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CHAPTER – I
INTRODUCTION
1
INTRODUCTION
Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and
above all gathering funds little by little to afford one’s dream.
Home is one of the things that everyone one wants to own. Home is a shelter to
person where he rests and feel comfortable. Many banks providing home loans whether
commercial banks or financial institutions to the people who want to have a home.
HDFC-(Housing Development And Finance Corporation) Home Loan, India have
been serving the people for around three decades and providing various housing loan
according to their varied needs at attractive & reasonable interest rates. Owing to their wide
network of financing, HDFC Housing Loans provides services at your doorstep and helps you
find a home as per your requirements.
Many banks are providing home loans at cheapest rate to attract consumers towards
them. The more customer friendly attitude of these banks, currently offer to consumers
cheapest loan over homes.
In view of acute housing shortage in the country, and keeping in mind the social –
economic role of commercial banks in the present times, the RBI advised banks to encourage
the flow of credit for housing finance.
With the RBI reducing bank rate, the home loan market rates nose-diving by 50 basis
points. The HDFC Bank and Standard chartered bank has become the first player in this
sector to announce a housing loan for a 20 years period. No doubt it will enhance the end cost
people to plan their house over longer duration now; it has been made easy for a person to
buy that dream house which he dreamt of long ago.
HDFC also provides with Home Improvement Loan for internal and external repairs
and other structural improvements like painting, waterproofing, plumbing and electric works,
2
tiling and flooring, grills and aluminium windows. HDFC finances up to 85% of the cost of
renovation (100% for existing customers).
Current status is that HDFC reduced home loan rates by 50 basis points for all its
existing floating rate customers.
ADVANTAGES OF HOME LOANS:-
The various benefits of home loans arising to the customers are:-
(i) Attractive interes rates:-
The various banks offer attractive interest rates to boost and help their customers.
Many banks provide loans on fixed or floating rates to facilitate consumers as per their needs.
(ii) Help in owning a home:-
The home availed by a person with the help of banks, because they provide technical
and financial assistance to customers for owning their dream home.
(iii) No requirement of guarantor:-
The commercial banks now a day, liberlise their laws regarding home loans. Some of
banks don’t even require the guarantor to grant loan to their consumers. They also make
consumers free by reliving him to find a guarantor to complete the proceedings of availing
loan.
(iv) Door-Step Services:-
These door to step services are provided from enquiry stage to the final disbursement
takes place such services are beneficial for customers in present busy life. Banks like ICICI
bank and standard chartered bank provide door to step services to customers to borrow loan.
3
(v) Loan period:-
There are many banks which provide maximum loan tenures upto 15-20 years based on
the loan amount and the creatibility of customers. This relieves the customers to repay loan
amount till a long period.
(vi) For accidental death insurance :-
Some banks provide free accidental death insurance with housing loan which is also
beneficial for the customers.
These benefits or advantages of home loans are responsible for making than so
popular among customer that a person who don’t have their home and want to buy, they do it
with home loan. Home loans help such persons in making their dream home.
DISADVANTAGES OF HOME LOANS:-
The main disadvantages of home loans are high lightened as below:
(i) Delays in processing :-
Many times, there are huge delays in processing of providing home loans because
various formulations to be fulfilled in this process. Due to these delays customers feel
mentally as well as financially weak.
(ii) Fluctuating interest rates :-
Some banks give home loans at floating rates, which fluctuate at Different intervals due
to some reasons. These changes sometimes, may lead to increase in interest rate which will
increase the cost of home loans to the customers
4
(iii) High Cost:-
The public sector banks charge high processing cost for home loan’s sanctioning.
They are forced to pay serious charges at various stages to fulfill the requirements. Some
consumers are not able to pay such charges so such people could not avail the benefits of
home loan schemes.
(iii) Problems in disbursement:-
There are many problems in disbursement of home loan amount. There are some delay
in disbursement of loan amount to the customers due to legal formalities. This causes
problems to the customers.
These are limitations or disadvantages of home loans. But some times some banks
charges high installments to repay loan amount. Such also causes problem to customers.
These limitations can be removed by providing good and promote services to the customers.
5
OBJECTIVES OF STUDY
There is no strongest foundation for your dream home, than a cheap loan. Home loans have
become that stronger foundations for people who want to own a home. The main objectives
of the study are as follows :-
1) The main objective of this study is to know the Customers perceptions about home loans
of HDFC housing development finance corporation LTD.
2)2) To analyze the history of hdfc ltd. To analyze the history of hdfc ltd.
3) Generating good business to the company by promoting and selling the products of HDFC
LTD.
4) To know the ideas of customers about home loan products and services.
5) To make comparative study of Disbursement of home loans by
Commercial banks.
6) Fixing the appointments with the customers.
7) To study the satisfaction level of customers about home loans.
8) To study the problems faced by customers in obtaining the home loans.
9) Visiting the customers and closing the deal.
10) To learn about various aspect of hdfc home loan ltd. To learn about various aspect of hdfc home loan ltd.
6
PURPOSE OF THE STUDY
The main purpose of this study is to attain the knowledge of the processing system of home
loans. the main purpose of the study are as follows :-
To know the ideas of customers about home loan products and services.
To study the satisfaction level of customers about home loans.
To study the problems faced by customers in obtaining the home loans.
To learn about various aspect of HDFC home loan ltd. To learn about various aspect of HDFC home loan ltd.
SCOPE OF STUDY
The Indian housing finance industry has grown by leaps and bound in few years. total home
loans disbursements by banks has risen which witnesses phenomenal growth from last 5
years. There are greater number of borrowers of home loans. so by this study we can find out
satisfaction level of customers and problems faced by them in obtaining home.
7
RESEARCH METHODOLOGY OF THE STUDY
RESEARCH METHODOLOGY:-
Research methodology is a way to systematically show the research problem. It may
be understood as a science of studying how research is done scientifically. It is necessary for
the researcher to know not only the research methods but also the methodology.
This Section includes the methodology which includes. The research design, objectives of
study, scope of study along with research methodology and limitations of study etc.
To know the Customers perceptions about home loans of HDFC housing
development finance corporation LTD.
To study the satisfaction level of customers about home loans.
To study the problems faced by customers in obtaining the home loans.
To make comparative study of disbursement of home loans by commercial banks, the
study shall be conducted in the manner enumerated below-
8
RESEARCH DESIGN:-
This project is based on exploratory study as well descriptive study. It was an
exploratory study when the customer satisfaction level was studied to suggest new methods
to improve the services of HDFC LTD in providing home loans and it was descriptive study
when detailed study was made for comparison of disbursement of home loans by commercial
banks.
SOURCES OF DATA :-
To fulfill the information need of the study. The data is collected from primary as well
as secondary sources-
A - PRIMARY SOURCE:-
I decided primary data collection method because our study nature does not permit to
apply observational method.
In survey approach we had selected a questionnaire method for taking a customer view
because it is feasible from the point of view of our subject & survey purpose. We conducted
100 sample of survey in our project to judge the satisfaction level of customers which took
home loans.
• Sample size;-
B – SECONDARY SOURCE:-
It was collected from internal sources. The secondary data was collected on the basis
of organizational file, official records, news papers, magazines, management books,
preserved information in the company’s database and website of the company.
9
SAMPLING :-
Sampling refers to the method of selecting a sample from a given universe with a view
to draw conclusions about that universe. A sample is a representative of the universe selected
for study.
SAMPLE SIZE :-
Large sample gives reliable result than small sample. However, it is not feasible to target
entire population or even a substantial portion to achieve a reliable result. So, in this aspect
selecting the sample to study is known as sample size. Hence, for my project my sample size
was 100.
The Sample Size consists of both the Professional and Business class people. IT
peoples, Doctors, Jewelers, Timber Merchants & Real estate Agents are taken as Sample.
SAMPLING TECHNIQUE:-
Random sampling technique was used in the survey conducted.
TOOLS OF ANALYSIS:-
Data has been presented with the help of bar graph, pie charts, line graphs etc.
PLAN OF ANALYSIS:-
Tables were used for the analysis of the collected data. The data is also neatly presented
with the help of statistical tools such as graphs and pie charts. Percentages and averages have
also been used to represent data clearly and effectively.
DATA COLLECTION INSTRUMENT DEVELOPMENT :-
The mode of collection of data will be based on Survey Method and Field Activity.
Primary data collection will base on personal interview. I have prepared the questionnaire
according to the necessity of the data to be collected.
10
LIMITATIONS OF THE STUDY:-
This study also includes some limitations which have been discussed as follows:
i) The sample size of 100 customers and 4 banks might prove a limitation because of
difficulty in generalization of results.
ii) To collect the data from various banks was quite difficult due to non- cooperation of some
banks. This proved to be major limitation of the study.
iii) To access such a large number of customers was difficult because of non-cooperative
attitude of respondents.
iv) Lack of data was also the other limitation of the study as some of banks do not have
proper data on topic.
v) There was limitation of time to conduct such a big survey in limited available time.
vi) Ignorance and reluctant attitude of customers was also a major limitation in this study.
