A

DESSERTATION PROJECT
ON

“COMPARATIVE STUDY AND ANALYSIS OF

HOME LOAN SCHEMES OFFERED BY
DIFFERENT BANKS”

Submitted For Partial Fulfillment

Of The Award
Of

“Masters of Business Administration”

Submitted to

UTTAR PRADESH TECHNICAL UNIVERSITY

LUCKNOW

Under the Submitted By

Supervision of
MOHD SHARQ
Dr. ARCHANA KUMARI MBA-IV Semester
ROLL NO-1721170009

RAKSHPAL BAHADUR MANAGEMENT

INSTITUTE
GREATER NOIDA

1
 RAKSHPAL BAHADUR MANAGEMENT INSTITUTE
An approved by A.I.C.T.E & Affiliated to U.P.T.U

DECLARATION
I, MOHD SHARQ, student of Masters Of Business
Administration of Rakshpal Bahadur management institute,
Uttar Pradesh Technical university, Uttar Pradesh hereby
declare that I have completed dissertation on “COMPARATIVE
STUDY AND ANALYSIS OF HOME LOAN SCHEMES
OFFERED BY DIFFERENT BANKS ” as part of the course
requirement.

I further declare that the information presented in this project is

true and original to the best of my knowledge.

DATE: MOHD SHARQ

PLACE: Greater Noida

2
CONTENTS

Page No.

Preface 4

Acknowledgement 6

 Introduction 8

 Objective of Study 14

 Bank Industry in India 16

 Research methodology 21
 ICICI BANK 24
 HDFC BANK 42
 IDBI BANK 64
 Analysis of Data 78
 Comparison 82
 Conclusion 92
 Recommendation 94
 Limitation 96
 Bibliography 98
 Questionnaire 100

3
PREFACE

4
 PREFACE

Research report is an integral part of management courses.

Research report preparation experience refers to knowledge and skills
acquired by a student by participation in activities performed by professional.
it is distinct from an education in which theoretical knowledge is acquired

The ability to develop solutions through practical application of

theoretical knowledge is acquired by management students in the course of
their summer training. It also helps the students to develop professional
competence and related skills as also to imbibe certain ethical values and
norms expected of professionals.

To understand this difficulty all you have to do is walk into a public

sector bank anywhere in this country. It takes close to half and hour to fill out
a demand draft, another half hour to withdraw cash and sometimes, more
than twenty days to get an up-country cheque credited to your account .This
report will accomplish to understand how one can apply for home loan and
how he\she can distinguish between the offering made by different banks.

MOHD SHARQ

5
ACKNOWLEDGEMENT

6
 ACKNOWLEDGEMENT

The Research will be incomplete without giving my sincere; gratitude to

all persons who have helped me in the preparation of the report .It is often the
result of valuable contributors of a number of individuals in a direct or indirect
manner, which helps in shaping and achieving an objective. Here we can not
resist the temptation of expressing our thanks to those who have contributed
greatly accomplishing this task.

I am highly thankful to Dr. ARCHANA KUMARI (H.O.D., RAKSHPAL

BAHADUR MANAGEMENT INSTITUTE, GREATER NOIDA) who give the
full support to me preparing the research report.

I would like to pay my gratitude to Dr. VENEET SENGER (Internal Guide)

for his kind attention , support and giving an opportunity to research
work on “COMPARATIVE STUDY AND ANALYSIS OF HOME LOAN
SCHEMES OFFERED BY DIFFERENT BANKS”.

Again, I greatly appreciate the diligent support provided by all the

faculty of RAKSHPAL BAHADUR MANAGEMENT INSTITUTE and my friends
for their whole heart support and co- operation.

Date:
Place: MOHD SHARQ

7
INTRODUCTION

8
 INTRODUCTION

A roof over one's head and ground beneath one's feet count
as the bare necessities of life. There’s nothing quite like owning a
home, however humble, to give one that warm and glowing
feeling. But when one buys a home, one has much more than a
feel-good purchase in mind: it’s also a crucial investment decision,
perhaps the biggest spending decision of one's life. There are
ample opportunities today for young salaried investors to plan
their moves early and buy a house at the right time — and at the
right price. In the process, not only do they fulfill that cherished
dream of owning a house, but also put themselves on the path to
acquiring property that would meet the needs and aspirations of
their growing family, even as it leads to wealth creation. Every
individual aspires to own a home. But many either spend a lifetime
saving to purchase a house or exhaust money on monthly house
rents.

Take a house loan and let the monthly rent (easily

converted into affordable EMIs) build dream home.

Profitable Proposition

“The overall demand in the residential sector has grown by

about 7-8 per cent in the past few months as compared to the
same period last year. The growth is on account of two main
factors:

 One, income-tax exemption;

9
 Two, with no similar rebates available for individuals in the
high-income group, they are creating a second asset.

Add to this the stable property prices over the last year and
plunging interest rates, planning for dream home could not have
been better timed. Rock-bottom interest rates, standardization of
the periodicity of interest calculation across lenders (which makes
it easier to compare loans), lower interest charges, waiver of loan
application processing fees and, a customer-friendly attitude is
reason enough to celebrate the ascension of the home loan
consumer as the king.

In response, private players like ICICI Bank, IDBI Bank and

HDFC Bank also brought down its interest rates to 9.00%, very
recently, to participate in the interest rate war. If one is still not
satisfied with the lowered loan rates, there’s more. Some industry
watchers believe the floating home loan rate will slip to 8 per cent
for long-term loans in another two to three years.

The expansion of bank branches to far-flung areas resulted in an

explosion of sorts in volumes of transactions and posed a severe strain on all
resources. More particularly, the inter-branch reconciliation became one area
that defied manual handling. It was in this background that the first steps
towards mechanization were taken in late 50s/early sixties in the Calcutta
office of the SBI for the reconciliation of inter-branch transactions.

The pace of branch expansion was so fast that by early sixties this
equipment was also considered inadequate and the Bank went in for the first
computer. The whole system of reporting and reconciliation of transactions
was revamped and modernized. Other larger nationalized Banks also followed

10
suit. Interestingly, at that time, no immediate need was felt for automation of
Branch and customer related activities or for that matter head office/corporate
office operations.

With increasing volumes of transactions, manual handling of these led

to dwindling customer service and increasing complaints. However,
mechanization of any kind was opposed by the Unions and resulted in slowing
down of computerization drive in Indian Banks. The need for information
technology is felt most in routine technology and repetitive commercial chores
which modern man is finding increasingly difficult to handle all by himself.

To understand this difficulty all you have to do is walk into a public

sector bank anywhere in this country. It takes close to half and hour to fill out
a demand draft, another half hour to withdraw cash and sometimes, more
than twenty days to get an up-country cheque credited to your account. Add to
this the irritation you get from harassed bank clerks and when you walk away
they feel they are actually doing you a favor by keeping your money with
them.

Look at it from another angle. You are a bank employee burdened with
monotonous, uninspiring work. All you do is post entries to a ledger, count out
soiled, half-torn currency notes and monitoring interest accruals on loans
given out to a thousand customers. If a bank opts for a high level of
computerization, even if it were to be achieved in a phased manner, they
would not only be able to service customers’ better but would also reap bigger
profits.

Most banks have changed the way interest is calculated

from annual rests to monthly rests. Under the annual rests
method, the EMIs (equated monthly installments) one pays
through a year are factored in as part-repayment of the principal

11
component only at the end of each year. In other words, one has
to pay interest even on the installments one has paid until they’re
reduced from the principal at the end of each year. Under monthly
rests, the principal is lowered by the appropriate amount each
month. The thumb rule being that the more frequently interest is
calculated, the better for the creditor. Recently, HDFC added
monthly rests on its fixed-interest loans apart from annual rests.
As a result, the fall in EMIs on fixed-interest loans (where the
interest rate is constant for the entire tenure of the loan,
irrespective of changes in the lending rates) is more pronounced
than on floating-rate loans (where the loan interest rate varies with
changes in the interest rates). For example, the EMI on a 15-year,
fixed-interest loan for Rs.15 lakhs has come down by Rs 840; the
corresponding fall in the EMI on a floating-rate loan is only Rs
465. Apart from lowering the cost of one's loan, the switchover to
monthly rests has another advantage: it makes it easier to
compare loans.

12
 INDUSTRY SCENARIO

The housing finance industry, encompassing banks and

housing finance companies (HFCs), has exhibited a 36 per cent
growth between April and December 2017 Despite the high
prepayment levels experienced by some HFCs.

Were it not for prepayments, the industry's outstanding

assets would have grown at a higher 43 per cent. Aggressive
marketing efforts of banks and HFCs have further precipitated this

trend.

Banks have an inherent advantage in retail finance,

especially in housing loans, because of the lower cost of funds,
existing retail relationships in liability products and large branch
network.

It is expected that banks will further increase their market

share in the housing finance sector in the medium term.

It is also expected that the housing finance sector will

maintain its high growth rates in future given that the key growth
drivers the government's thrust on the housing sector in terms of
fiscal incentives for individual housing loans coupled with the
demand-supply gap in housing - would remain strong.

13
ICICI HOME
FINANCE
COMPANY
LIMITED

14
 ICICI HOME FINANCE COMPANY LIMITED
-consumer friendly housing finance company

History:

ICICI Home Finance Company Limited was incorporated on May 28,

1999 as 100% subsidiary of ICICI Personal Financial Services Limited (ICICI
PFS). ICICI Home Finance Company Limited, was set up with the objective of
providing long term housing loans to individuals and corporate. The Company
was registered on March 30, 2000 with National Housing Bank (NHB) under
National Housing Bank Act, 1987 in terms of Housing Finance Companies
(NHB) Directions, 1989. With effect from May 3,2002, ICICI Home Finance
has become a 100% subsidiary of ICICI Bank Limited.

Overview:

ICICI Home Loans are at present available to customers in 150

cities/towns across the country. Loans are offered for purchase of new homes,
purchase of resale homes and home improvement. Besides, the company
also offers loans for commercial property and loans against existing property.
The loans are offered for tenors up to 30 years. The company has also
introduced several customer friendly services such as 'door-step' service,
'know your loan on phone' facility and 'ICICI Home Search' - free property
brokerage services.

ICICI Personal financial services limited (ICICI PFS),

FORMERLY ICICI- CREDIT, was one of the first four companies to
obtain registration as a non-banking financial company (NBFC)
from the Reserve Bank of India (RBI) on September 10, 1997

15
under the new section 45 IA of the Reserve Bank of India Act,
1934.

