HOUSING ASSIGNMENT

Interview with a bank manager related to housing

Arjun
Noel

Acknowledgement
We sincerely appreciate the time and patience put in for the
interview by Mrs.Soonam D.
Bank manager, State bank of Travancore, Kerala.

The interview has enlightened us about the banking sectors

involvement
and working in the real estate scenario currently.

Transcript of the
interview
1) What are the different types of bank loans given under housing sector?

There are two types of loans: Term loan and overdraft loan. Term loans are
provided for a fixed term maximum period being 30 years. In the case of
overdraft loan the bank fix a limit. The borrower can withdraw the money
within that amount. In overdraft loans the borrower has the flexibility to draw
and re-pay the amount within that limit and the interest charge will be less.

2) Up to what percentage the bank provides loan related to housing?

80% of the cost of the building or 80% of the estimate. In the case of income
criteria that is depending upon the age, if his/her age is below 45years, the
bank can sanction 60times his/her net monthly income. And if the age is
above 45years, the bank can sanction 48times his/her net monthly
income.

3) What is the process of loan sanction? Documents required for

getting a loan sanctioned?

If its a purchase of land or construction of house then the customer has to

submit the salary certificate, net salary statement, prior DD, possession
certificate of the property, the location sketch and encumbrance
certificate. For construction approval of plan, estimate certified by a
registered architect or an engineer.

Transcript of the
interview
4) How is the payback process? How is the EMI calculated?
The maximum re-payment time is up to 30years.Within that period depending upon the

borrowers age the re-payment period is calculated. The EMI is calculated based on the
quantum of loan and the period for which the loan is taken.

5) While providing a loan under housing sector, is the amount given to the buyer
or seller?
While purchasing a flat or a property the amount is directly given to the seller. But in

the case of construction of a house the amount is given in different installments to

the borrower.

6) How do you make sure that the borrower is able to payback the loan amount?
Re-payers financial capacity will be analyzed before sanctioning. The minimum eligibility

for the one who is working in India is that he/she should have an minimum net monthly
income of Rs.12000/-.In the case of NRIs the minimum net monthly income of
Rs15000/- is required. While considering the income criteria regular income from all
sources will be assessed. That is : Rental income, agricultural income etc.

7) For the construction of house, Hows the amount breakdown into different
installments?
In the case of construction of a house the amount will be dispersed in 3installments.

30% after the

Transcript of the
Interview
completion of basement, 40% after reaching the plinth level
and the remaining 30% is provided
for the finishing work
once the structure is completed. For purchase of land or flat, the
entire amount is given initially to the seller in the form of DD.

7) Do developers approach you for loan for housing?

No, when a project is launched by a particular developer they gets lot of

bookings for apartments before the construction of the project. With

that money the developer builds and the remaining amount will be
transferred at different floor levels. So the developers do not
approach the bank for loan.

8) How do you evaluate the current scenario in the real estate

market?
Presently its on the decline phase due to the financial crises. As a

matter of fact we have lost a few NRI customers who were looking for
financial assistance for construction purposes recently. There is a current
trend that the people are preferring flat/apartments over finding a
land and constructing a house which may be due to the scarcity of land.

Conclusion
The main objective of the interview was to find out the
involvement of banking sector in the real estate market. The interview
has helped us to find out more about the banking aspects of housing.
It was noticed that the middle income group approaches the
bank more for financial aid related to construction or purchase of land.
The current scenario of an increase in mass housing is also supporting
the fact that the middle income groups work environment prevails
mostly in the urban area prefer mass housing.