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housing loans(hdfc )

housing loans(hdfc )

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INTRODUCTION
1.1 INTRODUCTION TO HOME LOANS Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and above all gathering funds little by little to afford one’s dream. Home is one of the things that everyone one wants to own. Home is a shelter to person where he rests and feel comfortable. Many banks providing home loans whether commercial banks or financial institutions to the people who want to have a home. HDFC-(Housing Development And Finance Corporation) Home Loan, India have been serving the people for around three decades and providing various housing loan according to their varied needs at attractive & reasonable interest rates. Owing to their wide network of financing, HDFC Housing Loans provides services at your doorstep and helps you find a home as per your requirements. Many banks are providing home loans at cheapest rate to attract consumers towards them. The more customer friendly attitude of these banks, currently offer to consumers cheapest loan over homes. In view of acute housing shortage in the country, and keeping in mind the social – economic role of commercial banks in the present times, the RBI advised banks to encourage the flow of redit for housing finance. With the RBI reducing bank rate, the home loan market rates nosediving by 50 basis points. The HDFC Bank and Standard chartered bank has become the first player in this sector to announce a housing loan for a 20 years period. No doubt it will enhance the end cost people to plan their house over longer duration now; it has been made easy for a person to buy that dream house which he dreamt of long ago. 2

HDFC also provides with Home Improvement Loan for internal and external repairs and other structural improvements like painting, waterproofing, plumbing and electric works, tiling and flooring, grills and aluminium windows. HDFC finances up to 85% of the cost of renovation (100% for existing customers). Current status is that HDFC reduced home loan rates by 50 basis points for all its existing floating rate customers.

1.2 OBJECTIVES OF STUDY
There is no strongest foundation for your dream home, than a cheap loan. Home loans have become that stronger foundations for people who want to own a home. The main objectives of the study are as follows :➢ The main objective of this study is to know the Customers perceptions about ➢ home loans of HDFC(housing development finance corporation)LTD To know the awareness of customers about home loan products and services. ➢ To make comparative study of Disbursement of home loans by a few ➢ Commercial banks. ➢ To study the satisfaction level of customers about home loans.

➢ To study the problems faced by customers in obtaining the home loans. ➢ To learn about various aspect of hdfc home loan ltd.

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1.3

PURPOSE OF THE STUDY

The main purpose of this study is to attain the knowledge of the processing system of home loans. Which is as follows :-

To know the ideas of customers about home loan products and services.

To study the satisfaction level of customers about home loans.

To study the problems faced by customers in obtaining the home loans.

• To learn about various aspect of HDFC home loan ltd.

1.4 SCOPE OF STUDY

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The Indian housing finance industry has grown by leaps and bound in few years. total home loans disbursements by banks has risen which witnesses phenomenal growth from last 5 years. There are greater number of borrowers of home loans. so by this study we can find out satisfaction level of customers and problems faced by them in obtaining home.

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RESEARCH METHODOLOGY OF THE STUDY
RESEARCH METHODOLOGY:Research methodology is a way to systematically show the research problem. It may be understood as a science of studying how research is done scientifically. It is necessary for the researcher to know not only the research methods but also the methodology. This Section includes the methodology which includes. The research design, objectives of study, scope of study along with research methodology and limitations of study etc.

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To know the Customers perceptions about home loans of HDFC housing development finance corporation LTD. • To study the satisfaction level of customers about home loans.

• •

To study the problems faced by customers in obtaining the home loans. To make comparative study of disbursement of home loans by commercial banks, the study shall be conducted in the manner enumerated below-

2.1- RESEARCH DESIGN:This project is based on exploratory study as well descriptive study. It was an exploratory study when the customer satisfaction level was studied to suggest new methods to improve the services of HDFC LTD in providing home loans and it was descriptive study when detailed study was made for comparison of disbursement of home loans by commercial banks.

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

A - PRIMARY SOURCE:-

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In survey approach we had selected a questionnaire method for taking a customer view because it is feasible from the point of view of our subject & survey purpose. We conducted 200 sample of survey in our project to judge the satisfaction level of customers which took home loans.

• Sample size;For the questionnaire I have taken the sample size of 200 customers of HDFC LTD.

B – SECONDARY SOURCE:It was collected from internal sources. The secondary data was collected on the basis of organizational file, official records, news papers, magazines, management books, preserved information in the company’s database and website of the company.

2.3DATA COLLECTION INSTRUMENT DEVELOPMENT :The mode of collection of data will be based on Survey Method and Field Activity. Primary data collection will base on personal interview. I have prepared the questionnaire according to the necessity of the data to be collected.

2.4 LIMITATIONS OF THE STUDY:This study also includes some limitations which have been discussed as follows:

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i) The sample size of 100 customers and 4 banks might prove a limitation because of difficulty in generalization of results. ii) To collect the data from various banks was quite difficult due to noncooperation of some banks. This proved to be major limitation of the study. iii) To access such a large number of customers was difficult because of noncooperative attitude of respondents.

iv) Lack of data was also the other limitation of the study as some of banks do not have proper data on topic.

v) There was limitation of time to conduct such a big survey in limited available time.

vi) Ignorance and reluctant attitude of customers was also a major limitation in this study. Thus above all were the limitations in this research study. The maximum efforts were made to overcome these limitations in the study.

2.5 THE HISTORY OF INDIAN HOME LOANS:-

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Home loans in India have made people Buy Property in India in spite of the skyrocketing prices. Today, we find considerable Real Estate Investment in India, either in the field of Residential Property in India or Commercial Properties in India. Home Loans in India are disbursed by many Banks as Loan Banking is on of the most important function of the Financial Services in India. Property Dealers and Real Estate Consultants in India usually recommend that we undertake appropriate Home Loan or Mortgage Loan counseling so that we can Buy Apartment in India at an affordable Mortgage Rate.Purchasing the home of your dreams is not an easy task. Especially when you plan to buy a home on loan. Home loan means that you buy a house on installments. In simpler terms when you want to own a home and can’t afford to pay the amount in lump sum, you can pay it in monthly installments with an interest rate. The interest rates of home loans are expected to go down even further according to analysts who foresee a cut down in the rates by the RBI in the wake of the decision taken by US Federal Reserve to cut its rates by a significant margin. There are number of companies offer cheap home loans at a low interest rate. You can avail loan against existing house for renovation or expansion etc. There are many nationalized banks that offer finance for affordable housing. India Housing has put together a comprehensive data to provide you with the cheapest Home Loans available in the market. We have listed all the important housing finance institutes and some of the top home finance banks providing lowest interest rates. In the last few years, housing loan scenario in India has changed drastically. It has taken a front seat and people are looking forward to owning their own houses. It is no more a dream that required lifetime saving and a difficult decision to make. Today the new home purchase loan is much easily available and is much cheaper than what was available earlier. Banks are now everywhere and the schemes are implemented even in villages and smaller towns. The housing loans are popular there too, however, the activity 10

of building flats is little slow. It would not be wrong to say that there has been a boom in the home loan market and with this boom; there is also a boom in the Number of home loans mortgage brokers in India. The main reason for this boom in home loan market is the change in government policies. It is our government’s motivation that the home loan interest rates in India have fallen considerably. Lot many banks are offering home loans and this is available at low EMIs (Equated monthly Installments). High EMIs are now a thing of past. Today lending rate is in the range of 7.5 to 15 %. Again, there are different types of home loans available today. The interest rate available is also of two different types. One is the fixed rate loan and the other is the floating rate loan. In the fixed rate loan, whatever interest is fixed on the start of loan is carried on for the complete period. However, in the other one, the interest rate is not fixed and as the interest rate goes up or low the effect is directly transferred to the person who is taking the loan. In the last few years the floating interest rate has been a favorite among most of the people taking home loans. There is also a trend to opt for home construction loan. This loan is available to those who want to design their homes according to their requirement and taste. In other words, this loan is meant for those who themselves want to construct their new home. As shared earlier, taking a loan is not a difficult task. However, before taking a loan, one must realize that the relationship with the bank will be for a longer period usually 15 to 20 years so one must ensure faith and integrity in bank. Apart from low rate of interest, the bank should also provide some value added services. The other thing is to look into is the property that is to be brought. Making sure that the builder has all sanctions and facility to build a good building is very important. Taking home loans these days has become simpler. With the RBI regularly bring down interest rates; taking home loans have become extremely easy. Housing loans which were 16.5% to 18% a few years ago fell 11

by 11.5% to 13%. With interest rates going down, people increasingly number apply to take these loans. Some of the leading banks offering home loans in India, including ICICI Bank, IDBI Bank, HDFC Bank , Bank of Baroda, SBI, Standard Chartered Bank and Axis Bank .

