housing finance, its importance, objectives, methods

all about housing finance

1. Housing Finance

2. 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

3. 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

4. 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.

5. 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

6. 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.

7. 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

8. 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

9. 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.

10. F unction of NHB 1. Promotion and Development Function 2. Regulatory Function 3.  Financial Function

11. Fixing the amount of loan

12. Reducing Balance Rate

13. 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:

14. 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??

15. 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.