What Is A Lease

Developed By Huma Naz

199/FMS/MBAIT/F07

Kiran Afshan

200/FMS/MBAIT/F07

International Islamic university Islamabad

Leasing Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments. The lessee is the

receiver of the services or the assets under the lease contract and the lesser is the owner of the assets. The relationship between the tenant and the landlord is called a tenancy, and can be for a fixed or an indefinite period of time (called the term of the lease). The consideration for the lease is called rent. 1. A contract by which one party (lesser) gives to another (lessee) the use and possession of equipment for a specified time and for fixed payments. 2. The document in which this contract is written. 3. A great way companies can conserve capital. 4. An easy way vendors can increase sales! Under normal circumstances, an owner of property is at liberty to do what they want with their property, including destroy it or hand over possession of the property to a tenant. However, if the owner has surrendered possession to another (i.e. the tenant) then any interference with the quiet enjoyment of the property by the tenant in lawful possession is unlawful. Similar principles apply to real property as well as to personal property, though the terminology would be different. Similar principles apply to sub-leasing, that is the leasing by a tenant in possession to a sub-tenant. The right to sub-lease can be expressly prohibited by the main lease. Leasing a product is similar to renting it; you pay the leasing company each month for the use of the equipment. A contract lasts over a number of years, usually between 2 and 10, depending on the cost and usable life of the product. This means that you can have the full use (although you do not actually own it) of a piece of equipment without having to pay the full cost of the item in one go. Over the course of the lease, the leasing company will recover the price of the item plus their charges, meaning you only need a small deposit to start the lease. At the end of lease, you can choose to carry on leasing at a significantly lower rate (often called a Peppercorn Rental), or to sell the product to another person or company. If you sell the item then the proceeds are split between you and the leasing company, the percentages vary significantly depending on the type of product, its lifespan, the amount received, and who the leasing company is. Some large organizations (such as banks) offer leasing, although the majority of companies are independent, and some are dedicated to one industry or equipment type (E.g.: Vehicles).

Items can be Leased (i) Vehicles Vehicles are one of the most commonly leased products by businesses, their high cost makes paying for them upfront very difficult for most businesses. Many companies are vehicle leasing specific, and do not lease other forms of equipment. A great number of vehicles are available through leasing, including; standard cars for traveling employees, company cars, vans, and even specialist vehicles like forklift trucks. (ii) Office Equipment

Many different types of office equipment are available for leasing. Computers (including laptops), printers, photocopiers and fax machines are just some of the items that are widely available. Office furniture (particularly those related to computer equipment) is also available for leasing, although it as not widely available as the equipment itself. (iii) Other Items Almost any equipment that is used for business purposes can be leased. More specific items such as Dental or Medical and Hospital equipment, engineering and manufacturing equipment, and agricultural equipment are all available. If a product you require is not listed, many leasing companies will ask you to phone or email them to suggest it; they can then locate the product for you to lease from them

TYPES OF LEASING The most common types of leases are operating leases and finance leases. Operating Lease An operating lease is particularly attractive to companies that continually update or replace equipment and want to use equipment without ownership, but also want to return equipment at lease-end and avoid technological obsolescence. An operating lease usually results in the lowest payment of any financing alternative and is an excellent strategy for bypassing capital budgeting restraints. It typically qualifies for off-balance sheet treatment and can result in improved Return on Asset (ROA) due to a lower asset base. It can also result in higher reported earnings in the early years of the lease. Finance Lease A finance lease is a full-payout, non cancelable agreement, in which the lessee is responsible for maintenance, taxes and insurance. Finance leases are most attractive in cases where the lessee wants the tax benefits of ownership or expects the equipment's residual value to be high. These leases are structured as equipment financing agreements with residuals up to 10 percent. The lessee purchases the equipment upon lease termination at a pre-agreed amount. The term of a finance lease tends to be longer, nearly covering the useful life of the equipment. Other types of leases are listed below: Capital Lease Type of lease classified and accounted for by a lessee as a purchase and by the lessor as a sale or financing, if it meets any one of the following criteria: (a) the lessor transfers ownership to the lessee at the end of the lease term; (b) the lease contains an option to purchase the asset at a bargain price; (c) the lease term is equal to 75 percent or more of the estimated economic life of the property (exceptions for used property leased toward the end of its useful life); or (d) the present value of minimum lease rental payments is equal to 90 percent or more of the fair market value of the leased asset less related investment tax credits retained by the lessor. Direct Financing Lease (Direct Lease)

