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More over to these types, for sophisticated borrowers, interest-only mortgages and payment-
option ARMs can be mentioned as best options. However these types are considered as less
common types compared to other mortgage schemes.
To carry on the assessment we have randomly selected few leading financial institutes in Sri
Lanka which are extending mortgages to both individual and businesses. Here in this report it
has mentioned the observations related to their major mortgage products which are popular
among the community.
01. Housing Development Finance Corporation Bank (HDFC BANK)
HDFC is a licensed specialized bank (LSB) under the Housing Development Finance
Corporation Act No. 7 of 1997) and falls under the purview of theMinistry of Finance and
Planning. Notably, HDFC is one of the two LSBs authorized to provide housing loans backed
by the borrowers Employee Provident Fund (EPF) savings.
The bank established as a building society in 1984, HDFC was converted into a LSB in 2003
and subsequently listed on the Colombo Stock Exchange (CSE) in 2005. The Bank
predominantly provideshousing loans targeting the low- and middle-income segments.
The guidelines of HDFC Act No.7 had, until 2011, limited the Banks business tothe
provision of housing loans and related activities. Subsequent to amendmentsto the Act, 2
HDFC has widened the scope of its lending activities. The Bank nowdisburses short-term
financing such as gold loans, micro-financing and agriculture loans.
As per RAM ratings for HDFC their Long term rating is BBB. A financial institution rated
BBB has a moderate capacity to meet its financial obligations. The financial institution is
more likely to be weakened by adverse changes in circumstances, economic conditions
and/or operating environments thanthose in higher-rated categories. This is the lowest
investment-grade category.
Short term rating is P3: A financial institution rated P3 has a moderate capacity to meet its
short-term financial obligations. The financial institution is more likely to be weakened by
the effects of deteriorating circumstances than those in the higher-rated category. Thisis the
lowest investment-grade category.
Purchase of
Building Blocks
70% within
Municipality
limits and 60%
Pradeshiya Sabha
limits
Security The land on which The land on The land on EPF balance
the loan is which the loan which the loan
invested is invested is invested
Commercial bank which is awarded as the best bank in Sri Lanka for the consecutive 16th
year has a history which runs back to Pre- independent era. The bank has been established in
1920 which is the British colonial era, a period when the trade and commerce is emerging
and thriving.
In 1969 it has become an independent entity and with their excellent service delivery has
been able to continue to this day. This is the only Sri Lankan bank to be among the Top 1000
Banks in the World by the Banker Magazine - UK, consecutively in 2011, 2012 and 2013. In
accordance to Fitch Ratings thisan AA(lka) Awarded bank in Sri Lanka.
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Loan Portfolio
The loan portfolio of the bank is consisting with the following types
Loans
Basically commercial bank is offering mortgage loans both in domestic currency and foreign
currency. Their basic features are as follows.
Security/ The real estate that is subject to The real estate that is subject to the loan
Collateral the loan
Table 4: Loan Scheme in Commercial Bank
Home loans for 1% less than the published fixed and floating rates.
professionals
Table 5 : Prevailing Interest rates in Com Bank Mortgages
Sampath Bank is a one of leading commercial bank in Sri Lanka Which was incorporated in
1987 under the name of "Investment and Credit Bank Limited" in 1987 .Sampath Bank is the
first bank to introduced ATM cards in Sri Lanka which was famous as SET and also they are
the first bank in south Asia to introduced Debit Card also in 1997.Sampath Bank has made lot
of new banking inventions through their advanced technology. They are the third leading
private bank in Sri Lanka in terms of total assets. One of their main income sources is
extending loans to business sector and individuals. 9
Security / The mortgage over the same property or another immovable property
collateral which has to be acceptable to the bank mortgage protection policy will
be to guarantee repayment of loan outstanding in case of default.
Hatton National Bank is also one of leading commercial bank in Sri Lanka which was
established in 1970 by taking over Hatton bank and the Kandy and NuwaraEliya branches of
Grindlays Bank. HNB also generate income by lending money to their customers. One of
major loan mode of the bank is the housing loan that they offer known as Shanthi Housing
loan.
Shanthi Foreign Currency housing loan is another type of housing loan which provided for
the Sri Lankan who work in overseas. They can obtain the loan in currency which is similar
to the NRFC account. Repayment of the loan has to be made in LKR. Bank takes the lien of
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the NRFC account if the borrower makes any default
Providing Mortgage Financing is a core product in the NDBs product portfolio. They offer
several categories of mortgage schemes to their customers.
