j j j jj jj j

PROJECT REPORT ON

A STUDY HOME LOANS

j j j jj jj j

SUMMER TRAINING PROJECT REPORT SUBMITTED TOWARDS PARTIAL FULFILLMENT

OF BACHELOR OF BUSINESS ADMINISTRATION (Affiliated To Ch. Charan Singh University, Meerut) Academic Session [2008-2011] SUBMITTED BY: HIMANSHU GUPTA BHARDWAJ ROLL NO- 9342606 BBA SUBMITTED TO: PROF. BHAWNA MENTOR

MOHAN NAGAR, GHAZIABAD - 201007

1

INSTITUTE OF TECHNOLOGY & SCIENCE

j j j jj jj j

CONTENTS
STUDENT DECLARATION COMPANY CERTIFICATE ACKOWLEDGEMENT EXECUTIVE SUMMARY LIST OF ABBREVIATION INTRODUCTION OF HOME LOAN OBJECTIVES RESEARCH & METHODOLOGY REVIEW OF LITERATURE INDUSTRY PROFILE COMPANY PROFILE COMPARATIVE STUDY ANALYSIS & INTERPRETATION FINDINGS RECOMMENDATION & SUGGESTIONS

CHAPTER-1 CHAPTER -2 CHAPTER -3 CHAPTER -4 CHAPTER -5 CHAPTER -6 CHAPTER -7 CHAPTER -8 CHAPTER -9 CHAPTER -10

CONCLUSION REFERENCE QUESTIONNAIRE

j j j jj jj j

STUDENT DECLARATION

This is to certify that I have completed the Project titled A STUDY ON HOME LOANS under the guidance of MR. RACHIT SAXENA in the partial fulfillment of the requirement for the award of the degree of Bachelor in Business Administration from INSTITUTE OF TECHNOLOGY AND SCIENCE. This is an original work and I have not submitted it earlier elsewhere.

HIMANSHU GUPTA

j j j jj jj j

Company certificate
This is to certify that the project titled A STUDY ON HOME LOANS is an academic work done by HIMANSHU GUPTA submitted in the partial fulfillment of the requirement for the award of the degree of Bachelor in Business Administration from INSTITUTE OF TECHNOLOGY AND SCIENCE. under my guidance and direction. To the best of my knowledge and belief the data and information presented by him in the project has not been submitted earlier elsewhere.

MR.RACHIT SAXENA (Project Guide)

SALES MANEGER; HDFC

j j j jj jj j

ACKNOWLEDGEMENT
"Gratitude is not a thing of expression; it is more matter of feeling." There is always a sense of gratitude which one express towards others for their help and supervision in achieving the goals. This formal piece of acknowledgement is an attempt to express the feeling of gratitude towards people who helpful me in successfully completing of my training. I would like to express my deep gratitude to MR. HIMANSHU GUPTA my training coordinator for their constant co-operation. He was always there with his competent guidance and valuable suggestion through out the pursuance of this research project. Special thanks to MR.RACHIT SAXENA who guided me to work honestly and to give valuable suggestion for improving my work Last but not least I would also like to place of appreciation to all the respondents whose responses were of utmost importance for the project. Above all no words can express my feelings to my parents, friends all those persons who supported me during my project. I am also thankful to all the respondents whose cooperation & support has helped me a lot in collecting necessary information. I would also like to thank almighty God for his blessings showered on me during the completion of project report.

j j j jj jj j

EXECUTIVE SUMMARY
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 ones 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 had a home. The housing sector plays an important role in the economic development of the country. My project title is A STUDY ON HOME LOANS. I selected this topic because 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 loans. My objectives of study are To make comparative study of Disbursement of home loans by commercial banks. To study the satisfaction level of customers about home loans. To study the problems faced by customers in obtaining the home loans. And problems face by customers in obtaining home loans are The customer does not had proper knowledge about different Home loan products so they face problem in making a good deal. There are procedural delays, which harass the customers lot this will crush the curtsy of customers to avail the home loan. The attitude of bank employees some times non cooperative and it creates a hurdle in building trust and Confidence among customers about banks.

j j j jj jj j

LIST OF ABBREVIATIONS
ABBREVIATIONS
ROVR NRI RBI PNB SBI IIR FLIP DSAs BSAs DCOVR RPLR

EXPANSION
RECOMMENDATION OVER NON RESIDENT INDIAN RESERVE BANK OF INDIA PUNJAB NATIONAL BANK STATE BANK OF INDIA INCOME TO INSTALLMENT RATIO FLEXIBLE LOAN INSTALMENT PLAN DIRECT SELLING AGENTS BUSINESS SELLING AGENTS DOUBLE CHECKING OVER RETAIL PRIME LENDING RATE

j j j jj jj j

j j j jj jj j

chapter - 1 INTRODUCTION TO HOME LOANS :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 ones 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. 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. HDFC also provides with Home Improvement Loan for internal and external repairs and other structural improvements like painting, waterproofing, plumbing and electric works, 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.

j j j jj jj j

1.1 ADVANTAGES OF HOME LOAN :-

Attractive interest rate: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. 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. No requirement of guarantor:The commercial banks now a day, liberlise their laws regarding home loans. Some of banks dont 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. 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. 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. 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 dont have their home and want to buy, they do it with home loan. Home loans help such persons in making their dream home.

10

j j j jj jj j

1.2 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 (iii) High Cost:-

The public sector banks charge high processing cost for home loans 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.

11

j j j jj jj j

1.3 DISBURSEMENT OF HOME LOANS :Terms & conditions:a) Rate of interest = 8.25% - 9.50% ( R.B.I ) b) Time period = 15 20 years c) Limit = minimum 5 lacks. Maximum 500 cr. Or above Some questions asked by the customers:d) Location = NCR OR DELHI [ Area are authorized by G.D.A] e) Registery f)Passing map g) Marketing value of property

Conditions regarding co-applicants: -

12

j j j jj jj j

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 coapplicants 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.

