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Housing Loan Sheme Details

(1) Purpose :
i) To purchase or construct a new house/flat.
ii) To purchase an existing (old) house/flat.
iii) To extend, repair, renovate or alter an existing house/flat.
iv) To purchase a plot of land meant for the purpose of construction of a dwelling unit.
v) For furnishings/consumer durables as a part of the project cost.
(2) Number of Loans : Two loans may be given to an individual provided he has the capacity to repay. The two loans may be given at different times either for purchase/construction and subsequent repair/renovation of a single property or for purchase/construction or repair/renovation of two different properties.
(3) Eligibility : Individual (s) over 21 years of age with a steady source of income, including persons engaged in agriculture and allied activities.
(4) Loan Amount : The actual loan amount is to be determined on the basis of repayment capacity taking into acount incxome, age, assets and liabilities. The maximum loan amount is subject to the following :
(A) For borrowers over 21 to 45 years of age :
(Where any one borrower with an independent assured income is between 21 and 45 years of age.)
60 times the net monthly income of the applicant in case of salaried persons (i.e. net of all deductions including loan repayments and actual monthly tax deductions at source).
5 times net annual income in case of others (i.e. income as per latest income tax return filed less loan repayments and taxes payable). For agriculturists, the annual net income should be arrived at based on the nature of their activity (i.e. farming, dairy, poultry, orchards), land holding, cropping pattern, yield, etc. and average level of income derived there from in the area.
(B) Age over 45 years of age :
(where all borrowers with an independent assured income are over 45 years of age).
The maximum age of the borrower is kept at 65 years. However, in the case of joint accounts, if one of the co-borrowewr is below the age of 65 years, the loan may be considered.
For borrowers over 45 years of age, the loan amount is to be restricted to 48 times the net monthly income or 4 times the net annual income.
(C) Income of Spouce family : The income of two or more individuals of the family having independent source of income, may be clubbed for the purpose of granting of housing loan and they may be made co-borrowers/joint borrowers. Such individulas/borrowers should be preferably be
a. Husband and wife.
b. Real brothers running joint business or having independent souces of income.
c. Father and son.
(D) Other Income : For the purpose of calculation of repayment capacity of the housing loan applicant, family income as stated above may be considered provided the Bank/ Branch Manager is fully satisfied about income contributing member being part of one single family and they are opted as co-borrowers/joint borrowers.
Regular income from all sources can be considered to arrive at total eligible loan amount, provided the sanctioning authority is satisfied about the proof of the income.
(5) Margin :
(A) For land only -
Purchase of land meant for construction of dwelling unit : 15% of the cost of land, including registration, stamp duty and development cost charged by the Developer towards preparation of layout and to provide common amenities like roads, water supply, drainage, electricity, parks, recreatioln facilities etc. subject to Bank's approved valuer certfying the valuation thereof.
(B) Purchase/construction of new property -
Purchase of new or old house/flat or construction or extension of existing house/flat : 15% of the total project cost including cost of land, additional amenities, registration amount, stamp duty, for all loans upto Rs. 1 crore. For loans upto Rs. 25 lacs, this may be reduced to 10% by the higher authority in cases where check-off facility is available from a reputed employer or where additional collateral is available equivalent to at least one third of loan amount.
Margin for loans above Rs. 1 crore : 25% of the total project cost for all loans exceedings Rs. 1 crore, reduceable to 20% by the sanctioning authority where additional collateral equivalent to at least one third of loan amount is available.
(C) Purchase of old property -
In the case of old houses/flats being purchased, in addition to the usual prescribed documents for housing finance, the under noted documents/papers are required to be obtained, the expenses of which shall be borne by the borrower.
i) Valuation certificate/report from a Government approved valuer.
ii) Certificate from the Govt. approved architect/structural engineer regarding the condition of the house/flat. The life and the condition of the house should be such that Bank's security coverage is not affected till full repayment of the loan.
(D) Repair/Renovation -
For Repair, renovation of an existing house: 20% of the project cost. This may be reduced to 15% by the sanctioning authority in cases where check-off facility is available from a reputed employer.
(6) Repayment :
The repayment by way of Equated Monthly Instalments (EMI) will be determined on the basis of the current rate of interest, as follows:
(A) Period :
For applicants upto 45 years of age : Maximum of 20 years.
