Professional Documents
Culture Documents
REVA Busine
ss School
Unit Topics
1
Introduction to Financial Markets
Primary market: functions, types of issues, regulatory frame work for primary market, listing shares, Participants.
Secondary market: Role and function, market structure and participants, broker and client acquisition.
3 Fee based services: Issue management, corporate re-structuring, Depository services, NSDL and CDSL, Rating Agencies,
Credit Rating Process, Symbols, Advantages and limitations.
4 Fund based services: Housing finance - Institutions and banks offering housing finance, Leasing, elements and types, Hire
purchase; Bills Discounting, Factoring and Forfeiting, Angel Financing.(Problems on leasing)
4
Reference Books:
1. Financial Services, M Y Khan, 10/e, McGraw Hill Education (India) Private Limited,
2020.
2. Financial Markets and Services – Gordon & Natarajan, 7/e, Himalaya publishing
House, 2019.
3. Indian Financial System, M Y Khan, 11/e, McGraw Hill Education (India) Private
Limited, 2020.
4. Indian Financial System, H R Machiraju, 5/e, Vikas Publishing House Private Limited,
2019.
5
Housing Finance
The Housing Finance Company is yet another form of non-banking financial company which is engaged
in the principal business of financing of acquisition or construction of houses that includes the
development of plots of lands for the construction of new houses.
The Housing Finance Company is regulated by the National Housing Bank. Any non-banking finance
company can operate as a housing finance company, subject to the fulfillment of basic requirements as
specified in the Companies Act, 1956.
•The company should have its primary business of providing finance for housing, whether directly or
indirectly.
•The company should obtain a certificate of registration (COR) from the National Housing Bank (NHB).
The company conducting such business without a COR is an offense punishable under the provisions of
the National Housing Bank Act, 1987, also the NHB can demand the winding up of such company.
•The company should have minimum Net Owned Fund of Rs 10 Crore.
Once these basic requirements are fulfilled, the company should comply with the following conditions to
get registered as a Housing Finance Company:
•The company shall be in such a position that it is able to meet the full claims of its present as well as
future depositors as and when these accrue.
•The affairs of the housing finance company should not be detrimental to the interest of the present
and future depositors.
•The management of the company should not be prejudicial towards public interest or to the interest
of its depositors.
•The Company should have an adequate capital structure and better income prospects.
•The certificate of registration shall not be prejudicial to the operation and growth of housing
finance sector of the country.
so. all the above conditions must be met by the non-banking finance company to perform the business of
financing of houses (construction and acquisition).
List of Housing Finance Companies in India
The below-mentioned list of housing finance companies have been granted Certificate of Registration
(COR) with permission to accept public deposits
•Aadhar Housing Finance Limited (Formerly: DHFL Vysya Housing Finance Limited)
•Housing and Urban Development Corporation Limited
•Housing Development Finance Corporation Limited
•Can Fin Homes Limited
•Cent Bank Home Finance Limited
•Manipal Housing Finance Syndicate Limited
•PNB Housing Finance Limited
•Dewan Housing Finance Corporation Limited
•ICICI Home Finance Company Limited
•LIC Housing Finance Limited
•Sundaram Home Finance Limited
Lease
Section 105 of the Transfer of Property Act– defined Lease as —
“A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time,
express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of
crops, service or any other thing of value, to be rendered periodically or on specified occasions to the
transferor by the transferee, who accepts the transfer on such terms.
The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and
the money, share, service or other thing to be so rendered is called the rent.
In the contract of Lease, the person who is the transferor of the property is called the Lessor and the
person who is the transferee is called the Lessee. Both Lessor and Lessee can come into the contract of
lease for the transfer of right of the immovable property.
Lease is a contractual relationship between the Lessor and the Lessee therefore, the essential elements of a
valid contract are necessary to be fulfilled and the parties should be competent to the contract according to
the Indian Contract Act, 1872.
Types of lease
1. Financial lease
This type of lease is permanent and irrevocable. The Lessor transfers the rights of the immovable property
for a long period of time and works on the property. The Lessee takes charge of all the burdens and
liabilities of the property.
For instance, if a person assigned another person to look after his agricultural land and grow crops and
maintain it without specifying the termination of the lease, then it is said to be a financial lease.
2. Operating lease
In this type of lease, the Lessee does not hold the burden of the property and the lessor takes care of the
property. This type of lease is for a short period of time.
For instance, if a person transfers the property rights to another person in the form of a lease to provide
services on the immovable property for a short period of time then it is considered an operating lease.
3. Sale and lease back leasing
In this type of lease, the lessee sells the asset to the lessor with an advance agreement between the two of
leasing the asset back to the lessee for a fixed lease rental period. Such a lease is also known as Bipartite
lease.
4. Direct lease
This is a tri-partied lease which includes :
•equipment supplier,
•lessor,
•lessee.
7. Domestic lease
When the lease contract is made within the country it is known as domestic lease.
8. International lease
There are two types of International lease. :
Cross border lease
Import lease
An import lease occurs when the lessor and the lessee reside in the same country and the equipment
supplier resides in a different country. On the contrary, when the lessor and the lessee reside in two
separate countries ‘X’ and ‘Y’ then the lease is known as a Cross border lease. It doesn’t matter where the
equipment supplier resides.