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. 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).

13

j j j jj jj j

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.

CUSTOMER PROFILE Documents :If customer are self employed:A) I.D PROOF:-pan card -driving license -voter i.d card B) ADDRESS
PROOF :-

-pass book -Electricity bill -telephone bill ( landline/ postpaid) -rashan card -rent agreement ( if customer are live in rent) C) BUSINESS
PROOF :-

-visiting card -compay profile -letter head D) BANK STATEMENT:-LAST 6 MNTH BANK STATEMENT (UPDATE ) -COMPUTATION P&L A/C , BALANCE SHEET E)
INCOME TAX RETURN :-

14

j j j jj jj j

- LAST 3 YRS. SALARY SLIP 2 PHOTO / PROPERTY CHAIN PAPER

IF CUSTOMER ARE SALARY BASED :-

A) I.D PROOF :-PAN CARD -DRIVING LICENSE -3YRS. SALARY SLIP -JOINING LETTER - OFFER LETTER + RELEVANT B)
ADDRESS PROOF :-

LETTER

(SAME C)

AS )

BANK STATEMENT :-

(SAME D)

AS )

INCOME

PROOF

:-

SALARY SLIP FORM 16

CHAPTER-2
15

j j j jj jj j

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) 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.

16

j j j jj jj j

2.1 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.

2.2 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.

17

j j j jj jj j

CHAPTER-3 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-

3.1- 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.

3.2 SOURCES OF DATA :To fulfill the information need of the study. The data is collected from primary as well as secondary sourcesA - 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.

18

j j j jj jj j

Sample size;For the questionnaire I have taken the sample size of 100 customers of HDFC LTD. 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 companys database and website of the company.

3.3- 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.

3.4 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.

3.5 SAMPLING TECHNIQUE:Random sampling technique was used in the survey conducted.

3.6 TOOLS OF ANALYSIS:Data has been presented with the help of bar graph, pie charts, line graphs etc.

3.7 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.

3.8 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.

19

j j j jj jj j

3.9 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. Thus above all were the limitations in this research study. The maximum efforts were made to overcome these limitations in the study.

20

j j j jj jj j

CHAPTER 4 REVIEW OF LITERATURE

21

j j j jj jj j

4.1 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 2008) Government taking various steps to encourage people to go toward home loans . (Haavio, Kauppi 2000) Growth of home loans are due to increase of living standard of people, shifting from joint family to nuclear family .(Lacourr, Micheal 2007) 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 2006). SBI provide a very low interest rate on home loans as compared to other banks. (SBI May 2000)

4.2 Now after this conclusion the details of reviews are belowBerstain David (2009) examined in his study taken from 2001 to 2008 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 dont 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.

CHAPTER-5

22

j j j jj jj j

INTRODUCTION TO THE INDUSTRY PROFILE

5.1 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 cant 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 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 governments 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 %.

5.2 INTEREST RATES PROVIDED BY VARIOUS BANKS

Finance Institution Loan Period (in years) Fixed EMI / Lakh (INR) Floating EMI / Lakh (INR)

23

j j j jj jj j

Bank of Baroda

Up to 5 6 to 10 11 to 15 16 to 20 Up to 5 6 to 10 11 to 15 16 to 20 Up to 5 6 to 10 11 to 15 16 to 20

9.00 9.25 9.50 9.50 9.50 9.75 11 11 11 11

2076 1230 1044 932 2100 1300 2175 1375 1137 1033

8.00 8.25 8.25 8.50 8.75 9.25 9.25 9.75 9.50 9.50 9.50 9.50

2028 1227 970 868 2064 1280 1029 949 2101 1294 1045 933

State Bank Of India

HDFC

Up to 5 ICICI Bank 6 to 10 11 to 15 16 to 20

10.75 10.75 10.75 10.75 10.50 11 11 11 9.00 9.00 9.25 9.50 11 9.00 9.00 9.25 9.50

2162 1364 721 1016 2149 1373 1137 1032 2076 1267 1030 933 1032 2076 1267 1030 933

9.50 9.50 9.50 9.50 9.50 9.50 9.50 9.50 10.50 10.50 10.50 10.50 9.50 10.50 10.50 10.50 10.50

2101 1294 1045 933 2100 1294 1044 932 2150 1350 1106 999 932 2150 1350 1106 999

Up to 5 6 to 10 LIC Housing Finance 11 to 15 16 to 20 Up to 5 6 to 10 PNB Housing Finance 11 to 15 16 to 20 16 to 20 Up to 5 6 to 10 PNBHousing Finance 11 to 15 16 to 20

24

j j j jj jj j

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.

GRAPH :- 5.3

5.4 Indian home loans Industry:Indian Home loans industry is growing at a fast pace 30% per annum, this can be seen in the stats shown below with average ticket size (loan size) and Amount disbursed is rising every year the opportunities have become more dominant for different organization in India. The demand drivers are fast growing middle class population, rise in working women workforce, bigger aspirations of youth, Tax saving, Transparency in the real estate market. GRAPH:-

25

j j j jj jj j

Still in comparison to other nations India has a long way to go, The figures shown below shows that even the GDP/mortgage ratio is low which indicates that credit is not well sought as figure below shows the average percentage of mortgage to GDP .

