housing loans(hdfc )

1

INTRODUCTION

INTR ODUCTIO TION N TO HOME H OME LOANS LOAN S 1.1 INTRODUC Home Home is a drea dream m of a pers person on that that shows shows the the quan quanti tity ty of effo effort rts, s, sacrifices luxuries and above all gathering funds little by little to afford one’s dream. Home is one of the things things that everyone everyone one wants to own. Home is a shel shelte terr to pers person on wher where e he rest rests s and and feel feel comf comfor orta tabl ble. e. Ma Many ny bank banks s providing home loans whether commercial banks or financial institutions to the people who want to have a home. HDFC-(Ho HDFC-(Housing using Develop Development ment And Finance Finance Corporat Corporation) ion) Home Loan, Loan, India have been serving the people for around three decades and providing vari variou ous s hous housin ing g loan loan acco accord rdin ing g to thei theirr vari varied ed need needs s at attr attrac acti tive ve & 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 Many banks banks are are provi providi ding ng home home loans loans at cheap cheapest est rate rate to attrac attractt consum consumer ers s towar towards ds them. them. The more more custom customer er friend friendly ly attitu attitude de of these these banks, currently offer to consumers cheapest loan over homes. In view of acute housing shortage in the country, and keeping in mind the social – economic role of commercial banks in the present times, the RBI advised banks to encourage the flow of redit for housing finance. With the RBI reducing bank rate, the home loan market rates nosediving by 50 basis points. The HDFC Bank and Standard chartered bank has become the first player in this sector to announce a housing loan for a 20 years period. No doubt it will enhance the end cost people to plan their house over longer duration now; it has been made easy for a person to buy that dream house which he dreamt of long ago. 2

HDFC HDFC also also prov provide ides s with with Home Home Impro Improvem vement ent Loan Loan for intern internal al and exte extern rnal al

repa repair irs s

and

other ther

stru struct ctur ural al

impr improv ovem emen ents ts

like like

pain painti ting ng,,

waterpr waterproofi oofing, ng, plumbing plumbing and electric electric works, works, tiling tiling and flooring flooring,, grills grills and alumi aluminiu nium m windo windows. ws. HDFC HDFC financ finances es up to 85% 85% of the cost cost of renov renovati ation on (100% for existing customers). Current status is that HDFC reduced home loan rates by 50 basis points for all its existing floating rate customers.

1.2 OBJECTIVE OBJECT IVES S OF STUDY  STUD Y   There is no strongest foundation for your dream home, than a cheap loan. Home loans have become that stronger foundations for people who want to own a home. The main objectives of the study are as follows :➢

 The main objective of this study is to know the Customers perceptions abo about

ho home

loan loans s

of

HDFC FC(h (ho ousi using

dev devel elo opment ent

fina financ nce e

corporation)LTD ➢

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

➢ ➢

➢

➢

To make comparative study of Disbursement of home loans by a few Commercial banks. To study the satisfaction level of customers about home loans.   To study study the prob problem lems s faced faced by custom customer ers s in obtai obtainin ning g the home home loans.

➢

 To learn about various aspect of hdfc home loan ltd.

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1.3

PURPOSE PURP OSE OF THE STUDY  STUD Y 

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

•

  To To know know the the idea ideas s of custo custome mers rs abou aboutt home home loan loan prod produc ucts ts and and services.

•

 To study the satisfaction level of customers about home loans.

•

  To study study the prob problem lems s faced faced by custom customer ers s in obtai obtainin ning g the home home loans.

• •

 To learn about various aspect of HDFC home loan ltd.

1.4 SCOPE SCOP E OF STUDY  STU DY 

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 The Indian housing finance industry has grown by leaps and bound in few years. total home loans disbursements by banks has risen which witnesses phen phenom omen enal al grow growth th fro from last last 5 year years. s. Ther There e are are grea greate terr numb number er of  borrowers of home loans. so by this study we can find out satisfaction level of customers and problems faced by them in obtaining home.

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RESEARCH METHODOLOGY OF THE STUDY 

RESEARCH METHODOLOGY:-

Research methodology is a way to systematically show the research problem. problem. It may be understood as a science of studying how research is done scientifically. 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 limitations of study etc.

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•

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

To study the satisfaction level of customers about home loans.

•

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

•

  To To mak ake e compara arative tive stud study y of disb isburse ursem ment of

home home loans ans by

com commerci ercia al banks anks,, the the stud study y sha shall be cond conduc ucte ted d in the the manne annerr enumerated below-

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

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

A - PRIMARY SOURCE:-

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

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

B – SECONDARY SOURCE:-

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

2.3DATA DATA COLL COLLEC ECTI TION ON INST IN STRUM RUMEN ENT T DEVELOPMENT : The mode of collection of data will be based on Survey Method and Field Activ Activity ity.. Prima Primary ry data data collec collectio tion n will will base base on perso personal nal inter intervie view. w. I have have prep prepare ared d the questi questionn onnair aire e accor accordi ding ng to the necess necessity ity of the data data to be collected.

2.4 LIMI LIMITA TATI TION ONS S OF THE THE STUDY: STUD Y:- 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 cooperation of some banks. This proved to be major limitation limitation of the study. iii) To access such a large number of customers was difficult because of non-

cooperative 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 There was was limita limitati tion on of time time to conduc conductt such such a big big survey survey in limit limited ed

available time.

vi) Ignorance and reluctant attitude of customers was also a major limitation

in this study.  T Thu hus s abov above e all all were were the the limi limita tati tion ons s in this this rese resear arch ch stud study. y. The The maximum efforts were made to overcome these limitations in the study.

2.5 THE HISTORY HIST ORY OF INDIAN INDI AN HOME LOANS:LOAN S:-

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Home loans in India have made people Buy Property in India in spite

of the the skyr skyroc ocke keti ting ng pric prices es.. Toda Today, y, we find find cons consid ider erab able le Re Real al Esta Estate te 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 Servic Services es in India. India. Property Dealers and Real Estate Consultants in India

usually recommend that we undertake appropriate appropriate Home Loan or Mortgage Loan counseling so that we can Buy Apartment in India at an affordable

Mortgage Rate.Purchasing the home of your dreams is not an easy task. Especially when you plan to buy a home on loan. Home loan means that you buy a house on installments. In simpler terms when you want to own a home and can’t afford to pay the amount in lump sum, you can pay it in monthly installments with an interest rate.  The interest rates of home loans are expected to go down even further according to analysts who foresee a cut down in the rates by the RBI in the wake of the decision taken by US Federal Reserve to cut its rates by a significant margin.  There are number of companies offer cheap home loans at a low interest rate. You can avail loan against existing house for renovation or expansion etc. etc. There There are are many many natio national nalize ized d banks banks that that offer offer financ finance e for affor affordab dable le 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 all the the impo import rtan antt housi housing ng fina financ nce e insti institu tute tes s and and some some of the the top top home home finance banks providing lowest interest rates. In the last few years, housing loan scenario in India has changed drast drastic icall ally. y. It has taken taken a front front seat seat and people people are looking looking forward forward to owning their own houses. It is no more a dream that required lifetime saving and a difficult decision to make. Today the new home purchase loan is much easily available and is much cheaper than what was available earlier. Banks are now everywhere and the schemes are implemented even in villages and smaller towns. The housing loans are popular there too, however, the activity 10

of building flats is little slow. It would not be wrong to say that there has been a boom in the home loan market and with this boom; there is also a boom in the Number of home loans mortgage brokers in India.  The main reason for this boom in home loan market is the change in government policies. It is our government’s motivation that the home loan interest rates in India have fallen considerably. Lot many banks are offering home loans and this is available at low EMIs (Equated monthly Installments). High EMIs are now a thing of past. Today lending rate is in the range of 7.5 to 15 %. Again, there are different types of home loans available today. The interest rate available available is also of two different types. One is the fixed rate loan and the other other is the floatin floating g rate rate loan. loan. In the fixed rate loan, whatever 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 avai availa labl ble e to thos those e who who want want to desi design gn thei theirr home homes s acco accord rdin ing g to thei theirr requirement and taste. In other words, this loan is meant for those who themselves want to construct their new home. As shared earlier, taking a loan is not a difficult task. However, before taking a loan, one must realize that the relationship with the bank will be for a longer period usually 15 to 20 years so one must ensure faith and integrity in bank. Apart from low rate of interest, the bank should also provide some value added services. The other thing is to look into is the property that is to be brought. Making sure that the builder has all sanctions and facility to build a good building is very important.   Tak Takin ing g home home loan loans s thes these e days days has has beco become me simp simple ler. r. With With the the RBI RBI regu regula larl rly y brin bring g down down inte intere rest st rate rates; s; taki taking ng home home loan loans s have have beco become me extremely easy. Housing loans which were 16.5% to 18% a few years ago fell 11

