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1. Introduction to the housing finance industry 2. Introduction to HDFC 3. Objective and strategies 4. History & Evolution of the Organisation 5. Organisational structure 6. Vision, Mission 7. SWOT analysis 8. Subsidiaries 9 Culture of the organisation and values 10 Leadership 11 References

1.INTRODUCTION Overview of Housing Finance Industry Housing finance as a financial service is relatively young in India. The growth in housing and housing finance activities in recent years reflect the buoyant state of the housing finance market in India. The real estate sector is the second largest employment generator in the country. In 1970, the state set up the Housing and Urban Development Corporation (HUDCO) to finance housing and urban infrastructure activities, in 1977, the Housing Development Finance Corporation (HDFC) was the first housing finance company in the private sector to be set up in India. Currently there are 29 HFCs approved for refinance assistance from NHB. The following types of home loans are generally available in the market: Home Equity Loans: A form of finance to the customer by way of mortgage of existing property to the financier for taking a loan for some other purpose. The current market value of the property is the basis for providing home equity loans. Home Extension Loans: The purpose of this loan is the extension of existing houses Like the addition of rooms, toilet facilities etc. Such loans fall under the category of home loans. Home Improvement Loans: These loans are provided mainly for repairs and maintenance of existing houses- These could include internal and external repairing, waterproofing and roofing, complete interior renovation, tiling and flooring etc. Home Purchase Loans: Finance provided for the purchase of readymade houses.

Land Purchase Loans: These loans are being provided for the purchase of land for the purpose of construction of residential houses.

PROBLEMS AND ISUES WITH THE HOUSING FINANCE INDUSTRY IN INDIA Variation in standards The housing sector is witnessed varying standards and practices among the lending community, be it in origination and documentation or monitoring and supervision. Variation in standards across the industry imposes systematic risks, which can be a potential threat. Aggressive approach may lead to defaults Growing competition coupled with reduction in risk weights on housing loans has led the lending institutions to adopt aggressive practices including very high loan has led the lending institutions to adopt aggressive practices including very high loan to value loans, softening of collateral requirements, competitive pricing etc. with such an aggressive approach being followed may lead to increase in the default rates. Cost of funds The prevailing interest rate war has resulted in constant downward revision of interest rates. Further, the spreads are increasingly becoming thin as the lending rates are fast nearing the cost of funds. while during 1993-94, the interest rate on housing loans were in the range of 17-18% the same right now are in the range of 7%-8.5%. this may lead to erosion of profitability in the long run. Security Deficit due to norms Many primary lending institutions are making terms and conditions of sanction flexible and liberal, thus enabling the borrowers to avail the loans even more than value of security for long tenure of 20 to 25 years. The large quantum of institutional finance in the property transactions may lead to the problem of security deficit. Logically, the RBI has stipulated higher risk weightage of 75% as against 50% in November 2004.

Due diligence Issues Increasingly, there have been instances of dilution in due diligence on the part of lenders. Sometimes, loans are sanctioned without strictly complying with laid down rules, systems and procedures. This situation arises primarily out of fierce competitive pressures. It is observed that the growing customer expectations force the PLIs to compromise due to diligence, field verification process and appraisal norms, in a rush to sanction the loan at the earliest. Lack of Uniformity of norms amongst industry players While banks and HFCs are the prominent players, HFCs face few constraints. The regulatory norms stipulate 10% capital adequacy for banks whereas the same is 12% for HFCs. Further, banks have access to lower cost retail funds compared to HFCs. Uniformity in norms and hence a level playing field has to be ensured for a healthy housing finance system. These are newer challenges which need to be addressed and resolved in times to come. Industry Fragmentation The fragmented nature of the housing finance industry is a major impediment for its further growth. Despite this, the industry has managed to grow mainly due to consistent decline in interest rates, tax incentives given by the government and changing income profile of the Indian middle class population. Conflicting Interests While the private housing finance institutions are required to abide by the guidelines of the NHB, the general financial institutions, which include the commercial banks, follow the guidelines set by the RBI. Today, both these sections are competing with each other for the same housing pie but their functioning and lending practices seem to bear no similarity.

ALM Asset liability mismatch is one of the biggest risks housing finance institutions are confronted with. Funding of long term loans with short term deposits, leads to a mismatch between assets and liabilities that can be overcome by adopting appropriate asset liability management (ALM) techniques. FDI Constraints FDI guidelines for real estate development have come under a lot of flay. Guidelines requirements such as a minimum capitalization of US$10 million for a wholly owned subsidiary and US$5 million for joint ventures with Indian partners, development of a minimum area of acres, a minimum lock in period of 3 years from completion of minimum capitalization before repatriation of original investment, act as constraints to foreign investors.