A non-leveraged lease by a lessor (not a manufacturer or dealer) in which the lease meets any of the definitional criteria of a capital lease, plus certain additional criteria. First Amendment Lease The first amendment lease gives the lessee a purchase option at one or more defined points with a requirement that the lessee renew or continue the lease if the purchase option is not exercised. The option price is usually either a fixed price intended to approximate fair market value or is defined as fair market value determined by lessee appraisal and subject to a floor to insure that the lessor's residual position will be covered if the purchase option is exercised. If the purchase option is not exercised, then the lease is automatically renewed for a fixed term (typically 12 or 24 months) at a fixed rental intended to approximate fair rental value, which will further reduce the lessor's end-ofterm residual position. The lessee is not permitted to return the equipment on the option exercise date. If the lease is automatically renewed, then at the expiration of that initial renewal term, the lessee typically has the right either to return the equipment without penalty or to renew or purchase at fair market value. Full Payout Lease A lease in which the lessor recovers, through the lease payments, all costs incurred in the lease plus an acceptable rate of return, without any reliance upon the leased equipment's future residual value. Guideline Lease A lease written under criteria established by the IRS to determine the availability of tax benefits to the lessor. Leveraged Lease In this type of lease, the lessor provides an equity portion (usually 20 to 40 percent) of the equipment cost and lenders provide the balance on a nonrecourse debt basis. The lessor receives the tax benefits of ownership. Net Lease A lease wherein payments to the lessor do not include insurance and maintenance, which are paid separately by the lessee. Open-end Lease A conditional sale lease in which the lessee guarantees that the lessor will realize a minimum value from the sale of the asset at the end of the lease. Sales-type Lease A lease by a lessor who is the manufacturer or dealer, in which the lease meets the definitional criteria of a capital lease or direct financing lease. Synthetic Lease A synthetic lease is basically a financing structured to be treated as a lease for accounting purposes, but as a loan for tax purposes. The structure is used by corporations that are

seeking off-balance sheet reporting of their asset based financing, and that can efficiently use the tax benefits of owning the financed asset. Tax Lease A lease wherein the lessor recognizes the tax incentives provided by the tax laws for investment and ownership of equipment. Generally, the lease rate factor on tax leases is reduced to reflect the lessor's recognition of this tax incentive. Trac Lease A tax-oriented lease of motor vehicles or trailers that contains a terminal rental adjustment clause and otherwise complies with the requirements of the tax laws. True Lease A type of transaction that qualifies as a lease under the Internal Revenue Code. It allows the lessor to claim ownership and the lessee to claim rental payments as tax deductions. Formality of a lease The formal requirements for a lease are determined by the law and custom of the jurisdiction in which real property is located. In the case of personal property, it is determined by the law and custom of the jurisdiction in which the rental agreement is made.A tenancy for years greater than 1 year must be in writing in order to satisfy the Statute of Frauds. Term of a lease The term of the lease may be fixed, periodic or of indefinite duration.If it is for a specified period of time, the term ends automatically when the period expires, and no notice needs to be given, in the absence of legal requirements.The term's duration may be conditional, in which case it lasts until some specified event occurs, such as the death of a specified individual.A periodic tenancy is one which is renewed automatically, usually on a monthly or weekly basis.A tenancy at will lasts only as long as the parties wish it to, and be terminated without penalty by either party.It is common for a lease to be extended on a "holding over" basis, which normally converts the tenancy to a periodic tenancy on a month by month basis. Rent Rent is a requirement of leases in common law jurisdiction, but not in civil law jurisdiction. There is no requirement for the rent to be a commercial amount. "Pepper corn" rent or rent of some nominal amount is adequate for this requirement. Leasing of real property There are different types of ownership for land but, in common law states, the most common form is the fee simple absolute, where the legal term fee has the old meaning of real property, i.e. real estate. An owner of the fee simple holds all the rights and privileges to that property and, subject to the laws, codes, rules and regulations of the local law, can sell or by contract or grant, permit another to have possession and control of the property through a lease or tenancy agreement. For this purpose, the owner is called the lessor or landlord, and the other person is called the lessee or tenant, and the rights to possess and

