India Home Loans Ltd

Credit Policy of India Home Loans Ltd

1. Introduction

The principal object of India Home Loans Ltd. (IHLL) is transacting the business of
providing long term finance for housing. The objective of this Credit Policy is to lay
down systems, procedures and parameters for providing finance to Individuals and/or
persons for construction and/or purchase and/or repair and/or development of a
house for residential purpose. A long term loan for housing is called herein after in this
policy as a ‘housing loan’, while the other loan granted on the mortgage of a residential
house is called a ‘Loan against the Property’. It also covers the policy of providing
finance to builders in respect of their projects for constructing residential houses.

2. Loan Limit and tenure

Subject to the fulfillment of the criteria set out in this policy, IHLL may grant

i. a housing loan up to Rs.25,00,000/- (Rupees twenty five lakhs only) to a

person for a term not longer than 20 (twenty) years;
ii. a loan against property up to Rs.20,00,000/- (Rupees twenty lakhs only) to a
person for a period not exceeding 15 (fifteen) years and
iii. a loan up to 15% of the Owned Fund of IHLL to a Builder in respect of its
project for construction of residential houses/flats/apartments for a period
not exceeding 5 (five) years.

3. Eligibility Criteria

A person competent to contract and capable of meeting the margin money up to the
extent stated above or any amount as may be fixed from time to time by IHLL, having
sufficient regular income to pay his/her periodical installments regularly is eligible to
apply for a housing loan from IHLL. A non-resident Indian, subject to fulfillment of the
conditions prescribed by Reserve Bank of India in this regard may also apply for a
housing loan from IHLL. A person desiring to avail a loan from IHLL will be required to
apply for the loan in the Application Form prescribed by IHLL for the purpose. The
application form will contain information relating to the borrower’s identity,
social/financial status, nature of business activity, information about his clients’
business and other their location etc. With a view to prove his identification and
address, while submitting an application for a loan, the applicant will be required to
produce copies of the relevant documents from out of the documents indicated below.
 - PAN/Driving License/Passport/Voter’s identity Card/Ration Card/Electricity
Bill/Telephone Bill/Identity Card issued by a public authority along with one
recent passport size photograph .

As regards his/her income, the borrower may produce copies of at least any two of the
following documents.

- IT Returns for three years/Salary Slip/Income Certificate from the Competent

Authority/Bank Statement/Affidavit in respect of his/her/their income.

A Income from Salary % To be Considered Proof (Any 1)

1 Regular items of Salary 100% Salary Slip, Salary Certificate, ITR, Form 16 OR
Appointment letter if applicant is < 3 months in
the
company. Bank statements showing salary
credit
mandatory with salary certificate.
2 Annual (fixed bonus# etc.) 100% Form 16, Appointment letter or Increment
Letter.
3 Fixed reimbursements 100% Same amount appearing in last 2 Salary slips
4 Variable items in Salary 50% of average of last Supporting 3 latest Salary slips(Has to appear in
Slip like Overtime, 3 months all 3 Salary slips)
performance incentive,
flying allowance, mileage
allowance, etc.
5 Variable items as above 50% of average of last Original Salary Certificate from company with
not reflecting in Salary 3 months supporting 3 month credits in the bank
Slip statements
(Should have been credited in all 3 months)
6 Reimbursements against 0% Not to be considered
actual (medical, telephone
bill etc.), Income arrears &
One time bonus

B Income from Business % To be Considered Proof

Income from Business or 100% ITR for last 2 years with Computation of Income
profession. or
Profit and Loss A/c .(Non-recurring Income e.g
Profit/loss of sale of machinery should not be
considered.).
C Income from Rent 50% will be If 50% of rental income is less than 50% of
considered ifIncome
reflected in ITR or from Business or profession then a verification
supported by legal of
documents/ bank the rented property is sufficient.
statement (Tenancy)
If 50% of rental income is more than 50% of
Income
from Business or profession then the rented
property
should be mortgaged
D Income from Agriculture 0% Not to be considered
E Depreciation 0% Not to be considered
F Income from Other 50% will be Proof of the investment to be provided
sources (Interest, considered if
Dividend, FD etc.) reflected in ITR and
supported by legal
documents/ bank
statement

* F should be capped at 1/3 of (A+B+C+D)

Other Details
At least one of the applicants whose Income is considered should have Income from Salary or
1 Business.
2 For cash salary, Income for FOIR will be taken only from Form 16 / ITR.
All constant debits(loan deductions) seen in the bank statements, or salary slips is to be adjusted in
the FOIR
calculation. If only <= 3 EMIs are outstanding on the loan, the same can be ignored while calculating
3 FOIR
# Bonus can be considered for FOIR computation only if the quantum is fixed & mentioned in the
appointment
letter or increment letter. In other words it should be clearly established that the bonus is fixed in
nature & would
not vary based on performance or any other criteria. One time performance bonus cannot be
4 considered.
Closed Loans: Adding back interest charged to Net profit in P&L allowed for closed loans for FOIR
5 computation
 In case of Salaried NRI sourcing where income document provided is Salary certificate or Contract
copy:
· If the salary credits in the bank statements is lower than the salary certificate / contract copy, the
average of the 3
months salary credits can be considered.
· If the salary certificate / contract copy reflects a lower amount than the salary credits, the FOIR
should be based
6 on the salary certificate / contract copy.

