J&k BANK HOUSING LOAN SCHEME AND ITS

COMPARISON WITH OTHER MAJOR BANKS

HOME LOAN:
A home loan is a loan secured by real property through
use mortgage note which evidences the existences of the
loan and the encumbrance of that reality through the
granting of a mortgage which secures the loan. However
,the word mortgage a loan, in everyday usage, is most
often used to mean mortgage loan.
A home buyer or builder can obtain financing (a loan )
either to purchase or secure against the property from a
financial institution, such as a bank, either directly or
indirectly through intermediaries. Features of mortgage
loans such as the size of the loan, maturity of the loan,
interest rate, method of paying of the loan, and the other
characteristics can vary considerably.

In many jurisdictions, though not all (Bali, Indonesia

being one exception), it is normal for home purchases to
be funded by a mortgage loan . Few individuals have
enough savings or liquid funds to enable them to
purchase property outright. In countries where the
demand for home ownership is highest, strong domestic
markets have developed.

The word mortgage is a law French term meaning “dead

pledge”, apparently meaning that the pledge ends(dies)
either when the obligation is fulfilled or the property is
taken through foreclosure.

MORTGAGE LOAN BASICS

BASIC CONSCEPTS AND LEGAL REGULATION
According to Anglo-American property law, a mortgage
occurs when an owner(usually of a fee simple interest in
realty )pledges his interest(right to the property) as
security or collateral for a loan. Therefore, a mortgage is
an encumbrance(limitation) on the right to the property
just as an easement would be, but because most
mortgages occur as a condition for new loan money, the
word mortgage has become the generic term for a loan
secured by such real property.
As with other hfdjjgdhjhn mortgages have an interest
rate and or scheduled to amortize over a long period of
time, typically 30 years. All types of real property can be,
and usually or, secured with mortgage and bear an
interest rate that is supposed to reflect the lender’s risk.

Mortgage lending is the primary mechanism used in

many countries to finance private ownership of
residential and commercial property. Although the
terminology and precise forms will differ from country to
country, the basic components tend to be similar:
 Property: the physical residence being financed. The
exact form of ownership will vary from country to
country, and may restrict the types of lending that
are possible.
 Mortgage: the security interest of the lender in the
property, which may entail restrictions on the use or
disposal of the property. Restrictions may include
requirements to purchase home insurance, or pay
off outstanding debt before selling the property.
 Borrower:the person borrowing who either has or is
creating an ownership interest in the property.
 Lender: Any lender, but usually a bank or other
financial institution. Lenders may also be investors
who own an interest in the mortgage through a
mortgage – backed security. In such a situation, the
 initial lender is known as the mortgage originator,
which then packages and sells the loan to investors.
The payments from the borrower are thereafter
collected by a loan servicer.
 Principal : the original size of the loan, which may or
may not include certain other costs; as any principal
is repaid, the principal will go down in size.
 Interest : A financial charge for use of the lender’s
money.
Foreclosure or repossession: the possibility that the
lender has to foreclose, repossess or seize the property
under certain circumstances is essential to a mortgage
loan; without this aspect, the loan is arguably no
different from any other type of loan.
Many other specific characteristics are comman to many
markets, but the above are the essential features.
Governments usually regulate many aspects of mortgage
lending, either directly (through legal requirements, for
examples) or indirectly (through regulation of the
participants or the financial markets, such as the banking
industry), and often through state intervention(direct
lending by the government, by state-owned banks , or
sponsorship of various entities).other aspects that define
a specific mortgage may be regional, historical, or driven
by specific charactistics of the legal or financial system.

Mortgage loans are generally structured as long-term

loans, the periodic payments for which are similar to an
annuity and calculated according to the time value of
money formula. The most basic arrangement would
require a fixed monthly payment over a perid of ten to
thirty years, depending on loan conditions. over the
period the principal component of the loan (the original
loan) would be slowly paid down through amortization.
In practice, many variants are possible and common
worldwide and within each country.
Lenders provide funds against property to earn interest
income, and generally borrow these funds themselves
(for example, by taking deposits or issuing bounds ). The
price at which the lenders borrow money therefore
affects the cost of borrowing. Lenders may also, in many
countries , sell the mortgage loan to other parties who
are interested in receiving the stream of cash payments
from the borrower, often in the form of a security(by
means of securitization).
Mortgage lending will also take into account the
(perceived) riskiness of the mortgage loan, that is the
likelihood that the funds will be repaid (usually
considered a function of the creditworthiness of the
borrower );that if they are not repaid, the lender will be
able to foreclose and recoup some or all of its original
capital; and the financial, interest rate risk and time
delays that may be involved in certain circumstances

