ANNEXURE

HOUSING FINANCE SCHEME FOR INDIVIDUALS 

1).            ELIGIBILITY   

Individuals.   Joint  owners  are also eligible. 

2).            PURPOSE   

a)            For   construction of house or purchase of house/flat.  Loan can also be extended for purchase of land/plot for house building. 

b)           For carrying out repairs/ renovation/ additions/alterations to the house/flat. 

3).            EXTENT OF LOAN           

a)            Need-based loan, maximum of  Rs.15 lacs, in rural, semi-urban and in urban areas for construction of house or purchase of house/flat depending upon the project cost and repaying capacity of the borrower.  However, maximum amount of Rs.2 lacs can be sanctioned for purchase of land/plot for house building.  

b)            For repairs / renovation / additions / alterations, the maximum amount of loan shall not exceed Rs.5 lacs.  

4).            MARGIN 

a)            For construction of house or purchase of house/flat or for carrying out repairs/ renovation/additions/ alterations to existing house/ flat: 20%*.              However, Chairman may relax it upto 15%.   

b)            For purchase of land/plot for house building:             40%. 

5).        RATE OF INTEREST

The rate of interest to be charged will be such as prescribed by the Head Office from time to time.  Presently rate of interest will be charged as per LOANS:CIR:NO:1/2005 dated 14.9.2005 which are as follows:

Option for Fixed or Floating Rate of Interest exercised by the borrower will not be allowed to be changed for a minimum period of 3 years, where after any change would be at the discretion of the Sanctioning Authority. 

The above rate of interest will be applicable on  w.e.f. 14.9.2005. 

The borrower(s) will be required to exercise the option of rate of interest at the time of submission of loan application and the same be obtained. 

FOR PURCHASE OF PLOT/LAND

In case construction of the house is not completed within 2 years from date of disbursement of the loan or in case the plot/land is sold, interest rate at  15.50% p.a. from the disbursement of the loan is to be charged. 

6).            SECURITY : 

a)            Equitable/registered mortgage of the property. 

b)         Where mortgage can not be created immediately in situations like house/flat is being purchased/allotted by the Housing Board, Development Authorities or Co-operative Society, and title/conveyance deed are executed in favour of purchaser only after completion of construction & possession/ making full payment of the cost of house/flat, a stamped Tripartite Agreement be executed amongst Housing Board/Development Authority/Co-operative Society, the intending borrower and the Bank before release of the loan. (By entering into Tripartite Agreement among authority/seller, allottee/purchaser and bank, bank gets direct privity with the authority/seller.) 

To secure such loan, guarantee of person(s) acceptable to the Bank be obtained.

 c)            In situations where : 

i)        The mortgage by deposit of  Title Deeds  is not possible, the property being an  Ancestral Property (without Title Deeds) or Lal Dora Land,  

OR 

ii)  There is delay in  execution / unwillingness to execute a stamped Tripartite Agreement by Housing Board/Development Authority/Co-operative Society, the sanctioning authority may accept, at its discretion, equitable / registered mortgage of some other property / pledge of Government security, NSCs, KVPs, / PSU Bonds (where interest is being serviced regularly) / bank's FDR / LIC Policies (surrender value) etc. The value of such security so obtained should be equal to 150% of the loan amount in case of immovable property and 125% in case of liquid securities mentioned above. The details of such situations, alongwith reasons of obtaining alternative security as detailed above, must clearly be specified in the sanction note by sanctioning authority.

 7).            GUARANTEE  

Suitable guarantee acceptable to the  Bank may be obtained which may also include guarantee from family members/other relatives.           

Chairman, however, may waive this clause on merits of each case. 

8).            DISBURSEMENT             

a)            For outright purchase of house/flat & plot, the loan will be paid in lump sum to the vendor at the time of registration after satisfying that borrower has paid/provided for the balance amount/his contribution. 

b)            For house/flat under construction, the loan amount will be disbursed in stages depending on progress of construction and/or demand raised by selling agency after ensuring that the borrower has invested his pro rata share towards required margin. 

