CHAPTER-2

OBJECTIVES OF STUDY

There is no strongest foundation for your dream home, than a cheap loan. Home
loans have become that stronger foundations for people who want to own a home.
The main objectives of the study are as follows:-
1) The main objective of this study is to know the Customers perceptions about
home loans of HDFC housing development finance corporation LTD.
2) To analyze the history of hdfc ltd.
3) Generating good business to the company by promoting and selling the products
of HDFC LTD.
4) To know the ideas of customers about home loan products and services.
5) To make comparative study of Disbursement of home loans by Commercial
banks.
6) Fixing the appointments with the customers.
7) To study the satisfaction level of customers about home loans.
8) To study the problems faced by customers in obtaining the home loans.
9) Visiting the customers and closing the deal.
10) To learn about various aspect of hdfc home loan ltd.

2.1 PURPOSE OF THE STUDY

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

 To know the ideas of customers about home loan products and services.
 To study the satisfaction level of customers about home loans.
To study the problems faced by customers in obtaining the home loans.
 To learn about various aspect of HDFC home loan ltd.

2.2 SCOPE OF STUDY

The Indian housing finance industry has grown by leaps and bound in few
years. Total home loans disbursements by banks have raised which witness’s
phenomenal growth from last 5 years. There is greater number of borrowers of
home loans. So by this study we can find out satisfaction level of customers and
problems faced by them in obtaining home.
CHAPTER -3
 CHAPTER-3

RESEARCH METHODOLOGY OF THE STUDY

RESEARCH METHODOLOGY:-

Research methodology is a way to systematically show the research problem.

It may be understood as a science of studying how research is done scientifically. It
is necessary for the researcher to know not only the research methods but also the
methodology.
This Section includes the methodology which includes. The research design,
objectives of study, scope of study along with research methodology and limitations
of study etc.

 To know the Customers perceptions about home loans of HDFC housing

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

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

 To make comparative study of disbursement of home loans by commercial

banks, the study shall be conducted in the manner enumerated below-

3.1- RESEARCH DESIGN:-

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

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

3.2 – SOURCES OF DATA:-

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

A - PRIMARY SOURCE:-
 I decided primary data collection method because our study nature does not
permit to apply observational method.
In survey approach we had selected a questionnaire method for taking a customer
view because it is feasible from the point of view of our subject & survey purpose.
We conducted 50 sample of survey in our project to judge the satisfaction level of
customers which took home loans.
• Sample size;-
For the questionnaire I have taken the sample size of 100 customers of HDFC
LTD.
B – SECONDARY SOURCE:-

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

3.3- SAMPLING:-

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

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

SAMPLING TECHNIQUE:-

Random sampling technique was used in the survey conducted.

TOOLS OF ANALYSIS:-

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

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

3.4 DATA COLLECTION INSTRUMENT DEVELOPMENT:-

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

3.5 LIMITATIONS OF THE STUDY:-

This study also includes some limitations which have been discussed as follows:

i) The sample size of 100 customers and 4 banks might prove a limitation because of
difficulty in generalization of results.

ii) To collect the data from various banks was quite difficult due to non- cooperation
of some banks. This proved to be major limitation of the study.

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

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

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

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

Thus above all were the limitations in this research study. The maximum
efforts were made to overcome these limitations in the study.
CHAPTER-4
 REVIEW OF LITERATURE

SUMMARY:-

• After going through previous studies of Home loans I came to conclude

that- There is growth of home loans after 2001.

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

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

• Government taking various steps to encourage people to go toward home

loans. (Haavio, Kauppi 2000)

• Growth of home loans are due to increase of living standard of people,

shifting from joint family to nuclear family .(Lacourr, Micheal 2007)

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

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

Now after this conclusion the details of reviews are below-

Berstain David (2009) examined in his study taken from 2001 to 2008 that in
this period there is increase use of home loans as compared to private mortgage
insurance (PMI).he have divided his study into four sections. Section 1 describes
why people are going more for home loans than PMI. the main reason for this that
now home loans market provide Piggybank loans for those people who don’t have
20% of down payment. Section 2 tells the factors responsible for the growth of home
loans and the risks on shifting toward home equity market without any PMI
coverage. PMI can protect lenders from most losses up to 80% of LTV and the
absence of PMI will result in considerable losses in an environment. Section 3 tells
the measures in changes of type of loans. For this he have taken the data from the
2001 and 2007 AHS a joint project by HUD and Census The results of this analysis
presented in Table One reveal a sharp increase in the Prevalence of owner-occupied
properties with multiple mortgages among properties with Newly originated first
mortgages. Section 4 describe the Financial status of single-lien and multiple-lien
households and for this he have taken the survey of consumer finance and show that
financial position is more weaker in multiple loans than the single loans.
Narasimham Committee (1991) points out that although the banking system in our
country has made rapid progress during the last two decades, there is decline in
productivity and efficiency and erosion of profitability. The committee strongly
makes indications of liberalizing, deregulating economy to make Indian baking
system more competitive and efficient.

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

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

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

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

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

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

Varde and Singh (1979) in a study "profitability of commercial banks" over 15

years gave consideration to two types of factors that effects interest rates levels i.e.
internal factors (including operational and managerial efficiency of individual basis).

Banking Commission (1972) reviewed bank operating methods and procedures and
made recommendations for improving and modernizing these, particularly relating to
customers services, credit procedure and internal control systems. It observed that
present methods of working out branch profitability are not appropriate and an
integrated costing and financial reporting system is needed.
Department of Banking operations and development, RBI: Bombay observed
that the rapid expansion of banks activities since 1970 called for a phase of
consolidations to improve the quality of banks operational efficiency, productivity
and customer services.