MORTAGAGE LOAN TYPES

There are many types of mortgages used
worldwide, but several factors broadly define the
characteristics of the mortgage. All of these may be
subject to local regulation and legal requirements.
 Interest: interest may be fixed for the life of the
loan or variable, and change at certain predefined
periods; the interest rate can also, of course, be
higher or lower.
 Term: mortgage loans generally have a maximum
term, that is , the number of years after which an
amortization loan will be repaid. Some mortgage
loans may have no amortization, or require full
 repayment of any remaining blance at a certain
date, or even negative amortization.
 Payments amount and frequency : the amount paid
per period and the frequency of payments ; in some
cases the amount paid per period may change or
the borrower may have the option to increase or
decrease the amount paid.
 Prepayment: some types of mortgage may limit or
restrict prepayment of all or a portion of the loan,
or require payment of a penalty to the lender for
prepayment.
 the two basic types of amortized loans are the fixed
rate mortgage (FRM) and adjustable –rate
mortgage (ARM) (also known as floating rate or
variable rate mortgage ). In many countries (such as
united states), floating rate mortgages are the norm
and will simply be referred to as mortgages
.combinations of fixed and floating rate are also
common, whereby a mortgage loan will have a
fixed rate for some period, and vary after the end of
that period .
 in a fixed rate mortgage , the interest rate , and
hence periodic payments, remains fixed for the life
(or term )of the loan . therefore the payment is
 fixed , although ancillary costs(such as property
taxes and insurance) can do change . for a fixed rate
mortgage, payments for principal and interest
should not change over the life of the loan ,
 in an adjustable rate mortgage , the interest rate is
generally fixed for a period of time ,after which it is
periodically (for example , annually or monthly)
adjust up or down to some ,market index.
Adjustable rates transfer part of the interest rate
risk from the lender to the borrower , and thus are
widely used where fixed rate funding is difficult to
obtain or prohibitively expensive. Since the risk is
transferred to the borrower , the initial interest rate
may be from 0.5% to 2% lower than the average 30-
year fixed rate ;the size of the price differential will
be related to debt market conditions , including the
yield curve .
the charge to the borrower depends upon the
credit risk in addition to the interest rate risk . the
mortgage origination and underwriting process
involves checking credit scores , debt-to- income
,down payments, and assets. Jambo mortgages and
sub prime lending are not supported by payment
guarantees and face higher interest rates. Other
innovations described below can effect the rates as
well.

J&K BANKS HOUSING LOANS SCHEME IS AS

FOLLOWING:
HOUSING LOAN SCHEME
Quantu  for construction /purchase 60 months
m net salary or 75.00 lacs whichever is
Of loan lower.
 For repairs/renovation 20 months net
salary, subject to maximum of 5 lakhs
within j&k and 10.00 lakhs outside j&k.
 Also as an incentive for small borrowers,
the loans up to 1.5 lakhs granted for
repairs/renovation of existing houses
would now be secured by the third party
grantee of two persons or such other
security as is deemed appropriate by the
bank
 Eligibilit  Employees of the Govt, semi-Govt.
y Dept., civic Bodies,PSU’s with minimum
5 years service.
 Reputed Businessmen with the
minimum 5 years standing.
 Proffessionals &self employed like
Doctors, Engineers, CA’sAdvocates with
minimum 5 years standing

Rate of SECTOR/ Interest Interest

interest rate Rate linked to base
SCHEME
Linked to
(subject rate w.e.f.
PLR
To change) w.e.f.01.01 01.01.2011&
.2011 Fixed rate
 EFFECTIVE BASE Effective
INTEREST RATE interest
RATE (BR)8.75 rate
%)
Housing loans up to RS 20.300 lacs under fixed
rate option with repayment of the loan

FOR a
period
up to 5 fixed 10.75%
years

For a 11.50%
period
fixed
above
5 years
and up
 to 10
years

Housing loans up to RS 20.00 lacs under floating interest

rate option with repayment of the loan

For a period
PLR 10.00
up to 5 BR+1.25% 10.00
3.25% %
years
For a period
above 5
PLR 10.50
years and BR+1.75% 10.50%
2.75% %
up to 10
years
For a period PLR 11.25
above 10 BR+2.50% 11.25%
2.00% %
years and
up to 15
years

12.00%
For a period
above 15
PLR 12.00
years and BR+3.25%
1.25% %
up to 20
years

Housing loans above RS20.00 lacs under fixed interest rate

option with repayment of the loan

For a period up to 5
Fixed 11.50%
years

For a period above Fixed 12.25%

5 years and up to
10 years
Housing loan above Rs 20.00 lacs under floating interest
rate option with repayment of the loan

For a period up to 5 PLR 10.75% BR+2.00% 10.75

years 2.50% %

For a period above 5 PLR2.0 11.25 11.25

years and up to 10 0% %
% BR+2.50%
years
For a period above PLR 12.00 BR+3.25% 12.00
10years and up to 1.25% % %
15 years
For a period above PLR 12.75% BR+4.00% 12.75
15years and up to 0.50% %
20years

security  Mortgage of the house/property

to be purchased/constructed.
 Third party guarantee of one
person or Assignment of LIC
policies , pledge of govt . securities
etc .
 Negative lien on the property to be
repaired/renovated without
mortgaging the same to the bank.
REPAYMENT  For construction of a new
house 20 years including 9
months moratorium in equal
monthly
instalments.(Applicable to
new loans and disbursement
only)
 For addition /Renovation
10years including 2 months
moratorium in equal monthly
instalments.

