ICICI Bank's Home Loans Will Be 25 Basis Points Higher

Interest rates on home and other loans from ICICI Bank have gone up by 25 basis points following a decision by the country's largest private lender to increase its benchmark rates.

As a result of this increase interest rates on ICICI Bank's home loans will be 25 basis points higher than its rivals HDFC and State Bank of India, which offer loans at 10.25%. The bank said the increase was in line with the hike in its cost of funds. The increase in Base Rate, which has taken place within a fortnight of Reserve Bank of India raising policy rates by 25 basis points, will be effective from July 4. A 25 basis points increase in lending rates would push up the equated monthly instalment on a 20-year, Rs 30 lakh home loan by over Rs 500. ICICI Bank is the first major lender to respond to RBI's policy measures. Some lenders are holding back a hike over fears that credit growth may falter.

Last week, ING Vysya Bank was the among the first to revise rates with a 25 basis point hike in its Base Rate. Following an increase in policy rates last week, HDFC said that it would wait to see to what extent the increase in rates pushes up cost of funds. In an interview to ET Now On Thursday, Krishna Kumar, managing director, State Bank of India said the bank would soon have a meeting of its asset liability committee and take a view on interest rates.

According to Kumar, Reserve Bank is likely to increase rates in its July policy review as well if inflation continues to remain high.

ICICI Bank's Base Rate will now be 9.5% as against 9.25% at present. The Base Rate is the benchmark for all loans availed after July 1, 2010. The prime lending rate (PLR) which is the benchmark for older rates and the Floating Reference Rate – the peg from retail loans have also been hiked by 25 basis points.

Last week in an interview to a news agency, NS Kannan, chief financial officer, ICICI Bank said that overall loan growth for the bank in 1011-12 would be around18%-20%, which is in line with the industry, but slower than predictions (made at the start of the fiscal) of a 23%-25% industry credit growth. Kannan also said that retail loan growth this fiscal was likely to lag at 15%-17%, with retail portfolio likely between 35%-39% of the total loan book.

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Eligibility Criteria For Home Loans

Most people are obsessed with an idea of purchasing a home of their own. People, who are financially sound, manage to purchase their dream homes easily. But, there are also those who don’t have sufficient amount of money to purchase a dream home. Ostensibly, these people quest certain source to get financial assistance to purchase a home of their own without any hassle.

Home loan is the best source of arranging finance when it comes to purchasing a home. Fortunately, with presence of so many banks and financial institutes in the market today, people have good option to avail home loans to buy a dream home.

Home loan is one of the most important sources of managing your financial deficiency during the time of purchasing a home. People who need immediate financial assistance to ease out hassle involved in purchasing a home can fend off such problems by applying home loan at a bank or other financial institute that provide home loan services. However, availability of home loans is subject to fulfillment of certain eligibility criteria from the home loan applicants.

Banks have their respective eligibility criteria for home loan applicants. You are supposed to fulfill your eligibility criteria, failure to which may cause rejection of your application regarding home loans. The article is mentioning some eligibility criteria for home loans that will guide you how to avail home loans for your need.

The applicant should minimum be of 21 years old. The maximum age limits varies according to the applicant. The salaried person should be of 58 years old and age of 60 years is determined for government employees. Those who are self-employed must be 65 years age old.

As per the academic qualification, the applicant should be a graduate from any stream but s/he should be graduated from a recognized institute. If you have completed your master degree, that will be an added advantage to fulfill the eligibility criteria for home loans.

More so, there should be stability in source of income from the applicants. You should also state your current income, annual income and spouse’s income (if existed) and details of previous loans (if you’ve applied). You will be asked to submit a report of bank statements and details of taxes you are paying to the government.

You will be asked about the stability of your current work profiles, with information about whether or not you will stay connected with the job for almost 15 years.