2. INTRODUCTION TO HOUSING DEVELOPMENT FINANCE CORPORATION Ltd. (HDFC) Housing Development Finance Corporation Limited (HDFC Ltd.) was established in 1977 with the primary objective of meeting a social need of encouraging home ownership by providing long-term finance to households. Over the last three decades, HDFC has turned the concept of housing finance for the growing middle class in India into a worldclass enterprise with excellent reputation for professionalism, integrity and impeccable service. A pioneer and leader in housing finance in India, since inception, HDFC has assisted more than 38 Lakhs customers to own a home of their own, through cumulative housing loan approvals of over Rs. 3.73 trillion and disbursements of over Rs. 3.02 trillion as at March 31, 2011. HDFC has a wide network of 294 offices (which includes 76 offices of HDFC's wholly owned distribution company HDFC Sales Private Limited) catering to over 2,400 towns & cities spread across the country. It also has offices in Dubai, London and Singapore and service associates in the Middle East region, to provide housing loans and property advisory services to Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs). HDFC's unrelenting focus on Corporate Governance, high standards of ethics and clarity of vision, percolate through the organization. Trust, Integrity, Transparency and Professional Service are the important pillars of the brand HDFC and most importantly, people - both employees and customers - are its brand ambassadors. Customer satisfaction is the hallmark of all HDFC offerings. The first touch of HDFC's personalised service begins as soon as a customer approaches HDFC, and over time it progresses into a long and meaningful relationship. State-of-the-art information systems supported by strong in-house training programmes conducted at its specialized training centre in Lonavla, have equipped HDFC to respond swiftly to the ever-changing customer needs and thereby empower customers in making the right home buying decision. This is what sets apart HDFC's customer service philosophy - 'With You, Right Through'.

HDFC's specialist team of over 1,600 trained and experienced professionals follows a 'single-window concept' for providing smooth and value added services at all stages. The team guides the customers right through the entire process of property purchase - be it property search assistance, technical support prior to finalising the property, legal advice on property related documentation, personalised home loan counseling or providing tailor-made repayment options to suit the customer's specific requirements. HDFC's wide product range includes loans for purchase and construction of a residential unit, purchase of land, home improvement loans, home extension loans, non-residential premises loans for professionals and loan against property, while its flexible repayment options include Step Up Repayment Facility (SURF) and Flexible Loan Installment Plan (FLIP). HDFC also has a robust deposits mobilisation programme. HDFC has been able to mobilise deposits from over 10 lac depositors. Outstanding deposits grew from Rs. 1,458 crores in March 1994 to Rs 24,625 crores in March 2011. In addition, HDFC has received 'AAA' rating for its Deposit products for highest safety from both CRISIL and ICRA for sixteen consecutive years. Over the years, HDFC has emerged as a financial conglomerate with its presence in the entire gamut of financial services including banking, insurance (life and non-life), asset management, real estate venture capital and more recently education loans. Today, HDFC is recognised as one of the Best Managed Companies in India and is a model housing finance company for developing countries with nascent housing finance markets. HDFC has undertaken several consultancy assignments in various countries across Asia, Africa and East Europe to support and establish their housing finance institutions. At HDFC, 'Corporate Social Responsibility' has always been an evolving concept, akin to its 'learning by doing' philosophy. As part of its social objectives, HDFC has always endeavoured to contribute to economic development and social upliftment of the weaker sections of society and has professionally nurtured each of its social initiative as an investment. HDFC has undertaken development oriented work and supported

several social initiatives in the areas of education, child welfare, medical research, welfare for the elderly and the handicapped among several others. HDFC is how millions of Indian families spell the word 'Home' as the brand not only offers Housing Finance, but also Total Housing Solutions. The HDFC Advantage

Pioneers of Housing Finance in India with over 33-34 years of lending experience. Widest range of home loan & deposit products. Vast network of over 294 interconnected offices which includes 3 international offices. Most experienced and empowered personnel to ensure smooth & easy processing. Online loan application facility at and across-thecounter services for new deposits, renewals & repayments. Counseling and advisory services for acquiring a property. Flexible loan repayment options Free & safe document storage.

3.OBJECTIVE Business Objective HDFCs primary objective 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.They aim to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. Goals:

Develop close relationships with individual households. Maintain our position as the premier housing finance institution in the country. Transform ideas into viable and creative solutions. To grow through diversification by gaining leverage from our existing client base. To nurture the values and ethos of Brand HDFC through all its Subsidiaries and Associate Companies.