2.6 Home Loan Procedure in India :Submission of Application Form: - After choosing a particular home loan, the customer submits the application form to the housing finance company (HFC) along with other relevant documents as required by the HFC. They comprise documents to establish income, age, residence, employment, investments, etc. The customer also needs to hand over a cheque for payment of an up front (non -refundable) processing fee of about 0.5-1% of the loan amount to the HFC. Validation of the Information: - In the next stage, HFCs validate the information provided by the customer on the application form. They usually conduct checks on the residential address of the customer, the place of employment of the customer, and credentials of the employer. Some HFCs may insist on a personal interview with the customer and perform a reference check on the references provided by the customer on the application form. Issue of Sanction Letter :- After due appraisal of customer profile, a sanction letter is issued which contains details such as loan amount, rate of interest, annual / monthly reducing balance, tenor of the loan, mode of repayment and general terms and conditions of the loan. This is the actually the approval of the money lending procedure by the company. However, the money is sanctioned only after the documents and the property on behalf of which the loan is being granted is thoroughly verified. 12

Submission of Documents: - Once the sanction letter is passed, the customer is required to leave the entire set of original documents pertaining to the property being purchased with the HFC as security for the loan amount sanctioned. These documents remain in the custody of the HFC till the time the loan is fully repaid. Once the documents are handed over to the HFC, they send all the documents for a thorough legal scrutiny. Validation of Property: - Prior to disbursement, the HFC also conducts a site visit to the customer's property to ensure that all construction norms have been adhered to properly. Once the HFC is satisfied that the property is legally and technically clear, they disburse the loan amount. The disbursement from the HFI is on the basis of the stage of construction of the property. Payment Procedure: - Once all the above mentioned process, the borrower is entitled to take the money from the lender party. Until such time that the entire sanctioned amount is not drawn, the customer is supposed to pay a simple interest on the Actual Amount drawn (without any principal repayments). The EMI payments commences only after the entire sanctioned loan amount is drawn.

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2.7 INTEREST RATES PROVIDED BY VARIOUS BANKS
Finance Institution Loan EMI / Lakh Period Fixed Floating (INR) (in years) Up to 5 6 to 10 11 to 15 16 to 20 Up to 5 Of6 to 10 11 to 15 16 to 20 Up to 5 6 to 10 11 to 15 16 to 20 9.00 9.25 9.50 9.50 9.50 9.75 11 11 11 11 2076 1230 1044 932 2100 1300 2175 1375 1137 1033 8.00 8.25 8.25 8.50 8.75 9.25 9.25 9.75 9.50 9.50 9.50 9.50 EMI / Lakh (INR) 2028 1227 970 868 2064 1280 1029 949 2101 1294 1045 933

Bank of Baroda

State India

Bank

HDFC

ICICI Bank

Up to 5 6 to 10

10.75 2162 10.75 1364 14

9.50 9.50

2101 1294

11 to 15 16 to 20 Up to 5 Housing6 to 10 11 to 15 16 to 20 Up to 5 Housing6 to 10 11 to 15 16 to 20

10.75 721 10.75 1016 10.50 11 11 11 9.00 9.00 9.25 9.50 2149 1373 1137 1032 2076 1267 1030 933

9.50 9.50 9.50 9.50 9.50 9.50 10.50 10.50 10.50 10.50

1045 933 2100 1294 1044 932 2150 1350 1106 999

LIC Finance

PNB Finance

The above table illustrates the comparison between the interest rates from various Housing Finance Companies and banks. It can be seen that if one wishes to go for floating loans, the bank which gives the best deal as far as the interest rate is concerned is HDFC followed by PNB Housing Finance with the lower rates.

2.8Recent trends of home loan in India:In order to understand the recent trends we need to know or understand various factors. These factors play vital role in Indian home loan market. These include interest rate on which banks provide home loan, tax rebate on home loan and its impact. Apart from this to understand the recent trend we need to compare the trends of home loan of different years. Here we have compared the interest and other market trends of year 2009 with 2007-08. This kind of comparison gives the result which helps us to understand the trends of market of any industry. Apart from the impact of present and past economic ups and down also affect the trends. Today the US slowdown is the major issue which has affected almost all the industry. So we have also discussed this issue in terms to define trend of home loan market in India.

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HDFC: yielding Ground: Loan growth may slow down in 2009-10 as the company loses some market share.

GRAPH

Competition is not new to HDFC, after all ICICI Bank was a tough competitor when it went on a customer acquisition spree some years back.

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This time around, although ICICI may not be in a position to give HDFC a run for its money, public sector banks, especially State Bank of India (SBI) could. The difference between four years ago and now is that money today is not yet cheap and certainly not as inexpensive as it was back in 2004 and 2005. Of course with bank loans to HDFC now treated as priority lending, the cost of funds for HDFC should come down. But should long-term rates go up, HDFC will feel the pinch. That’s why the market sat up and took note when SBI kicked off an 8 per cent in- the- first -year product believing HDFC could lose some market share. In the recent rally, the stock which had plunged to a two year low, has gained 31 per cent to the Sensex’s 23 per cent. The good news is that transactions could start picking up in the second half of 2009 now that property prices have started trending down as have interest rates. But although the home loan major believes it can manage a growth of 20 per cent in 2009-10, analysts are not so sure. CLSA points out that HDFC’s loan growth (pre-securitisation) would be around 15-17 per cent. One reason for this is that HDFC Bank may now hold back a higher proportion of loans that it originates; the bank currently sources just over a fourth of HDFC’s loans. As a result HDFC’s operating income may increase by about 15 per cent in 2009-10 while its net profits should grow by about 10-12 per cent. HDFC has always scored when it comes to keeping bad loans in check, which is why a few delays or even defaults will not hurt the balance sheet. At Rs 1,653,the stock trades at around 2.8 times the estimated adjusted book value for 2009-10.

2.9Types of home loans: Housing loans offered by banks are of different types:• Home Purchase Loans 17

• • • • • • • • • •

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

Home purchase loans:This is the basic home loan for the purchase of a new home. If you want to buy a flat in some society or some already built house, banks and HFCs sanction you home purchase loans for this process. Home construction loans:This loan is available for the construction of a new home on a said property. The documents that are required in such a case are slightly different from the ones you submit for a normal Housing Loan. If you have purchased this plot within a period of one year before you started construction of your house, most HFCs will include the land cost as a component, to value the total cost of the property. In cases where the period from the date of purchase of land to the date of application has exceeded a year, the land cost will not be included in the total cost of property while calculating eligibility. Home improvement loans:-

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These loans are given for implementing repair works and renovations in a home that has already been purchased, for external works like structural repairs, waterproofing or internal work like tiling and flooring, plumbing, electrical work, painting, etc. One can avail of such a loan facility of a home improvement loan, after obtaining the requisite approvals from the relevant building authority. the following are coming under the improvement loans: • • • • • • • • • • External repairs Tiling and flooring Internal and external painting Plumbing and electrical work Waterproofing and roofing Grills and aluminum windows Waterproofing on terrace Construction of underground/overhead water tank Paving of compound wall (with stone/tile/etc.) Borewell. home

Home extension loans:An extension loan is one which helps you to meet the expenses of any alteration to the existing building like extension/ modification of an existing home; for example addition of an extra room etc. One can avail of such a loan facility of a home extension loan, after obtaining the requisite approvals from the relevant municipal corporation. Home conversion loans:This is available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through a home conversion loan, the existing loan 19

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

Balance- transfer loans:Balance Transfer is the transfer of the balance of an existing home loan that you availed at a higher rate of interest (ROI) to either the same HFC or another HFC at the current ROI a lower rate of interest. Refinance loans:Refinance loans are taken in case when a loan for your house from a HFI at a particular ROI you have taken drops over the years and you stand to lose. In such cases you may opt to swap your loan. This could be done from either the same HFI or another HFI at the current rates of interest, which is lower. 20

NRI home loans:This is tailored for the requirements of Non-Resident Indians who wish to build or buy a home or property in India. The HFCs offer attractive housing finance plans for NRI investors with suitable repayment options. On would be entitled for home loans in the range of Rs 5 lakh to a maximum of Rs 1 crore, based on the repayment capacity, previous credit history and the cost of the property. The bank may provide a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land. The repayment capacity is calculated taking into account factors such as: • • • • • • • • Age Income/Salary Qualifications Dependant/(s) Assets/Liabilities Credit History Stability / continuity of your employment/business Income of co-applicant/(s) Taking home loans these days has become simpler. With the RBI regularly bring down interest rates; taking home loans have become extremely easy. Housing loans which were 16.5% to 18% a few years ago fell by 11.5% to 13%. With interest rates going down, people increasingly number apply to take these loans. Some of the leading banks offering home loans in India, including ICICI Bank, IDBI Bank, HDFC Bank State Bank, Bank of Baroda, Kotak Bank, SBI, Standard Chartered Bank and Axis Bank.