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

2.6 Home Loan Procedure Proce dure in India Indi a :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 comp compris rise e docum document ents s to estab establis lish h incom income, e, age, age, reside residence nce,, emplo employme yment, nt, inve invest stme ment nts, s, etc. etc. The The custo custome merr also also need needs s to hand hand over over a cheq cheque ue for for payment of an up front (non -refundable) processing fee of about 0.5-1% of  the loan amount to the HFC. Validati Validation on of the Informat Information: ion: - 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 may insi insist st on a pers person onal al inte interv rvie iew w with with the the cust custom omer er and and perf perfo orm a refe refere renc nce e chec check k on the the refe refere renc nces es prov provid ided ed by the the cust custom omer er on the the application form. Issue Issue of Sanction Sanction Letter Letter :- After After due appra appraisa isall of custom customer er profi profile, le, a

sanction letter is issued which contains details such as loan amount, rate of  inter interest est,, annual annual / month monthly ly reduci reducing ng balan balance, ce, tenor tenor of the loan, loan, mode mode of  repayment and general terms and conditions of the loan. This is the actually the approval of the money lending procedure by the company. However, the money is sanctioned only after the documents and the property on behalf of  which the loan is being granted is thoroughly verified. 12

Submis Submissi sion on of Docume Documents nts:: - Once Once the the sanc sancti tion on lett letter er is pass passed ed,, the the

customer is required to leave the entire set of original documents pertaining to the the prop proper erty ty bein being g purc purcha hase sed d with with the the HFC HFC as secu securi rity ty for for the the loan 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. properly. Once the HFC is satisfied that the property property is lega egally lly

and and

tech techni nica callly

clear lear,,

the they

disbur sburse se the the

loan

amount. unt. The The

disbursement from the HFI is on the basis of the stage of construction of the property. Paymen Paymentt Proced Procedure: ure: - Once Once all all the the abov above e ment mentio ione ned d proc proces ess, s, the 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). repayments). The EMI payments commences only after the entire sanctioned loan amount is drawn.

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2.7 INTEREST RATES PROVIDED BY VARIOUS BANKS Finance Institution

Bank of Baroda

State India

Bank

HDFC

ICICI Bank

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

EMI / Lakh (INR)

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

9.00 9.25 9.50 9.50

2076 1230 1044 932

8.00 8.25 8.25 8.50

2028 1227 970 868

Up to 5 Of6   to 10 11 to 15 16 to 20

9.50 9.75 -

2100 1300 -

8.75 9.25 9.25 9.75

2064 1280 1029 949

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

11 11 11 11

2175 1375 1137 1033

9.50 9.50 9.50 9.50

2101 1294 1045 933

Up to 5 6 to 10

10.75 2162 10.75 1364

9.50 9.50

2101 1294

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11 to 15 16 to 20

10.75 721 10.75 1016

9.50 9.50

1045 933

LIC Finance

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

10.50 11 11 11

2149 1373 1137 1032

9.50 9.50 9.50 9.50

2100 1294 1044 932

PNB Finance

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

9.00 9.00 9.25 9.50

2076 1267 1030 933

10.50 10.50 10.50 10.50

2150 1350 1106 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.

2.8Recent Rece nt trends tre nds of home hom e loan loan in India I ndia::In order to und underst erstan and d the recen ecentt tre trends nds we nee need to kno know or understand various factors. These factors play vital role in Indian home loan market. These include interest rate on which banks provide home loan, tax rebate on home loan and its impact. Apart from this to understand the recent trend we need to compare the trends of home loan of different years. Here we have compared the interest and other market trends of year 2009 with 2007 2007-0 -08. 8. This This kind kind of comp compar aris ison on give gives s the the resu result lt whic which h help helps s us to understand the trends of market of any industry. Apart from the impact of  present and past economic ups and down also affect the trends. Today the US slowdown is the major issue which has affected almost all the industry. So we have also discussed this issue in terms to define trend of home loan market in India.

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HDFC: yielding Ground: -

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

GRAPH

Comp Co mpet etit itio ion n is not not new new to HDFC HDFC,, afte afterr all all ICIC ICICII Bank Bank was was a toug tough h competitor when it went on a customer acquisition spree some years back.

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 This time around, although ICICI may not be in a position to give HDFC a run for its money, public sector banks, especially State Bank of India (SBI) could.  The difference between four years ago and now is that money today is not yet cheap and certainly not as inexpensive as it was back in 2004 and 2005. Of course with bank loans to HDFC now treated as priority lending, the cost of funds for HDFC should come down. But should long-term rates go up, HDFC will feel the pinch.  That’s why the market sat up and took note when SBI kicked off an 8 per cent in- the- first -year product believing HDFC could lose some market share. In the recent rally, the stock which had plunged to a two year low, has gained 31 per cent to the Sensex’s 23 per cent. The good news is that transa transacti ctions ons could could start picking picking up in the second second half of 2009 2009 now now that 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 per cent cent in 2009 2009-1 -10, 0, anal analys ysts ts are are not not so sure. sure. CLSA CLSA poin points ts out out that that HDFC’s loan growth (pre-securitisation) (pre-securitisation) would be around 15-17 per cent. One reason for this is that HDFC Bank may now hold back a higher proportion of  loans that it originates; the bank currently sources just over a fourth of  HDFC’s loans. As a result HDFC’s operating income may increase by about 15 per cent in 2009-10 while its net profits should grow by about 10-12 per cent. HDFC has always scored when it comes to keeping bad loans in check, which is why a few delays or even defaults will not hurt the balance sheet. At Rs 1,653,the stock trades at around 2.8 times the estimated adjusted book value for 2009-10.

2.9 Types Typ es of o f home home loan l oans: s: Housing loans offered by banks are of different types:•

Home Purchase Loans

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•

Home Construction Loans

•

Home Improvement Loans

•

Home Extension Loans

•

Home Conversion Loans

•

Land Purchase Loans

•

Stamp Duty Loans

•

Bridge Loans

•

Balance Transfer Loans

•

Refinance Loans

•

Loans to NRIs

Home purchase loans:-

  This is the basic ho home me lo loan an 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 prop proper erty ty.. The The docu docume ment nts s that that are are requ requir ired ed in such such a case case are are slig slight htly ly different from the ones you submit for a normal Housing Loan. Loan. If you have purc purcha hase sed d this this plo plot with within in a peri period od of one year year befo before re you you star starte ted d const constru ruct ctio ion n of your your house house,, most most HFCs HFCs will will incl includ ude e the the land land cost cost as a component, 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. eligibility. Home improvement loans:-

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 These loans are given for implementing repair works and renovations in a home that has already been purchased, for external works like structural repairs, repairs, waterproofi waterproofing ng or internal internal work like tiling tiling and flooring flooring,, plumbing 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 build building ing author authority ity.. the follo followin wing g are are comin coming g under under the

home 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 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, loan, after obtaining the requisite approvals from the relevant municipal corporation. Home conversion loans:-

 This is available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through a home conversion loan, the existing loan 19

is tran transfe sferr rred ed to the the new new home home incl includ udin ing g the the extr extra a amou amount nt requ requir ired ed,, eliminating the need for pre-payment of the previous loan. Land purchase loans:-

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

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

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

Balance- transfer loans:-

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

Refinance loans are taken in case when a loan for your house from a HFI at a particular ROI you have taken drops over the years and you stand to lose. In such cases you may opt to swap your loan. This could be done from either the same HFI or another HFI at the current rates of interest, which is lower. 20

NRI home loans:-

 This is tailored for the requirements of Non-Residen of  Non-Residentt 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 cost of land land in case case of purc purcha hase se of land land.. The The repa repaym ymen entt capa capaci city ty is calculated taking into account factors such as: •

Age

•

Income/Salary

•

Qualifications

•

Dependant/(s)

•

Assets/Liabilities

•

Credit History

•

Stability / continuity of your employment/business employment/business

•

Income of co-applicant/(s) co-applicant/(s)   Tak Takin ing g home home loan loans s thes these e days days has has beco become me simp simple ler. r. With With the the RBI RBI

regu regula larl rly y brin bring g down down inte intere rest st rate rates; s; taki taking ng home home loan loans s have have beco become me extremely easy. Housing loans which were 16.5% to 18% a few years ago fell by 11.5% 11.5% to 13%. 13%. With With inter interest est rates rates going going down, down, people people incre increasi asingl ngly y number apply to take these loans. Some of the leading banks offering home loans in India, including ICICI Bank, IDBI Bank, HDFC Bank State Bank, Bank of Baroda, Kotak Bank, SBI, Standard Chartered Bank and Axis Bank.