11
CHAPTER – II
REVIEW OF LITERATURE
12
Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and
above all gathering funds little by little to afford one’s dream.
Home is one of the things that everyone one wants to own. Home is a shelter to
person where he rests and feel comfortable. Many banks providing home loans whether
commercial banks or financial institutions to the people who want to have a home.
HDFC-(Housing Development And Finance Corporation) Home Loan, India have
been serving the people for around three decades and providing various housing loan
according to their varied needs at attractive & reasonable interest rates. Owing to their wide
network of financing, HDFC Housing Loans provides services at your doorstep and helps you
find a home as per your requirements.
Many banks are providing home loans at cheapest rate to attract consumers towards
them. The more customer friendly attitude of these banks, currently offer to consumers
cheapest loan over homes.
In view of acute housing shortage in the country, and keeping in mind the social –
economic role of commercial banks in the present times, the RBI advised banks to encourage
the flow of credit for housing finance.
With the RBI reducing bank rate, the home loan market rates nose-diving by 50 basis
points. The HDFC Bank and Standard chartered bank has become the first player in this
sector to announce a housing loan for a 20 years period. No doubt it will enhance the end cost
people to plan their house over longer duration now; it has been made easy for a person to
buy that dream house which he dreamt of long ago.
HDFC also provides with Home Improvement Loan for internal and external repairs
and other structural improvements like painting, waterproofing, plumbing and electric works,
13
tiling and flooring, grills and aluminium windows. HDFC finances up to 85% of the cost of
renovation (100% for existing customers).
Current status is that HDFC reduced home loan rates by 50 basis points for all its
existing floating rate customers.
DISBURSEMENT OF HOME LOANS :-
The every bank has its own procedure to disburse the loan amount among customers.
After choosing your right home, the next step is disbursement of home loans. The loan
amount is disbursed after identifying and selecting the property or home that are purchased
and submit the requisite legal documents. In the disbursement of home loans a clear title and
full verification to ensure that a person has full rights on his house. The 230A clearance of
seller and /or 371 clearances from the appropriate authority of income tax is also needed.
(I) Eligibility criteria:-
However, if one is a resident or non-resident individual who is planning to buy a
house in India, one can apply for a home loan. If a person has decided to buy a property in the
near future, he/she can apply for a loan before even selecting the property. Once the
maximum amount to put into the property has been decided, the Housing Finance Institutions
or Banks will let the customer know that how much he/she is eligible for and this helps to
plan out the budget.
(ii) Conditions regarding co-applicants: -
All Housing Finance Institutions lay down conditions on who can be co-applicants. all
co-owners to the property. need to be co-applicants to the loan necessarily. These
institutions do not permit minors to join in as either coowner or as co-applicants because a
minor is not eligible to enter into a contact as per law. They do not permit even friends or
relatives who are not blood relatives to take a property jointly.However, Income of co-
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applicants can be clubbed together to get higher loan eligibility. Given below is a Table that
throw light on acceptable relationship of a co-applicant for clubbing of income.
Income Clubbing of Co-applicants:- It is as follows:-
Combination Income Clubbing: -
Husband-Wife: - Income of husband-wife can be clubbed.
Parent - son: - It can be clubbed if only son is there but not if any male sibling exists.
Brother-Brother: - If they are currently staying together and intend to stay together in
the new property, then only, their income-can be clubbed for above purposes.
Brother-Sister: - No clubbing-is possible.
Sister-Sister : - No clubbing is possible.
Parent-Minor- Child: - No clubbing is possible in this case also.
(iii) General Terms and Conditions: - The following are the terms and conditions
applicable to the basic home loan product only. These are likely to change on the basis of the
variations of the home loan product. Typically, in general home loans, the following
conditions are applicable :-
1) The loan to value ratio (LTV) cannot exceed a particular percentage. This differs from
product to product and from one Housing Finance Institutional Bank (HFI/B) to another.
The components of the value of the Property calculated here are covered under cost of
property.
2) The maximum tenure of the bank is nominally fixed by HFI/Bs. However, HFls/Bs do
provide for different tenures with different terms and conditions.
3) The installment that one pay is normally restricted to about-50-per cent of the monthly-
gross income of the candidate.
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4) The total monthly outflow towards all the loans that have been availed of, including the
current loan is normally restricted to 50% of the gross monthly income.
5) One will be eligible for a loan amount which is the lowest as per one's eligibility. This is
calculated as per the LTV norms, the HR, norms and the FOIR norms as mentioned above.
6) Most HFls/Bs consider the profile before they judge the repayment capacity. The
judgement is based on age, qualifications, number of dependents, employment details,
employer credentials, work experience, previous track record of repayment of any loans that
have been availed of, occupation, the industry to which the candidate's business relates to, if
he/she is self-employed, then the turnover in the last 3-4 years etc.
7) Some HFIs/Bs insists on guarantees from other individuals for the repayment of the loan.
In such cases, the customers has to arrange for the personal guarantee before the
disbursement of the loan takes place.
8) The property should be technically clear before the HFIs/Bs disburses the loans amount.
Most of institutions and banks have a teams of technical experts who visit the site to get a
technical report before the disbursement of loan. This is also beneficial to the customer as
they check for the technical quality and compliance with local laws.
9) The property should be legally clear before one can avail of a disbursement of the loan
amount. Housing-Finance Institutions /Banks (HFIs/Bs) take legal clearance from their
lawyers before the disbursement of amount. This proves to be beneficial to the customers as a
legal expert checks his/her documentation to ensure that he/she get a proper title to the
property.
10) The disbursement of the loan is as per the progress of construction of the property unless
it is a ready property in which case the disbursement will be by one single cheque. PEMI or
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simple interest on the loan amount disbursed to the customer in case of a part disbursement
will be payable by the customer on the disbursement.
11) The disbursement in most cases will be favoring the builder or the seller or the society
or the development authority as the case may be. The disbursement will come in the
customer's favour under special circumstances only.
12) The repayment of loan can be made either through deduction against salary, post-dated
cheques, standing instructions or Auto debit instructions to bank.
13) The principle is amortized either on annual reducing or monthly reducing basis as the
case may be.
The above terms and conditions are generally true for most Housing finance
Institutions/Banks with respect to the general Home Loans. However, the specific terms and
conditions vary with respect to special Housing Finance Institutions or Banks.
(iv) Charges applicable to home loans :-
The different kinds of charges applicable to home loans are discussed below:
a) Processing fees :-
First of all, comes the process fee. This is a charge that is levied by most HFls/Bs. This
has to be paid at the time of submission of the application form. It's normally charged as a
percentage of the loan amount sanctioned. Some HFls also charge a flat fee based on the loan
amount instead of a percentage. When a lower amount is sanctioned the excess fees paid at
the time of submission of the application is adjusted with the charges, which one make to the
HFI/B subsequently. Most HFls/Bs refund the processing fee if the loan application is
rejected.
17
b) Administrative fees :-
This charge is again, normally, a percentage of the loan amount sanctioned. It is collected
by the HFI/B for the maintenance of customer's records, issuing interest certificates, legal
charges, technical charges, etc. though the tenure of the loan. It is payable by the customer
when he/she accepts the offer letter given by the HFI/B. This payment has to be made before
the availment of the disbursement. The mode of collection of these fees varies from one
HFI/B to another.
c) Rate of interest :-
This is the rate of interest applicable on the loan amount through the tenure of the loan. It
is charged on the principal monthly reducing method. Most HFIs/Bs give an option to select
either a fixed rate of interest or a variable rate of interest.
d) Legal Charges:-
Some HFIs/Bs mainly Public Sector Banks levy legal charges that they incur on getting the
property documents vetted by their panel of lawyers.
e) Technical Charges:-
These charges are also levied by certain Housing Finance Institutions/Banks (HFIs/Bs)
to meet their expenses on the technical site visits to the customer's property. This ensures
quality of construction and construction within the norms as stipulated by the respective
approval authority.
18
f) Stamp duty and registration charges:-
HFIs that go in for a registered mortgage pass these charges on to the customer. These
are rather heavy in certain states depending on the laws laid down by the state where one buy
a property.
g) Personal Guarantee from Charges :-
Since the personal guarantee provided by the customer need to be stamped, these
charges are also recovered from the customer. They are charged to him by HFIs who demand
for Guarantees.
h) Cheque Bounce Charges :-
In case the cheques through which one make a payment to HFls get dishonored, some
minimum charges are levied by the HFI. The same are recovered from the customer.
(i) Delayed payment charges :-
HFls/Bs charge delayed payment charges from the customer if he/she delays the
payment of installments beyond the due date.
(j) Additional charges :-
These are levied as a percentage on the delayed payment charges by most HFls. They
are levied if one fail to pay the dues within the stipulated time after a delay has taken place.
(k) Incidental charge :-
This is payable in case the HFI/B sends a representative from their organization to
collect their outstanding dues. It is normally charged at a flat rate per visit. These charges are
levied by most HFls/Bs.
