The document discusses housing finance. It describes the different types of housing finance like direct finance, supplementary finance, and indirect finance. It discusses the purpose, quantum, eligibility, and terms of housing loans. Housing loans are typically provided for purchasing or building a house. The loan amount usually ranges from Rs. 100,000 to Rs. 2 crores. Individuals over 18 with sufficient income are eligible, and loans are typically repaid over 15-25 years. Housing loans have a margin of 80-85% of the property cost and are secured by a mortgage on the property. Interest rates can be fixed or floating.

1. Housing Finance
Introduction
Types of Housing Finance
Purpose, Quantum
Eligibility and Terms of loan
Margin, Interest, Security
Housing Finance Retail Banking Chapter 15

2. Introduction
A housing finance is refers to finance provided to
individuals or group of individuals including co-operative
societies for purchase/build house or houses. The R.B.I. has
states that banks are free to decide the guidelines on accepts
such as age of dwelling units, repayment schedules, margin
and security with the approved of their board.
Housing Finance Retail Banking Chapter 15

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

4. Purpose, Quantum
The housing loan provided for;
1. Purchase of flat/house or purchase of plot of land.
2. For renovation/repairs of an existing house/flat.
3. For extending an existing house.
4. Short term bridge finance while purchasing another
house/flat.
The quantum of loan is vary from bank to bank normally
bank stipulate minimum of Rs. 1,00,000/-. The maximum would
depend on the bank and it could vary from Rs. 10 lakhs to Rs. 2
crores or more. For repairs the amount is less, around Rs. 10
lakhs.
Housing Finance Retail Banking Chapter 15

5. Eligibility and Terms of loan
All individuals are eligible who are above the age of 18
years having sufficient income to repay the loan. The loans are
not normally extended to the individuals who are above 58 years
of age. The amount of advance will be based on individuals
gross pay or net take home pay. The criteria may be differs from
bank to bank as per the suggestion of R.B.I.
The terms or the period of repayment is also depend on
age of buyer. Normally it is from 15 years to 25 years. The main
aspect behind this is the amount of loan along with interest
should be repaid before the person retires. Loans provided for
self employed personals are some time a shorter duration.
Housing Finance Retail Banking Chapter 15

6. Margin, Interest, Security
The housing loan is normally between 80% to 85% of
cost of the house/flat. The entire amount is rarely advanced by
nationalized bank. Some private banks are now financing 100%
amount.
For housing loan there are two types of interest rate.
One is fixed for entire tenure of the loan and the other one is
floating. Which is charging through out the duration of loan.
The security in respect of housing finance is the property
purchase with a mortgage is taken on the same. For additional
security guarantee may be taken.
Housing Finance Retail Banking Chapter 15

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