During the year 1998-99, there was a significant shift in the

company’s operations from leasing and hire purchase to
distribution and servicing of all retail products for the ICICI Group.
It is now a focal point for marketing and distribution of all retail
asset products for ICICI, including auto loans, consumer durable
finance and other financial products. The company has thus
become a critical part of ICICI’S retail strategy aimed at offering a
comprehensive range of products and services to retail customers.

In view of this reorientation of the business, the name of the

company was changed from ICICI CREDIT CORPORATION
LIMITED to ICICI PERSONAL FINANCIAL SERVICES LIMITED
(ICICI PFS) effective March 22, 1999.

ICICI commenced its custodial services business in 1992

and played a pioneering role in the business when it accepted the
custodian role for the first ever GDR issue by an Indian corporate
(Reliance Industries Limited). ICICI has a major market share in
the segment and acts as custodian of 41 ADR/GDR issues and, in
the process, has established relationships with all the major
overseas depository banks operating in the Indian Market. After its
success in the GDR segment, ICICI expanded its custodial
operations by offering custodial services to overseas institutional
investors including foreign institutional investors (FII’S) and as on
June 30, 1999, the value of assets held in our custody exceeded
US 2 billion.

16
At present, ICICI offers a full range of custodial services for
primary and secondary market operations pertaining to debt,
equity, money market instruments GDR/EURO issues conversions
and GDR arbitrage to:

1. Overseas Institutional Investors like

a. FIIs

b. OCBs

c. OFFSHORE FUNDS

d. VENTURE FUNDS

2. Overseas Governmental Agencies

3. Institutions looking for proprietary investments

4. Mutual funds

5. Private investment companies

6. Large corporate

7. High net worth individuals

As a value added service ICICI custodial services division

assists the clients in preparation, submission and follow up for
various applications for regulatory approvals including initial
application by FII’S/OCB with SEBI/RBI.

17
PERSONAL BANKING:

At ICICI BANK, they are committed to making banking a

pleasure. This commitment is manifested in the services they offer
– a wide range of accounts, investment schemes, and facilities.
Each service offers their customers security, flexibility of operation
and maximum returns. The various services provided under this is
as follows:

 Maxi Cash – savings Account

 Quantum – Fixed Deposits

 Quantum optima – Value added Savings Account

 Money plus – Current Account

 ATM

 Phone Banking

 Treasure Chest – Locker facility

 Power Pay Payroll

 Retail Treasury Instruments

CORPORATE BANKING:

MOBILE COMMERCE

ICICI Bank now brings Bank Account and ICICI Credit Card to
customers fingertips. With Mobile Commerce , customers can
perform a wide range of query-based transactions from their
OrangeTM (MUMBAI) and AIRTEL (DELHI) Mobile Phone, without
even making a call.

 Access multiple accounts

18
 Balance enquiry to the linked accounts

 Cheque book requests

 Mini statement – Listing of last three transactions

 Request for account statements (by mail or fax)

ICICI:

Attractive interest rates

Door-step service from enquiry stage till final disbursement

No guarantor required

Can transfer your existing high-interest rate loan

Can transfer your existing high-interest rate loan

Special 100% funding for select properties

Home loan

 Customer must be at least 21 years of age when the loan is

sanctioned.

 The loan must terminate before or when you turn 65 years of

age or before retirement, whichever is earlier.

 Customer must be employed or self-employed with a regular

source of income.

Loan Amount:

A number of factors are taken into account when assessing

repayment capacity. Customers income, age, number of
dependants, qualifications, assets and liabilities, stability/
continuity of customer employment/ business are some of them.
However, there are ways by which you can enhance your
eligibility.

19
 If customer spouse is earning, put him/her as a co-applicant.
The additional income shall be included to enhance loan
amount. Incidentally, if there are any co-owners they must
necessarily be co-applicants.

 Customer fiancée's income can also be considered for

sanctioning the loan on your combined income? The
disbursement of the loan, however, will be done only after
submit proof of marriage.

 Providing additional security like bonds, fixed deposits and LIC

policies may also help to enhance eligibility.

While there is no need for a guarantor, it could be that having one

might enhance your credibility with us. If so, our loan officer would
provide customer with the necessary details.

The final amount to be sanctioned will depend on your repayment

capacity. However, what customer ultimately are entitled to will
have to conform within the limits fixed for each loan.

Also, when the company looks at the total cost, registration

charges, transfer charges and stamp duty costs are included.

20
HOME LOANS :

We at ICICI Bank understand the value of owning your own home.

Our affordable home loans can make all the difference to their
dream of owning home.

0% processing fee for a limited period.

Refer to the table for a loan option that suits their need best

FIND THE RIGHT HOME:

Introducing Home Search - Our FREE online property search

facility. A one stop shop for all their real estate needs.

What you get

0% brokerage on first sale properties

Access the entire market under one roof

Site visits to properties short listed by you

Help in negotiating the best price

Help with legal documentation

Documents

Passport size photograph. Age verification: PAN card, Voters ID,

Passport, License. Bank statement for the last six months. Income
Documents e.g. Latest Form 16, Certified IT returns for latest 3
years. Processing Fee cheque. Loan Enclosure letter. These are
the documents required for sanctioning a loan. Customer may be
asked to submit further legal documents if required by ICICI or its
approved lawyers. Do retain photocopies of all documents being
submitted by them.

21
Disbursement

Customer loan will be disbursed after you identify and select the
property or home that customer are purchasing and on their
submission of the requisite legal documents.

While customer may be under the impression that the list of

documents asked for is rather extensive. Each and every single
document asked for will be verified and checked to ensure their
safety.

This may take some time but the bank want to ensure a clear title
and will complete all the legal and technical verifications to ensure
that they have full rights to their home.

The 230 A Clearance of the seller and / or 37I clearance from the
appropriate income tax authorities (if applicable) is also needed.

On satisfactory completion of the above, on registration of the

conveyance deed and on the investment of your own contribution,
the loan amount (as warranted by the stage of construction) will be
disbursed by ICICI.

The disbursement will be in favor of the builder/seller.

22
List of documents for disbursement

Standard documents :

Loan Agreements Disbursement Requests Post-dated cheques

Personal guarantor's documents, as the case may be adjustable
Rate Loans

Home Loan Interest Rates for Resident Indians

In your quest of the perfect home loan, ICICI Bank Home Loans ensures
that you get the best deal, in terms of interest rate and other facilities also, in
the most convenient way. With our varied offering of house loans and home
finance, we give you an opportunity to select the perfect home loan as per
your needs. You can choose from:

 Adjustable Rate Home Loan

 Fixed Rate Home Loan

Combination of the above two

Step Up Repayment Facility (SURF)

SURF is a variant to enhance the eligibility of a young professionally

qualified home loan customer with out increasing monthly outflow as EMI. The
structuring consider a notional percentage increase in income & offers options
of graded increase in EMI over the tenure of the loan contracted.

The tenure is divided in three parts

 Primary being lowest EMI

 Secondary

 Tertiary being highest EMI

The following are the features of SURF

 Higher eligibility of loan amount with lower EMI

 Graded increase in EMI considering future increase in Income

23
 Suited for young professionals.

SURF can be availed by Resident Indian whether Salaried or Self-Employed

Professionals.

Flexible Installment Plan (FLIP)

FLIP is a variant for structuring enhanced eligibility of home loan

applicants with varying tenure of income source. This repayment facility is
given when income is going to reduce after certain time during the loan tenure
due to one of the borrowers retiring before loan maturity. The EMI payable
becomes affordable based on individual income source and also matching the
family cash flow. This variant is offered typically to family members joining as
applicants like husband & wife or father & son with varying tenure of service
Period / Age norm.

FLIP has the following features

 FLIP considers income of two applicants and offers step down

repayment facility

 One of the applicants should have service period till the end of the
tenure of the loan

 FLIP would have two different EMIs during the tenure of the loan

 Normally the first EMI would be based on the combined income

 The second EMI would be smaller & based on the lower income with
longer tenure of the applicant

FLIP can be availed by Resident Indian whether Salaried or Self-

Employed and also by Non- Resident Indian who is Salaried.

24
Part Fixed, Part Floating

A product that offers the dual benefit of fixed rate loans as well as
floating rate loans. With this product, a customer can book part of his loan
under a fixed rate plan and the other part under a floating rate plan. Thus, he
can minimize the impact of any adverse changes in the interest rate regimes
and at the same time, avail of any benefits that may come by way of favorable
changes.
Part Fixed, Part Floating can be availed by Resident Indian whether Salaried
or Self-Employed and also by Non- Resident Indian who is Salaried.

Smart Fix Home Loans

3 years fixed and floating rate thereafter. A product that offers the
safety of fixed rates plus the advantages of floating rates. The Smart Fix
enables the customer to lock at fixed rate of interest today with the contract to
move to a floating rate on a subsequent date. For the first 3 years you get a
fixed interest rate. From the fourth year, your loan gets switched to the
prevailing floating interest rate. Thus, a customer gets an opportunity to
observe the interest rate movement over a period of time and expects to
benefit in the bargain

Smart Fix can be availed by Resident Indian whether Salaried or Self-

Employed.

The interest rate on ICICI Bank Home Loans is linked to the ICICI Bank
Floating Reference Rate (FRR)/PLR. As per earlier communication, FRR/PLR
was increased by 1% on Feb 9th 2008. Consequently interest rate for all
existing customers under Adjustable Rate Home Loans (ARHL) also went up
by 1%. Subsequent to this change, as per recent announcement, the
FRR/PLR has been further increased by 1% effective from March 31st
2018.The FRR has gone up from 8.35% to 9.35%& PLR has gone up from
9.10% to 8.75%. For all the Adjustable Rate Home Loan customers, both the
above changes will be effective from 1st April 2019.

25
Listed below are the steps involved in availing of a home
loan :

Step 1 A person applies for a home loan.

The executive meets the applicant and briefs him the entire
Step 2
loan process, requirements and the various options available.

The applicant chooses a Housing Finance Company (HFC)

Step 3
and hands over the income documents to the executive.

The income documents are handed over to the HFC for

Step 4
eligibility and approval.

The HFC verifies the documents and checks the repaying

Step 5 capacity, saving habits, tenure of service, etc. of the
applicant and approves the loan amount.

After approval, an offer letter is given to the applicant by the

Step 6 HFC, along with a list of original property title documents that
have to be handed over to the HFC.

The applicant gives the original property title documents to

Step 7
the HFC.

The HFC scrutinizes the legal and technical aspects of the

Step 8
original title documents.

If the HFC is satisfied as to the legal & technical aspects of

Step 9 the documents then the applicant is called to sign the loan
agreement.

The loan disbursement schedule is decided by the HFC

according to the stage of construction (if property under
Step 10
construction)or a one time payment is made if property is
ready for possession

Step 11 The applicant gets possession of the property depending

26
 upon the level of completion of the property.