CHAPTER-5
 CHAPTER-5

INTRODUCTION TO THE INDUSTRY

5.1 THE HISTORY OF INDIAN HOME LOANS:-

Home loans in India have made people Buy Property in India in spite of the
skyrocketing prices. Today, we find considerable Real Estate Investment in India,
either in the field of Residential Property in India or Commercial Properties in India.
Home Loans in India are disbursed by many Banks as Loan Banking is on of the
most important function of the Financial Services in India. Property Dealers and
Real Estate Consultants in India usually recommend that we undertake appropriate
Home Loan or Mortgage Loan counseling so that we can Buy Apartment in India at
an affordable Mortgage Rate. Purchasing the home of your dreams is not an easy
task. Especially when you plan to buy a home on loan. Home loan means that you
buy a house on installments. In simpler terms when you want to own a home and
can’t afford to pay the amount in lump sum, you can pay it in monthly installments
with an interest rate.
The interest rates of home loans are expected to go down even further
according to analysts who foresee a cut down in the rates by the RBI in the wake of
the decision taken by US Federal Reserve to cut its rates by a significant margin.
There are number of companies offer cheap home loans at a low interest rate.
You can avail loan against existing house for renovation or expansion etc. There are
many nationalized banks that offer finance for affordable housing. India Housing has
put together a comprehensive data to provide you with the cheapest Home Loans
available in the market. We have listed all the important housing finance institutes
and some of the top home finance banks providing lowest interest rates.
In the last few years, housing loan scenario in India has changed drastically. It
has taken a front seat and people are looking forward to owning their own houses. It
is no more a dream that required lifetime saving and a difficult decision to make.
Today the new home purchase loan is much easily available and is much cheaper
than what was available earlier. Banks are now everywhere and the schemes are
implemented even in villages and smaller towns. The housing loans are popular there
too, however, the activity of building flats is little slow. It would not be wrong to say
that there has been a boom in the home loan market and with this boom; there is also
a boom in the Number of home loans mortgage brokers in India.
The main reason for this boom in home loan market is the change in
government policies. It is our government’s motivation that the home loan interest
rates in India have fallen considerably. Lot many banks are offering home loans and
this is available at low EMIs (Equated monthly Installments). High EMIs are now a
thing of past. Today lending rate is in the range of 7.5 to 15 %.
Again, there are different types of home loans available today. The interest rate
available is also of two different types. One is the fixed rate loan and the other is the
floating rate loan. In the fixed rate loan, whatever interest is fixed on the start of loan
is carried on for the complete period. However, in the other one, the interest rate is
not fixed and as the interest rate goes up or low the effect is directly transferred to
the person who is taking the loan. In the last few years the floating interest rate has
been a favorite among most of the people taking home loans.
There is also a trend to opt for home construction loan. This loan is available
to those who want to design their homes according to their requirement and taste. In
other words, this loan is meant for those who themselves want to construct their new
home.
As shared earlier, taking a loan is not a difficult task. However, before taking a
loan, one must realize that the relationship with the bank will be for a longer period
usually 15 to 20 years so one must ensure faith and integrity in bank. Apart from low
rate of interest, the bank should also provide some value added services. The other
thing is to look into is the property that is to be brought. Making sure that the builder
has all sanctions and facility to build a good building is very important.
Taking home loans these days has become simpler. With the RBI regularly
bring down interest rates; taking home loans have become extremely easy. Housing
loans which were 16.5% to 18% a few years ago fell by 11.5% to 13%. With interest
rates going down, people increasingly number apply to take these loans. Some of the
leading banks offering home loans in India, including ICICI Bank, IDBI Bank,
HDFC Bank , Bank of Baroda, SBI, Standard Chartered Bank and Axis Bank .

5.2 Home Loan Procedure in India:-

Submission of Application Form: - After choosing a particular home loan, the
customer submits the application form to the housing finance company (HFC) along
with other relevant documents as required by the HFC. They comprise documents to
establish income, age, residence, employment, investments, etc. The customer also
needs to hand over a cheque for payment of an up front (non -refundable) processing
fee of about 0.5-1% of the loan amount to the HFC.

Validation of the Information: - In the next stage, HFCs validate the information
provided by the customer on the application form. They usually conduct checks on
the residential address of the customer, the place of employment of the customer, and
credentials of the employer. Some HFCs may insist on a personal interview with the
customer and perform a reference check on the references provided by the customer
on the application form.
Issue of Sanction Letter :- After due appraisal of customer profile, a sanction letter
is issued which contains details such as loan amount, rate of interest, annual /
monthly reducing balance, tenor of the loan, mode of repayment and general terms
and conditions of the loan. This is the actually the approval of the money lending
procedure by the company. However, the money is sanctioned only after the
documents and the property on behalf of which the loan is being granted is
thoroughly verified.

Submission of Documents: - Once the sanction letter is passed, the customer is

required to leave the entire set of original documents pertaining to the property being
purchased with the HFC as security for the loan amount sanctioned. These
documents remain in the custody of the HFC till the time the loan is fully repaid.
Once the documents are handed over to the HFC, they send all the documents for a
thorough legal scrutiny.

Validation of Property: - Prior to disbursement, the HFC also conducts a site visit
to the customer's property to ensure that all construction norms have been adhered to
properly. Once the HFC is satisfied that the property is legally and technically clear,
they disburse the loan amount. The disbursement from the HFI is on the basis of the
stage of construction of the property.

Payment Procedure: - Once all the above mentioned process, the borrower is
entitled to take the money from the lender party. Until such time that the entire
sanctioned amount is not drawn, the customer is supposed to pay a simple interest on
the Actual Amount drawn (without any principal repayments). The EMI payments
commences only after the entire sanctioned loan amount is drawn.

5.3 INTEREST RATES PROVIDED BY VARIOUS BANKS

Loan Period EMI / Lakh EMI / Lakh

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

Up to 5 9.00 2076 8.00 2028

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

State Bank Of India Up to 5 9.50 2100 8.75 2064

 6 to 10 9.75 1300 9.25 1280
11 to 15 - - 9.25 1029
16 to 20 - - 9.75 949

Up to 5 11 2175 9.50 2101

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

Up to 5 10.75 2162 9.50 2101

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

Up to 5 10.50 2149 9.50 2100

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

Up to 5 9.00 2076 10.50 2150

PNB Housing6 to 10 9.00 1267 10.50 1350
Finance 11 to 15 9.25 1030 10.50 1106
16 to 20 9.50 933 10.50 999

16 to 20 11 1032 9.50 932

Up to 5 9.00 2076 10.50 2150

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

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

Oral or written lock-in agreement? :-

Some lenders have preprinted forms that set out the exact terms of the lock-in
agreement. Others may only make an oral lock-in promise on the telephone or at the
time of application. Oral agreements can be very difficult to prove in the event of a
dispute. It is wise to obtain written, rather than verbal, lock-in agreements to make
sure that you fully understand how your lender’s lock-ins and loan commitments
work and to have a tangible record of your arrangements with the lender. This record
may be useful in the event of a dispute.

Charges of a lock-in:-

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

Types of lock-in:-

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

Locked-in Interest Rate--Floating Points: - Under this option, the lender lets you
lock in the interest rate, while permitting or requiring the points to rise and fall
(float) with changes in market conditions. If market interest rates drop during the
lock-in period, the points may also fall. If they rise, the points may increase. Even if
you float your points, your lender may allow you to lock-in the points at some time
before settlement at whatever level is then current. (For instance, say you’ve locked
in a 10½ percent interest rate, but not the 3 points that went with that rate. A month
later, the market interest rate remains the same, but the points the lender charges for
that rate have dropped to 2½. With your lender’s agreement, you could then lock in
the lower 2½. Points.) If you float your points and market interest rates increase by
the time of settlement, the lender may charge a greater number of points for a loan at
the rate you’ve locked in. In this case, the benefit you might have had by locking in
your rate may be lost because you’ll have to pay more in up-front costs.

