used. Type I error levels are not guaranteed.

Interpretation
As f value = 4.644 which is a large value so here we will reject Ho and accept H1, which
means that age does not depend on choice of preferred sector.

Table 3 Market analysis of age dependency

Hypothesis 2
Ho – Age depend upon your primary account.

H1- Age does not depend upon your primary account.

Regression
Variables Entered/Removeda
Model Variables Entered Variables Removed Method

In which bank you

1 have your primary . Enter
bank account?b

a. Dependent Variable: What is your age?

b. All requested variables entered.

Model Summaryb
Mo Change Statistics Durbin-Watson
del R Square F df1 df2 Sig. F
Change Chang Change
e
a
1 .001 .029 1 48 .866 1.861
a. Predictors: (Constant), In which bank you have your primary bank
account?
b. Dependent Variable: What is your age?

Coefficientsa
Model Unstandardized Standardiz t Sig.
Coefficients ed
Coefficien
ts

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 B Std. Beta
Error
(Constant) 2.144 .376 5.693 .000
In which bank you
1
have your primary .019 .112 .025 .170 .866
bank account?
a. Dependent Variable: What is your age?

Residuals Statisticsa
Minimu Maximu Mean Std. N
m m Deviation
Predicted Value 2.16 2.26 2.20 .031 50
Residual -1.258 3.799 .000 1.245 50
Std. Predicted
-1.223 1.896 .000 1.000 50
Value
Std. Residual -1.000 3.020 .000 .990 50
a. Dependent Variable: What is your age?

Interpretation
As f change = .029 so we will accept Ho and reject H1, which means that age depend upon
your primary account. As in the result we can see that the customer with above age of 35
mostly prefer public banks where as below 35 years age preferred private banks as their
primary bank.

Table 4 - Preferred primary account

Frequencies

In which bank you have your primary bank account?

Frequenc Percent Valid Cumulative
y Percent Percent
ICICI 10 20.0 20.0 20.0
SBI 14 28.0 28.0 48.0
PNB 8 16.0 16.0 64.0
AXIS 10 20.0 20.0 84.0
Valid
IDBI 2 4.0 4.0 88.0
OTHE
6 12.0 12.0 100.0
R
Total 50 100.0 100.0

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Interpretation
In the frequency table we can interpretate that the most preferred bank for opening a primary
account by customer is SBI (State Bank of India).

Table 5 - Desired sector

Frequencies

Which financial sector you will opt in the desired sector ?

Frequency Percent Valid Cumulat
Percent ive
Percent
SBI 16 32.0 32.0 32.0
PNB 7 14.0 14.0 46.0
IDBI 2 4.0 4.0 50.0
Bank of Baroda 2 4.0 4.0 54.0
ICICI 8 16.0 16.0 70.0
Valid HDFC 6 12.0 12.0 82.0
AXIS BANK 6 12.0 12.0 94.0
Kotak Mahindra 1 2.0 2.0 96.0
Reliance capital
2 4.0 4.0 100.0
ltd.
Total 50 100.0 100.0

Interpretation
In this frequency table too we can analyze that the most preferred bank for taking home loan
by is SBI (State Bank of India) and the next popular bank is another PSU(Public Sector
Undertaking) name PNB (Punjab National Bank) where as the other financial institution are
not comparatively preferred much.

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Table 6- Desired financial institution
Crosstabs

Which financial sector you will opt in the desired sector? * Which sector you prefer for
taking home loan?
Crosstabulation
Count
Which sector you prefer for taking home Total
loan ?
PSU Private NBFC
Sector
SBI 18 0 0 18
PNB 7 0 0 7
IDBI 2 0 0 2
bank of baroda 2 0 0 2
Which financial sector
you will opt in the ICICI 0 7 0 7
desired sector ? HDFC 0 5 0 5
AXIS BANK 0 6 0 6
Kotak Mahindra 0 1 0 1
Reliance capital
0 0 2 2
ltd.
Total 29 19 2 50

Interpretation
The table clearly interprets that when we relate the responses of row and column it can be
concluded that PSU is the most preferred sector and SBI is the most opted financial institution
in the desired sector which is PSU for taking home loan.

Graphical Presentation of the most desired sector

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Interpretation
In this graphical presentation we can see that PSU is having the maximum responses of
customer as compared
pared to private and NBFC
NB for having a home loan.

Graphical Presentation of the most wanted financial institution for home

loan

Interpretation
In this graphical presentation we can see that SBI is most popular among customers,
customer may be
because it offers the lowest interest rate and less documentation in providing home loan and is
also one of the oldest bank, very reachable to customers
cus as it has many branches
ches all over India.

Graphical Presentation on the basis of preferred parameters for home loan

35
30
25
20
15
10
5
0
COUNT

Interpretation
In this graphical presentation we can see that interest rate is most favoured parameter among
customers, with time taking as the second preference and documentation as the third and rest
can be seen in above graph.