control the land are exchanged for some payment (called consideration in legal English), usually a monthly rent. The acceptance of rent by the landowner from a tenant creates (or extends) most of the rights of tenancy even without a written lease (or beyond the time limit of an expiring lease). Although leases can be oral agreements that are periodic, i.e. extended indefinitely and automatically, written leases should always define the period of time covered by the lease. In the 1930s, the British government introduced infinite leases, only to remove the power to create these in the early 1990s. Leasing of tangible personal property An owner can allow another the use of a vehicle (such as vehicle leasing of a car, a truck or an airliner) or a computer either for a fixed period of time or at will. This can be a simple leasing transaction, or it can be a transaction intended to allow the user the right to buy the item at some future time. Real leases Whether it is better to lease or buy land will be determined by each state's legal and economic systems. In those countries where acquiring title is complicated, the state imposes high taxes on owners, transaction costs are high, and finance is difficult to obtain, leasing will be the norm. But, freely available credit at low interest rates with minimal tax disadvantages and low transaction costs will encourage land ownership. Private property rental Rental, tenancy, and lease agreements are formal and informal contracts between an identified landlord and tenant giving rights to both parties, e.g. the tenant's right to occupy the accommodation for an agreed term and the landlord’s right to receive an agreed rent. If one of these elements is missing, only a tenancy at will or bare licence comes into being. In some legal systems, this has unfortunate consequences. When a formal tenancy is created, the law usually implies obligations for the lessor, e.g. that the property meets certain minimum standards of habitability. With a bare licence, some states do not imply any significant lessee protections Leasing Internationally The practice of leasing is well established in most countries of the world .However the benefits (in particular the tax benefits) to the lessee and lessor will vary widely depending on national accounting standards and tax regulations. These largely divide into countries observing: Legal Form: the lessor’s legal ownership of the property. or Substance: the lessee legal right to use the property. National accounting standards vary in the tests that decide if the lease is a: Capital or Finance Lease, which is considered a financing transaction - as the lessor has less of the risks of ownership, such as the value of the equipment in future years. Operating Lease, whose term is short compared to the useful life of the asset, where the lessee does not have to show the lease on their balance sheet