2.10HDFC Home Loan:-

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

HDFC home loans can be applied for either individually or jointly. Proposed owners of the property will have to be co-applicants. However, the coapplicants need not be co-owners. Maximum tenure is 20 years subject to retirement age. Loan Amount: - 85% of the cost of the property (including the cost of the land) and based on the repayment capacity of the customer. Rate of Interest :- The current applicable fixed rate of interest in respect of the total loan approved is as follows:

For loans up to Rs.2, 00,000:-

Term of Loan (No. of Years) Up to 5 6 - 10 22

Rate Per Annum (%p.a) 10.00 10.75

11 - 15 For loans greater than Rs.2, 00,000 Term of Loan (No. of Years) 5 10 15

11.00

Rate Per Annum (%p.a) 10.00 11.00 11.25

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

Rupees 2199 1401 1159

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

Rupees 2199 1416 1175

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

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charge of 2% of the amount being prepaid is payable on repayment of a loan ahead of schedule. Repayment Period: - Repayment Options – Step Up Repayment Facility; - helps younger borrowers to take a much bigger loan today based on an increase in their future income. Flexible Loan installments Plan: - Often customers, parents and their children wish to purchase properties together. The parent is nearing retirement and their children have just started working. This option helps such customers combine the incomes and take a long term home loan where in the instalment reduces upon retirement of the earning parent. Tranche Based EMI Customers purchasing an under construction

property need to pay interest (on the loan amount drawn based on level of construction) till the property is ready. To help customer save this interest, HDFC has introduced a special facility of Tranche Based EMI. Customers can fix the installments they wish to pay till the time the property is ready for possession. The minimum amount payable is the interest on the loan amount drawn. Anything over and above the interest paid by the customer goes towards Principal repayment. The idea is customer benefits by starting EMI and hence repays the loan faster. Accelerated Repayment Scheme provides borrower the opportunity to repay the loan faster by increasing the EMI. Whenever the borrower gets an increment, increase in disposable income or have lump sum funds for loan prepayment, they can benefit by saving of interest because of faster loan repayment. Borrower can benefit by: • • Increase in EMI means faster loan repayment Saving of interest because of faster loan repayment

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You can invest lump sum funds rather than use it for loan prepayment. The return from the investments also gives you the comfort of paying the increased EMI...

Documents Required :Salaried Customers Application form with photograph Self Employed Professionals Application form with photograph Education Qualifications Latest Salary-slip Certificate and Proof of business existence Form 16 Last 3 years Income Tax returns (self and business) Last 3 years Profit /Loss and Self Employed Businessman Application form with photograph Education Qualifications Certificate and Proof of business existence Business profile Last 3 years Income Tax Last 6 months returns (self and business) Last 3 years Profit /Loss and Balance Sheet Processing fee cheque Last 6 months bank statements Processing fee cheque Last 6 months bank statements (self and business) Processing fee cheque bank statements Balance Sheet

The Credit Appraisal is an important step in sanctioning loan applications .Hence the Credit Appraiser needs to have certain important documents to compute the credit worthiness of person these include the following :1) SALARY SLIPS (3 MONTHS CURRENT) :- The salary slip is usually a printed sheet of paper that contains 2 components the applicant .In the case of salaried

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Income/Earnings collumn: - It contains an exhaustive list of the various components that are added to the persons salary. They contain various components like Basic pay, HRA etc. Deductions :- It contains an exhaustive list of various components that are deducted from the persons Earnings. They contain various components like Income tax, Provident fund, Employee Loans etc. 2) BANK STATEMENTS(6 MONTHS CURRENT) ;- The bank statement

contains the various transactions that the applicant performs in his bank account. It has 3 components • • Date Descriptions ;- It contains the brief and standardized description of the activity or the account related to the transaction .Eg. Clearing cheque 166129, Transfer deposit. • • Deposits: - It contains the amounts that were credited to the account Withdrawal ;- It contains the amounts that were debited to the account. This is carefully studied to find out about any regular withdrawals or a series of checks so that any existing loans may be revealed and there can be a correct estimate of the repayment capacity. • • Balance :- It shows effect of transaction on the pre existing account balance Special feature :HDFC will not consider any loan s with out standing EMI of or below 6 months. 3) FORM 16 :- It is form given by Employer which states the income earned from that company during the full financial year ,and gives the details of Tax deducted at source.

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

9) CHARGES FOR PROCESSING FEES :- This is a standard and nominal fees to be paid at the time of applying for loan Fees structure. 0.5% of loan amount +Service tax of 12% (Less)Education Less of 3% OR time. 10) PHOTOCOPIES OF PROPERTY PAPERS. NON RESIDENT INDIAN 5618/-

HDFC takes from applicant whichever is less. This is applicable time to

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SALARIED/EMPLOYED; - An NRI is a person with Indian citizenship but residing in another country. An NRI can take a housing loan from HDFC. He is however not eligible for a Top Up loans,Home Equity Loans,Non Residential Premises Loans .He is however eligible for Home Improvement and Home Extension Loans from HDFC . An NRI Loan is appraised on the Net Salary. This is the take home pay package obtained after reducing the deductions from the earnings .As this salary is low it reduces their loan eligibility .However the salary is converted into Indian Currency for computing credit worthiness.The figure obtained is higher in Indian currency hence the loan eligibility rises.Eg 5,487$ american dollars will mean 2,46,915 Rupees. SELF EMPLOYED PROFESSIONALS :- An NRI applicant can also be a Doctor, Engineer etc.In these cases HDFC will put them in the special category of Self Employed Professionals. Their credit appraisal is carried out as follows:Their latest available Profit and Loss A/c is reviewed by the credit appraiser. This account has two sides a Profit side which reveals all earnings and gains .There is also a Loss side which shows all taxes, liabilities and losses. We refer to the Profit side a the Gross Receipts.These includes components revealing the nature and amount of the Prime income and other earnings Eg Consultation fees in case of Doctor . From the Gross Receipts we calculate the Gross Profits and thereon move to calculate Loan eligibility .Which is the loan amount that can be conveniently sanctioned to the applicant. Loan Eligibility = Gross Profit * 2

Another important consideration is that the Annual outflow of EMIs should not exceed the NET PROFIT. The Net Profit is computed by deducting the various costs and losses from the Gross profit.