2.10 2.10HDFC HDF C Home H ome Loan:Loa n:-

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Eligibility; - HDFC home loans are available for: •

Purchase of flat, row house, bungalow from developers 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 owner owners s of the prop propert erty y will will have have to be co-ap co-appl plica icants nts.. Howev However, er, the coapplicants need not be co-owners. Maximum tenure is 20 years subject to retirement age. Loan Amount: - 85% of the cost of the property (including the cost of the

land) and based on the repayment capacity of the customer. Rate of Interest :- The current applicable fixed rate of interest in respect of 

the total loan approved is as follows:

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

Term of Loan

Rate Per Annum

(No. of Years)

(%p.a)

Up to 5

10.00

6 - 10

10.75 22

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 disbu disburse rsed. d. This This intere interest st is called called pre-EM pre-EMII inter interest est.An .An early early redem redempti ption on

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charge of 2% of the amount being prepaid is payable on repayment of a loan ahead of schedule. Repayment Period: - Repayment Options – Step Up Repayment Facility; - helps younger borrowers to take a much

bigger loan today based on an increase in their future income. Flexible Flexible Loan installm installments ents Plan: - Often Often custo customer mers, s, parent parents s and their their

chil childr dren en wish wish to purc purcha hase se prop proper erti ties es toge togeth ther er.. The The pare parent nt is near nearin ing g retirement and their children have just started working. This option helps such customers combine the incomes and take a long term home loan where in the instalment reduces upon retirement of the earning parent. Tran Tranch che e Base Based d EMI EMI

-

Customer Customers s purchasin purchasing g an under under construct construction ion

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 provid provides es borrow borrower er the opportu opportunity nity to

repay the loan faster by increasing the EMI. Whenever the borrower gets an increment, increase in disposable income or have lump sum funds for loan prepayment, they can benefit by saving of interest because of faster loan repayment. Borrower can benefit by: •

Increase in EMI means faster loan repayment

•

Saving of interest because of faster loan repayment

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•

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

Documents Required :Salaried

Self Employed

Self Employed

Customers

Professionals

Businessman

Application form

Application form with

Application Application form with

with photograph

photograph

photograph

Education Qualifications Qualifications

Education Qualifications Qualifications

Latest Salary-slip Certificate and Proof of 

Certificate and Proof of 

business existence Form 16

business existence

Last 3 years Income Tax returns (self and business)

Business profile Last 3 years Income Tax

Last 6 months

Last 3 years Profit /Loss and

bank statements Balance Sheet

returns (self and business) Last 3 years Profit /Loss and Balance Sheet

Processing fee cheque

Last 6 months bank statements Processing fee cheque

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

  The Credit Appraisal is an important step in sanctioning loan applications .Hence the Credit Appraiser needs to have certain important documents to comp compute ute the credit credit worthin worthiness ess of

the appli applican cantt .In the case of salar salaried ied

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

25

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

comp compone onents nts that that are added added to the person persons s salar salary. y. They They conta contain in vario various us components 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 BANK STATEMEN STATEMENTS(6 TS(6 MONT MONTHS HS CURREN CURRENT) T) ;- 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 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

•

Withdr Withdrawa awall ;- It cont contai ains ns the the amou amount nts s that that were were debi debite ted d to the the

acco accoun unt. t. This This is care carefu full lly y stud studie ied d to find find out out abo about any any regu regula larr withdrawals or a series of checks so that any existing loans may be reve reveal aled ed and and ther there e can can be a corr correc ectt esti estima mate te of the the repa repaym ymen entt capacity. •

Balance 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.

26

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

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

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)Education Less of 3%

OR

5618/-

HDFC takes from applicant whichever is less. This is applicable time to time. 10) PHOTOCOPIES OF PROPERTY PROPERTY PAPERS. PAPERS. NON RESIDENT INDIAN

27

SALARIED/EMPLOYED; 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 EMPLOYED PROFESSIO PROFESSIONALS NALS :- An NR NRII appl applic ican antt can can also also be a

Doct Doctor or,, Engi Engine neer er etc. etc.In In thes these e case cases s HDFC HDFC will will put put them them in the the spec specia iall 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 This accoun accountt has has two sides sides a Profi Profitt side side which which reveal reveals s all all ea earni rnings ngs and gains .There is also a Loss side which shows shows all taxes, liabilities liabilities and losses. We refer to the Profit side a the Gross Receipts.These includes components revealing the nature nature and amount of the Prime Prime income and other earnings earnings Eg Consultation fees in case of Doctor . From the Gross Receipts we calculate the Gross Profits and thereon move to calculate Loan eligibility .Which is the loan amount that can be conveniently sanctioned to the applicant. Loan Eligibility

=

Gross Profit * 2

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

28

STAGES OF HOME LOAN

Applicati

Munirka HUB

DataEntr Login

Disburseme nt of loan

DoubleCheckin g

Scanning

Recommendati on Over(ROVR)

Fixed charges

 The representation shown above is not a perfect copy of the actual process.   Thi This s is beca because use thes these e stag stages es are are taki taking ng plac place e simu simult ltan aneo eous usly ly and and one one application is being taken care for by the experienced employees of both HDFC HDFC Ltd Ltd serv servic ice e cent centre re and and HDFC HDFC Ltd Ltd HUB HUB (als (also o call called ed the the back back end end office).Also the applicant may be asked to send information or may be asked questi question ons s regar regardin ding g his requir requireme ement nt and/o and/orr his docum document ents s for for his own own

29

convenience Hence the loan application may or may not shuttle through different stages. APPLICATION STAGE :- This is the stage where the Application Form first

reac reache hes s the the conc concer erne ned d Serv Servic ice e Ce Cent ntre re Here Here all all the the docu docume ment nts s

in the 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 all docu docume ment nts s are are pres presen entt and and in thei theirr prop proper er plac place e .He .He chec checks ks if the the docum document ents s are are duly duly filled filled,no ,nott fake,a fake,atte tteste sted d by author authority ity in questi question on and present in order.In order.In case any document document is missing the applicant applicant is contacted contacted electr electron onica ically lly or by mail

.The .The applic applicant ant is conta contacte cted d by teleph telephone one 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 also at this this stag stage e that that the the QU QUIC ICK K DATA DATA ENTR ENTRY Y of the the loan loan application application is done to create a serial no. of the application. 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 mean means s of a lett letter er and/ and/or or elec electr tron onic ic comm commun unic icat atio ion n the the syst system em 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 that of

fill fillin ing g up a docu docume ment nt know known n as the the INTER INTERVI VIEW EW SHEE SHEET. T. for for

proc processi essing ng indivi individua duall loans loans (sala (salari ried ed cases cases)) .It conta contains ins vario various us simpl simple e entries like :1. Name of borrower 2. Name of co-borrower 30

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

SCANNING: - In this stage the various important documents of the applicant

are scanned. this helps to create their electronic copy which acts as a ready reference, a proof, and can also be shared and utilized by other employees of HDFC Ltd. DATA ENTRY  :- The file has been sent to the back end office or the HUB .At

HUB there are many experts with their own specializations . these officials review the various parts of the filae again and perform many specialized tasks Data entry is also one of these tasks .this entry is much more different 31

and complex as compared to the earlier performed Quick Data Entry. An exhaustive amount and type of information has to be entered into the ILPS system ranging from Personal Details, Employment Details to Property Rate History and Customer Interactions. RECOMMENDATION OVER (ROVR) :- The Recommendation OVER is also

reffered to as the First Appraisal at this stage certain specially appointed persons have been given the responsibility of recommending a loan. These people have to take special care of reviewing every document, and all the smal smalll deta detail ils s that that need need to be consi conside dere red d befo before re consi conside deri ring ng the the loan loan appl applic icat atio ion n to be vali valid. d. Afte Afterr this this the the file file is sent sent to anot anothe herr spec specia iall lly y appo appoint inted ed person person as explai explained ned belo below. w. At this this stage stage if any corr correct ectio ion n or mistake is present it can be sent back to the Service Centre. DOUBLE DOUBLE CHECKING CHECKING OVER :- As the the name name sugge suggest sts s at this this stag stage e

a

specially appointed 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 stag stage e can can caus cause e a grea greatt loss loss to the the comp compan any. y.Th The e Doub Double le chec checke kerr 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 numb number er of year years s with with the the comp compan any y and and shou should ld have have show shown n exem exempl plar ary y performance performance and must posses experience. experience. SANCTIONING SANCTIONING :- An authorized sanctioning authority within HDFC itself will

revi review ew the the rema remark rks s of Doub Double le Chec Checke kerr and and Sanc Sancti tion onin ing g auth author orit ity y .If .If it considers the loan suitable to be Sanctioned it gives its approval .After it has given its approval stamp the ILPS system will automatically send a letter to the Applicant that his loan has been sanctioned. 32

After this approval the Applicant can go to whichever Service Centre which he selects to get his loan disbursed. SPECI PECIAL AL CASE CASE :- A spec specia iall case case can can aris arise e if the the appl applic ican antt has has not not

mentioned the property for which he wants to take a loan .In that case the appl applic ican antt can can let let the the case case be rema remain in pend pendin ing g . this this mean means s that that the the Applicants loan request will be considered to be complete even though he has not decided the property. However the Applicant is expected to finalise the property in a short time. A Property Address is necessary to 1. get the loan loan disb disburs ursed ed 2. Process the Legal and Technical Technical Appraisal Appraisal of the property property and its Papers.

DISBURSEMENT: -  The last and final stage in the Home Loan process is that

of disb disbur urse seme ment nt.. afte afterr the the sanc sancti tion onin ing g has has take taken n plac place e the the appl applic ican antt becomes a registered customer of HDFC Ltd . He can now

take take the disburs disburseme ement nt of the loan from from any of the vario various us

service centre of HDFC .The loan shall be disbursed in one Lump sum or in suitable installments to be decided by HDFC with reference to the need and/or progress of construction (which decision shall be final and binding on the borrower).The borrower hereby acknowledges the receipt of the loan disbursed as indicated in the receipt.