Step 12 The applicant starts paying the EMIs.

WHAT ALL CAN ONE TAKE A LOAN FOR :

There are different types of home loans tailored to meet

ones needs. Here are some of them:

Home Purchase Loans : This is the basic home loan for the
purchase of a new home.

Home Improvement Loans : These loans are given for

implementing repair works and renovations in a home that has
already been purchased by the client.

Home Construction Loan : This loan is available for the

construction of a new home.

Home Extension Loan : This is given for expanding or extending

an existing home. For e.g.: addition of an extra room etc.

Home Conversion Loan: 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. Through home conversion loan, the existing loan is
transferred to the new home including the extra amount required,
eliminating the need of pre-payment of the previous loan.

27
Land Purchase Loans : This loan is available for purchase of land
for both construction or investment purposes.

Bridge Loans : Bridge loans are designed for people who wish to
sell the existing home and purchase another one. The bridge
loans help finance the new home, until a buyer is found for the
home.

Amount

This largely depends on a number of factors like ones age,

profession, salary, the city one resides in among other such
factors. It varies between Rs. 5 lakhs to Rs. 1 crore depending on
the lender. As a rule of thumb, depending upon the HFC, one will
have to cough up 15%-20% of the loan amount as a down
payment. For smaller amounts, this may not be much. But for
figures running into lakhs, this could make loads of difference. For
eg. An apartment costing Rs 10 lakh may get 85 per cent
financing. So, one will have to arrange for the remaining Rs 1.5
lakh. If one takes this into account, the additional thousands will
definitely put a strain on ones finances.

Tenure

Generally, the maximum tenure of home loans is 30 years,

with a few lenders offering tenure of 35 years or more The longer
the tenure, more one pays in total interest, but ones monthly
payments will be less. So depending on ones earning potential
and bank balance, one can choose an appropriate tenure. An
important requirement of most banks/HFCs is that one pays up the
entire loan before one retires. One can always prepay ones entire
loan amount before it is due. There is a trend to do away with the

28
pre-payment penalty being imposed by some lenders so its best
one checks on this as well.

Interest Rate

Without doubt the most important parameter to factor into

ones calculations. The interest rates may vary from institution to
institution and generally range from about 7.0% to around 8.0%.
Repayment is in the form of EMI's (equated monthly installments).
The longer the tenure, the more one pays in interest, but ones
monthly payment will be less.

Refinance

This is a concept that is yet to catch on in the home loan

market but is bound to be a major service in the months to come.
Under this facility, one can take a new loan from another
bank/HFC to pay back an old loan before its natural tenure. It
gives one the opportunity of prepaying ones high cost debt and
gets a lower cost one. In today's falling interest rate scenario one
should use this vehicle to lower ones debt payments as much as
possible. The lender facilitates the shift by paying the outstanding
and transferring the asset to their portfolio.

29
Miscellaneous charges

A heading that should be ignored at one’s peril! The interest

rates and EMIs are not the only cost factor. Never underestimate
how much the processing and administration fees amount to. A 0 .
5% administration fee and a 0.5% processing fee on, say, a Rs
5,00,000 loan, would amount to Rs 5,000. Other times, it could be
just one fee (either administration or processing) but could yet
work out to be much more if it is considerably higher at, say, 2.5
per cent or 3 per cent. The various other fees, which one is
required to pay along with the margin amount, are:

a) Interest Tax

This is the tax payable on the interest paid on a home loan

and not the principal. This tax is some times included in the
interest rate of the loan, or may be charged separately as interest
tax.

b) Processing Charge

It's a fee payable to the lender on applying for a loan. It is

either a fixed amount not linked to the loan or may also be a
percentage of the loan amount. The loan amount received by you
can be less than the processing fee.

c) Prepayment Penalties

When a loan is paid back before the end of the agreed

duration a penalty is charged by some banks/companies, which is
usually between 1% and 2% of the amount being pre paid.

30
d) Commitment Fees

Some institutions levy a commitment fee in case the loan is

not availed of within a stipulated period of time after it is
processed and sanctioned.

e) Others

It is quite possible that some lenders may levy a

documentation or consultant charge.

31
32
HDFC
BANK

33
 HDFC BANK

The Housing Development Finance Corporation Limited

(HDFC) was amongst the first to receive an ‘in principle’ approval
from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI’s liberalization of the Indian
Banking Industry. It was incorporated in August 1994 in the name
of ‘HDFC Bank Limited’, with its registered office in Mumbai.
HDFC began operations as a Scheduled Commercial Bank in
January 1995.

About the Promoter

HDFC, the promoter, is India’s premier housing finance

company and enjoys an impeccable track record in India as well
as in international markets.

Since its inception in 1997, HDFC has maintained a

consistent growth in its operations and profitability and over the
past 5 years has achieved annual growth rate of 25 – 30 %.

Its outstanding loan portfolio covers over a million dwelling units.

HDFC has developed significant expertise in retail mortgage

loans to different market segments and also has a large corporate
client base in relation to its housing related credit facilities and its
investment portfolio.

34
 With its tremendous brand equity, strong reputation in the
Indian and international financial services market, large
shareholder base and unique consumer franchise, HDFC was
ideally positioned to promote a bank in the Indian environment.
HDFC (together with its fully owned subsidiary HDFC Investments
Ltd.) owns about 31% of the equity.

They had started with a strategic alliance with the NatWest

group in UK with 20% equity, which was divested later on. The
bank also signed a memorandum of understanding for strategic
business collaboration with the Chase Manhattan Bank in
February 2 nd 1999.

Business Philosophy

The mission of HDFC Bank is to be world class Indian bank.

This would imply a bank that would meet various financial needs
of its customers in a convenient and cost effective manner at
international standards of service.

The bank seeks to achieve the status of a "preferred

organization" among its major constituents- customers,
shareholders, regulators, employees, suppliers etc.-while
maintaining the highest levels of integrity and corporate
governance.

The business philosophy at HDFC Bank is based on four

core values: Operational Excellence, Customer Focus, Product
Leadership and People.

35
Competitors:

Bank faces strong competition in all of their principal lines of

business. Their primary competitors are large public sector banks,
other private sector banks, foreign banks and, in some product
areas, non-banking financial institutions.

Wholesale Banking : Principal competitors in wholesale banking

are public and new private sector banks as well as foreign banks.
The large public sector banks have traditionally been the market
leaders in commercial lending. Foreign banks have focused
primarily on serving the needs of multinational companies and
Indian corporations with cross-border financing requirements
including trade, transactional and foreign exchange services, while
the large public sector banks have extensive branch networks and
large local currency funding capabilities.

Retail Banking: In retail banking, their principal competitors are

the large public sector banks, which have much larger deposit
bases and branch networks, other new private sector banks and
foreign banks in the case of retail loan products. The retail deposit
shares of the foreign banks is quite small by comparison to the
public sector banks, and have also declined in the last five years,
which we attribute principally to competition from new private
sector banks. However, some of the foreign banks have a
significant presence among non-resident Indians and also
compete for non-branch-based products such as auto loans and
credit cards. They face significant competition primarily from
foreign banks in the provision of debit cards and also expect to
face competition from foreign banks when we begin offering credit
cards. In mutual fund sales and other investment related products,
their principal competitors are brokers and foreign private banks.

36
Treasury : In treasury advisory services for corporate clients, they
compete principally with foreign banks in foreign exchange and
derivatives trading, as well as the State Bank of India and other
public sector banks in the foreign exchange and money markets
business.

Loans:

HDFC Bank brings you a wide range of loans to cater your

financial needs.

The bank offers the following loans-

· Personal Loans

· Consumer Loans

· Auto Loans

· Loans against shares

· Loans against RBI Bonds

· Loans against Insurance policy

. E-instant loans-gives the facility of loan approval in 60

seconds on the internet.

HDFC has offices spread all over the country. This extensive
network helps HDFC in providing service to large and well spread
out clients. This network of interconnected offices (on Data
Circuits) helps HDFC to process applications for purchase of
property anywhere in India. HDFC has further established an
office in Dubai and Service Associates in Kuwait, Oman and Qatar
to make it easier for Middle East based Non-Resident Indians to
apply for a loan to HDFC - India.

37
 HDFC is the pioneer of housing finance in India and has
been a leader in the business for the last 23 years. HDFC has vast
experience and a very committed and skilled staff to handle
housing loan applications and solving customer problems.

HOME LOAN SCHEMES

PURPOSE

HDFC Ltd. offers loans for the following purposes:

 Land Purchase

 Home Construction/Purchase

 Home Extension

 Home Improvement loans

 Short-term Bridge Loans

 Non-Residential Premises Loans For Professionals

38
2-in-1 Home Loan scheme

A home-loan scheme that’s twice as good!

Confused whether to opt for an Adjustable Rate or Fixed Rate

Loan?

HDFC brings you the best of both options with 2-in-1 Home Loan.

2-in-1 Home Loan provides customers with a choice of breaking

up the loan requirement into Adjustable and Fixed Rate loans.

Customers benefit both ways, as it helps them hedge their interest

rate risk against rising interest rates to the extent of the fixed rate
portion of the loan and take the advantage of falling interest rates,
with the Adjustable Rate portion.

2-in-1 Home Loans can be taken in any proportion. With no

prepayment charges under the Adjustable Rate Home Loan,
customers planning to make part prepayments can take a portion
of the loan intended for prepayment under Adjustable Rate loan
option; the rest can be taken under Fixed Rate Loan option.

LOAN AMOUNT

Loans can be availed up to a maximum of 85% of the cost of

the property (including the cost of the land). HDFC lends up to a
maximum of Rs. 1,00,00,000 on a Home Loan to an individual.

LOAN TENURE

You can repay the loan over a maximum period of 30 years.

39
RATE OF INTEREST

Interest is calculated on annual rests. Principal repayments

are credited at the end of HDFC's financial year. The effective rate
of interest varies depending on the term of the loan. For a loan
with a term of 15 years, the effective interest rate would be higher
by 0.37% per annum than the indicated rate of interest.

SECURITY

Typically the security for the loan is a first mortgage of the

property to be financed, normally by way of deposit of title deeds
and/or such other collateral security as may be necessary.

Interim security may be additionally required, if the property

is under construction. Collateral or interim security could be
assignment to HDFC of life insurance policies, the surrender value
of which is at least equal to the loan amount, guarantees from
sound and solvent guarantors, pledge of shares and such other
investments that are acceptable to HDFC.

The title to the property should be clear, marketable and free

from encumbrance. To elaborate, there should not be any existing
mortgage, loan or litigation which is likely to affect the title to the
property adversely.