26

j j j jj jj j

GRAPH:-5.4

Comparison with other nations India fall behind in terms of Mortgage Penetration which directly demonstrates the potential in Indian market for Housing mortgage finance companies

27

j j j jj jj j

GRAPH:- 5.5

Sources: RBI

Real Estate is currently sought of as a great means of Investment, the prices of residents have shot up very high which is clearly shown in the figure below, the major cities have witnesses lot of development and price appreciation which demonstrates the growing demand . more and more people are migrating to cities for work / business. More and more jobs are created and price index rise becomes inevitable.

28

j j j jj jj j

Price Index: FIG-5.6

The above figure shows the rise in prices of space per sq feet in different major cities. Housing shortage in India: - The below figure shows the ever-increasing demand for houses in India and also mentioned here is the Rural and urban requirement. Banks are driving new strategies to tap both the markets in a different way Rural/Urban. There are categories with Indian loan demand, which is shown in this figure

FIG:- 5.7

29

j j j jj jj j

Recent trends of home loan in India:In order to understand the recent trends we need to know or understand various factors. These factors play vital role in Indian home loan market. These include interest rate on which banks provide home loan, tax rebate on home loan and its impact. Apart from this to understand the recent trend we need to compare the trends of home loan of different years. Here we have compared the interest and other market trends of year 2009 with 2007-08. This kind of comparison gives the result which helps us to understand the trends of market of any industry. Apart from the impact of present and past economic ups and down also affect the trends. Today the US slowdown is the major issue which has affected almost all the industry. So we have also discussed this issue in terms to define trend of home loan market in India.

5.8 Types of home loans: Housing loans offered by banks are of different types:

Home Purchase Loans Home Construction Loans Home Improvement Loans Home Extension Loans Home Conversion Loans Land Purchase Loans Stamp Duty Loans Bridge Loans Balance Transfer Loans Refinance Loans

30

j j j jj jj j

Loans to NRIs

Home purchase loans:This is the basic home loan for the purchase of a new home. If you want to buy a flat in some society or some already built house, banks and HFCs sanction you home purchase loans for this process. Home construction loans:This loan is available for the construction of a new home on a said property. The documents that are required in such a case are slightly different from the ones you submit for a normal Housing Loan. If you have purchased this plot within a period of one year before you started construction of your house, most HFCs will include the land cost as a component, to value the total cost of the property. In cases where the period from the date of purchase of land to the date of application has exceeded a year, the land cost will not be included in the total cost of property while calculating eligibility. Home improvement loans:These loans are given for implementing repair works and renovations in a home that has already been purchased, for external works like structural repairs, waterproofing or internal work like tiling and flooring, plumbing, electrical work, painting, etc. One can avail of such a loan facility of a home improvement loan, after obtaining the requisite approvals from the relevant building authority. the following are coming under the home improvement loans: External repairs Tiling and flooring Internal and external painting Plumbing and electrical work Waterproofing and roofing Grills and aluminum windows Waterproofing on terrace Construction of underground/overhead water tank Paving of compound wall (with stone/tile/etc.) Borewell. Home extension loans:An extension loan is one which helps you to meet the expenses of any alteration to the existing building like extension/ modification of an existing home; for example addition of an extra room etc. One can avail of such a loan facility of a home extension loan, after obtaining the requisite approvals from the relevant municipal corporation. Home conversion loans:This is available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required.

31

j j j jj jj j

Through a home conversion loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need for pre-payment of the previous loan. Land purchase loans:This loan is available for purchase of land for both home construction or investment purposes. Stamp duty loans:This loan is sanctioned to pay the stamp duty amount that needs to be paid on the purchase of property. Bridge loans:Bridge Loans are designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home.

Balance- transfer loans:Balance Transfer is the transfer of the balance of an existing home loan that you availed at a higher rate of interest (ROI) to either the same HFC or another HFC at the current ROI a lower rate of interest. Refinance loans:Refinance loans are taken in case when a loan for your house from a HFI at a particular ROI you have taken drops over the years and you stand to lose. In such cases you may opt to swap your loan. This could be done from either the same HFI or another HFI at the current rates of interest, which is lower. NRI home loans:This is tailored for the requirements of Non-Resident Indians who wish to build or buy a home or property in India. The HFCs offer attractive housing finance plans for NRI investors with suitable repayment options. On would be entitled for home loans in the range of Rs 5 lakh to a maximum of Rs 1 crore, based on the repayment capacity, previous credit history and the cost of the property. The bank may provide a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land. The repayment capacity is calculated taking into account factors such as: Age Income/Salary Qualifications Dependant/(s) Assets/Liabilities Credit History Stability / continuity of your employment/business Income of co-applicant/(s) 32

j j j jj jj j

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 State Bank, Bank of Baroda, Kotak Bank, SBI, Standard Chartered Bank and Axis Bank.

HDFC Home Loan:Highlights:

HDFC markets its parent HDFC's home loan products. Finances up to 85% of the cost of the property (Agreement value + Stamp duty + Registration charges). Home improvement loan, which facilitates internal and external repairs and other structural improvements like painting, waterproofing, plumbing and electric works, tiling and flooring, grills and aluminum windows. Finances up to 85% of the cost of renovation (100% for existing customers). Home extension loan for extension of an existing dwelling unit under the same terms as applicable to home loan. Land Purchase Loan to purchase land for constructing house. Finances up to 70% of the cost of the land. Repayment over a maximum period of 10 years. Fixed Rate, Floating Rate and options to structure loan as partly fixed or partly floating. Flexible repayment options to suit individual needs. Insurance cover under Term Assurance Plan Offer in-house scrutiny of property documents.

Eligibility; - HDFC home loans are available for:

Purchase of flat, row house, bungalow from developers Purchase of existing freehold properties Purchase of properties in an existing or proposed co-operative housing society or apartment owner's association Purchase of first Power of Attorney purchases in Delhi for DDA flats allotted before 1992. Construction of own house

HDFC home loans can be applied for either individually or jointly. Proposed owners of the property will have to be co-applicants. However, the co-applicants need not be co-owners. Maximum tenure is 20 years subject to retirement age. Loan Amount: - 85% of the cost of the property (including the cost of the land) and based on the repayment capacity of the customer.