Housing Loans are the main products NDB offers under their mortgage schemes & they
offer several types of housing loans to their customers & for the customer convenience.
We have classified mortgage schemes in NDB as per below & described accordingly.
Home loans
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Housing loans
Loans to self
employed
Education loan
Vehicle Loan
If a person already owns a land on which he or she wish to build their dream home NDB will
assist them by providing 100% of the Construction Cost, subject to a maximum of 75% of the
banks valuation of your property.
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2. HOME purchase
Anyone wish to purchase a home can turn to NDB home loan and get up to 80% of the
banks valuation of the house & property as a loan to purchase your future home.
3. HOME extension
NDB home loan assist home extension too. Can get the funds needed (100% of the
Construction Cost) subject to a maximum of 75% of the banks valuation on the property, to
suit requirement.
4. HOME improvement
Can get NDB home loan and get up to 100% of the Improvement Cost, subject to a maximum
of 75% of the banks valuation of the property to add that extra bit of personal touch that will
make home improvement.
5. Land purchase loan
NDB with its home loan options provides the means to buy lands, subject to a maximum 70%
of the banks valuation of the property.
6. NRS loan
NDB offers Non Resident Sri Lankans, with permanent employment contracts abroad and
earning a minimum salary equivalent to Rs. 50,000/-, and opportunity to obtain an NDB
home loan for the purchase, construction, or improvement of a house. People can obtain a
loan starting from a minimum amount of Rs. 500,000/- subject to a maximum repayment
period of 5 years.
Viyana Home Loan
Viyana home loan scheme comes as a joint initiative between NDB and the Employee Trust
Fund Board.
For a resident of Sri Lanka with 5 years of uninterrupted ETF membership and currently
employed at an organization that is pre-cleared/approved by NDB, the home loan scheme
offers a range of loan options from ready purchase to construction, from adding an extension
to home improvement, for a maximum of Rs. 1,500,000/-.
(*Only ETF members with 5 years of contribution to the ETF and a balance stipulated by the
ETF are eligible to apply.)
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NDB also provides the flexibility of structuring the loan up to a maximum period of 20 years,
depending on the date of retirement at a very concessionary interest rate (subject to
government taxes) with the loan being secured by the mortgage over property in favors of
NDB.
People have the convenience of the payment being deducted from your pay sheet, based on
the undertaking of their employer and their selves. Thereby eliminating the hassle associated
with repayment.
And also accepts requests for loan amounts greater than Rs. 1,500,000/-, at the normal
lending rates of NDB.
NDB has a housing loan scheme that will cater to the self-employed, looking for a loan for
the purpose of ready purchase, construction, extension, improvement of a house or to top-up
an existing housing loan.
With an attractive interest rate and with a minimum loan amount from Rs 500,000/- this
scheme offers the borrower the ability to match his income with the repayment by giving him
greater flexibility and safety.
A further boost would be the period of repayment, which can be extended up to a maximum
of
10 years with equated installments.
Has the ability to mortgage the property itself and other terms & conditions applicable &
differ according to the different scenarios.
The loan is granted for varied purposes including buying a vehicle or property, improving or
expanding your house, financing your childs higher education, wedding expenses, overseas
travel and virtually any other legitimate reason of your choice.
75% FORCED SALE VALUE - HOME LOAN OUTSTANDING = NDB HOME LOAN MAX
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NDB Home Loan Max affords the opportunity to maximize the existing home loan
with NDB enabling to fulfill peoples lifes expectations while repaying their existing
home loan. Facilities are flexible and tailor-made to suit the requirements depending
on the repayment capacity.
Any Sri Lankan citizen between the ages of 18 & 55 years with a fixed income
(permanent employment), self-employed or with a professional practice is eligible for
this Loan. The loan can also be obtained by non-resident Sri Lankans employed
overseas, subject to exchange control regulations. And can be obtained individually or
as a joint loan with spouse.
The Loan amount will depend upon each individuals repayment capacity up to a
maximum of LKR 10 Mn.
Loan can be secured through the same property already mortgaged to the bank for the
home loan.
NDB Home Loan Max will be offered at very competitive interest rates.
A mortgage protection cover needs to be obtained to protect the dependents and ease
their burden in the event of an unlikely death or permanent disability of the
mortgagee.
Education Loan
NDB offers Mortgage Backed Educational Loans to overcome financial obstacles that the
youth of today are faced with. The Bank continues to offer Educational Loans that are
designed especially for local and foreign educational needs.