19
l) Prepayment Charges :-
This is a penalty charged by HFls/Bs from when one makes either a part prepayment or
a full repayment of the loan. This charge is levied only on lump sum payments and not on the
EMls that one pays. This charge is levied on the amount prepaid by one and not on the entire
outstanding principal. These charges are gradually being discount. So, these are the charges
levied by most Housing Finance Institutions and Banks while granting home loan to the
customers. Now, the decision on the repayment capacity shall be talked about as follows.
(v) Judgement regarding repayment capacity on the basis of income :-
To understand how the income of a customer is considered to arrive at his repayment
capacity, it is first necessary to classify customers into salaried and self employed
individuals.
a) The income of the salaried individual is considered in the following manner:-
Gross monthly income as it appears on the salary slip
Less:- Any non regular variable income appearing on the salary slip (including overtime,
etc.)
Add : - 50 per cent of the average variable income of the last six months.
Add: - Any fixed cash/voucher payments for which proof can be submitted.
Add: - 50 per cent of the average variable cash/voucher payments with proof like traveling
reimbursement etc.
Add :- HRA receivable if not being received already in the salary slip.
The above income calculated for the calculation of eligibility using IIR and FOIR norms. For
calculation of FOIR, the installments of all the loans that one has availed of currently for
20
which repayment is being made is taken into account as well. The lower of the two
eligibilities is considered as the maximum repayment capacity.
b) To consider income of Self-employed individuals we further classify them into
Professionals and non-professionals .
Professionals: - Comprising doctors, chartered accountants, lawyers, architects, etc.
For calculation of eligibility of professional's income is computed by most HFIs using
the gross professional receipts instead of the Net profit as in the case of self-employed
non-professionals.
Non-Professionals : - The income of non-professionals is normally calculated by
HFIs in the following manner: -
Average of the net profits of last 2 years as it appears in the profit and loss account (Returns
need to be filed for the same. They should be filed regularly before the due date is over).
Less: - Any income, which is unusual and non-recurring in nature like sale of some asset, etc
which affects profits substantially,
Add: - Any expense that is unusual and non-recurring in nature like repairs and maintenance
that has not been capitalized and effect profit adversely.
Add: - 50 per cent of the average depreciation of the last two years. The above income is
calculated for the calculation of eligibility using IIR and FOIR norms.
For calculation of FOIR the installments of all the loans that one has availed of currently for
which repayment is being made is taken into account and the eligibility is worked out. The
lower of the two eligibilities is considered as the
maximum repayment capacity.
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(vi) Credit documentation:-
Given below is the exhaustive list of credit documents- that need to be submitted for a
general home loan product. The documents vary from one HFI/B to another based on one's
employer, qualifications experience etc. the general requirements are as follows: -
(a) Income Documents : -
For salaried slips for the last three months appointments letter-salary certificate-
retainership agreement, if appointed as a consultant-Form 16 issued by the employer in
customer's name income document for self employee - last three years profit and loss account
statement duly attested by Chartered Accountants. Last three years Balance Sheets duly
attested by Chartered Accountant, last three years Income Tax Returns with computation
chart duly filed and certified by the Income Tax authorities.
b) Proof of employment : -
Identify card issued by the employer- Visiting card.
(c) Employer's details (In case of private limited companies) : -
Profile of employer on employers letterhead (to be signed by a senior person in the organization) comprising
• Name of promoter/directors
• Background of promoters/directors
• Nature of business activity of your employer
• Number of employees
• List of branches/factories
• List of suppliers
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• List of clients/customers
• Turnover of employer
• Annual reports of the employer for the last two to three years.
(d) Proof of age (Anyone of the following) : -
Passport- Voter's ID card-PAN card-Ration card-Employer's identity card-School
leaving certificate-Birth certificate.
(e) Proof of residence (Anyone of the following) : -
Ration card-Passport- PAN card-Rent agreement, if the customer is staying currently on
rent- Bank Pass book-Allotment letter from the company if he/she is residing in company
quarters.
(f) Proof of name change (If applicable) : -
A copy of the official gazette –A copy of a newspaper advertisement publicizing the
name change-Marriage certificates.
(g) Proof if investment (If required) :-
Bank statement for the last six months of all operating and salary accounts - Bank
statements for the last six months of all current accounts, if self-employed-any other
photocopies of investments held, if required by the HFC.
(vii) Legal documentation :-
Legal Documentation the typical legal documents that need to be submitted to the
HFC arc discussed here. Given below is a list of legal property documents that need to be
submitted to the HFC for mortgage of the property. The name and the list of documents vary
23
from state to state and also depend on the type of property being financed. A broad outline of
the documents required is given below.
a) Acceptance copy of the offer letter issued by the HFC/B.
b) Title documents of the property that include -sale agreement duly
Registered-Own contribution receipts - Allotment letter-Registration receipt-Land documents
indicating ownership, if applicable- Possession letter-Lease agreement, if applicable
(Property bought from a development authority) - Mortgage deed if the HFC opts for a
registered mortgage.
c) No Objection Certificate from the developer, society or development authority as
applicable.
d) Personal Guarantees, if applicable.
e) In case of alternator additional security, documents for the same depending upon the
security details.
f) Post dated cheques for the EMls.
The above documents are only indicative in nature and do not cover the entire list. It may,
also be noted that in a resale case, the previous chain of agreement also need to be taken.
(viii) The tax benefits that are applicable to housing loans for individuals :-
Currently Tax Benefits to individuals are available only for the Home Loans and Home
Extension Loans products. The benefits available are covered under these sections.
24
Property Insurance :-
Is it compulsory to insure the property? some HFls insist on a mortgage redemption life
insurance policy. In this case the customer gets a benefit of an interest rate reduction. Though
the HFI may not insist, it is better to go in for property insurance to safeguard the asset
against any sort of damage or loss. The customer can select the tenure for the property
insurance. The insurance premium is changed up front. Most insurance companies provide
for huge discounts on the rate of premium for larger tenures. The premium charged currently
is seventy-seven for every lakh of property for a year. So a customer has to fulfill various
conditions to be eligible for availing home loan from a Housing Finance Institution/Bank
After fulfilling these conditions, a customer can avail loan at low interest rate i.e. fixed rate
floating rate. A decision on whether one should go in for a fixed-rate loan or a floating-rate
loan now is a function of two factors i.e. One's perception of where interest rates in the
economy are headed and one' capacity to ride the interest rate changes. A floating-rate loan
let one take advantage of further falls in interest rates but one stand to loose if interest rate,
rise again. However this decision is based on the perception of the consumer.
SUMMARY:-
• After going through pervious studies of Home loans I came to conclude that-
• There is growth of home loans after 2001.
• Home loans have an inverse relation with interest rates i.e. when interest rate low the
demand of home loans increase. (Ojha 1987)
• People are going more towards home loans than private mortgage insurance .
(Berstain 2009)
• Government taking various steps to encourage people to go toward home loans .
(Haavio, Kauppi 2000)
25
• Growth of home loans are due to increase of living standard of people, shifting from
joint family to nuclear family .(Lacourr, Micheal 2008)
• There are some problems also attach with these home loans such as time i.e filling of
application of loan to closing ,people have their own specified needs from these home loans
which are not fulfilling. (Lacour Micheal 2007).
• SBI provide a very low interest rate on home loans as compared to other banks. (SBI
May 2000)
Now after this conclusion the details of reviews are below-
Berstain David (2011) examined in his study taken from 2001 to 2009 that in this
period there is increase use of home loans as compared to private mortgage insurance
(PMI).he have divided his study into four sections. Section 1 describes why people are going
more for home loans than PMI. the main reason for this that now home loans market provide
Piggybank loans for those people who don’t have 20% of down payment. Section 2 tells the
factors responsible for the growth of home loans and the risks on shifting toward home equity
market without any PMI coverage. PMI can protect lenders from most losses up to 80% of
LTV and the absence of PMI will result in considerable losses in an environment. Section 3
tells the measures in changes of type of loans. For this he have taken the data from the 2001
and 2008 AHS a joint project by HUD and Census The results of this analysis presented in
Table One reveal a sharp increase in the Prevalence of owner-occupied properties with
multiple mortgages among properties with Newly originated first mortgages. Section 4
describe the Financial status of single-lien and multiple-lien households and for this he have
taken the survey of consumer finance and show that financial position is more weaker in
multiple loans than the single loans.
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Vandell, Kerry D (2009) analysis the sharp rise and than suddenly drop down home prices
from the period 1998- 2009. changes in prices are for the reasons as such economic
fundamentals , the problem was not sub prime lending per se, but the Fed‘s dramatic
reductions, then increases in interest rates during the early- mid-2000 , the housing ―boom
was concentrated in those markets with significant supply-side restrictions, which tend to be
more price-volatile; he problem was not in the excess supply of credit in aggregate, or the
increase in sub prime per se, but rather in the increased or reduced presence of certain other
mortgage products.