33

j j j jj jj j

Rate of Interest :- The current applicable fixed rate of interest in respect of the total loan approved is as follows: For loans up to Rs.2, 00,000:Term of Loan (No. of Years) Up to 5 6 - 10 11 - 15 For loans greater than Rs.2, 00,000 Term of Loan (No. of Years) 5 10 15 Rate Per Annum (%p.a) 10.00 11.00 11.25 Rate Per Annum (%p.a) 10.00 10.75 11.00

All loans on annual rest basis. You repay the loan in Equated Monthly instalments (EMIs) comprising principal and inertest.EMI per Rs 1, 00,000 (for loan up to Rs.2, 00,000) Term of Loan (No. of Years) 5 10 15 Rupees 2199 1401 1159

EMI per Rs.1, 00,000 (for loan greater than Rs.2, 00,000) Term of Loan (No. of Years) 5 10 15 Rupees 2199 1416 1175

34

j j j jj jj j

5.9 Documents Required :Salaried Customers Self Employed Professionals Application form with photograph Latest Salary-slip Form 16 Application form with photograph Education Qualifications Certificate and Proof of business existence Self Employed Businessman Application form with photograph Education Qualifications Certificate and Proof of business existence

Last 3 years Income Tax returns (self Business profile and business) Last 3 years Income Tax returns (self Last 3 years Profit /Loss and Balance and business) Sheet Last 3 years Profit /Loss and Balance Sheet Last 6 months bank statements Processing fee cheque Last 6 months bank statements (self and business) Processing fee cheque

Last 6 months bank statements

Processing fee cheque

The Credit Appraisal is an important step in sanctioning loan applications .Hence the Credit Appraiser needs to have certain important documents to compute the credit worthiness of the applicant .In the case of salaried person these include the following :1) SALARY SLIPS (3 MONTHS CURRENT) :- The salary slip is usually a printed sheet of paper that contains 2 components Income/Earnings collumn: - It contains an exhaustive list of the various components that are added to the persons salary. They contain various components like Basic pay, HRA etc. Deductions :- It contains an exhaustive list of various components that are deducted from the persons Earnings. They contain various components like Income tax, Provident fund, Employee Loans etc. 2) BANK STATEMENTS(6 MONTHS CURRENT) ;- The bank statement contains the various transactions that the applicant performs in his bank account. It has 3 components Date Descriptions ;- It contains the brief and standardized description of the activity or the account related to the transaction .Eg. Clearing cheque 166129, Transfer deposit. Deposits: - It contains the amounts that were credited to the account Withdrawal ;- It contains the amounts that were debited to the account. This is carefully studied to find out about any regular withdrawals or a series of checks so

35

j j j jj jj j

that any existing loans may be revealed and there can be a correct estimate of the repayment capacity. Balance :- It shows effect of transaction on the pre existing account balance Special feature :- HDFC will not consider any loan s with out standing EMI of or below 6 months.

3) FORM 16 :- It is form given by Employer which states the income earned from that company during the full financial year ,and gives the details of Tax deducted at source. 4) COPY OF INCOME TAX RETURN(SARAL) :- The SARAL tax return form reveals the structure of incomes and/or the various earnings of the tax returnee .It also shows the various deductions that will not be included and it also contains the Rebates on which he earns tax benefit. 5) RESIDENCE PROOF :- The residence proof includes the Electricity bill, Telephone bill, Ration Card ,Passport. 6) PHOTO ID PROOF :- The photo proof includes the Pancard ,Voter ID card, Employee ID card, Passport etc. 7) AGE PROOF: - The age proof includes the Pan card, Passport, Photo ID. 8) LOAN APPLICATION FORM DULY FILLED :- It can also be downloaded from HDFCs user friendly web based portal.

9) CHARGES FOR PROCESSING FEES :- This is a standard and nominal fees to be paid at the time of applying for loan Fees structure. 0.5% of loan amount +Service tax of 12% (Less)Education Less of 3%

OR 5618/HDFC takes from applicant whichever is less. This is applicable time to time. 10) PHOTOCOPIES OF PROPERTY PAPERS.

5.10 STAGES OF HOME LOAN

36

j j j jj jj j

Application

Munirka HUB Login Scanning

DataEntry

Disbursement of loan The Loan

Fixed charges

DoubleChecking Over(DCOVR)

Recommendation Over(ROVR)

The representation shown above is not a perfect copy of the actual process. This is because these stages are taking place simultaneously and one application is being taken care for by the experienced employees of both HDFC Ltd service centre and HDFC Ltd HUB (also called the back end office).Also the applicant may be asked to send information or may be asked questions regarding his requirement and/or his documents for his own convenience Hence the loan application may or may not shuttle through different stages.