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Required Documents For Home Loan From SBI Bank

List of papers/ documents applicable to all applicants:

·	Completed loan application
·	3 Passport size photographs
·	Proof of identify (photo copies of Voters ID card/ Passport/ Driving licence/ IT PAN card)
·	Proof of residence (photo copies of recent Telephone Bills/ Electricity Bill/ Property tax receipt/ Passport/ Voters ID card)
·	Proof of business address for non-salaried individuals
·	Statement of Bank Account/ Pass Book for last six months
·	Signature identification from present bankers
·	Personal Assets and Liabilities statement
For guarantor (wherever applicable):
·	Personal Assets and Liabilities Statement
·	2 passport size photographs
·	Proof of identification as above
·	Proof of residence as above
·	Proof of business address as above
·	Signature identification from his/her present bankers
Additional documents required for salaried persons :
·	Original Salary Certificate from employer
·	TDS certificate on Form 16 or copy of IT Returns for last two financial years, duly acknowledged by IT Deptt.
Additional documents required for Professionals/self- employed/ other IT assesses:
·	Acknowledged copies of three years I.T. returns/ Assessment Orders.
·	Photocopies of challans evidencing payment of Advance Income Tax.

Online Sent Your Query To Know About SBI Home Loan

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LIC Home Loan Documents And Eligibility In India

LIC Home Loan Documents

• A LIC home loan application form furnished with the desired information.
• Copy of the sanctioned plan and sanction letter.
• One guarantor form and his or her certificate of salary.
• Copy of NA permission and ULC clearance.
• Last two years of account statement or bank pass book.

LIC Home Loan Eligibility

• An individual to get the LIC loan must be self-employed with an income of Rs 150000 per annum.
• The minimum age limit of a LIC home loan applicant must be 25 years and the maximum age limit is 58 years.

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Documents Required For Home Loan & Auto Loan

HOUSING LOANS—

APPLICANTS/ GUARANTOR

1. 3 Passport Size Photographs.

2. Proof of Identity- Voter ID/ Passport/ Driving License/ Pan Card

3. Proof of residential- Electricity/ Phone/Mobile/Credit Card Bill

4. Form-16 with IT return for last 2 years for salaried applicants

5. Latest Salary Slip for last 3 Months.

6. Bank account statement for last 1 year

7. 3 year IT return with computation of Income & Balance Sheet for Non- Salaried

8. Proof of business Address for Non-Salaried.

9. Proof of Assets and Investments

10. Processing fees

11. Advocate fees & Valuation fees

Property Papers:

1. Complete chain of Property.

2. Approved Map/ Plan

3. Detailed estimate of Construction.

4. Agreement to Sale

5. Completion letter from Authority

Auto Loan

1. Quotation from Car Dealer

2. Processing fees-0.5%

Documents Required In Takeover Cases

1. Sanction Latter

2. Complete chain of property

3. Fore Closer Letter

4. Loan Account statement

5. List of Documents held with bank

Please bring original document along with Photocopy

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Home Loan - It's Tough Being A Guarantor

It has serious implications, and being relieved midway is not easy.

Few years before, Nitin Bhalla had stood a guarantor for his friend’s home loan. Now, he wants to opt out, but the bank is unwilling to play ball. This is despite his friend paying his equated monthly instalments (EMIs) regularly. The bank wants him to continue as a guarantor for the current dues.

“The guarantor cannot shirk his responsibility now. The bank had taken both his and the borrower’s creditworthiness while disbursing the loan,” says V N Kulkarni, chief counsellor, Abhay Credit Counselling.

SET FREE ASKING TO BE RELIEVED ISN’T EASY UNLESS…

There is a substitute guarantor for the loan The bank is convinced about your reason for not wishing to continue Get the defaulter to clear his loan Until the bank hands over a discharge letter, you are liable for the amount outstanding as on the date of revocation of your guarantee If additional loan is granted without your consent. You will not be liable for that portion

Need for guarantors
Most banks will ask for a guarantor when the value of the security offered is lower than the loan. In case of home loans, the mortgaged property itself is a security with the bank. Yet, some banks can ask for a guarantor, if they fear the value of the mortgaged property will decrease, or if the borrower’s income looks uncertain.

Few banks may not ask for a guarantor, but insist on a co-borrower. This, however, does not change anything for the co-borrower. His role and liability are the same as that of a borrower if the first applicant defaults.

Banks offering educational loans above Rs 7.5 lakh usually accept the parent as a co-borrower. But the bank may insist on an additional guarantor, if it thinks the parent alone is financially incapable of servicing the loan.

