A Study On Home Loans Rajni Mba 3RD Sem Finance Col Rdias Delhi

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

HOME LOANS” under the guidance of “Mr. Amit Kumar Gupta” in the
partial fulfillment of the requirement for the award of the degree of
“Masters in Business Administration” from “Rukmini Devi Institute Of
Advanced Studies, New Delhi.” This is an original work and I have not
submitted it earlier elsewhere.
RAJNI
Rukmini Devi Institute of Advanced Studies 1

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CERTIFICATE
This is to certify that the project titled “A STUDY ON HOME LOANS” is

an academic work done by “RAJNI” submitted in the partial fulfillment of
the requirement for the award of the degree of “Masters in Business
Administration” from “Rukmini Devi Institute Of Advanced Studies, New
Delhi.” under my guidance and direction. To the best of my knowledge and
belief the data and information presented by him in the project has not
been submitted earlier elsewhere.
Mr. Amit Kumar Gupta (Project Guide)

RDIAS

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

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

for their constant co-operation. He was always there with his competent guidance
and
valuable suggestion through out the pursuance of this research project. Special
thanks to
Mr.Amit Kumar Gupta who guided me to work honestly and to give valuable suggestion
for improving my work Last but not least I would also like to place of appreciation
to all
the respondents whose responses were of utmost importance for the project.
Above all no words can express my feelings to my parents, friends all those persons
who
supported me during my project. I am also thankful to all the respondents whose
cooperation & support has helped me a lot in collecting necessary information.
I would also like to thank almighty God for his blessings showered on me during the
completion of project report.
Rukmini Devi Institute of Advanced Studies

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EXECUTIVE SUMMARY
Home is a dream of a person that shows the quantity of efforts, sacrifices

luxuries
and above all gathering funds little by little to afford one’s dream. Home is one
of the
things that everyone one wants to own. Home is a shelter to person where he rests
and feel
comfortable. Many banks providing home loans whether commercial banks or financial
institutions to the people who want to had a home. The housing sector plays an
important
role in the economic development of the country.
My project title is “A STUDY ON HOME LOANS”. I selected this topic because
The Indian housing finance industry has grown by leaps and bound in few years.Total
home loans disbursements by banks has risen which witnesses phenomenal growth from
last 5 years. There are greater number of borrowers of home loans.so by this study
we can
find out satisfaction level of customers and problems faced by them in obtaining
home
loans.
My objectives of study are-
• To make comparative study of Disbursement of home loans by commercial banks.
• To study the satisfaction level of customers about home loans.
• To study the problems faced by customers in obtaining the home loans.
For this I had taken four commercial Banks in Dehradun city namely HDFC Bank, PNB,
standard chartered Bank, SBI. It includes two public sector banks and two private
sector
banks. The period of study is five years commencing from 2004-2008.
In the research methodology I had taken both primary data as well as secondary data
, in
the primary data I had make a questionnaire to check the satisfaction level of
customers
about home loans . In the secondary data I had studied the annual reports of RBI,
commercial banks & broachers of these banks.
For the first objective I had collected the information about the number of account
holders
of specified banks, no of disbursement of home loans and recovery of these loans.
After analysis I came to following findings
In the comparative study of specified banks it’s found that
 Punjab National Bank is having large number of customer base with high loan
disbursement and recovery of loans.
 The standard chartered bank showed less outstanding balance which presented
in
percentage form in the diagram.
In case of second objective i.e. customer satisfaction level it is found that

 On the basis of data the HDFC is emerging at higher position a Compare to
Standard
chartered bank and other public sector banks on Ground of professionally
managed
services, reliable & transparent System, easy query handling etc.
And problems face by customers in obtaining home loans are

• The customer does not had proper knowledge about different Home loan
products
so they face problem in making a good deal.

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• There are procedural delays, which harass the customers lot this will
crush the
curtsy of customers to avail the home loan.
• The attitude of bank employees some times non cooperative and it creates
a hurdle
in building trust and Confidence among customers about banks.
• 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.
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 some of the limitation
faced
in collecting the data were Lack of time, lack of data, non-response, reluctant
attitude and
illiteracy of respondents, which posed problems in carrying out the research.
Some of the suggestions are

• To increase their customers, the banks 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.
• To satisfy their customers and for good dealings in future, the banks should
make
prompt disbursement of loan amount to the customers so that they can buy or
construct their dream home as early as possible.
• The Banks 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.
• 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 having lower interest rates,
have the
maximum clients for loans.
• The public sector banks should improve their overall services to

increase the
number of customers for home loans. They should recruit professionals to
provide
such services and to satisfy the customers.
.