APPLICATION STAGE :- This is the stage where the Application Form first reaches
the concerned Service Centre Here all the documents in the application are reviewed by the experienced staff present at the service centre The HDFC Ltd employee who reviews the file checks to see whether all documents are present and in their proper place .He checks if the documents are duly filled,not fake,attested by authority in question and present in order.In case any document is missing the applicant is contacted electronically or by mail .The applicant is contacted by telephone and requested for the document until he denies it being with him. This exercise is called FOLLOW UP. the credit appraisal of the loan application starts at this stage. The service centre employees compute the gross salary, IIR, FOIR, Loan Eligibility ratio etc.The credit worthiness of the applicant is calculated here. It is also at this stage that the QUICK DATA ENTRY of the loan application is done to create a serial no. of the application. after that another page appears and more data is entered .It is now that a special and unique LOAN A/C NO. is created under which all the loan processes will be carried out. The number that has been generated is communicated to the applicant by means of a letter and/or electronic communication the system of electronically recording the data helps to create ready reference, a proof ,helps in quick and easy processing of the data. It also helps to very easily and quickly share data with other employees of HDFC. The next and important processing performed at the service centre is that of filling up a document known as the INTERVIEW SHEET. for processing individual loans (salaried cases) .It contains various simple entries like :-

37

j j j jj jj j

1. Name of borrower 2. Name of co-borrower 3. Income details:-Family background and permanent address etc. It also contains various important entries like. 5. Gross Salary 6. Rental 7. Other incomes 8. Obligations: - The various other loans that the applicant is entitled to pay ,their amount, their remaining terms ,source etc. 9. Remarks;- This collumn contains the various findings that the employee has found out after thorough review of the applicants documents such as bank statement, salary slip etc. Hence the interview sheet contains the important findings which the employee has collected after careful review of the various documents .The interview sheet helps to cut corners and helps save time by not having other employees to go through the documents again and again .It hence acts as a souce of quick reference. After all this has been performed well enough the loan application will be arranged in a file and all it will be given its loan a/c no which also acts as its file no. the file is now ready to be sent to the HUB where further processing will take place. SCANNING: - In this stage the various important documents of the applicant are scanned. this helps to create their electronic copy which acts as a ready reference, a proof, and can also be shared and utilized by other employees of HDFC Ltd. DATA ENTRY :- The file has been sent to the back end office or the HUB .At HUB there are many experts with their own specializations . these officials review the various parts of the filae again and perform many specialized tasks Data entry is also one of these tasks .this entry is much more different and complex as compared to the earlier performed Quick Data Entry. An exhaustive amount and type of information has to be entered into the ILPS system ranging from Personal Details, Employment Details to Property Rate History and Customer Interactions. RECOMMENDATION OVER (ROVR) :- The Recommendation OVER is also reffered to as the First Appraisal at this stage certain specially appointed persons have been given the responsibility of recommending a loan. These people have to take special care of reviewing every document, and all the small details that need to be considered before considering the loan application to be valid. After this the file is sent to another specially appointed person as explained below. At this stage if any correction or mistake is present it can be sent back to the Service Centre. DOUBLE CHECKING OVER :- As the name suggests at this stage a specially appointed person will double check all the past proceedings .He will examine the Loan file for any discrepancies ,any missing and /or misplaced documents,the Credit Appraisal results,etc.this is a very important stage and must be handled with exceptional care. This is because a mistake at this stage can cause a great loss to the company.The Double checker is

38

j j j jj jj j

responsible for the ultimate sanctioning of the loan .If any mistake is done at this stage there is no going back and hence no protection.HDFC takes great care while appointing double checkers .They should have completed a select number of years with the company and should have shown exemplary performance and must posses experience. SANCTIONING :- An authorized sanctioning authority within HDFC itself will review the remarks of Double Checker and Sanctioning authority .If it considers the loan suitable to be Sanctioned it gives its approval .After it has given its approval stamp the ILPS system will automatically send a letter to the Applicant that his loan has been sanctioned. After this approval the Applicant can go to whichever Service Centre which he selects to get his loan disbursed. SPECIAL CASE :- A special case can arise if the applicant has not mentioned the property for which he wants to take a loan .In that case the applicant can let the case be remain pending . this means that the Applicants loan request will be considered to be complete even though he has not decided the property. However the Applicant is expected to finalise the property in a short time. A Property Address is necessary to 1. get the loan disbursed 2. Process the Legal and Technical Appraisal of the property and its Papers.

DISBURSEMENT: - The last and final stage in the Home Loan process is that of disbursement. after the sanctioning has taken place the applicant becomes a registered customer of HDFC Ltd . He can now take the disbursement of the loan from any of the various service centre of HDFC .The loan shall be disbursed in one Lump sum or in suitable installments to be decided by HDFC with reference to the need and/or progress of construction (which decision shall be final and binding on the borrower).The borrower hereby acknowledges the receipt of the loan disbursed as indicated in the receipt.

CHAPTER-6

39

j j j jj jj j

COMPANY PROFILE OF HDFC HOSING DEVELOPMENT FINANCE CORPORATION LTD

6.1 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, 2007 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, 2007. 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. 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:

40

j j j jj jj j

CHART:- 6.2

HDFC LTD

72.26% HDFC STANDARD LIFE

60% HDFC ASSET MANAGEMENT

23.26% HDFC BANK (inclusive

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 Chubb General Insurance Company HDFC holds 74%.

41

j j j jj jj j

SNAPSHOT-II Loan Approvals (Up to Dec 2007) Loan Disbursements (Up to Dec. 2007) Housing Units financed Distribution Offices Outreach Programs 181 90 Rs. 805 billion. (US $ 18.30 bn.) Rs.669 billion (US $ 15.20 bn) 2.5 million.

HDFC Limited

jjjjjjjj

Type Founded Headquarters Key people Industry Revenue Employees Website

Public (BSE: 500010) 1977 Mumbai,India Ravi Maurya Hasmukhbhai Parekh Housing Finance US$ 1.49 billion (2008) 1,029 www.hdfc.com

42

j j j jj jj j

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. BOARD OF DIRECTORS:Mr. D S Parekh - Chairman Mr. Keshub Mahindra - Vice Chairman Ms. Renu S. Karnad - Executive Director Mr. K M Mistry - Managing Director Mr. Shirish B Patel Mr. B S Mehta Mr. D N Ghosh Dr. S A Dave Mr. S Venkitaramanan Dr. Ram S Tarneja Mr. N M Munjee 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.