For applicants over 45 years of age : Maximum of 15 years.
(B) Moratorium period :
Normally repayment, i.e. EMI will commence from the month following the months when full disbursement has been made. Where loan is sought for construction of a new dwelling unit, or where a flat/house is purchased in instalments from a Govt./Public Agency, a moratorium period or repayment holiday, at the request of the borrower, may permitted till 2 months after completion of construction or 18 months from the disbursement of first instalment of the loan, whichever may be earlier.
The moratorium period is to be included in the maximum repayment period of 15 years or 20 years, as admissible.
(C) Repayment Schedule :
For agriculturists Generally, income of agriculturists is seasonal and this makes payment of monthly installmnent difficult. However, realigning the repayment schedule may be permitted with expected cash flow in case of Home Loans availed by agriculturists.
The periodicity of installment for repayment shall be decided upon the merits of each case, on a realistic basis, coinciding with harvest of the crop at half yearly/yearly intervals or coinciding with the generation of income from ancillary agricultural activities pursued by the borrower e.g. dairy/poultry etc. or in monthly/quarterly installments in case of other regular sources of income. The repayment could be made by post-dated cheques or by executing standing instructions.
(D) Interest moratorium :
During the moratorium period interest recovery may also be deferred, at the request of the borrower. In such cases, the equated monthly instalments shall be fixed on the basis of the loan amout, and
i) The permitted moratorium period.
ii) The expected accrued compound interest during the moratorium period on the presumption that the entire loan is disbursed on the date of first disbusal.
After completion of the moratorium period should the borrower request for a change in the equated monthly instalment on the basis of the actual outstandings, plus accrued interest, the same may be permitted only after a fresh check-off facility for the revised EMI is established or fresh post dated cheques have been taken.
(E) EMI Reset :
Whenever the interest rates rise or fall during the currency of the loan, the EMI need not be increased/decreased. The net effect of interest fluctuations should normally be by way of increase or decrease in the number of instalments. Refixing of EMI downwards may be permitted by the sanctioning authority for select customers, consequent upon decline in rates of interest, upon written request of the borrower in the under noted cases:
i) Where the conduct of the account has been satisfactory and the account is a Standard Assets.
ii) Where original housing loan was of Rs.5 lacs or more and the downward revision in the rate of interest is 1% or more as compared to the rate at which original loan was granted.
The facility of downward refixing of EMI can be granted only twice during the tenure of a loan.
Part payments or balloon payments would be permitted. If 20% or more of the outstanding is prepaid in one instance the Bank/branch may refix the EMI after establishing a fresh check-off facility or obtention of fresh post-dated cheques.
Refixing of EMI upwards may be permitted, at the request of the customer, after establishing a fresh check-off facility or obtention of fresh post-dated cheques.
(F) Prepayment penalty :
2% penalty on the amount prepaid in excess of nomal EMI dues shall be levied in respect of preclosure of Housing Lolans before expiry of half of the original tenure (i.e. for a loan with repayment tenure of 10 years, prepayment penalty will be charged if the loan is preclosed before 5 years).
Pre-payment penalty should be computed and recovered by debit to the Housing Loan at the time of liquidation of the loan and credited to Bank Interest Account as "advance interest".
(G) Check off facility :
In the case of salaried persons, a check-off facility is preferable. Where check-off facility is not available, post dated cheques should be obtained.
(H) Post dated cheques :
Post dated cheques should be dated prior to the 7th of every month. Or may be in the form of standing instructions for debit of a salary SB/CA/c are recorded, the instructions may be dated 1,8,15,22 or 29, depending upon the expected date of receipt of salary.
Should any cheque be received back unpaid from the paying banker for want of sufficient funds it should be presented for a second time after a maximum lapse of one week. Should it still remain unpaid, action under Section 138 of the N.I. Act should be initiated.
Under a check-off arrangement, an Irrevocable Letter of Authority is required to be obtained from the borrower(employee) concerned and a letter of undertaking from the employer is to be taken. In case of Government officers, who are themselves the drawing and disbursing authorities and take housing loans, a letter of undertaking needs to be obtained .
(7) Interest :
As prescribed from time to time. As per the extant instructions, term loans can be extended either on floating interest rate basis or on fixed interest rate basis.