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TABLE OF CONTENTS
Student Declaration …………………………………………………….. i

Certificate from Company/ Organization …………………………. … ii
Certificate from guide…………………………………………………… iii
Acknowledgement..…………………………………………………....... iv
Executive Summary………………………………………………………..v
Chapter Scheme………………………………………………………….. vi
List of Tables………………………………………………………………vii
List of graphs………………………………………………………………viii
List of charts……………………………………………………………….ix
List of Abbreviations……………………………………………………... x
CHAPTER 1: INTRODUCTION-
1.1 Introduction to home loans…………………………............... 1
1.2 Advantages of home loans…………………………………… 1
1.3 Disadvantages of home loans………………………………... 2
1.4 Disbursement of home loans………………………………… 3
CHAPTER 2: OBJECTIVES OF THE STUDY………………………... 13

2.1 Purpose of the Study………………………………………......14
2.2 Scope of the Study…………………………………………......14
CHAPTER 3: RESEARCH METHODOLOGY……………………….. 16

3.1 Research Design………………………………………………. 16
3.2 Data collection……………………………………………….... 16
3.3 Sample size……………………………………………………..17
3.4 Sampling Technique…………………………………………. 17
3.5Liminations……………………………………………………. 18
CHAPTER 4: REVIEW OF LITERATURE…………………………… 20
CHAPTER 5: INDUSTRY PROFILE………………………………….. 22

5.1 The History of Indian home Loans………………………….. 22
5.2 Home Loan procedure in India……………………………….23
5.3 Interest rate provided by banks………………………………24
5.4 Indian Market for Home loans is more than Rs.500,000 cr... 27
5.5 Indian home loans Industry………………………………….. 28
5.6 Recent trends oh home loans in India………………………...31

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5.7 Impact of slowdown on home loan market in India…………31

5.8 Interest and market trends in year 2009……………………..33
5.9 Types of home loans…………………………………………... 35
5.10 HDFC home loan……………………………………………..37
CHAPTER 6: COMPANY PROFILE……………………………………48
CHAPTER 7: DISBURSEMENT OF HOME LOANS BY HDFC …….62
CHAPTER 8: COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS

BY COMMERCIAL BANKS ………………………………………….. 66
CHAPTER 9: ANALYSIS & INTERPRETATION …………………… 80

CHAPTER 10: FINDINGS……………………………………………….97
CHAPTER 11: RECOMMENDATIONS AND SUGGESTIONS…….. 98
CHAPTER 12: CONCLUSION………………………………………….100
BIBLIOGRAPHY ……………………………………………………….. 101
ANNEXURES…………………………………………………………… 103

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LIST OF TABLES
TABLE NO. TITLE PAGE NO.
5.2 Financial Snapshot

5.3 Interest rates provided by various banks
5.4 CONSOLIDATED EARNINGS (As at March 31, 2008)
7.2 HDFC: 4Q09 Summary
8.1 Disbursement of home loans by different banks
8.2 No. of Home loan account holders
8.3 Home loans distributed by HDFC and commercial banks
8.4 Recovery of Home loans:-
8.5 Outstanding balance
9.1 Age group of surveyed respondents
9.2 Gender classification of surveyed respondents
9.3 Education qualification of respondent’s
9.4 No .of years are you in Dehradun
9.5 Customer profile of surveyed respondents
9.6 Annual household income
9.7 Do you know about HDFC LTD
9.8 Reasons for getting Home financed
9.9 From where you have got your Home financed

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9.10 Source of information home loans scheme
9.11 Opinion about the services of HDFC LTD
9.12 Opinion of customers about Home loan scheme
9.13 Data gives preferences of respondents of Home loans

companies and banks

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LIST OF GRAPHS
GRAPH NO TITLE PAGE NO

5.1 Indian Market for Home loans is more than 28
Rs.500,000 crore:-
5.2 Indian Home loans Industry 29
5.3 Indian Market for Housing mortgage finance 30

companies
5.4 The prices of residents have shot up very high 30
5.5 Residential prices in India 31
5.6 Housing shortage in India 32

5.7 HDFC yielding ground 34
6.3 HDFC Up, up and away 55
7.1 HDFC housing loan spreads 62

8.2 Home loans holders of HDFC and commercial banks 70
8.3 Home loans distributed by HDFC and commercial 72
banks
8.4 Recovery of home loans 75
8.5 Balance due on home loans by HDFC and 77
commercial banks
9.8 Reasons for getting the home financed 86
9.9 From where you have got your home financed 88