43

j j j jj jj j

6.3 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 Moodys and Standard and Poors. 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 Indias 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.) Indias 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. Business Growth:The company commands a market share of over 60% in the housing finance sector. Leveraging on its brand equity HDFC has also entered the Indian Mutual Fund scene quite recently. HDFC was the only applicant to be given clearance by the government, to enter the Rs 250 bn life insurance business. This in itself speaks volumes about the managements professional reputation. Financial year 2000 proved to be a boon for housing finance companies, as the tax benefits announced in the budget, coupled with the low real estate prices and rising disposable incomes, spurred housing demand. As a result, demand for housing finance too has registered high rates of growth. The housing sector has now been recognized as an engine of economic growth and HDFC is well placed to capitalise on this surge in demand. Against this backdrop, HDFC logged in an excellent performance. The companys approvals and disbursements during the first half of financial year 2001 witnessed a year on year growth of 33% and 32% respectively. The robust growth in itself is a conclusion that HDFCs business is far less susceptible to any economy downturn.

44

j j j jj jj j

(TABLE:-6.2) Financial Snapshot Growth ratios FY98 FY99 FY00 Operating income Other income Net profits 13.7% 331.7% 18.3% 21.6% 15.2%

1HFY01 21.1% 346.8% 19.8%

-24.6% -54.0% 13.8% 20.4%

Approvals Disbursements

28.9% 31.1%

25.2% 24.4%

30.3% 31.2%

33.4% 31.5%

% change compared to corresponding previous period The entry of new players has not in any way significantly reduced HDFCs domination in terms of volume. However, the increased competition has led to a decline in interest spread (the difference between interest income earned and interest paid). Over the last couple of years HDFCs spread has shrunk from 2.1% in financial year 1997 to 1.8% in financial year 2000. When it comes to containing risk, the companys track record is among the best in the financial sector. During the financial year 2000, HDFC has reduced the quantum of loans where payment was in arrears to just 0.9% of its portfolio. This is because individuals account for nearly 70% of its total outstanding loans. The high level of an individual investors personal contribution in a house makes the possibility of default less likely. In keeping with its tradition of playing safe, HDFC is diversifying its business. The company has chosen the acquisition route to increase its assets and customer base in its core business of housing finance. Its recent acquisition of Home Trust Housing Finance and Gruh Finance will not only increase its size but will also bring the economies of scale.

45

j j j jj jj j

GRAPH:-6.4

BUSINESS OBJECTIVES:- The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. ORGANISATIONAL GOALS:- HDFC's main goals are to :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.

46

j j j jj jj j

TABLE:-6.5 CONSOLIDATED EARNINGS:(As at March 31, 2008)

HDFC Return on Equity Return on Average Assets Earnings per share (Rs) Profit after Tax (Rs in billion) Total Assets (Rs in billion) 27.8% 2.7% 85 24.36 810.99

consolidated 28.2% 2.7% 95 27.13 925.83

DISTRIBUTION NETWORK: - HDFCs distribution network spans 254 outlets that include 54 offices of HDFCs distribution company, HDFC Sales Private Limited (HSPL). In addition, HDFC covers over 90 locations through its outreach programmes. Distribution 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.

47

j j j jj jj j

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

48

j j j jj jj j

CHAPTER-8 COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY COMMERCIAL BANKS

8.1 - Disbursement of Home loans by different banks:HDFC LTD :Years No. of Home loan account holders. 700 950 1130 1435 1594 Home loan Disbursed (in crore Rs.) Distributed 90.07 120.00 144.67 180.33 240.00 Recovered 63.05 91.20 127.31 165.90 228.12 Balance 27.02 28.8 17.36 14.43 11.88

2004-05 2005-06 2006-07 2007-08 2008-09

Interpretation:On the above table, it is evident that there are increase in No. of account holders from 700 to 1594 in the year 2008-09. The loan amount distributed among home loan account holder has also increased from Rs.90.07 crore in 2004-05 to Rs.240 crore in 2008-09. The recovery procedure for home loans is also strengthening due to increment in recovered amount, i.e. Rs.63.05 crore to Rs.288.12 crore. So it nut shall there are upward trend in number of accountholders and disbursement of home loans.

49

j j j jj jj j

Punjab National Bank :Years No. of Home loan account holders. 810 950 1120 1433 1500 Home loan Disbursed (in crores Rs.) Recovered 97.28 150.00 185.86 231.07 265.05

Distributed 120.15 183.26 213.65 240.87 265.15

Balance 22.87 33.26 28.05 9.80 9.10

2004-05 2005-06 2006-07 2007-08 2008-09

Interpretation:The Punjab National Bank is Public sector Bank. It comes second after State Bank of India in its branch location and expansion. From the Table, the figures show that there are increasing trend in customer base from 810 in the year 2004-05 to 1500 in the year 2008-09. The bank also show enhancement in loan amount up to Rs.265.15 crore in the year 2008-09. The recovery process of loans in past is slow but now it is increasing.

Standard Chartered Bank :Years No. of Home loan account holders Home loan Disbursed (in crores Rs.) Recovered

Distributed

Balance

50

j j j jj jj j

2004-05 2005-06 2006-07 2007-08 2008-09

106 130 154 180 260

6.21 11.55 17.06 20.09 24.10

5.27 10.16 14.35 18.68 23.91

0.94 1.38 2.70 1.41 0.48

Interpretation:The standard chartered bank is a private sector bank. It has also upgraded its position in banking sector in DEHRADUN. The figures shown in table reveals that there is upward shift in customer base of Bank from 106 customers to 260 customers. The bank has also increased its share in housing finance by distributing Rs. 24.10 crores in 2008-09. The recovery procedure of Home loan is very sound. ICICI BANK:Years No. of Home loan account holders 650 853 1019 1132 1434 Home loan Disbursed (in crores Rs.) Recovered 98.12 105.00 133.46 144.65 209.16

Distributed 104.33 123.24 150.65 176.75 224.00

Balance 6.21 18.24 17.19 32.10 14.84

2004-05 2005-06 2006-07 2007-08 2008-09

Interpretation : The amount reveal that there is tremendous increase in Home loan accountholders. The amount distributed as home loan is also increased from Rs. 104.33 in 2004-05 to Rs.224crore in 2008-2009. But the recovery mechanism of the Bank is not so good thats why the outstanding amount shows fluctuating trend.