Loans above Rs 10 lakh, taken by small and medium enterprises, also need a guarantor.

Locked in as guarantor
Relieving a guarantor is solely at the bank’s discretion.

“Banks usually exhaust all their resources to get the borrower to pay up, before asking the guarantor to pay up,” says S Govindan, general manger, personal banking and operations, Union Bank of India.

Most banks are not willing to relieve the guarantor. But the option may be considered if the guarantor is able to convince the bank of his\her reasons for not wanting to continue.

A guarantor can ask to be relieved when an additional loan has been granted without his consent. He will, however, be liable until the original amount of the loan has been repaid. In both cases, the bank will insist on having a substitute guarantor. From the recovery point of view, banks have the right to recover the default amount from borrower and/or the guarantor. And, unless the guarantor claims himself\herself insolvent, the bank will try and recover as much of its dues as possible from him\her, say bankers.

In case the bank has some tangible assets of the guarantor on which a charge has been created with the bank, it can invoke the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, or SARFAESI Act, and auction the guarantor’s assets for recovery of its dues.

If the guarantor’s assets are not mortgaged with the bank, it could approach the Debt Recovery Tribunal, a fast track court for recovery of debt for banks. When there are no assets that can be liquidated, the bank would initiate legal action against the guarantor in the civil courts.

Loans for oneself
Being a guarantor is as good as taking a loan yourself, in terms of credit exposure. Some banks inform credit bureaus about both their borrowers’ and guarantors’ exposures.

“This could impact the amount of loan that the guarantor can take in the future, since his\her potential obligation as a guarantor is factored in by lending institutions,” says Samir Bhatia, managing director and CEO, Equifax Credit Information Services.

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Forget The Loan: Here Are Six Ways To Fund Your Kid's College Education

Before I even thought about having kids I started planning their college fund. Then I got divorced and my ex took the college funds and cashed them out to by a belt and a new wardrobe. For the next seven or eight years, I sat dazed and confused without saving or doing much else but surviving. Then, just the other day, I woke up and realized that my oldest is going into fourth grade! I best get on that college-fund thing.

I researched a bit and as I looked at the numbers I had a mini panic attack. One site told me that I would need to start saving $1,000 a month just to be able to send my eldest to college. I used the online calculator but fudged the numbers: I couldn't bear to admit that I would have two kids in college at the same time!

Dr. Pamela T. Rambo, of Rambo Research and Consulting, is a retired college financial aid and scholarship director. As someone who has more than 30 years of experience helping families pay for higher education, she understands the issues. "In this economy, where parent investments and home equity have declined, paying for college is tougher than ever. Even those with 529's and other college savings plans are having a tough time."

If your kids are going to attend college, but you haven't save enough money, they may need to take an alternative route to get there.

Send them to community college. Consider the idea of going to college nearby and avoiding room and board and other related costs, notes Rambo. She also suggests going to a community college to save big on the first two years.?

Look into a year of public service. Colleen Flynn, manager of LiftCommunities.org, a nonprofit agency in Washington, D.C., notes that "AmeriCorps offers education awards of approximately $5,000 for each year of service (up to two years), and several schools offer matching awards. With a year of work-service experience, public service alums are often considered more desirable by colleges because they add a level of diversity and increased world experience that the typical high school grad doesn't possess." This increases their chances of receiving additional funding or scholarships from the school, she says, "and often they are more prepared to attend college because of their service experience."??

Get hired by the college of your choice. Erika Huebschman, a third-year law student at Whittier Law School, suggests taking a job with the college you're interested in attending. Many of them offer their employees benefits, and usually, they offer educational benefits. If you work at the school, you could possibly attend classes for free. Huebschman's sister "paid for a lot of her law school working as an assistant in an administrative office."

Acquire class credits. "One way for families to decrease the price of college is to utilize alternative credit," explained Caitlin Muir from CollegePlus.org. "Some options include AP exams, CLEP tests, and dual credit. Students and their parents can save thousands of dollars. For instance, if a student grew up bilingual, he or she could take the Spanish CLEP test and earn 12 college credits in one afternoon. The CLEP test costs $77. Can you imagine paying $77 for a full semester of college?" ?