Advantages of Leasing Leasing provides 100% financing

Most leases simply require first and last payments paid in advance and a small documentation fee. No security deposits or up-front money is required. Enterprise Financial Solutions, Inc. (EFSI) pays your vendor in full including installation, delivery and taxes unless state law prohibits. Leasing preserves credit lines Credit lines with banks and other depository institutions are precious and hard to establish. Conserve those lines for inventory, A/R or other uses and emergencies. EFSI will take care of the financing for your capital equipment so that your lines of credit remain free. Leasing increases purchasing power Your needs may be for a $50,000 machine but your available cash/credit only allows for $30,000, hence you settle for a smaller piece of machinery that only meets your needs half-way. EFSI can increase your purchasing power by allowing you to finance the needed equipment for the job. That way you get the equipment you need to meet demand and promote growth. Leasing balances usage and cost Leasing makes sense when the equipment you use creates a return that exceeds its cost. In other words, leasing allows you to set a fixed monthly payment for the use of equipment that creates an anticipated return exceeding that payment. That way you are certain that your operation is profitable and the equipment serves its purpose. Leasing provides fixed rate financing Leasing is not subject to market fluctuations and interest rate increases. You can negotiate the monthly payments up front and secure a fixed rate for the life of the lease. This makes it much easier to project cash flow and budgets for planning purposes. Leasing conserves working capital Keep your hard-earned cash on hand or invested. Enterprise Financial Solutions, Inc. enables you to enjoy the working capital your company receives since it covers all costs associated with capital equipment purchases. This ability to grow and keep your cash ultimately puts you ahead of your competition and ensures long-term profitability. Leasing is convenient Unlike dealing with bank loans and other alternative types of financing, leasing is an easy and convenient process. Typically, all we require is a one-page application for any request up to $50,000. Any request above that amount will require some financial disclosure. . Leasing is a hedge against inflation Since your payments apply to the use of the equipment you do not pay for ownership on equipment that consistently depreciates. Furthermore, your cash savings can yield a return that fights inflationary pressures.

Leasing provides flexible payments Lease payments can be structured to meet your needs. This adjustment is possible by correcting the residual value of the equipment due at lease end. By changing your end of lease balloon payment from $10,000 to $25,000 for example, you can lower your monthly payment significantly. Leasing provides options Leasing provides flexible end of lease options. Equipment at the end of the lease term can returned, extended or purchased. No Large Outlay The biggest advantage of leasing equipment is that the cost is spread over a number of years; there is no need for you to pay the entire amount upfront. This can significantly help maintain cash flow, which is critical to all businesses. Poor cash flow is the main cause of small business failures, and leasing can help you to keep it under better control. Leasing can also allow you to use better equipment (E.g.: A more efficient / faster / more accurate product) that would be too expensive to buy outright. Security When you lease a product, it is still owned by the leasing company, meaning that they have better security on your finance. This means you are unlikely to need any further security to be able to start a leasing contract, and therefore you have a much better chance of acceptance (passing the credit check) than with other forms of finance. Tax Advantages When structured properly, a lease agreement may allow you to receive tax benefits. These benefits and their availability are subject to an array of factors and we suggest you talk with your accountant about these benefits. Similarly, any tax benefit received from the ownership of the equipment by EFSI is passed on to the lessee through competitive rates and lower fees.Lease rentals are considered as an operating cost, which means that it is often possible to deduct them from taxable profits (as a trading expense). However, you should always check that the equipment you are buying is eligible before agreeing to a contract. If your business pays no or minimal taxes, then some leasing companies will claim the capital allowance on your behalf, and lower the leasing costs accordingly. Budgeting As a lease agreement is almost always a fixed contract, it is relatively easy to budget and forecast with. The amount can be worked into your businesses budget much more easily than an irregularly occurring lump sum; allowing you to keep a much better control over current and future cash flow. In the event that you need an item replacing quickly, you can do so with a relatively minor monthly adjustment to the budget, instead of a lump sum that could seriously damage cash flow.