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STAGES OF HOME LOAN

Applicati on

Munirka HUB

DataEntr y Login Scanning

Disburseme nt of loan

Fixed charges

DoubleCheckin g Over(DCOVR)

Recommendati on Over(ROVR)

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

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convenience Hence the loan application may or may not shuttle through different stages. APPLICATION STAGE :- This is the stage where the Application Form first reaches the concerned Service Centre Here all the documents in the application are reviewed by the experienced staff present at the service centre The HDFC Ltd employee who reviews the file checks to see whether all documents are present and in their proper place .He checks if the documents are duly filled,not fake,attested by authority in question and present in order.In case any document is missing the applicant is contacted electronically or by mail .The applicant is contacted by telephone and requested for the document until he denies it being with him. This exercise is called FOLLOW UP. the credit appraisal of the loan application starts at this stage. The service centre employees compute the gross salary, IIR, FOIR, Loan Eligibility ratio etc.The credit worthiness of the applicant is calculated here. It is also at this stage that the QUICK DATA ENTRY of the loan application is done to create a serial no. of the application. after that another page appears and more data is entered .It is now that a special and unique LOAN A/C NO. is created under which all the loan processes will be carried out. The number that has been generated is communicated to the applicant by means of a letter and/or electronic communication the system of electronically recording the data helps to create ready reference, a proof ,helps in quick and easy processing of the data. It also helps to very easily and quickly share data with other employees of HDFC. The next and important processing performed at the service centre is that of filling up a document known as the INTERVIEW SHEET. for processing individual loans (salaried cases) .It contains various simple entries like :1. Name of borrower 2. Name of co-borrower 30

3. Income details:-Family background and permanent address etc. It also contains various important entries like. 5. Gross Salary 6. Rental 7. Other incomes 8. Obligations: - The various other loans that the applicant is entitled to pay ,their amount, their remaining terms ,source etc. 9. Remarks;- This collumn contains the various findings that the employee has found out after thorough review of the applicants documents such as bank statement, salary slip etc. Hence the interview sheet contains the important findings which the employee has collected after careful review of the various documents .The interview sheet helps to cut corners and helps save time by not having other employees to go through the documents again and again .It hence acts as a souce of quick reference. After all this has been performed well enough the loan application will be arranged in a file and all it will be given its loan a/c no which also acts as its file no. the file is now ready to be sent to the HUB where further processing will take place.

SCANNING: - In this stage the various important documents of the applicant are scanned. this helps to create their electronic copy which acts as a ready reference, a proof, and can also be shared and utilized by other employees of HDFC Ltd. DATA ENTRY :- The file has been sent to the back end office or the HUB .At HUB there are many experts with their own specializations . these officials review the various parts of the filae again and perform many specialized tasks Data entry is also one of these tasks .this entry is much more different 31

and complex as compared to the earlier performed Quick Data Entry. An exhaustive amount and type of information has to be entered into the ILPS system ranging from Personal Details, Employment Details to Property Rate History and Customer Interactions. RECOMMENDATION OVER (ROVR) :- The Recommendation OVER is also reffered to as the First Appraisal at this stage certain specially appointed persons have been given the responsibility of recommending a loan. These people have to take special care of reviewing every document, and all the small details that need to be considered before considering the loan application to be valid. After this the file is sent to another specially appointed person as explained below. At this stage if any correction or mistake is present it can be sent back to the Service Centre. DOUBLE CHECKING OVER :- As the name suggests at this stage a

specially appointed person will double check all the past proceedings .He will examine the Loan file for any discrepancies ,any missing and /or misplaced documents,the Credit Appraisal results,etc.this is a very important stage and must be handled with exceptional care. This is because a mistake at this stage can cause a great loss to the company.The Double checker is responsible for the ultimate sanctioning of the loan .If any mistake is done at this stage there is no going back and hence no protection.HDFC takes great care while appointing double checkers .They should have completed a select number of years with the company and should have shown exemplary performance and must posses experience. SANCTIONING :- An authorized sanctioning authority within HDFC itself will review the remarks of Double Checker and Sanctioning authority .If it considers the loan suitable to be Sanctioned it gives its approval .After it has given its approval stamp the ILPS system will automatically send a letter to the Applicant that his loan has been sanctioned. 32

After this approval the Applicant can go to whichever Service Centre which he selects to get his loan disbursed. SPECIAL CASE :- A special case can arise if the applicant has not mentioned the property for which he wants to take a loan .In that case the applicant can let the case be remain pending . this means that the Applicants loan request will be considered to be complete even though he has not decided the property. However the Applicant is expected to finalise the property in a short time. A Property Address is necessary to 1. get the loan disbursed 2. Process the Legal and Technical Appraisal of the property and its Papers.

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

33

34

35

COMPANY PROFILE OF HDFC HOSING DEVELOPMENT FINANCE CORPORATION LTD INTRODUCTION:Housing Development Finance Corporation Limited , founded 1977 by Ravi Maurya and Hasmukhbhai Parekh, is an Indian NBFC, focusing on home mortgages. HDFC's distribution network spans 243 outlets that include 49 offices of HDFC's distribution company, HDFC Sales Private Limited. In addition, HDFC covers over 90 locations through its outreach programmes. HDFC's marketing efforts continue to be concentrated on developing a stronger distribution network. Home loans are also Sharcket through HDFC Sales, HDFC Bank Limited and other third party Direct Selling Agents (DSA). HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since emerged as the largest residential mortgage finance institution in the country. The corporation has had a series of share issues raising its capital to Rs. 119 Crores. The gross premium income for the year ending March 31, 2007 stood at Rs. 2,856 Crores and new business premium income at Rs. 1,624 Crores. The company has covered over 8,77,000 lives year ending March 31, 2007. HDFC operates through almost 450 locations throughout the country with its corporate head quarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing company in India for the last 27 years.

36

SNAPSHOT-I • Incorporated in 1977 as the first specialized Mortgage Company in India. • Almost 90% of initial shareholding in the hands of domestic institutes and retail investors. Current 77% of shares held by foreign institutional investors. • Besides the core business of mortgage HDFC has evolved into a financial conglomerate with holdings In: • CHART:- 3.1

72.26% 60% 23.26% HDFC HDFC STANDAR ASSET LTD BANK (inclusive of MANAGEMEN D LIFE T

✔ HDFC Standard Life insurance Company- HDFC holds 72.26 %. ✔ HDFC Asset Management Company – HDFC holds 60% ✔ HDFC Bank- HDFC holds 23.26%. 37

✔ Intelenet Global (Business Process Outsourcing) – HDFC holds 50%. ✔ HDFC Chubb General Insurance Company – HDFC holds 74%. SNAPSHOT-II

• • • •

Loan Approvals (Up to Dec 2007) Loan Disbursements (Up to Dec. 2007) Housing Units financed Distribution ➢ Offices ➢ Outreach Programs

Rs. 805 billion. (US $ 18.30 bn.) Rs.669 billion (US $ 15.20 bn) 2.5 million. 181 90

jjjjjjjj

HDFC Limited

Type Founded Headquarters Key people Industry Revenue Employees Website

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

38

KEY EXECUTIVE HDFC HOUSING DEVELOPMENT FINANCE CORP LTD :Mr. Deepak S Parekh: -

serves as Executive Chairman and Chief Executive

Officer of the Board of Housing Development Finance Corp. Ltd., (HDFC). He joined HDFC Limited in a senior management position in 1978. He was inducted as a whole-time director of HDFC Limited in 1985 and was appointed as its Executive Chairman in 1993. He is the Chief Executive Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of Chartered Accountants (England & Wales). Mr. K.m mistry: - The Managing Director of the Corporation. He has been employed with the Corporation since 1981 and was the executive director of the Corporation since 1993. He was appointed as the deputy managing director in 1999 and the Managing Director in 2000. He is also a member of the Investors’ Grievance Committee of Directors. Ms. Renu S. Karnad: - The Executive Director of the Corporation. She has been employed with the Corporation since 1978 and was appointed as the Executive Director of the Corporation in 2000. She is responsible for overseeing all aspects of lending operations of HDFC.New Delhi. BOARD OF DIRECTORS:Mr. D S Parekh - Chairman Mr. Keshub Mahindra - Vice Chairman Ms. Renu S. Karnad - Executive Director Mr. K M Mistry - Managing Director Mr. Shirish B Patel Mr. D N Ghosh Dr. S A Dave Mr. S Venkitaramanan Dr. Ram S Tarneja Mr. N M Munjee

39

Mr. B S Mehta

Mr. D M Satwalekar

GROUP COMPANIES:• • • • • • • • • HDFC Bank: World Class Indian Bank- among the top private banks in India. HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager. Intelenet Global: BPO services for international customers. CIBIL: Credit Information Bureau India Limited. HDFC Chubb: Upcoming Private companies in the field of General Insurance. HDFC Mutual Fund HDFC reality.com: Helps to search properties in all major cities in India HDFC securities HDFC Standard Life Insurance Company Ltd Aug, 2000 JOINT VENTURE