33

34

35

COMPANY PROFILE OF HDFC HOSING DEVELOPMENT FINANCE CORPORATION LTD

INTRODUCTION:Housing Housing Developm Development ent Finance Finance Corporat Corporation ion Limited Limited , founded

1977 by Ravi Maurya and Hasmukhbhai Parekh, Parekh, is an Indian NBFC, NBFC, focusing on home mortgages. mortgages . HDFC' HDFC's s distri distribut butio ion n netwo network rk spans spans 243 243 outlet outlets s that that includ include e 49 office offices s of HDFC' HDFC's s distri distribut butio ion n comp company any,, HDFC HDFC Sales Sales Priva Private te Limited. In addition, HDFC covers over 90 locations through its outreach prog progra ramme mmes. s. HDFC' HDFC's s mark marketi eting ng effor efforts ts contin continue ue to be conce concentr ntrate ated d on developing a stronger distribution network. Home loans are also Sharcket through HDFC Sales, HDFC Bank Limited and other third party Direct Selling Agents (DSA). HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since emerged as the largest residential mortgage finance institution in the country. The corporation has had a series of share issues raising its capital to Rs. 119 Crores. The gross premium income for the year ending March 31, 2007 stood at Rs. 2,856 Crores and new business premium income at Rs. 1,624 Crores. The company has covered over 8,77,000 lives year ending March 31, 2007. HDFC operates through almost 450 locations throughout the country with with its its corp corpor orat ate e head head quar quarte ters rs in Mumb Mumbai ai,, Indi India. a. HDFC HDFC also also has has an Internati International onal Office in Dubai, Dubai, UAE with service service associate associates s in Kuwait, Kuwait, Oman and Qatar. Qatar. HDFC HDFC is the largest largest housing housing compa company ny in India India for the last last 27 years.

36

SNAPSHOT-I

•

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

•

Almost 90% of initial shareholding in the hands of domestic institutes and retail investors. Current 77% of shares held by foreign institutional investors.

•

Besi Beside des s the the core core busi busine ness ss of mort mortga gage ge HDFC HDFC has has evol evolve ved d into into a financial conglomerate conglomerate with holdings In:

•

CHAR CH ART: T:-- 3 .1

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

✔

HDFC Standard Life insurance Company- HDFC holds 72.26 %.

✔

HDFC Asset Management Company – HDFC holds 60%

✔

HDFC Bank- HDFC holds 23.26%. 37

✔

Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.

✔

HDFC Chubb General Insurance Company – HDFC holds 74%. SNAPSHOT-II

•

Loan Approvals

Rs. 805 billion.

(Up to Dec 2007) •

(US $ 18.30 bn.)

Loan Disbursements

Rs.669 billion

(Up to Dec. 2007) •

Housing Units financed

•

Distribution

(US $ 15.20 bn) 2.5 million.

➢

Offices

181

➢

Outreach Programs

90

 j jjjjjj  jjjjjj HDFC Limited

Type Founded Headquarters Key people

Public (BSE: BSE: 500010) 500010) 1977 Mumbai, Mumbai ,India Ravi Maurya Hasmukhbhai Parekh

Industry

Housing Finance

Revenue

US$ 1.49 billion (2008)

Employees Website

1,029 www.hdfc.com

38

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

serves as Executive Chairman and Chief Executive

Officer of the Board of Housing Development Finance Corp. Ltd., (HDFC). He   joine joined d HDFC HDFC Limit Limited ed in a senio seniorr manag manageme ement nt posit positio ion n in 1978 1978.. He was was indu induct cted ed as a who whole-t le-tim ime e dire direct ctor or of HDFC HDFC Limi Limite ted d in 1985 1985 and and was was appo appoint inted ed as its Execut Executive ive Chairm Chairman an in 1993 1993.. He is the Chief Chief Execut Executive ive Officer Officer of HDFC Limited. Limited. Mr. Parekh is a Fellow of the Institute of Chartered 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 Corpo Corporat ratio ion n since since 1993 1993.. He was was appo appoint inted ed as the deput deputy y managi managing ng director in 1999 and the Managing Director in 2000. He is also a member of  the Investors’ Grievance Committee of Directors. 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 Exec Execut utiv ive e Dire Direct ctor or of the the Co Corp rpor orat atio ion n in 2000 2000.. She She is resp respon onsi sibl ble e for for overseeing all aspects of lending operations 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 Director

Mr. S Venkitaramanan Venkitaramanan

Mr. K M Mistry - Managing Director

Dr. Ram S Tarneja

Mr. Shirish B Patel

Mr. N M Munjee

39

Mr. B S Mehta

Mr. D M Satwalekar

GROUP COMPANIES:•

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

•

HDFC HD FC AM AMC: C: On One e of th the e to top p 3 AM AMCs Cs in In Indi diaa- Pr Pref efer erre red d in inve vest stme ment nt manager.

•

Intelenet Global: BPO services for international customers.

•

CIBIL: Credit Information Bureau India Limited.

•

HDFC HD FC Chu Chubb bb:: Upc Upcom oming ing Pr Priva ivate te co comp mpani anies es in the fie field ld of Gen Genera erall Insurance.

•

HDFC Mutual Fund

•

HDFC reality.com: Helps Helps to search properties in all major cities in India

•

HDFC securities

•

HDFC Standard Life Insurance Company Ltd Aug, 2000  JOINT VENTURE

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

awards. HDFC is rated ‘AAA’ by both CRISIL and ICRA. Similarl Similarly, y, Standard Life is rated ‘AAA’ both by Moody’s and Standard and Poor’s. These reflect the efficiency with which HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively. HDFC Standard Life Insurance Company Ltd was incorporated on 14 th August Aug ust 20 2000 00.. HD HDFC FC is the ma majo jorit rity y sta stakeh kehol olde derr in the ins insura urance nce JV wi with th 81.4% staple and Standard of as a staple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture. HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private Life Li fe Insu Insura rance nce Co Comp mpani anies, es, whi which ch off offer ers s a ran range ge of ind indivi ividua duall and gr group oup insura ins urance nce sol soluti utions ons.. It is a jo joint int ven ventur ture e be betwe tween en Ho Housi using ng Dev Develo elopm pment ent Financ Fin ance e Cor Corpo porat ratio ion n Li Limit mited ed (HD (HDFC FC Ltd Ltd.) .) Ind India’ ia’s s le leadi ading ng hou housin sing g fin financ ance e institution and the Standard Life Assurance Company, a leading provider of  financ fin ancial ial ser servic vices es fro from m the Uni United ted Kin Kingd gdom. om. Bo Both th the pr prom omot oters ers ar are e wil willl know kn own n fo forr th thei eirr et ethi hica call de deal alin ings gs an and d fi fina nanc ncia iall st stre reng ngth th an and d ar are e th thus us committed to being a long-term player in the life insurance industry- all important importa nt factors to consider when choosing your insurer. Business Growth:-

 The company commands a market share of over 60% in the housing finance sector. Leveraging on its brand equity HDFC has also entered the Indian Mutual Fund scene quite recently. HDFC was the only applicant to be given clearance by the government, to enter the Rs 250 bn life insurance business. This in itself speaks volumes about the management’s professional reputation. Fina Financ ncia iall yea year 2000 proved ved to be a boon for for hous housiing fina financ nce e companies, as the tax benefits announced in the budget, coupled with the low low real real esta estate te pric prices es and and risi rising ng disp dispos osab able le inco income mes, s, spur spurre red d housi housing ng demand. As a result, demand for housing finance too has registered high rates of growth. The housing sector has now been recognized as an engine of 

41

econom economic ic grow growth th and and HDFC HDFC is well well place placed d to capita capitalis lise e on this this surge surge in demand. Agai Agains nstt this this back backdr drop op,, HDFC HDFC logg logged ed in an exce excell llen entt perf perfor orma manc nce. e. The The company’s approvals approvals and disbursements during the first half of financial year 2001 witnessed a year on year growth of 33% and 32% respectively. The robu robust st grow growth th in itse itself lf is a conc conclu lusi sion on that that HDFC HDFC’s ’s busi busine ness ss is far far less less susceptible to any economy downturn.

