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PROJECT REPORT
On
A STUDY ON CUSTOMER SATISFACTION ON HDFC
HOME LOANS.

In Partial Fulfillment for the Award of Degree


MASTER OF BUSSINESS ADMINISTRATION
AFFILIATED TO
U.P. TECHNICAL UNIVERSITY, LUCKNOW
SESSION (2010-2012)

Submitted to:
Submitted by:
Mr. .Ritesh Agarwal Ghanshyam Das
(Project Guide) MBA 4th SEMISTER
K.C.M.T., BAREILLY

KHANDELWAL COLLEGE OF MANAGEMENT


SCIENCE & TECHNOLOGY

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STUDENT DECLARATION

This is to certify that I have completed the Project titled A STUDY ON


CUSTOMER SATISFACTION ON HDFC HOME LOANS under the
guidance of Mr. RITESH AGARWALsir in the partial fulfillment of the
requirement for the award of the degree of Masters in Business
Administration from Khandelwal College of management science &
technology, Bareilly. This is an original work and I have not submitted it
earlier elsewhere.

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ACKNOWLEDGEMENT

"Gratitude is not a thing of expression; it is more matter of feeling."

There is always a sense of gratitude which one express towards others for their
help and supervision in achieving the goals. This formal piece of acknowledgement is an
attempt to express the feeling of gratitude towards people who helpful me in
successfully completing of my training.

I would like to express my deep gratitude to Mr.Ritesh Agarwal who guided


me to work honestly and to give valuable suggestion for improving my work Last but
not least I would also like to place of appreciation to all the respondents whose
responses were of utmost importance for the project.

Above all no words can express my feelings to my parents, friends all those
persons who supported me during my project. I am also thankful to all the respondents
whose cooperation & support has helped me a lot in collecting necessary information.

I would also like to thank almighty God for his blessings showered on me during
the completion of project report.

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TABLE OF CONTENTS
Student Declaration .. i
Certificate from guide ii
Acknowledgement......... iii
Executive Summary..iv
List of Abbreviations... v
CHAPTER 1: INTRODUCTION-
1.1 Introduction to home loans............... 1
1.2 Advantages of home loans 1
1.3 Disadvantages of home loans... 2
1.4 Disbursement of home loans 3
CHAPTER 2: OBJECTIVES OF THE STUDY... 13
2.1 Purpose of the Study......14
2.2 Scope of the Study......14
CHAPTER 3: RESEARCH METHODOLOGY.. 16
3.1 Research Design. 16
3.2 Data collection.... 16
3.3 Sample size..17
3.4 Sampling Technique. 17
3.5Liminations. 18
CHAPTER 4: REVIEW OF LITERATURE 20
CHAPTER 5: INDUSTRY PROFILE.. 22
5.1 The History of Indian home Loans.. 22
5.2 Home Loan procedure in India.23
5.3 Interest rate provided by banks24
5.4 Indian Market for Home loans is more than Rs.500,000 cr... 27
5.5 Indian home loans Industry.. 28
5.6 Recent trends oh home loans in India...31
5.7 Impact of slowdown on home loan market in India31
5.8 Interest and market trends in year 2009..33
5.9 Types of home loans... 35
5.10 HDFC home loan..37
CHAPTER 6: COMPANY PROFILE48
CHAPTER 7: DISBURSEMENT OF HOME LOANS BY HDFC .62
CHAPTER 8: COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS
BY COMMERCIAL BANKS .. 66
CHAPTER 9: ANALYSIS & INTERPRETATION 80
CHAPTER 10: FINDINGS.97
CHAPTER 11: RECOMMENDATIONS AND SUGGESTIONS.. 98
CHAPTER 12: CONCLUSION.100
BIBLIOGRAPHY .. 101
ANNEXURES 103

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LIST OF ABBREVIATIONS

ABBREVIATIONS EXPANSION

ROVR RECOMMENDATION OVER

NRI NON RESIDENT INDIAN

RBI RESERVE BANK OF INDIA

PNB PUNJAB NATIONAL BANK

SBI STATE BANK OF INDIA

IIR INCOME TO INSTALLMENT RATIO

FLIP FLEXIBLE LOAN INSTALMENT PLAN

DSAs DIRECT SELLING AGENTS

BSAs BUSINESS SELLING AGENTS

DCOVR DOUBLE CHECKING OVER

RPLR RETAIL PRIME LENDING RATE

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CHAPTER- 1

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CHAPTER 1

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 ones dream.
Home is one of the things that everyone one wants to own. Home is a shelter to
person where he rests and feels comfortable. Many banks providing home loans whether
commercial banks or financial institutions to the people who want to have a home.
HDFC-(Housing Development And Finance Corporation) Home Loan, India have
been serving the people for around three decades and providing various housing loan
according to their varied needs at attractive & reasonable interest rates. Owing to their wide
network of financing, HDFC Housing Loans provides services at your doorstep and helps
you find a home as per your requirements.
Many banks are providing home loans at cheapest rate to attract consumers towards
them. The more customer friendly attitude of these banks, currently offer to consumers
cheapest loan over homes.
In view of acute housing shortage in the country, and keeping in mind the social
economic role of commercial banks in the present times, the RBI advised banks to
encourage the flow of credit for housing finance.
With the RBI reducing bank rate, the home loan market rates nose-diving by 50
basis points. The HDFC Bank and Standard chartered bank has become the first player in
this sector to announce a housing loan for a 20 years period. No doubt it will enhance the
end cost people to plan their house over longer duration now; it has been made easy for a
person to buy that dream house which he dreamt of long ago.
HDFC also provides with Home Improvement Loan for internal and external repairs
and other structural improvements like painting, waterproofing, plumbing and electric
works, 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.

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1.2 ADVANTAGES OF HOME LOANS:-


The various benefits of home loans arising to the customers are:-

(i) Attractive interest rates:-


The various banks offer attractive interest rates to boost and help their customers.
Many banks provide loans on fixed or floating rates to facilitate consumers as per their
needs.
(ii) Help in owning a home:-
The home availed by a person with the help of banks, because they provide
technical and financial assistance to customers for owning their dream home.
(iii) No requirement of guarantor:-
The commercial banks now a day, liberalize their laws regarding home loans. Some
of banks dont even require the guarantor to grant loan to their consumers. They also make
consumers free by reliving him to find a guarantor to complete the proceedings of availing
loan.
(iv) Door-Step Services:-
These door to step services are provided from enquiry stage to the final disbursement
takes place such services are beneficial for customers in present busy life. Banks like ICICI
bank and standard chartered bank provide door to step services to customers to borrow
loan.
(v) Loan period:-
There are many banks which provide maximum loan tenures upto 15-20 years based
on the loan amount and the creatibility of customers. This relieves the customers to repay
loan amount till a long period.
(vi) For accidental death insurance :-
Some banks provide free accidental death insurance with housing loan which is also
beneficial for the customers.
These benefits or advantages of home loans are responsible for making than so
popular among customer that a person who doesnt have their home and want to buy, they
do it with home loan. Home loans help such persons in making their dream home.

1.3 DISADVANTAGES OF HOME LOANS:-


The main disadvantages of home loans are high lightened as below:

(i) Delays in processing :-


Many times, there are huge delays in processing of providing home loans because
various formulations to be fulfilled in this process. Due to these delays customers feel
mentally as well as financially weak.

(ii) Fluctuating interest rates :-


Some banks give home loans at floating rates, which fluctuate at Different intervals
due to some reasons. These changes sometimes, may lead to increase in interest rate which
will increase the cost of home loans to the customers

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(iii) High Cost:-


The public sector banks charge high processing cost for home loans sanctioning.
They are forced to pay serious charges at various stages to fulfill the requirements. Some
consumers are not able to pay such charges so such people could not avail the benefits of
home loan schemes.

(iii) Problems in disbursement:-


There are many problems in disbursement of home loan amount. There is some delay
in disbursement of loan amount to the customers due to legal formalities. This causes
problems to the customers.
These are limitations or disadvantages of home loans. But some times some banks
charges high installments to repay loan amount. Such also causes problem to customers.
These limitations can be removed by providing good and promote services to the
customers.

1.4 DISBURSEMENT OF HOME LOANS:-

The every bank has its own procedure to disburse the loan amount among
customers. After choosing your right home, the next step is disbursement of home loans.
The loan amount is disbursed after identifying and selecting the property or home that are
purchased and submit the requisite legal documents. In the disbursement of home loans a
clear title and full verification to ensure that a person has full rights on his house. The 230A
clearance of seller and /or 371 clearances from the appropriate authority of income tax is
also needed.

(I) Eligibility criteria:-

However, if one is a resident or non-resident individual who is planning to buy a


house in India, one can apply for a home loan. If a person has decided to buy a property in
the near future, he/she can apply for a loan before even selecting the property. Once the
maximum amount to put into the property has been decided, the Housing Finance
Institutions or Banks will let the customer know that how much he/she is eligible for and
this helps to plan out the budget.

(ii) Conditions regarding co-applicants: -


All Housing Finance Institutions lay down conditions on who can be co-applicants.
All co-owners to the property. Need to be co-applicants to the loan necessarily. These
institutions do not permit minors to join in as either co owner or as co-applicants because
a minor is not eligible to enter into a contact as per law. They do not permit even friends
or relatives who are not blood relatives to take a property jointly. However, Income of co-
applicants can be clubbed together to get higher loan eligibility. Given below is a Table
that throws light on acceptable relationship of a co-applicant for clubbing of income.

Income Clubbing of Co-applicants:- It is as follows:-

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Combination Income Clubbing: -

Husband-Wife: - Income of husband-wife can be clubbed.

Parent - son: - It can be clubbed if only son is there but not if any male sibling exists.

Brother-Brother: - If they are currently staying together and intend to stay together in
the new property, then only, their income-can be clubbed for above purposes.

Brother-Sister: - No clubbing-is possible.

Sister-Sister: - No clubbing is possible.

Parent-Minor- Child: - No clubbing is possible in this case also.

(iii) General Terms and Conditions: - The following are the terms and conditions
applicable to the basic home loan product only. These are likely to change on the basis of
the variations of the home loan product. Typically, in general home loans, the following
conditions are applicable:-

1) The loan to value ratio (LTV) cannot exceed a particular percentage. This differs from
product to product and from one Housing Finance Institutional Bank (HFI/B) to
another. The components of the value of the Property calculated here are covered under
cost of property.

2) The maximum tenure of the bank is nominally fixed by HFI/Bs. However, HFls/Bs do
provide for different tenures with different terms and conditions.

3) The installment that one pay is normally restricted to about-50-per cent of the monthly-
gross income of the candidate.

4) The total monthly outflow towards all the loans that have been availed of, including the
current loan is normally restricted to 50% of the gross monthly income.

5) One will be eligible for a loan amount which is the lowest as per one's eligibility. This is
calculated as per the LTV norms, the HR, norms and the FOIR norms as mentioned above.

6) Most HFls/Bs considers the profile before they judge the repayment capacity. The
judgment is based on age, qualifications, number of dependents, employment details,
employer credentials, work experience, previous track record of repayment of any loans
that have been availed of, occupation, the industry to which the candidate's business relates
to, if he/she is self-employed, then the turnover in the last 3-4 years etc.

