Products and Variants - Basic_FST

Basics of Mortgages

Housing Sector & Housing Finance Industry

Housing Sector in India Government Rapid Rising focus on urbanization purchasing affordable Indian Housing housing power Sector Rising population • Housing continues to be topmost Migration of priority for all Governments people from rural to urban • It is still an ‘end-user’ driven market • Around 40 percent of Housing sales Investments in socio- were from the ‘Affordable Housing’ economic segment which is the most promising segment. infrastructure 3

What is a Housing Finance Company (HFC) ?  A Housing Finance Company is another form of non-banking financial company which is engaged in the principal business of financing of acquisition or construction of houses that includes the development of plots of lands for the construction of new houses  A separate license is required to operate as a HFC 4

Home Loans in India PSU Banks Private Banks  Most of the buyers rely on a Home Loan to fund their home purchase HFCs  Home Loans allow the buyers to make 5 easy repayment through Equated Monthly Installments (EMI) Market Share in Housing Sector Banks HFCs 56% 44% HFCs Banks

ICICI Group ICICI Group has played a pivotal role by being partners in nation building. Over the past 65 years, ICICI has moved on from being an Industrial Credit Institution to being a financial power house ICICI Group seeks to partner the country's growth and globalisation through the delivery of world-class financial services across all cross-sections of society ICICI Group has presence in almost all sectors like Banking, Insurance, Securities, Asset management, Venture capital and Home Finance Our presence is across the length and breadth of the country with more than 6000 branches and more than one lakh employees within the group. ICICI Group has excelled in every business that it has ventured into and ICICI HFC also aims to uphold the same and become the market leader. 6

ICICI Group Companies 7

Loans

What is a loan? • A loan in simple terms is something that is borrowed, especially a sum of money that is expected to be paid back with interest • It is essentially money borrowed with a promise of return within a specific time period/tenor • The lender decides a rate of interest that you must pay on the money you borrow, along with the principal amount borrowed

Types of Loans Unsecured Loans Secured Loans Borrower pledges Do not have asset some asset (e.g. car for collateral or property) as Home Loans Loan against Personal Credit Cards collateral Property Loans In the event of Rely only on credit Educational default, the lender history & income to Loans can take possession qualify for loan of the asset to cover the loan Vehicle Loans Gold Loans 10

Mortgage & Mortgage Products

What is Mortgage “Mortgage” is a type of loan transaction which has an immovable property / real estate as a security •orU“ncdoellar tMeroarl”tgfaogreths,edloiffaenreanmt otyupnets. of products are offered classified in two categories - • Purchase Products: Where the customer is seeking funds to purchase or acquire a new asset • Leverage Products: Where the customer is seeking to use his existing property to get funding which they can use 12

Mortgage Products Mortgage Products Purchase Leverage • Home Loan • Loan against • Plot/Land Loan Property • Non Residential • Top Up Premises Loan • Lease Rental (NRP) Discounting (LRD) 13

Key Concepts

Key Concepts Home Loan involves a Home Purchase transaction, where a customer is purchasing a residential property Home Loan is an aspirational product with great social importance, and an industry which has seen huge demand growth in the last two decades in India

Key Concepts EMI is the monthly payments a borrower has to make towards a loan. EMI starts once the loan has been fully disbursed. EMI is calculated on the basis of the amount borrowed, the applicable rate of interest and the tenure of the loan. Rate of Interest is the amount payable to the financing institution over and above the loan amount. The EMI is split into principal and interest. There are two types of interest - floating and fixed. The Security for a Home Loan is the property which is being purchased, and the financier creates a Mortgage on that property, which allows it to dispose off the property if the loan is not repaid Own Contribution A financier will never fund the full purchase amount of a property. Instead, the Borrower (buyer) must pay a certain portion of the total price out of his own funds – this portion is called Own Contribution /Borrower's equity