(TABLE:-3.2) (TABLE:-3.2) Financial Snapshot

Growth ratios

FY98

FY99

FY00 1HFY0 1

Operating

13.7% 21.6% 15.2%

21.1%

income Other in 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 HDFC’s domination in terms of volume. However, the increased competition has led 42

to a decli decline ne in intere interest st sprea spread d (the (the differ differenc ence e betwe between en intere interest st incom income e earned and interest paid). Over the last couple of years HDFC’s spread has shrunk from 2.1% in financial year 1997 to 1.8% in financial year 2000. When it comes to containing risk, the company’s track record is among the best best in the the fina financ ncia iall sect sector or.. Duri During ng the the fina financ ncia iall year year 2000 2000,, HDFC HDFC has 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 outs outsta tand ndin ing g loan loans. s. The The high high leve levell of an indi indivi vidu dual al inve invest stor or’s ’s pers person onal al contribution contribution in a house makes the possibility 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. Apar Apartt fro from thes these e trad tradit itio iona nall metho ethods ds of gro growing wing,, HDFC HDFC is also also leveraging the Internet to consolidate its business. It has picked up a stake in various portals. These are pure investments to draw synergies for its existing businesses. Its proposed venture with TCS for setting up call centres can potentially provide HDFC with strong revenue streams. The venture is aimed at cornering a share of $10 bn IT (information technology) enabled services market where India has a significant cost advantage. While its investments in new business may not yield immediate returns, they are likely to enhance HDFC HDFC’s ’s retu return rns s on equi equity ty over over the the medi medium um term term.. It will will also also help help in expanding its customer base and provide more credence to its cross-selling efforts. HDFC derives an edge in all its forays because of its wide reaching marketing and distribution network (over 44,000 agents). Once it has the entire range of products (post insurance), the company has plans to enter into distribution of financial products by leveraging its own as well as the network of HDFC Bank. The company can leverage its existing channels to provide the products and services in the areas of Infotech services, asset 43

manageme management, nt, life insurance insurance and commercial commercial banking. banking. This over a longer longer time frame can emerge as a major source of revenue for the company.   The company’s proactivity and brand name, has always accorded it prem premiu ium m valu valuat atio ions ns on the the bour bourse ses. s. But But the the evid eviden ence ce of incr increa easi sing ng competition (from SBI and ICICI) may lead to slow down in its growth, in turn affect affecting ing its curre current nt valua valuatio tions. ns. Nevert Neverthel heless ess,, if its invest investme ments nts in new ventures like call centres, mutual funds, insurance and Internet initiatives click, then HDFC looks set for higher growth and hence, valuations. Also one should not ignore the value of its 27% stake in HDFC Bank (India’s No. 1 private sector bank), which will pay rich dividends to the company.

GRAP GR APH: H:-3 -3 .3

44

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

residential housing stock in the country through the provision of housing financ finance e in a system systemati atic c and profe professio ssional nal manne manner, r, and to prom promote ote home home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.

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

45

a) develop close relationships with individual 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. properties. HDFC also offers depository services in form of term deposits.

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

Home Extension Loan

Loans to professionals for office or clinic.

Home Equity Loans (Loan Against Property)

Loan against Rent receivables

Short Term Bridging Loan.

Loans to professionals for non-residentials non-residentials premises loan

46

Key Associates and Subsidiaries: - These are:-

HDFC BANK:•

23.26% owned by HDFC(inclusive of warrants)

•

Market Cap US $ 11 billion

•

ADRs listed on NYSE

•

In February 2008, HDFC Bank board approved the merger with

Centurion Bank of Punjab {CBOP} (1 share of HDFC Bank for 29 Shares of CBOP)

•

1,412 branches, 528 cities, 2,890 ATMs

•

Over 12 million customer accounts

•

Key business areas

_ Wholesale banking Retail banking Treasury operations

•

Financials (as per Indian GAAP) for the half year ended Sept 30, 2008

– Total net revenues: Rs 48.26 bn, increase of 51% over previous year – PAT: Rs 9.92 bn, increase of 44% over the previous year

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

47

Structure: - Strong and stable partnership:•

•

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

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

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 07-08 (Previous year Rs 28.56 bn); reflecting a growth of 70% Q1 08-09 growth in total premium of 34% over Q1 07-08 Funds under management of group new business increased by 8% in as at June 30, 2008 as against the previous year. Coverage: - Committed to increasing coverage in an under-insured market :- Achieved a total sum assured of Rs. 33.12 bn in respect of 0.25

million lives covered in Q1 09 taking the cumulative sum assured to Rs. 907.5

bn

covering

over

3.66

million

lives

Claims

other

than

withdrawals/surrenders withdrawals/surrenders amounted to Rs 0.09 bn . Divers rsif ifie ied d dist distri ribu buti tion on netw networ ork k to cate caterr to cust custom omer er Distribu Distribution tion:: - Dive prefe preferen rence: ce: - HDFC HDFC netwo network rk is used used to cross cross sell sell by offer offering ing custo customiz mized ed products Operates out of 575 offices across the country serving over450 locat locatio ions ns Ne Netwo twork rk of over over 1,62,0 1,62,000 00 financ financial ial consul consultan tants, ts, 379 379 corpo corpora rate te agents and other sales intermediaries . Market share: - Market share of 7.3% (private sector) and 4.7% (overall) in

terms of Effective Premium. Key perfo performa rmance nce indic indicato ators rs and busine business ss pract practic ices: es: -A diversifi diversified ed

distribution distribution mix including the tied agency and alternate channels 48

•

Bank Banks, s,

brok broker ers, s,

tele telem marke arketi ting ng,,

dire direct ct

sale sales s

forc force e

Tied Tied

agen agency cy

contributed 64% effective premium in Q1 09 Strong bank assurance tie-ups with public, private, co-operative and foreign banks amongst the leading players in the pensions segment Leveraging technology to strengthen processes. •

Workflow system awarded the best technology innovation

•

Web based facility to service customers and channel partners

HDFC ASSET MANAGEMENT:-

•

 Tie-up with Standard Life Investments (SLI)

•

HDFC holds 60% of HDFC Asset Management

•

HDFC MF offers 34 equity and debt oriented products

•

Earned a Profit after Tax of Rs 1.18 billion for FY08; Return on Equity: 75%

•

•

Paid a dividend of 150% for FY08 to equity shareholders   Total Total assets assets under under manag manageme ement nt (AUM) (AUM) as at Septe Septemb mber er 30, 30, 2008 2008,, stood at Rs. 647 bn which is inclusive of portfolio management and advisory Services of Rs. 170 bn.

•

Equity assets as a proportion of the mutual fund’s AUM is 35%.

HDFC PROPERTY FUND:-

•

Launched in March 2005

•

First Scheme: HDFC India Real Estate Fund

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

HDFC International Fund

– Fund Corpus: US$ 800 million – International, 9 year close ended fund 49

– Targeted at premier institutions and funds across the world Interested in taking an exposure in Indian real estate. HDFC ERGO GENERAL INSURANCE COMPANY LTD:-

•

•

HDFC holds 74% and ERGO (Germany) holds 26%  The company offers Auto Insurance, Home Insurance, Group Accident Insu Insura ranc nce, e, Gr Grou oup p Trav Travel el Insur Insuran ance ce,, Co Comm mmer erci cial al Insu Insura ranc nce e whic which h incl includ udes es Fire Fire and and Ma Mari rine ne and and Spec Specia ialt lty y Insur Insuran ance ce Prod Produc ucts ts like like Directors & Officers Liability .

•

Achieved Gross Written Premium of Rs. 2.4 bn.

•

Operates out of 28 locations across the country

•

HDFC HDFC netw networ ork k is used used to cros cross s sell sell Home Home Insu Insurrance ance & Acci Accide dent nt Insurance

•

HDFC and HDF HDFC Bank ank data atabase is used used to cro cross sel sell Accid ccide ent Insurance. TABL TABLE: E:-3 -3 .4 CONSOLIDATED EARNINGS:(As at March 31, 2008)

HDFC

consolidated

Return on Equity

27.8%

28.2%

Return on Average Assets

2.7%

2.7%

Earnings per share (Rs)

85

Profit after Tax (Rs in billion)

24.36

Total Assets (Rs in billion)

810.99

50

95 27.13 925.83

DISTRIBUTION NETWORK: - HDFC’s distribution network spans 254 outlets

that include 54 offices of HDFC’s distribution company, HDFC Sales Private Limit Limited ed (HSPL (HSPL). ). In addi additio tion, n, HDFC HDFC covers covers over over 90 locat locatio ions ns throu through gh its outreach outreach program programmes. mes. Distribu Distribution tion channels channels form form an integral integral part part of the distribution network with home loans being distributed through HSPL, HDFC Bank Limited and other third party direct selling associates.  To cater to non-resident Indians, HDFC has offices in London and Dubai and serv servic ice e asso associ ciat ates es in Kuwa Kuwait it,, Oman Oman,, Qa Qata tar, r, Shar Sharja jah, h, Abu Abu Dhab Dhabii and and Al Khobar, Jeddah and Riyadh in Saudi Arabia.

51

HDFC HOME LOAN ADVANTAGE :•

Home loan counselling sharing over 30 years of home loan experience

•

Door step service

•

Helps in finding Dream home

•

Wide Product Range

•

Multiple Repayment Option

•

Wide Network of financing

•

Post disbursement service

•

Loan repayment option

AWARDS & ACCOLADES:-

•

Goldman Sachs has listed HDFC as one among top 7 financial services organization in 2008.

•

HDFC ranked ranked among the top 3 Best Managed Managed Companies Companies in India India by Finance Asia in 2007

•

Selected as the best Indian company in the FIs / NBFCs / Financial Services sector at the Dun & Bradstreet – American Express Corporate Awards 2006 and 2007.

•

Best Investment Management Company in India by EUROMONEY 2007

•

HDFC was awarded a rating of 4 out of 5 in Karmayog's ‘Corporate Social Responsibility Responsibility Ratings’ in 2007.