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

5.4 Indian Market for Home loans is more than Rs.500, 000 crore:-Today, not
only the metros are witnessing the housing crunch even the second tier cities like-
Jaipur, Bhubneshwar, Lucknow, Trivendrum etc. are falling into the dearth of living
space and wanting for more expansion.
India Report:
Indian credit report in comparison to the other Asian countries is shown in the
statistics below, which is among the lowest. It is Indian psyche that credit is termed
bad, Indian are traditionally not inclined to take credit this reflects in the figures
below:-
GRAPH: - 5.1

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

GRAPH:- 5.4
 Sources: RBI

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

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

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

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

5.7 Impact of slowdown on home loan market in India:- The fear of a recession
looms over the United States. And as the clinch goes, whenever the US sneezes, the
world catches a cold. This is evident from the way the Indian markets crashed taking
a cue from a probable recession in the US and a global economic slowdown. U.S
slowdown has affected almost all sectors not only in US but to all over the world.
Indian economy has also been affected by this slowdown because India is a growing
country and almost in all sectors various multinational companies have major
contribution. So the role of this slowdown is a major issue to be discussed while
talking about Home Loan Market in India.

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

HDFC: yielding Ground: -

 Loan growth may slow down in 2009-10 as the company loses some market
share. Competition is not new to HDFC, after all ICICI Bank was a tough competitor
when it went on a customer acquisition spree some years back. This time around,
although ICICI may not be in a position to give HDFC a run for its money, public
sector banks, especially State Bank of India (SBI) could.
The difference between four years ago and now is that money today is not yet
cheap and certainly not as inexpensive as it was back in 2004 and 2005. Of course
with bank loans to HDFC now treated as priority lending, the cost of funds for
HDFC should come down. But should long-term rates go up, HDFC will feel the
pinch.

That’s why the market sat up and took note when SBI kicked off an 8 per cent
in- the- first -year product believing HDFC could lose some market share. In the
recent rally, the stock which had plunged to a two year low, has gained 31 per cent to
the Sensex’s 23 per cent. The good news is that transactions could start picking up in
the second half of 2009 now that property prices have started trending down as have
interest rates.

But although the home loan major believes it can manage a growth of 20 per
cent in 2009-10, analysts are not so sure. CLSA points out that HDFC’s loan growth
(pre-securitization) would be around 15-17 per cent. One reason for this is that
HDFC Bank may now hold back a higher proportion of loans that it originates; the
bank currently sources just over a fourth of 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.

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

HDFC Reduces Home Loan Rate By 0.5 Percent: - Home finance major HDFC
reduced home loan rates by 50 basis points for all its existing floating rate customers.
HDFC also said that it will charge 10.25 percent of interest annually from new
applicant for a loan of Rs 20 lakh or less. And for loans of more than Rs 20 lakh, it
will charge interest at 11.25 percent. The bank also reduced the interest rate on
deposits that it accepts from the public by 50 basis points. In a statement to the
media, HDFC informed that all the changes will come into effect from December 22.
HDFC was able to bring home loan cuts because the government and RBI had taken
series of measures to infuse liquidity into the economy. Over the last three months,
RBI has cut key policy rates; including cash reserve ratio, repo and reverse repo
rates, and statutory liquidity ratio. Government has also infused money into the
housing sector through the National Housing Bank. PSU banks are also forced to cut
rates for new home loans up to Rs 20 lakh.
Although in the past few weeks several banks cut home loan rates, but those
decisions applied only to new customers. HDFC is the first major housing lender to
cut rates for both current and new customers. While commenting on this matter, Keki
Mistry, HDFC vice chairman and MD said that the bank was able to exercise the
move especially because of the recent reduction in the cost of funds. The wholesale
funding rate has declined from October-November levels hence HDFC decided to
pass on the benefits to its customers, both old and new ones.

5.9 Types of home loans: -

Housing loans offered by banks are of different types:-

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

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

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

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

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

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

Land purchase loans:- This loan is available for purchase of land for both home
construction or investment purposes.
Stamp duty loans:- This loan is sanctioned to pay the stamp duty amount that needs
to be paid on the purchase of property.
Bridge loans:- Bridge Loans are designed for people who wish to sell the existing
home and purchase another. The bridge loan helps finance the new home, until a
buyer is found for the old home.
Balance- transfer loans:- Balance Transfer is the transfer of the balance of an
existing home loan that you availed at a higher rate of interest (ROI) to either the
same HFC or another HFC at the current ROI a lower rate of interest.
Refinance loans:- Refinance loans are taken in case when a loan for your house
from a HFI at a particular ROI you have taken drops over the years and you stand to
lose. In such cases you may opt to swap your loan. This could be done from either
the same HFI or another HFI at the current rates of interest, which is lower.
NRI home loans:- This is tailored for the requirements of Non-Resident Indians
who wish to build or buy a home or property in India. The HFCs offer attractive
housing finance plans for NRI investors with suitable repayment options.
On would be entitled for home loans in the range of Rs 5 lakh to a maximum of Rs 1
crore, based on the repayment capacity, previous credit history and the cost of the
property. The bank may provide a maximum of 85% of the cost of the property or the
cost of construction as applicable and 75% of the cost of land in case of purchase of
land. The repayment capacity is calculated taking into account factors such as:
 Age
 Income/Salary
 Qualifications
 Dependant/(s)
 Assets/Liabilities
 Credit History
 Stability / continuity of your employment/business
 Income of co-applicant/(s)
Taking home loans these days has become simpler. With the RBI regularly
bring down interest rates; taking home loans have become extremely easy. Housing
loans which were 16.5% to 18% a few years ago fell by 11.5% to 13%. With interest
rates going down, people increasingly number apply to take these loans. Some of the
leading banks offering home loans in India, including ICICI Bank, IDBI Bank,
HDFC Bank State Bank, Bank of Baroda, Kotak Bank, SBI, Standard Chartered
Bank and Axis Bank.

5.10 HDFC Home Loan:-

Highlights:-

 HDFC markets its parent HDFC's home loan products.