9).            INSURANCE      

The property will be kept insured for re-construction cost (and not the market value or the limit sanctioned for House/ flats as the reconstruction cost will be higher as compared to limit sanctioned) in respect of  fire, riots and wherever required, against other appropriate hazards, such as earthquake, flood, etc. by the borrower with usual bank clause.           

However, the BMs should ascertain by reviewing on an on-going basis that the adequate coverage of insurance is available for reconstruction cost at all times as the cost may increase during the period of the insurance policy, which generally is being taken for a period of 10 years.  

Subsidiaries of General Insurance Corporation are issuing insurance policy, specifically to cover risks relating to housing.  These policies are called “Fire Policy A”, which cover risks such as fire, lightening, riot, strike, terrorism, storm, cyclone, typhoon, hurricane, tornado, flood, inundation, earthquake, fire & shock.  These policies can also be issued on one time basis for a period of 10 years at a reduced premium i.e. 50% of the normal premium.

The value of the property is based on rate of construction of the building as per the PWD rates for that particular Region and the same is suitably loaded for extra fittings and fixtures, superior constructions and other relevant details. In fire insurance, building above the plinth and foundation is covered. However, when the policy is extended to cover the risk of earthquake then the cost of plinth and foundation can be included in the sum insured. 

10).            REPAYMENT 

a)            Loan alongwith interest is to be re-paid in equated monthly instalments within a maximum period of 20 years, inclusive of moratorium period, if any.  Moratorium or repayment holiday may be permitted where the house/flat are constructed till completion of construction or 18 months from the date of disbursement of first instalment of the loan, whichever is earlier.  However, Chairman may further relax the moratorium period by six months. 

Further, in those cases where a moratorium period is allowed by the sanctioning authority, where loan is allowed for construction purposes, it may be ensured that the amount of expected accrued interest, on monthly compounded basis, for the period of moratorium is added to the Loan (Principal) amount presuming that the entire loan is disbursed on the date of first disbursal itself and EMI calculated accordingly.  

However, there may be situations where Sanctioning Authority is required to quote EMI matching to the EMI quoted by our competitors.  This is on account of recovery of interest component chargeable in the account, during the period of moratorium, by some of the Housing Financial Institutions / Banks. Therefore, it is desirable that the prospective borrower is suitably advised and given the option, at his/her specific request, of either: 

i) Repaying the interest component chargeable in the account during the period of moratorium and EMI thereafter; OR 

ii) In case borrower exercises the option of not paying interest during the moratorium period, interest component chargeable in the account for the moratorium period would be spread over the EMIs for the entire repayment period. The EMI in such cases be appropriately worked out and advised presuming that the entire loan is disbursed on the date of first disbursal itself. 

This is explained by an example hereunder: 

EXAMPLE

i)          Amount of Loan sanctioned and disbursed say                -  Rs. 3,00,000/- 

ii)             Repayment period allowed say                                           - 15 years 

iii)            Moratorium period allowed say                                           - 18 months 

iv)        Rate of interest                                                                         - 9.50% p.a.  

v)         EMI (on arrear basis) on Rs. 345370/-

inclusive of interest for the moratorium

period of 18 months presuming that entire

loan is disbursed on the date of first

disbursal itself                                                               - Rs. 3592/- p.m.           

(Rs. 3,00,000/- (Principal) + Rs.45370/- ( interest for 18 months). 

It may be noticed that the EMI without adding the interest for the moratorium period would be Rs. 3120/- only (i.e. Rs.1040 per lac multiplied by 3 = Rs.3120/-). 

Incumbents should ensure to clarify the exact position to the prospective borrower to avoid any anticipated Business Loss for quoting a higher EMI.  

Further, the aforesaid provision of moratorium period be developed and promoted/ used as an effective marketing tool by the field functionaries. 

In case of loans to individual members of Group Housing Societies, the repayment shall start from immediate subsequent month after the final disbursement of the loan. 

b)            In case of purchase of ready built house/ flat or land/plot, the repayment to start after the date of possession or 3 months from the date of advance whichever is earlier. 

c)            Repayment should be fixed on a realistic basis, which should not normally exceed 50% of gross income. The income of the spouse and earning children (whether married or unmarried) should be taken into account for determining the income for the purpose of borrowers’ repaying capacity. Income of the joint owners of the property may also be added for determining the repaying capacity. In such cases, they should be made co-borrower.  