•

HDFC is featured in the Limca Book of Records 2006, for the landmark achievement of Rs. One trillion in home loan approvals

•

HDFC was awarded the Gold Shield in the Finance Sector by ICAI for excellence in Financial Reporting in 2005. This is the 14th time HDFC has been selected for this award.

•

HDFC has been awarded the 'Business Superbrand' Superbrand' status.

•

HDFC has been awarded the 'Best Home Financier' title by Outlook Money – 2005

•

Economic Times Corporate Citizen of the Year Award - November 2004.

52

FUTUR FU TURE: E: - HDFC HDFC has alway always s been been marke market-o t-orie riente nted d and dynam dynamic ic with with

respe respect ct to resour resource ce mobi mobilis lisati ation on as well well as its lendi lending ng prog program ramme. me. this this rend render ers s it more more than than capa capabl ble e to meet meet the the new new chal challe leng nges es that that have have emer emerge ged. d. Over Over the the year years, s, HDFC HDFC has has deve develo lope ped d a vast ast clie client nt base ase of  borrowers, borrowers, depositors, shareholders and agents, and it hopes to capitalize 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 throu through gh partne partnersh rships ips with with some some of the best best instit instituti utions ons in the world world,, for providing specialized financial services. Each institution is being fine-tuned for a specif specific ic marke market, t, while while offer offering ing the entir entire e HDFC HDFC custo customer mer base base the highest standards of quality in product design, facilities and service

53

54

COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY COMMERCIAL BANKS

4.1 - Disbursement Disbur sement of o f Home loans by different differen t banks:-

HDFC LTD :-

Years

No. of  

Home loan Disbursed

Home loan

(in crore Rs.)

account holders.

Distributed

Recovered

Balance

2004-05

700

90.07

63.05

27.02

2005-06

950

120.00

91.20

28.8

2006-07

1130

144.67

127.31

17.36

2007-08

1435

180.33

165.90

14.43

2008-09

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 2008-09. The loan amount dist distri ribu bute ted d amon among g home home loan loan acco accoun untt hold holder er has has also also incr increa ease sed d from from Rs.9 Rs.90. 0.07 07 cror crore e in 2004 2004-0 -05 5 to Rs.2 Rs.240 40 cror crore e in 2008 2008-0 -09. 9. The The reco recove very ry proc proced edur ure e for for home home loan loans s is also also stre streng ngth then enin ing g due due to incr increm emen entt in recovered amount, i.e. Rs.63.05 crore to Rs.288.12 crore. So it nut shall

55

there are upward trend in number of accountholders and disbursement of  home loans. Punjab National Bank :-

Years

No. of  

Home loan Disbursed

Home

(in crores Rs.) Recovered

loan

Distributed

Balance

account 2004-05

holders. 810

120.15

97.28

22.87

2005-06

950

183.26

150.00

33.26

2006-07

1120

213.65

185.86

28.05

2007-08

1433

240.87

231.07

9.80

2008-09

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 the year year 2004 2004-0 -05 5 to 150 1500 in the the year year 2008 2008-0 -09. 9. The The bank bank also lso show show enhancement in loan amount up to Rs.265.15 crore in the year 2008-09. The recovery process process of loans in past is slow but now it is increasing.

56

Standard Chartered Bank :-

Years

No. of  

Home loan Disbursed

Home loan

(in crores Rs.) Recovered

account

Distributed

Balance

2004-05

holders 106

6.21

5.27

0.94

2005-06

130

11.55

10.16

1.38

2006-07

154

17.06

14.35

2.70

2007-08

180

20.09

18.68

1.41

2008-09

260

24.10

23.91

0.48

Interpretation:-

  The The standa standard rd charte chartere red d bank bank is a priva private te sector sector bank. It has has also also upgraded its position in banking sector in DEHRADUN. The figures shown in table reveals that there is upward shift in customer base of Bank from 106 custo custome mers rs to 260 260 cust custom omer ers. s. The The bank bank has has also also incr increa ease sed d its its shar share e in housing finance by distributing Rs. 24.10 crores in 2008-09. The recovery procedure of Home loan is very sound. 57

ICICI BANK:-

Years

No. of  

Home loan Disbursed

Home

(in crores Rs.) Recovered

loan

Distributed

Balance

account 2004-05

holders 650

104.33

98.12

6.21

2005-06

853

123.24

105.00

18.24

2006-07

1019

150.65

133.46

17.19

2007-08

1132

176.75

144.65

32.10

2008-09

1434

224.00

209.16

14.84

Interpretation Interpretation :-

  The amount reveal that there is tremendous increase in Home loan accountholders. The amount distributed as home loan is also increased from Rs. Rs. 104. 104.33 33 in 2004 2004-0 -05 5 to Rs. Rs. 224 224 cror crore e in 2008 2008-09 -09.. But But the the reco recove very ry mechanism of the Bank is not so good that’s why the outstanding amount shows fluctuating trend.

58

4.2 -COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY  COMMERCIAL BANKS:-

  There are number of schemes and products, offered by commercial banks to attract the customers. The comparison among different commercial banks which offer home loans in regard of Disbursement of home loans are as:No. of Home loan account accou nt holders holder s ;-

Tabl Ta ble e 5.2(a .2 (a))

Years

HDFC LTD

Punjab

Standard

ICICI

National

chartered

Bank 

Bank 

Ban

2004-05

700

810

106

650

2005-06

950

950

130

853

2006-07

1130

1120

154

1019

2007-08

1435

1433

180

1132

2008-09

1594

1500

260

1434

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

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

Table 5.2 (b) (b)

Name of Bank

Average (Rs)

Percentage of  

HDFC LTD

1109

Accountholders 32

Punjab National Bank

1163

34

Standard Chartered

166

5

1018

29

3456

100

Bank ICICI BANK  Total

60

GRAP GR APH: H:-- 4 .2

Home loan holders of HDFC LTD and commercial banks

Interpretation:-

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

61

HDFC LTD

Home loans distributed by HDFC and Commercial banks:-

Table Tab le 4.3 (a)

Years

HDFC LTD

Punjab

Standard

National

chartered

Bank 

Bank 

ICICI BANK 

2004-05

120.15

90.07

6.21

104.33

2005-06

183.26

120.00

11.55

123.24

2006-07

213.65

144.67

17.06

150.65

2007-08

240.87

180.33

20.09

176.75

2008-09

265.15

240.00

24.10

224.00 (Rs.in

crore)

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

62

Tabl Ta ble e. 4.3 (b) (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

15.80

3

155.79 531.22

29 100

Standard Chartered Bank ICICI BANK  Total

  To under understa stand nd the compar compariso ison n more more effect effective ively ly and closel closely, y, it has been been shows Diagrammatically as follows:-

63

GRAPH:- 4.3

Home loans granted by HDFC LTD and commercial banks

Interpretation:-

  There is no doubt that every bank tries to maximize its home loan disbursement. But on the basis of data it is concluded that HDFC LTD shows high average of loan grants Rs. 20.62 crore as compared to ICICI, standard charte charted d bank bank and PN PNB B respe respecti ctivel vely. y. Rs155 Rs155.01 .01,, Rs. 15.80 15.80 and Rs. 155.7 155.79 9 crores. On this analysis the HDFC LTD are higher loan provider as compared to other sector banks.

64

Recovery of Home loans:-

Table4.4 (a)

Years

HDFC

Punjab

Standard

ICICI BANK 

BANK (Rs

National

chartered

(Rs in

in crore)

Bank( Rs

Bank (Rs in

crore)

2004-05

97.28

in crore) 63.05

crore) 5.27

98.12

2005-06

150.00

91.20

10.16

105.00

2006-07

185.86

127.31

14.35

133.46

2007-08

231.07

165.90

18.68

144.65

2008-09

256.05

228.12

23.91

209.16

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

65

Table 4.4 (b) (b)

Name of Bank

Average (Rs)

Percentage of home loans recovered( Rs

HDFC LTD

184.05

in crore) 39

Punjab National Bank

135.21

30

14.47

3

138.08

28

471.80

100

Standard Chartered Bank ICICI BANK  Total

It is more clear with the help of this diagram:GRAP GRAPH: H:-- 4 .4

66

Home loans recovered by HDFC LTD and commercial banks

Interpretation:-

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

Outstanding Outstanding Balance :-

Table 4.5 (a) (a)

67

Years

HDFC LTD

Punjab

Standard

ICICI BANK(Rs

(Rs in

National

chartered

in crore)

crore)

Bank(Rs in

Bank(Rs in

2004-05

22.87

crore) 27.02

crore) 0.94

6.21

2005-06

33.26

28.8

1.38

18.24

2006-07

28.05

17.36

2.70

17.19

2007-08

9.80

14.43

1.41

32.10

2008-09

9.10

11.88

0.48

14.84

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

Table 4.5 (b) (b)

Name of Bank

Average

Percentage of 

(Rs)

balance due (Rs in

68

crore)

HDFC LTD

20.61

34

PNB

19.89

33

Standard Chartered Bank

1.38

2

ICICI BANK 

17.72

31

Total

59.15

100

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

 The diagrammatically diagrammatically presentation of data is as:GRAP GRAPH: H:-- 4. 4 .5

69

Balance due on home loans by HDFC LTD and commercial banks

Interpretation:-

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

70

ANALYSIS & INTERPRETATION I NTERPRETATION

71

 T The he anal analys ysis is is base based d on the the resp respon onse ses s give given n by cust custom omer ers s thro throug ugh h questionnaires. AGE GROUP OF SURVEYED RESPONDENTS TABL TA BLE E 5.1: .1 :

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

No. of Respondents 80 64 30 20 6 CHART-5.1:

Analysis:- From the chart above we find that 47% of the respondents fall in

the age group of 18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36 – 49 years.  Therefore most of the respondents are relatively young (below 26 years of  age). and 6% respondent’s age are 50-60 years and 2% respondent’s age are 60 to above years. GENDER CLASSIFICATION OF SURVEYED RESPONDENTS TABLE-5.2 Sr. No.