Interim security may be additionally required, if the property

is under construction. Collateral or interim security could be
assignment to HDFC of life insurance policies, the surrender value
of which is at least equal to the loan amount, guarantees from
sound and solvent guarantors, pledge of shares and such other
investments that are acceptable to HDFC.

40
DOCUMENTATION

Following documents should be produced for approval of loan:

a) Common for all applicants :

1. Allotment letter of the co-operative society / association of

apartment owners.

2. Copy of approved drawings of proposed construction /

purchase.

3. Agreement for sale/sale deed/detailed cost estimate from

architect/engineer for the property to be purchased /
constructed.

4. If you have been in your present employment / business or

profession for less than a year, mention details of occupation
for previous 5 years, giving position held, reasons for change
and period of the same.

5. Applicable Processing Fees.

6. Any other information regarding your repayment capacity that is

necessary and will assist HDFC in appraising the case.

b) Additionally

If borrower is employed:

1. Latest salary slip/salary certificate showing all deductions.

2. If your job is transferable, permanent address where

correspondence relating to the application can be mailed.

3. A letter from your employer agreeing to deduct the monthly

installment towards repayment of the loan from your salary.
This will expedite the processing of your loan application.

41
If borrower is Self-Employed:

1. Balance Sheets and Profit & Loss Accounts of the

business/profession along with copies of Individual Income Tax
Returns for the last three years certified by a Chartered
Accountant.

2. A note giving information on the nature business/profession,

form of organization, clients, suppliers, etc.

ELIGIBILITY

The repayment capacity as determined by HDFC will help in

deciding how much one can borrow (the cost of the property or Rs.
1 crore, whichever is lower). Repayment capacity takes into
consideration factors such as income, age, qualifications, number
of dependants, spouse's income, assets, liabilities, stability and
continuity of occupation and savings history. And, of course,
HDFC's main concern is to make sure customer can comfortably
repay the amount they borrow

TAX-BENEFIT

Resident Indians are eligible for certain tax benefits on

principal and interest components of a loan under the Income Tax
Act, 1961. Interest repayment of Rs. 5,00,000 p.a. (for a loan on
or after April 1, 2015) can get borrower a tax saving up to
approximately Rs. 150,000 p.a. Moreover, customer can get added
tax benefits under Sec 88 on repayment of principal amount up to
Rs. 20,000 p.a. which can further reduce borrower’s tax liability by
Rs. 2,000 p.a.

42
About the product

HDFC's Home Loans offers you various unique benefits and

are easy to arrange and repayable in easy monthly installments.
The terms of the loan can be structured according to customer
unique requirements.

Home Loans can be applied for by either individually or

jointly. Proposed owners of the property, in respect of which the
loan is being sought, will have to be co-applicants. However, the
co-applicants need not be co-owners.

Loans can be availed upto a maximum of 85% of the cost of

the property (including the cost of the land). HDFC lends upto a
maximum of Rs. 1,00,00,000 on a Home Loan to an individual.
You can repay the loan over a maximum period of 30 years . They
determine the loan amount after evaluating the repayment
capacity of the individual. HDFC's main concern is to help
individuals comfortably repay the borrowed amount.

Get in touch with your nearest HDFC office today. We will be

pleased to discuss and help you realise your plans for a house

USP

Superior Processing Capacity : HDFC has over the years

invested substantially into computer systems and training. This
has enabled HDFC to respond to customer needs and build up
capabilities to approve loans on the spot or disburse them fast.

Branch Network : HDFC has offices spread all over the country.
This extensive network helps HDFC in providing service to large
and well spread out clients. This network of interconnected offices
(on Data Circuits) helps HDFC to process applications for

43
purchase of property anywhere in India. HDFC has further
established an office in Dubai and Service Associates in Kuwait,
Oman, Qatar, Bahrain and Saudi Arabia to make it easier for
Middle East based Non-Resident Indians to apply for a loan to
HDFC - India.

Experienced and Trained Staff: HDFC is the pioneer of housing

finance in India and has been a leader in the business for the last
25 years. HDFC has vast experience and a very committed and
skilled staff to handle housing loan applications and solving
customer problems.

Free Counseling : HDFC believes that it is in the business of

providing solutions to an individuals need for owning a house, and
not just in the business of providing finance. Keeping this in mind
HDFC will provide free counseling to on how and where to buy a
house in India (Property Services) or what are the prices and
trends in the real estate market or what precautions one should
take before buying a house. This service is offered at any of
HDFC's offices.

Legal and Technical Guidance : HDFC has qualified Legal and

Technical staff who liase with the developers to collect and
scrutinize the property documents and permissions. We have
Master Files of most projects being developed by reputed
developers. It has always been HDFC's endeavor to protect the
interest of the borrower, as we believe that buying a house is one
of the most important decisions in his life.

Extension Products : Over the last 25 years, HDFC has

developed various products in response to the needs of our

44
customers. Today we offer Home Loans, Adjustable Rate Home
Loans, Home Extension Loans, Home Improvement Loans, Home
Equity Loans, Short Term Bridging Loans and Land Purchase
Loans.

Flexible (Customized) Repayment Schemes : Keeping in mind

the fact that each individual has a unique problem requiring
unique solutions, HDFC has developed various repayment options
like Step Up Repayment Facility, Flexible Loan Installment and
Balloon Payment Scheme.

Pari Passu/ Second Mortgage Arrangements : HDFC has a tie-

up with a large number of Public Sector Organizations and banks
which enables us to

offer loans to your employees with the flexibility of their spouse

also availing a loan from his/her own employer.

Safe Document Storage Facilities : HDFC has state of art

storage facilities, which are theft and fire proof, at various
locations where loan and property documents are stored. In this
way valuable documents are stored safely over the period of the
loan and are released almost immediately after a customer repays
his loan.

Post disbursement services:

a) The exemption in respect of interest on borrowed capital is Rs

1,50,000 under section 24 (b) of the Income Tax Act. Further
interest on housing loans can now be taken into account by an
employer while computing the tax to be deducted from an

45
 employee's salary.

b) HDFC sends interest certificates to its customers well in

advance which enables them to take advantage of the tax
exemption in their monthly salary

c) We can transfer files of customers from one location to

another in case of transfer of the customer in course of his job.

d) A customer, after availing of a loan can approach HDFC

anytime thereafter to increase the Equated Monthly Installment
which will help him repay the loan faster. This facility is offered
free of charge to our customers.

Electronic Mail : HDFC through its e-mail service can promptly

respond to queries. In addition, HDFC can promptly send it is
application form cum brochure and other details on its loan
products by e-mail to interested individuals. For Non-Resident
Indians, our interactive Website offers another means for
contacting us. In our effort to reach out globally dispersed Non-
Resident Indians, we will continuously enhance our Website.

Home Conversion Loans : HDFC offers the option of a Home

Conversion Loan to its existing customers who are interested in
moving to a new house. Through this scheme customers can apply
to have their existing loan transferred towards the purchase of the
new home. Customers may also apply for an additional loan
amount for the purchase of the new house. This gives the
customer the option of selling their existing house, if they wish to,
without having to repay their old loan.

Applications can be made before selecting property:

Individuals may make an application for a loan even if the property
has not been selected or the construction has not commenced.
HDFC can provide assistance in locating an appropriate house to

46
such customers.

Home Improvement Loans : As an exclusive offer to it's existing

customers HDFC offers Home Improvement Loans upto 100% of
the improvement cost as compared to Home Improvement Loans
of upto 70% of the improvement cost offered to the general public.

Fee

A processing fee of 0.5% of the loan amount applied for i.e.

Rs. 5 per Rs. 1000 of the loan applied for is payable when the
application form is submitted to HDFC. This fee is in respect of
costs incidental to the application.

For example:

Loan applied for Fees

Rs.20,000 Rs.100
Rs. 1,00,000 Rs. 500

On approval of the loan, a loan offer is made to you. On

acceptance of the

offer, you will have to pay an administrative fee of 0.5% of

the loan approved. You can also pay the processing and
administrative fees upfront i.e. 1% of the loan at the time of
submission of the loan application itself.

Rate of Interest

Adjustable rate of Interest :

The interest rate on your ARHL is linked to HDFC's Marginal

Cost of Funds Based on Lending Rate (MCLR). The rate of
interest is revised every three months from the date of first
disbursement, if there is a change in MCLR. However, the EMI on

47
the ARHL will not change. For instance, if the interest rate
increases, the interest component in EMI will increase; the
principal component would reduce, resulting in an extension of the
term of the loan and vice-versa when the interest rate decreases.
customer will be provided with an annual statement indicating the
details of the interest and principal payments made during the
year.

Annual Rest Option

Term of Loan (No. of Years) Rate Per Annum (%p.a)

1 – 30 8.90

Monthly Rest Option

Term of Loan (No. of Years) Rate Per Annum (%p.a)

Upto-5 10.25
6-10 9.50
11 – 30 8.90

Rate of interest under MCLR is linked to HDFC's MCLR

(Marginal Cost of Funds Based on Lending Rate) which currently
is 8.70% per annum.

Customer repays the loan in EMIs comprising principal and

interest. Pending final disbursement, you pay interest on the
portion of the loan disbursed. This interest is called pre-EMI

48
 interest .

EMI per Rs.1,00,000 for Annual Rest

Option

Term of loan (No. of years)

Rupees

30 1179

EMI per Rs.1,00,000 for Monthly Rest

Option

Term of loan (No. of years) Rupees

5 2,876

10 1,481

30 1148

There is no early redemption charge on repayment of a loan

ahead of schedule.

Fixed rate of interest:

The current applicable fixed rate of interest in respect of the

total loan approved is are as follows:

Annual Rest Option

Term of Loan (No. of Years) Rate Per Annum (%p.a)

Upto-5 12.25
6-10 11.25
11 – 30 10.75

Monthly Rest Option

Term of Loan (No. of Years) Rate Per Annum (%p.a)

Upto-5 12.55

49
6-10 11.50
11 – 30 11.00

You repay the loan in Equated Monthly Installments (EMIs)

comprising principal and interest.

EMI per Rs.1,00,000 for Annual Rest

Option

Term of loan (No. of years) Rupees

5 2,857

10 1,613

30 1163

EMI per Rs.1,00,000 for Monthly Rest

Option

Term of loan (No. of years) Rupees

5 2,788

10 1,494

30 1166

Pending final disbursement, customer pay interest on the

portion of the loan disbursed. This interest is called pre-EMI
interest .

An early redemption charge of 2% of the amount being prepaid is

payable on repayment of a loan ahead of schedule.

How to Apply:

Customer can either download (in a pdf format) the

application form or, get the application form by email or normal

50
mail. Alternately, customer can collect the application forms from
any of your nearest HDFC Offices.