Growth strategies:

Increase the return on equity each year by 1 percentage point in order to maximise shareholder value; Maintain gross Non-Performing Assets (NPAs) below 1%; Consistently grow the loan book; Improve operational efficiency by consistently bringing down the cost to income ratio.

4.HISTORY AND EVOLUTION HDFC was incorporated in 1977 by Mr.Hasmukhbhai Parekh with the primary objective of meeting a social need - that of promoting home ownership by providing long-term finance to households. The launching of HDFC was meant to be one small step in dealing with the availability of housing accommodation in India which was then virtually nonexistent. HDFC as a pioneer launched India's first specialised home loan company with an initial capital of Rs. 100 million.

5 Organisational Structure

6. Vision and Mission


Increase the return on equity each year by 1 percentage point in order to maximise shareholder value; Maintain gross Non-Performing Assets (NPAs) below 1%; Consistently grow the loan book;

Improve operational efficiency by consistently bringing down the Cost to income ratio To enhance residential housing stock in country through the provison of housing finance in a systematic and professional manner. To promote home ownership MISSION OF THE COMPANY: To be no1 housing finance sector To increase flow of resources to housing sector by integrating Housing finance sector with overall domestic market Develop close relationships with individual households.

Maintain our position as the premier housing finance institution in the country. Transform ideas into viable and creative solutions. To grow through diversification by gaining leverage from our existing client base.

To nurture the values and ethos of Brand HDFC through all its Subsidiaries and Associate Companies


Strengths : 1. Right strategy for the right products. 2. Superior customer service vs. competitors. 3. Great Brand Image. 4. Products have required accreditation. 5. High degree of customer satisfaction. 6. Good place to work 7. Lower response time with efficient and effective service. 8. Dedicated workforce aiming at making a long-term career in the field. Weakness : 1. Some gaps in range for certain sectors. 2. Customer service staff need training. 3. Processes and systems, etc

4. Management cover insufficient. 5. Sectoral growth is constrained by low unemployment levels and competition for staff Opportunities : 1. Profit margins will be good. 2. Could extend to overseas broadly. 3. New specialist applications. 4. Could seek better customer deals. 5. Fast-track career development opportunities on an industry-wide basis. 6. An applied research center to create opportunities for developing techniques to provide added-value services. Threats : 1. Legislation could impact. 2. Great risk involved 3. Very high competition prevailing in the industry. 4. Vulnerable to reactive attack by major competitors. 5. Lack of infrastructure in rural areas could constrain investment. 6. High volume/low cost market is intensely competitive.

8. SUBSIDIARIES HDFC Bank HDFC Asset Management Company Ltd HDFC Standard Life Insurance Company Limited HDFC Sales HDFC ERGO General Insurance Company ltd ( formerly HDFC General Insurance Company Ltd) Other Companies Co-Promoted by HDFC

9. Organizational Culture & Values: They have an open and informal culture. They value integrity, commitment, teamwork and excellence in customer service. They have adopted a policy of "Learning By Doing" which encourages decision making as well as learning from doing. They continue to grow rapidly inspite of the competitive market scenario and young professionals opting to make a career with HDFC today will find more challenging and exciting opportunities to contribute and grow with them. Learning By Doing is the process of making meaning from direct experience. It is learning through reflection on doing, which is often contrasted with rote or didactic learning. Experiential learning is related to, but not synonymous with, experiential education , action learning, adventure learning, free choice learning, cooperative learning, and service learning. While there are relationships and connections between all these theories of education, importantly they are also separate terms with separate meanings. It focuses on the learning process for the individual. An example of experiential learning is going to the zoo and learning through observation and interaction with the zoo environment, as opposed to reading about animals from a book. Thus, one makes discoveries and experiments with knowledge firsthand, instead of hearing or reading about others' experiences.