1 2

Category

Married Unmarried Total

No. of   Respondents 140 60 200

respondents

72

Percentage

70% 30% 100% Base 200

CHAR CHARTT-5 5.2

Interpretation

From the table and graph above it can be seen that ➢

70% respondent’s are married.

➢

30% respondent’s are unmarried. Educational qualification of respondent’s

TABLE-5.3 Sr. No.

1 2 3

Category

Under graduate Graduate Post graduate Total

No. of   Respondents 50 80 70 200

Percentage

25% 40% 35% 100% Base

200 respondents CHAR CHARTT-5 5.3

Interpretation

From the table and graph above it can be seen that ➢

25% respondent’s are under graduate.

➢

40% respondent’s are Graduate.

➢

35% respondents are Post graduate.

CUSTOMER PROFILE OF SURVEYED RESPONDENTS

73

TABL TA BLE E 5 .5: .5 : Customer profile Student Housewife Working Professional Business Self Employed Government service employee Chart-5.5

No. of respondents 15 10 100 40 20 15

Interpretation

From the table and graph above it can be seen that:51% of the respondents are working professionals, 22% are into business and and 11% 11% are are self self-e -emp mplo loye yed, d, 11% 11% of the the resp respon onde dent nt’s ’s are are gove govern rnme ment nt service employee and 3% of the respondents are student and 2% of the respondents are house-wife. ANNUAL HOUSE HOLD INCOME?

TABLE-5.6

Sr. No.

Category

No. of

74

Percentage

1 2

Less than 2 lacs Between 2 to 5

Respondents 98 62

3 4

lacs Between 5to 8lacs More than 8 lacs Total

30 10 200

49% 31% 15% 5% 100% Bas

e 200 respondents CHAR CHARTT-5 5.6

Interpretation

From the table and graph above it can be seen that ➢

49% respondent’s annual household household income is less than 2 lacs.

➢

31% respondent’s annual household income is between 2 to 5 lacs.

➢

15% respondent’s annual household income is between 5 to 8 lacs.

➢

5% respondent’s annual household income is more than 8 lacs.

Do you know about HDFC housing development finance corporation corporat ion LTD? TABL TA BLE E 5 .7: .7 :

Category

No. of Respondents

Yes

164

No

36

75

CHART:-5.7

Awareness about HDFC LTD

Interpretation:-

From the table and graph above it can be seen that ➢

91% respondent’s are known about HDFC LTD

➢

9% respondent’s are not known about HDFC LTD

Tabl Table e 5 .8:.8 :Reason Reas ons for gettin g etting g the home h ome Loan Lo an

Sr.No.

Number of Reasons

Percentage(%)

a.

Non-availability of funds

36

b.

Reluctancy to pay cash in

35

c.

one go Tax benefit

24

d.

Any other

5

76

GRAP GRAPH: H:-- 5 .8

Interpretation:-

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

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

Table-5.9 From where you have got your home loan?

Name of of Ba Banks / company

(%)Percentage of of customers

HDFC LTD

55

Punjab National Bank

15

Standard Chartered Bank

07

ICICI BANK

20

Any other

03

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

GRAP GRAPH: H:-- 5 .9

78

From where you have got your home financed

Interpretation:-

  The analysis showed that a large number of customers prefer HDFC LTD as compared to others. The data shows that 7% of customers took loan from Standard Chartered Bank, 20% of customers from ICICI BANK, 15% Customers took loan from Punjab National Bank, 55% of customers took loan from HDFC LTD and a 3% of customers fall under the category of 'Any other' which included State State Bank of India, 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 figu figure res s of the the two two priv privat ate e sect sector or bank banks s i.e. i.e. ICIC ICICII bank bank and and Stan Standa dard rd Chartered Bank. As ICICI is the market leader in the home loans sector. This may may be the the reas reason on for for such such diff differ eren ence ce in Stan Standa dard rd Char Charte tere red d Bank Bank's 's perce percenta ntage ge and ICICI ICICI Bank' Bank's s percen percentag tage. e. Anothe Anotherr reaso reason n for for speci speciali alized zed serv servic ices es in home home loan loans, s, more more amou amount nts s of loan loans, s, and and effi effici cien entt quer query y handling. 79

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

Table-5.10

Sources of information informa tion about a bout Home Loans Scheme Sch eme?

Sources of information

(%)Percentage of customers

Newspapers

49

Magazines

16

Banners/Hoardings/Pamphlets

11

Word of mouth

20

Any other source

04

CHART:CHART :-5.10 percenta perc entage ge of source of informati info rmation on about home hom e loans scheme

80

Sources of information about Home Loans Scheme

Interpretation:-

 The data shows that around 20% of customers got information from source of 'Word of Mouth' which includes information from friends, relatives, colleagu colleagues es etc. 49% of customers customers got informat information ion from newspapers, newspapers, only 16% of

customer customers s from magazines magazines and 4% of customers customers got informatio information n

about about home home loans loans scheme schemes s under under 'Any 'Any other other source source'' and 11% 11% throug through h Banners/ Hoardings/Pamphlets Hoardings/Pamphlets .

Table-5.11 Opinion about the services of HDFC LTD?

Services of HDFC

Percentage of customers agreeing

LTD

81

Strongly

Agree

Neutral

agree

Disagre Strong e

ly disagr

86%

10%

4%

-

ee -

67%

33%

-

-

-

c. Socially responsible

75%

10%

15%

4%

-

d. Customer care

20%

68%

8%

-

-

e. Query handling

20%

76%

4%

-

-

a. Professionally Professionally managed b. Reliable & transparent

GRAP GR APHH-5 5.11 .1 1

Opinion of customers about HDFC LTD

82

Interpretation:-

Customers from HDFC LTD are quite satisfied from their services like query handling and customers social responsibility of banks towards customers and professionally managed services. They don't give so good response to reliability and transparency services of banks. So, custom customer er's 's satisf satisfact action ion level level towar toward d HDFC HDFC LTD servic services es is lightl lightly y satisfied.

Table-5.12

83

Opinion of customers custome rs about home loan loa n schemes scheme s?

HDFC LTD :-

Services of  HDFC LTD

Percentage of customers agreeing Strongly

Agree

Neutral

Disagr

Strongly

ee

agree 60%

35%

5%

-

disagree -

loan b. Legal

42%

45%

14%

-

-

formalities c. Interest rates

32%

56%

12%

-

-

d. Repayment

26%

64%

10%

-

-

options e. Security

20%

32%

48%

-

-

demanded f. Installments

55%

40%

5%

-

-

g. Services

45%

30%

18%

6%

1%

h. Processing for

55%

24%

18%

3%

-

a. Amount of 

sanction of loan

GRAP GR APH: H:-- 5.12 .1 2

Percentage of satisfaction satisfaction level of customers of HDFC LTD

84

Interpretation:-

 The analysis shows that the customers of HDFC LTD gave 60 percent of  amou amount nt of loan loan and and lega legall proc procee eedi ding ngs, s, 56% 56% to inte intere rest st rate rates, s, 45% 45% to proceedings and services, 55% to installments. So, customer of HDFC LTD didn't give response regarding the services of the bank / company except to the amount of loan and legal formalities.

PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS

85

 There are everything in the world has good or bad points. No doubt banking industry/ company has made many efforts to enhance the customer sati satisf sfac acti tion on but but cust custom omer er stil stilll face faced d some some prob proble lems ms.. Thes These e are are high 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 The bank banks s do not not take take into into acco accoun untt the the payi paying ng capac apacit ity y of  customers. So some customers are not able to get amount of loan needed by them. So abov above e disc discus usse sed d are are the the prob proble lems ms whic which h face faced d by cust custom omer ers s whil while e availing home loans.