Customer need to submit it along with supporting documents

and the processing fees at any HDFC office that is convenient to
the customer. Customer can make payments by cheque marked
"Payee's account only" drawn on a bank in a city where HDFC has
an office, by demand draft (payable at par to HDFC) or by cash.

Customer can make an application at any time after they

have decided to acquire a house, even if the house has not been
selected or the construction has not commenced.

HDFC will consider your application, make enquiries as it

deems necessary and convey its decision to you. On approval of
the loan, a loan offer is made to you. On acceptance of the offer,
you will have to pay an administrative fee for the loan approved.

customer can take disbursement of the loan after the

property has been technically appraised, all legal documentation
has been completed and you have invested your own contribution
in full (Own contribution is the total cost of the property less
HDFC's loan). The loan will be disbursed in full or in suitable
installments (normally not exceeding three in numbers) taking into

Account the requirement of funds and progress of construction, as

assessed by HDFC and not necessarily according to a builder's
agreement.

51
Supporting Documents to be attached :

For approval of loan

a) Common for all applicants :

1. Allotment letter of the co-operative society / association of

apartment owners.

2. Copy of approved drawings of proposed construction /

purchase.

3. Agreement for sale/sale deed/detailed cost estimate from

architect/engineer for the property to be purchased /
constructed.

4. If you have been in your present employment / business or

profession for less than a year, mention details of occupation
for previous 5 years, giving position held, reasons for change
and period of the same.

5. Applicable Processing Fees.

6. Any other information regarding your repayment capacity that is

necessary and will assist HDFC in appraising the case.

b) Additionally,

If You Are Employed:

1. Latest salary slip/salary certificate showing all deductions.

2. If job is transferable, permanent address where

correspondence relating to the application can be mailed.

3. A letter from employer agreeing to deduct the monthly

installment towards repayment of the loan from the salary. This
will expedite the processing of your loan application.

52
If You Are Self-Employed:

1. Balance Sheets and Profit & Loss Accounts of the

business/profession along with copies of Individual Income
Tax Returns for the last three years certified by a Chartered
Accountant.

2. A note giving information on the nature of

business/profession, form of organization, clients, suppliers,
etc.

53
IDBI
BANK

54
 IDBI

IDBI, the tenth largest development bank in the world has

promoted world class institutions in India. A few of such
institutions built by IDBI are The National Stock Exchange (NSE),
The National Securities Depository Services Ltd.(NSDL), Stock
Holding Corporation of India (SHCIL) etc. IDBI is a strategic
investor in a plethora of institutions which have revolutionized the
Indian Financial Markets.

DBI promoted idbi bank to mark the formal foray of the IDBI
Group into commercial Banking. This initiative has blossomed into
a major success story. idbi bank, which began with an equity
capital base of Rs.1000 million (Rs.800 million contributed by IDBI
and Rs.200 million by SIDBI), commenced its first branch at
Indore in November 1995. Thereafter in less than seven years the
bank has attained a front ranking position in the Indian Banking
Industry.

idbi bank successfully completed its public issue in February

99 which led to its paid-up capital expanding to Rs.1400 million.
The promoters holding consequent to this public issue stood
reduced to 71% with IDBI holding 57% and SIDBI 14% of the paid
up capital of IDBI Bank. This is in line with the requirement of RBI
which stipulates that eventually the promoters holding should be
brought down to 40%.

The Bank

The birth of idbi bank took place after RBI issued guidelines
for entry of new private sector banks in January 93. Subsequently,

55
IDBI as promoters sought permission to establish a commercial
bank and retained KPMG a management consultant of
international repute to prepare the groundwork for establishing a
commercial Bank. The Reserve Bank of India conveyed it's in
principle approval to establish idbi bank on February 11th, 1994.
Thereafter the Bank was incorporated at Gwalior under
Companies Act on 15th of September 1994 (Registration No. 10-
08624 of 1994) with its Registered Office at Indore. The Certificate
for Commencement of Business was received on 2nd of
December 1994.

Management Team - The Core Strength of The Bank

Since August 2000 idbi bank has witnessed a transformation

in the top management structure with top talent from foreign banks
and private banks coming together to create a world-class
management team. Mr Gunit Chadha joined idbi bank as its
Managing Director & CEO after spending 16 years with Citicorp in
New York and India, on 22nd August 2000. He laid out the bank's
immediate priorities, amongst them being building up a
performance driven customer focused organization. Existing
talented people within the bank were re-aligned to a functionally
driven Product & Sales organizational structure. Also, to align
employee interests with shareholder interests founder Stock
Options (ESOPs) in October 2000 covering 75 % of the existing
employees of idbi bank were distributed.

56
Key recruits into the top management team were:

In January 2001, Janak Desai joined in as Country Treasurer

after an outstanding innings at Standard Chartered Bank and ABN
Amro.

In February 2001. Ajay Bimbhet joined as Head-Retail

Banking to lead retail banking at idbi bank. Ajay comes after a
strong and brilliant 25 year career at ANZ Grindlays.

In December 2000, Neeraj Bhushan Bhai joined idbi bank as

the Chief Technology Officer. Neeraj has been a major success
story in the assignments handled by him earlier as Chief
Information Officer of Sharekhan.com and Chief Technology
Officer of ICICI Infotech in their technology initiatives.

In April 2001, Subramanian Kumar joined idbi bank as Head

- Operations after earning accolades during his stint at Standard
chartered Bank, Dubai and previously at HDFC Bank.

In May 2001, Ulhas Deshpande joined as Head - HRD. He

has more than 18 years of rich human resource experience, of
which over 10 years has been in heading the HR function in
premier organizations- Hindustan Ciba Geigy, Merind, Parke Davis
and most recently as Head-HR at Tata-AIG.

In August 2001, Susheel Kak joined as Head - Corporate

Banking after a 25 years of varied banking experience in SBI and
Deutsche Bank in Singapore and India.

Idbi bank is growing at a very fast pace. Recently, the no. of

employees have crossed 1000 mark from 777 employees as on
1st April 2001 and it is expected to cross 1200 by the end of this
financial year. The Bank also has a state-of-the-art training centre
at Belapur and every employee receives on an average at least 40
hours of training in a year.

57
Technology and Tech Initiatives

Keeping in line with its policy of leveraging technology to

drive its business, idbi bank deployed Finacle, the e-age banking
solution from Infosys to consolidate its position, meet challenges
and quickly seize new business opportunities. Entire Finacle
rollout was remarkable considering the fact that it was
implemented across all branches in a record time-frame of 5
months. Finacle will provide the critical technology platform to
propel the bank's new thrust and direction.

The bank has also implemented Kondor+ - a treasury Front

Office software from Reuters and ITMS- treasury back office
software from Synergy Login. Achievement of these significant
milestones is consistent with idbi bank's continued focus to create
customer and shareholder value through deployment of superior
technology.

Investments in technology is part of the plan to put in place

building blocks for creating the right organizational infrastructure
which will help idbi bank in consistently delivering superior
products, convenient access channels and efficient service to our
retail and corporate customers. Of the total investments of over
Rs. 75 crors, large investment has been made in back-end
technology to strengthen processes, systems and control. This, in
the long run, propelled by a top quality management team will
clearly set idbi bank apart from its competitors.

58
Strategic Retail Initiatives

idbi bank in the previous calendar year initiated its formal

foray into retail banking. idbi bank's depository services product E-
Sec is a major success story and the bank today is in the top three
league in India in this segment. A spate of retail products were
introduced such as home finance, loans against shares,
educational loans, car loans, Sweep in account, SMS/WAP mobile
banking etc. on very competitive terms.

Retail Bank has acquired software for its Retail Assets

products. Also, on its way is Internet Banking with Bancaway, from
Infosys. idbi bank has recently launched its upgraded, state-of-
the-art telebanking product across 17 centres with latest software
from BK Systems. Mobile banking

(WAP/SMS) from Hexaware, which is mobile service

provider independent, launched during FY01. We have also
migrated to an Open Architecture "Oasis" ATM Switch capable of
providing features like Bill Presentation Payment and personalised
messaging.

The bank has recently announced its strategic alliance with TATA
AIG General Insurance Company for selling General Insurance
Products through select branches & ATMs of idbi bank.

The bank announced a landmark strategic alliance to make

available widely, both organization’s products through each others'
distribution channels. Now you can buy coveted savings Products
like the National Savings Certificates and Kisan Vikas Patra on
Internet .

59
 The New products which are going to be announced shortly
are Credit Cards, Debit Cards etc.

Idbi bank is continuously looking for ways to leverage its technical

strengths and bring to the retail customer convenience products at
reasonable cost.

Corporate Banking and Credit

Idbi bank has launched its Cash Management Services in

the 2nd quarter of FY02 with powerful software from Cash Teck.
The bank has also invested in Credit Rating System software from
CRISIL to strengthen its corporate risk assessment mechanism.
This goes live from the first quarter of 2001-2002. Moreover, the
bank is in the process of investing in more back-end systems for
Fixed Assets, Payables, FTP and ALM.

Stronger Capital Adequacy

Capital Adequacy ratio of idbi bank is well above the RBI

norm of 9% and as on 30th June 2001 stood at 12.01 %.-->

idbi bank has adopted Governance standards based on best

practices prevalent internationally. It has a structure of governance
which meets with the requirements prescribed by the
Kumarmangalam Birla panel and fully meets the recommendations
by internationally acclaimed and recognized norms of governance
addressed by the Cadbury, Greenbury and Meryn King
committees.

60
Employee Contribution

idbi bank has more than 1000 talented and highly motivated
employees as on date.

The average age of the employee at idbi bank is 31 yrs.

85% of the employees are MBAs/CAs/ Professionally Qualified

Bankers.

The bank has rolled out broad based grant of stock options
covering 75% of the employees to align their interests with those
of its shareholders.

Buying a home of one's own is every individuals first stop in

life. . Which is precisely why, we at idbi bank, have pulled out all
the stops to sew together a home loan product that has flexibility
as its very foundation. Bank have created a product that is
competitively benchmarked, that is amply affordable and one that
is customer-sensitive. Only because when it comes to buying a
house, the first thing customer need to do is to feel at home with
their bank.

Advantage

 Interest Rate on Monthly Reducing

 Balance

 Home Loan services at Door Step

 Simple Documentations

 Personalized Service

 Legal and Technical Assistance

61
Housing Loan Rates :

Floating rate loans have been institutionalized as the

standard offering, making it simple for new customers to benefit
from favorable interest rate changes in the future too.

MUMBAI: Public sector lender IDBI Bank on Tuesday announced a cut

in its fixed deposit rates for home loans.

Simultaneously, it has upped interest rates on term deposits of various

tenures by 0.25-0.50 per cent.