7) Some HFIs/Bs insists on guarantees from other individuals for the repayment of the
loan. In such cases, the customers have to arrange for the personal guarantee before the
disbursement of the loan takes place.

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8) The property should be technically clear before the HFIs/Bs disburses the loans
amount. Most of institutions and banks have a team of technical experts who visit the site
to get a technical report before the disbursement of loan. This is also beneficial to the
customer as they check for the technical quality and compliance with local laws.

9) The property should be legally clear before one can avail of a disbursement of the loan
amount. Housing-Finance Institutions /Banks (HFIs/Bs) take legal clearance from their
lawyers before the disbursement of amount. This proves to be beneficial to the customers
as a legal expert checks his/her documentation to ensure that he/she get a proper title to the
property.

10) The disbursement of the loan is as per the progress of construction of the property
unless it is a ready property in which case the disbursement will be by one single cheque.
PEMI or simple interest on the loan amount disbursed to the customer in case of a part
disbursement will be payable by the customer on the disbursement.

11) The disbursement in most cases will be favoring the builder or the seller or the society
or the development authority as the case may be. The disbursement will come in the
customer's favour under special circumstances only.

12) The repayment of loan can be made either through deduction against salary, post-dated
cheques, standing instructions or Auto debit instructions to bank.

13) The principle is amortized either on annual reducing or monthly reducing basis as the
case may be.

The above terms and conditions are generally true for most Housing finance
Institutions/Banks with respect to the general Home Loans. However, the specific terms
and conditions vary with respect to special Housing Finance Institutions or Banks.

(iv) Charges applicable to home loans:- The different kinds of charges applicable to
home loans are discussed below:

a) Processing fees:- First of all, comes the process fee. This is a charge that is levied by
most HFls/Bs. This has to be paid at the time of submission of the application form. It's
normally charged as a percentage of the loan amount sanctioned. Some HFls also charge a
flat fee based on the loan amount instead of a percentage. When a lower amount is
sanctioned the excess fees paid at the time of submission of the application is adjusted with
the charges, which one make to the HFI/B subsequently. Most HFls/Bs refund the
processing fee if the loan application is rejected.

b) Administrative fees :- This charge is again, normally, a percentage of the loan amount
sanctioned. It is collected by the HFI/B for the maintenance of customer's records, issuing
interest certificates, legal charges, technical charges, etc. though the tenure of the loan. It is
payable by the customer when he/she accepts the offer letter given by the HFI/B. This

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payment has to be made before the availment of the disbursement. The mode of collection
of these fees varies from one HFI/B to another.

c) Rate of interest:- This is the rate of interest applicable on the loan amount through the
tenure of the loan. It is charged on the principal monthly reducing method. Most HFIs/Bs
gives an option to select either a fixed rate of interest or a variable rate of interest.

d) Legal Charges:- Some HFIs/Bs mainly Public Sector Banks levy legal charges that
they incur on getting the property documents vetted by their panel of lawyers.

e) Technical Charges:- These charges are also levied by certain Housing Finance
Institutions/Banks (HFIs/Bs) to meet their expenses on the technical site visits to the
customer's property. This ensures quality of construction and construction within the norms
as stipulated by the respective approval authority.

f) Stamp duty and registration charges:- HFIs that go in for a registered mortgage pass
these charges on to the customer. These are rather heavy in certain states depending on the
laws laid down by the state where one buy a property.

g) Personal Guarantee from Charges :- Since the personal guarantee provided by the
customer need to be stamped, these charges are also recovered from the customer. They are
charged to him by HFIs who demand for Guarantees.

h) Cheque Bounce Charges:- In case the cheques through which one makes a payment
to HFls get dishonored, some minimum charges are levied by the HFI. The same are
recovered from the customer.

(i) Delayed payment charges: - HFls/Bs charge delayed payment charges from the
customer if he/she delays the payment of installments beyond the due date.

(j) Additional charges :- These are levied as a percentage on the delayed payment charges
by most HFls. They are levied if one fails to pay the dues within the stipulated time after a
delay has taken place.

(k) Incidental charge:- This is payable in case the HFI/B sends a representative from their
organization to collect their outstanding dues. It is normally charged at a flat rate per visit.
These charges are levied by most HFls/Bs.

l) Prepayment Charges :- This is a penalty charged by HFls/Bs from when one makes
either a part prepayment or a full repayment of the loan. This charge is levied only on lump
sum payments and not on the EMls that one pays. This charge is levied on the amount
prepaid by one and not on the entire outstanding principal. These charges are gradually
being discount. So, these are the charges levied by most Housing Finance Institutions and
Banks while granting home loan to the customers. Now, the decision on the repayment
capacity shall be talked about as follows.

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(v) Judgment regarding repayment capacity on the basis of income :-

To understand how the income of a customer is considered to arrive at his repayment


capacity, it is first necessary to classify customers into salaried and self employed
individuals.

a) The income of the salaried individual is considered in the following manner:-

Gross monthly income as it appears on the salary slip

Less: - Any non regular variable income appears on the salary slip (including overtime,
etc.)

Add: - 50 per cent of the average variable income of the last six months.

Add: - Any fixed cash/voucher payments for which proof can be submitted.

Add: - 50 per cent of the average variable cash/voucher payments with proof like traveling
reimbursement etc.

Add: - HRA receivable if not being received already in the salary slip.

The above income calculated for the calculation of eligibility using IIR and FOIR norms.
For calculation of FOIR, the installments of all the loans that one has availed of currently
for which repayment is being made is taken into account as well. The lower of the two
eligibilities is considered as the maximum repayment capacity.

b) To consider income of Self-employed individuals we further classify them into


Professionals and non-professionals.

Professionals:- Comprising doctors, chartered accountants, lawyers, architects, etc.


For calculation of eligibility of professional's income is computed by most HFIs
using the gross professional receipts instead of the Net profit as in the case of self-
employed non-professionals.

Non-Professionals: - The income of non-professionals is normally calculated by


HFIs in the following manner: -

Average of the net profits of last 2 years as it appears in the profit and loss account (Returns
need to be filed for the same. They should be filed regularly before the due date is over).

Less: - Any income, which is unusual and non-recurring in nature like sale of some asset,
etc which affects profits substantially,

Add: - Any expense that is unusual and non-recurring in nature like repairs and
maintenance that has not been capitalized and effect profit adversely.

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Add: - 50 per cent of the average depreciation of the last two years. The above income is
calculated for the calculation of eligibility using IIR and FOIR norms.
For calculation of FOIR the installments of all the loans that one has availed of currently
for which repayment is being made is taken into account and the eligibility is worked out.
The lower of the two eligibilities is considered as the
Maximum repayment capacity.

(vii) Credit documentation:- Given below is the exhaustive list of credit


documents- that need to be submitted for a general home loan product. The
documents vary from one HFI/B to another based on one's employer,
qualifications experience etc. the general requirements are as follows: -

(a) Income Documents : - For salaried slips for the last three months appointments letter-
salary certificate-retainership agreement, if appointed as a consultant-Form 16 issued by
the employer in customer's name income document for self employee - last three years
profit and loss account statement duly attested by Chartered Accountants. Last three years
Balance Sheets duly attested by Chartered Accountant, last three years Income Tax Returns
with computation chart duly filed and certified by the Income Tax authorities.

b) Proof of employment: - Identify card issued by the employer- Visiting card.

(c) Employer's details (In case of private limited companies) : - Profile of employer on
employers letterhead (to be signed by a senior person in the organization) comprising

Name of promoter/directors

Background of promoters/directors

Nature of business activity of your employer

Number of employees

List of branches/factories

List of suppliers

List of clients/customers

Turnover of employer
Annual reports of the employer for the last two to three years.

(d) Proof of age (Anyone of the following) : - Passport- Voter's ID card-PAN card-
Ration card-Employer's identity card-School leaving certificate-Birth certificate.

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(e) Proof of residence (Anyone of the following) : - Ration card-Passport- PAN card-
Rent agreement, if the customer is staying currently on rent- Bank Pass book-Allotment
letter from the company if he/she is residing in company quarters
.
(f) Proof of name change (If applicable) : - A copy of the official gazette A copy of a
newspaper advertisement publicizing the name change-Marriage certificates.

(g) Proof if investment (If required):- Bank statement for the last six months of all
operating and salary accounts - Bank statements for the last six months of all current
accounts, if self-employed-any other photocopies of investments held, if required by the
HFC.

(vii) Legal documentation:- Legal Documentation the typical legal documents that need
to be submitted to the HFC arc discussed here. Given below is a list of legal property
documents that need to be submitted to the HFC for mortgage of the property. The name
and the list of documents vary from state to state and also depend on the type of property
being financed. A broad outline of the documents required is given below.

a) Acceptance copy of the offer letter issued by the HFC/B.

b) Title documents of the property that include -sale agreement duly

Registered-Own contribution receipts - Allotment letter-Registration receipt-Land


documents indicating ownership, if applicable- Possession letter-Lease agreement, if
applicable (Property bought from a development authority) - Mortgage deed if the HFC
opts for a registered mortgage.

c) No Objection Certificate from the developer, society or development authority as


applicable.

d) Personal Guarantees, if applicable.

e) In case of alternator additional security, documents for the same depending upon the
security details.

f) Post dated cheques for the EMls.

The above documents are only indicative in nature and do not cover the entire list. It may,
also be noted that in a resale case, the previous chain of agreement also need to be taken.

(viii) The tax benefits that are applicable to housing loans for individuals:-Currently
Tax Benefits to individuals are available only for the Home Loans and Home Extension
Loans products. The benefits available are covered under these sections.
Property Insurance:-

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Is it compulsory to insure the property? Some HFls insist on a mortgage redemption life
insurance policy. In this case the customer gets a benefit of an interest rate reduction.
Though the HFI may not insist, it is better to go in for property insurance to safeguard the
asset against any sort of damage or loss. The customer can select the tenure for the property
insurance. The insurance premium is changed up front. Most insurance companies provide
for huge discounts on the rate of premium for larger tenures. The premium charged
currently is seventy-seven for every lakh of property for a year. So a customer has to fulfill
various conditions to be eligible for availing home loan from a Housing Finance
Institution/Bank After fulfilling these conditions, a customer can avail loan at low interest
rate i.e. fixed rate floating rate. A decision on whether one should go in for a fixed-rate loan
or a floating-rate loan now is a function of two factors i.e. One's perception of where
interest rates in the economy are headed and one' capacity to ride the interest rate changes.
A floating-rate loan let one take advantage of further falls in interest rates but one stand to
loose if interest rate, rise again. However this decision is based on the perception of the
consumer.

CHAPTER-2

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CHAPTER-2

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OBJECTIVES OF STUDY

There is no strongest foundation for your dream home, than a cheap loan. Home loans have
become that stronger foundations for people who want to own a home. The main objectives
of the study are as follows:-

1) The main objective of this study is to know the Customers perceptions about home loans
of HDFC housing development finance corporation LTD.

2) To analyze the history of hdfc ltd.

3) Generating good business to the company by promoting and selling the products of
HDFC LTD.