HDFC Standard Life Insurance Company Limited was one of the first companies to be granted license by the IRDA to operate in life insurance sector. Reach of the JV player is highly rated and been conferred with many 40

awards. HDFC is rated ‘AAA’ by both CRISIL and ICRA. Similarly, Standard Life is rated ‘AAA’ both by Moody’s and Standard and Poor’s. These reflect the efficiency with which HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively. HDFC Standard Life Insurance Company Ltd was incorporated on 14 th August 2000. HDFC is the majority stakeholder in the insurance JV with 81.4% staple and Standard of as a staple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture. HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private Life Insurance Companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.) India’s leading housing finance institution and the Standard Life Assurance Company, a leading provider of financial services from the United Kingdom. Both the promoters are will known for their ethical dealings and financial strength and are thus committed to being a long-term player in the life insurance industry- all important factors to consider when choosing your insurer. Business Growth:The company commands a market share of over 60% in the housing finance sector. Leveraging on its brand equity HDFC has also entered the Indian Mutual Fund scene quite recently. HDFC was the only applicant to be given clearance by the government, to enter the Rs 250 bn life insurance business. This in itself speaks volumes about the management’s professional reputation. Financial year 2000 proved to be a boon for housing finance companies, as the tax benefits announced in the budget, coupled with the low real estate prices and rising disposable incomes, spurred housing demand. As a result, demand for housing finance too has registered high rates of growth. The housing sector has now been recognized as an engine of

41

economic growth and HDFC is well placed to capitalise on this surge in demand. Against this backdrop, HDFC logged in an excellent performance. The company’s approvals and disbursements during the first half of financial year 2001 witnessed a year on year growth of 33% and 32% respectively. The robust growth in itself is a conclusion that HDFC’s business is far less susceptible to any economy downturn.

(TABLE:-3.2) Financial Snapshot

Growth ratios Operating income Other income Net profits Approvals Disbursements

FY98

FY99

FY00 1HFY0 1 21.1%

13.7% 21.6% 15.2%

331.7% -24.6% -54.0% 346.8% 18.3% 13.8% 20.4% 28.9% 25.2% 30.3% 31.1% 24.4% 31.2% 19.8% 33.4% 31.5%

% change compared to corresponding previous period The entry of new players has not in any way significantly reduced HDFC’s domination in terms of volume. However, the increased competition has led 42

to a decline in interest spread (the difference between interest income earned and interest paid). Over the last couple of years HDFC’s spread has shrunk from 2.1% in financial year 1997 to 1.8% in financial year 2000. When it comes to containing risk, the company’s track record is among the best in the financial sector. During the financial year 2000, HDFC has reduced the quantum of loans where payment was in arrears to just 0.9% of its portfolio. This is because individuals account for nearly 70% of its total outstanding loans. The high level of an individual investor’s personal contribution in a house makes the possibility of default less likely. In keeping with its tradition of playing safe, HDFC is diversifying its business. The company has chosen the acquisition route to increase its assets and customer base in its core business of housing finance. Its recent acquisition of Home Trust Housing Finance and Gruh Finance will not only increase its size but will also bring the economies of scale. Apart from these traditional methods of growing, HDFC is also leveraging the Internet to consolidate its business. It has picked up a stake in various portals. These are pure investments to draw synergies for its existing businesses. Its proposed venture with TCS for setting up call centres can potentially provide HDFC with strong revenue streams. The venture is aimed at cornering a share of $10 bn IT (information technology) enabled services market where India has a significant cost advantage. While its investments in new business may not yield immediate returns, they are likely to enhance HDFC’s returns on equity over the medium term. It will also help in expanding its customer base and provide more credence to its cross-selling efforts. HDFC derives an edge in all its forays because of its wide reaching marketing and distribution network (over 44,000 agents). Once it has the entire range of products (post insurance), the company has plans to enter into distribution of financial products by leveraging its own as well as the network of HDFC Bank. The company can leverage its existing channels to provide the products and services in the areas of Infotech services, asset 43

management, life insurance and commercial banking. This over a longer time frame can emerge as a major source of revenue for the company. The company’s proactivity and brand name, has always accorded it premium valuations on the bourses. But the evidence of increasing competition (from SBI and ICICI) may lead to slow down in its growth, in turn affecting its current valuations. Nevertheless, if its investments in new ventures like call centres, mutual funds, insurance and Internet initiatives click, then HDFC looks set for higher growth and hence, valuations. Also one should not ignore the value of its 27% stake in HDFC Bank (India’s No. 1 private sector bank), which will pay rich dividends to the company.

GRAPH:-3.3

44

BUSINESS OBJECTIVES:-

The primary objective of HDFC is to enhance

residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.

ORGANISATIONAL GOALS:- HDFC's main goals are to :45

a) develop close relationships with individual households, b) maintain its position as the premier housing finance institution in the country, c) transform ideas into viable and creative solutions, d) provide consistently high returns to shareholders, and e) to grow through diversification by leveraging off existing client base. In addition to home building loans, HDFC also offers home extension, home improvement and home conversion loans. It also helps to identify and value properties. HDFC also offers depository services in form of term deposits.

Types of Products offered
HDFC provide loans to meet all your requirements for you to make that house a home. • • • • • • • Home Improvement Loan Home Extension Loan Loans to professionals for office or clinic. Home Equity Loans (Loan Against Property) Loan against Rent receivables Short Term Bridging Loan. Loans to professionals for non-residentials premises loan 46

Key Associates and Subsidiaries: - These are:-

HDFC BANK:• • • • 23.26% owned by HDFC(inclusive of warrants) Market Cap US $ 11 billion ADRs listed on NYSE In February 2008, HDFC Bank board approved the merger with

Centurion Bank of Punjab {CBOP} (1 share of HDFC Bank for 29 Shares of CBOP) • • • 1,412 branches, 528 cities, 2,890 ATMs Over 12 million customer accounts Key business areas

_ Wholesale banking Retail banking Treasury operations • Financials (as per Indian GAAP) for the half year ended Sept 30, 2008 – Total net revenues: Rs 48.26 bn, increase of 51% over previous year – PAT: Rs 9.92 bn, increase of 44% over the previous year

HDFC Standard Life Insurance Company Ltd. (HDFC-SL) :47

Structure: - Strong and stable partnership:• • • • Tie up with Standard Life Assurance Company, U.K. HDFC holds 72.26% of the equity of HDFC-SL Offers 20 individual products and 5 group plans along with 5 optional riders Offers 8 fund options with market linked products

Products: - Diversified product portfolio covering all life stages and needs:-

Premium income and growth: - Values driven growth:Total premium income of Rs. 48.59 bn for FY 07-08 (Previous year Rs 28.56 bn); reflecting a growth of 70% Q1 08-09 growth in total premium of 34% over Q1 07-08 Funds under management of group new business increased by 8% in as at June 30, 2008 as against the previous year. Coverage: - Committed to increasing coverage in an under-insured market :- Achieved a total sum assured of Rs. 33.12 bn in respect of 0.25 million lives covered in Q1 09 taking the cumulative sum assured to Rs. 907.5 bn covering over 3.66 million lives Claims other than withdrawals/surrenders amounted to Rs 0.09 bn . Distribution: - Diversified distribution network to cater to customer preference: - HDFC network is used to cross sell by offering customized products Operates out of 575 offices across the country serving over450 locations Network of over 1,62,000 financial consultants, 379 corporate agents and other sales intermediaries . Market share: - Market share of 7.3% (private sector) and 4.7% (overall) in terms of Effective Premium. Key performance indicators and business practices: -A diversified distribution mix including the tied agency and alternate channels 48

Banks,

brokers,

telemarketing,

direct

sales

force

Tied

agency

contributed 64% effective premium in Q1 09 Strong bank assurance tie-ups with public, private, co-operative and foreign banks amongst the leading players in the pensions segment Leveraging technology to strengthen processes. • • Workflow system awarded the best technology innovation Web based facility to service customers and channel partners

HDFC ASSET MANAGEMENT:• • • • • • Tie-up with Standard Life Investments (SLI) HDFC holds 60% of HDFC Asset Management HDFC MF offers 34 equity and debt oriented products Earned a Profit after Tax of Rs 1.18 billion for FY08; Return on Equity: 75% Paid a dividend of 150% for FY08 to equity shareholders Total assets under management (AUM) as at September 30, 2008, stood at Rs. 647 bn which is inclusive of portfolio management and advisory Services of Rs. 170 bn. • Equity assets as a proportion of the mutual fund’s AUM is 35%.