Guidelines for factoring repayment obligations into FOIR

Term loans: If an EMI based loan, interest portion can be added back to profit & EMI to be factored in
calculation
7 of the FOIR.
OD / CC products: Interest payments towards the same should not be added back to profit & no
obligation to be
8 factored.
Overdraft products with fixed repayment obligations: If reflecting in the bank statement should be
factored.
The average of the last 3 / 6 months payments reflecting in the bank statement should be factored as
repayment
9 obligation.

10 Any other income if has to be considered, approval to be take from risk team.

11 Income from Other Sources

Capping of Income from Other sources:- Income from Other Sources should be capped at 50% of
Core Income
of an applicant. If any applicant or co-applicant does not have any Core Income, then it will be capped
at 50% of
the Total core Income of all other applicants.
- While computing the financial eligibility of the borrower, his/her income from
various sources may be considered as indicated below.

For a loan other than the project loan, an application for such a loan may be submitted
jointly by husband and wife, if they are eligible to apply for the loan. If however, a
person eligible to apply for a loan is unmarried, he/she may alone apply for the loan. All
the applicants in respect a their respective loan will be required to jointly execute the
related loan agreement, mortgage deed, promissory note etc and they will be liable to
repay their loan jointly and severally.

4. Property
The following documents, as applicable, will be submitted by the applicant(s) in support
of his/her/their title to the land and house/flat proposed for purchase and/or
construction in India.

i. Extract from the land record;

ii. Sale deed in favour of the Borrower and/or Agreement for Sale by and
between the Builder/owner and the Borrower;
iii. Property Card;
iv. Will;
v. Succession Certificate;
vi. Partition Deed;
vii. Gift Deed;
viii. Allotment Letter from the Competent Authority;

5. Report on the title to the property and valuation of the property

The applicant(s) may be required to submit the following Certificates in respect of the
title to the property and the value thereof.

i. Title verification certificate issued by an Advocate who has conducted

searches as regards the title to the property.
ii. Valuation Certificate from the approved Valuer.

6. Construction

As regards the construction of the flat/house for which the loan is applied for, the
Applicant(s) may be required to produce the following documents.

i. Approved plan/Sanction for construction of the house house/flat/building

from the concerned Municipality/Village Panchayat;
ii. Commencement Certificate;
iii. Completion Certificate and
iv. A certificate from an Engineer that the construction is compliant with the
guidelines issued by the National Disaster Management Authority on
ensuring disaster resilient.

7. Re. LTV and IIR

IHLL may grant a housing loan up-to Rs.25 lakhs which is within 80% of the value of the
property proposed to be purchased by the borrower. In other cases, IHLL may grant a
loan which is not more than 75% of the value of the property. While granting a loan, it
will be ensured that installment to income ratio (IIR) does not exceed 40%. In
exceptional cases, loans with IIR exceeding 40% may be granted subject to the approval
of the Loan Committee and/or the Board as applicable.
 8. Security

Loans sanctioned by IHLL will be secured by a registered simple mortgage or any other
mortgage that may be decided by IHLL, from time to time. Besides, IHLL may, at its
discretion obtain the following as collateral securities from the borrower, namely,

i. Guarantee from a third party,

ii. Assignment of Insurance policies in respect of his/her life and/or property,
iii. Promissory Note,
iv. A power of attorney in favor of IHLL to create a mortgage on the property
acquired on the loan, in its favor wherever it is necessary.

9. Guarantor

Before accepting a guarantee furnished by a third party, the following will be required
to be submitted in support of the identification, address and credit worthiness of the
Guarantor.

i. Copy of PAN/Passport/Election Card/Driving License/No document in

support of the Guarantor’s identification;
ii. Copy of Passport/Ration Card/Telephone Bill/Electricity Bill/Driving
License/No document in support of the address of the Guarantor;
iii. Salary Slip/IT Returns/Affidavit/Income Certificate issued by the Competent
Authority in respect of the income of the Guarantor. While computing the
income of the guarantor, the criteria specified above in the case of computing
income of the applicant will be applicable.
iv. As a measure of fair practice, the guarantor will be explained about his
liabilities and obligations as a guarantor in respect of the loan.

10. Execution of Documents

A sanctioned loan will be released only after the following documents are properly
executed in favour of IHLL. It may be ensured that the simple mortgage executed by a
borrower is registered with the concerned Registrar of Assurances before the loan is
released.

i. Loan Agreement,
ii. Mortgage Deed,
iii. Guarantee Deed,
iv. Promissory Note and
v. Assignment of LIC Policies.