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CHAPTER-6

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FINDINGS

1. HDFC LTD is having good brand image image in the minds of customers. customers. 2. Majority Majority of the peopl people e have got loans loans from HDFC HDFC LTD only 3. Most Most of the custo customer mers s are not aware aware of the prod product ucts s of HDFC HDFC home loans 4. Some of of the customer’s customer’s felt that the interest interest rates rates are some what high 5. Some Some of the the cust custom omer er not not havi having ng good good fait faith h on priv privat ate e bank banks s like like Standard chartered bank, HSBC bank etc. 6. Most of the people directly directly go to HDFC to to apply a home loan loan 7. Some Some of the customer of HDFC HDFC already already benefited benefited through through HDFC home home loan products and services 8. HDFC LTD LTD is providi providing ng good good service services s to their their custom customers. ers. 9. ) The interest rates also some what high when compare to other banks

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SUGGESTIONS

These suggestions have been discussed as follows:-

1) To incr increa ease se thei theirr cust custom omer ers, s, the the HDFC HDFC LTD LTD shou should ld prov provid ide e 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 should use easy proce procedur dure, e, or say, say, less less length lengthy y procedure for the sanctioning of loan to the customer. There should be less numb number er of lega legall form formal alit itie ies, s, in case case this this exis exists ts,, then then,, thes these e shou should ld be completed in less time. This will be helpful in attracting more customers. 4) Although the interest rates on specific norms, yet customers seek less interest rate which can lower their cost of house. So banks should try to lower their interest rates. Needles to say, that the bank which is having lower interest rates, have the maximum clients for loans. 5) HDFC LTD provide loan according to the repaying capacity of the customer and his/her eligibility. Due to which, some customers are not able to get amount of loan needed by them. So, the HDFC LTD should soften their norms regarding the loan amount. 89

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

Charges:

The

Company

has

to

reduce

the

mortality

and

administration administration charges. 8) Th The e co comp mpan any y ha has s to re redu duce ce th thei eirr in inte tere rest st ra rate tes s on ho home me lo loan an products

and services.

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

the customer needs.

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

90

Finally the whole research was carried out in a systematic way to reach at accura accurate te resul results. ts. The whole whole resear research ch and and findi findings ngs were were based based on the objectives. However, the study had some limitations also such as lack of  time time,, lack lack of data data,, nonnon-re resp spon onse se,, relu reluct ctan antt atti attitu tude de and and illi illite tera racy cy of  respondents, which posed problems in carrying out the research. But proper atte attent ntio ion n was was made made to Ca Carr rry y out out rese resear arch ch in prop proper er way way and and to make make accurate conclusion for the HDFC LTD which may beneficial for banks to enhance their customer base.

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REFERENCES REVIEWS

➢

Bersta Berstain in David David(20 (2008) 08),, “Home “Home equity equity loans loans and priv private ate mortg mortgage age insurance: Recent Trends & Potential Implications”, Vol.3 No.2, August 2008, Pp. 41 - 53

➢

Dr. Rangarajan C. (2001), “A Simple Error Correction Model of House Price”.Journal of Housing Economics Vol. 4, No. 3,pp 27 – 34

92

➢

Fanning Fanning (1982), (1982), “The Demand for Home Home Mortgage 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.

➢

Haav Haavio io,, Ka Kaup uppi pi(2 (200 000) 0) , “Res “Resid iden enti tial al Lend Lendin ing g to LowLow-In Inco come me and and Mino Minori rity ty Fa Fami mili lies es:: Evid Eviden ence ce from from the the 1992 1992 HMDA HMDA Data Data," ," Fe Fede dera rall Reserve Bulletin,Vol no 80(2), December 2000 Pp-79-108

➢

Kulkarni (1979), “Development responsibility responsibility and profitability profitability of banks”  Journal of Economic Perspectives, Vol 9 No 1 ,pp. 26-32.

➢

La courr, Micheal(2007) , “Economic Factors Affecting Home Mortgage Disc Disclo losur sure e Act Act Re Repo port rtin ing” g” The The Amer Americ ican an Re Real al Esta Estate te and and Ur Urba ban n Economics Association, Association, Vol.2 No. 2 May 18, 2007, Pp. 45 -58

➢

La cour Micheal(2006) , “The Home Purchase Mortgage Preferences Of  Lowand-M Lowand-Mode oderate rate Income Income Household Households”, s”, Forthco Forthcoming ming in Real Estate Estate Economics , Vol 18, No 4 , December 20, 2006, p. 585.

➢

Vandell ,kerry D(2008), “Subprime lending and housing bubble:tail bubble:tail wag dog?”International dog?”International Journal of Bank Marketing, Marketing, vol 21,no 2, pp. 53-7

➢

Brochure on home loans from HDFC LTD

NEWS PAPERS ➢

 The Times of India

➢

Financial Express

WEB PAGES:-

http://www.hdfcindia.com/ http://www.hdfcindia.com/other http://www.hdfcindia.com/others/popup/new s/popup/news/hdfc_fin_result_june s/hdfc_fin_result_june_30_08. _30_08. html www.hdfc.com 93

http://www.iloveindia.com http://www.iloveindia.com/real-estate/ho /real-estate/housing-financeusing-financecompanies/hdfc.html http://www.loansnews.info/Home-l http://www.loansnews.info/Home-loan/hdfc-home-lo oan/hdfc-home-loans/ ans/ http://www.hdfcindia.com/loa http://www.hdfcindia.com/loans/hm-loan-docume ns/hm-loan-documents.asp nts.asp http://www.thinkplaninvest.com/ http://www.thinkplaninvest.com/2009/01/hd 2009/01/hdfc-will-cut-home-lo fc-will-cut-home-loan-rates/ an-rates/ http://www.suncorp.com.au/suncorp http://www.suncorp.com.au/suncorp/personal/ho /personal/home_loans/tip me_loans/tips/faq.aspx s/faq.aspx http://investing.businessweek.com/r http://investing.businessweek.com/research/stocks/p esearch/stocks/people/p eople/people.asp? eople.asp? ric=HDFC.BO http://www.economywatch.co http://www.economywatch.com/companies/f m/companies/forbes-list/indi orbes-list/india/housinga/housingdevelopment-finance-corpo development-finance-corporation.html ration.html http://www.hdfcindia.com/loa http://www.hdfcindia.com/loans/home-loan.asp ns/home-loan.asp http://docs.google.com/gview? a=v&q=cache:woJTMDV1 a=v&q=cache:woJTMDV1HLYJ:www.hdfc.com HLYJ:www.hdfc.com/pdf/32AGM /pdf/32AGM %2520speech.pdf+hdfc+housing+finance+development+product&hl=en &gl=in http://www.munichre.com/en/pre http://www.munichre.com/en/press/press_release ss/press_releases/2007/200 s/2007/2007_10_30 7_10_30_profi _profi le_hdfc.aspx

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

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http://ayaanbayaan.com/h http://aya anbayaan.com/hdfc dfc -ltd-financial-resu -ltd-finan cial-results-india lts-indian-gaap-forn-gaap-for-thetheperiod-april-to-june-2009/ http://www.valuenotes.com/pr http://www.valuenotes.com/press/pr_HDFC_2 ess/pr_HDFC_250ct05.asp? 50ct05.asp? ArtCd=70013&Cat=C&Id=100

QUESTIONNAIRE Dear Sir/ madam I am D.V.Nara doing g MBA MBA from from Osma Osmani nia a Univ Univer ersi sity ty.. I m D.V.Narayana yana Reddy Reddy doin prep prepari aring ng a proj project ect on

A STUDY STUDY ON HOME HOME LO LOAN ANS. S. For this I have

designed a Questionniare to know your views and satisfaction level of home loans .please fill the given as per your thinking and experiences with this. I will be thankful to you for this.

95

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

…………………………………………………………………….. Contact

No

:®………………(

O)………………

(M)

……………………… ………...............Pin:

City:

………………….State:

……………………….

1. Name: ____________________  2. Age: (a) 18-25 years

(b) 26-35 years

(d) 50-60year

(f)more than 60 years

(c) 36-49 years

3. Marrital Status? (a) Married

(b) Un married

4. Educational qualification of respondent’s? (a)Under graduate

(b) Graduate

(c) Post graduate

5. occupation of respondents? (a) Student

(b) Housewife

Professional 96

(c) Working

(d) (d) Busine Business ss

(e) Self Self Emplo Employed yed

(f) Gover Governme nment nt servic service e

employee 6. What is your Annual Household Income? (a) Less than 2 lacs

(b) Between 2 to 5 lacs

(c) Between 2 to 5 lacs

(d) More than 8 lacs

7. Do you know about HDFC housing development finance corporation LTD? (a) Yes

(b) No

8. Reasons for getting the home Loan? (a) Non-availability Non-availability of funds

(b) Reluctancy to pay cash in one go

(c) Tax benefit

(d) Any other

9. From where you have got your home loan? (a) HDFC LTD (d) ICICI BANK

(b) Punjab National Bank

(c) Standard Chartered Bank

(e) Any other

10 Sources of information about Home Loans Scheme? (a)Newspaper (a) Newspapers s (d) Word of mouth

(b) Magazines

(c) Banners/Hoardings/Pamp Banners/Hoardings/Pamphlets hlets

(f) Any other source

97

11 Opinion about the services of HDFC LTD? (a) Strongly agree

(b) Agree

(c) Neutral

(d) Disagree

(e) Strongly disagree

12 Opinion of customers about home loan schemes? (a) Strongly Agree

(b) Agree

(c) Neutral

(d) Disagree

(f) Strongly disagree

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

THANKS

98