What are the Disadvantages of Leasing? (i) No Ownership The main disadvantage of leasing is that you never own the product. It remains the property of the leasing company during and after the lease. The only exception being if you arrange for it to be sold to another company or person, in which case the leasing company would receive the money and a percentage would be passed back to you (depending on the amount, product type, age, and which leasing company you use). As you do not own the product, you are unable to sell it in the event it is no longer needed, and you cannot upgrade to a newer or better product without either paying off the remaining contract, or paying a large fee to cancel the contract. You also need to carry on paying a smaller lease cost, even after the cost of the equipment has been fully covered. Hire purchase will allow you to own the product at the end of the agreement, but this is normally more difficult to arrange, and is often available only on highly costly items. (ii) Long Term Expense Although leasing allows you to avoid paying a large lump sum, over a long period of time it often works out considerably more expensive. Over the course of a standard lease, you pay the cost of the equipment as well as the leasing companies charges. After the lease finishes you need to carry on paying rental to use the product (although after the initial lease the cost of rental goes down significantly). This means that over a number of years, you will pay considerably more than the actual cost of the equipment without ever actually owning it. (iii) Maintenance Although you do not own the equipment that you lease, you are still responsible for its maintenance and repair. Unless you have specifically trained employees to fix the equipment, then this could prove very costly in the event of a serious fault. Some leasing companies will allow you to cover the maintenance and repair costs for an extra sum (which is added to the monthly leasing cost). This will increase your monthly payments, but may save you money in the long run; particularly with manual or highly technical products that may go wrong frequently, and may cause severe disruption if out of action. Cover is normally through the leasing company itself, or through a separate insurance policy. Car leasing is slightly different, as many of these agreements include basic maintenance. However, it is vitally important to check, as some will not include it in the basic price, and the terms and conditions will vary with each leasing company. SOME OTHER DISADVANTAGES

Commitment to contract for entire validity period. Higher fixed costs per month. More expensive than purchase. Leasing provides the following advantages: The holder only pays for use . Better liquidity, since holder does not need to put up a large amount of money for purchase .  Fixed rate, so precise monthly costs can be calculated .  Minimal sales risk, since the holder is not responsible for the vehicle's disposal at the end of contract validity .      

STANDARD RELATED TO LEASING

LEASING IN ISLAMIC SYSTEM IJARA Ijara shares many similar characteristics to lease financing and hire-purchase arrangements. It involves a lessor (usually a financial institution) purchasing an asset, and

renting it to a lessee for a specific time period at an agreed rental or receiving a share of the profits generated by the asset. There are two main types of lease under the Ijara structure. The first involves a longer term lease which usually ends with the transfer of ownership of the asset to the lessee (Ijara wa lqtina), as in a modern finance lease. The second type of lease is for a shorter term and will usually end with the financial institution retaining ownership of the asset, in common with an operating lease. The rental income in this second type of lease will take into account wear and tear of the asset. To comply with Shariah, the leased assets must not be prohibited items (for example, machinery for the manufacturing of alcohol) and must be used in waysdeemed lawful by Shariah

CONCEPT OF IJRAH • Ijarah is an Islamic alternative of Leasing. • Leasing backed by an acceptable contract is an acceptable transaction under Shariah. “Ijarah is a contract whereby the owner of an asset, other than consumable, transfers its usufruct to another person for an agreed period at an agreed consideration.”

SILENT FEATURE OF IJARAH 

Contrary to Finance Lease, in Ijarah the ownership of the assets remains with Lessor (the bank) and only its right of usage is transferred to the lessee.

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Until the assets to be leased are delivered to the lessee, no lease rental become due and payable. (i.e. Ijarah cannot be recorded until the subjected asset is delivered to the lessee.)

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The title of the assets remains with the Lessor during the entire lease term.

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The Lessor bears all the risk and reward associated with the ownership to the asset.

All cost associated with the asset to bring it into usable form and condition should be borne by the lessor. Types/Classification of Ijarah 1. Operating Ijarah Operating Ijarah is a lease that does not include a promise that the legal title in the leased asset will pass to the lessee at the end of the lease 

2. Ijarah Muntahia Bittamleek (Ijarah wa Iqtina) It is a lease that concludes with the legal title in the asset passing to the lessee after Ijarah. Ijarah Muntahia Bittamleek includes:

Ijarah through gift Ijarah & transfer of legal title at the end of the lease for a token consideration or other amount as specified in the lease  Ijarah through transfer of title prior to the end of lease at a price pre-decided 3. Ijarah tul Musha or Joint ownership Ijarah It is a lease where Bank & customer jointly owned the leased asset. Bank gives its share to the customer on lease. After the term of Ijarah, the treatment is similar to Ijarah Muntahia Bittamleek  