La courr, Micheal (2008) analysis in his study the factors affected the increase in the level
of Annual percentages rates (APR) spread reporting during 2006 over 2005. the three main
factors are changes in lender business practices; (2) changes in the risk profile of borrowers;
and (3) changes in the yield curve environment. The result show that after controlling for the
mix of loan types, credit risk factors, and the yield curve, there was no statistically significant
increase in reportable volume for loans originated directly by lenders during 2006, though
indirect, wholesale originations did significantly increase. Finally, given a model of the
factors affecting results for 2005-2006, we predict that 2007 results will continue to show an
increase in the percentage of loans that are higher priced when final numbers are released in
September 2008.
La cour Micheal (2007) examined the home purchase mortgage product preferences of LMI
households. Objectives of his study to analysis the factors that determined factors their choice
of mortgage product , is different income groups have some specified need to met particular
product. The role pricing and product substitution play in this segment of the market and do
results vary when loans are originated through mortgage brokers? For this they have use the
regression analysis and the results are high interest risk reduce loan value. Self employed
borrower chooses reduce documented loans than salaried workers.use of this product type
27
seems to be more prevalent among borrowers with substantial funds for down payment and
better credit scores. In case of pricing Multi families requires price premium and larger loans
carry lower rate. And the role of time, particularly, the time required for the loan to proceed
from application to closing it is find that government lending taking the longest time and
Nonprime loans the shortest time.Multi family properties take longer time in closing. And
during peak season take longer time to close. And for last objective it is find that broker
originated loans close faster.The effect of mortgage brokers on pricing and other market
outcomes is fertile ground for additional research.
Dr. Rangarajan C. (2001) said that the financial system of India built a vast network of
financial institutions and markets over times and the sector is dominated by banking sector
which accounts for about two-third of the assets of organized financial sector.
Haavio, Kauppi (2000) stated that countries where a large proportion of the population lives
in owner – occupied housing are experiencing higher unemployment rates. Than countries
where the majority of people live in private rental housing, which might suggest that rental
housing enhances labour mobility. In this paper, they develop a simple inter temporal two
region model that allow us to compare owner occupied housing markets to rental markets and
to analyze how these alternative arrangements allocate people in space and time. announced
that it will offer loans for Rs. 2-10 lakh at 12.5 percent the lowest rate offered by any housing
finance provider, big brother SBI has taken the rate war in the home loans category to new
heights. This is because, apart from the low rate, the interest on these loans is calculated on
principal, which is reduced every month unlike other housing finance companies which
calculate interest on annually reducing basis.
Narasimham Committee (1991) points out that although the banking system in our country
has made rapid progress during the last two decades, there is decline in productivity and
efficiency and erosion of profitability. The committee strongly make indications of
28
liberlising, deregulating economy to make Indian baking system more competitive and
efficient.
Ojha (1987) in his paper "modern international caparison of productivity and
Profitability of pubic sector banks of India" making Comparison on the basis of per employee
indicators and taking examples of state bank group and Punjab National bank noted that
Indian banks are the lowest in all accounts. However such international comparison will not
be fair for numbers of reasons.
Godse (1983) in his essay, “looking a fresh at banking productivity” observe that
productivity aspect is only at the Conceptualization stage in banking industry. He suggested
improvement in productivity and procedures, costing of operations and capital expenditure
etc.
Fanning (1982), while examining bank productivity of British banks observed that although
the productivity of the UK clearing banks is improving, they are still heavily over manned as
compared with similar banks else where.
Kulkarni (1979) in his study “Development responsibility and profitability of banks” stated
that while considering banks costs and profits, social benefits arising out of it cannot be
ignored. He suggested that while meeting social responsibility banks should try to make
developmental business as successful as possible.
Varde and Singh (1979) in a study "profitability of commercial banks" over 15 years gave
consideration to two types of factors that effects interest rates levels i.e. internal factors
(including operational and managerial efficiency of individual basis).
Banking Commission (1972) reviewed bank operating methods and procedures and made
recommendations for improving and modernizing these, particularly relating to customers
29
services, credit procedure and internal control systems. It observed that present methods of
working out branch profitability are not appropriate and an integrated costing and financial
reporting system is needed.
Department of Banking operations and development, RBI : Bombay observed that the
rapid expansion of banks activities since 1970 called for a phase of consolidations to improve
the quality of banks operational efficiency, productivity and customer services.
30
CHAPTER-III
INDUSTRY AND COMPANY
PROFILE
31
THE HISTORY OF INDIAN HOME LOANS:-
Home loans in India have made people Buy Property in India in spite of the
skyrocketing prices. Today, we find considerable Real Estate Investment in India, either in
the field of Residential Property in India or Commercial Properties in India. Home Loans in
India are disbursed by many Banks as Loan Banking is on of the most important function of
the Financial Services in India. Property Dealers and Real Estate Consultants in India
usually recommend that we undertake appropriate Home Loan or Mortgage Loan counseling
so that we can Buy Apartment in India at an affordable Mortgage Rate.Purchasing the home
of your dreams is not an easy task. Especially when you plan to buy a home on loan. Home
loan means that you buy a house on installments. In simpler terms when you want to own a
home and can’t afford to pay the amount in lump sum, you can pay it in monthly installments
with an interest rate.
The interest rates of home loans are expected to go down even further according to
analysts who foresee a cut down in the rates by the RBI in the wake of the decision taken by
US Federal Reserve to cut its rates by a significant margin.
There are number of companies offer cheap home loans at a low interest rate. You can
avail loan against existing house for renovation or expansion etc. There are many
nationalized banks that offer finance for affordable housing. India Housing has put together a
comprehensive data to provide you with the cheapest Home Loans available in the market.
We have listed all the important housing finance institutes and some of the top home finance
banks providing lowest interest rates.
In the last few years, housing loan scenario in India has changed drastically. It has taken
a front seat and people are looking forward to owning their own houses. It is no more a dream
32
that required lifetime saving and a difficult decision to make. Today the new home purchase
loan is much easily available and is much cheaper than what was available earlier. Banks are
now everywhere and the schemes are implemented even in villages and smaller towns. The
housing loans are popular there too, however, the activity of building flats is little slow. It
would not be wrong to say that there has been a boom in the home loan market and with this
boom; there is also a boom in the Number of home loans mortgage brokers in India.
The main reason for this boom in home loan market is the change in government
policies. It is our government’s motivation that the home loan interest rates in India have
fallen considerably. Lot many banks are offering home loans and this is available at low
EMIs (Equated monthly Installments). High EMIs are now a thing of past. Today lending rate
is in the range of 7.5 to 15 %.
Again, there are different types of home loans available today. The interest rate available
is also of two different types. One is the fixed rate loan and the other is the floating rate loan.
In the fixed rate loan, whatever interest is fixed on the start of loan is carried on for the
complete period. However, in the other one, the interest rate is not fixed and as the interest
rate goes up or low the effect is directly transferred to the person who is taking the loan. In
the last few years the floating interest rate has been a favorite among most of the people
taking home loans.
There is also a trend to opt for home construction loan. This loan is available to those
who want to design their homes according to their requirement and taste. In other words, this
loan is meant for those who themselves want to construct their new home.
As shared earlier, taking a loan is not a difficult task. However, before taking a loan,
one must realize that the relationship with the bank will be for a longer period usually 15 to
20 years so one must ensure faith and integrity in bank. Apart from low rate of interest, the
33
bank should also provide some value added services. The other thing is to look into is the
property that is to be brought. Making sure that the builder has all sanctions and facility to
build a good building is very important.
Taking home loans these days has become simpler. With the RBI regularly bring
down interest rates; taking home loans have become extremely easy. Housing loans which
were 16.5% to 18% a few years ago fell by 11.5% to 13%. With interest rates going down,
people increasingly number apply to take these loans. Some of the leading banks offering
home loans in India, including ICICI Bank, IDBI Bank, HDFC Bank , Bank of Baroda, SBI,
Standard Chartered Bank and Axis Bank .
Home Loan Procedure in India :-
Submission of Application Form: - After choosing a particular home loan, the customer
submits the application form to the housing finance company (HFC) along with other
relevant documents as required by the HFC. They comprise documents to establish income,
age, residence, employment, investments, etc. The customer also needs to hand over a cheque
for payment of an up front (non -refundable) processing fee of about 0.5-1% of the loan
amount to the HFC.
Validation of the Information: - In the next stage, HFCs validate the information provided
by the customer on the application form. They usually conduct checks on the residential
address of the customer, the place of employment of the customer, and credentials of the
employer. Some HFCs may insist on a personal interview with the customer and perform a
reference check on the references provided by the customer on the application form.
Issue of Sanction Letter :- After due appraisal of customer profile, a sanction letter is issued
which contains details such as loan amount, rate of interest, annual / monthly reducing
balance, tenor of the loan, mode of repayment and general terms and conditions of the loan.
34
This is the actually the approval of the money lending procedure by the company. However,
the money is sanctioned only after the documents and the property on behalf of which the
loan is being granted is thoroughly verified.