Key Concepts The percentage to which extent of the total property price, the loan can be given, is called the Loan To Value Ratio (LTV). For instance, if total property cost is 60 Lacs, and HFC has given a Home Loan of 30 Lacs for it, then LTV = 50% Cost of Property Cost Of Property (COP) = Agreement Value + Amenities + Society charges + SEB and Water charges + One time maintenance + other applicable charges. Stamp duty and registration charges are not considered in COP Market Value Market Value of a property is the property value as per the prevailing market rate in the locality Simple Interest paid by customer on disbursed amount is known as the Pre EMI. (For Builder purchase cases where disbursement happens in part over a period of time as per the construction stage)

Key Concepts Before sanctioning a loan, a financier ensures the borrower’s repaying capacity by checking several parameters like income, age, savings, employer, assets and liabilities and other information in order avoid the possibility of default. The process of ensuring repayment capacity is called Credit Appraisal. Post credit appraisal, when a loan financier approves the application & thus agrees to provide the loan to an applicant, the loan is considered as sanctioned A Sanction Letter states that the loan has been confirmed to be given. Sanction letter confirms the applicant’s eligibility for getting the loan & mentions other loan- related details such as loan amount, the rate of interest, tenure, EMIs etc. The financier has the right to cancel the loan even upon issuing the sanction letter of the loan in case of property-related or other issues Disbursement is the release of the loan amount from the financier to the borrower. A loan will be disbursed after all documents have been provided to the financier & the financier has approved the loan. Loan disbursement can be partial or full

Key Concepts Prepayment is a facility that helps repay a home loan (in part or full) if a customer has surplus funds before the completion of the loan tenure. This reduces the outstanding principal owed, and in turn reduces the EMIs or the remaining loan tenure ECS / Direct Debit from bank account are the usual preferred modes of repayment. For NRI, repayment is allowed from NRE/NRO Account only APF Approval given by the financier to an entire Project of a Builder, after doing upfront legal and technical verification is called Advanced Processing Facility (APF). An APF project ensures quick TAT for all individual loan disbursements in the project. Balance transfer of loan is the process where a customer transfers his outstanding principal amount to another bank or financial institute primarily for a better rate of interest and also better features

Mortgage – Loan Life Cycle Sourcing Loan Underwrit Closure -ing Collection Sanction Disburse- Legal & ment Technical

Product Offerings Home Loan Land Loan Home Loan against Loan Against Non Residential Lease Rental Balance Improvement Property Property – Premises Loan Discounting Transfer and Revenue Loans Generating Top Up Collateral Purchase of Purchase of Renovation or LAP Residential LAP Industrial Purchase of residential residential plot Extension of Property commercial property Refinance on existing LAP LAP property LRD against – residential residential Commercial Institutional Purchase of Godown/Wareh property property commercial ouse/Commerci Property plot for al Property construction Construction on LAP LAP Nursing and own use self-owned plot Residential Plot Home LAP LAP Commercial Specialized Plot Property 21

Home Loans

Home Loan Transaction Types Resale Direct purchase Resale Self Construction Balance Transfer from Builder One individual home An individual may A transaction where a Purchase can be in buyer purchases a construct a residential customer transfers his ready or under home from another house on land owned outstanding principal who sells it. amount to another bank construction properties Seller may have by him/her where payments are as The funding for the or financial institute per construction stage purchased the house same is obtained from primarily for a better rate from another seller, Banks/HFCs as loan Home buyers rely on Disbursement happens of interest & better Banks/HFCs to provide from a Builder or features constructed it on his as per stage of finance for their construction The repayment track purchase & thereby own record of the existing loan confirm credentials of The transaction between buyer & seller is an important the developer would be funded by consideration here Banks/HFCs

Benefits Customer enjoys Structuring suitable long repayment EMI with tenure of up to 25 combination of years variants to match Customer enjoys personal cash flow Income Tax Benefits Build an asset now and pay as you on Principal & earn. Security for Interest repayment the family too on Home Loans Faster repayment as calculation is on monthly reducing balance method