ESSENTIAL ELEMENTS FOR A VALID LEASE
•Immovable Property – A contract of Lease can be made only for immovable properties and cannot be
done for a moveable property. The Lessor and the Lessee exchange the rights of the property through the
contract of lease for the working and use of the immovable property and
•Parties – For a Lease agreement, there must be two or more parties for the proper transfer of rights of the
immovable property. It cannot be completed in the absence of the parties as it a bi-partied agreement.
•Subject matter of lease – The subject matter of the lease agreement is necessary to be mentioned in the
contract. The purpose of transfer of the right of the immovable property, the services and profit decided,
the details of the immovable property, and other important data are required to be written in the contract of
lease.
•Duration– It is an essential to mention the duration of a lease agreement which specifies the
commencement of the contract and how long the services and rights will be transferred through a valid
legal contract. It is explained under section 106 of the Transfer of Property Act.
•Consideration – Lawful consideration is an essential element for the fulfillment of a contract of lease.
Considerations in the form of money as premium or rent, shared profit or as share of crops and services
are essential the transfer of the rights of the immovable property.
•Competency –According to the Indian Contract Act, 1872, the parties entering into a contract of lease
should be competent. All the parties must be of sound mind, a majority by age, and not subject to any law
which restricts them to be a part of a valid contract. If the transfer of the right of property is done to a
minor, then a legal guardian is necessary to work on behalf of the minor till he or she attains a majority
age.
•Valid contract essentials– Essential elements like Offer, Acceptance, Consideration, Lawful Object,
Intention of the Parties, Competency, Capacity to Contract, Subject Matter, Writing and Registration etc.,
mentioned in the essential elements of a valid contract given under Indian Contract Act, 1872 are
important to be followed in the contract of a lease as it is a contractual agreement made between two
parties.
•Express and implied transfer – The transfer of rights between the Lessor and the Lessee should be
made expressly or impliedly, in a written contract and the notice of the termination of the lease should be
given according to the clause mentioned in the contract of lease and should be duly signed and delivered
among the parties.
•Possession of Property – In the contractual agreement of lease, transfer of the right of property is made
and the parties exchange the right of possession of the property for a certain period of time and do not
exchange the ownership of the immovable property.
Essential Elements of Lease
Parties- The parties to a lease are the lessor and the lessee. The lessor is also called the landlord and the
lessee the tenant.
Subject matter of lease- The subject matter of lease must be immovable property. The word "immovable
property" may not be only house, land but also benefits to arise out of land, right to collect fruit of a
garden, right to extract coal or minerals, hats, rights of ferries, fisheries or market dues. The contract for
right for grazing is not lease. A mining lease is lease and not a sale of minerals.
Duration of lease- The right to enjoy the property must be transferred for a certain time, express or
implied or in perpetuity. The lease should commence either in the present or on some date in future or on
the happening of some contingency, which is bound to happen. Though the lease can commence from a
past day, but that is for the purpose of computation of lease period, as the interest of the lessee begins from
the date of execution. No interest passes to the lessee before execution. In India, the lease may be in
perpetuity.
Consideration- The consideration for lease is either premium or rent, which is the price paid or promised
in consideration of the demise. The premium is the consideration paid of being let in possession, such as
Salami, even if it is to be paid in installments.
Sub-lease- A lessee can transfer the whole or any part of his interest in the property by sub-lease.
However, this right is subject to the contract to the contrary and he can be restrained by the contract from
transferring his lease by sub-letting. The lessee can create sub-leases for different parts of the demised
premises. The sub-lessee gets the rights, subject to the covenants, terms and conditions in the lease deed.
Hire Purchase
Hire purchase is an arrangement made while buying expensive goods. The consumer makes a down
payment during the purchase, and the outstanding balance will be paid in installments with
an interest charge.
3) Reluctant Importers :
The importers do not give guarantee for helping in forfeiting.
4) No Legal Framework :
The forfeiting does not have any legal framework due which no protection is given to the banker or
forfeiter. There is some protection provided from the existing covers for the risk related to foreign
transactions.
5) Insufficient Data :
The data related to various forfeiting companies on the credit rating agencies, foreign country is not
enough. The EXIM bank does not give it service to high-risk countries like Nigeria.
Angel investing
Angel investors are wealthy private investors focused on financing small business ventures in
exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use their own net
worth. Compared to venture capitalists, angels may also be more patient with entrepreneurs and open to
providing smaller amounts for a longer time period. But they do want to see an exit strategy at some point
where they can pocket their profits, typically through a public offering or an acquisition.
Angel investors fund businesses in many industries. According to the Center for Venture Research at the
University of New Hampshire, 2020 was the first time in several years that angel-funded businesses were
in the seed and startup stage. The total investments during that year were $25.3 billion – a 6% increase
over 2019
The Advantages of Angel Investors
•Having an angel investor means your business doesn’t have to repay the
funds because you’re giving ownership shares in exchange for money.
• Angel investing is usually reserved for established businesses beyond the
startup phase.
•These companies have shown promise for profits, but still need capital to
develop products or grow.
• Because an angel’s money is on the line, they can be highly motivated to help
you succeed through mentoring or by offering direct management help.
•The Disadvantages of Angel Investors
•One big disadvantage is that angel investors typically want 10% to 50% of your
company in exchange for funding.
•That means business owners could lose control of their business if the angel investors
determine they’re keeping the company from succeeding.
•It’s important to think about how much equity you want to give away to an investor for
funding because if you give too much, you may not own the company anymore if things
don’t go well and the angel investor has more ownership than you.
THANK