HDFC PROPERTY FUND:• • Launched in March 2005 First Scheme: HDFC India Real Estate Fund

– Fund corpus: US $ 250 million – fully invested – Domestic, 7 year close ended fund – Funds managed by HDFC Venture Capital Limited • HDFC International Fund – Fund Corpus: US$ 800 million – International, 9 year close ended fund 49

– Targeted at premier institutions and funds across the world Interested in taking an exposure in Indian real estate. HDFC ERGO GENERAL INSURANCE COMPANY LTD:• • HDFC holds 74% and ERGO (Germany) holds 26% The company offers Auto Insurance, Home Insurance, Group Accident Insurance, Group Travel Insurance, Commercial Insurance which includes Fire and Marine and Specialty Insurance Products like Directors & Officers Liability . • • • • Achieved Gross Written Premium of Rs. 2.4 bn. Operates out of 28 locations across the country HDFC network is used to cross sell Home Insurance & Accident Insurance HDFC and HDFC Bank database is used to cross sell Accident Insurance. TABLE:-3.4 CONSOLIDATED EARNINGS:(As at March 31, 2008) HDFC Return on Equity Return on Average Assets Earnings per share (Rs) Profit after Tax (Rs in billion) Total Assets (Rs in billion) consolidated 27.8% 2.7% 85 24.36 810.99 28.2% 2.7% 95 27.13 925.83

50

DISTRIBUTION NETWORK: - HDFC’s distribution network spans 254 outlets that include 54 offices of HDFC’s distribution company, HDFC Sales Private Limited (HSPL). In addition, HDFC covers over 90 locations through its outreach programmes. Distribution channels form an integral part of the distribution network with home loans being distributed through HSPL, HDFC Bank Limited and other third party direct selling associates. To cater to non-resident Indians, HDFC has offices in London and Dubai and service associates in Kuwait, Oman, Qatar, Sharjah, Abu Dhabi and Al Khobar, Jeddah and Riyadh in Saudi Arabia.

51

HDFC HOME LOAN ADVANTAGE :• • • • • • • • Home loan counselling sharing over 30 years of home loan experience Door step service Helps in finding Dream home Wide Product Range Multiple Repayment Option Wide Network of financing Post disbursement service Loan repayment option

AWARDS & ACCOLADES:• • • Goldman Sachs has listed HDFC as one among top 7 financial services organization in 2008. HDFC ranked among the top 3 Best Managed Companies in India by Finance Asia in 2007 Selected as the best Indian company in the FIs / NBFCs / Financial Services sector at the Dun & Bradstreet – American Express Corporate Awards 2006 and 2007. • • • • Best Investment Management Company in India by EUROMONEY 2007 HDFC was awarded a rating of 4 out of 5 in Karmayog's ‘Corporate Social Responsibility Ratings’ in 2007. HDFC is featured in the Limca Book of Records 2006, for the landmark achievement of Rs. One trillion in home loan approvals HDFC was awarded the Gold Shield in the Finance Sector by ICAI for excellence in Financial Reporting in 2005. This is the 14th time HDFC has been selected for this award. • • • HDFC has been awarded the 'Business Superbrand' status. HDFC has been awarded the 'Best Home Financier' title by Outlook Money – 2005 Economic Times Corporate Citizen of the Year Award - November 2004.

52

FUTURE: - HDFC has always been market-oriented and dynamic with respect to resource mobilisation as well as its lending programme. this renders it more than capable to meet the new challenges that have emerged. Over the years, HDFC has developed a vast client base of borrowers, depositors, shareholders and agents, and it hopes to capitalize on this loyal and satisfied client base for future growth. Internal systems have been developed to be robust and agile, to take into account changes in the volatile external environment. HDFC has developed a network of institutions through partnerships with some of the best institutions in the world, for providing specialized financial services. Each institution is being fine-tuned for a specific market, while offering the entire HDFC customer base the highest standards of quality in product design, facilities and service

53

54

COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY COMMERCIAL BANKS

4.1 - Disbursement of Home loans by different banks:HDFC LTD :Years No. of Home loan account holders. 2004-05 2005-06 2006-07 2007-08 2008-09 700 950 1130 1435 1594 Distributed 90.07 120.00 144.67 180.33 240.00 Recovered 63.05 91.20 127.31 165.90 228.12 Balance 27.02 28.8 17.36 14.43 11.88 Home loan Disbursed (in crore Rs.)

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

55

there are upward trend in number of accountholders and disbursement of home loans. Punjab National Bank :Years No. of Home loan account 2004-05 2005-06 2006-07 2007-08 2008-09 holders. 810 950 1120 1433 1500 120.15 183.26 213.65 240.87 265.15 97.28 150.00 185.86 231.07 265.05 22.87 33.26 28.05 9.80 9.10 Distributed Home loan Disbursed (in crores Rs.) Recovered Balance

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

56

Standard Chartered Bank :Years No. of Home loan account 2004-05 2005-06 2006-07 2007-08 2008-09 holders 106 130 154 180 260 Distributed 6.21 11.55 17.06 20.09 24.10 Home loan Disbursed (in crores Rs.) Recovered 5.27 10.16 14.35 18.68 23.91 Balance 0.94 1.38 2.70 1.41 0.48

Interpretation:The standard chartered bank is a private sector bank. It has also upgraded its position in banking sector in DEHRADUN. The figures shown in table reveals that there is upward shift in customer base of Bank from 106 customers to 260 customers. The bank has also increased its share in housing finance by distributing Rs. 24.10 crores in 2008-09. The recovery procedure of Home loan is very sound. 57

ICICI BANK:Years No. of Home loan account 2004-05 2005-06 2006-07 2007-08 2008-09 holders 650 853 1019 1132 1434 104.33 123.24 150.65 176.75 224.00 98.12 105.00 133.46 144.65 209.16 6.21 18.24 17.19 32.10 14.84 Distributed Home loan Disbursed (in crores Rs.) Recovered Balance

Interpretation :The amount reveal that there is tremendous increase in Home loan accountholders. The amount distributed as home loan is also increased from Rs. 104.33 in 2004-05 to Rs. 224 crore in 2008-09. But the recovery mechanism of the Bank is not so good that’s why the outstanding amount shows fluctuating trend.

58

4.2 -COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY COMMERCIAL BANKS:There are number of schemes and products, offered by commercial banks to attract the customers. The comparison among different commercial banks which offer home loans in regard of Disbursement of home loans are as:No. of Home loan account holders ;Table 5.2(a)

Years

HDFC LTD

Punjab National Bank

Standard chartered Ban 106 130 154 180 260

ICICI Bank 650 853 1019 1132 1434

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

700 950 1130 1435 1594

810 950 1120 1433 1500

Average of No. of accounts holders: - Total of home loan customers 59

= -------------------------------------No. of year

Table 5.2 (b) Name of Bank HDFC LTD Punjab National Bank Standard Chartered Bank 1018 ICICI BANK Total 3456 29 100 Average (Rs) 1109 1163 166 Percentage of Accountholders 32 34 5

60

GRAPH:- 4.2

Home loan holders of HDFC LTD and commercial banks

Interpretation:The figure reveals that HDFC LTD is having large number of home loan accountholders. So it ranks first among other banks. But government sector PNB is not behind so much with 31% also market leader. The banks have shown increase in their customers base from 2004 to 2008.but comes as market leader in the home loan cases. HDFC LTD

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Home loans distributed by HDFC and Commercial banks:Table 4.3 (a)

Years

HDFC LTD

Punjab National Bank

Standard chartered Bank 6.21 11.55 17.06 20.09 24.10

ICICI BANK

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

120.15 183.26 213.65 240.87 265.15

90.07 120.00 144.67 180.33 240.00

104.33 123.24 150.65 176.75 224.00 (Rs.in

crore)

Average of home loans granted Total home loans granted = --------------------------------No. of years

62

Table. 4.3 (b) Name of Bank Average (Rs) Percentage of home loans granted (Rs in crore) HDFC LTD Punjab National Bank Standard Chartered Bank ICICI BANK Total 204.62 155.01 15.80 155.79 531.22 39 29 3 29 100

To understand the comparison more effectively and closely, it has been shows Diagrammatically as follows:-

63

GRAPH:- 4.3

Home loans granted by HDFC LTD and commercial banks

Interpretation:There is no doubt that every bank tries to maximize its home loan disbursement. But on the basis of data it is concluded that HDFC LTD shows high average of loan grants Rs. 20.62 crore as compared to ICICI, standard charted bank and PNB respectively. Rs155.01, Rs. 15.80 and Rs. 155.79 crores. On this analysis the HDFC LTD are higher loan provider as compared to other sector banks.

