Housing Finance

The terms “Housing Finance” or “Home Loan” means

finance for buying or modifying a property. The
different housing loan products could be classified as:-
• Home Loans,
• Home Extension Loans,
• Home Improvement Loans
• Land Loans
• NRI home Loans
• Home Loans: A home loan is a loan taken from
a Housing Finance Institution (HFI) to buy or to
modify a property. The term property
includes:-
• (a) Property – under construction
• (b) Property – ready for occupation
• (c) Resale Property
• (d) Self Construction or own construction
• Home Extension Loan: A home extension loan
is a finance taken from HFI to extend the built
up area of an existing property. like
• Additional Floor Space Index (FSI) granted by
the approving authority to construct an
additional room.
• Construction of an additional floor in the
existing house.
• Land Loan:
A land loan is a loan taken from HFI to purchase
the plot of land from either a developmental
authority or a society or a developer
NRI Home Loan:
The NRI home loan’s available to Non-Resident Indians
from various HFIs for any of the following activities:-
(a) For purchase of house of a house either under
construction or on resale.
(b) For self-construction of a property on a plot of
land.
(c) To finance the purchase of a plot of land allotted by
a society/development authority.
• Income Tax Act 1961, NRI is one who
employed abroad for a period of not less than
182 days in the financial year immediately
preceding the year in which he is assessed
 National Housing Bank
• The National Housing Bank (NHB) is an apex level financial
institution catering to the housing sector in the country.
• It was established on July 9, 1988. It works as a facilitator
in promoting housing finance institutions or providing
assistance to other institutions of such type.
• It is headquartered in Delhi and has offices in all the
major cities of India.
• NHB has following departments which are NHB Residex
Cell, Regulation and Supervision, Refinancing operations,
Direct finance operations, Information Technology,
Resource mobilization and management, Development
and risk management, Board and CMD secretariat
 objectives
• To promote a sound, healthy, viable and cost effective housing
finance system to all segments of the population
• To make housing credit more affordable.
• To regulate the activities of housing finance companies based
on regulatory and supervisory authority derived under the
Act.
• To encourage augmentation of supply of build able land and
also building materials for housing and to upgrade the
housing stock in the country.
• To encourage public agencies to emerge as facilitators and
suppliers of serviced land for housing.
 Function of NHB
• 1. Promotion and Development Function
• 2. Regulatory Function
• 3. Financial Function
Fixing the amount of loan
Reducing Balance Rate
 Problem
• Mr. Ishan wants to purchase 2BHK flat for Rs.
30L. from gupta properties.
• He could pay only 10L. now and he will take
loan for rest of the amount.
• Determine whether Ishan should take loan on
fixed rate or switch from floating rate to fixed
rate if following information is available:
• Loan amount 20L, for 10 years and loan to paid on
annual basis.
• Fixed rate of interest 10% p.a
• Floating rate of interest is 8%, after 4 year the floating
rate is expected to raise to 12% p.a.
• Now he decided to switch from floating to fixed rate of
interest by paying 4% switching over cost on the
remaining balance loan amount.
• Which option he should select??
 problem
• Suppose you have taken a loan of $30000,
R=9% p.a. for 20 years.
• What will be your monthly installment?
• Suppose you would like to pay in 10 years,
EMI?
• Compare the total amount that you will in
both the above options.