At the discretion of IHLL, the borrowers may be required to deliver 24 post dated
cheques in favour of IHLL.

11. Interest on loan and other criteria for the loan

IHLL will lend with interest that may be fixed by it from time to time, either on a fixed or
floating rate basis. The fixed rate of interest in respect of a loan may be revised on the
basis of the prevailing economic conditions and while entering into a loan agreement, a
suitable condition may be stipulated in this regard.

i. Computation of Interest

In calculating the EMI, interest shall be calculated on the monthly reducing method and
is rounded off to the next rupee. Interest and any other charges shall be computed on
the basis of a year of three hundred sixty five days.

ii. Details of Disbursement

The loan may be disbursed in one lump sum or in suitable installments to be decided by
IHLL with reference to the need of the Borrower or progress of construction of the
house which decision shall be final and binding on the Borrower. IHLL may deduct from
the sums to be lent to the Borrower any monies then remaining due and payable by the
Borrower to IHLL. In the case of a loan to be disbursed in installments, IHLL will ensure
that the borrower has produced a certificate from an engineer showing the stipulated
progress of the construction of the house, before any installment is released.

iii. Mode of Disbursement

All payments to be made by IHLL to a borrower shall be made by a cheque/demand

draft crossed and marked "A/c payee only" and the collection charges, if any in respect
of all such cheques/demand drafts, will have to be borne by the borrower. The interest
on a loan will begin to accrue in favour of IHLL as and from the date of
delivery/dispatch of the cheques/demand drafts, irrespective of the time taken for
transit/ collection of the cheques/demand drafts by the borrower and/or his/her bank.

iv. Utilization of disbursement

IHLL will ensure that the disbursements made by it to a borrower are utilized by the
borrower for the purpose of purchase or construction of the house as the case may be,
and the borrower may be required to produce documents relating to the utilization of
the proceeds of the disbursements to the satisfaction of IHLL.

v. Insurance of the property

The property acquired and/or proposed to be acquired on the loan from IHLL should
adequately be insured and the borrower will be required to assign the insurance policy
in favor of IHLL. It may be ensured that such an insurance policy is renewed till the loan
with interest is repaid in full to IHLL.

vi. Fair Practices Code

As a measure of fair practice, the borrowers will be explained about their entitlements,
obligations and liabilities in repayment of their loans. The method of calculating interest
on their loans, procedure of fixing equated monthly installments, method of levying
charges on late payment of their dues, recovery measures for collecting dues etc. may be
explained to the borrowers at the time they execute documents in favor of IHLL.

12. Prepayment charges

A borrower will be liable to pay a charge that may be fixed by IHLL from time to time, if
he/she prepays any loan taken from IHLL. However, if the prepayment is made from out
of his/her own source or income, no such charge will be levied on the borrower. The
borrower will be required to produce documents in this regard.

13. Delegation of Power

The following officers and/or authorities of IHLL are authorized to sanction loans
within the limits indicated against each.

i. Manager in charge of a branch office of IHLL ----- up-to Rs.2,00,000/-

ii. Chairman and Managing Director of IHLL ------ up-to Rs.5,00,000/-
iii. Loan Committee ------- up-to Rs.15,00,000/-
iv. Board of Directors ------ Any amount

14. Anti Money Laundering Policy

In consonance with the guidelines issued by NHB in respect of Anti Money Laundering
Measures, IHLL will obtain information relating to the details of its borrowers in the
application form as stated earlier above. On the basis of the information obtained and in
accordance with the guidelines issued by NHB in this regard, IHLL will categorize its
borrowers as low risk or medium risk or high risk borrowers. The borrowers that are
likely to pose a higher than average risk to IHLL will be categorized as medium or high
risk depending on the borrower’s background, nature and location of activity, country of
origin, sources of funds and the borrower’s profile. IHLL may apply enhanced due
diligence measures based on the risk assessment, thereby requiring intensive due
diligence for higher risk borrowers, especially those for whom the sources of funds are
not clear. Examples of borrowers requiring higher due diligence may include

(a) Non-resident borrowers,

(b) High net worth individuals,
(c) Trusts, charities, NGOs and organizations receiving donations,
(d) Companies having close family shareholding or beneficial ownership,
(e) Firms with sleeping partners,
(f) Politically exposed persons (PEPs) of foreign origin,
(g) Non-face to face customers, and
(h) Those with dubious reputation as per public information available etc.
IHLL will exercise ongoing monitoring of all the loans granted in favor of its borrowers.
The loans of IHLL will be subjected to the scrutiny of its concurrent/ internal auditors.

15. Safe keeping of securities

Securities obtained by IHLL in respect of its loans will be kept and maintained in a fire
proof safe vault that could be closed and/or opened with two keys. The safe vault will be
operated by two authorized officials of IHLL who will hold and keep one key each. The
safe vault will be opened and/or closed only in the presence of the officials authorized
to operate the vault.

Certified to be True

Mahesh Pujara

CMD & Managing Director