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

Eligibility; - HDFC home loans are available for:

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

HDFC home loans can be applied for either individually or jointly. Proposed owners
of the property will have to be co-applicants. However, the co-applicants need not be
co-owners. Maximum tenure is 20 years subject to retirement age.
Loan Amount: - 85% of the cost of the property (including the cost of the land) and
based on the repayment capacity of the customer.
Rate of Interest :- The current applicable fixed rate of interest in respect of the total
loan approved is as follows:
For loans up to Rs.2, 00,000:-

Term of Loan Rate Per Annum

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

Up to 5 10.00
6 - 10 10.75
11 - 15 11.00

For loans greater than Rs.2, 00,000

Term of Loan Rate Per Annum

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

5 10.00
10 11.00
15 11.25

All loans on annual rest basis. You repay the loan in Equated Monthly instalments
(EMIs) comprising principal and inertest.EMI per Rs 1, 00,000 (for loan up to
Rs.2, 00,000)

Term of Loan Rupees

 (No. of Years)

5 2199
10 1401
15 1159

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

Term of Loan
Rupees
(No. of Years)

5 2199
10 1416
15 1175

Pending final disbursement, you pay interest on the portion of the loan disbursed.
This interest is called pre-EMI interest. An early redemption charge of 2% of the
amount being prepaid is payable on repayment of a loan ahead of schedule.

Repayment Period: - Repayment Options –

Step Up Repayment Facility; - helps younger borrowers to take a much bigger loan
today based on an increase in their future income.

Flexible Loan installments Plan: - Often customers, parents and their children wish
to purchase properties together. The parent is nearing retirement and their children
have just started working. This option helps such customers combine the incomes
and take a long term home loan where in the installment reduces upon retirement of
the earning parent.

Tranche Based EMI - Customers purchasing an under construction property need to

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

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

The Credit Appraisal is an important step in sanctioning loan applications .Hence the
Credit Appraiser needs to have certain important documents to compute the credit
worthiness of the applicant .In the case of salaried person these include the
following :-
1) SALARY SLIPS (3 MONTHS CURRENT) :- The salary slip is usually a
printed sheet of paper that contains 2 components
Income/Earnings collumn: - It contains an exhaustive list of the various
components that are added to the person’s salary. They contain various components
like Basic pay, HRA etc.

Deductions: - It contains an exhaustive list of various components that are deducted

from the persons Earnings. They contain various components like Income tax,
Provident fund, Employee Loans etc.
2) BANK STATEMENTS (6 MONTHS CURRENT) ;- The bank statement
contains the various transactions that the applicant performs in his bank account. It
has 3 components
 Date
 Descriptions; - It contains the brief and standardized description of the
activity or the account related to the transaction .Eg. Clearing cheque 166129,
Transfer deposit.
 Deposits: - It contains the amounts that were credited to the account
 Withdrawal; - It contains the amounts that were debited to the account. This
is carefully studied to find out about any regular withdrawals or a series of
checks so that any existing loans may be revealed and there can be a correct
estimate of the repayment capacity.
 Balance :- It shows effect of transaction on the pre existing account balance
 Special feature: - HDFC will not consider any loan s with out standing EMI
of or below 6 months.

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

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

5) RESIDENCE PROOF: - The residence proof includes the Electricity bill,

Telephone bill, Ration Card, Passport.

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

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

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

from HDFCs user friendly web based portal.
9) CHARGES FOR PROCESSING FEES :- This is a standard and nominal fees to
be paid at the time of applying for loan

Fees structure. 0.5% of loan amount

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

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

NON RESIDENT INDIAN

SALARIED/EMPLOYED; - An NRI is a person with Indian citizenship but

residing in another country. An NRI can take a housing loan from HDFC. He is
however not eligible for a Top Up loans, Home Equity Loans,Non Residential
Premises Loans .He is however eligible for Home Improvement and Home
Extension Loans from HDFC .
An NRI Loan is appraised on the Net Salary. This is the take home pay package
obtained after reducing the deductions from the earnings .As this salary is low it
reduces their loan eligibility .However the salary is converted into Indian Currency
for computing credit worthiness.The figure obtained is higher in Indian currency
hence the loan eligibility rises.Eg 5,487$ american dollars will mean 2,46,915
Rupees.

SELF EMPLOYED PROFESSIONALS: - An NRI applicant can also be a Doctor,

Engineer etc.In these cases HDFC will put them in the special category of Self
Employed Professionals. Their credit appraisal is carried out as follows:-
Their latest available Profit and Loss A/c is reviewed by the credit appraiser. This
account has two sides a Profit side which reveals all earnings and gains .There is also
a Loss side which shows all taxes, liabilities and losses.
We refer to the Profit side a the Gross Receipts. These include components revealing
the nature and amount of the Prime income and other earnings Eg Consultation fees
in case of Doctor. From the Gross Receipts we calculate the Gross Profits and
thereon move to calculate Loan eligibility .Which is the loan amount that can be
conveniently sanctioned to the applicant.

Loan Eligibility = Gross Profit * 2

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

SOURCES OF LOAN APPLICANTS

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

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

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

Deposits: Individuals: - these are:-

 Fixed Rate Deposits

 Variable Rate Deposits
 HDFC has instituted well-defined service standards for both depositors and deposit
agents. HDFC has been able to mobilise deposits from over 10 lac depositors.
Outstanding deposits grew from Rs. 1,458 crores in March 1994 to 19,359 crores in
March 2009. Much of this success can be attributed to its strong brand image,
superior services, security and above all, the significant contribution made by
HDFC's deposit agents. HDFC has over 15,000 deposit agents and distributes all its
retail savings (deposit) products primarily through this channel.
HDFC has been awarded “AAA” rating for its deposits from both CRISIL and ICRA
for the FOURTEENTH consecutive year, representing highest safety as regards
timely payment of principal and interest.
The problem of Negative Amortization is specific to the Adjustable or the Variable
rate loans that are lent to customers. In the case of Variable rate home loans there are
three components:-
 RPLR – 14% (CURRENT)
 SPREAD – 3% (CURRENT)
 ROI- 11%
The term RPLR is short for Retail Prime Lending Rate. this rate is dependent on
market forces .In India the RPLR has been observing an upward trend .As a result of
this there is a change in rate of interest to be applied to different loans.RPLR is
revised every 3 months In which it may or may not change.
Spread refers to a special discount offered to loan applicants coming to HDFC.this
discount is fixed by HDFC .Every loan applicant is eligible to receive this discount
from HDFC Ltd.It helps create a market advantage and benefits the
Applicants.Spread is fixed for an uncertain length of time .It is absolutely dependent
on the companys discretion to change it or not. Currently HDFC is offering 2.5%
spread on a loan of above 20 lacs and 3% spread on a loan of below 20 lacs.
ROI is the rate of interest that is applicable to the loan at the time of lending. It is
computed by subtracting spread discount from the RPLR. at the time of lending the
ROI is good enough to repay the interest as well as the principal components
.However as the RPLR increases as it is bound to do so after some time the required
EMI also increases .Hence after some time the EMI becomes insufficient to repay the
principal as well as the interest component .