In case of self employed individuals the gross income may be arrived at by adding amount of depreciation to the Net Profit amount and repaying capacity be assessed accordingly.

Likely rental income, if the property is to be let out be also considered for determining the repaying capacity.

d)            Sanctioning authority may consider fixing the monthly instalments on graduated basis, if there is reasonable expectation of growth in the income in the coming years on specific request from the borrower. 

e)            Repayment of the loan alongwith interest should not ordinarily extend beyond the age of 65 years of borrower.  Chairman may relax repayment upto the age of 70 years.  In case loan is allowed to joint owners, it should be ensured that atleast one of the joint owners should be able to repay the loan alongwith interest maximum upto the age of 65 years. 

f)            In order to ensure that regular instalments are received and defaults are minimized it be ensured as under: 

Minimum 24 Advance Cheques signed by borrower towards repayment of monthly instalments along with Letter of Deposits be obtained. However, when the number of cheques with the branch reaches six (6), the borrower to give additional 24 cheques duly signed.  This system of giving additional cheques shall continue till the adjustment of the loan. OR 

Irrevocable Letter of Authority from the borrower to the employer for either remitting the salary to the bank or for remitting the monthly instalment for repayment of loan to the bank.  An acknowledgement of the said letter of authority from the employer be kept on record.  Further, in cases where employer remits the salary to the bank, an irrevocable letter of authority from the borrower be obtained for debiting the amount of instalment to the SF Account. 

11).            UPFRONT FEE & DOCUMENTATION CHARGES: 

Upfront Fee and Documentation charges be charged as under:

Upfront fee: 1.00% of the loan amount.

 Documentation charge: Rs.1500/-. 

50% of the upfront fee is to be levied on receipt of the proposal and balance after sanction of loan. In case the loan proposal is declined or the loan sanctioned is not availed by the customer within a period of 6 months, upfront fee recovered shall be forfeited after giving due notice to the borrower. 

General Manager is vested with powers to waive upto 50% of the Upfront fee subject to a maximum of Rs.7500/- per customer and have full powers to waive documentation charges.                       

Chairman have full  powers to waive Upfront fee and  documentation charges. 

12).            CONFIDENTIAL REPORT      

Confidential Report on borrower and  guarantor is to be prepared as under

Upto Rs.2 lac on             PNB- 282-C and

Above Rs.2 lac      on              PNB- 282- B

 13).            LOANING POWERS             

Loaning powers under Housing Loan Scheme will be the same as advised vide loans circular no.2/2005 dated 14.9.2005 which are as follows:

14).      PRE PAYMENT CHARGE: 

To avoid Take over/shifting of Housing Loan accounts by other Banks / financial institutions a flat pre-payment charge of 2% be recovered from all those borrowers who intend to shift their Housing Loan Accounts to some other Banks / Financial Institutions by way of availment of loan from such banks / financial institutions.  

However, such a charge will not be recoverable from those borrowers who pre-pay their loan from their own sources.   

15.)            ISSUANCE OF INTEREST CERTIFICATES 

An interest certificate may be issued to the borrower(s) who have availed housing loan from the bank for availing benefits under the provisions of income tax act on the prescribed proforma. (Annexure XVII)  

 16).            CLASSIFICATION OF HOUSING FINANCE UNDER PRIORITY SECTOR

The advance under this scheme within the limits specified above shall be classified under Priority Sector Advance: 

17).            OTHER GUIDELINES              

a)                 Need-based bank credit (within the overall limit of Rs.5 lacs ) as housing finance can be extended for repairs, addition, etc. to a building/house/flat irrespective of whether it is owner occupied or tenant occupied. For this purpose, estimate of cost of repair/addition, etc., and the certificate of completion of work done be obtained from qualified engineer/architect.

b)                 Requests for additional finance may also be considered for carrying out alterations/ additions/repairs to the house/flat already financed by the Bank.

