Housing Finance

Housing finance refers to finance provided to individuals or group of individuals for purchasing/building a house. RBI has given a free rein to banks to decide on the age of dwelling, repayment schedule, margin and security with the approval of their board. There are three types of housing finance namely direct finance, indirect finance and supplementary finance. Housing loan is normally 80 to 85% of the cost of flat. However, some banks provide 100% amount. Banks charge fixed interest rate or a floating rate on housing loans.

1. Housing Finance
Retail Banking
Chapter 15
HousingFinance
Introduction
TypesofHousingFinance
Purpose,Quantum
EligibilityandTermsofloan
Margin,Interest,Security

2. Housing Finance
Retail Banking
Chapter 15
Introduction
A housing finance is refers to finance provided to
individuals or group of individuals including co-operative
societiesforpurchase/buildhouseorhouses.TheR.B.I.has
statesthatbanksarefreetodecidetheguidelinesonaccepts
suchasageofdwellingunits,repaymentschedules,margin
andsecuritywiththeapprovedoftheirboard.

3. Chapter 15
TypesofHousingFinance
ThedifferenttypesofHousingFinanceareshowninthe
chart.
Types of Housing Finance
Direct FinanceIndirect Finance Supplementary Finance
Finance provided
to purchase
another house
Buy an old house
Housing Finance
Finance provided
For letting it out
for Rent
Purchase of plot
provided
borrower Declares that
he intends to construct
a house on the plot
Retail Banking
Finance provided
To other housing
financial institution
Finance provided
for
alteration/repairs
Financed provided
after obtaining
“Pain Passu” or
“Second Mortgage”

4. Housing Finance
Retail Banking
Chapter 15
Purpose,Quantum
Thehousingloanprovidedfor;
1. Purchaseofflat/houseorpurchaseofplotofland.
2. Forrenovation/repairsofanexistinghouse/flat.
3. Forextendinganexistinghouse.
4. Short term bridge finance while purchasing another
house/flat.
Thequantumofloanisvaryfrombanktobanknormally
bankstipulateminimumofRs.1,00,000/-.Themaximumwould
dependonthebankanditcouldvaryfromRs.10lakhstoRs.2
croresormore.Forrepairstheamountisless,aroundRs.10
lakhs.

5. Housing Finance
Retail Banking
Chapter 15
EligibilityandTermsofloan
Allindividualsareeligiblewhoareabovetheageof18
yearshavingsufficientincometorepaytheloan.Theloansare
notnormallyextendedtotheindividualswhoareabove58years
of age. The amount of advance will be based on individuals
grosspayornettakehomepay.Thecriteriamaybediffersfrom
banktobankasperthesuggestionofR.B.I.
Thetermsortheperiodofrepaymentisalsodependon
ageofbuyer.Normallyitisfrom15yearsto25years.Themain
aspectbehindthisistheamountofloanalongwithinterest
shouldberepaidbeforethepersonretires.Loansprovidedfor
selfemployedpersonalsaresometimeashorterduration.

6. Housing Finance
Retail Banking
Chapter 15
Margin,Interest,Security
Thehousingloanisnormallybetween80%to85%of
costofthehouse/flat.Theentireamountisrarelyadvancedby
nationalizedbank.Someprivatebanksarenowfinancing100%
amount.
Forhousingloantherearetwotypesofinterestrate.
Oneisfixedforentiretenureoftheloanandtheotheroneis
floating.Whichischargingthroughoutthedurationofloan.
Thesecurityinrespectofhousingfinanceistheproperty
purchasewithamortgageistakenonthesame.Foradditional
securityguaranteemaybetaken.

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