Fixed home loan rates for three-years have been reduced by 1-1.5 per
cent to 10.75 per cent from 12.5-13.5 per cent per annum earlier, a press
release issued here stated.

For five-years, the rate has been reduced from the earlier 13.75-14.25
per cent per annum by 1-1.5 per cent to 10.75 per cent per annum.

The interest rate on floating home loans remains pegged at 9.75 per cent.

The bank has increased interest rates on its term deposits for tenures
beginning from nine months up to one year to a tenure of up to 10 years.
Now for a maturity of nine months up to one year and for an amount up to Rs
15-lakh, the rate has been increased from 7.25 per cent to 7.75 per cent while
for deposits above Rs 15 lakh to Rs 1 crore, the rate has been upped from
7.50 per cent to 8 per cent.

Two years up to three years and up to Rs 15-lakh, the new rate is 8.50
per cent as against the earlier 8 per cent while for amounts above Rs 15-lakh
up to Rs 1-crore, the rate has been revised from 8.25 per cent to 8.75 per
cent. For three up to five years and up to Rs 15-lakh, the new interest rate is
8.75 per cent as against the earlier 8.25 per cent while for Rs 15-lakh to Rs 1-
crore, the rate applicable will be 9 per cent as against the earlier 8.50 per
cent.

62
Pre-payment Fees

Pre-payment Fee of 2% on principal outstanding if the

prepayments are through institutional / HFC s Cheque / pay order
In case of customer premature closing his home loan account with
his own funds no prepayment will be levied

COMPARISON OF HOME SAVER WITH

NORMAL HOME LOAN

Let’s suppose that the customer have a home loan of Amount RS.
10 lakhs Repaid in 16 years (192 months) at an interest rate of
11.25% p.a. (monthly rests)

Some Interesting facts about you home loan

You owe the bank

25
Principal Paid
Total Payments In

20 Interest Paid
Rupees Lakhs

10
15
4.98
4.13
10
1.5 11.6
9.37 10.09
5
5.25

0
60 120 134 192
Months

Imaging how much the value of their home will have to appreciate
to just be worth the value you finally paid for it!

63
COMPARATIVE ANALYSIS OF

HOME LOAN AND HOME SAVER

Home Loan Home Saver

 A fixed repayment structure  The interest customer pay may

with high interest & low be substantially reduced &
principal recovery consequently repayment
towards principal can be high.
The interest you pay depends
on their loan balance each day.
When you loan balance is
reduced the interest
component comes down.

 Inflexible repayment plan  Customer have option to make

excess payment over & above
your EMI to reduce their
balance daily. Payment holiday
also available.

 Prepayment may be subject to  No prepayment hassle & no

many constraints including penalty is chargeable on any
penalties. excess customer use to reduce
their loan principal. They can
also with draw any surplus at
your convenience anytime &
anywhere.

 Interest is calculated on a  Interest is calculated daily on

64
 monthly balance & applied net loan balance & applied
monthly monthly

 Their home loan A/C in kept  Home Saver is one single A/C
separate from their bank A/C. where home loan & deposits or
Saving & other surplus reside surplus funds is integrated
in a separate current/saving together. Every rupee they pay
account where money is goes to repaying the loan
earning either Zero or low rather than repaying interest.
interest. So they can use their surplus
cash to save there as much
interest as in charged on home
saver A/C.

65
HOW DOES HOMESAVER COMPARE WITH

A NORMAL HOME LOAN ?

Normal home loan Home Saver

 A fixed repayment structure  The Potential to substantially

with high interest and low reduce interest and
principal recovery consequently repayment
towards principal can be high

 Inflexible repayment plan  Flexible repayments including

Payment Holidays.

 Prepayments are subject to  No part prepayment hassle or

many constraints, including penalty.
penalties.

 Interest is calculated on  Interest calculated on daily

monthly balance and applied balances and applied monthly
monthly

 Their home loan account is  One single account where

separate from bank account home loan principal is
integrated with their deposits
and credits

THE HOMESAVER ADVANTAGE

66
 Reduction in Interst Paid Reduction in Tenure

12.00 200
180
Interst Paid (in Rs. lakhs)

10.00 74

Tenure (in months)

5.00 160
140
8.00
120
11.60 192
6.00 100
80
4.00 6.60 118
60
2.00 40
20
0.00 0
Norm al hom e loan Hom eSaver Normal home loan HomeSaver

67
OBJECTIVE OF THE
STUDY

68
 OBJECTIVE OF THE STUDY

The objective of this research is---

1-To analyze the home loans with a view to arrive at the most popular
loan schemes offered by the banks.

2- To conclude from the analysis the best possible schemes which

would keep the bank ahead of competition.

3-To find the critical factors that are essential for any housing loan
to become the most favored scheme in the Indian scenario.

4-To analyze repayment policy also affect of age factor on repayment

influence on customer when they choose home loan scheme.

5-To analyze the importance of standard comparison provided by

different agency on customer when choosing home loan scheme.

6- To analyze the affect of current home loan scheme on customer.

7- To analyze the preference of customer on choosing particular home

loan scheme.

69
SCOP OF STUDY

70
 SCOP OF STUDY
The scope of the proposed study is restricted to Hyderabad
divisions of both LICHFL and HDFC. Hyderabad divisions of these
organizations extend the facilities of housing finance to its clients
belonging to Hyderabad region in the State of Andhra Pradesh.

1) LIC HOUSING FINANCE LIMITED (LICHFL):

LIC Housing Finance Limited (LICHFL) as a subsidiary of Life
Insurance
Corporation (LIC) was incorporated on June 19th 1989, to
accelerate the development of housing. LICHFL is the second
largest Housing Finance Company in India.
‘To each one a home of his own” is the main objective of
LICHFL. It renders liberal financial assistance to policy holders
and others for purchase/construction of residential houses/flats.
The following are the other objectives of LICHFL:
(i) To provide loans to public sector/private sector employees to
construct
residential accommodation for their employees.
(ii) To mobilize insurance linked long term savings from the public
to deploy such funds in long-term finance in the housing sector.
(iii) To facilitate approval of builders in advance and offer them
construction finance to enhance customer servicing with a real
estate market information.
LIC Housing Finance provides long term finance to resident
individuals of India and Non-Resident Indians (NRIs) for the
purchase, construction, repair and renovation of new/existing
flats/houses and mortgage. The Company is the only one of its
kind that offers a Life Insurance Policy as collateral security to
back its loans. LICHFL also provides finance on existing property
of business / personal needs. The company has been growing
steadily over the last two decades both in terms of business and
profits.

71
There are 6 Regional Offices, 112 Area Offices consisting of
Operating Offices and Extension Counters spread across Nation.
LICHFL has got its Registered and Corporate Office at Mumbai. It
has a total team of 2,500 dedicated employees in the Country.
With these LICHFL had widest network amongst all the Housing
Finance
Companies in India. Hyderabad branch of LICHFL was established
in the year 1993
with just 20 employees and today it has a total of 6 branches in
Hyderabad at various places like Ameerpet, Dilsukhnagar,
Gacchibowli, Himayathnagar, Kukatpally, and Secunderabad.
There are about 107 fulltime employees in LICHFL, Hyderabad
branches and more than 500 company appointed Direct Sales
Agents (DSAs) and Home Loan Agents (HLAs) working under
Hyderabad branches.

2) HOUSING DEVELOPMENT FINANCE

CORPORATION (HDFC)
The Housing Development Finance Corporation (HDFC) was
formally promoted and incorporated on October 17, 1977 under
the chairmanship of Mr.H.T.Parekh. HDFC was promoted by ICICI,
the International Finance Corporation and His Royal Highness Aga
Khan. Each party had contributed 5% of the equity of the
Corporation.
HDFC from its very first day of its operations was built as a
principle centered organization. An organization built on the basis
of fairness and kindness, efficiency and effectiveness. It has
gradually built trust among the people strengthening
communications and participative management style. Trust is the
very cement for meaningful relationships and an open and creative
management style. It is the very foundation for measuring worth.
Objective of HDFC is to enhance residential housing stock and to
promote house ownership by providing individual

72
household/families with long term housing loans at commercially
viable rate. More specifically, the objectives of HDFC are:
i. To finance mainly low and middle income group of people to
purchase/construct a single family dwelling unit primarily for self
occupation, and
ii. Granting loans to the co-operative sector for housing their
employees. HDFC provides long term finance to individuals for the
purchase, construction, repair and renovation of new/existing
flats/houses and mortgage loans. HDFC is specialized in the field
of housing. Its own name was constituted from three words – the
interlocking of three areas of housing, finance and development.
HDFC being a pioneer organization in the field of housing finance
is a leading institution in retail lending housing finance at time
when no other major player was in the field. HDFC has
consistently endeavored to provide top notch service to its
customers through its extensive network of 87 offices which inter
linked Nationwide, and introduced innovative value added
products to enhance both its range and quality of service.
HDFC’s Hyderabad branch was opened in the year 2000 and with
just 15 employees and today HDFC has got 12 branches in Delhi-
NCR at various places like Vasundhara, Munirka, Vaishali, Noida,
Indrapuram and Lajpat Nagar with 2000 fulltime employees and
many Marketing Agents working under these branches.

3) SELECTION OF LOAN APPLICANTS:

The property for which loan is applied must be in and around
Guragaon Muncipal Corporation (GMC), Indrapuram, Vaishali,
Sahibabad, Greater Noida, Noida, Greater Kailash, Lajpat Nagat,
and all approved colony, Urban Development Authority (HUDA)
layouts. Outer areas of the City like
Delhi Development Authority (DDA) & Airport Development
Authority (ADA) Uppal and New Friends Colony also come under
the jurisdiction of LICHFL and HDFC.

73
The identification of customers are through direct walk-ins by
customers, customers responding to the paper ads, hoardings,
other media, direct sales made by LICHFL agents & HDFC Home
Loan Executives, references given by the existing customers,
references made by panel members of LICHFL & HDFC,
references made by builders, references made by employees of
LICHFL & HDFC and other references etc.
The loan applicants net income from his salary must be above
Rs.20,000/- per month. The organization in which the applicant is
working must be government owned organization and incase of a
private employee the organization in which the applicant is
working must be in approved list organizations acceptable to
LICHFL & HDFC. In case of a business person his net annual
income must be Rs.2, 50,000/- and above.
Applicant must submit application form duly filled legibly with
photographs affixed on it by the applicant co-borrower and by
furnishing all documents relating to loan property like property
plan approved by civic authorities, link documents of property,
encumbrance certificate, sale deed from vendor, estimates from
panel engineer, income details like salary certificates in case of
salaried applicant income tax returns certificate certified by
chartered accountant or auditor incase of businessman applying
for loan, PAN card, copy of bank statement showing his/her
income, current place or residence, Passport incase of NRIs
,current place of work or business etc.
Applicant also needs to furnish guarantor details like proof of
income of guarantor, residential address, proof of guarantor and
guarantor’s employment and professional details must be
furnished. After perusal of the above documents, if LICHFL &
HDFC is satisfied with the above details, LICHFL’s Credit Officer &
HDFC Credit Officer will inspect the property and value the
property with their Panel Value Engineer/Technical Team and
prepares the report to be approved by the Branch Manager.