STAGES OF HOME LOAN

Application Munirka
HUB
Data Entry

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

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

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

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

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

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

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

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

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

CHAPTER-6
 CHAPTER-6

COMPANY PROFILE

OF

HDFC HOSING DEVELOPMENT FINANCE CORPORATION LTD

INTRODUCTION:-
Housing Development Finance Corporation Limited , founded 1977 by
Ravi Maurya and Hasmukhbhai Parekh, is an Indian NBFC, focusing on home
mortgages. HDFC's distribution network spans 243 outlets that include 49 offices of
HDFC's distribution company, HDFC Sales Private Limited. In addition, HDFC
covers over 90 locations through its outreach programmes. HDFC's marketing efforts
continue to be concentrated on developing a stronger distribution network. Home
loans are also Sharcket through HDFC Sales, HDFC Bank Limited and other third
party Direct Selling Agents (DSA).
HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has
since emerged as the largest residential mortgage finance institution in the country.
The corporation has had a series of share issues raising its capital to Rs. 119 Crores.
The gross premium income for the year ending March 31, 2007 stood at Rs. 2,856
Crores and new business premium income at Rs. 1,624 Crores. The company has
covered over 8,77,000 lives year ending March 31, 2009.
HDFC operates through almost 450 locations throughout the country with its
corporate head quarters in Mumbai, India. HDFC also has an International Office in
Dubai, UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest
housing company in India for the last 27 years.

SNAPSHOT-I

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

 Almost 90% of initial shareholding in the hands of domestic institutes and

retail investors. Current 77% of shares held by foreign institutional investors.

 Besides the core business of mortgage HDFC has evolved into a financial
conglomerate with holdings In:

CHART:- 6.1

HDFC
LTD

23.26%
72.26% 60%
HDFC
HDFC HDFC
BANK (inclusive
STANDARD ASSET
of warrants)
LIFE MANAGEMENT
  HDFC Standard Life insurance Company- HDFC holds 72.26 %.
 HDFC Asset Management Company – HDFC holds 60%
 HDFC Bank- HDFC holds 23.26%.
 Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.
 HDFC Chubb General Insurance Company – HDFC holds 74%.

SNAPSHOT-II

 Loan Approvals Rs. 805 billion.

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

HDFC Limited
jjjjjjjj

Type Public (BSE: 500010)

Founded 1977
Headquarters Mumbai,India
Ravi Maurya
Key people
Hasmukhbhai Parekh
Industry Housing Finance
Revenue US$ 1.49 billion (2010)
Employees 1,029
Website www.hdfc.com
KEY EXECUTIVE HDFC HOUSING DEVELOPMENT FINANCE CORP
LTD :-

Mr. Deepak S Parekh: - serves as Executive Chairman and Chief Executive Officer
of the Board of Housing Development Finance Corp. Ltd., (HDFC). He joined
HDFC Limited in a senior management position in 1978. He was inducted as a
whole-time director of HDFC Limited in 1985 and was appointed as its Executive
Chairman in 1993. He is the Chief Executive Officer of HDFC Limited. Mr. Parekh
is a Fellow of the Institute of Chartered Accountants (England & Wales).

Mr. K.m mistry: - The Managing Director of the Corporation. He has been
employed with the Corporation since 1981 and was the executive director of the
Corporation since 1993. He was appointed as the deputy managing director in 1999
and the Managing Director in 2000. He is also a member of the Investors’ Grievance
Committee of Directors.

Ms. Renu S. Karnad: - The Executive Director of the Corporation. She has been
employed with the Corporation since 1978 and was appointed as the Executive
Director of the Corporation in 2000. She is responsible for overseeing all aspects of
lending operations of HDFC.New Delhi.

BOARD OF DIRECTORS:-

Mr. D S Parekh - Chairman Mr. D N Ghosh

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

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

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

Mr. Shirish B Patel Mr. N M Munjee

Mr. B S Mehta Mr. D M Satwalekar

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

 HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.
  Intelenet Global: BPO services for international customers.

 CIBIL: Credit Information Bureau India Limited.

 HDFC Chubb: Upcoming Private companies in the field of General Insurance.

 HDFC Mutual Fund

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

 HDFC securities

 HDFC Standard Life Insurance Company Ltd Aug, 2000

JOINT VENTURE

HDFC Standard Life Insurance Company Limited was one of the first
companies to be granted license by the IRDA to operate in life insurance sector.
Reach of the JV player is highly rated and been conferred with many awards. HDFC
is rated ‘AAA’ by both CRISIL and ICRA. Similarly, Standard Life is rated ‘AAA’
both by Moody’s and Standard and Poor’s. These reflect the efficiency with which
HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs. 600,000
Cr. respectively.
HDFC Standard Life Insurance Company Ltd was incorporated on 14 th August
2000. HDFC is the majority stakeholder in the insurance JV with 81.4% staple and
Standard of as a staple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the
venture.
HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private Life
Insurance Companies, which offers a range of individual and group insurance
solutions? It is a joint venture between Housing Development Finance Corporation
Limited (HDFC Ltd.) India’s leading housing finance institution and the Standard
Life Assurance Company, a leading provider of financial services from the United
Kingdom. Both the promoters are will known for their ethical dealings and financial
strength and are thus committed to being a long-term player in the life insurance
industry- all important factors to consider when choosing your insurer.

Business Growth:-

The company commands a market share of over 60% in the housing finance
sector. Leveraging on its brand equity HDFC has also entered the Indian Mutual
Fund scene quite recently. HDFC was the only applicant to be given clearance by the
government, to enter the Rs 250 bn life insurance business. This in itself speaks
volumes about the management’s professional reputation.
Financial year 2000 proved to be a boon for housing finance companies, as the
tax benefits announced in the budget, coupled with the low real estate prices and
rising disposable incomes, spurred housing demand. As a result, demand for housing
finance too has registered high rates of growth. The housing sector has now been
recognized as an engine of economic growth and HDFC is well placed to capitalise
on this surge in demand.
Against this backdrop, HDFC logged in an excellent performance. The company’s
approvals and disbursements during the first half of financial year 2001 witnessed a
year on year growth of 33% and 32% respectively. The robust growth in itself is a
conclusion that HDFC’s business is far less susceptible to any economy downturn.