Submission of Documents: - Once the sanction letter is passed, the customer is required to
leave the entire set of original documents pertaining to the property being purchased with the
HFC as security for the loan amount sanctioned. These documents remain in the custody of
the HFC till the time the loan is fully repaid. Once the documents are handed over to the
HFC, they send all the documents for a thorough legal scrutiny.
Validation of Property: - Prior to disbursement, the HFC also conducts a site visit to the
customer's property to ensure that all construction norms have been adhered to properly.
Once the HFC is satisfied that the property is legally and technically clear, they disburse the
loan amount. The disbursement from the HFI is on the basis of the stage of construction of
the property.
Payment Procedure: - Once all the above mentioned process, the borrower is entitled to take
the money from the lender party. Until such time that the entire sanctioned amount is not
drawn, the customer is supposed to pay a simple interest on the Actual Amount drawn
(without any principal repayments). The EMI payments commences only after the entire
sanctioned loan amount is drawn.
35
INTEREST RATES PROVIDED BY VARIOUS BANKS
Finance InstitutionLoan Period
(in years)Fixed
EMI / Lakh
(INR)Floating
EMI / Lakh
(INR)
Bank of Baroda
Up to 5 9.00 2086 8.00 2028
6 to 10 9.25 1230 8.25 1227
11 to 15 9.50 1054 8.25 970
16 to 20 9.50 932 8.50 868
State Bank Of India
Up to 5 9.50 2100 8.75 2074
6 to 10 9.75 1300 9.25 1280
11 to 15 - - 9.25 1029
16 to 20 - - 9.75 949
HDFC
Up to 5 11 2175 9.50 2101
6 to 10 11 1375 9.50 1294
11 to 15 11 1137 9.50 1055
16 to 20 11 1033 9.50 933
36
ICICI Bank
Up to 5 10.75 2162 9.50 2101
6 to 10 10.75 1364 9.50 1294
11 to 15 10.75 721 9.50 1055
16 to 20 10.75 1016 9.50 933
LIC Housing Finance
Up to 5 10.50 2149 9.50 2100
6 to 10 11 1373 9.50 1294
11 to 15 11 1137 9.50 1054
16 to 20 11 1032 9.50 932
PNB Housing Finance
Up to 5 9.00 2086 10.50 2150
6 to 10 9.00 1267 10.50 1350
11 to 15 9.25 1030 10.50 1107
16 to 20 9.50 933 10.50 999
16 to 20 11 1032 9.50 932
PNBHousing Finance Up to 5 9.00 2086 10.50 2150
6 to 10 9.00 1267 10.50 1350
37
11 to 15 9.25 1030 10.50 1107
16 to 20 9.50 933 10.50 999
The above table illustrates the comparison between the interest rates from various
Housing Finance Companies and banks. It can be seen that if one wishes to go for floating
loans, the bank which gives the best deal as far as the interest rate is concerned is HDFC
followed by PNB Housing Finance with the lower rates.
Lock-in facility by banks :-
A lock-in, also called a rate-lock or rate commitment, is a lender’s promise to hold a
certain interest rate and a certain number of points for you, usually for a specified period of
time, while your loan application is processed. (Points are additional charges imposed by the
lender that are usually prepaid by the consumer at settlement but can sometimes be financed
by adding them to the mortgage amount. One point equals one percent of the loan amount.)
Depending upon the lender, you may be able to lock in the interest rate and number of points
that you will be charged when you file your application, during processing of the loan, when
the loan is approved, or later.
A lock-in that is given when you apply for a loan may be useful because it’s likely to
take your lender several weeks or longer to prepare, document, and evaluate your loan
application. During that time, the cost of mortgages may change. But if your interest rate and
points are locked in, you should be protected against increases while your application is
processed. This protection could affect whether you can afford the mortgage. However, a
locked-in rate could also prevent you from taking advantage of price decreases, unless your
lender is willing to lock in a lower rate that becomes available during this period.
38
It is important to recognize that a lock-in is not the same as a loan commitment,
although some loan commitments may contain a lock-in. A loan commitment is the lender’s
promise to make you a loan in a specific amount at some future time. Generally, you will
receive the lender’s commitment only after your loan application has been approved. This
commitment usually will state the loan terms that have been approved (including loan
amount), how long the commitment is valid, and the lender’s conditions for making the loans
such as receipt of a satisfactory title insurance policy protecting the lender.
Oral or written lock-in agreement? :-
Some lenders have preprinted forms that set out the exact terms of the lock-in
agreement. Others may only make an oral lock-in promise on the telephone or at the time of
application. Oral agreements can be very difficult to prove in the event of a dispute. It is wise
to obtain written, rather than verbal, lock-in agreements to make sure that you fully
understand how your lender’s lock-ins and loan commitments work and to have a tangible
record of your arrangements with the lender. This record may be useful in the event of a
dispute.
Charges of a lock-in:-
Lenders may charge you a fee for locking in the rate of interest and number of points
for your mortgage. Some lenders may charge you a fee up-front, and may not refund it if you
withdraw your application, if your credit is denied, or if you do not close the loan. Others
might charge the fee at settlement. The fee might be a flat fee, a percentage of the mortgage
amount, or a fraction of a percentage point added to the rate you lock in. The amount of the
fee and how it is charged will vary among lenders and may depend on the length of the lock-
in period.
Types of lock-in:-
39
Locked-In Interest Rate--Locked-In Points :- Under this option, the lender lets you lock in
both the interest rate and points quoted to you. This option may be considered to be a true
lock-in because your mortgage terms should not increase above the interest rate and points
that you’ve agreed upon even if market conditions change.
Locked-in Interest Rate--Floating Points:- Under this option, the lender lets you lock in the
interest rate, while permitting or requiring the points to rise and fall (float) with changes in
market conditions. If market interest rates drop during the lock-in period, the points may also
fall. If they rise, the points may increase. Even if you float your points, your lender may
allow you to lock-in the points at some time before settlement at whatever level is then
current. (For instance, say you’ve locked in a 10½ percent interest rate, but not the 3 points
that went with that rate. A month later, the market interest rate remains the same, but the
points the lender charges for that rate have dropped to 2½. With your lender’s agreement,
you could then lock in the lower 2½. Points.) If you float your points and market interest rates
increase by the time of settlement, the lender may charge a greater number of points for a
loan at the rate you’ve locked in. In this case, the benefit you might have had by locking in
your rate may be lost because you’ll have to pay more in up-front costs.
Indian Economy is growing at a nice pace (8% p.a) which is also driving per capita income
rise. The demand of real estate has reached at a new peak according to ninth five year plan
there is a shortage of 42million houses .But in India the figures to GDP are smaller in
comparison to the other countries Contribution of housing to GDP is close to 8%. Sources:
NHB .
5.4 I ndian Market for Home loans is more than Rs.500,000 crore:-
40
Today, not only the metros are witnessing the housing crunch even the second tier cities like-
Jaipur, Bhubneshwar, Lucknow, Trivendrum etc. are falling into the dearth of living space
and wanting for more expansion.
India Report:
Indian credit report in comparison to the other Asian countries is shown in the statistics
below, which is among the lowest. It is Indian psyche that credit is termed bad, Indian are
traditionally not inclined to take credit this reflects in the figures below:-
STAGES OF HOME LOAN
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MunirkaHUB
Login Scanning
DataEntry
RecommendationOver(ROVR)DoubleChecking
Over(DCOVR)Fixedcharges
Disbursement of loanThe Loan
Application
COMPANY PROFILE
HDFC HOSING DEVELOPMENT FINANCE CORPORATION
LTD
INTRODUCTION:-
Housing Development Finance Corporation Limited , founded 1977 by Ravi
Maurya and Hasmukhbhai Parekh, is an Indian NBFC, focusing on home mortgages. HDFC's
distribution network spans 243 outlets that include 49 offices of HDFC's distribution
company, HDFC Sales Private Limited. In addition, HDFC covers over 90 locations through
its outreach programmes. HDFC's marketing efforts continue to be concentrated on
developing a stronger distribution network. Home loans are also Sharcket through HDFC
Sales, HDFC Bank Limited and other third party Direct Selling Agents (DSA).
HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since
emerged as the largest residential mortgage finance institution in the country. The corporation
has had a series of share issues raising its capital to Rs. 119 Crores. The gross premium
income for the year ending March 31, 2008 stood at Rs. 2,856 Crores and new business
premium income at Rs. 1,624 Crores. The company has covered over 8,77,000 lives year
ending March 31, 2008.
HDFC operates through almost 450 locations throughout the country with its
corporate head quarters in Mumbai, India. HDFC also has an International Office in Dubai,
UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing
company in India for the last 27 years.
42
SNAPSHOT-I
Incorporated in 1977 as the first specialized Mortgage Company in India.
Almost 90% of initial shareholding in the hands of domestic institutes and retail
investors. Current 77% of shares held by foreign institutional investors.
Besides the core business of mortgage HDFC has evolved into a financial
conglomerate with holdings In:
GRAPH:- 6.1
HDFC Standard Life insurance Company- HDFC holds 72.26 %.