Reset clause in fixed interest rates :
All fixed intrerest rates are subject to reset clause. Reset period has been fixed at every two years. However the borrower has option to repay the loan in full at the end of the re-set period without any penalty, if the revised rates are not acceptable to him/her.
(8) Processing Fees :
Upto Rs.25000/- - Nil
Above Rs.25000/- - 0.5% of loan amount.
The processing fee is payable with submission of application to the Bank. The higher authority will have discretion to reduce or even waive the processing fees:
i) where bulk business is involved and a check off facility from a reputale employer is available.
ii) during short period promotional drives/special scheme offers.
All charges in connection with Search Report/valuation certificate, etc. to be born by the borrower or recovered on a cost basis, as and when incurred.
Once the account becomes an NPA, a fresh search report should be obtained from the Bank's advocate.
(9) Takeover of Housing Loans :
Takeover of housing loans may be considered in cases where:
i) possession of the house/flat has been taken,
ii) repayment of the existing loan has already commenced,
iii) instalments are being paid as per terms of sanction and
iv) the owner has valid documents evidencing his title to the house/flat.
The following procedure is normally followed:
a) The prospective borrower should address a letter to the institution from whom the finance has been availed asking them to deliver the title deeds and other securities, if any, direct to new Bank's branch upon receipt of the nloan amount.
b) After receipt of information about outstanding in the loan account with upto date interest, alongwith statement of Account for period of loan or for the last 10-12 months(where the loan has run for a longer period) and confirmation that they are holding an equitable mortgage over the property and upon the borrower's request to the Bank to repay his outstanding loan to the institution by debit to his loan account , the disbursal of the lolan will be done. This is, of course, subject to the above information being found satisfactory and completion of documentation.
c) The agreemnt to mortgage would be taken.
d) During the interim period between granting of loan and creation of equitahble mortgage on the house/flat being financed, some security including third party guarantee may be taken, whereever considered necessary. However, the kind of security where taken, should be flexible depending on the status and integrity of the borrower and it need not be related to the loan amount. The security may be waived in the case of takeover of bulk loans of employees of corporations and institutions of repute, provided such corporations/institutions provide check-off facility, besides an irrevocable undertaking for making payment out of any amount payable to the employee, e.g., terminal benefits, etc. in case of his/her retirement, resignation, etc. towards all dues pertaining to the account. However, no deviation fromn the takeover conditions would be permitted except in cases of takeover of Standard Asswet loans in bulk of employees of good corpoates and institutions with a check-off facility. This security may be released after creation of a valid equitable mortgage subsequent to receipt of title deeds and verification of title, etc.
e) The disbursement of the loan shall be made direct to the institution stipulating that the amount shall be appropriated towards the said outstanding loan only and the title deeds and other securities, etc. should be delivered to an authorised representative of the Bank only.
f) On receipt of title deeds, etc. the bank must apprise to the borrower, in writing, as to which of the documents/securities were received from the institution in order to avoid any legal complication later on that the Bank failed to obtain the documents/securities as instructed.
(10) Insurance :
The dwelling unit purchased/constructed should be insured against the risk of fire/riots/earthquakes/lightning, floods, etc. in the joint names of the borrower and the Bank for the full market value of the propoperty or the oustanding loan amount, whichever is higher. A copy of the policy is to be retained with the Bank. The borrowers may be encouraged to obtain insurance for the full estimated period of the loan to be able to avail substantial discounts offered by insurance companies.
(11) Disbursement :
The safeguard the Bank's interest and to prevent misuse of funds, disbursements should be made only in phases and should be corelated to the actual progress made in the construction e.g. at stages like completion of plinth, construction of lintel level, completion of roof, etc. Bank/branches may insist on a certificate from engineer/architect of he borrower as regards stage of completion of the project. Disbursements sholuld be made only after the bank/branch is satisfied about the proper use of funds. Inspection of the site also to be carried out by the bank official during the course of construction.
As regards loans for repairs/renovations/construction, etc. bank/branches needs to satisfy themselves about the estimated cost of work involved having regard to the extent thereof, marterials to be used, cost of labour and other charges and after obtaining certificate(s) of qualified engineers/architects as considered necessary.

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