(TABLE:-6.2) Financial Snapshot

Growth ratios FY10 FY09 FY10 1HFY11

Operating income 13.7% 21.6% 15.2% 21.1%

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

Net profits 18.3% 13.8% 20.4% 19.8%

Approvals 28.9% 25.2% 30.3% 33.4%

Disbursements 31.1% 24.4% 31.2% 31.5%

% change compared to corresponding previous period

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

Apart from these traditional methods of growing, HDFC is also leveraging the
Internet to consolidate its business. It has picked up a stake in various portals. These
are pure investments to draw synergies for its existing businesses. Its proposed
venture with TCS for setting up call centres can potentially provide HDFC with
strong revenue streams. The venture is aimed at cornering a share of $10 bn IT
(information technology) enabled services market where India has a significant cost
advantage. While its investments in new business may not yield immediate returns,
they are likely to enhance HDFC’s returns on equity over the medium term. It will
also help in expanding its customer base and provide more credence to its cross-
selling efforts.
HDFC derives an edge in all its forays because of its wide reaching marketing
and distribution network (over 44,000 agents). Once it has the entire range of
products (post insurance), the company has plans to enter into distribution of
financial products by leveraging its own as well as the network of HDFC Bank. The
company can leverage its existing channels to provide the products and services in
the areas of Infotech services, asset management, life insurance and commercial
banking. This over a longer time frame can emerge as a major source of revenue for
the company.
The company’s proactivity and brand name, has always accorded it premium
valuations on the bourses. But the evidence of increasing competition (from SBI and
ICICI) may lead to slow down in its growth, in turn affecting its current valuations.
Nevertheless, if its investments in new ventures like call centres, mutual funds,
insurance and Internet initiatives click, then HDFC looks set for higher growth and
hence, valuations. Also one should not ignore the value of its 27% stake in HDFC
Bank (India’s No. 1 private sector bank), which will pay rich dividends to the
company.
 The near term concerns however, are centered on its diversifications. It is not
easy for the company to dominate its other new businesses, as it has done in housing
finance. With its entry into the insurance sector in association with Standard Life of
the UK, the growth from other income may slowdown, as the insurance business
requires long gestation period and large investments. Lower than anticipated returns
could also worry its investors.

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

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

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

a) develop close relationships with individual households,

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

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

Types of Products offered

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

Key Associates and Subsidiaries: - These are:-

HDFC BANK:-
 23.26% owned by HDFC(inclusive of warrants)
  Market Cap US $ 11 billion
 ADRs listed on NYSE
 In February 2010, HDFC Bank board approved the merger with
Centurion Bank of Punjab {CBOP} (1 share of HDFC Bank for 29
Shares of CBOP)
 1,412 branches, 528 cities, 2,890 ATMs
 Over 12 million customer accounts
 Key business areas
_ Wholesale banking Retail banking Treasury operations
 Financials (as per Indian GAAP) for the half year ended Sept 30,
2010
– Total net revenues: Rs 48.26 bn, increase of 51% over previous year
– PAT: Rs 9.92 bn, increase of 44% over the previous year
HDFC Standard Life Insurance Company Ltd. (HDFC-SL) :-
Structure: - Strong and stable partnership:-
 Tie up with Standard Life Assurance Company, U.K.
 HDFC holds 72.26% of the equity of HDFC-SL
Products: - Diversified product portfolio covering all life stages and needs:-
 Offers 20 individual products and 5 group plans along with 5 optional riders
 Offers 8 fund options with market linked products
Premium income and growth: - Values driven growth:-
Total premium income of Rs. 48.59 bn for FY 09-10 (Previous year Rs 28.56 bn);
reflecting a growth of 70% Q1 10-11 growth in total premium of 34% over Q1 09-10
Funds under management of group new business increased by 8% in as at June 30,
2010 as against the previous year.
Coverage: - Committed to increasing coverage in an under-insured market :-
Achieved a total sum assured of Rs. 33.12 bn in respect of 0.25 million lives covered
in Q1 11 taking the cumulative sum assured to Rs. 907.5 bn covering over 3.66
million lives Claims other than withdrawals/surrenders amounted to Rs 0.09 bn .
Distribution: - Diversified distribution network to cater to customer preference: -
HDFC network is used to cross sell by offering customized products Operates out of
575 offices across the country serving over450 locations Network of over 1,62,000
financial consultants, 379 corporate agents and other sales intermediaries .
Market share: - Market share of 7.3% (private sector) and 4.7% (overall) in terms
of Effective Premium.
Key performance indicators and business practices: -A diversified distribution
mix including the tied agency and alternate channels
 Banks, brokers, telemarketing, direct sales force Tied agency contributed 64%
effective premium in Q1 11 Strong bank assurance tie-ups with public, private,
co-operative and foreign banks amongst the leading players in the pensions
segment Leveraging technology to strengthen processes.
  Workflow system awarded the best technology innovation
 Web based facility to service customers and channel partners
HDFC ASSET MANAGEMENT:-
 Tie-up with Standard Life Investments (SLI)
 HDFC holds 60% of HDFC Asset Management
 HDFC MF offers 34 equity and debt oriented products
 Earned a Profit after Tax of Rs 1.18 billion for FY08; Return on Equity: 75%
 Paid a dividend of 150% for FY10 to equity shareholders
 Total assets under management (AUM) as at September 30, 2010, stood at Rs.
647 bn which is inclusive of portfolio management and advisory
Services of Rs. 170 bn.
 Equity assets as a proportion of the mutual 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
– Targeted at premier institutions and funds across the world
Interested in taking an exposure in Indian real estate.

HDFC ERGO GENERAL INSURANCE COMPANY LTD:-

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

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

Return on Equity 27.8% 28.2%

Return on Average Assets 2.7% 2.7%

Earnings per share (Rs) 85 95

Profit after Tax (Rs in billion) 24.36 27.13

Total Assets (Rs in billion) 810.99 925.83

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

that include 54 offices of HDFC’s distribution company, HDFC Sales Private
Limited (HSPL). In addition, HDFC covers over 90 locations through its outreach
programmed. Distribution channels form an integral part of the distribution network
with home loans being distributed through HSPL, HDFC Bank Limited and other
third party direct selling associates.

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

HDFC HOME LOAN ADVANTAGE:-

 Home loan counselling sharing over 30 years of home loan experience

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

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

CHAPTER-7
 CHAPTER- 7

DISBURSEMENT OF HOME
LOANS BY HDFC HOUSING DEVELOPMENT FINANCE
CORPORATION LIMITED

This chapter contains results and discussion on disbursement of Home loans

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

GRAPH-7.1 HDFC: Housing loan spreads:-

2.35%

2.30%

2.25%

2.20%

2.15%
2.10%

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

 HDFC surprises positively on 4Q numbers with the bottom line at Rs7334mn,

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

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

Rs mn 4Q11A Y/Y Q/Q

Income from Operations 30,715 42% 6%

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

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

45%

40%

35%

30%

25%

20%

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

YOY DISBURSEMENT GROWTH

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

HDFC provides long-term housing loans to low and middle-income individuals, as

well as to corporations. HDFC also provides construction finance to real estate
developers, besides providing lease-financing facilities to companies and
development authorities for infrastructure and other assets.
CHAPTER-8
 CHAPTER-8

COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY

COMMERCIAL BANKS

8.1 - Disbursement of Home loans by different banks:-

HDFC LTD:-

Years No. of Home loan Disbursed

Home loan (in crore Rs.)
Account
holders. Distributed Recovered Balance
 2006-07 700 90.07 63.05 27.02

2007-08 950 120.00 91.20 28.8

2008-09 1130 144.67 127.31 17.36

2009-10 1435 180.33 165.90 14.43

2010-11 1594 240.00 228.12 11.88

Interpretation:-

On the above table, it is evident that there are increase in No. of account
holders from 700 to 1594 in the year 2010-11. The loan amount distributed among
home loan account holder has also increased from Rs.90.07 crore in 2006-07 to
Rs.240 crore in 2010-11. The recovery procedure for home loans is also
strengthening due to increment in recovered amount, i.e. Rs.63.05 crore to Rs.288.12
crore. So it nut shall there are upward trend in number of accountholders and
disbursement of home loans.