Process of Ijarah (Muntahia Bittamleek) PROCESS OF IJRAH

VENDOR

ISLAMIC BANK

Agr ee men t1

CUSTOMER

 The customer approaches the Bank with the request for Ijarah financing and enters into a promise to lease agreement.  The Bank purchases the item required for leasing and receives title of ownership from the vendor  The Bank makes payment to the vendor

VENDOR

ISLAMIC BANK

Agr ee men t2

CUSTOMER

 The Bank leases the asset to the customer after execution of lease agreement.  The customer makes periodic payments as per the contract.  At the end of the tenure customer can purchase the asset from the bank with the help of separate Sale agreement

Accounting Standard for Ijarah IFAS 2 - Ijarah Application of Standard The Islamic Financial Accounting Standard (IFAS)-2 “ IJARAH” was issued by the Institute of Chartered Accountants of Pakistan and was adopted by the Securities and Exchange Commission of Pakistan vide its notification S.R.O 431 (i)/2007 dated May 22,2007. Effective date IFAS-2 becomes operative for financial statements covering periods beginning on or after July 01, 2007. Retrospective application of this IFAS is not mandatory. i.e. the IFAS is applicable for Ijarah commencing on or after July 01, 2007. Major difference between accounting of Finance Lease and Ijarah Finance Lease (pre-adoption method) 1) Leases are recorded as financing in the books of Lessor (the bank). 2) Un-earned income i.e ‘excess of aggregate rentals over cost of the asset” are recorded at the inception of lease and amortized over the lease term. 3) Provision against Doubtful debts is calculated according to the criteria given in Prudential Regulations for banks. 4) Leases are disclosed net of provision, income suspense and unearned income. Revenue is recorded to the extent of income portion of the rentals based on the manner which produce a constant rate of return. Ijarah (post-adoption method) 1) Ijarah assets are recorded at cost less accumulated depreciation and impairment. 2) Rental from Ijarah is recognized as income on accrual basis. 3) Costs, including depreciation is charged to income statement. 4) Assets leased out should be classified according to it nature, distinguished from the assets in own use. (i.e. Plant & Machinery, Vehicle etc.) 5) Lessor should make an impairment testing for the asset on a regular basis. Any impairment should be dealt in according to the requirements of IAS 36 “ Impairment of assets.”

Accounting Policy for Ijarah Ijarah Asset Recognition •

All Ijarah transactions are to be recorded as “Asset Acquired for Ijarah” at sum of all Cost incurred by the bank in acquiring the asset..

•

Assets are to be stated at their cost less accumulated depreciation and impairment if any.

•

Depreciation is to be charged to income applying the method which reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the bank.

•

In respect of addition and disposal of assets, depreciation will be charged from the month of acquisition till the month of disposal.

Revenue Recognition Ijara rentals are to be recognized as income on accrual basis in a systematic manner over the lease period Expense Recognition Carrying costs, including depreciation, incurred in earning the Ijarah income are recognized as an expense in the Income statement.

LEASING SYSTEM OF SONERI BANK

About Soneri Bank

Incorporated on September 28, 1991 the first Branch of Soneri Bank Limited formally opened doors for operations in Lahore on April 16, 1992 followed by Karachi Branch on May 09, 1992. The bank now operates with 97 branches spread all over Pakistan including the Northern Areas of the country where no other private bank has ventured so far. Expansion of branches is based on a policy of maintaining a balance between the urban and rural areas with a view to offering services even in the remote areas of Pakistan. Pleasant and sophisticated atmosphere has been provided in the branches which are all fully air-conditioned and computerized. The essence of our business philosophy is to cater to the banking requirements of small & medium sized entrepreneurs, providing them qualitative & competitive services with emphasis on encouraging exports. Nearly forty percent of our credit portfolio is related to export financing and credit decisions are taken within 48 hours that is why we say: We have more time for you

Agriculture finance facilities

Soneri bank provide agriculture finance facilities to their customer at its selected branches. All data related to this sub system is on line and customers easily approach this facility. All transactions related to these loans are centralized and on line. Customers check their loan position any time. Following loans are provided to customers

Production Loans Production loans are offered to meet the input and other working capital requirements for farming, orchards and nursery, tunnel farming, storage of raw material, transportation marketing grading and packing etc., by farmers.