74
Branch Manager will give his final nod for disbursement of loan
after evaluating the feasibility of loan.

4) SELECTION OF SAMPLE RESPONDENTS:

The selection of 500 respondents was made on the basis of
stratified random
Sampling from the records of LIC Housing Finance Limited
(LICHFL), Hyderabad
Offices and House Development Finance Corporation (HDFC)
Offices, Hyderabad
The above table 2.1 relating to the respondents of LICHFL
reveals that out of 379 male applicants, the percentage of male
below the age of 30 years is 3.4 %. There were 71.1 % of male
applicants between the age group of 30 to 60 years and 1.3 % of
male applicants between the age group of 60 to 65 years.
The study shows that out of 121 female applicants of
LICHFL, the percentage of female below the age of 30 years is
1.37%. The percentage of female between the age group of 30 to
60 years is 22.75%.
The table also reveals that out of 379 male applicants, 99.2%
applicants were married and 0.8% applicants were unmarried.
Table 1 also shows that 100% of female applicants are married
women.
The above table 2.1 relating to the respondents of HDFC
reveals that out of 350 male applicants, the percentage of male
below the age of 30 years is 5.2%. There were 64.4% of male
applicants between the age group of 30 to 60 years and 1% of
male applicants between the age group of 60 to 65 years.
The study shows that out of 150 female applicants, the
percentage of female below the age of 30 years is 3.6%. The
percentage of female between the age group of 30 to 60 years is
5.8%.
The table also reveals that out of 350 male applicants,
98.2% applicants were married and 1.8% applicants were

75
unmarried. Table 1 also shows that 100% of female applicants are
married women.
In both the organizations, majority of the respondents were
in the age group of 30 to 60 years old.
The organization in study is meant for providing housing
finance to those who need it. LICHFC and HDFC provides loans
for variety of purposes in housing such as purchase of a house,
construction of new house, extension of existing houses and
improvement and mortgages.
A question was asked to the respondents of both LICHFL
and HDFC as to the purpose for which the loan was taken .
The total respondents of LICHFL 50.40% were approaching
for loan for the new construction of house/flat and 25.60% have
said that the purpose of loan is to purchase the house/flat. For the
purpose of extension and repairs/ improvement of houses about
12.80% and 11.20% of them have approached LICHFL.
The out of 500 respondents of HDFC, 38.67% of the
respondents have approached the organization for the purpose of
loan for new construction, 28% of them approached for purchase
of house/flat whereas 21.33% for extension and improvement and
12% for repairs and renewals respectively.

By and large it can be said that majority of the respondents of both

the organization availing loan for the purpose of purchase and
construction of new house/ Flat only.

76
LITRATURE REVIEW

77
 LITRATURE REVIEW
In this section, it is proposed to briefly discuss the studies made in
the past relation to housing and housing finance both at National
level and State level. Studies relating to housing and housing
finance were indeed, a subject of great importance and draw
attention both from the government and from the academic
community as well.
The research literature relating to housing finance is very
limited, due to growing literature on industrial and commercial
undertakings. The area of housing finance is of recent emergence
and there is acute shortage of written work in this field. The
literature available in this area is mostly by way of contributions in
the form of statements by leading authorities heading various
institutions like HUDCO and National Housing Bank. The shortage
of literature in this vital area is evident by the Central Government
thrust in formulating National Housing Bank in 1988.
Bhardwaj is one of the studies tried to bring out meaningful
conclusion regarding human settlement problem. After analyzing
the nature of problems and renewing the present efforts, he
discussed the interaction involved between human settlements
and family well- being.
Rama Rao , in his study stressed upon the need to
strengthen the policy with regard to house construction materials
and building services in Andhra Pradesh.
Khodaji has stated that process of urban renewal that
includes replanting, redevelopment, conservation and
rehabilitation. In order to solve the urban crisis, there is an urgent
need for Urban Renewal Programmers to be taken up by the
developing countries. He viewed that people’s participation is a
perquisite for the successes of Urban Renewal Program.

78
 Prabahavathi and Sharma, are of the opinion that
development program for the weaker section housing is not
implemented in an effective manner as the innocent poor, who are
really deserving are deprived by the relatively educated, rich and
well 50 placed people. These people have access to great deal of
social and political systems both within and outside slums.
Verghese has geographically described the problem of
housing the country.

A study conducted by Jayaram and Sandhu11 shows problems,

policy and perspectives related to housing in India. A detailed
study of various factors in housing production, role of
informational community on technology transfer etc, has been
conducted by
The researcher has also studied the categories of and the
difficulties, problems faced by the people of Chandigarh. He made
comparison and concluded that housing conditions in Chandigarh
is better than that in other towns in the country.
Narad Naresh has examined the various efforts made by
Government of India to improve housing infrastructure for human
settlements and legislative support.
A study conducted by Sabir Ali reveals that not only the
basic services like drinking water, electricity, toilets, roads and
health are lacking in resettlement colonies in Delhi but the
maintenance of these services and facilities are also poor.
Miglani15 in his study focused that the unpredicted growth of
population and labor force in urban areas has brought forth a
number of problems in towns and cities of developing countries.
He observed that measurement and magnitude of housing
shortage is typical and there is no specific criterion to define
housing need and supply.
The uncontrolled urban growth as per the observation made
by Mongia16 is the poor housing situation and the vital aspect of
housing shortages relates to the housing for the low income

79
group. In this article entitled ‘Necessity Turned into Luxury’, he
pointed out that inadequate house building activity is due to rising
cost of construction non utilization of construction techniques and
low priority given to housing in the allocation of plan funds.

Arjun Singh in his study evaluated the requirement of

housing and the projects to be taken up for some identified tribes
in Gujarath. After analyzing the housing position in India Francis
and Hegadde18, have reached the conclusion that there seems to
be a big gap between present and future requirement of housing in
India.
Singh in his study portrays various institutution responsible
for implementing the housing in Uttar Pradesh. According to
him ,Uttar Pradesh. Housing and Development Board has made
significant improvement in housing by concentrating on low cost
housing for weaker sections.
Khurana in his study tried to examine in detail the housing
problem and role of cooperatives in India.
Pugh in his study “Housing and Urbanization” apart from
various issues also examined the housing finance and the
Government housing. He remarked that housing is close to the
social life to the rich and poor. He is of the opinion that subsidy in
housing cannot be justified.
Mulk Rajhas made an attempt to study the issue of limited
resources at national level and focused on the role of informal
sector as far as housing finance is concerned.
Pavithran has studied the need for optimum utilization of
resources and effective management of funds which is crucial
decision to be made in housing activity.
Vijay Bhole studied on various housing finance agencies and
housing issues on the performance of Andhra Pradesh Housing
Board.

80
 Bijilani, clearly discussed the endeavors of HUDCO the apex
national Housing Finance Institution in providing low cost housing
methodology and techniques.
Tiwari has conducted study towards another direction of
housing finance. He stressed the need for involvement of
commercial banks in providing the liberal finances to overcome
the shortages of housing units in India.
Sharma has highlighted the issue relating to housing and
housing finances performance of HUDCO and future policies
related to functioning and establishment of NHB.
Sundaram examined that to create a necessary atmosphere
of maximum saving so as to invest in housing sector, there should
be coordination between public housing and financial institutions
such as HUDCO and LICHFL.
Rao in his study has pointed out there is need to discuss the
housing finance in different perspectives to include the financing
of infrastructure facilities in the development of housing
settlements apart from the financing for the construction of house
structure. Due to resource constraint the strategy of government is
to concentrate on the construction of homes for poor and low
income sections.
Chandrasekar is of the opinion the government provides
suitable environment for the private investment agencies; they
could allocate a portion of their investment towards construction of
houses for the low and middle income sections apart from the
council complexes.
Sharma in his study emphasized the need for reconciliation
of increasing resource mobilization and catering to the needs of
low income and poor section of the country at affordable cost. He
further points out the HUDCO are doing a lot in this regard.
Lal in his study made a reference to NHB. He is of the
opinion that the establishment of separate national apex body is
necessary to concentrate on financial mobilization housing.

81
 Sivaramakrishna reveals that HDFC is able to maintain
recovery rate of nearly 98 %. In general, the LICHFL’s
performance is worth praising in the field of housing finance.
Gopalan in his study observed that it is difficult task for low
and poor income group to raise the funds from private source for
the construction of houses because of their low repaying capacity.
The public agencies are required to raise their capital mainly
through borrowings and are not able to recover the cost from the
borrowers of housing finance and finding it difficult to finance for
housing.
Singhal observed that government initiative at various levels
and the ratification of NHB, the housing financial institutions have
to act accordingly to meet the requirement of housing.
Mohan Rakesh has indicated in his study that creation of
squatter settlements in and around the urban areas is due to
natural rate of growth and encroachment of migrants form rural
areas and accelerated growth in urban areas.
“Housing is a universal problem although the problem is chronic in
developing countries; Cherunillam38 says that most of the
advanced countries also face this problem with varying degrees”.
In the opinion of Dayal “Roti, kapada our makan, (Food,
Clothing and
Shelter)” are the basic needs of human being despite the Food
and clothing, the requirement of shelter is very essential for
human being.
Miglani observes in order to ensure investment in housing
and activate funds, LICHFL should increase its branches
substantially and regulations should be amended to encourage
investment in housing.
In the Opinion of Rajiv Sharma41 “Government care is
required to be taken to see that the urban poor are provided
housing near their place of occupation. Securing effective linkages
between asset creation and asset management is a must to
ensure optimal outcomes from the use of resources for housing”.