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Thus, by analyzing and interpretating
terpretating the result it can be concluded that the recent market
scenario depicts, PSU as the most affirmative sector and SBI, a PSU as most prominent
financial institution by respondent for taking home loan. But when it comes to customer they
face various difficulties and for every customer need of preference is different like it can be
seen above so only those who understa
understands customer pain and relieves them are the top player
in the market.

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CHAPTER - 9

CONCLUSION

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 CHAPTER–9: CONCLUSION

The housing sector is one of the booming sectors which are beneficial for every related
financial institution. In India housing like Affordable housing is very helpful for bottom of
pyramid people. While making the research report there were many factors which are
influencing the home loan market and which affects the credit appraisal process.

The study would be helpful for the all the financial institutions like – Banks, NBFCs (Non-
Banking Financial Company). It would be beneficial for the marketer, developers to make
their future strategies in a more informed and updated manner. The study can reveal the
comparative difference between financial institutions which can help them to take necessary
actions at the time of need.

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 CHAPTER - 10

LIMITATIONS & SUGGESTIONS

SUGG

&

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 LIMITATIONS

The research study is never perfect there is always have some scope of improvements.
Therefore present study has some limitations in the project like –

 The calculations shown are based on assumed data.

 The responses of the respondents may be or may not be biased in nature.

 Lack of data is also an issue as all relevant data cannot be available to outsiders.

 The sample frame includes only Delhi NCR region.

 The responses considered mainly are of income based people.

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 SUGGESTIONS

After completing the study I came to know that there are differences in the working manner of
Banks and HFC’s because of which approach to customers are also different. Some of the
suggestion to Reliance Home Finance Ltd. can be like-

 After doing the market research I came to know that there are many untapped areas
specially in TIER-II category so RHFL can work for that areas as competition is also very
less.

 RHFL provide various personalized schemes to their customers but many a time customers
are not aware of them so RHFL can make them aware through various channels like radio,
personal meeting with customer.

 To satisfy their customers and for good dealing in future, the RHFL should make prompt
disbursement of loan amount to the customers so that they can buy or construct their
dream home as early as possible.

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ANNEXURES

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 BIBLIOGRAPHY

 Jones Lang Lasalle (2012) , “Affordable Housing in India” , pp 02-05

 Knight Frank India Pvt. Ltd. (2012) , “Affordable Housing Market Scenario in India” , pp

 KPMG (2012) , “Affordable Housing – a key growth driver in real estate sector” , pp 05-
03-06

 http://www.google.com
14

 http://www.reliancehomefinance.com/home/default.aspx
 http://www.axisbank.com
 http://www.hdfc.com
 http://www.deal4loans.com/
 http://www.dhfl.com
 http://www.icra.in
 http://www.nhb.org.in/
 http://www.Indianbudget.nic.in
 http://www.rbi.org.in
 http://www.Economictimes.indiatimes.com

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 QUESTIONNAIRE
Objective – Need identification of customers for availing the home loan facility.
1) Name –
2) Age –
3) Gender –
4) Contact No. –
5) E-mail Id –

6) Occupation –
a) Self-employed Professional
b) Self-employed Non-professional
c) Salaried

7) Your annual income is -

a) Below 4 lakhs
b) 4-8 lakhs
c) 8-12 lakhs
d) Above 12 lakhs

8) Who owns the house you presently live in?

a) Parents
b) Spouse
c) Relative
d) Other_________

9) In which bank you have your primary bank account?

a) ICICI
b) SBI
c) PNB
d) Axis bank
e) IDBI
f) Others__________

10) Who would you choose to be with, for taking home loan?
a) Current bank
b) Other Financial Institution

11) Which sector will you prefer for taking home loan?
a) PSU ( Public Sector Undertaking )
b) Private Sector
c) NBFC ( Non- Banking Financial Company )

12) Which financial institution you opt in the desired sector?

PSU Private Sector NBFC

 SBI  ICICI  Reliance Capital Ltd.

 PNB  HDFC  Indiabulls
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   
  
IDBI Axis bank DHFL

  
Bank of Baroda Kotak Mahindra Muthoot Fincorp Ltd.
Others__________ Others________ Others___________

13) Give ranking from (1 -10) to the parameters on the basis of your preferred
home loan.
Parameters Ranking

Interest Rate

Amount of Loan

Processing Fees

Documentation

Brand Value

Time Taking

Branch Network

After Sale Service

Eligibility Method

Customer Connectivity

14) Do you have any previous home loan experience?

a) Yes
b) No

15) Have you faced any difficulty in getting the loan? If yes, what and from which
financial institution?
a) Yes
b) No

Thank you for giving your valuable time.

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