Development Loans: Development loans are offered for the purchase of tractors, trolley, thrashers, ploughs, cultivators, laser levelers, combine harvesters, processing machinery, transport for delivery of dairy, poultry, fisheries. Installation of tube-wells, turbine, land levelling, soil improvement, land reclamation, seed processing units and for godowns, silos and cold storages.

Livestock: To meet the fixed cost and working capital requirements for cattle farming, cattle feed units, dairy farming, poultry farming; poultry feed units and fish farming. Repayment Period: Principal amount of Finance plus mark-up thereon is repayable depending upon nature of business ranging from one to five years. Revolving facility is also available under specific terms. Mark-up Rate: 15% p.a. and on overdue instalment 1% additional charge will be recovered. This rate is market based and fixed at the start of each year.

PERSONAL FINANCE

This is one of the best services provided by Soneri bank. Centralized computer system is used to save data about the loans. Customer’s monthly installments information is maintained in their respective branches and at central branch. ELIGIBLE BRROWER • Salaried persons in permanent employment with legal entities approved by the Bank who meet bank conditions to qualify for the finance. • To meet medical expenses for self or dependants of applicants. • To meet educational expenses of applicant’s children. • To meet travel expenses for self and family members. • To meet renovation expenses of self owned residential property. • To meet advance rent payment for rented residential property occupied by the applicants. • To meet domestic needs. Maximum Amount of Finance Rs. 500,000 or five times of applicant’s one month gross salary, whichever is lower. Mark-up Rate (Annualized) 19% p.a. On daily product of outstanding principal amount of finance. Maximum Repayment Principal amount of finance plus mark-up thereon is repayable in equal monthly installments within a maximum period of 5 years. Processing Fee No Processing Fee is applicable. Pre-Payment Penalty Accelerated repayments / Pre-payments of finance are acceptable without any penalty. Late Payment Penalty Services Charges of Rs. 500/- per overdue installment. The overdue installments shall be reflected in borrower's current account with the lending branch. Personal Loan Insurance Amount of Finance and mark-up outstanding are insured against life of borrowers Free of cost. Other Charges Stamp Duty on Security Document is recoverable from borrowers at actual.

Soneri Ghar Finance

Soneri Ghar Finance is the most affordable route for personal home, Offering a maximum finance of Rs. 5 million and a convenient repayment period of up to 10 years, Soneri Bank is the best way to find the home of customer choice. Centralized computer system is used to save data about the loans. Customer’s monthly installments information is maintained in their respective branches and at central branch. Purpose: Purchase / Construction of residential Property for self-occupancy. Extension / Renovation on own property. Financing Amount: Purchase / Construction of residential property up to Rs. 5,000,000/Extension / Renovation on own property up to Rs. 2,000,000/Payment Period: Purchase / Construction of residential Property up to 10 years. Extension / Renovation on own property up to 7 years. Mark-up Rates: Floating Mark-up rate @ 4.5% above Prevailing SBP Discount Rate. Minimum 16.50% p.a. Fee, Legal Charges, Valuations: Processing fee: Rs. 2500/- or 0.50% of the finance amount whichever is higher. Legal/valuations charges Rs. 3000/-. Eligibility Confirmed Permanent Employee/ Self Employed Professionals / Business person. Minimum length of confirmed service with present employer must be at least for 5 years. Minimum length of practice by Self Employed Professionals / Business person must be at least for 2 years. Applicant’s age must not be more than 60 years at the time of maturity of the finance being applied for. Monthly repayment installments not to exceed 40% of the net take home salary / 40% of declared monthly income. Eligible Borrowers