Punjab National Bank:-

Years No. of Home Home loan Disbursed

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

2014-15 810 120.15 97.28 22.87

2015-16 950 183.26 150.00 33.26

2016-17 1120 213.65 185.86 28.05

2007-18 1433 240.87 231.07 9.80

2018-19 1500 265.15 265.05 9.10

Interpretation:-

The Punjab National Bank is Public sector Bank. It comes second after State
Bank of India in its branch location and expansion. From the Table, the figures show
that there are increasing trend in customer base from 810 in the year 2014-015 to
1500 in the year 2018-19. The bank also show enhancement in loan amount up to
Rs.265.15 crore in the year 2018-19. The recovery process of loans in past is slow
but now it is increasing.

Oriental Bank of Commerce:-

Years No. of Home loan Disbursed

Home loan (In crores Rs.)
account Distributed Recovered Balance
holders
2014-15 106 6.21 5.27 0.94

2015-16 130 11.55 10.16 1.38

2016-17 154 17.06 14.35 2.70

2007-18 180 20.09 18.68 1.41

2018-19 260 24.10 23.91 0.48

Interpretation:-

The oriental bank of commerce is a public sector bank. It has also upgraded its
position in banking sector in Bareilly. The figures shown in table reveal that there is
upward shift in customer base of Bank from 106 customers to 260 customers. The
bank has also increased its share in housing finance by distributing Rs. 24.10 crores
in 2018-19. The recovery procedure of Home loan is very sound.

ICICI BANK:-

Years No. of Home loan Disbursed

Home (in crores Rs.)
 loan Distributed Recovered Balance
account
holders
2014-15 650 104.33 98.12 6.21

2015-16 853 123.24 105.00 18.24

2016-17 1019 150.65 133.46 17.19

2007-18 1132 176.75 144.65 32.10

2018-19 1434 224.00 209.16 14.84

Interpretation:-

The amount reveals that there is tremendous increase in Home loan

accountholders. The amount distributed as home loan is also increased from Rs.
104.33 in 2015-16 to Rs. 224 crore in 2018-19. But the recovery mechanism of the
Bank is not so good that’s why the outstanding amount shows fluctuating trend.

8.2 -COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY

COMMERCIAL BANKS:-

There are number of schemes and products, offered by commercial banks to

attract the customers. The comparison among different commercial banks which
offer home loans in regard of Disbursement of home loans are as:-

No. of Home loan account holders;-

Table 8.2(a)
 Years HDFC LTD Punjab Oriental ICICI
National Bank Bank
Bank Of
Commerce

2014-15 700 810 106 650

2015-16 950 950 130 853

2016-17 1130 1120 154 1019

2007-18 1435 1433 180 1132

2018-19 1594 1500 260 1434

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

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

Table 8.2 (b)

Name of Bank Average (Rs) Percentage of

Accountholders
HDFC LTD 1109 32

Punjab National Bank 1163 34

Oriental Bank of 166 5

Commerce

ICICI BANK 1018 29

Total 3456 100
GRAPH:- 8.2

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 customer’s base from 2007 to 2011.but HDFC LTD comes as market leader in
the home loan cases.

Home loans distributed by HDFC and Commercial banks:-

Table 8.3 (a)

Years HDFC LTD Punjab Oriental Bank ICICI BANK
National of Commerce
Bank

2014-15 120.15 90.07 6.21 104.33

2015-16 183.26 120.00 11.55 123.24

2016-17 213.65 144.67 17.06 150.65

2007-18 240.87 180.33 20.09 176.75

2018-19 265.15 240.00 24.10 224.00

(Rs.in crore)

Average of home loans granted

Total home loans granted

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

Table. 8.3 (b)

Name of Bank Average (Rs) Percentage of home

loans granted (Rs in
crore)
HDFC LTD 204.62 39

Punjab National Bank 155.01 29

Oriental Bank of Commerce 15.80 3

ICICI BANK 155.79 29

Total 531.22 100

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

GRAPH:- 8.3

Home loans granted by HDFC LTD and

commercial banks

Interpretation:-

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

Recovery of Home loans:-

Table 8.4 (a)

Years HDFC Punjab Oriental Bank ICICI

BANK (Rs National Of Commerce BANK (Rs in
in crore) Bank( Rs (Rs in crore) crore)
in crore)
2014-15 97.28 63.05 5.27 98.12

2015-16 150.00 91.20 10.16 105.00

2016-17 185.86 127.31 14.35 133.46

2007-18 231.07 165.90 18.68 144.65

2018-19 256.05 228.12 23.91 209.16

Average recovery of home loans

Total home loans recovered

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

Table 8.4 (b)

Name of Bank Average (Rs) Percentage of home

loans recovered( Rs in
crore)
 HDFC LTD 184.05 39
Punjab National Bank 135.21 30
Oriental Bank of 14.47 3
Commerce 138.08 28
ICICI BANK
Total 471.80 100

It is clearer with the help of this diagram: -

GRAPH: - 8.4

Home loans recovered by HDFC LTD and

commercial banks

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

Outstanding Balance:-
Table 8.5 (a)

Years HDFC LTD Punjab Oriental Bank ICICI

(Rs in crore) National of Commerce BANK(Rs in
 Bank(Rs in ( Rs in crore) crore)
crore)
2014-15 22.87 27.02 0.94 6.21

2015-16 33.26 28.8 1.38 18.24

2016-17 28.05 17.36 2.70 17.19

2007-18 9.80 14.43 1.41 32.10

2018-19 9.10 11.88 0.48 14.84

Average of balance due

Total of Balance due in 5 years

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

Table 8.5 (b)

Name of Bank Average Percentage of

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

PNB 19.89 33

Oriental Bank of Commerce 1.38 2

ICICI BANK 17.72 31

Total 59.15 100

Average of one bank

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

The diagrammatically presentation of data is as:-

GRAPH:- 8.5
 Balance due on home loans by HDFC LTD and
commercial banks

Interpretation:-

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

CHAPTER-9
 CHAPTER-9

ANALYSIS & INTERPRETATION

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

 AGE GROUP OF SURVEYED RESPONDENTS

TABLE 9.1:

Age group No. of Respondents

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

CHART-9.1:

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

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

TABLE-9.2
Sr. No. Category No. of Percentage
 Respondents
1 Married 70 70%
2 Unmarried 30 30%
Total 100 100%
Base 100
respondents

CHART-9.2

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

Educational qualification of respondent’s

TABLE-9.3
Sr. No. Category No. of Percentage
Respondents
1 Under graduate 25 25%
2 Graduate 40 40%
3 Post graduate 35 35%
 Total 100 100%
Base 100
respondents

CHART-9.3

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

Number Of year’s Are You in Bareilly?