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

5) To make comparative study of Disbursement of home loans by Commercial banks.

6) Fixing the appointments with the customers.

7) To study the satisfaction level of customers about home loans.

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

9) Visiting the customers and closing the deal.

10) To learn about various aspect of hdfc home loan ltd.

2.1 PURPOSE OF THE STUDY

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The main purpose of this study is to attain the knowledge of the processing system of home
loans. The main purpose of the study 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.

2.2 SCOPE OF STUDY

The Indian housing finance industry has grown by leaps and bound in few years.
Total home loans disbursements by banks have raised which witnesss phenomenal
growth from last 5 years. There is 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.

CHAPTER -3

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CHAPTER-3

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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.

To know the Customers perceptions about home loans of HDFC housing


development finance corporation LTD.
To study the satisfaction level of customers about home loans.

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

To make comparative study of disbursement of home loans by commercial banks,


the study shall be conducted in the manner enumerated below-

3.1- RESEARCH DESIGN:-

This project is based on exploratory study as well descriptive study. It was an


exploratory study when the customer satisfaction level was studied to suggest new methods
to improve the services of HDFC LTD in providing home loans and it was descriptive
study when detailed study was made for comparison of disbursement of home loans by
commercial banks.

3.2 SOURCES OF DATA:-

To fulfill the information need of the study. The data is collected from primary as well
as secondary sources-

A - PRIMARY SOURCE:-

I decided primary data collection method because our study nature does not permit
to apply observational method.
In survey approach we had selected a questionnaire method for taking a customer view
because it is feasible from the point of view of our subject & survey purpose. We
conducted 50 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 100 customers of HDFC LTD.
B SECONDARY SOURCE:-

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It was collected from internal sources. The secondary data was collected on the
basis of organizational file, official records, news papers, magazines, management books,
preserved information in the companys database and website of the company.

3.3- SAMPLING:-

Sampling refers to the method of selecting a sample from a given universe with a
view to draw conclusions about that universe. A sample is a representative of the universe
selected for study.

SAMPLE SIZE:-
Large sample gives reliable result than small sample. However, it is not feasible to target
entire population or even a substantial portion to achieve a reliable result. So, in this aspect
selecting the sample to study is known as sample size. Hence, for my project my sample
size was 100.
The Sample Size consists of both the Professional and Business class people. IT
peoples, Doctors, Jewelers, Timber Merchants & Real estate Agents are taken as Sample.

SAMPLING TECHNIQUE:-

Random sampling technique was used in the survey conducted.

TOOLS OF ANALYSIS:-

Data has been presented with the help of bar graph, pie charts, line graphs etc.

PLAN OF ANALYSIS:-
Tables were used for the analysis of the collected data. The data is also neatly presented
with the help of statistical tools such as graphs and pie charts. Percentages and averages
have also been used to represent data clearly and effectively.

3.4 DATA COLLECTION INSTRUMENT DEVELOPMENT:-


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

3.5 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 non- cooperation of
some banks. This proved to be major limitation of the study.

iii) To access such a large number of customers were difficult because of non-cooperative
attitude of respondents.

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

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

vi) Ignorance and reluctant attitude of customers was also a major limitation in this study.

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

CHAPTER-4

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CHAPTER 4

REVIEW OF LITERATURE

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SUMMARY:-

After going through previous studies of Home loans I came to conclude that-
There is growth of home loans after 2001.

Home loans have an inverse relation with interest rates i.e. when interest rate low
the demand of home loans increase. (Ojha 1987)

People are going more towards home loans than private mortgage insurance.
(Berstain 2008)

Government taking various steps to encourage people to go toward home loans.


(Haavio, Kauppi 2000)

Growth of home loans are due to increase of living standard of people, shifting
from joint family to nuclear family .(Lacourr, Micheal 2007)

There are some problems also attach with these home loans such as time i.e. filling
of application of loan to closing ,people have their own specified needs from these home
loans which are not fulfilling. (Lacour Micheal 2006).

SBI provides a very low interest rate on home loans as compared to other banks.
(SBI May 2000)

Now after this conclusion the details of reviews are below-

Berstain David (2009) examined in his study taken from 2001 to 2008 that in this
period there is increase use of home loans as compared to private mortgage insurance
(PMI).he have divided his study into four sections. Section 1 describes why people are
going more for home loans than PMI. the main reason for this that now home loans market
provide Piggybank loans for those people who dont have 20% of down payment. Section 2
tells the factors responsible for the growth of home loans and the risks on shifting toward
home equity market without any PMI coverage. PMI can protect lenders from most losses
up to 80% of LTV and the absence of PMI will result in considerable losses in an
environment. Section 3 tells the measures in changes of type of loans. For this he have
taken the data from the 2001 and 2007 AHS a joint project by HUD and Census The results
of this analysis presented in Table One reveal a sharp increase in the Prevalence of owner-
occupied properties with multiple mortgages among properties with Newly originated first
mortgages. Section 4 describe the Financial status of single-lien and multiple-lien
households and for this he have taken the survey of consumer finance and show that
financial position is more weaker in multiple loans than the single loans.
Narasimham Committee (1991) points out that although the banking system in our
country has made rapid progress during the last two decades, there is decline in
productivity and efficiency and erosion of profitability. The committee strongly makes

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indications of liberalizing, deregulating economy to make Indian baking system more


competitive and efficient.

Ojha (1987) in his paper "modern international caparison of productivity and


Profitability of pubic sector banks of India" making Comparison on the basis of per
employee indicators and taking examples of state bank group and Punjab National bank
noted that Indian banks are the lowest in all accounts. However such international
comparison will not be fair for numbers of reasons.

Godse (1983) in his essay, looking a fresh at banking productivity observe that
productivity aspect is only at the Conceptualization stage in banking industry. He suggested
improvement in productivity and procedures, costing of operations and capital expenditure
etc.

Fanning (1982), while examining bank productivity of British banks observed that
although the productivity of the UK clearing banks is improving, they are still heavily over
manned as compared with similar banks else where.

Kulkarni (1979) in his study Development responsibility and profitability of banks


stated that while considering banks costs and profits, social benefits arising out of it cannot
be ignored. He suggested that while meeting social responsibility banks should try to make
developmental business as successful as possible.

Varde and Singh (1979) in a study "profitability of commercial banks" over 15 years gave
consideration to two types of factors that effects interest rates levels i.e. internal factors
(including operational and managerial efficiency of individual basis).

Banking Commission (1972) reviewed bank operating methods and procedures and made
recommendations for improving and modernizing these, particularly relating to customers
services, credit procedure and internal control systems. It observed that present methods of
working out branch profitability are not appropriate and an integrated costing and financial
reporting system is needed.

Department of Banking operations and development, RBI: Bombay observed that the
rapid expansion of banks activities since 1970 called for a phase of consolidations to
improve the quality of banks operational efficiency, productivity and customer services.

CHAPTER-5

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CHAPTER-5

INTRODUCTION TO THE INDUSTRY

5.1 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 cant afford to pay the amount in lump sum, you can
pay it in monthly installments with an interest rate.
The interest rates of home loans are expected to go down even further according to
analysts who foresee a cut down in the rates by the RBI in the wake of the decision taken
by US Federal Reserve to cut its rates by a significant margin.
There are number of companies offer cheap home loans at a low interest rate. You can
avail loan against existing house for renovation or expansion etc. There are many
nationalized banks that offer finance for affordable housing. India Housing has put together
a comprehensive data to provide you with the cheapest Home Loans available in the
market. We have listed all the important housing finance institutes and some of the top
home finance banks providing lowest interest rates.
In the last few years, housing loan scenario in India has changed drastically. It has
taken a front seat and people are looking forward to owning their own houses. It is no more
a dream that required lifetime saving and a difficult decision to make. Today the new home
purchase loan is much easily available and is much cheaper than what was available earlier.
Banks are now everywhere and the schemes are implemented even in villages and smaller
towns. The housing loans are popular there too, however, the activity of building flats is
little slow. It would not be wrong to say that there has been a boom in the home loan
market and with this boom; there is also a boom in the Number of home loans mortgage
brokers in India.
The main reason for this boom in home loan market is the change in government
policies. It is our governments motivation that the home loan interest rates in India have
fallen considerably. Lot many banks are offering home loans and this is available at low
EMIs (Equated monthly Installments). High EMIs are now a thing of past. Today lending
rate is in the range of 7.5 to 15 %.
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.

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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 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 .

5.2 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.

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.

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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.

5.3 INTEREST RATES PROVIDED BY VARIOUS BANKS

Loan Period EMI / Lakh EMI / Lakh


Finance Institution Fixed Floating
(in years) (INR) (INR)

Up to 5 9.00 2076 8.00 2028


6 to 10 9.25 1230 8.25 1227
Bank of Baroda
11 to 15 9.50 1044 8.25 970
16 to 20 9.50 932 8.50 868

Up to 5 9.50 2100 8.75 2064


6 to 10 9.75 1300 9.25 1280
State Bank Of India
11 to 15 - - 9.25 1029
16 to 20 - - 9.75 949

Up to 5 11 2175 9.50 2101


6 to 10 11 1375 9.50 1294
HDFC
11 to 15 11 1137 9.50 1045
16 to 20 11 1033 9.50 933

Up to 5 10.75 2162 9.50 2101


6 to 10 10.75 1364 9.50 1294
ICICI Bank
11 to 15 10.75 721 9.50 1045
16 to 20 10.75 1016 9.50 933

Up to 5 10.50 2149 9.50 2100


6 to 10 11 1373 9.50 1294
LIC Housing Finance
11 to 15 11 1137 9.50 1044
16 to 20 11 1032 9.50 932

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Up to 5 9.00 2076 10.50 2150


6 to 10 9.00 1267 10.50 1350
PNB Housing Finance
11 to 15 9.25 1030 10.50 1106
16 to 20 9.50 933 10.50 999

16 to 20 11 1032 9.50 932

Up to 5 9.00 2076 10.50 2150


6 to 10 9.00 1267 10.50 1350
PNBHousing Finance
11 to 15 9.25 1030 10.50 1106
16 to 20 9.50 933 10.50 999

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

Lock-in facility by banks:-


A lock-in, also called a rate-lock or rate commitment, is a lenders promise to hold a
certain interest rate and a certain number of points for you, usually for a specified period of
time, while your loan application is processed. (Points are additional charges imposed by
the lender that are usually prepaid by the consumer at settlement but can sometimes be
financed by adding them to the mortgage amount. One point equals one percent of the loan
amount.) Depending upon the lender, you may be able to lock in the interest rate and
number of points that you will be charged when you file your application, during
processing of the loan, when the loan is approved, or later.
A lock-in that is given when you apply for a loan may be useful because its likely
to take your lender several weeks or longer to prepare, document, and evaluate your loan
application. During that time, the cost of mortgages may change. But if your interest rate
and points are locked in, you should be protected against increases while your application
is processed. This protection could affect whether you can afford the mortgage. However, a
locked-in rate could also prevent you from taking advantage of price decreases, unless your
lender is willing to lock in a lower rate that becomes available during this period.
It is important to recognize that a lock-in is not the same as a loan commitment,
although some loan commitments may contain a lock-in. A loan commitment is the lenders
promise to make you a loan in a specific amount at some future time. Generally, you will
receive the lenders commitment only after your loan application has been approved. This
commitment usually will state the loan terms that have been approved (including loan
amount), how long the commitment is valid, and the lenders conditions for making the
loans such as receipt of a satisfactory title insurance policy protecting the lender.