Salaried persons in permanent employment with legal entities approved by the Bank who meet our other conditions to qualify for the finance. Purpose of Finance • To meet medical expenses for self or dependants of applicants. • To meet educational expenses of applicant’s children. • To meet travel expenses for self and family members. • To meet renovation expenses of self owned residential property. • To meet advance rent payment for rented residential property occupied by the applicants. • To meet domestic needs. Maximum Repayment Period Principal amount of finance plus mark-up thereon is repayable in equal monthly installments within a maximum period of 5 years. Processing Fee No Processing Fee is applicable. Pre-Payment Penalty Accelerated repayments / Pre-payments of finance are acceptable without any penalty. Late Payment Penalty Services Charges of Rs. 500/- per overdue installment. The overdue installments shall be reflected in borrower's current account with the lending branch. Personal Loan Insurance Amount of Finance and mark-up outstanding are insured against life of borrowers Free of cost. Other Charges Stamp Duty on Security Document is recoverable from borrowers at actual.

SONARI ASHAISH

This is one of the best services provided by Soneri bank. Centralized computer system is used to save data about the loans. Customer’s monthly installments information is maintained in their respective branches and at central branch. Eligible Borrowers Salaried persons employed by cooperate entities on the approved panel of the Bank who meet bank conditiond to quality for the finance. Purpose: For Purchase of Consumer Durable products under the Brand name "PEL" from manufacture's sales outlets. Maximum Amount of Finance: Upto Rs. 50,000/- or the official price of PEL products to be purchase, whichever is lower. Mark-up Rate Finance is available Free of Mark-up. Maximum Repayment Period Principal amount of finance is repayable in equal monthly installments within a minimum period of 2 years. Processing Fee No Processing Fee is applicable. Pre-Payment Penalty Accelerated repayments/Pre-Payments are acceptable without any penalty. Late Payment Penalty Late Payment Fee @ Rs. 500/- per month for each overdue installment is recoverable from borrowers. Other Charges Stamp duty on Security Documents at actual is for account of borrowers.

CAR FINANCE

Salaried Persons/Self Employed Professionals / Business Persons who meet our other conditions to qualify for the finance. Purpose of Finance For purchase of brand new un-registered cars / other types of approved motor vehicles for private use. Maximum Amount of Finance For Cars up to 1800 CC Rs. 1.0 M. For Cars exceeding 1800 CC Rs. 2.0 M.

Down Payment On finance of up to Rs. 1.0 M: Minimum 15% of Car Price. On finance exceeding Rs. 1.0 M but not more than Rs. 2.0 M: Minimum 20% of Car Price. Mark-up Rate (Annualized) 17% p.a. calculated on daily products of outstanding finance amount. Repayment Period Principle amount of Finance plus mark-up thereon is repayable within maximum period of 5 years. Processing Fee Rs. 2000/- per application recoverable up-front (Refundable if finance not approved). Insurance of Cars / Motor Vehicles Cars / Motor Vehicles financed to be comprehensively insured with any of the Insurance Companies listed on the approved panel of the Bank. Insurance Premium payable by the borrowers up-front for each year during the repayment period. Other Charges Car / Motor Vehicle Registration Charges, Car / Vehicle Registration Renewal Fee and Stamp Duty on Loan Documents executed at actual and costs involved with repossession of cars / motor vehicles are for the account of borrowers. Repossession of Cars / Motor Vehicles The Bank reserves the Right to repossess Cars / Motor Vehicles financed at any time if monthly repayment installments fall overdue and sell the repossessed Cars / Motor Vehicles in the open market towards adjustment of amount due from the borrowers. Consumer Finance Division Phones # 4389564, 4322149, and 4322150