Education loan can be taken by the parents on behalf of their children or even by close
relatives as well as the potential students who are in employment. A parent/relative or
potential student can also apply for joint loans, giving them further flexibility to achieve their
lifelong dreams. Property of parents can be mortgaged in this case.
Mortgage Backed Education Loans can be obtained up to Rs. 7.5 Million and can be taken
with a repayment period of up to 7 years. Furthermore, tailor-made solutions are offered in
Mortgage can be taken over the vehicle to be purchased. Ownership documents to be handed
over to the bank.
There are applicable terms & conditions applicable can be can be negotiated with the bank
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accordingly.
These loans are most preferably offered for the top government officials, doctors, engineers
and for the people who are permanently employed at reputed well established companies.
If a person needs to purchase machinery or any other property, they have the ability to go &
talk with the bank & make necessary arrangements. They have the ability to mortgage the
property to be purchased & or any other security as per the requirements. Bank may apply the
term & conditions accordingly. Requirement for a guarantee will depend on the applicant.
Up to the level of 5 million at a rate of 0.5% additional loans can be obtained. If the loan
amount is more than 5 million 0.25% interest is charged for excess amount. This service of
mortgages can be offered by any NSB loan centre or the credit division at head office.
The speciality about this type of mortgage is, we will be required to obtain a Mortgagees
title insurance in respect of all loans disbursed through the Express Service.
In case of loans for purchase of a property, transfer deeds will have to be executed by the 19
Legal Officers of the Bank at a fee which will be subject to the loan amount.
iv. Rata Ithuru Housing Loan
National service bank facilitates housing loans with a host of special concessions to enable
Sri Lankan migrant employees abroad to obtain housing loans.
Loans are offered for different purposes for the customers. Such as
To repay a loan obtained from a recognized financial institution for housing purposes.
These persons are required to open a Rata Ithuru savings account before applying for a
housing loan and remit a sum equivalent to the loan installment to be credited to the account,
before obtaining the final loan installment.
The size of the loan amount offered will be decided based on the following factors.
The normal time period allowed to repay the debt is 5 years. But this would be changed to an
extent of 10 years based on the nature of the contract. The significance under this it is
necessary to offer a security in order to obtain a housing loan. The asset can be the house/land
to be constructed / purchased or the house to be completed/repaired/extended, or another
immovable property.
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.
State Mortgage and investment bank could be identified as one of the major banks which deal
with the mortgage products in Sri Lanka. Being a special bank, they possess the capabilities
and resources to specialize in mortgage products within the country.
Categories of the Mortgage products
When focusing on the mortgage products in SMIB bank, there are three segments of
mortgage products which are commonly used by the bank namely,
Government Loans
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Property Mortgage Loans
Property mortgage personal loans
Government Loans
As the name itself implies, government loans are given to government sector employees as a
monthly installment loan. The loan should be applied via the department head of the
applicant and the loan must be pre approved by the said department head prior to be
forwarded to the bank. The monthly due installment would be straight away deducted from
the monthly salary of the client. One of the special features of this loan is that it can be
obtained only once in the service period for an government sector employees. The bank
would require a clear deed of a property to be pledged against the loan and the bank would
assess the credit worthiness of the applicant mainly via the CRIB reports.
Property Mortgage Loans
Under this product, the installments could be paid through a standing order and the total
deductions should be less than 60% of the gross salary of the client. The bank would required
a clear deed to be pledged for the loan and the loan applicant must necessarily be a person
below the age of 60 years. Spouses and parents and single children could obtain a joint loan
and the loan would be released for three times.
Purposes
Loan Amounts
The loan amount mainly depends on the value of the collateral pledged by the individual and
on the purpose of the mortgage loan.
However the minimum amount that would be extended to the borrowers under a mortgage
loan is Rs. 100,000.00
For a purchase of a house or a building the bank would provide a mortgage up to 65% to 75&
of the forced sale value of the said building.
Insurance cover
The bank would prefer a loan protection insurance cover for the mortgage loans extended to
the borrowers. While such an insurance cover provides a definite protection for the bank, it
also acts as a safety measurement for the borrower. Such an insurance cover would release 23
the dependents of the borrower from the repayment of the mortgage loan in the event of the
death of the original borrower. The bank has not made it a mandatory requirement for the
mortgage loan borrowers to subscribe for such an insurance cover but the management
encourages the clients to obtain it. This is a single premium loan.