c)         There is no bar in providing finance to a person who or whose spouse already having house or flat in his/her name.

d)         In case of default in repayment of loan, the borrower shall be liable to pay penal interest @ 2% over and above the applicable rate on the amount of default and for the period of default.  An undertaking to this effect shall be obtained from the borrower.

e)         In case of finance for purchase of plot/land/flat/ house, sanctioning authority to ensure that the title of the same is marketable and free from encumbrances. 

f)          Chairman may permit takeover of housing loan accounts from other financial institutions/ banks.  However, Sanctioning Authority, while taking over the loans shall ensure that housing loan accounts with other financial institutions/banks are running regular with no defaults in payment of interest/instalments. 

g)         Bank finance extended to a person who is already owning a house in the town/village where he resides for buying/constructing a second house in the same town/village or in other town/village for the purpose of self-occupation, may be considered as Direct Housing Finance.

h)         Bank finance extended for purchase of house/borrower who proposes to let it out on rental basis on account of his posting outside the Head Quarter or because he has been provided accommodation by his employer, may be treated as Direct Housing Finance.

i)                   Bank finance extended to a person who proposes to buy an old house wherein he is presently residing as a tenant may be classified as Direct Housing Finance.

j)          Re-schedulement in Housing loans may be allowed by an authority one step higher, maximum upto a total period of 7 years over and above the repayment period as prescribed in the original sanction by the sanctioning authority. This shall also be applicable in case of takeover of housing loan accounts provided the accounts are running regular. However, incase of NPA accounts guidelines as issued by Protested Advances Division (PAD), HO, from time to time shall be applicable. 

k)         Statement of account of prospective borrower(s) minimum for last six months be obtained. In case of salaried employees, statement of account should be of that account in which their salary is being credited. In other cases it should be of an account whose declaration has been made in the income tax returns. This is to facilitate ascertaining general conduct of the account including other borrowings. 

 18).            DOCUMENTATION           

A.        For Purchase of built house/flat/dwelling unit from individual(s) in the name(s) of the borrower(s).

 a)           Application-cum-appraisal/ sanction form (PNB 1054)

 Following documents be obtained alongwith loan application:- 

i)                    Proof of Address

ii)                   Proof of Income

iii)                 Proof of Title of the Vendor

iv)                 Agreement to sell alongwith original receipts of payment of earnest money etc. made by the borrower (s) to the vendor.

v)                  Plan of the House/Flat to be purchased.

vi)                 Attested copy of completion certificate, if obtained.

vii)                In case of leasehold property, letter of authority from appropriate authority permitting transfer and mortgage of the property.

viii)              Non-Encumbrance Certificate  

b)                Agreement for Housing Loan (Annexure II )

c)                Irrevocable Power of Attorney in favour of the bank to carry out obligations of the borrower(s) under the Loan Agreement (Annexure III)

d)                Agreement of Guarantee (PNB 58)

e)                Letter from the borrower(s) to exercise the option of rate of interest (Annexure XV )

f)                 Irrevocable letter of authority from the borrower(s) authorizing the employer to remit salary/instalment and other amount payable to the Bank cum letter of acknowledgement from employer , Letter of authority (Annexure IV ) OR Advance cheques signed by the borrower repaying monthly instalments alongwith the letter of deposit (Annexure VI )

g)                Authority for insuring and payment of premium (PNB 374)

h)                Confidential Report (PNB 282-C upto Rs.2 lac PNB 282-B above Rs.2lac).

i)                  Any other document which may be necessary as per requirement of the case. 