HDFC Asset Management Company – HDFC holds 60%
HDFC Bank- HDFC holds 23.26%.
Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.
HDFC LTD
72.26% HDFC
STANDARDLIFE
60% HDFCASSET
MANAGEMENT
23.26% HDFC
BANK (inclusive of warrants)
43
HDFC Chubb General Insurance Company – HDFC holds 74%
SNAPSHOT-II
Loan Approvals Rs. 806 billion.
(Up to Dec 2008) (US $ 18.30 bn.)
Loan Disbursements Rs.669 billion
(Up to Dec. 2008) (US $ 15.20 bn)
Housing Units financed 2.5 million.
Distribution
Offices 181
Outreach Programs 90
HDFC Limited
Type Public (BSE: 500010)
Founded 1977
Headquarters Mumbai,India
Key people Ravi Maurya
Hasmukhbhai Parekh
Industry Housing Finance
Revenue US$ 1.49 billion (2009)
Employees 1,029
44
KEY EXECUTIVE HDFC HOUSING DEVELOPMENT FINANCE CORP LTD :-
Mr. Deepak S Parekh: - serves as Executive Chairman and Chief Executive Officer of the
Board of Housing Development Finance Corp. Ltd., (HDFC). He joined HDFC Limited in a
senior management position in 1978. He was inducted as a whole-time director of HDFC
Limited in 1985 and was appointed as its Executive Chairman in 1993. He is the Chief
Executive Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of Chartered
Accountants (England & Wales).
Mr. K.m mistry: - The Managing Director of the Corporation. He has been employed with
the Corporation since 1981 and was the executive director of the Corporation since 1993. He
was appointed as the deputy managing director in 1999 and the Managing Director in 2000.
He is also a member of the Investors’ Grievance Committee of Directors.
Ms. Renu S. Karnad: - The Executive Director of the Corporation. She has been employed
with the Corporation since 1978 and was appointed as the Executive Director of the
Corporation in 2000. She is responsible for overseeing all aspects of lending operations of
HDFC.New Delhi.
45
BOARD OF DIRECTORS:-
Mr. D S Parekh - Chairman Mr. D N Ghosh
Mr. Keshub Mahindra - Vice Chairman Dr. S A Dave
Ms. Renu S. Karnad - Executive Director Mr. S Venkitaramanan
Mr. K M Mistry - Managing Director Dr. Ram S Tarneja
Mr. Shirish B Patel Mr. N M Munjee
Mr. B S Mehta Mr. D M Satwalekar
GROUP COMPANIES:-
HDFC Bank: World Class Indian Bank- among the top private banks in India.
HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.
Intelenet Global: BPO services for international customers.
CIBIL: Credit Information Bureau India Limited.
HDFC Chubb: Upcoming Private companies in the field of General Insurance.
HDFC Mutual Fund
HDFC reality.com: Helps to search properties in all major cities in India
HDFC securities
HDFC Standard Life Insurance Company Ltd Aug, 2000
46
JOINT VENTURE
HDFC Standard Life Insurance Company Limited was one of the first companies to
be granted license by the IRDA to operate in life insurance sector. Reach of the JV player is
highly rated and been conferred with many awards. HDFC is rated ‘AAA’ by both CRISIL
and ICRA. Similarly, Standard Life is rated ‘AAA’ both by Moody’s and Standard and
Poor’s. These reflect the efficiency with which HDFC and Standard Life manage their asset
base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively.
HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000.
HDFC is the majority stakeholder in the insurance JV with 81.4% staple and Standard of as a
staple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture.
HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private Life
Insurance Companies, which offers a range of individual and group insurance solutions. It is
a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.)
India’s leading housing finance institution and the Standard Life Assurance Company, a
leading provider of financial services from the United Kingdom. Both the promoters are will
known for their ethical dealings and financial strength and are thus committed to being a
long-term player in the life insurance industry- all important factors to consider when
choosing your insurer.
ORGANISATIONAL GOALS:- HDFC's main goals are to :-
47
a) develop close relationships with individual households,
b) maintain its position as the premier housing finance institution in the country,
c) transform ideas into viable and creative solutions,
d) provide consistently high returns to shareholders, and
e) to grow through diversification by leveraging off existing client base.
In addition to home building loans, HDFC also offers home extension, home improvement
and home conversion loans. It also helps to identify and value properties. HDFC also offers
depository services in form of term deposits.
Types of Products offered
HDFC provide loans to meet all your requirements for you to make that house a home.
Home Improvement Loan
Home Extension Loan
Loans to professionals for office or clinic.
Home Equity Loans (Loan Against Property)
Loan against Rent receivables
Short Term Bridging Loan.
Loans to professionals for non-residentials premises loan
Key Associates and Subsidiaries: - These are:-
HDFC BANK:-
23.26% owned by HDFC(inclusive of warrants)
Market Cap US $ 11 billion
ADRs listed on NYSE
In February 2009, HDFC Bank board approved the merger with
Centurion Bank of Punjab {CBOP} (1 share of HDFC Bank for 29
48
Shares of CBOP)
1,412 branches, 528 cities, 2,890 ATMs
Over 12 million customer accounts
Key business areas. Wholesale banking Retail banking Treasury operations
Financials (as per Indian GAAP) for the half year ended Sept 30,
2009
– Total net revenues: Rs 48.26 bn, increase of 51% over previous
year
– PAT: Rs 9.92 bn, increase of 44% over the previous year
HDFC Standard Life Insurance Company Ltd. (HDFC-SL) :-
Structure: - Strong and stable partnership:-
Tie up with Standard Life Assurance Company, U.K.
HDFC holds 72.26% of the equity of HDFC-SL
Products: - Diversified product portfolio covering all life stages and needs:-
Offers 20 individual products and 5 group plans along with 5 optional riders
Offers 8 fund options with market linked products
Premium income and growth: - Values driven growth:-
Total premium income of Rs. 48.59 bn for FY 08-09 (Previous year Rs 28.56 bn); reflecting a
growth of 70% Q1 09-10 growth in total premium of 34% over Q1 08-09 Funds under
management of group new business increased by 8% in as at June 30, 2009 as against the
previous year.
Coverage: - Committed to increasing coverage in an under-insured market :- Achieved
a total sum assured of Rs. 33.12 bn in respect of 0.25 million lives covered in Q1 10 taking
49
the cumulative sum assured to Rs. 908.5 bn covering over 3.66 million lives Claims other
than withdrawals/surrenders amounted to Rs 0.10 bn .
Distribution: - Diversified distribution network to cater to customer preference: - HDFC
network is used to cross sell by offering customized products Operates out of 575 offices
across the country serving over450 locations Network of over 1,62,000 financial consultants,
379 corporate agents and other sales intermediaries .
Market share: - Market share of 7.3% (private sector) and 4.7% (overall) in terms of
Effective Premium.
Key performance indicators and business practices: -A diversified distribution mix
including the tied agency and alternate channels
Banks, brokers, telemarketing, direct sales force Tied agency contributed 64%
effective premium in Q1 10 Strong bank assurance tie-ups with public, private, co-
operative and foreign banks amongst the leading players in the pensions segment
Leveraging technology to strengthen processes.
Workflow system awarded the best technology innovation
Web based facility to service customers and channel partners
HDFC ASSET MANAGEMENT:-
Tie-up with Standard Life Investments (SLI)
HDFC holds 60% of HDFC Asset Management
HDFC MF offers 34 equity and debt oriented products
Earned a Profit after Tax of Rs 1.18 billion for FY09; Return on Equity: 75%
Paid a dividend of 150% for FY09 to equity shareholders
Total assets under management (AUM) as at September 30, 2009, stood at Rs.647bbn
which is inclusive of portfolio management and advisory
Services of Rs. 170 bn.
50
Equity assets as a proportion of the mutual fund’s AUM is 35%.
HDFC PROPERTY FUND:-
Launched in March 2006
First Scheme: HDFC India Real Estate Fund
– Fund corpus: US $ 250 million – fully invested
– Domestic, 7 year close ended fund
– Funds managed by HDFC Venture Capital Limited
HDFC International Fund
– Fund Corpus: US$ 800 million
– International, 9 year close ended fund
– Targeted at premier institutions and funds across the world
Interested in taking an exposure in Indian real estate.
HDFC ERGO GENERAL INSURANCE COMPANY LTD:-
HDFC holds 74% and ERGO (Germany) holds 26%
The company offers Auto Insurance, Home Insurance, Group Accident Insurance,
Group Travel Insurance, Commercial Insurance which includes Fire and Marine and
Specialty Insurance Products like Directors & Officers Liability .
Achieved Gross Written Premium of Rs. 2.4 bn.
Operates out of 28 locations across the country
HDFC network is used to cross sell Home Insurance & Accident Insurance
HDFC and HDFC Bank database is used to cross sell Accident Insurance.