64

Recovery of Home loans:Table4.4 (a) Years HDFC BANK (Rs in crore) 2004-05 2005-06 2006-07 2007-08 2008-09 97.28 150.00 185.86 231.07 256.05 Punjab National Bank( Rs in crore) 63.05 91.20 127.31 165.90 228.12 Standard chartered Bank (Rs in crore) 5.27 10.16 14.35 18.68 23.91 ICICI BANK (Rs in crore) 98.12 105.00 133.46 144.65 209.16

Average recovery of home loans Total home loans recovered = ---------------------------------No. of years

65

Table 4.4 (b)

Name of Bank

Average (Rs)

Percentage of home loans recovered( Rs in crore) 39 30 3 28

HDFC LTD Punjab National Bank Standard Chartered Bank ICICI BANK Total

184.05 135.21 14.47 138.08

471.80

100

It is more clear with the help of this diagram:GRAPH:- 4.4

66

Home loans recovered by HDFC LTD and commercial banks

Interpretation:In the previous years the recovery process of granting loans are very unorganized and inefficient. So there are less recovery of home loans by the commercial banks. But it is evident from the table that every bank whether public or private showed increase HDFC LTD has the greatest recovery of home loans i.e. 39%, thereafter Punjab national bank recovered the 30% of sanction amount. The standard chartered bank is having lowest recovery of their granted amount as home loans.

Outstanding Balance :Table 4.5 (a)

67

Years

HDFC LTD (Rs in crore)

Punjab National Bank(Rs in crore) 27.02 28.8 17.36 14.43 11.88

Standard chartered Bank(Rs in crore) 0.94 1.38 2.70 1.41 0.48

ICICI BANK(Rs in crore)

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

22.87 33.26 28.05 9.80 9.10

6.21 18.24 17.19 32.10 14.84

Average of balance due Total of Balance due in 5 years = -------------------------------------No. of years

Table 4.5 (b)

Name of Bank

Average (Rs) 68

Percentage of balance due (Rs in

crore) HDFC LTD PNB Standard Chartered Bank ICICI BANK Total 20.61 19.89 1.38 17.72 59.15 34 33 2 31 100

Average of one bank %age = --------------------------- x100 Total Average of Banks

The diagrammatically presentation of data is as:GRAPH:- 4.5

69

Balance due on home loans by HDFC LTD and commercial banks

Interpretation:From the above table and figure it shows that standard chartered bank has been less outstanding balance among other banks. The HDFC LTD got high balances due to large customer base, not proper recovery process and lack of modernisation of activities. The public sector bank PNB is having more balance due i.e. 33% as compared to standard chartered bank and icici bank.

70

ANALYSIS & INTERPRETATION

71

The analysis is based on the responses given by customers through questionnaires. AGE GROUP OF SURVEYED RESPONDENTS TABLE 5.1:

Age group 18 - 25 years 26 - 35 years 36 - 49 years 50 - 60 years More than 60 years CHART-5.1:

No. of Respondents 80 64 30 20 6

Analysis:- From the chart above we find that 47% of the respondents fall in the age group of 18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36 – 49 years. Therefore most of the respondents are relatively young (below 26 years of age). and 6% respondent’s age are 50-60 years and 2% respondent’s age are 60 to above years. GENDER CLASSIFICATION OF SURVEYED RESPONDENTS TABLE-5.2 Sr. No. 1 2 Category Married Unmarried Total No. of Respondents 140 60 200 Percentage 70% 30% 100% Base 200

respondents

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CHART-5.2

Interpretation From the table and graph above it can be seen that ➢ 70% respondent’s are married. ➢ 30% respondent’s are unmarried. Educational qualification of respondent’s TABLE-5.3 Sr. No. 1 2 3 Category Under graduate Graduate Post graduate Total No. of Respondents 50 80 70 200 Percentage 25% 40% 35% 100% Base 200 respondents CHART-5.3

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

CUSTOMER PROFILE OF SURVEYED RESPONDENTS 73

TABLE 5.5: Customer profile Student Housewife Working Professional Business Self Employed Government service employee Chart-5.5 No. of respondents 15 10 100 40 20 15

Interpretation From the table and graph above it can be seen that:51% of the respondents are working professionals, 22% are into business and 11% are self-employed, 11% of the respondent’s are government service employee and 3% of the respondents are student and 2% of the respondents are house-wife. ANNUAL HOUSE HOLD INCOME? TABLE-5.6 Sr. No. Category No. of 74 Percentage

1 2 3 4

Less than 2 lacs Between 2 to 5 lacs Between 5to 8lacs More than 8 lacs Total

Respondents 98 62 30 10 200

49% 31% 15% 5% 100% Bas

e 200 respondents CHART-5.6

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

Do you know about HDFC housing development finance corporation LTD? TABLE 5.7: Category Yes No. of Respondents 164

No

36

75

CHART:-5.7

Awareness about HDFC LTD

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

Table 5 .8:Reasons for getting the home Loan Sr.No. a. b. c. d. Number of Reasons Non-availability of funds Reluctancy to pay cash in one go Tax benefit Any other Percentage(%) 36 35 24 5

76

GRAPH:- 5.8

Interpretation:To interpret the response of the questions, the figures shows that most of the customers find the problem in availability of funds i.e. 36% and very less number of customers found problem in paying cash in one go is 35%, customers get housing loan for tax benefits is 24%. This was the expected response because a large number of people find a problem of availability of funds which works as an obstacle in owning a dream home. In today's life, people hardly earn both means and ends of life and they don't have much of money to buy a home or a land to construct house because of cost of property. So, they take the advantage of home loans provided by different banks at different terms feasible to the customers. There are very less number of people, who don't own home even when they 77

have sufficient funds and they take the advantage of home loans because they don't want to pay huge cash in one go. On the basis of study, it is concluded that most of people lack of money in fulfiling their dreams and few of them were reluctant to pay cash in one go and wanted to pay their home loans slowly in installments.

Table-5.9
From where you have got your home loan? Name of Banks / company HDFC LTD Punjab National Bank Standard Chartered Bank ICICI BANK Any other (%)Percentage of customers 55 15 07 20 03

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

GRAPH:- 5.9

78

From where you have got your home financed

Interpretation:The analysis showed that a large number of customers prefer HDFC LTD as compared to others. The data shows that 7% of customers took loan from Standard Chartered Bank, 20% of customers from ICICI BANK, 15% Customers took loan from Punjab National Bank, 55% of customers took loan from HDFC LTD and a 3% of customers fall under the category of 'Any other' which included State Bank of India, Canara Bank, Punjab and Sind Bank, etc. The data shows that most of people prefer HDFC LTD compared to public sector banks and other private banks. This is because of the extra services provided by HDFC LTD. However, there is less difference in figures of ICICI Bank and Punjab National Bank. But there is considerable difference in figures of the two private sector banks i.e. ICICI bank and Standard Chartered Bank. As ICICI is the market leader in the home loans sector. This may be the reason for such difference in Standard Chartered Bank's percentage and ICICI Bank's percentage. Another reason for specialized services in home loans, more amounts of loans, and efficient query handling. 79

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

Table-5.10
Sources of information about Home Loans Scheme? Sources of information Newspapers Magazines Banners/Hoardings/Pamphlets Word of mouth Any other source (%)Percentage of customers 49 16 11 20 04

CHART:-5.10 percentage of source of information about home loans scheme

80

Sources of information about Home Loans Scheme

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

Table-5.11
Opinion about the services of HDFC LTD? Services of HDFC LTD 81 Percentage of customers agreeing

Strongly agree

Agree

Neutral

Disagre Strong e ly disagr ee -

a. Professionally managed b. Reliable & transparent c. Socially responsible

86%

10%

4%

-

67%

33%

-

-

-

75%

10%

15%

4%

-

d. Customer care

20%

68%

8%

-

-

e. Query handling

20%

76%

4%

-

-

GRAPH-5.11 Opinion of customers about HDFC LTD

82

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

Table-5.12

83

Opinion of customers about home loan schemes? HDFC LTD :Services of HDFC LTD a. Amount of loan b. Legal formalities c. Interest rates d. Repayment options e. Security demanded f. Installments g. Services h. Processing for sanction of loan Percentage of customers agreeing Strongly agree 60% 42% 32% 26% 20% 55% 45% 55% Agree 35% 45% 56% 64% 32% 40% 30% 24% Neutral 5% 14% 12% 10% 48% 5% 18% 18% Disagr ee 6% 3% Strongly disagree 1% -