Oral or written lock-in agreement? :-


Some lenders have preprinted forms that set out the exact terms of the lock-in
agreement. Others may only make an oral lock-in promise on the telephone or at the time

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of application. Oral agreements can be very difficult to prove in the event of a dispute. It is
wise to obtain written, rather than verbal, lock-in agreements to make sure that you fully
understand how your lenders lock-ins and loan commitments work and to have a tangible
record of your arrangements with the lender. This record may be useful in the event of a
dispute.

Charges of a lock-in:-

Lenders may charge you a fee for locking in the rate of interest and number of
points for your mortgage. Some lenders may charge you a fee up-front, and may not refund
it if you withdraw your application, if your credit is denied, or if you do not close the loan.
Others might charge the fee at settlement. The fee might be a flat fee, a percentage of the
mortgage amount, or a fraction of a percentage point added to the rate you lock in. The
amount of the fee and how it is charged will vary among lenders and may depend on the
length of the lock-in period.

Types of lock-in:-

Locked-In Interest Rate--Locked-In Points :- Under this option, the lender lets you lock
in both the interest rate and points quoted to you. This option may be considered to be a
true lock-in because your mortgage terms should not increase above the interest rate and
points that youve agreed upon even if market conditions change.

Locked-in Interest Rate--Floating Points: - Under this option, the lender lets you lock in
the interest rate, while permitting or requiring the points to rise and fall (float) with changes
in market conditions. If market interest rates drop during the lock-in period, the points may
also fall. If they rise, the points may increase. Even if you float your points, your lender
may allow you to lock-in the points at some time before settlement at whatever level is then
current. (For instance, say youve locked in a 10 percent interest rate, but not the 3 points
that went with that rate. A month later, the market interest rate remains the same, but the
points the lender charges for that rate have dropped to 2. With your lenders agreement,
you could then lock in the lower 2. Points.) If you float your points and market interest
rates increase by the time of settlement, the lender may charge a greater number of points
for a loan at the rate youve locked in. In this case, the benefit you might have had by
locking in your rate may be lost because youll have to pay more in up-front costs.

Indian Economy is growing at a nice pace (8% p.a) which is also driving per capita income
rise. The demand of real estate has reached at a new peak according to ninth five year plan
there is a shortage of 42million houses .But in India the figures to GDP are smaller in
comparison to the other countries Contribution of housing to GDP is close to 8%. Sources:
NHB

5.4 Indian Market for Home loans is more than Rs.500, 000 crore:-Today, not only the
metros are witnessing the housing crunch even the second tier cities like- Jaipur,

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Bhubneshwar, Lucknow, Trivendrum etc. are falling into the dearth of living space and
wanting for more expansion.
India Report:
Indian credit report in comparison to the other Asian countries is shown in the statistics
below, which is among the lowest. It is Indian psyche that credit is termed bad, Indian are
traditionally not inclined to take credit this reflects in the figures below:-

GRAPH: - 5.1

5.5 Indian home loans Industry:- Indian Home loans industry is growing at a fast pace
30% per annum, this can be seen in the stats shown below with average ticket size (loan
size) and Amount disbursed is rising every year the opportunities have become more
dominant for different organization in India. The demand drivers are fast growing middle
class population, rise in working women workforce, bigger aspirations of youth, Tax
saving, Transparency in the real estate market. Still in comparison to other nations India
has a long way to go, the figures shown below shows that even the GDP/mortgage ratio is
low which indicates that credit is not well sought as figure below shows the average
percentage of mortgage to GDP.Comparison with other nations India fall behind in terms of
Mortgage Penetration which directly demonstrates the potential in Indian market for
Housing mortgage finance companies

GRAPH:- 5.4

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Sources: RBI

Real Estate is currently sought of as a great means of Investment, the prices of


residents have shot up very high which is clearly shown in the figure below, the major
cities have witnesses lot of development and price appreciation which demonstrates the
growing demand . More and more people are migrating to cities for work / business. More
and more jobs are created and price index rise becomes inevitable. The above figure shows
the rise in prices of space per sq feet in different major cities.

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

5.6 Recent trends of home loan in India:- In order to understand the recent trends we
need to know or understand various factors. These factors play vital role in Indian home
loan market. These include interest rate on which banks provide home loan, tax rebate on
home loan and its impact. Apart from this to understand the recent trend we need to
compare the trends of home loan of different years. Here we have compared the interest
and other market trends of year 2011-12 with 2011-10. This kind of comparison gives the
result which helps us to understand the trends of market of any industry. Apart from the
impact of present and past economic ups and down also affect the trends. Today the US
slowdown is the major issue which has affected almost all the industry. So we have also
discussed this issue in terms to define trend of home loan market in India.

5.7 Impact of slowdown on home loan market in India:- The fear of a recession looms
over the United States. And as the clinch goes, whenever the US sneezes, the world catches
a cold. This is evident from the way the Indian markets crashed taking a cue from a
probable recession in the US and a global economic slowdown. U.S slowdown has affected
almost all sectors not only in US but to all over the world. Indian economy has also been
affected by this slowdown because India is a growing country and almost in all sectors

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various multinational companies have major contribution. So the role of this slowdown is a
major issue to be discussed while talking about Home Loan Market in India.

Bankers who were earlier falling over each other to dole out home loans, even for
soft furnishings, have suddenly become choosy. Banks like SBI, ICICI Bank, UTI Bank,
IDBI Bank and leading mortgage firm HDFC are now apparently making a conscious
attempt to curb their aggression in the home loan market. Situation is like that if a customer
who recently approached a private sector bank for a home loan of about Rs 10 lakh for a
tenure of 15 years found, to his shock, that the eventual loan disbursement was just Rs 5
lakh. Most bankers aren't willing to confirm any slowdown in their home loan portfolio. On
record, they attribute the marginal dip in home loan disbursements to the recent hike in
interest rate.
Privately, however, they have a different story to tell. "The slowdown in the home
loan market for select players like ICICI Bank was evident from January. ICICI Bank's
average home loan disbursement in a month is around Rs 2,500 crore in a month, which
has come down to almost Rs 2,000 crore in March," said a private sector banker. ICICI
Bank officials denied any slowdown in their home loan portfolio and they say that the
recent dip in interest rates has had some impact on disbursals. However, in absolute terms,
it is still low. Even this slowdown the deposit growth for the sector as a whole is around
17%, while credit is growing at almost 28%, forcing banks to become selective. Institutions
now charge a floating rate of 8 to 8.25 per cent on home loans above Rs 20 lakh. Initial
estimates by bankers suggest that the increase in rate for home loans and other segments
would be around 25-50 basis points (0.25% to 0.5%). Even as the provisioning requirement
has gone up around 60 basis points, the hike in interest rates may be lower as the impact
would be felt for the first year. It would also depend on how well capitalized the banks are
as the rise in provisioning and risk weightage would affect the return on equity for banks.
Weaker banks and banks with a large portfolio of these loans are likely to be more affected
and may hike rates first.
Home loan growths of disbursals were at 20 per cent in 2007-08 according to a
study by the credit rating agency CRISIL, a Standard & Poors company. This rate is lower
than the 30 per cent annual increase seen in the past three years, but in absolute terms
represents a substantial expansion. The slower growth reflects the impact of rising property
prices and interest.

HDFC: yielding Ground: -


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

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Thats 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 Sensexs 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 HDFCs loan growth (pre-
securitization) 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 HDFCs loans.

As a result HDFCs 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.

5.8 Interest and market trends in year 2011:- Home loan interest rates, especially on new
home loan accounts, started softening from the beginning of this year when the Reserve
Bank of India (RBI) announced sharp cuts in the repo rate and cash reserve ratio (CRR).
The RBI started slashing the key policy rates since October last year, after taking into
account the worsening liquidity situation of banks here. The central bank has reduced its
key policy interest rates (repo and reverse repo) and reserve ratio (CRR) four times in the
last six months. The cut in the repo rate meant commercial banks would have funds
available at a lower cost. On the other hand, the cut in the CRR meant banks would have to
keep less money with the RBI and hence they had more money to lend. Analysts believe
that interest rates have not yet bottomed out and there will be further cuts in borrowing
rates over the next few months.
While the interest rate cut expectation is a thing of the past, the question is will it go
back to the old levels of 7-8 percent which contributed to a property boom? Consensus is
already building up for the fact that we are headed towards a low interest rate regime in the
coming couple of years, in line with global trends. In the case of the domestic economy, the
trigger for low interest rates has already happened on the deposit front with banks reducing
the rate by 1-2 percent in the last few weeks. Now, the deposit rate has come down to
single digit even with respect to long term deposits (on 3-5 years) and that would mean
banks have access to cheaper funds. With inflation too sliding down at a rapid pace, there is
hope for continuance of a cheaper rate regime.
Following in State Bank of Indias (SBIs) footsteps, other state-run banks may also
come out with scheme offering home loan at a fixed rate of 8%. The Indian Banks
Association (IBA) would review the response of borrowers towards the SBI scheme after
three weeks and if it finds that there has been a good response, other banks will follow suit.
Last week, SBI had announced that it would offer home loans at a flat rate of 8% to all
borrowers and would freeze this rate for one year. The chairman of one of the major banks,
who asked not to be named, said SBI can afford to lend at such cheap rate as it has one of
the best current and savings account (CASA) deposit ratio. CASA deposits are the cheapest

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source of funds for a bank and a high CASA deposit ratio brings down their average cost of
funds. This in turn helps the bank in offering cheaper credit while maintaining their net
interest margin (NIM). NIM is the difference between the rates at which banks borrow and
lend.
State-owned banks started cutting their home loan rates after country's largest lender; State
Bank of India froze its new home loan rates at eight per cent for one year recently.

HDFC Reduces Home Loan Rate By 0.5 Percent: - Home finance major HDFC reduced
home loan rates by 50 basis points for all its existing floating rate customers. HDFC also
said that it will charge 10.25 percent of interest annually from new applicant for a loan of
Rs 20 lakh or less. And for loans of more than Rs 20 lakh, it will charge interest at 11.25
percent. The bank also reduced the interest rate on deposits that it accepts from the public
by 50 basis points. In a statement to the media, HDFC informed that all the changes will
come into effect from December 22.
HDFC was able to bring home loan cuts because the government and RBI had taken series
of measures to infuse liquidity into the economy. Over the last three months, RBI has cut
key policy rates; including cash reserve ratio, repo and reverse repo rates, and statutory
liquidity ratio. Government has also infused money into the housing sector through the
National Housing Bank. PSU banks are also forced to cut rates for new home loans up to
Rs 20 lakh.

Although in the past few weeks several banks cut home loan rates, but those decisions
applied only to new customers. HDFC is the first major housing lender to cut rates for both
current and new customers. While commenting on this matter, Keki Mistry, HDFC vice
chairman and MD said that the bank was able to exercise the move especially because of
the recent reduction in the cost of funds. The wholesale funding rate has declined from
October-November levels hence HDFC decided to pass on the benefits to its customers,
both old and new ones.