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9.11 Opinion about the services of HDFC LTD 91

9.12 Percentage of satisfaction level of customers of 93
HDFC LTD
9.13 Data gives preference of respondents home loans 94
companies and banks

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LIST OF CHARTS
CHART TITLE PAGE NO
NO
6.1 Snapshot of HDFC LTD 50
9.1 Age group of surveyed respondents 79
9.2 Gender classification of surveyed respondents 80
9.3 Educational qualification of respondents 81

9.4 Staying years in Dehradun 82
9.5 Customers profile of surveyed respondents 83
9.6 Annual house hold Income 84

9.7 Awareness about HDFC LTD 85
9.10 Percentage of source of information about home loans 89
scheme

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LIST OF ABBREVIATIONS
ABBREVIATIONS EXPANSION
ROVR RECOMMENDATION OVER
NRI NON RESIDENT INDIAN
RBI RESERVE BANK OF INDIA
PNB PUNJAB NATIONAL BANK
SBI STATE BANK OF INDIA
IIR INCOME TO INSTALLMENT RATIO
FLIP FLEXIBLE LOAN INSTALMENT PLAN
DSAs DIRECT SELLING AGENTS
BSAs BUSINESS SELLING AGENTS
DCOVR DOUBLE CHECKING OVER
RPLR RETAIL PRIME LENDING RATE

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CHAPTER- 1

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CHAPTER – 1
INTRODUCTION
1.1 INTRODUCTION TO HOME LOANS
Home is a dream of a person that shows the quantity of efforts, sacrifices

luxuries
and above all gathering funds little by little to afford one’s dream.
Home is one of the things that everyone one wants to own. Home is a
shelter to
person where he rests and feel comfortable. Many banks providing home loans whether
commercial banks or financial institutions to the people who want to have a home.
HDFC-(Housing Development And Finance Corporation) Home Loan, India have
been serving the people for around three decades and providing various housing loan
according to their varied needs at attractive & reasonable interest rates. Owing to
their
wide network of financing, HDFC Housing Loans provides services at your doorstep
and
helps you find a home as per your requirements.
Many banks are providing home loans at cheapest rate to attract consumers
towards
them. The more customer friendly attitude of these banks, currently offer to
consumers
cheapest loan over homes.
In view of acute housing shortage in the country, and keeping in mind the
social –
economic role of commercial banks in the present times, the RBI advised banks to
encourage the flow of credit for housing finance.
With the RBI reducing bank rate, the home loan market rates nose-diving by
50
basis points. The HDFC Bank and Standard chartered bank has become the first player
in
this sector to announce a housing loan for a 20 years period. No doubt it will
enhance the
end cost people to plan their house over longer duration now; it has been made easy
for a
person to buy that dream house which he dreamt of long ago.
HDFC also provides with Home Improvement Loan for internal and external
repairs and other structural improvements like painting, waterproofing, plumbing
and
electric works, tiling and flooring, grills and aluminium windows. HDFC finances up
to
85% of the cost of renovation (100% for existing customers).
Current status is that HDFC reduced home loan rates by 50 basis points for
all its
existing floating rate customers.
1.2 ADVANTAGES OF HOME LOANS:-

The various benefits of home loans arising to the customers are:-
(i) Attractive interest rates:-

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The various banks offer attractive interest rates to boost and help their
customers.
Many banks provide loans on fixed or floating rates to facilitate consumers as per
their
needs.
(ii) Help in owning a home:-

The home availed by a person with the help of banks, because they provide
technical and financial assistance to customers for owning their dream home.
(iii) No requirement of guarantor:-
The commercial banks now a day, liberlise their laws regarding home loans.
Some
of banks don’t even require the guarantor to grant loan to their consumers. They
also make
consumers free by reliving him to find a guarantor to complete the proceedings of
availing
loan.
(iv) Door-Step Services:-

These door to step services are provided from enquiry stage to the final
disbursement
takes place such services are beneficial for customers in present busy life. Banks
like ICICI
bank and standard chartered bank provide door to step services to customers to
borrow
loan.
(v) Loan period:-

There are many banks which provide maximum loan tenures upto 15-20 years
based
on the loan amount and the creatibility of customers. This relieves the customers
to repay
loan amount till a long period.
(vi) For accidental death insurance :-

Some banks provide free accidental death insurance with housing loan which
is also
beneficial for the customers.
These benefits or advantages of home loans are responsible for making than
so
popular among customer that a person who don’t have their home and want to buy,
they do
it with home loan. Home loans help such persons in making their dream home.
1.3 DISADVANTAGES OF HOME LOANS:-