51
TABLE:-6.4
CONSOLIDATED EARNINGS:-
(As at March 31, 2011)
HDFC consolidated
Return on Equity 27.8% 28.2%
Return on Average Assets 2.7% 2.7%
Earnings per share (Rs) 85 95
Profit after Tax (Rs in billion) 24.36 27.13
Total Assets (Rs in billion) 810.99 925.83
DISTRIBUTION NETWORK: - HDFC’s distribution network spans 254 outlets that
include 54 offices of HDFC’s distribution company, HDFC Sales Private Limited (HSPL). In
addition, HDFC covers over 90 locations through its outreach programmes. Distribution
52
channels form an integral part of the distribution network with home loans being distributed
through HSPL, HDFC Bank Limited and other third party direct selling associates.
To cater to non-resident Indians, HDFC has offices in London and Dubai and service
associates in Kuwait, Oman, Qatar, Sharjah, Abu Dhabi and Al Khobar, Jeddah and Riyadh
in Saudi Arabia.
HDFC HOME LOAN ADVANTAGE :-
Home loan counselling sharing over 30 years of home loan experience
Door step service
Helps in finding Dream home
Wide Product Range
Multiple Repayment Option
Wide Network of financing
Post disbursement service
Loan repayment option
AWARDS & ACCOLADES:-
Goldman Sachs has listed HDFC as one among top 7 financial services organization
in 2009.
HDFC ranked among the top 3 Best Managed Companies in India by Finance Asia in
2008
Selected as the best Indian company in the FIs / NBFCs / Financial Services sector at
the Dun & Bradstreet – American Express Corporate Awards 2007 and 2008.
Best Investment Management Company in India by EUROMONEY 2008
HDFC was awarded a rating of 4 out of 5 in Karmayog's ‘Corporate Social
Responsibility Ratings’ in 2008.
53
HDFC is featured in the Limca Book of Records 2007, for the landmark achievement
of Rs. One trillion in home loan approvals
HDFC was awarded the Gold Shield in the Finance Sector by ICAI for excellence in
Financial Reporting in 2006. This is the 14th time HDFC has been selected for this
award.
HDFC has been awarded the 'Business Superbrand' status.
HDFC has been awarded the 'Best Home Financier' title by Outlook Money – 2006
Economic Times Corporate Citizen of the Year Award - November 2005.
FUTURE: - HDFC has always been market-oriented and dynamic with respect to resource
mobilisation as well as its lending programme. this renders it more than capable to meet the
new challenges that have emerged. Over the years, HDFC has developed a vast client base of
borrowers, depositors, shareholders and agents, and it hopes to capitalize on this loyal and
satisfied client base for future growth. Internal systems have been developed to be robust and
agile, to take into account changes in the volatile external environment. HDFC has developed
a network of institutions through partnerships with some of the best institutions in the world,
for providing specialized financial services. Each institution is being fine-tuned for a specific
market, while offering the entire HDFC customer base the highest standards of quality in
product design, facilities and service.
54
CHAPTER-V
ANALYSIS & INTERPRETATION
55
ANALYSIS & INTERPRETATION
The analysis is based on the responses given by customers through questionnaires.
AGE GROUP OF SURVEYED RESPONDENTS
TABLE 5.1:
Age group No. of Respondents
18 - 25 years 127
26 - 35 years 67
36 - 49 years 46
50 - 60 years 24
More than 60 years 6
CHART-5.1:
56
Analysis:- From the chart above we find that 47% of the respondents fall in the age group of
18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36
– 49 years.
Therefore most of the respondents are relatively young (below 26 years of age). and 6%
respondent’s age are 50-60 years and 2% respondent’s age are 60 to above years.
GENDER CLASSIFICATION OF SURVEYED RESPONDENTS
TABLE-52
Sr. No. Category No. of Respondents Percentage
1 Married 140 70%
2 Unmarried 60 30%
Total 200 100%
Base 200 respondents
CHART-5.2:
Interpretation
From the table and graph above it can be seen that
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70% respondent’s are married.
30% respondent’s are unmarried.
Educational qualification of respondent’s
TABLE-5.3
Sr. No. Category No. of Respondents Percentage
1 Under graduate 50 25%
2 Graduate 80 40%
3 Post graduate 70 35%
Total 200 100%
Base 200 respondents
CHART-5.3
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Interpretation
From the table and graph above it can be seen that
25% respondent’s are under graduate.
40% respondent’s are Graduate.
35% respondents are Post graduate.
Number Of year’s Are You in Dehradun?
TABLE-5.4
Sr. No. Category No. of Respondents Percentage
1 Less than five years 78 39%
2 More than five years 122 61%
Total 200 100%
Base 200 respondents
CHART-5.4
Staying years in Dehradun
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Interpretation
From the table and graph above it can be seen that
39% respondent’s are in Dehradun is less than five year’s.
61% respondent’s are in Dehradun is more than five year’s.
CUSTOMER PROFILE OF SURVEYED RESPONDENTS
TABLE 5.5:
Customer profile No. of respondents
Student 7
Housewife 5
Working Professional 116
Business 49
Self Employed 24
Government service employee 24
60
Chart-5.5
Interpretation
From the table and graph above it can be seen that:-
51% of the respondents are working professionals, 22% are into business and 11% are self-
employed, 11% of the respondent’s are government service employee and 3% of the
respondents are student and 2% of the respondents are house-wife.
ANNUAL HOUSE HOLD INCOME?
TABLE-5.6
Sr. No. Category No. of Respondents Percentage
1 Less than 2 lacs 98 49%
2 Between 2 to 5 lacs 62 31%
3 Between 5to 8lacs 30 15%
4 More than 8 lacs 10 5%
Total 200 100%
Base 200 respondents
CHART-5.6
61
Interpretation
From the table and graph above it can be seen that
49% respondent’s annual household income is less than 2 lacs.
31% respondent’s annual household income is between 2 to 5 lacs.
15% respondent’s annual household income is between 5 to 8 lacs.
5% respondent’s annual household income is more than 8 lacs.
Do you know about HDFC housing development finance corporation LTD?
TABLE 5.7:
Category No. of Respondents
Yes 164
No 16
CHART:-5.7
62
Awareness about HDFC LTD
Interpretation:-
From the table and graph above it can be seen that
91% respondent’s are known about HDFC LTD
9% respondent’s are not known about HDFC LTD
o Table 5.8:-
Reasons for getting the home financed
Sr.No. Number of Reasons Percentage
a. Non-availability of funds 36
b. Reluctancy to pay cash in one go 35
c. Tax benefit 24
d. Any other 5
GRAPH:- 5.8
63
Interpretation :-
To interpret the response of the questions, the figures shows that most of the
customers find the problem in availability of funds i.e. 36% and very less number of
customers found problem in paying cash in one go is 35%, customers get housing loan for tax
benefits is 24%. This was the expected response because a large number of people find a
problem of availability of funds which works as an obstacle in owning a dream home.
In today's life, people hardly earn both means and ends of life and they don't have
much of money to buy a home or a land to construct house because of cost of property. So,
they take the advantage of home loans provided by different banks at different terms feasible
to the customers. There are very less number of people, who don't own home even when they
64
have sufficient funds and they take the advantage of home loans because they don't want to
pay huge cash in one go.
On the basis of study, it is concluded that most of people lack of money in fulfiling
their dreams and few of them were reluctant to pay cash in one go and wanted to pay their
home loans slowly in installments.
Table-5.9
From where you have got your home financed
Name of Banks / company Percentage of customers
HDFC LTD 55
Punjab National Bank 15
Standard Chartered Bank 08
ICICI BANK 20
Any other 03
65
To understand the response more effective and closely, it has been showed diagrammatically
as follows :-
GRAPH:- 5.9
From where you have got your home financed
66
Interpretation:-
The analysis showed that a large number of customers prefer HDFC LTD as
compared to others. The data shows that 7% of customers took loan from Standard Chartered
Bank, 20% of customers from ICICI BANK, 15% Customers took loan from Punjab National
Bank, 55% of customers took loan from HDFC LTD and a 3% of customers fall under the
category of 'Any other' which included State Bank of India, Canara Bank, Punjab and Sind
Bank, etc.
The data shows that most of people prefer HDFC LTD compared to public sector
banks and other private banks. This is because of the extra services provided by HDFC LTD.
However, there is less difference in figures of ICICI Bank and Punjab National Bank. But
there is considerable difference in figures of the two private sector banks i.e. ICICI bank and
Standard Chartered Bank. As ICICI is the market leader in the home loans sector. This may
be the reason for such difference in Standard Chartered Bank's percentage and ICICI Bank's
percentage. Another reason for specialized services in home loans, more amounts of loans,
and efficient query handling.
67
However, the analysis showed that the people prefer HDFC LTD for home loan
because of their services and excessive feat compared to other banks.
68
CHAPTER-V
FINDINGS, SUGGESTIONS AND
CONCLUSION
FINDINGS
1. HDFC LTD having good brand image in the minds of customers.
2. Majority of the people got loans from HDFC LTD only
69
3. Most of the customers are not aware of the products of HDFC home loans
4. Some of the customer’s felt that the interest rates are some what high
5. Some of the customer not having good faith on private banks like Standard chartered
bank, HSBC bank etc.