B.            For Purchase of Plot/Land. 

a) Application-cum-appraisal/sanction form (PNB 1054)  

  Following documents be obtained alongwith loan application:-

 i)                    Proof of Address

ii)                   Proof of Income

iii)                 Proof of Title of the Vendor

iv)                 Agreement to sell alongwith original receipts of payment of earnest money etc. made by the borrower (s) to the vendor.

v)                  In case of leasehold plot/land, letter of authority from appropriate authority permitting transfer and mortgage.

vi)                 Non-Encumbrance Certificate 

b) Declaration  from  the borrower(s) at the time of application (Annexure VII)

c) Agreement for Housing Loan (Annexure VIII )

d) Equitable Mortgage/Mortgage Deed (Annexure IX )

e) Agreement of Guarantee (PNB-58)

f) Letter from the borrower to exercise the option of rate of interest (Annexure XV )

g) Irrevocable letter of authority from the borrower(s) authorizing the employer to remit salary/instalment and other amount payable to the Bank cum letter of acknowledgement from employer, Letter of authority (Annexure IV) OR Advance cheques signed by the borrower repaying monthly instalments alongwith the letter of deposit (Annexure VI )

h)                           Brief confidential Report (PNB 282-C)

i)                             Any other document which may be necessary as per requirement  of  the case.

 C.                For Construction/Repair/Renovation/Addition/Alteration 

 a) Application-cum-appraisal/sanction form (PNB 1054) 

Following documents be obtained alongwith loan application:- 

i) Proof of Address

ii) Proof of Income

iii) Attested copy of Sale Deed/Lease Deed

iv) In case of construction/addition/alteration, plan approved by the competent authority.

v) Estimate of construction / repair/ renovation / addition/ alteration by a qualified Civil Engineer/Architect.

vi) In case of leasehold property, letter of authority from appropriate authority permitting mortgage.

vii) Non-Encumbrance Certificate 

b) Agreement for Housing Loan (Annexure II )

c)                        Equitable Mortgage/Mortgage Deed (Annexure IX )

d)                        Agreement of Guarantee (PNB-58)

e) Letter from the borrower(s) to exercise the option of rate of interest (Annexure XV )

f) Irrevocable letter of authority from the borrower(s) authorizing the employer to remit salary/instalment and other amount payable to the Bank cum letter of acknowledgement from employer , Letter of authority (Annexure IV ) OR Advance cheques signed by the borrower repaying monthly instalments alongwith the letter of deposit (Annexure VI )

g)                          Authority for insuring and payment of premium       (PNB 374)

h)                          Brief confidential Report (PNB 282-C)

i)                            Any other document which may be necessary as per requirement of the case.  

D.        For Purchase of House/Flat from Development Authority/ Housing Board/Private Builders/Group Housing Society.

 a)  Application-cum-Appraisal/sanction form (PNB1054)    

Following documents be obtained alongwith loan application 

i)                    Proof of Address

ii)                   Proof of Income

iii)                 Agreement to Sell/Letter of Allotment/Brochure of Scheme and other relevant correspondence between the borrower(s) and vendor regarding sale and purchase of the property. 

iv)                 Original receipts of payments made by the borrower (s) to Development Authority/Group Housing Society etc.

v)                  In case the house/flat is to be purchased on leasehold basis, letter of authority from vendor(s)/other authority permitting mortgage of the property by the borrower.

vi)                 In case of proposal of members of Group Housing Societies, a letter from the Society duly signed on its letter head (Annexure X ) 

                        b)            Agreement for Housing Loan (Annexure II )

c) Irrevocable Power of Attorney in favour of the bank (Annexure III ) 

d) (i)    Tripartite Agreement  

 (ii)  In case of Housing Loan to members of Group Housing Societies, Tripartite Agreement be obtained as per (Annexure XII) and the share certificate issued by the concerned Society in respect of borrower(s) own holding in its capital together with transfer deed signed in blank for the said share be also obtained 

e) Agreement of Guarantee (PNB 58)

f)      Letter from the borrower(s) to exercise the option of rate of interest (Annexure XV )

g) Irrevocable letter of authority from the borrower(s) authorizing the employer to remit salary/instalment and other amount payable to the Bank cum letter of acknowledgement from employer, Letter of authority (Annexure IV ) OR Advance cheques signed by the borrower repaying monthly instalments alongwith the letter of deposit (Annexure VI )

h) Authority for insuring and payment of premium(PNB 374)

j)                  Confidential Report (PNB 282-C upto Rs.2 lac PNB 282-B above Rs.2lac).

i) Any other document which may be necessary as per requirement of the case.  

A complete set of the documents/annexures mentioned in the circular is being sent separately to all the branches.

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