The main disadvantages of home loans are high lightened as below:
(i) Delays in processing :-

Many times, there are huge delays in processing of providing home loans
because
various formulations to be fulfilled in this process. Due to these delays customers
feel
mentally as well as financially weak.
(ii) Fluctuating interest rates :-

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

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The public sector banks charge high processing cost for home loan’s
sanctioning.
They are forced to pay serious charges at various stages to fulfill the
requirements. Some
consumers are not able to pay such charges so such people could not avail the
benefits of
home loan schemes.
(iii) Problems in disbursement:-

There are many problems in disbursement of home loan amount. There are
some
delay in disbursement of loan amount to the customers due to legal formalities.
This causes
problems to the customers.
These are limitations or disadvantages of home loans. But some times some
banks
charges high installments to repay loan amount. Such also causes problem to
customers.
These limitations can be removed by providing good and promote services to the
customers.
1.4 DISBURSEMENT OF HOME LOANS :-
The every bank has its own procedure to disburse the loan amount among
customers. After choosing your right home, the next step is disbursement of home
loans.
The loan amount is disbursed after identifying and selecting the property or home
that are
purchased and submit the requisite legal documents. In the disbursement of home
loans a
clear title and full verification to ensure that a person has full rights on his
house. The 230A
clearance of seller and /or 371 clearances from the appropriate authority of income
tax is
also needed.
(I) Eligibility criteria:-
However, if one is a resident or non-resident individual who is planning

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

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

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 Husband-Wife: - Income of husband-wife can be clubbed.
 Parent - son: - It can be clubbed if only son is there but not if any male
sibling exists.
 Brother-Brother: - If they are currently staying together and intend to stay

together in
the new property, then only, their income-can be clubbed for above purposes.
 Brother-Sister: - No clubbing-is possible.
 Sister-Sister : - No clubbing is possible.
 Parent-Minor- Child: - No clubbing is possible in this case also.
(iii) General Terms and Conditions: - The following are the terms and conditions
applicable to the basic home loan product only. These are likely to change on the
basis of
the variations of the home loan product. Typically, in general home loans, the
following
conditions are applicable :-
1) The loan to value ratio (LTV) cannot exceed a particular percentage. This
differs from
product to product and from one Housing Finance Institutional Bank (HFI/B) to
another. The components of the value of the Property calculated here are covered
under
cost of property.
2) The maximum tenure of the bank is nominally fixed by HFI/Bs. However, HFls/Bs do
provide for different tenures with different terms and conditions.
3) The installment that one pay is normally restricted to about-50-per cent of the
monthly-
gross income of the candidate.
4) The total monthly outflow towards all the loans that have been availed of,
including the
current loan is normally restricted to 50% of the gross monthly income.
5) One will be eligible for a loan amount which is the lowest as per one's
eligibility. This is
calculated as per the LTV norms, the HR, norms and the FOIR norms as mentioned
above.
6) Most HFls/Bs consider the profile before they judge the repayment capacity. The
judgement is based on age, qualifications, number of dependents, employment
details,
employer credentials, work experience, previous track record of repayment of any
loans
that have been availed of, occupation, the industry to which the candidate's
business relates
to, if he/she is self-employed, then the turnover in the last 3-4 years etc.
7) Some HFIs/Bs insists on guarantees from other individuals for the repayment of
the
loan. In such cases, the customers has to arrange for the personal guarantee before
the
disbursement of the loan takes place.

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8) The property should be technically clear before the HFIs/Bs disburses the loans
amount. Most of institutions and banks have a teams of technical experts who visit
the site
to get a technical report before the disbursement of loan. This is also beneficial
to the
customer as they check for the technical quality and compliance with local laws.
9) The property should be legally clear before one can avail of a disbursement of
the loan
amount. Housing-Finance Institutions /Banks (HFIs/Bs) take legal clearance from
their
lawyers before the disbursement of amount. This proves to be beneficial to the
customers
as a legal expert checks his/her documentation to ensure that he/she get a proper
title to the
property.
10) The disbursement of the loan is as per the progress of construction of the
property
unless it is a ready property in which case the disbursement will be by one single
cheque.
PEMI or simple interest on the loan amount disbursed to the customer in case of a
part
disbursement will be payable by the customer on the disbursement.
11) The disbursement in most cases will be favoring the builder or the seller or
the society
or the development authority as the case may be. The disbursement will come in the
customer's favour under special circumstances only.
12) The repayment of loan can be made either through deduction against salary,
post-dated
cheques, standing instructions or Auto debit instructions to bank.
13) The principle is amortized either on annual reducing or monthly reducing basis
as the
case may be.
The above terms and conditions are generally true for most Housing
finance
Institutions/Banks with respect to the general Home Loans. However, the specific
terms
and conditions vary with respect to special Housing Finance Institutions or Banks.
(iv) Charges applicable to home loans :-
The different kinds of charges applicable to home loans are discussed below:
a) Processing fees :-
First of all, comes the process fee. This is a charge that is levied by most
HFls/Bs.
This has to be paid at the time of submission of the application form. It's
normally charged
as a percentage of the loan amount sanctioned. Some HFls also charge a flat fee
based on
the loan amount instead of a percentage. When a lower amount is sanctioned the
excess
fees paid at the time of submission of the application is adjusted with the
charges, which
one make to the HFI/B subsequently. Most HFls/Bs refund the processing fee if the
loan
application is rejected.
b) Administrative fees :-