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

Staying years in Bareilly

Interpretation
From the table and graph above it can be seen that
 39% respondent’s are in Bareilly is less than five year’s.
 61% respondent’s are in Bareilly is more than five year’s.

CUSTOMER PROFILE OF SURVEYED RESPONDENTS

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

Chart-9.5

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

ANNUAL HOUSE HOLDS INCOME?

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

CHART-9.6

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

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

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

 5% respondent’s annual household income is more than 8 lacs.
Do you know about HDFC housing development finance corporation LTD?
TABLE 9.7:

Category No. of Respondents

Yes 91

No 9

CHART:-9.7
 Awareness about HDFC LTD

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

Table 9 .8:-
Reasons for getting the home financed

Sr.No. Number of Reasons Percentage

a. Non-availability of funds 36

b. Reluctancy to pay cash in one 35

go
c. Tax benefit 24

d. Any other 5
 GRAPH:- 9.8

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

Table-9.9

From where you have got your home financed

Name of Banks / company Percentage of customers

HDFC LTD 55

Punjab National Bank 15

 Oriental Bank of Commerce 07

ICICI BANK 20

Any other 03

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

From where you have got your home

financed

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

Table-9.10

Sources of information about Home Loans Scheme

Sources of information Percentage of customers

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

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

 Sources of information about Home Loans Scheme

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

Table-9.11

Opinion about the services of HDFC LTD

Services of HDFC Percentage of customers agreeing

LTD
 Strongly Agree Neutral Disagree Strongly
agree disagree
a. Professionally 86% 10% 4% - -
managed

b. Reliable & 67% 33% - - -

transparent

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

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

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

GRAPH-9.11

Opinion of customers about HDFC LTD

Interpretation:-

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

Table-9.12

Opinion of customers about home loan schemes

HDFC LTD :-

Services of Percentage of customers agreeing

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

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% -
sanction of loan

GRAPH:- 9.12
 Percentage of satisfaction level of customers of HDFC LTD

Interpretation:-

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

TABLE:- 9.13

DATA GIVES PREFERENCE OF RESPONDENTS OF HOME LOANS

COMPANIES AND BANKS
 NO.OF
COMPANY’S NAME (%)
RESPONDENTS
HDFC LTD 78 78
ORIENTAL BANK OF
2 2
COMMERCE
ICICI BANK 10 10
PNB 7 7
SBI 3 3
TOTAL 100 100

GRAPH:-9.13

NO. OF RESPONDENTS

INTERPRETATION:-
From the table and graph above it can be seen that:-
78% of the people contacted prefer HDFC LTD to any other and therefore it is
ranked no.1 by that percent of respondents.
PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS
 There are everything in the world has good or bad points. No doubt
banking industry/ company has made many efforts to enhance the customer
satisfaction but customer still faced some problems. These are high lightened as
below:

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

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

3) The attitude of bank employees some times non cooperative and it

creates a hurdle in building trust and Confidence among customers about banks.

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

So above discussed are the problems which faced by customers while

availing home loans.
CHAPTER-10

CHAPTER-10

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

2. Majority of the people got loans from HDFC LTD only

3. Most of the customers are not aware of the products of HDFC home
loans

4. Some of the customer’s felt that the interest rates are some what high

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

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

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

home loan products and services

8. Customer awareness is medium about HDFC products.

9. HDFC LTD providing good services to their customers.

CHAPTER-11
 CHAPTER-11

RECOMMENDATIONS AND SUGGESTIONS

These suggestions have been discussed as follows:-

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

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

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

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

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

5) HDFC LTD provide loan according to the repaying capacity of the

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

6) Create awareness: The Company has to take care of awareness creation

about the products and services among the customers.

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

charges.

8) The company has to reduce their interest rates on home loan products and
services.
 9) The company has to identify the potential customers.

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

11) The HDFC LTD should try to provide proper knowledge regarding
their home loan schemes, even to people who don't know about such schemes and
their benefits especially in rural areas. So they should provide knowledge to the
ignorant customers, especially in rural areas and backward urban area so, above is
the main suggestions provided to the HDFC LTD. By considering these
suggestions, the HDFC LTD can strengthen their customer base in home loans
sector. They should improve their services and reduce legal proceedings and
should be friendly to their customers. All this will be helpful to satisfy their
customers.
CHAPTER-12

CHAPTER-12

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 some reasons.
4) The interest rates also some what high when compare to other banks
5) The loan sanction process is low when compare to other banks.
6) For disbursement process is also it will take low time when compare to other
banks
Finally the whole research was carried out in a systematic way to reach at
exact results. The whole research and findings were based on the objectives.
However, the study had some limitations also such as lack of time, lack of data, non-
response, reluctant attitude and illiteracy of respondents, which posed problems in
carrying out the research. But proper attention was made to Carry out research in
proper way and to make accurate conclusion for the HDFC LTD which may
beneficial for banks to enhance their customer base.

BIBLIOGRAPHY

REFERENCES
REVIEWS
  Berstain David(2008), “Home equity loans and private mortgage
insurance: Recent Trends & Potential Implications”, Vol.3 No.2, August 2008,
Pp. 41 53

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

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

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

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

 Godse (1983), “looking a fresh at banking productivity”, Journal of

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

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

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

NEWS PAPERS
 The Times of India
 Financial Express

WEB PAGES:-

http://www.hdfcindia.com/

http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_08.html
www.hdfc.com
http://www.iloveindia.com/real-estate/housing-finance- companies/hdfc.html
http://www.loansnews.info/Home-loan/hdfc-home-loans/
 QUESTIONNAIRE
Name: ………………………………………………………………………..
Address: ……………………………………………………………………..
Contact No :®………………( O)……………… (M)………………………
City: ………...............Pin: ………………….State: ……………………….
1. Name: ____________________

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

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

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

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

5. Have you ever taken Home loan before?

(a) Yes (b) No

6. If yes, from which Bank/company?

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

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

Highly dissatisfied Neutral satisfied

highly dissatisfied
dissatisfied

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

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

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

10. How much loan amount you took?

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

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

12. Do you own a home…?

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

13. Have you get it financed?

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

14. What is reason for getting it financed?

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

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

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

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

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

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