Loan Against Property

Types & Features Loan Can be availed against self-occupied against residential, commercial or revenue Property generating property Residential Commercial Revenue Loan is availed against the market value generating collateral of the property Can be used for business needs, fund Balance Transfer is also available on all of the children’s education or marriage, meet above types medical expenses or take a vacation in India or abroad

Benefits The loan amount can be The interest rate on LAP is quite substantial, depending lower than a personal loan as the loan is secured with the on the market value of the property mortgage of the property The tenure of the loan can be The borrower can continue longer than a personal loan using the mortgaged to enable lower EMI and property for residential or facilitates easy repayment commercial purpose

Other Products & Variants

Other Products Home Improvement Loan Lease Rental Discounting Top Up Loan Loans for enhancing LRD is a Loan that allows one to the house in ways such term loan offered borrow a certain against rentals received as tiling & flooring, from lease contracts amount of money over internal and external with corporate tenants and above the plaster, painting etc. home loan The loan is provided to Available for both the lessor based on The customer should existing and new have a good the discounted value of customers the rentals and the repayment track record underlying property of the existing loan value. Loans at lower rates than personal loans

Specific segmental Variant – Affordable segment Apna Ghar Micro LAP Home Loan Loan Against Property Under construction property LAP Self Occupied Residential Ready for possession property Property Resale property LAP Self Occupied Commercial Construction on self-owned plot Property Balance Transfer + Top Up Balance Transfer + Top Up Composite Loan Acquire a plot for Residential use and construction on the same Home Improvement Loan 30

Fixed Deposits

Key Highlights Highest Credit Ratings by CRISIL, ICRA & CARE Minimum Deposit amount starting Rs 10,000 & tenure ranging from 1 year to 10 years. Additional interest rate benefit of 0.25% for Senior Citizens Multiple income plan to best suit the client’s requirements with Loan against deposit up to 75% of FD value. Easy online platform for customer onboarding. Earn revenue up to 2%.

Customer Classification Individual Non - Individual Resident Non – Resident Trust Firms Association Societies Clubs Individual Individual (NRI) Banks HUF Additional Forms – 10F, Corporate DTAA, FATCA Corporation Pvt Ltd & Statutory Local Funding from NRO account Public Ltd) Boards Authorities

Gold Loan

Why should we do Gold Loans? India Is the largest consumer and accounts for 10% of the total world gold stock Rural India holds 65% of the total Gold stock which is estimated at 23000 tonnes Demand for Gold remains stable @ 800 to 900 tonnes annually despite rise in prices India accounts for 22% of Global jewellery demand & 2/3rd of this demand is from rural and semi urban markets 35

Approved Borrowers Owner of the gold jewellery & meeting the prescribed credit norms Resident Indian Aged 25 years and Individuals above Max Age 70 years Loans to non at the time of loan individuals not maturity allowed 36

Documentation from customer KYC Proof PAN Card Accepted Sanction Letter (ASL)

Eligible Gold ornaments Kundan Jewellery will not be funded Gold Jewellery from 18 karat to 22 karat only Loan against bullion/primary gold, gold coins, units of exchange- Stone/Thread/Wax weight to be excluded from respective weight traded funds (ETF) & units of gold mutual fund not to be funded of jewellery item Precious stones engraved in The net weight of the gold jewellery should be at least 60% of eligible gold ornament will not be the gross weight of the gold considered jewellery 38

Negative & Caution Gold Ornaments Negative Ornaments Caution Ornaments to be funded with LTV not higher than 60% Mangalsutra /Temple- or Watch Strap / Watch/Tie Ear and nose studs Drops/Anklet/Tikka Church ornaments Clips/Cufflinks /Matti/ear chain Single ornament exposure Hair pins/Any footwear/ Gold bullion / Gold Loan against single gold Black bead ornaments Coin/Gold bars/Any other ornament, one piece of /Heavy baby Bangles / jewellery to be capped at unusual items INR 3.00 Lacs 39

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