82
 Samuel42 in his book,“Government of Andhra Pradesh
estimates that by 2020, the Hyderabad City will become more than
three times to its current size. By 2012 the population of
Hyderabad is expected to reach 13.64 million as a result more
land and houses are required to meet the demand”.
According to Reema Sharma43 “The main objective of
housing finance in India is adequate housing for all. The year 1987
was celebrated as an `International Shelter Year' that emphasized
the need to promote better housing to people.
The union government of India has given priority to housing
sector in all the five-year plans”.
In the opinion of Ashok Kumar44 “Housing continues to be one of
the thrust areas of the economy for the policy makers. Rising
income levels coupled with increased rate of formation of new
households has contributed to a steady growth in demand for
housing. Added to this is a significant shift in home-ownership
pattern with younger population are striving to acquire their own
houses. This phenomenon of early purchase has resulted in
increased demand for housing loans”.
According to Dr.P.S.Rana45, “Besides a robust housing
finance system, a sound and sustainable housing policy is equally
important for expansion in housing credit. Defective policies with
short term objectives in the housing construction segment can
impose serious constraints on the credit system. While the two
policy areas of the financial sector, viz. monetary and credit policy
and fiscal policy are well
Chanda Kochhar70, MD and CEO, ICICI Bank said “In a
major relief for home loan borrowers, the Reserve Bank of India
(RBI) in its annual Monetary Policy for 2012-13 has made it
mandatory for all banks to stop the practice of charging penalty on
pre-payment of loans taken on floating rate. In the past few
months, many banks have voluntarily abolished the pre-payment
penalties. But, RBI's directive is to ensure uniformity in lending

83
rates across the banking system and henceforth no bank can
charge such penalties. All major banks have waved pre-payment penalty,"

84
IMPORTANCE OF THE
STUDY

85
 IMPORTANCE OF THE STUDY

House is an integral a part of a person, who since his / her start and
childhood,
desires to have residing area of his / her personal. As soon as in a lifetime
funding requires mortgage to perform it and that’s how the house mortgage
comes into scheme of issues.

Shopping for a house is dream for everybody. Owing to the rising worth of
properties, it has nearly turned into unimaginable for a median incomes
particular person to purchase a house on a lump sum cost.

Subsequently, the idea of dwelling mortgage has are available in

existence. There are plethora of housing finance firms and equal variety of
banks that supply dwelling loans.

The duty of deciding on one firm and one supply for dwelling mortgage
amidst the 1000’s obtainable choices have turn into a really advanced job
owing to the burgeoning housing finance market within the nation. Aside from
this, there are intricate enterprise jargons and technicalities that make this job
harder. On this examine, I suggest to present the fundamental data of
dwelling mortgage technicalities, in order that when an individual applies for
the house mortgage, he / she will be able to perceive the fundamentals and
assist themselves stay away from the duping parts out there.

The necessity for dwelling loans arises not as a result of property costs
are heading upwards on a regular basis however as a result of dwelling loans
make nice sense from a long-term financial savings perspective. Not solely
are dwelling loans helpful software for the frequent man to personal a roof

86
over his head however in addition they assist save cash in the long term.
With skyrocketing actual property costs, individuals are more and more
choosing
housing loans to accumulate their dream dwelling. Rates of interest are
coming down on a regular basis and the banks and the housing finance firms
are actually falling over one another to lure the possible home-seekers.
However the tax breaks and beneficent lending charges, lots of people
nonetheless can’t organize sources for the down-payment, which comes out
to be not less than 15 per cent of the property worth. Taking cognizance of the
scenario, Banks are developing with dwelling mortgage merchandise known
as ‘zero down cost loans’ whereby 100 per cent funding is supplied for choose
properties. These profitable gives are different main causes for why folks are
choosing loans.
Even when one can afford to purchase a house with one’s personal cash,
dwelling loans needs to be availed as a result of the act nearly as good
financial savings instrument. In accordance to trade estimates, the long run
common return in investing in a house is about 20% p.a. whereas the typical
value of borrowing funds out there right this moment is about 7% p.a.
(contemplating all tax breaks). For salaried workers, housing loans are the
easiest way to avail of tax advantages. Many individuals merely go for the
house loans as a way to avail these advantages. Curiosity funds as much as `
1.5 lakh on housing loans are deductible from the taxable revenue and there’s
a additional deduction of taxable revenue most as much as ` 1 lakh in
opposition to compensation of principal
portion every year. In case an individual stays in a rented home, the price of
the
mortgage will likely be almost zero per cent since he will likely be saving an
honest quantity on hire.

87
RESEARCH
METHODOLOGY

88
 RESEARCH METHODOLOGY

Research Methodology is an important part of every project. Because

it help in knowing how to select representative sample from the world or the
general population, the right research tools and techniques to complete the
research.

To satisfy the customer the study of consumer behavior is important

because he is the king. The Research Process is based on survey method, so
in order to implement the survey we go to Service Provider and the Services
user which is the customers.

The research involves the following steps :-

 Define the problem & research objective - The problem and objective is
to assess the services offered by various service provider and what
the consumer wants.

 Developing the research Plan - The second stage of research

methodology is to develop a research plan.The research plan
desigined to take decesion on the data soruces, research
approaches, research, instruments, sampling plan and contact
methods.

 Survey Research – It was a descriptive research.

 Research Instrument – The use of an effective research instrument is very

important. Because through this instrument we collect data. In this
project through observations & personal interviews were
conducted.

89
 Personal Interview – As we were doing direct selling. we interacted with
my customers are asked about there views in selecting a service and
what are there wants and expectations from a service provider

 Sampling Plan - After finalizing the research approach and instruments a

sampling must be designed.

 Sampling Unit –data have been collected from banks

 Sample size – It has been collected from four banks.

 Sampling Procedure: - What process should be used to collect the

sample. So, representation samples, convenience sampling is used.

 Collect the Information:-After completing all the steps, the data are
collected from different sources.

Analyze the Information:-After the data is collected they are analyzed to

know the findings. The data is then tabulated to develop frequency
distribution.

Present the findings:-As the last step, the findings are presented that are
relevant to the major marketing decisions.

90
91
DATA ANALYSIS

92
 DATA ANALYSIS

The home loans provided by various banks are more or less

same at a basic level. The banks generally try to go ahead of
other banks in terms of attracting number of customers to their
countries. For this they are trying to offer some unique services as
per the unique requirements of the unique and important
customers.

In the next page various data’s have been shown which

shows that are the home loans provided by various banks and
SCB have also tried to compare the services offered by the
banks,.

TRENDS IN INTEREST RATES OF HOUSING LOANS

Interest Rates Have Dropped

93
And Housing Loan Disbursement Have Soared

50,000 45,000
45,000
40,000
35,000
29,359
30,000
25,000 22,425
19,723
20,000
15,000 11,352
10,000
5,000
0
2003-04 2004-05 2005-06 2006-07 2007-08

94
MARKET SHARE OF MAJOR PLAYERS

Source: http://indiaproperties.com

Market Share of Players

8
5
32 Standard Chartered Bank
10
Citibank
ICICI
HDFC
IDBI

5 OTHERS

45

PROPERTY RATES

95
RECOMMENDATION

96
 RECOMMENDATIONS

The following suggestions are strongly recommended:

1. To broaden the customer base the vast middle income strata should be
fully exploited

2. Simplify the procedure, reduce service charges, and demand only the
basic essential proof.

3. Most banks are reluctant to advance loan to the service class e.g. lawyers,
police officers etc.. This aspect must be exploited.

4. Adoption of flexible and more lenient penalty should the customer fail to
deposit the payment on time. The penalty should be on case to case
basis rather then the same for the entire customer base.

5. Restriction to be reduced to bare minimum for loan advances and for

repayment. For e.g. offer long-term repayment facilities and have no age
restriction to choosing repayment.

6. The maximum age for repayment could be increase to 65-70 years of age.
Such facility will help grow fast retail segment of the bank.

7. Offer multiple repayment loans.

8. Service class to be exploited by offering special reduced rates and linking

the repayment from the source from where the pay-cheque to the
employee is issued. This needs to undergo special contract with
government organization to ensure implementation.

97
CONCLUSION

98
 CONCLUSIONS

1-The Indian customer has come a long way from purchasing to fulfilling their
needs from buying a house.

2- Customers now grab everything that comes their way but they do their own
survey of optimum loans; same is the case with banks, and housing loans.
With innumerable choices before him, the customer is indeed the king.

3- It is therefore imperative that if a bank has to succeed in the competitive

world

4- it should be technological sarvy, customer centric progressive driven by

highest standards of corporate governance and guided by sound ethical
values and above all should be cordial and should have personalize customer
services.

5-There is scope of exploiting the vast middle income group by releasing

loans with special interest rate which would be beneficial to both parties.

99
ANNEXURE

100
TRENDS IN INTEREST RATES OF HOUSING LOANS

Interest Rates Have Dropped

And Housing Loan Disbursement Have Soared

50,000 45,000
45,000
40,000
35,000
29,359
30,000
25,000 22,425
19,723
20,000
15,000 11,352
10,000
5,000
0
2003-04 2004-05 2005-06 2006-07 2007-08
101
102
MARKET SHARE OF MAJOR PLAYERS

Source: http://indiaproperties.com

Market Share of Players

8
5
32 Standard Chartered Bank
10
Citibank
ICICI
HDFC
IDBI

5 OTHERS

45

PROPERTY RATES

103
BIBLIOGRAPHY

104
 BIBLIOGRAPHY

 www.indiaproperties.com

 www.apnaloan.com

 Philip Kotler, Marketing Management, 9th edition

 Akkar ;Marketing Research

 Icicibank.com

 Idbibank.com

 Hdfcbank.com

105
QUESTIONNAIRE

106
QUESTIONNAIRE

NAME: __________________ GENDER: M F

AGE: ________________ PROFESSION:

SERVICE BUSINESS
HOUSE HOLD ANY OTHER
MOBILE NUMBER : __________________

MONTHLY INCOME:
10,000-20,000. 21,000-40,000. 41,000-60,000. 61,000 ABOVE

1-You are living in your own house or rent?

OWN HOUSE NOT OWN

2-Will you prefer home loan to buying home ?

Yes No

3-Whould you like to prefer loan from housing bank or other?

Yes No

107
4-Which Bank you prefer for housing loan ?
a- HDFC b-ICICI c-IDBI d-OTHERS

5- Are you give importance of TAX benefit while choosing loan scheme?

Yes No

6- You give more focus when choosing loan scheme on-

AMOUNT INTEREST RATE
DOCUMENTATION TIME

7- How much affect location of bank when you choosing loan scheme?

VARY MUCH LITTLE BIT .

8- Are you familiar with procedure of home loan scheme ?

YES NO

9- Are you familiar with repayment policy of home loan scheme?

YES NO

10- Is service charge affect on you when you choosing home loan scheme?
YES NO

11-Would you prefer your own survey or accept standard comparison of bank cheme?

OWN SURVEY STANDERD COMPARISON

12- In which scheme you are more familiar of repayment policy in home loan
scheme?
YES NO

13- Did you think age of repayment should increases or not?

YES NO

108
14- How much you satisfied with the current home loan scheme of your choosing
BANK?
____________________________________________________

15- You have any suggestion for amendment of home loan scheme ?

109