5.9 Types of home loans: -

Housing loans offered by banks are of different types:-

Home Purchase Loans


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

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Home purchase loans:- This is the basic home loan for the purchase of a new
home. If you want to buy a flat in some society or some already built house, banks
and HFCs sanction you home purchase loans for this process.

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

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

Home extension loans:- An extension loan is one which helps you to meet the expenses of
any alteration to the existing building like extension/ modification of an existing home; for
example addition of an extra room etc. One can avail of such a loan facility of a home
extension loan, after obtaining the requisite approvals from the relevant municipal
corporation.

Home conversion loans:- This is available for those who have financed the present home
with a home loan and wish to purchase and move to another home for which some extra
funds are required. Through a home conversion loan, the existing loan is transferred to the
new home including the extra amount required, eliminating the need for pre-payment of the
previous loan.

Land purchase loans:- This loan is available for purchase of land for both home
construction or investment purposes.

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Stamp duty loans:- This loan is sanctioned to pay the stamp duty amount that needs to be
paid on the purchase of property.

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

Balance- transfer loans:- Balance Transfer is the transfer of the balance of an existing
home loan that you availed at a higher rate of interest (ROI) to either the same HFC or
another HFC at the current ROI a lower rate of interest.

Refinance loans:- Refinance loans are taken in case when a loan for your house from a
HFI at a particular ROI you have taken drops over the years and you stand to lose. In such
cases you may opt to swap your loan. This could be done from either the same HFI or
another HFI at the current rates of interest, which is lower.

NRI home loans:- This is tailored for the requirements of Non-Resident Indians who wish
to build or buy a home or property in India. The HFCs offer attractive housing finance
plans for NRI investors with suitable repayment options.
On would be entitled for home loans in the range of Rs 5 lakh to a maximum of Rs 1 crore,
based on the repayment capacity, previous credit history and the cost of the property. The
bank may provide a maximum of 85% of the cost of the property or the cost of construction
as applicable and 75% of the cost of land in case of purchase of land. The repayment
capacity is calculated taking into account factors such as:
Age
Income/Salary
Qualifications
Dependant/(s)
Assets/Liabilities
Credit History
Stability / continuity of your employment/business
Income of co-applicant/(s)
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.

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5.10 HDFC Home Loan:-

Highlights:-

HDFC markets its parent HDFC's home loan products.


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

Eligibility; - HDFC home loans are available for:

Purchase of flat, row house, bungalow from developers


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

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


(No. of Years) (%p.a)

Up to 5 10.00

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6 - 10 10.75
11 - 15 11.00

For loans greater than Rs.2, 00,000

Term of Loan Rate Per Annum


(No. of Years) (%p.a)

5 10.00
10 11.00
15 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
Rupees
(No. of Years)

5 2199
10 1401
15 1159

EMI per Rs.1, 00,000 (for loan greater than Rs.2, 00,000)

Term of Loan
Rupees
(No. of Years)

5 2199
10 1416
15 1175

Pending final disbursement, you 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.

Repayment Period: - Repayment Options

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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 installment 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
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 Self Employed Professionals Self Employed Businessman

Application form
Application form with photograph Application form with photograph
with photograph

Education Qualifications Certificate Education Qualifications Certificate


Latest Salary-slip
and Proof of business existence and Proof of business existence

Last 3 years Income Tax returns


Form 16 Business profile
(self and business)

Last 3 years Income Tax returns


Last 6 months bank Last 3 years Profit /Loss and (self and business)
statements Balance Sheet Last 3 years Profit /Loss and
Balance Sheet

Processing fee Last 6 months bank statements Last 6 months bank statements (self
cheque Processing fee cheque and business)

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Processing fee cheque

The Credit Appraisal is an important step in sanctioning loan applications .Hence the Credit
Appraiser needs to have certain important documents to compute the credit worthiness of
the applicant .In the case of salaried person these include the following :-

1) SALARY SLIPS (3 MONTHS CURRENT) :- The salary slip is usually a printed sheet
of paper that contains 2 components

Income/Earnings collumn: - It contains an exhaustive list of the various components that


are added to the persons salary. They contain various components like Basic pay, HRA etc.

Deductions: - It contains an exhaustive list of various components that are deducted from
the persons Earnings. They contain various components like Income tax, Provident fund,
Employee Loans etc.

2) BANK STATEMENTS (6 MONTHS CURRENT) ;- The bank statement contains the


various transactions that the applicant performs in his bank account. It has 3 components

Date
Descriptions; - It contains the brief and standardized description of the activity or
the account related to the transaction .Eg. Clearing cheque 166129, Transfer
deposit.
Deposits: - It contains the amounts that were credited to the account
Withdrawal; - It contains the amounts that were debited to the account. This is
carefully studied to find out about any regular withdrawals or a series of checks so
that any existing loans may be revealed and there can be a correct estimate of the
repayment capacity.
Balance :- It shows effect of transaction on the pre existing account balance
Special feature: - HDFC will not consider any loan s with out standing EMI of or
below 6 months.

3) FORM 16:- It is form given by Employer which states the income earned from that
company during the full financial year, and gives the details of Tax deducted at source.

4) COPY OF INCOME TAX RETURN (SARAL):- The SARAL tax return form reveals
the structure of incomes and/or the various earnings of the tax returnee .It also shows the
various deductions that will not be included and it also contains the Rebates on which he
earns tax benefit.

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5) RESIDENCE PROOF: - The residence proof includes the Electricity bill, Telephone
bill, Ration Card, Passport.

6) PHOTO ID PROOF :- The photo proof includes the Pan card ,Voter ID card, Employee
ID card, Passport etc.

7) AGE PROOF: - The age proof includes the Pan card, Passport, Photo ID.

8) LOAN APPLICATION FORM DULY FILLED: - It can also be downloaded from


HDFCs user friendly web based portal.

9) CHARGES FOR PROCESSING FEES :- This is a standard and nominal fees to be


paid at the time of applying for loan

Fees structure. 0.5% of loan amount


+Service tax of 12%
(Less)Education Less of 3%

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

NON RESIDENT INDIAN

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 include 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.

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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.

SOURCES OF LOAN APPLICANTS

1) WALK IN:- This refers to the Applicants who apply for the loan by going to the service
centre or regional branch office .They may have come to know about HDFC s home loan
service from any source but this is their first contact with HDFC is in absence of any
intermediary like friends, sales men etc.The applicants who contact through or by the
Website are also included in the walk in category. Walk-In applicants are given concessions
on fees and charges which is applicable from time to time.

2) CALLCENTRE LEADS: - The call centre leads refer to the applicants that come in
contact with HDFC through HDFC Bank or through HLSIL .HDFC bank is the banking
section of HDFC which informs HDFC Ltd about persons who it thinks to needing a
loan .HLSIL which has been started by HDFC Ltd and refers to Housing Loan Services
India Limited.
This organization has been especially started by HDFC to assist persons searching for
home loans at easy rates and good service.HLSIL contacts probable needfuls of home loan,
contacts them, explains them the various advantages of an HDFC home loan and get their
loan application filled. Every HDFC service centre has its own team which is managed by
leader who reports directly to the Branch Manager .In the India habitat centre the HLSIL
team is under the leadership of a team leader who reports directly to Mr. Prashant
Malik(Branch MgrIHC /Ranked 2nd in the prestigious National Corporate Challenge 2005
conducted annually by HDFC )

3) DSAs and BSAs; - These are respectively the Direct selling agents and the Business
selling agents.the DSAs refer to organizations which work in agreement with HDFC and
forwards them the loan requests of applicants they contact or those that contact them on the
other hand BSAs usually forward loan requests and assist HDFC by forwarding them the
names addresses contact nos etc of various probable needfuls of home loans BSAs usually
are Builders who book houses for sale in the future. they may also include Brokers.Egs for
DSAs are Nishk,Chatrath,BKM.etc

Deposits: Individuals: - these are:-

Fixed Rate Deposits


Variable Rate Deposits
HDFC has instituted well-defined service standards for both depositors and deposit agents.
HDFC has been able to mobilise deposits from over 10 lac depositors. Outstanding deposits
grew from Rs. 1,458 crores in March 1994 to 19,359 crores in March 2009. Much of this
success can be attributed to its strong brand image, superior services, security and above
all, the significant contribution made by HDFC's deposit agents. HDFC has over 15,000

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deposit agents and distributes all its retail savings (deposit) products primarily through this
channel.
HDFC has been awarded AAA rating for its deposits from both CRISIL and ICRA for
the FOURTEENTH consecutive year, representing highest safety as regards timely
payment of principal and interest.
The problem of Negative Amortization is specific to the Adjustable or the Variable rate
loans that are lent to customers. In the case of Variable rate home loans there are three
components:-
RPLR 14% (CURRENT)
SPREAD 3% (CURRENT)
ROI- 11%
The term RPLR is short for Retail Prime Lending Rate. this rate is dependent on market
forces .In India the RPLR has been observing an upward trend .As a result of this there is a
change in rate of interest to be applied to different loans.RPLR is revised every 3 months In
which it may or may not change.
Spread refers to a special discount offered to loan applicants coming to HDFC.this discount
is fixed by HDFC .Every loan applicant is eligible to receive this discount from HDFC
Ltd.It helps create a market advantage and benefits the Applicants.Spread is fixed for an
uncertain length of time .It is absolutely dependent on the companys discretion to change it
or not. Currently HDFC is offering 2.5% spread on a loan of above 20 lacs and 3% spread
on a loan of below 20 lacs.
ROI is the rate of interest that is applicable to the loan at the time of lending. It is computed
by subtracting spread discount from the RPLR. at the time of lending the ROI is good
enough to repay the interest as well as the principal components .However as the RPLR
increases as it is bound to do so after some time the required EMI also increases .Hence
after some time the EMI becomes insufficient to repay the principal as well as the interest
component .

STAGES OF HOME LOAN

Application Munirka
HUB Data Entry
Login Scanning

Recommendation
Double Checking Over (ROVR)
Disbursement
Fixed Over (DCOVR)
of loan
The Loan Charge
s

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

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

Hence the interview sheet contains the important findings which the employee has
collected after careful review of the various documents .The interview sheet helps to cut

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corners and helps save time by not having other employees to go through the documents
again and again .It hence acts as a souce of quick reference.
After all this has been performed well enough the loan application will be arranged
in a file and all it will be given its loan a/c no which also acts as its file no. the file is now
ready to be sent to the HUB where further processing will take place.

SCANNING: - In this stage the various important documents of the applicant are scanned.
This helps to create their electronic copy which acts as a ready reference, a proof, and can
also be shared and utilized by other employees of HDFC Ltd.

DATA ENTRY: - The file has been sent to the back end office or the HUB .At HUB there
are many experts with their own specializations. these officials review the various parts of
the filae again and perform many specialized tasks Data entry is also one of these tasks .this
entry is much more different and complex as compared to the earlier performed Quick Data
Entry. An exhaustive amount and type of information has to be entered into the ILPS
system ranging from Personal Details, Employment Details to Property Rate History and
Customer Interactions.