Serve in the armed forces. Lisa Hill, a mother of a college student at Rensselaer Polytechnic Institute in Troy, NY, says that her daughter has a four-year Navy ROTC scholarship there. "She gets a monthly stipend, attends a private engineering school, and will only have to serve her country four years to repay for college.?Not only will she get great engineering experience and travel the world, but?she'll come out of college debt-free."

Enroll in a tuition-free school. You may not be aware of it, but tuition-free schools do exist. The Cooper Union, in New York City, is a highly selective institution with an impeccable reputation. Berea College in Berea, Ky., also offers free tuition. All you need to do is fulfill the school's requirements, which are usually working a dozen or so hours a week on campus in a job that is related to your major.

Paying for college has never been more difficult, but there are some good opportunities available, it's just a matter of sitting down and hammering out your priorities and options.

Compare Home Loan In India

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Home Loans, Car Loans May Get Costlier, But Not Immediately

Your home loan or car loan EMIs (equated monthly instalments) may go up because of the 25 bps increase in repo and reverse repo rates announced by Reserve Bank of India.

Interest rates on various retail loans are likely to be revised upwards and the exact amount of hike and timing would depend on individual banks. The predominant view among bankers is that the hike in repo and reverse repo rates should be passed on to the borrower.

In the recent past, banks have only been focusing on hiking deposits rates. Now, it is time the focus moves to the assets side of a bank's balance sheet which might result in rate hike, say experts.

Wait-and-watch

However, for the next two weeks, banks may adopt a wait-and-watch approach before raising their prime lending rate or base rate.

While observing that rates may inch up, Ms Renu Challu, Managing Director, State Bank of Hyderabad (SBH), told Business Line that her bank might not immediately increase the lending rates.

“There is definitely an indication of an upward bias in the lending rates. But for now, it is certain that rates are not going to come down,'' she said.

Mr Ramnath Pradeep, Chairman and Managing Director of Corporation Bank, said neither deposits nor loan interest rates will be increased till March 31.

Asked if the bank was planning to launch a new loan or deposit product, he said the bank has launched many such products in the past few months.

According to a senior official of Union Bank, the current ‘mismatch' between the hike in the repo/reverse repo rate and base rate would drive increase in lending rates.

“In the recent past, say from March last, the policy rates have gone up by 250 basis points while the base rates of bank have gone up by about 170 bps roughly. This will call for a hike in lending rates,'' he explained.

When asked if home loan and car loan rates would now go up, a South-based public sector bank official said, “Our bank will hold the rates. If we raise the rates any further, it would affect our growth rates apart from pushing some of these assets into non-performing category. We will maintain status quo.”

Mr P. Jayaram Bhat, Managing Director, Karnataka Bank Ltd, sees no immediate reasons to increase advance rates as of now. The decision to increase depends on the liquidity position of individual banks, he added.

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After Policy Move, Can Home loan Borrowers Breathe Easy?

The Reserve Bank of India continued on a tightening mode – hiking key policy rates by 25 bps. The central bank raised its key lending rate, the repo rate, to 6.75% and its key borrowing rate, the reverse repo rate, to 5.75%. The CRR has been left unchanged. The RBI also raised its inflation forecast for March-end to 8% from 7%.

Vice chairman and CEO of HDFC Bank Keki Mistry and chief economist of Kotak Mahindra Bank Indranil Pan, in an interview on CNBC-TV18 debated on what this would mean for the banking industry and home loan borrowers at large.

Below is a verbatim transcript of their interview with CNBC-TV18’s Elan Dutta and Shereen Bhan. For complete details watch the accompanying video.

Q: The rate hike has been along expected lines and the direction in which the Reserve Bank is likely to move now seems fairly clear that there will be further hardening of rates. The question is are we going to see an immediate interest rate revision or will rates in March at least remain stable?

Mistry: In my view, no. The market is already factored in much higher interest rates than what actually has happened. I don’t think this quarter percent increase in rates by RBI will have any impact on interest rates in the system. If you look at the bond yield today, they have gone up by 2 or 3 basis points which is normal after a policy like this.