Mr. H.T. Parekh ~ An industrialist, writer and philanthropist ~

Born on March 10, 1911 in a banking family at Surat, Mr. Hasmukh Thakordas Parekh, fondly referred to as Hasmukhbhai was the doyen of the Indian housing and financial sector. A graduate in Economics from Mumbai, Mr. Parekh also pursued a BSc. degree in Banking and Finance from the London School of Economics. After returning to India in 1936, Mr. Parekh began his financial career with a leading stockbroking firm, Harkisandass Lukhmidass. Simultaneously, he was a lecturer in Economics at the St. Xavier's College in Mumbai for about three years. He considered his twodecade long stint at the broking firm valuable, as it not only gave him his most basic lessons in the business but also immensely contributed to his personal growth. During this period Mr. Parekh also continued to study and write on different aspects of the economy and economic policy, money and banking, and also participated in public discussions. Driven by deep interest in investment banking, he decided to move on to his next major assignment. In 1956, Mr. Parekh joined the newly set up development finance institution Industrial Credit and Investment

Corporation of India Limited (ICICI). Under his leadership ICICI grew impressively to gain acceptance of the Indian business community, recognition of Government and even became a show piece for the World Bank. For decades he had been stressing the need for a financial corporation specializing in providing long term finance for ownership housing. Thus even at the age of 66, when most people think of retirement, Mr. Parekh was determined to set up his most ambitious enterprise. His lifelong dream of helping Indians own their home, as he had seen abroad during his student days, led to the formation of the Housing Development Finance Corporation Limited (HDFC) in 1977. It was the first-of-its-kind in India. It is under Mr. Parekhs leadership and direction that HDFC grew manifold while being strongly rooted in the principles of integrity, transparency and professionalism. Soon HDFC became a major role model not only for the country but for the entire Asian region. In keeping with his zeal for promoting new ventures, in 1983, Mr. Parekh promoted the first private sector oil exploration company in India, Hindustan Oil Exploration Company Limited. He also set up Gujarat Rural Housing Finance Corporation Limited in 1986. Mr. Parekhs love for writing blossomed right from his school days. In addition to being a regular contributor to the media with over 200 published articles to his credit on a variety of subjects such as industry, economic policy, capital market, development banking, credit policy, etc., he was the author of several books. He authored The Bombay Money Market, a novel book detailing the intricate workings of the money market in lndia. He also chronicled his considerable experience as a development banker in his book, The Story of a Development Bank (ICICI: 1955-1979). Some of his other books include The Future of Joint-Stock Enterprise in India, India and Regional Development, Management of Industry in India and The Indian Capital Market - Past, Present & Future. Also, his writings in Gujarati, Hirane Patro and Hirane Vadhu Patro are considered works of great importance in Gujarati literature. His wisdom and warmth drew people from all walks of life to him for

advice, guidance and inspiration. Mr. Parekh was a man of few words, and believed that strong views need not be expressed in strong words. He had a keen eye for talent and nurtured it by providing direction and ample learning opportunities. Known for his humility, affection and concern for fellowmen, Mr. Parekh was associated with several philanthropic causes and welfare organizations. In 1986, he was one of the founders of the Centre for Advancement of Philanthropy and served as its Chairman since its inception until his retirement in 1993. His concern and love for the city of Mumbai (erstwhile Bombay) led him to form the Bombay Community Public Trust in 1991. This venture was designed specifically to address the needs of disadvantaged citizens in the city of Mumbai. He took the initiative to finance Mumbais first public toilet by any corporate house Sulabh Shauchalaya. Additionally, Mr. Parekh served as trustee of the Sameeksha Trust, Saurashtra Trust, Kasturba Gandhi National Memorial Trust, The India Foundation, The lndia Heritage Trust, The Chakallas Puraskar Trust and also served as the President of the Social Service League. Some of Mr. H.T. Parekhs major achievements are:

The James Taylor prize for standing 1st in B.A. (Economics) from the University of Mumbai. Honorary Fellow of the London School of Economics and Political Science, U.K. Padma Bhushan by the Government of India for his contribution to the field of economic activities in 1992.

The thoughts and dreams of a legend like Mr. H.T. Parekh live on forever, changing human lives for the better.

Board of Directors Details of the Board of Directors in terms of their directorships/memberships in committees of public companies (excluding HDFC) as on July 8, 2011 are as under: No. of Committees*** Member Chairperson Non Mr. Deepak S. Executive Parekh Chairman Mr. Keshub Mahindra Vice Chairman

Sr. No.

Name of Director


No. of Directorship**


Mr. Shirish B. Independent Patel Mr. B. S. Mehta Mr. D. M. Sukthankar Mr. D. N. Ghosh Independent



6 7 8


5 7 11

1 6 6

1 0 1

Dr. S. A. Dave Independent Dr. Ram S. Tarneja Mr. N. M. Munjee Independent




Dr. Bimal Jalan

Independent Nonexecutive

11 Dr. J. J. Irani $


Mr.V.Srinivasa Executive Rangan Director Ms. Renu Sud Managing Karnad Director Vice Chairman & Chief Executive Officer




Mr. Keki. M. Mistry