51

j j j jj jj j

CHAPTER-9 ANALYSIS & INTERPRETATION

The analysis is based on the responses given by customers through questionnaires. AGE GROUP OF SURVEYED RESPONDENTS

TABLE 9.1:
Age group 18 - 25 years 26 - 35 years 36 - 49 years 50 - 60 years More than 60 years No. of Respondents 127 67 46 24 6

CHART-9.1:

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% respondents age are 50-60 years and 2% respondents age are 60 to above years.

52

j j j jj jj j

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS TABLE-9.2 Sr. No. 1 2 Category Married Unmarried Total No. of Respondents 140 60 200 Percentage 70% 30% 100% Base 200 respondents

CHART-9.2

Interpretation From the table and graph above it can be seen that 70% respondents are married. 30% respondents are unmarried.

Educational qualification of respondents

53

j j j jj jj j

TABLE-9.3 Sr. No. 1 2 3 Category Under graduate Graduate Post graduate Total No. of Respondents 50 80 70 200 Percentage 25% 40% 35% 100% Base 200 respondents

CHART-9.3

Interpretation From the table and graph above it can be seen that 25% respondents are under graduate. 40% respondents are Graduate. 35% respondents are Post graduate.

Number Of years Are You in Dehradun?

54

j j j jj jj j

TABLE-9.4 Sr. No. 1 2 Category Less than five years More than five years Total No. of Respondents 78 122 200 Percentage 39% 61% 100% Base 200 respondents

CHART-9.4

Staying years in Dehradun

Interpretation From the table and graph above it can be seen that 39% respondents are in Dehradun is less than five years. 61% respondents are in Dehradun is more than five years. CUSTOMER PROFILE OF SURVEYED RESPONDENTS

TABLE 9.5: Customer profile Student Housewife Working Professional No. of respondents 7 5 116

55

j j j jj jj j

Business Self Employed Government service employee Chart-9.5

49 24 24

11%

student 11% 3% 2% housewife working professional business

22%

51%

self-empoyed government service

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 selfemployed, 11% of the respondents are government service employee and 3% of the respondents are student and 2% of the respondents are house-wife. ANNUAL HOUSE HOLD INCOME? TABLE-9.6 Sr. No. 1 2 3 4 Category Less than 2 lacs Between 2 to 5 lacs Between 5to 8lacs More than 8 lacs Total No. of Respondents 98 62 30 10 200 Percentage 49% 31% 15% 5% 100% Base 200 respondents

56

j j j jj jj j

CHART-9.6

Interpretation From the table and graph above it can be seen that 49% respondents annual household income is less than 2 lacs. 31% respondents annual household income is between 2 to 5 lacs. 15% respondents annual household income is between 5 to 8 lacs. 5% respondents annual household income is more than 8 lacs.

57

j j j jj jj j

Do you know about HDFC housing development finance corporation LTD? TABLE 9.7: Category Yes No. of Respondents 164

No

16

CHART:-9.7

Awareness about HDFC LTD

Interpretation:From the table and graph above it can be seen that 91% respondents are known about HDFC LTD 9% respondents are not known about HDFC LTD

Table 9 .8:Reasons for getting the home financed

58

j j j jj jj j

Sr.No. a. b. c. d.

Number of Reasons Non-availability of funds Reluctancy to pay cash in one go Tax benefit Any other GRAPH:- 9.8 40 35 30 25 20 15 10 5 0

Percentage 36 35 24 5

percentage of customers

nonreluctancy availability of funds

tax benefit

any other

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 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-9.9
From where you have got your home financed

59

j j j jj jj j

Name of Banks / company HDFC LTD Punjab National Bank Standard Chartered Bank ICICI BANK Any other

Percentage of customers 55 15 07 20 03

To understand the response more effective and closely, it has been showed diagrammatically as follows :-

60

j j j jj jj j

GRAPH:- 9.9
From where you have got your home financed

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. However, the analysis showed that the people prefer HDFC LTD for home loan because of their services and excessive feat compared to other banks.

61

j j j jj jj j

Table-9.10
Sources of information about Home Loans Scheme Sources of information Newspapers Magazines Percentage of customers 49 16

Banners/Hoardings/Pamphlets Word of mouth Any other source

11 20 04

62

j j j jj jj j

CHART:-9.10 percentage of source of information about home loans scheme

20% 11%

4% 49% 16%

newspaper magazines banners word of mouth any other source

Sources of information about Home Loans Scheme Interpretation:The data shows that around 20% of customers got information from source of 'Word of Mouth' which includes information from friends, relatives, colleagues etc. 49% of customers got information from newspapers, only 16% of customers from magazines and 4% of customers got information about home loans schemes under 'Any other source' and 11% through Banners/ Hoardings/Pamphlets .