RECOMMENDATION OVER (ROVR) :- The Recommendation OVER is also reffered


to as the First Appraisal at this stage certain specially appointed persons have been given
the responsibility of recommending a loan. These people have to take special care of
reviewing every document, and all the small details that need to be considered before
considering the loan application to be valid. After this the file is sent to another specially
appointed person as explained below. At this stage if any correction or mistake is present it
can be sent back to the Service Centre.
DOUBLE CHECKING OVER :- As the name suggests at this stage a specially
appointed person will double check all the past proceedings .He will examine the Loan file
for any discrepancies ,any missing and /or misplaced documents,the Credit Appraisal
results,etc.this is a very important stage and must be handled with exceptional care. This is
because a mistake at this stage can cause a great loss to the company.The Double checker is
responsible for the ultimate sanctioning of the loan .If any mistake is done at this stage
there is no going back and hence no protection.HDFC takes great care while appointing
double checkers .They should have completed a select number of years with the company
and should have shown exemplary performance and must posses experience.
SANCTIONING: - An authorized sanctioning authority within HDFC itself will review
the remarks of Double Checker and Sanctioning authority .If it considers the loan suitable
to be sanctioned it gives its approval .After it has given its approval stamp the ILPS system
will automatically send a letter to the Applicant that his loan has been sanctioned.
After this approval the Applicant can go to whichever Service Centre which he selects to
get his loan disbursed.
SPECIAL CASE: - A special case can arise if the applicant has not mentioned the property
for which he wants to take a loan .In that case the applicant can let the case be remain
pending. This means that the Applicants loan request will be considered to be complete
even though he has not decided the property. However the Applicant is expected to finalise
the property in a short time.
A Property Address is necessary to

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1. get the loan disbursed


2. Process the Legal and Technical Appraisal of the property and its Papers.

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

CHAPTER-6

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CHAPTER-6

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, 2009.
HDFC operates through almost 450 locations throughout the country with its
corporate head quarters in Mumbai, India. HDFC also has an International Office in Dubai,
UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing
company in India for the last 27 years.

SNAPSHOT-I

Incorporated in 1977 as the first specialized Mortgage Company in India.

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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:- 6.1

HDFC
LTD

23.26%
72.26% 60%
HDFC
HDFC HDFC
BANK (inclusive
STANDARD ASSET
of warrants)
LIFE MANAGEMENT

HDFC Standard Life insurance Company- HDFC holds 72.26 %.


HDFC Asset Management Company HDFC holds 60%
HDFC Bank- HDFC holds 23.26%.
Intelenet Global (Business Process Outsourcing) HDFC holds 50%.
HDFC Chubb General Insurance Company HDFC holds 74%.

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SNAPSHOT-II

Loan Approvals Rs. 805 billion.


(Up to Dec 2009) (US $ 18.30 bn.)
Loan Disbursements Rs.669 billion
(Up to Dec. 2009) (US $ 15.20 bn)
Housing Units financed 2.5 million.
Distribution
Offices 181
Outreach Programs 90

HDFC Limited
jjjjjjjj

Type Public (BSE: 500010)


Founded 1977
Headquarters Mumbai,India
Ravi Maurya
Key people
Hasmukhbhai Parekh
Industry Housing Finance
Revenue US$ 1.49 billion (2010)
Employees 1,029
Website www.hdfc.com

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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. D N Ghosh

Mr. Keshub Mahindra - Vice Chairman Dr. S A Dave

Ms. Renu S. Karnad - Executive Director Mr. S Venkitaramanan

Mr. K M Mistry - Managing Director Dr. Ram S Tarneja

Mr. Shirish B Patel Mr. N M Munjee

Mr. B S Mehta Mr. D M Satwalekar

GROUP COMPANIES:-
HDFC Bank: World Class Indian Bank- among the top private banks in India.

HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.

Intelenet Global: BPO services for international customers.

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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 awards. HDFC is rated AAA by both CRISIL
and ICRA. Similarly, Standard Life is rated AAA both by Moodys and Standard and
Poors. These reflect the efficiency with which HDFC and Standard Life manage their asset
base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively.
HDFC Standard Life Insurance Company Ltd was incorporated on 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 Indias leading Private Life
Insurance Companies, which offers a range of individual and group insurance solutions? It
is a joint venture between Housing Development Finance Corporation Limited (HDFC
Ltd.) Indias leading housing finance institution and the Standard Life Assurance Company,
a leading provider of financial services from the United Kingdom. Both the promoters are
will known for their ethical dealings and financial strength and are thus committed to being
a long-term player in the life insurance industry- all important factors to consider when
choosing your insurer.

Business Growth:-

The company commands a market share of over 60% in the housing finance sector.
Leveraging on its brand equity HDFC has also entered the Indian Mutual Fund scene quite
recently. HDFC was the only applicant to be given clearance by the government, to enter

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the Rs 250 bn life insurance business. This in itself speaks volumes about the
managements professional reputation.
Financial year 2000 proved to be a boon for housing finance companies, as the tax
benefits announced in the budget, coupled with the low real estate prices and rising
disposable incomes, spurred housing demand. As a result, demand for housing finance too
has registered high rates of growth. The housing sector has now been recognized as an
engine of economic growth and HDFC is well placed to capitalise on this surge in demand.
Against this backdrop, HDFC logged in an excellent performance. The companys
approvals and disbursements during the first half of financial year 2001 witnessed a year on
year growth of 33% and 32% respectively. The robust growth in itself is a conclusion that
HDFCs business is far less susceptible to any economy downturn.

(TABLE:-6.2) Financial Snapshot


Growth ratios FY10 FY09 FY10 1HFY11

Operating income 13.7% 21.6% 15.2% 21.1%

Other income 331.7% -24.6% -54.0% 346.8%

Net profits 18.3% 13.8% 20.4% 19.8%

Approvals 28.9% 25.2% 30.3% 33.4%

Disbursements 31.1% 24.4% 31.2% 31.5%

% change compared to corresponding previous period


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

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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 HDFCs 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 management, life insurance and commercial banking. This over a longer time frame
can emerge as a major source of revenue for the company.
The companys 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 (Indias No. 1 private
sector bank), which will pay rich dividends to the company.
The near term concerns however, are centered on its diversifications. It is not easy
for the company to dominate its other new businesses, as it has done in housing finance.
With its entry into the insurance sector in association with Standard Life of the UK, the
growth from other income may slowdown, as the insurance business requires long gestation
period and large investments. Lower than anticipated returns could also worry its investors.

BUSINESS OBJECTIVES:- The primary objective of HDFC is to enhance residential


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

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

a) develop close relationships with individual households,


b) maintain its position as the premier housing finance institution in the country,
c) transform ideas into viable and creative solutions,
d) provide consistently high returns to shareholders, and
e) to grow through diversification by leveraging off existing client base.

In addition to home building loans, HDFC also offers home extension, home improvement
and home conversion loans. It also helps to identify and value properties. HDFC also offers
depository services in form of term deposits.

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Types of Products offered

HDFC provide loans to meet all your requirements for you to make that house a home.
Home Improvement Loan

Home Extension Loan

Loans to professionals for office or clinic.

Home Equity Loans (Loan Against Property)

Loan against Rent receivables

Short Term Bridging Loan.

Loans to professionals for non-residentials premises loan

Key Associates and Subsidiaries: - These are:-

HDFC BANK:-
23.26% owned by HDFC(inclusive of warrants)
Market Cap US $ 11 billion
ADRs listed on NYSE
In February 2010, 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,
2010
Total net revenues: Rs 48.26 bn, increase of 51% over previous year
PAT: Rs 9.92 bn, increase of 44% over the previous year

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

Structure: - Strong and stable partnership:-


Tie up with Standard Life Assurance Company, U.K.
HDFC holds 72.26% of the equity of HDFC-SL

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

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Offers 20 individual products and 5 group plans along with 5 optional riders
Offers 8 fund options with market linked products

Premium income and growth: - Values driven growth:-


Total premium income of Rs. 48.59 bn for FY 09-10 (Previous year Rs 28.56 bn);
reflecting a growth of 70% Q1 10-11 growth in total premium of 34% over Q1 09-10 Funds
under management of group new business increased by 8% in as at June 30, 2010 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
11 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
Banks, brokers, telemarketing, direct sales force Tied agency contributed 64%
effective premium in Q1 11 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 FY10 to equity shareholders
Total assets under management (AUM) as at September 30, 2010, 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 funds AUM is 35%.

HDFC PROPERTY FUND:-


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

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Fund corpus: US $ 250 million fully invested


Domestic, 7 year close ended fund
Funds managed by HDFC Venture Capital Limited
HDFC International Fund
Fund Corpus: US$ 800 million
International, 9 year close ended fund
Targeted at premier institutions and funds across the world
Interested in taking an exposure in Indian real estate.

HDFC ERGO GENERAL INSURANCE COMPANY LTD:-


HDFC holds 74% and ERGO (Germany) holds 26%
The company offers Auto Insurance, Home Insurance, Group Accident Insurance,
Group Travel Insurance, Commercial Insurance which includes Fire and Marine and
Specialty Insurance Products like Directors & Officers Liability .
Achieved Gross Written Premium of Rs. 2.4 bn.
Operates out of 28 locations across the country
HDFC network is used to cross sell Home Insurance & Accident Insurance
HDFC and HDFC Bank database is used to cross sell Accident Insurance.

TABLE:-6.4
CONSOLIDATED EARNINGS:-
(As at March 31, 2011-10)

HDFC consolidated

Return on Equity 27.8% 28.2%

Return on Average Assets 2.7% 2.7%

Earnings per share (Rs) 85 95

Profit after Tax (Rs in billion) 24.36 27.13

Total Assets (Rs in billion) 810.99 925.83

DISTRIBUTION NETWORK: - HDFCs distribution network spans 254 outlets that


include 54 offices of HDFCs distribution company, HDFC Sales Private Limited (HSPL).
In addition, HDFC covers over 90 locations through its outreach programmed. 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.

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To cater to non-resident Indians, HDFC has offices in London and Dubai and service
associates in Kuwait, Oman, Qatar, Sharjah, Abu Dhabi and Al Khobar, Jeddah and Riyadh
in Saudi Arabia.

HDFC HOME LOAN ADVANTAGE:-

Home loan counselling sharing over 30 years of home loan experience


Door step service
Helps in finding Dream home
Wide Product Range
Multiple Repayment Option
Wide Network of financing
Post disbursement service
Loan repayment option

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.