Q: What about deposit rates? The view is that deposit rates may not go up further from the current levels. Would you agree with that?

Mistry: The lending rates will be a function of funding costs. If deposit rates don’t go up, I don’t see any reason why lending rates will go up. You must recognize that the big question mark in what I say is oil. What I say is on the assumption that oil prices don’t go much higher from these levels and in fact start correcting and start going back in the near future to the levels that were there a month ago.

Q: Hasn’t the Reserve Bank dilemma increased? While the upside risk to inflation continue the Reserve Bank is now talking about emerging risk to growth as well?

Pan: Yes, that they are concerned about growth as well, given the dynamics of the global economy, especially, with relation to oil. At the moment we have seen that the oil prices have globally moved beyond USD 100 a barrel. There is definitely a downside risk for the Indian economy in all senses of the term.

Even though the policy looks slightly more hawkish than what we would have expected, they definitely resisted from moving by 50 basis points and continued to move by 25 basis points.

Q: This is the 8th rate hike since March 2010, given the fact inflation continues to be enemy number 1, do you now expect the Reserve Bank to move more aggressively or are you in the camp that believes the Reserve Bank should wait and watch and not move in May or perhaps even June?

Pan: I don’t think they can be more aggressive that they have to move in a very calibrated way still. They still have to move by 25 bps, assess the system and move ahead by another 25 bps. The base view that we have as of now, given the inflation dynamics that we are looking into and given the way the growth dynamics in India is panning out, we think that about 50 to 75 bps from now on is definitely on in terms of the repo rate.

The peaks of the repo rate we are expecting around 7.25 to 7.50 but I don’t think that they can be aggressive in the sense that they can move by 50 bps. I would still consider them moving by 25 bps at each step. I don’t think they would be moving higher than 75 bps as per the current assessment.

The whole problem in this assessment is that whether oil goes to USD 120 or USD 140 we really don’t know as of now. But given the fact that we are looking at oil more or less at the same average of USD 100 to USD 105 for the next financial year, 75 bps increase from now on, at the max, looks to be a fair assumption.

Q: The Reserve Bank for the very first time has acknowledged the risk to growth now. Given where inflation is and the fact that we are likely to see the rate hike cycle harden, what are you expecting in terms of credit off take and specifically growth as far as home loans are concerned?

Mistry: The most important thing in determining credit off take is going to be affordability. The cost of a house as a multiple of the annual income of our borrowers is today about 4.7 times. We believe that as long as it is in the range of 4.2 to 5.7, housing continues to be very affordable. Secondly, if you look at penetration of mortgages in India, it’s extremely low. The mortgage to GDP ratio in India stands at 8%. If you look at the Western World, in the US and UK, the ratio is in the 80’s. In some of the Scandinavian countries it’s in the 90’s.

In most emerging markets in Asia this ratio will be between 15% and 25%. What does that mean? That means the housing loans in the system can double and even if they double we will just get to the level where most of the Asian countries are. So, penetration is very low.

If you look at the demographics in India, 60% of India’s population is below 30 years of age, that’s a fact which is well known. What is not well known is that unlike the Western World where people go and buy a house when they are in the 20’s, people in India don’t do that.

When an average middle class couple get married which may be in their late 20’s they don’t go and immediately buy an apartment of their own, they go and stay with the boys family for a few years, then they get children, children start going to school, then the extended family becomes too large, they need a house and that’s the time people look to buy a house. The growth will remain strong. I continue to believe that on the housing side and I would say a similar thing even for bank credit, we should be looking at a growth which should be 20% or upwards of 20%.

Q: But for now the home loan borrowers, should they heave a sigh of relief?

Mistry: I think so. I don’t think immediately there is any likelihood of rates going up because this is pretty much factored in.

Q: The Reserve bank has been accused of being behind the curve after the raise policy, which camp do you belong to? Is it behind the curve or prudent?

Pan: They are definitely not behind the curve is my own assessment. They have proactively kept liquidity tight, therefore, ensured that monetary policy transmission has happened. Since the liquidity has been tightened, the incremental increase from the low of the cycle was from three-quarter to the current 675. Going forward, they would be increasing interest rates but they would not be very aggressive.