Margin  15% for

construction/purchase of built
house flat.
 20% for renovation/purchase
of land.

Processing  0.25 of the loan amount

chrages
Term credit and housing loan portfolio of the
bank:
 March- 2010
 Advances :20930.41cr
 Home loan portfolio:709.04cr
 Percentage to total advances :3.38%
 March-2011
 Advances:23684.00cr
 Home loan portfolio:817.82cr
 Percentage to total advances:3.45%

Housing loan portfolio as on March -2011;

S.no Type of housing NO. OF Amount
Accounts
loan in
crorers
1 PUBLIC 87494 1780.03

2 staff 7883 150.60

3 indirect 334 60.47

BACKGROUND OF THE STUDY:-

The project is about the level of customer perception with
regard to home loan product of jammu and Kashmir bank.
It involves surveying the customers to get their insight
about housing loan scheme. The study was undertaken for
a period of 42 days during which the different aspects of
home loan product were analyzed and on the basis of
analysis : suggestions to improve the product are given.
The research undertaken was descriptive type. The nature
of research was quantitative. The type of questions was
standard and limited probing and the type of
questionnaire was structured and formalized. The
collected data were classified, tabulated and validated
then analyses by conventional analysis using statistical
tools like percentages and averages and results were
displayed with the help of tables and graphs. Customers
are more knowledgeable; companies must be faster, more
 agile, and more creative than a few years ago. The finance
department at j&k is constantly in pursuit to achive higher
customer satisfication and enhance the brand/
relationship management.

This project has helped the researcher to conclude that by

improving product related benefits will be helpful in
achieving more than forecasted target in future. The main
aim is to make the product to reach every customer faster,
friendly and conveniently. The company can further
enhance its association with its existing customers by
providing them with a host of value added product and
services and also expand its customer’s base which will
ultimately help contribute towards the overall success of
the organization.

OBJECTIVES OF THE STUDY:-

 To measure the level of satisfaction among the customers.
 To find out the scheme liked and disliked most by the j&k
bank customers.
To examine the level of awareness of bank services.

SCOPE OF THE STUDY:-

The study worked in the arena of covering the following
objectives.
To measure the customer satisfaction level with regards to
home loan product of j&k bank.
To find out the loopholes which came across while selling the
product.
To suggest measures this can be taken to overcome the same.

LIMITATION:-
Though each and every care was taken to incorporate all the
minute details of the study, but still it suffers from some of the
limitations, which are as under.
 The sample may be considered small as compared to the
total population.
 Respondents were reluctant to answer some questions, as
they took them personal, therefore increasing the
possibility of error.
 The study was carried for a specific period of time.

NEED AND SIGNIFICANCE OF THE STUDY:-

 This survey was mainly carried out to study the
different aspects of home loan product of j&k bank.
 This study will help the organization to identify
customer behaviour towards product and much can
be increased in that by providing better services to
customers.
  The study was also carried to highlight the
complaints regarding the housing loan product.
 Effective implementation of complaints redressal
system and customer’s relationship management will
ultimately drive organization to surpass all
competition.

COMPARISON OF PRODUCT WITH OTHER

MAJOR BANK PRODUCTS:-

In the last few years, housing loan scenario in j&k has

changed drastically. It has taken a front scar and people
are looking forward to owning their own houses. It is no
more a dream that required lifetime saving and a difficult
decision to make. Today the new home purchase loan is
much easily available and is much cheaper than what was
available earlier.

Banks are now everywhere and the schemes are

implemented even in villages and smaller towns. It would
not be wrong to say that there has been a boom in the
home loan market and with this boom. There is also a
boom in the number of home loan mortgage brokers in
j&k.
The main reason for this boom in home loan market is the
change in government policies. It is our governments
motivation that the home loan interest rates in india have
fallen considerably. Lot many banks are offering home
loans and this is available at low EMIs (equated monthly
instalments). High EMIs are now a thing of past.today
lending rate is in the range of 7.5 to 15%.

Again,there are differently types of home loans available

today. The interest rate available is also of two different
types. One is the fixed rate loan and the other is floating
rate loan. In the fixed rate loan, whatever interest is fixed
on the start of loan is carried on for the complete
period.however, in the other one , the interest rate is not
fixed and as the interest rate goes up or low the effect is
directly transferred to the person who is talking the loan.In
the last few years the floating interest rate has been a
favourite among most of the people talking home loans.

There is also a trend to opt for home construction loan.this

loan is available to those who want to design their homes
according to their requirement and taste. In other words,
this loan is meant for those who themselves want to
construct their new home.

As shared earlier, taking a loan is not a difficult task.

However, before taking a loan, one must realize that the
relationship with the bank will be for a longer period
usually 15 to 20 years so one must ensure faith and
integrity in bank. Apart from low rate of interest, the bank
should also provide some value added services. The other
thing is to look into is the property that is to be brought.
Making sure that the builder has all sanctions and facility
to build a good building is very important.