6. Most of the people are directly go to HDFC to apply a home loan
7. Some of the customer of HDFC already benefited through HDFC home loan products
and services
8. Customer awareness is medium about HDFC products.
9. HDFC LTD providing good services to their customers.
RECOMMENDATIONS AND SUGGESTIONS
These suggestions have been discussed as follows:-
70
1) To increase their customers, the HDFC LTD should provide specialized services in
this sector. These services can be such as proper guidance to the customer regarding the
processing of loans, especially for the customers who are illiterate.
2) To satisfy their customers and for good dealings in future, the HDFC LTD should
make prompt disbursement of loan amount to the customers so that they can buy or construct
their dream home as early as possible.
3) The HDFC LTD should use easy procedure, or say, less lengthy procedure for the
sanctioning of loan to the customer. There should be less number of legal formalities, in case
this exists, then, these should be completed in less time. This will be helpful in attracting
more customers.
4) Although the interest rates on specific norms, yet customers seek less interest rate
which can lower their cost of house. So banks should try to lower their interest rates. Needles
to say, that the bank which is having lower interest rates, have the maximum clients for loans.
5) HDFC LTD provide loan according to the repaying capacity of the customer and
his/her eligibility. Due to which, some customers are not able to get amount of loan needed
by them. So, the HDFC LTD should soften their norms regarding the loan amount.
6) Create awareness: The Company has to take care of awareness creation about the
products and services among the customers.
7) Charges: The Company has to reduce the mortality and administration charges.
8) The company has to reduce their interest rates on home loan products and services.
9) The company has to identify the potential customers.
10) Company should consider the present competition and should act according to the
customer needs.
71
11) The HDFC LTD should try to provide proper knowledge regarding their home
loan schemes, even to people who don't know about such schemes and their benefits
especially in rural areas. So they should provide knowledge to the ignorant customers,
especially in rural areas and backward urban area So, above are the main suggestions
provided to the HDFC LTD. By considering these suggestions, the HDFC LTD can
strengthen their customer base in home loans sector. They should improve their services and
reduce legal proceedings and should be friendly to their customers. All this will be helpful to
satisfy their customers.
CONCLUSION
72
1) In my study we came to know that many peoples are interested to take a home loan from
HDFC LTD to construct their homes.
2) Home loans have long period when compare to other personal loans and other loans. So
peoples are confused to take a home loan.
3) Even though the interest rates are high peoples are willing to take a loan from HDFC LTD
due to some reasons.
4) The interest rates also some what high when compare to other banks
5) The loan sanction process is low when compare to other banks.
6) For disbursement process is also it will take low time when compare to other banks
Finally the whole research was carried out in a systematic way to reach at exact
results. The whole research and findings were based on the objectives. However, the study
had some limitations also such as lack of time, lack of data, non-response, reluctant attitude
and illiteracy of respondents, which posed problems in carrying out the research. But proper
attention was made to Carry out research in proper way and to make accurate conclusion for
the HDFC LTD which may beneficial for banks to enhance their customer base.
BIBLIOGRAPHY
73
REFERENCES
REVIEWS
Berstain David(2009), “Home equity loans and private mortgage insurance: Recent
Trends & Potential Implications”, Vol.3 No.2, August 2009, Pp. 41 - 53
Dr. Rangarajan C. (2001), “A Simple Error Correction Model of House Price”.Journal
of Housing Economics Vol. 4, No. 3,pp 27 – 34
Fanning (1982), “The Demand for Home Mortgage Debt” Journal of Urban
Economics, Vol 11 No 2, November, pp. 770-774
Godse (1983), “looking a fresh at banking productivity”, Journal of Real Estate
Literature, Vol. No. 13, Page 141 to 164.
Haavio, Kauppi(2000) , “Residential Lending to Low-Income and Minority Families:
Evidence from the 1992 HMDA Data," Federal Reserve Bulletin,Vol no 80(2),
December 2000 Pp-79-109
Kulkarni (1979), “Development responsibility and profitability of banks” Journal of
Economic Perspectives, Vol 9 No 1 ,pp. 26-32.
La courr, Micheal(2008) , “Economic Factors Affecting Home Mortgage Disclosure
Act Reporting” The American Real Estate and Urban Economics Association, Vol.2
No. 2 May 18, 2008, Pp. 45 -58
La cour Micheal(2007) , “The Home Purchase Mortgage Preferences Of Lowand-
Moderate Income Households”, Forthcoming in Real Estate Economics , Vol 18, No
4 , December 20, 2007, p. 585.
Vandell ,kerry D(2009), “Subprime lending and housing bubble:tail wag
dog?”International Journal of Bank Marketing, vol 21,no 2, pp. 53-7
Brochure on home loans from HDFC LTD
74
NEWS PAPERS
The Times of India
Financial Express
WEB PAGES:-
http://www.hdfcindia.com/
http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_09.html
http://www.iloveindia.com/real-estate/housing-finance- companies/hdfc.html
http://www.loansnews.info/Home-loan/hdfc-home-loans/
http://www.hdfcindia.com/loans/hm-loan-documents.asp
http://www.thinkplaninvest.com/2011/01/hdfc-will-cut-home-loan-rates/
http://www.suncorp.com.au/suncorp/personal/home_loans/tips/faq.aspx
http://investing.businessweek.com/research/stocks/people/people.asp?ric=HDFC.BO
http://www.economywatch.com/companies/forbes-list/india/housing-development-
finance-corporation.html
http://www.hdfcindia.com/loans/home-loan.asp
http://docs.google.com/gview?a=v&q=cache:woJTMDV1HLYJ:www.hdfc.com/pdf/
32AGM%2520speech.pdf+hdfc+housing+finance+development+product&hl=en&gl=in
http://www.munichre.com/en/press/press_releases/2008/2008_10_30_profile_hdfc.aspx
http://www.hdfc.com.mv/faq.htm
http://ayaanbayaan.com/hdfc-ltd-financial-results-indian-gaap-for-the-period-april-to-
june-2011/
http://www.valuenotes.com/press/pr_HDFC_250ct06.asp?ArtCd=70013&Cat=C&Id=100
QUESTIONNAIRE
75
Dear Sir/ madam
I am Rakesh chette doing MBA from OSMANIA UNIVERCITY. I m preparing a project on A
WORKING OF HOUSING FINANCE COMPANY. For this I have designed a Questionniare to
know your views and satisfaction level of home loans .please fill the given as per your
thinking and experiences with this. I will be thankful to you for this.
Name: ………………………………………………………………………..
Address: ……………………………………………………………………..
Contact No :®………………( O)……………… (M)………………………
City: ………...............Pin: ………………….State: ……………………….
1. Name: ____________________
2. Age:
(a) Below 30 (b) 30-40 (c) 40-50 (d) Above 50
3. Occupation:
(a) Professional (b) Self-employed (c) Salaried
(e) Others
4. Which income group do you belong? (Per annum)
(a) Below 2 lakhs (b) 2-4 lakhs
(c) 4-6 lakhs (d) 6 lakhs and above
5. Have you ever taken Home loan before?
(a) Yes (b) No
6. If yes, from which Bank/company?
(a) ICICI (b) HDFC (c) UTI
76
(d) Centurion bank of Punjab (e) others
7. Are you Satisfied with the services provided? (on 5 point scale)
_____________________________________________________________________
Highly dissatisfied Neutral satisfied highly
dissatisfied dissatisfied
8. While taking loan, which things attract you the most?
(a) Interest rates (b) Service Provided
(c) Pay back period (d) Schemes
(d) Others
9. Even if the Interest rate is high for the personal loans, you will go for it?
(a) Yes (b) No
10. How much loan amount you took?
(a) Less than 1 lakhs (b) 1-5 lakhs
(c) 5-10 lakhs (d) more than 10 lakhs
11. Even if the Interest rate is high for the Home loans, you will go for it?
(a) Yes (b) No
12. Do you own a home…?
Yes [ ] No [ ]
If Yes, then, Proceed………
13. Have you get it financed?
Yes [ ] No [ ]
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If Yes, then, proceed……..
14. What is reason for getting it financed?
1. Non availability of funds [ ]
2. Reluctance to pay cash in on go [ ]
3. Tax benefit [ ]
4. Any other (please specify) .........................................
15. From which of the following banks/ company you have got if financed?
Standard Chartered Bank [ ] State Bank of India [ ]
ICICI Bank [ ] HDFC LTD [ ]
Any other (please specify) ...........................................
16. From where have you got information about home loans scheme?
(Check list)…………………..
Newspapers [ ] Magazines [ ]
Hoarding/banners [ ] Word of mouth [ ]
Any other (please specify)...........................................
17. What problems did you face while getting home loans?
a. Lack of knowledge
b. Procedural delays and non cooperation
c. Any other (please specify) ........................................
18. Did you face any problem after sanction of loan?
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______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
19. What suggestions do you want to give for improvements in home loans Scheme?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
THANKS
79
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