They have to be very cautious in terms of increasing interest rates because it clearly points out that managing growth versus inflation is also crucial from a monetary policy aspect. It is not only inflation that needs to be looked at.

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Home And Auto Loans Are Set To Get Pricier

Floating rate home and auto loan borrowers may have to brace for higher interest rates on their loans , with many economists expecting a 0.25 per cent policy interest rate hike by the Reserve Bank of India (RBI) in its midquarter credit policy review on Thursday. However, some of them hope that the apex bank may pause the rate hikes this time, citing uncertainties on the growth front.

"RBI is likely to hike both the policy rates (repo and reverse repo rates) by 0.25 per cent in the forthcoming review. Inflation still remains a problem with oil prices coming under upward pressure, despite some moderation in food prices," said D.K. Joshi, chief economist of rating agency Crisil.

"The government has to pass it on to the customers sooner or later," Joshi added. The Centre is already facing the prospect of rise in fiscal deficit in the coming fiscal. RBI had made it clear that it may not have to act if the global oil price rise is borne by the Centre. But if it is to be passed on to the customers, then it may have to hike rates to cap the inflationary expectations.

Spiralling credit growth is also adding to RBI's worries on the inflation front. It could push up demand and stoke further rise in prices. A rate hike would also address this concern as higher rates would distance a large number of prospective borrowers. Credit growth in the last 12 months has been above 24 per cent, against the projected 20 per cent growth for the fiscal.

If policy rates are hiked again, it will be the eighth time that the RBI would be doing so since March 2010 to tame inflation that has remained at elevated levels. It had raised the repo (rate at which RBI lends to banks) and the reverse repo (rate at which it accepts overnight deposits from banks) rate by 1.75 per cent and 2.25 per cent to 6.5 per cent and 5.5 per cent, respectively.

Food price inflation softened to a three-month low of 9.52 per cent in late February. The benchmark WPI inflation in January was at 8.23 per cent, well above the RBI's comfort zone of four to five per cent and its end-March 2011 target of seven per cent. WPI inflation for February is expected to moderate further.

However, Prof. N.R. Bhanumurthy of the National Institute of Public Finance and Policy (NIPFP), said, "It is a big dilemma on how to balance low inflation and high growth at this juncture. Corporate investments are not picking up, and that is also getting reflected in the IIP (index of industrial production) figures. As such, RBI might hold for this time and act in the quarterly review in May."

"Aggressive hike in rates are expected to stifle economic growth. So, movements of inflation would be watched carefully," Bhanumurthy added. IIP grew by only 3.7 per cent in January, compared to the same months in 2010. This is subdued, though higher than that in December. "The high base year effect has been a dampener on growth numbers this year and will continue to be so in February and March. Also, high interest rates have started impacting investment decisions," said Madan Sabnavis, chief economist of CARE Ratings.

"We believe that the RBI should maintain a neutral stance on March 17 as inflation is coming down and industrial growth is being affected by high interest rates, though the RBI might increase interest rates by another 25 bps (or 0.25 per cent)," Sabanavis added.

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The Man Who Brought Home Loans To India

On this day, let’s take the time to remember HT Parekh, and say a prayer of gratitude for this towering man of finance and understand his farsightedness. HTP, as he was called by all, is inarguably the father of home finance or mortgage lending in India.

Tomorrow, 10th March, marks the birth centenary of Hasmukh T Parekh (HTP as he was called by all). Every newly employed person who walks away with a home loan sanction today in 24 hours ought to say a prayer of gratitude to HTP. That's because he proved that successful mortgage finance was possible in an unregulated industry that is in the grip of land sharks and developers and where, even today, a full cheque payment is possible only in a relatively small number of projects-that too in the metros.

On this day, let's take the time to remember this towering man of finance and understand his farsightedness.

HTP's Relevance

Until the mid-1990s, for a large section of the Indian middle-class, owning a home was a dream that could, at best, be met at retirement when one got a lump sum from a provident fund and gratuity from the employer. There were no HFCs (housing finance companies; banks could not lend for housing-neither to individuals nor to builders since housing did not qualify as an 'industry'). Worse, as much as 60% to 70% of the payment was in cash (until the 1980s in Mumbai) and later as much as 40% was in cash payment.