63

j j j jj jj j

Table-9.11
Opinion about the services of HDFC LTD Services of HDFC LTD Strongly agree a. Professionally managed b. Reliable & transparent c. Socially responsible 86% Percentage of customers agreeing Agree Neutral Disagree Strongly disagree -

10%

4%

67%

33%

75%

10%

15%

4%

d. Customer care

20%

68%

8%

e. Query handling

20%

76%

4%

GRAPH-9.11 64

j j j jj jj j

Opinion of customers about HDFC LTD

90 80 70 60 percentage of customers 50 40 30 20 10 0 strongly agree agree neutral disagree strongly disagree

c
factor

Interpretation:Customers from HDFC LTD are quite satisfied from their services like query handling and customers social responsibility of banks towards customers and professionally managed services. They don't give so good response to reliability and transparency services of banks. So, customer's satisfaction level toward HDFC LTD services is lightly satisfied.

Table-9.12
65

j j j jj jj j

Opinion of customers about home loan schemes HDFC LTD :Services of HDFC LTD Percentage of customers agreeing Strongly agree 60% 42% 32% Agree 35% 45% 56% Neutral 5% 14% 12% Disagree Strongly disagree -

a. Amount of loan b. Legal formalities c. Interest rates

d. Repayment options e. Security demanded f. Installments g. Services h. Processing for sanction of loan

26% 20% 55% 45% 55%

64% 32% 40% 30% 24%

10% 48% 5% 18% 18%

6% 3%

1% -

GRAPH:- 9.12

66

j j j jj jj j

Percentage of satisfaction level of customers of HDFC LTD

70 60 50
percentage of customers

40 30 20 10 0

strongly agree agree neutral disgree strongly disagree

g h

factors

Interpretation:The analysis shows that the customers of HDFC LTD gave 60 percent of amount of loan and legal proceedings, 56% to interest rates, 45% to proceedings and services, 55% to installments. So, customer of HDFC LTD didn't give response regarding the services of the bank / company except to the amount of loan and legal formalities.

TABLE:- 9.13

67

j j j jj jj j

DATA GIVES PREFERENCE COMPANIES AND BANKS

OF

RESPONDENTS

OF

HOME

LOANS

COMPANYS NAME HDFC LTD STANDARD CHARTERED BANK ICICI BANK PNB SBI TOTAL GRAPH:-9.13

NO.OF RESPONDENTS 78 2 10 7 3 100

(%) 78 2 10 7 3 100

NO. OF RESPONDENTS

INTERPRETATION:From the table and graph above it can be seen that:-

68

j j j jj jj j

78% of the people contacted prefer HDFC LTD to any other and therefore it is ranked no.1 by that percent of respondents. PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS There are everything in the world has good or bad points. No doubt banking industry/ company has made many efforts to enhance the customer satisfaction but customer still faced some problems. These are high lightened as below: 1) The customer does not have proper knowledge about different home loan products so they face problem in making a good deal. 2) There are procedural delays, which harass the customers lot. This will crush the curtsy of customers to avail the home loan. 3) The attitude of bank employees some times non cooperative and it creates a hurdle in building trust and Confidence among customers about banks. 4) The banks do not take into account the paying capacity of customers. So some customers are not able to get amount of loan needed by them. So above discussed are the problems which faced by customers while availing home loans.

CHAPTER-10 FINDINGS
69

j j j jj jj j

1. 2. 3. 4. 5. 6. 7. 8. 9.

HDFC LTD having good brand image in the minds of customers. Majority of the people got loans from HDFC LTD only Most of the customers are not aware of the products of HDFC home loans Some of the customers felt that the interest rates are some what high Some of the customer not having good faith on private banks like Standard Most of the people are directly go to HDFC to apply a home loan Some of the customer of HDFC already benefited through HDFC home loan Customer awareness is medium about HDFC products. HDFC LTD providing good services to their customers.

chartered bank, HSBC bank etc.

products and services

CHAPTER-11

70

j j j jj jj j

RECOMMENDATIONS AND SUGGESTIONS

These suggestions have been discussed as follows: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.

CHAPTER-12 CONCLUSION
71

j j j jj jj j

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.

72

j j j jj jj j

REFERENCES
Berstain David(2008), Home equity loans and private mortgage insurance: Recent Trends & Potential Implications, Vol.3 No.2, August 2008, 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-79-108 Kulkarni (1979), Development responsibility and profitability of banks Journal of Economic Perspectives, Vol 9 No 1 ,pp. 26-32. La courr, Micheal(2007) , Economic Factors Affecting Home Mortgage Disclosure Act Reporting The American Real Estate and Urban Economics Association, Vol.2 No. 2 May 18, 2007, Pp. 45 -58 La cour Micheal(2006) , The Home Purchase Mortgage Preferences Of LowandModerate Income Households, Forthcoming in Real Estate Economics , Vol 18, No 4 , December 20, 2006, p. 585. Vandell ,kerry D(2008), 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

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_08.html www.hdfc.com 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 73

j j j jj jj j

http://www.thinkplaninvest.com/2009/01/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-developmentfinance-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/2007/2007_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-tojune-2009/ http://www.valuenotes.com/press/pr_HDFC_250ct05.asp? ArtCd=70013&Cat=C&Id=100

74

j j j jj jj j

QUESTIONNAIRE
Dear Sir/ madam I am HIMANSHU GUPTA doing B.B.A from (Institute of technology & science). I m preparing a project on A STUDY ON HOME LOANS. 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 3. Occupation: (a) Professional (e) Others

(b) 30-40

(c) 40-50

(d) Above 50 (c) Salaried

(b) Self-employed

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

75

j j j jj jj j

(d) Centurion bank of Punjab

(e) others

7. Are you Satisfied with the services provided? (on 5 point scale) _____________________________________________________________________ Highly dissatisfied dissatisfied Neutral satisfied highly 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 (c) 5-10 lakhs

(b) 1-5 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 [ ] 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 [ ]

76

j j j jj jj j

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? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 19. What suggestions do you want to give for improvements in home loans Scheme? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________

THANKS

77