GRAPH:- 5.12 Percentage of satisfaction level of customers of HDFC LTD

84

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

PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS

85

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

86

CHAPTER-6

87

FINDINGS

1. HDFC LTD is having good brand image in the minds of customers. 2. Majority of the people have got loans from HDFC LTD only 3. Most of the customers are not aware of the products of HDFC home loans 4. Some of the customer’s felt that the interest rates are some what high 5. Some of the customer not having good faith on private banks like Standard chartered bank, HSBC bank etc. 6. Most of the people directly go to HDFC to apply a home loan 7. Some of the customer of HDFC already benefited through HDFC home loan products and services 8. HDFC LTD is providing good services to their customers. 9. ) The interest rates also some what high when compare to other banks

88

SUGGESTIONS

These suggestions have been discussed as follows:1) To increase their customers, the HDFC LTD should provide specialized services in this sector. These services can be such as proper guidance to the customer regarding the processing of loans, especially for the customers who are illiterate. 2) To satisfy their customers and for good dealings in future, the HDFC LTD should make prompt disbursement of loan amount to the customers so that they can buy or construct their dream home as early as possible. 3) The HDFC LTD should use easy procedure, or say, less lengthy procedure for the sanctioning of loan to the customer. There should be less number of legal formalities, in case this exists, then, these should be completed in less time. This will be helpful in attracting more customers. 4) Although the interest rates on specific norms, yet customers seek less interest rate which can lower their cost of house. So banks should try to lower their interest rates. Needles to say, that the bank which is having lower interest rates, have the maximum clients for loans. 5) HDFC LTD provide loan according to the repaying capacity of the customer and his/her eligibility. Due to which, some customers are not able to get amount of loan needed by them. So, the HDFC LTD should soften their norms regarding the loan amount. 89

6) Create awareness: The Company has to take care of awareness creation about the products and services among the customers. 7) Charges: The Company has to reduce the mortality and

administration charges. 8) The company has to reduce their interest rates on home loan products and services.

9) The company has to identify the potential customers. 10) Company should consider the present competition and should act according to the customer needs.

CONCLUSION
1) In my study we came to know that many peoples are interested to take a home loan from HDFC LTD to construct their homes. 2) Home loans have long period when compare to other personal loans and other loans. So peoples are confused to take a home loan. 3) Even though the interest rates are high peoples are willing to take a loan from HDFC LTD due to certain reasons. 45) The loan sanction process is low when compare to other banks. 6) The disbursement process very effective as it time when compared to other banks

90

Finally the whole research was carried out in a systematic way to reach at accurate results. The whole research and findings were based on the objectives. However, the study had some limitations also such as lack of time, lack of data, non-response, reluctant attitude and illiteracy of respondents, which posed problems in carrying out the research. But proper attention was made to Carry out research in proper way and to make accurate conclusion for the HDFC LTD which may beneficial for banks to enhance their customer base.

91

REFERENCES
REVIEWS ➢ Berstain David(2008), “Home equity loans and private mortgage insurance: Recent Trends & Potential Implications”, Vol.3 No.2, August 2008, Pp. 41 - 53 ➢ Dr. Rangarajan C. (2001), “A Simple Error Correction Model of House Price”.Journal of Housing Economics Vol. 4, No. 3,pp 27 – 34

92

➢ Fanning (1982), “The Demand for Home Mortgage Debt” Journal of Urban Economics, Vol 11 No 2, November, pp. 770-774 ➢ Godse (1983), “looking a fresh at banking productivity”, Journal of Real Estate Literature, Vol. No. 13, Page 141 to 164. ➢ Haavio, Kauppi(2000) , “Residential Lending to Low-Income and Minority Families: Evidence from the 1992 HMDA Data," Federal Reserve Bulletin,Vol no 80(2), December 2000 Pp-79-108 ➢ Kulkarni (1979), “Development responsibility and profitability of banks” Journal of Economic Perspectives, Vol 9 No 1 ,pp. 26-32. ➢ La courr, Micheal(2007) , “Economic Factors Affecting Home Mortgage Disclosure Act Reporting” The American Real Estate and Urban Economics Association, Vol.2 No. 2 May 18, 2007, Pp. 45 -58 ➢ La cour Micheal(2006) , “The Home Purchase Mortgage Preferences Of Lowand-Moderate Income Households”, Forthcoming in Real Estate Economics , Vol 18, No 4 , December 20, 2006, p. 585. ➢ Vandell ,kerry D(2008), “Subprime lending and housing bubble:tail wag dog?”International Journal of Bank Marketing, vol 21,no 2, pp. 53-7 ➢ Brochure on home loans from HDFC LTD NEWS PAPERS ➢ The Times of India ➢ Financial Express WEB PAGES:http://www.hdfcindia.com/ http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_08. html www.hdfc.com 93

http://www.iloveindia.com/real-estate/housing-financecompanies/hdfc.html http://www.loansnews.info/Home-loan/hdfc-home-loans/ http://www.hdfcindia.com/loans/hm-loan-documents.asp http://www.thinkplaninvest.com/2009/01/hdfc-will-cut-home-loan-rates/ http://www.suncorp.com.au/suncorp/personal/home_loans/tips/faq.aspx http://investing.businessweek.com/research/stocks/people/people.asp? ric=HDFC.BO http://www.economywatch.com/companies/forbes-list/india/housingdevelopment-finance-corporation.html http://www.hdfcindia.com/loans/home-loan.asp http://docs.google.com/gview? a=v&q=cache:woJTMDV1HLYJ:www.hdfc.com/pdf/32AGM %2520speech.pdf+hdfc+housing+finance+development+product&hl=en &gl=in http://www.munichre.com/en/press/press_releases/2007/2007_10_30_profi le_hdfc.aspx

http://www.hdfc.com.mv/faq.htm

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http://ayaanbayaan.com/hdfc-ltd-financial-results-indian-gaap-for-theperiod-april-to-june-2009/ http://www.valuenotes.com/press/pr_HDFC_250ct05.asp? ArtCd=70013&Cat=C&Id=100

QUESTIONNAIRE
Dear Sir/ madam I am D.V.Narayana Reddy doing MBA from Osmania University. I m preparing a project on A STUDY ON HOME LOANS. For this I have designed a Questionniare to know your views and satisfaction level of home loans .please fill the given as per your thinking and experiences with this. I will be thankful to you for this.

95

Name: ……………………………………………………………………….. Address:

……………………………………………………………………..
Contact No :®………………(

O)………………

(M)

………………………
City:

………...............Pin:

………………….State:

……………………….

1. Name: ____________________ 2. Age: (a) 18-25 years (d) 50-60year (b) 26-35 years (f)more than 60 years (c) 36-49 years

3. Marrital Status? (a) Married (b) Un married

4. Educational qualification of respondent’s? (a)Under graduate (c) Post graduate (b) Graduate

5. occupation of respondents? (a) Student Professional 96 (b) Housewife (c) Working

(d) Business employee

(e) Self Employed

(f) Government service

6. What is your Annual Household Income? (a) Less than 2 lacs (c) Between 2 to 5 lacs (b) Between 2 to 5 lacs (d) More than 8 lacs

7. Do you know about HDFC housing development finance corporation LTD? (a) Yes (b) No

8. Reasons for getting the home Loan? (a) Non-availability of funds (c) Tax benefit (b) Reluctancy to pay cash in one go (d) Any other

9. From where you have got your home loan? (a) HDFC LTD (d) ICICI BANK (b) Punjab National Bank (e) Any other (c) Standard Chartered Bank

10 Sources of information about Home Loans Scheme? (a) Newspapers (d) Word of mouth (b) Magazines (c) Banners/Hoardings/Pamphlets

(f) Any other source

97

11 Opinion about the services of HDFC LTD? (a) Strongly agree (e) Strongly disagree (b) Agree (c) Neutral (d) Disagree

12 Opinion of customers about home loan schemes? (a) Strongly Agree (b) Agree (c) Neutral (d) Disagree

(f) Strongly disagree

18. Did you face any problem after sanction of loan? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________

THANKS

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