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CHAPTER-7

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CHAPTER- 7

DISBURSEMENT OF HOME
LOANS BY HDFC HOUSING DEVELOPMENT FINANCE
CORPORATION LIMITED

This chapter contains results and discussion on disbursement of Home loans by


HDFC LTD. It is divided into two parts one part is related to the disbursement of home
loans by HDFC LTD and the second part included the comparative study of disbursement
of home loans made by commercial banks.
Disbursement of Home loans by HDFC LTD:-

GRAPH-7.1 HDFC: Housing loan spreads:-

2.35%

2.30%

2.25%

2.20%

2.15%

2.10%

2.05%
1QO5 2QO5 3QO5 4QO5 1QO6 2QO6 3QO7 4QO7 1QO8 2QO8 1QO9 2Q09 1Q10 2Q10 1Q11

HDFC surprises positively on 4Q numbers with the bottom line at Rs7334mn, 11%
above our and Street estimates, reporting 16% growth at the pretax, pre-
extraordinary level.
Hence the stock was up a significant 13.8%% today and has outperformed the
Sensex by 22.6% since its recent lows in March.
4Q11: Retail and wholesale disbursement growth was healthier than expected at
17% firm spreads at 2.2%. Cost-income ratio continues to improve and so does
asset quality.
Demand dynamics: Consumer and wholesale demand expected to grow 18-20%
in FY10E with average loan size at Rs1.5 million. Boost expected in 2H10E as real
estate prices and interest rates bottom out.

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(TABLE: - 7.2) HDFC: 4Q 11 Summary

Rs mn 4Q11A Y/Y Q/Q

Income from Operations 30,715 42% 6%


Total Interest Expenses 20,641 52% 1%
Net Interest Income 10,073 26% 18%
Fees 743 106% 215%
Operating Expenses* 619 13% -38%
Operating Profit 10,198 33% 32%
Capital Gains 12 -99% -22%
Others 67 -17% 20%
Total Other Income 78 -94% 11%
Pre-Tax Profit
(pre-extraordinaries) 10,267 16% 31%
Pre-tax PROFIT 10,267 -6% 31%
Tax 2,943 -9% 25%
Net Profit 67% 4% -3%
Interest Income/Interest Expense
Cost Income 5.7% -3% -6%
Fees/Operating Income 7% 3% 4%
Disbursements 124,390 17% 32%
Sanctions 153,460 17% 59%
Loans 851,981 17% 3%

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GRAPH-7.3
HDFC: Y/Y Disbursement growth:-

45%

40%

35%

30%

25%

20%

15%
1QO1 2QO1 3QO1 1QO2 2QO2 3QO2 1QO3 2QO4 1QO5 1QO6 1QO7 1QO8 1QO9 1Q10 1Q11

YOY DISBURSEMENT GROWTH


------- ANNUAL AVG DISB. GROWTH

HDFC provides long-term housing loans to low and middle-income individuals, as well as
to corporations. HDFC also provides construction finance to real estate developers, besides
providing lease-financing facilities to companies and development authorities for
infrastructure and other assets.

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CHAPTER-8

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CHAPTER-8

COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS


BY COMMERCIAL BANKS

8.1 - Disbursement of Home loans by different banks:-

HDFC LTD:-

Years No. of Home Home loan Disbursed


loan (in crore Rs.)
Account
holders. Distributed Recovered Balance

2006-07 700 90.07 63.05 27.02

2007-08 950 120.00 91.20 28.8

2008-09 1130 144.67 127.31 17.36

2009-10 1435 180.33 165.90 14.43

2010-11 1594 240.00 228.12 11.88

Interpretation:-
On the above table, it is evident that there are increase in No. of account holders
from 700 to 1594 in the year 2010-11. The loan amount distributed among home loan
account holder has also increased from Rs.90.07 crore in 2006-07 to Rs.240 crore in 2010-
11. The recovery procedure for home loans is also strengthening due to increment in

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recovered amount, i.e. Rs.63.05 crore to Rs.288.12 crore. So it nut shall there are upward
trend in number of accountholders and disbursement of home loans.

Punjab National Bank:-

Years No. of Home Home loan Disbursed


loan account (in crores Rs.)
Holders. Distributed Recovered Balance

2006-07 810 120.15 97.28 22.87

2007-08 950 183.26 150.00 33.26

2008-09 1120 213.65 185.86 28.05

2009-10 1433 240.87 231.07 9.80

2010-11 1500 265.15 265.05 9.10

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 2006-07 to 1500 in the year
2010-11. The bank also show enhancement in loan amount up to Rs.265.15 crore in the
year 2010-11. The recovery process of loans in past is slow but now it is increasing.

Oriental Bank of Commerce:-

Years No. of Home Home loan Disbursed


loan (In crores Rs.)
account Distributed Recovered Balance
holders

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2006-07 106 6.21 5.27 0.94

2007-08 130 11.55 10.16 1.38

2008-09 154 17.06 14.35 2.70

2009-10 180 20.09 18.68 1.41

2010-11 260 24.10 23.91 0.48

Interpretation:-
The oriental bank of commerce is a public sector bank. It has also upgraded its
position in banking sector in Bareilly. The figures shown in table reveal 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 2010-11. The
recovery procedure of Home loan is very sound.

ICICI BANK:-

Years No. of Home loan Disbursed


Home (in crores Rs.)
loan account Distributed Recovered Balance
holders
2006-07 650 104.33 98.12 6.21

2007-08 853 123.24 105.00 18.24

2008-09 1019 150.65 133.46 17.19

2009-10 1132 176.75 144.65 32.10

2010-11 1434 224.00 209.16 14.84

Interpretation:-

The amount reveals that there is tremendous increase in Home loan accountholders.
The amount distributed as home loan is also increased from Rs. 104.33 in 2006-07 to Rs.
224 crore in 2010-11. But the recovery mechanism of the Bank is not so good thats why
the outstanding amount shows fluctuating trend.

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8.2 -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 8.2(a)

Years HDFC LTD Punjab Oriental ICICI


National Bank Bank
Bank Of
Commerce

2006-07 700 810 106 650

2007-08 950 950 130 853

2008-09 1130 1120 154 1019

2009-10 1435 1433 180 1132

2010-11 1594 1500 260 1434

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


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

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Table 8.2 (b)

Name of Bank Average (Rs) Percentage of


Accountholders
HDFC LTD 1109 32

Punjab National Bank 1163 34

Oriental Bank of 166 5


Commerce

ICICI BANK 1018 29

Total 3456 100

GRAPH:- 8.2

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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 2007 to 2011.but HDFC LTD comes as market leader in the home
loan cases.

Home loans distributed by HDFC and Commercial banks:-

Table 8.3 (a)

Years HDFC LTD Punjab Oriental Bank ICICI BANK


National of Commerce
Bank

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2006-07 120.15 90.07 6.21 104.33

2007-08 183.26 120.00 11.55 123.24

2008-09 213.65 144.67 17.06 150.65

2009-10 240.87 180.33 20.09 176.75

2010-11 265.15 240.00 24.10 224.00

(Rs.in crore)

Average of home loans granted

Total home loans granted


= ---------------------------------
No. of years

Table. 8.3 (b)

Name of Bank Average (Rs) Percentage of home


loans granted (Rs in crore)
HDFC LTD 204.62 39

Punjab National Bank 155.01 29

Oriental Bank of Commerce 15.80 3

ICICI BANK 155.79 29

Total 531.22 100

To understand the comparison more effectively and closely, it has been shows

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Diagrammatically as follows:-

GRAPH:- 8.3

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, Oriental Bank of Commerce 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.

Recovery of Home loans:-


Table 8.4 (a)

Years HDFC Punjab Oriental Bank ICICI BANK


BANK (Rs in National Of Commerce (Rs in crore)
crore) Bank( Rs in (Rs in crore)
crore)

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2006-07 97.28 63.05 5.27 98.12

2007-08 150.00 91.20 10.16 105.00

2008-09 185.86 127.31 14.35 133.46

2009-10 231.07 165.90 18.68 144.65

2010-11 256.05 228.12 23.91 209.16

Average recovery of home loans

Total home loans recovered


= ----------------------------------
No. of years

Table 8.4 (b)

Name of Bank Average (Rs) Percentage of home


loans recovered( Rs in
crore)
HDFC LTD 184.05 39
Punjab National Bank 135.21 30
Oriental Bank of Commerce 14.47 3
ICICI BANK 138.08 28

Total 471.80 100

It is clearer with the help of this diagram: -

GRAPH: - 8.4

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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 is 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 Oriental bank of commerce is having lowest
recovery of their granted amount as home loans.

Outstanding Balance:-
Table 8.5 (a)

Years HDFC LTD Punjab Oriental Bank of ICICI BANK(Rs


(Rs in crore) National Commerce in crore)
Bank(Rs in ( Rs in crore)
crore)

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2006-07 22.87 27.02 0.94 6.21

2007-08 33.26 28.8 1.38 18.24

2008-09 28.05 17.36 2.70 17.19

2009-10 9.80 14.43 1.41 32.10

2010-11 9.10 11.88 0.48 14.84

Average of balance due

Total of Balance due in 5 years


= --------------------------------------
No. of years

Table 8.5 (b)

Name of Bank Average Percentage of


(Rs) balance due (Rs in crore)
HDFC LTD 20.61 34

PNB 19.89 33

Oriental Bank of Commerce 1.38 2

ICICI BANK 17.72 31

Total 59.15 100

Average of one bank


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

The diagrammatically presentation of data is as:-


GRAPH:- 8.5

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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 Oriental bank
of commerce and icici bank.

CHAPTER-9

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CHAPTER-9

ANALYSIS & INTERPRETATION

The analysis is based on the responses given by customers through questionnaires.

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AGE GROUP OF SURVEYED RESPONDENTS

TABLE 9.1:

Age group No. of Respondents


18 - 25 years 47
26 - 35 years 25
36 - 49 years 17
50 - 60 years 9
More than 60 years 2

CHART-9.1:

Analysis: - From the chart above we find that 47% of the respondents fall in the age
group of 18 25 years, 25% fall in the age group of 26 35 years and 17% fall in the age
group of 36 49 years. Therefore most of the respondents are relatively young (below 26
years of age). And 9% respondents age are 50-60 years and 2% respondents age are 60 to
above years.

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

TABLE-9.2
Sr. No. Category No. of Respondents Percentage

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1 Married 70 70%
2 Unmarried 30 30%
Total 100 100%
Base 100 respondents

CHART-9.2

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

Educational qualification of respondents

TABLE-9.3
Sr. No. Category No. of Respondents Percentage
1 Under graduate 25 25%
2 Graduate 40 40%
3 Post graduate 35 35%

Khandelwal college of management science & technology, Bareilly 80


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Total 100 100%


Base 100 respondents

CHART-9.3

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

Number Of years Are You in Bareilly?

TABLE-9.4
Sr. No. Category No. of Respondents Percentage
1 Less than five years 40 40%
2 More than five years 60 60%
Total 100 100%

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Base 100 respondents

CHART-9.4

Staying years in Bareilly

Interpretation
From the table and graph above it can be seen that
39% respondents are in Bareilly is less than five years.
61% respondents are in Bareilly is more than five years.

CUSTOMER PROFILE OF SURVEYED RESPONDENTS

TABLE 9.5:
Customer profile No. of respondents
Student 3
Housewife 2
Working Professional 51
Business 22
Self Employed 11

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Government service employee 11

Chart-9.5

Interpretation
From the table and graph above it can be seen that:-
51% of the respondents are working professionals, 22% are into business and 11% are self-
employed, 11% of the respondents are government service employee and 3% of the
respondents are student and 2% of the respondents are house-wife.

ANNUAL HOUSE HOLDS INCOME?