Combined with absurd income-tax rates (over 50% to 70%), it ensured that ordinary Indians could not aspire to own homes or apartments during their working lives.

It was in that milieu, more than half a century earlier, that HTP drafted his first proposal for a housing finance company for Harkisondass Lukhmidass (on February 16, 1951). The HFC would work on the lines of building societies in the UK. The proposal fell through. But persistence and perseverance in following his dreams was his hallmark. He would leave no stone unturned, no forum unexplored, no opportunity missed-to argue, discuss, persuade and cajole.

Two decades later, even as chairman of ICICI, he drafted another proposal- this time, for Bank of Baroda to set up a subsidiary for housing finance-and sent it for the finance ministry's consideration (July 25, 1973). He also kept pleading that banks be allowed to lend for housing.

But it was only after he retired from ICICI (as its executive chairman in 1976) that he could turn to his pet project with the single-mindedness that was required to turn it into reality and Housing Development Finance Corporation (HDFC) was registered on October 17, 1977.

What was revolutionary in those times was that HTP thought of lending against future income-income-gearing-at a time when incomes were really low. Even managerial remuneration was regulated by the Company Law Board; the limit for reporting salaries to shareholders under Section 217 was Rs36,000 p.a! Consumer finance was unknown in those days; all lending was capital-geared-in a capital-scarce economy.

That someone could hope to convince the government to allow him to set up a viable private sector company for home finance, in those days seemed more of a pipe-dream. But so convinced was he of the need for housing finance that HTP structured a unique company and turned entrepreneur to demonstrate that his vision could be successfully converted to reality. It is no wonder that former RBI governor Dr IG Patel wrote that HTP, was "justly acclaimed for his unique personal qualities and for his ability to turn dreams into reality (in a Foreword to the collected writings of HT Parekh)*. It is important to note that IG used dream in the plural-for there were several dreams-his own and those of others-that HTP was able to realise.

A different organisation

From its very concept stage, HTP viewed HDFC as meeting the need of small home-owners. At a time when Indians waited for years to get a telephone or a gas connection or even a Bajaj Scooter, HTP decided that HDFC would provide first-world service with a single point service to customers. If this won the hearts of borrowers and made HDFC such a rock-solid brand, it was his pragmatism in lending that helped the business grow and has, ultimately, spawned a score of mortgage lenders, despite the fact that proper regulation is still not in place.

In an interview to Moneylife magazine in 2010, HDFC chairman Deepak Parekh recalled how HDFC, along with Reliance Industries, were both considered 'bubbles' and that people wondered which of them would blow up. He recalled that HDFC succeeded, first, because of HTP's belief that "you can trust a middle-class person to repay" and the second, because of a decision to figure out risk mitigation systems that did not depend on the legal system. This included working a way around the high black money component in home purchases. Deepak Parekh recalls, "If we gave 70% of the white component (as home finance), it became so insignificant that we could not really lend. For many years, our lending limit was Rs70,000. The agreement value would be much lower than the actual transaction amount. So we introduced a system whereby our technical people would go to the site and come up with what we called the 'appraised value'. So we gave 70% of the appraised value, which should not be more than the agreement value. In effect, in the early days, we funded most of the agreement value and the gap was funded by cash. That itself was around 30% to 40%. That was the practical solution."

Had it not been for that pragmatism and HTP's personal reputation, several generations of Indians would never have owned an apartment. HDFC was the only housing finance company for over a decade and Deepak Parekh recall's NR Narayana Murthy (founder of Infosys) telling him, 'he had a wife next to him and an appointment letter in his pocket, but nowhere to live. He didn't know anyone when he walked in, or who to meet. His wife stopped him and asked him to say a prayer at the steps of Ramon House (HDFC head office). HTP's attention to detail went way beyond just the product structure and service. As a retail organisation from its inception, he wanted HDFC's corporate identity to have a symbol as well as a logotype. A symbol would transcend multiplicity of Indian languages. And, typical of him, he chose the logotype of HDFC in lower case then. Years later, it was changed to capital letters. The amount of time that he spent on designing the application form displayed his overarching concern for customer service.

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