TABLE-9.6
Sr. No. Category No. of Respondents Percentage
1 Less than 2 lacs 49 49%
2 Between 2 to 5 lacs 31 31%
3 Between 5to 8lacs 15 15%
4 More than 8 lacs 5 5%
Total 100 100%
Base 100 respondents

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CHART-9.6

Interpretation
From the table and graph above it can be seen that
49% respondents annual household income is less than 2 lacs.

31% respondents annual household income is between 2 to 5 lacs.

15% respondents annual household income is between 5 to 8 lacs.


5% respondents annual household income is more than 8 lacs.

Do you know about HDFC housing development finance corporation LTD?

TABLE 9.7:

Category No. of Respondents


Yes 91

No 9

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CHART:-9.7

Awareness about HDFC LTD

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

Table 9 .8:-

Reasons for getting the home financed

Sr.No. Number of Reasons Percentage

a. Non-availability of funds 36

b. Reluctancy to pay cash in one go 35


c. Tax benefit 24

d. Any other 5

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GRAPH:- 9.8

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

Table-9.9

From where you have got your home financed

Name of Banks / company Percentage of customers

HDFC LTD 55

Punjab National Bank 15

Oriental Bank of Commerce 07

Khandelwal college of management science & technology, Bareilly 86


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ICICI BANK 20

Any other 03

To understand the response more effective and closely, it has been showed
diagrammatically as follows:-
GRAPH:- 9.9

From where you have got your home financed

Interpretation:-
The analysis showed that a large number of customers prefer HDFC LTD as
compared to others. The data shows that 7% of customers took loan from Oriental Bank of
commerce, 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 private sector banks i.e. ICICI bank.
As ICICI is the market leader in the home loans sector. This may be the reason for such
difference in ICICI Bank's percentage. Another reason for specialized services in home
loans, more amounts of loans, and efficient query handling.

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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-9.10

Sources of information about Home Loans Scheme


Sources of information Percentage of customers

Newspapers 49
Magazines 16
Banners/Hoardings/Pamphlets 11
Word of mouth 20
Any other source 04

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

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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-9.11

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Opinion about the services of HDFC LTD

Services of HDFC LTD Percentage of customers agreeing

Strongly Agree Neutral Disagree Strongly


agree disagree

a. Professionally 86% 10% 4% - -


managed

b. Reliable & 67% 33% - - -


transparent

c. Socially responsible 75% 10% 15% 4% -

d. Customer care 20% 68% 8% - -

e. Query handling 20% 76% 4% - -

GRAPH-9.11

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Opinion of customers about HDFC LTD

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

Table-9.12

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Opinion of customers about home loan schemes

HDFC LTD :-

Services of HDFC Percentage of customers agreeing


LTD
Strongly Agree Neutral Disagree Strongly
agree disagree
a. Amount of loan 60% 35% 5% - -

b. Legal formalities 42% 45% 14% - -

c. Interest rates 32% 56% 12% - -

d. Repayment options 26% 64% 10% - -

e. Security demanded 20% 32% 48% - -

f. Installments 55% 40% 5% - -

g. Services 45% 30% 18% 6% 1%

h. Processing for 55% 24% 18% 3% -


sanction of loan

GRAPH:- 9.12

Percentage of satisfaction level of customers of HDFC LTD

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Interpretation:-

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

TABLE:- 9.13

DATA GIVES PREFERENCE OF RESPONDENTS OF HOME LOANS


COMPANIES AND BANKS

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NO.OF
COMPANYS NAME (%)
RESPONDENTS
HDFC LTD 78 78
ORIENTAL BANK OF
2 2
COMMERCE
ICICI BANK 10 10
PNB 7 7
SBI 3 3
TOTAL 100 100

GRAPH:-9.13

NO. OF RESPONDENTS

INTERPRETATION:-
From the table and graph above it can be seen that:-
78% of the people contacted prefer HDFC LTD to any other and therefore it is
ranked no.1 by that percent of respondents.

PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS

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There are everything in the world has good or bad points. No doubt banking
industry/ company has made many efforts to enhance the customer satisfaction but
customer still faced some problems. These are high lightened as below:

1) The customer does not have proper knowledge about different home loan
products so they face problem in making a good deal.

2) There are procedural delays, which harass the customers lot. This will crush
the curtsy of customers to avail the home loan.

3) The attitude of bank employees some times non cooperative and it creates a
hurdle in building trust and Confidence among customers about banks.

4) The banks do not take into account the paying capacity of customers. So
some customers are not able to get amount of loan needed by them.

So above discussed are the problems which faced by customers while availing
home loans.

CHAPTER-10

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CHAPTER-10

FINDINGS

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1. HDFC LTD having good brand image in the minds of customers.

2. Majority of the people 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 customers felt that the interest rates are some what high

5. Some of the customer not having good faith on private banks like HSBC
bank .

6. Most of the people are directly go to HDFC to apply a home loan

7. Some of the customer of HDFC already benefited through HDFC home


loan products and services

8. Customer awareness is medium about HDFC products.

9. HDFC LTD providing good services to their customers.

CHAPTER-11

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CHAPTER-11

RECOMMENDATIONS AND SUGGESTIONS

These suggestions have been discussed as follows:-

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1) To increase their customers, the HDFC LTD should provide specialized


services in this sector. These services can be such as proper guidance to the customer
regarding the processing of loans, especially for the customers who are illiterate.

2) To satisfy their customers and for good dealings in future, the HDFC LTD
should make prompt disbursement of loan amount to the customers so that they can buy
or construct their dream home as early as possible.

3) The HDFC LTD should use easy procedure, or say, less lengthy procedure for
the sanctioning of loan to the customer. There should be less number of legal
formalities, in case this exists, then, these should be completed in less time. This will be
helpful in attracting more customers.

4) Although the interest rates on specific norms, yet customers seek less interest
rate which can lower their cost of house. So banks should try to lower their interest
rates. Needles to say, that the bank which is having lower interest rates, have the
maximum clients for loans.

5) HDFC LTD provide loan according to the repaying capacity of the customer
and his/her eligibility. Due to which, some customers are not able to get amount of loan
needed by them. So, the HDFC LTD should soften their norms regarding the loan
amount.

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

7) Charges: The Company has to reduce the mortality and administration


charges.

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

9) The company has to identify the potential customers.

10) Company should consider the present competition and should act according
to the customer needs.

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11) The HDFC LTD should try to provide proper knowledge regarding
their home loan schemes, even to people who don't know about such schemes and their
benefits especially in rural areas. So they should provide knowledge to the ignorant
customers, especially in rural areas and backward urban area so, above is the main
suggestions provided to the HDFC LTD. By considering these suggestions, the HDFC
LTD can strengthen their customer base in home loans sector. They should improve their
services and reduce legal proceedings and should be friendly to their customers. All this
will be helpful to satisfy their customers.

CHAPTER-12

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CHAPTER-12

CONCLUSION

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1) In my study we came to know that many peoples are interested to take a home loan from
HDFC LTD to construct their homes.
2) Home loans have long period when compare to other personal loans and other loans. So
peoples are confused to take a home loan.
3) Even though the interest rates are high peoples are willing to take a loan from HDFC
LTD due to some reasons.
4) The interest rates also some what high when compare to other banks
5) The loan sanction process is low when compare to other banks.
6) For disbursement process is also it will take low time when compare to other banks
Finally the whole research was carried out in a systematic way to reach at exact
results. The whole research and findings were based on the objectives. However, the study
had some limitations also such as lack of time, lack of data, non-response, reluctant attitude
and illiteracy of respondents, which posed problems in carrying out the research. But
proper attention was made to Carry out research in proper way and to make accurate
conclusion for the HDFC LTD which may beneficial for banks to enhance their customer
base.

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BIBLIOGRAPHY

REFERENCES
REVIEWS

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Berstain David(2008), Home equity loans and private mortgage


insurance: Recent Trends & Potential Implications, Vol.3 No.2, August 2008, Pp. 41
53

Dr. Rangarajan C. (2001), A Simple Error Correction Model of House


Price.Journal of Housing Economics Vol. 4, No. 3,pp 27 34

Fanning (1982), The Demand for Home Mortgage Debt Journal of


Urban Economics, Vol 11 No 2, November, pp. 770-774

Godse (1983), looking a fresh at banking productivity, Journal of Real


Estate Literature, Vol. No. 13, Page 141 to 164.

Haavio, Kauppi(2000) , Residential Lending to Low-Income and


Minority Families: Evidence from the 1992 HMDA Data," Federal Reserve
Bulletin,Vol no 80(2), December 2000 Pp-79-108

NEWS PAPERS
The Times of India
Financial Express

WEB PAGES:-

http://www.hdfcindia.com/

http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_08.html

www.hdfc.com

http://www.iloveindia.com/real-estate/housing-finance- companies/hdfc.html

http://www.loansnews.info/Home-loan/hdfc-home-loans/

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QUESTIONNAIRE

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Name: ..
Address: ..
Contact No :( O) (M)
City: ...............Pin: .State: .

1. Name: ____________________

2. Age:
(a) Below 30 (b) 30-40 (c) 40-50 (d) Above 50

3. Occupation:
(a) Professional (b) Self-employed (c) Salaried
(e) Others

4. Which income group do you belong? (Per annum)


(a) Below 2 lakhs (b) 2-4 lakhs
(c) 4-6 lakhs (d) 6 lakhs and above

5. Have you ever taken Home loan before?


(a) Yes (b) No

6. If yes, from which Bank/company?


(a) ICICI (b) HDFC (c) UTI
(d) Centurion bank of Punjab (e) others

7. Are you satisfied with the services provided? (on 5 point scale)
_____________________________________________________________________

Highly dissatisfied Neutral satisfied highly


dissatisfied dissatisfied

8. While taking loan, which things attract you the most?


(a) Interest rates (b) Service Provided
(c) Pay back period (d) Schemes
(d) Others

9. Even if the Interest rate is high for the personal loans, you will go for it?
(a) Yes (b) No

10. How much loan amount you took?


(a) Less than 1 lakhs (b) 1-5 lakhs
(c) 5-10 lakhs (d) more than 10 lakhs

Khandelwal college of management science & technology, Bareilly 106


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11. Even if the Interest rate is high for the Home loans, you will go for it?
(a) Yes (b) No

12. Do you own a home?


Yes [ ] No [ ]
If Yes, then, Proceed

13. Have you get it financed?


Yes [ ] No [ ]
If Yes, then, proceed..

14. What is reason for getting it financed?


1. Non availability of funds [ ] 2. Reluctance to pay cash in on go [ ]
3. Tax benefit [ ] 4. Any other (please specify).........................................

15. From which of the following banks/ company you have got if financed?
Oriental Bank of Commerce[ ] State Bank of India [ ]
ICICI Bank [ ] HDFC LTD [ ]
Any other (please specify)...........................................

16. From where have you got information about home loans scheme?
(Check list)..
Newspapers [ ] Magazines [ ]
Hoarding/banners [ ] Word of mouth [ ]
Any other (please specify)...........................................

17. What problems did you face while getting home loans?
a. Lack of knowledge b. Procedural delays and non cooperation
c. Any other (please specify)........................................

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


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

THANKS

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Khandelwal college of management science & technology, Bareilly 108