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This charge is again, normally, a percentage of the loan amount sanctioned.

It is
collected by the HFI/B for the maintenance of customer's records, issuing interest
certificates, legal charges, technical charges, etc. though the tenure of the loan.
It is payable
by the customer when he/she accepts the offer letter given by the HFI/B. This
payment has
to be made before the availment of the disbursement. The mode of collection of
these fees
varies from one HFI/B to another.
c) Rate of interest :-
This is the rate of interest applicable on the loan amount through the tenure
of the loan.
It is charged on the principal monthly reducing method. Most HFIs/Bs give an option
to
select either a fixed rate of interest or a variable rate of interest.
d) Legal Charges:-
Some HFIs/Bs mainly Public Sector Banks levy legal charges that they incur
on
getting the property documents vetted by their panel of lawyers.
e) Technical Charges:-
These charges are also levied by certain Housing Finance

Institutions/Banks
(HFIs/Bs) to meet their expenses on the technical site visits to the customer's
property. This
ensures quality of construction and construction within the norms as stipulated by
the
respective approval authority.
f) Stamp duty and registration charges:-
HFIs that go in for a registered mortgage pass these charges on to the

customer. These
are rather heavy in certain states depending on the laws laid down by the state
where one
buy a property.
g) Personal Guarantee from Charges :-
Since the personal guarantee provided by the customer need to be stamped,

these
charges are also recovered from the customer. They are charged to him by HFIs who
demand for Guarantees.
h) Cheque Bounce Charges :-

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In case the cheques through which one make a payment to HFls get dishonored,
some
minimum charges are levied by the HFI. The same are recovered from the customer.
(i) Delayed payment charges :-
HFls/Bs charge delayed payment charges from the customer if he/she delays the
payment of installments beyond the due date.
(j) Additional charges :-
These are levied as a percentage on the delayed payment charges by most HFls.
They
are levied if one fail to pay the dues within the stipulated time after a delay has
taken place.
(k) Incidental charge :-
This is payable in case the HFI/B sends a representative from their

organization to
collect their outstanding dues. It is normally charged at a flat rate per visit.
These charges
are levied by most HFls/Bs.
l) Prepayment Charges :-
This is a penalty charged by HFls/Bs from when one makes either a part
prepayment
or a full repayment of the loan. This charge is levied only on lump sum payments
and not
on the EMls that one pays. This charge is levied on the amount prepaid by one and
not on
the entire outstanding principal. These charges are gradually being discount. So,
these are
the charges levied by most Housing Finance Institutions and Banks while granting
home
loan to the customers. Now, the decision on the repayment capacity shall be talked
about as
follows.
(v) Judgement regarding repayment capacity on the basis of income :-
To understand how the income of a customer is considered to arrive at his

repayment
capacity, it is first necessary to classify customers into salaried and self
employed
individuals.
a) The income of the salaried individual is considered in the following manner:-
Gross monthly income as it appears on the salary slip
Less:- Any non regular variable income appearing on the salary slip (including
overtime,
etc.)
Add : - 50 per cent of the average variable income of the last six months.

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Add: - Any fixed cash/voucher payments for which proof can be submitted.
Add: - 50 per cent of the average variable cash/voucher payments with proof like
traveling
reimbursement etc.
Add :- HRA receivable if not being received already in the salary slip.
The above income calculated for the calculation of eligibility using IIR and FOIR
norms.
For calculation of FOIR, the installments of all the loans that one has availed of
currently
for which repayment is being made is taken into account as well. The lower of the
two
eligibilities is considered as the maximum repayment capacity.
b) To consider income of Self-employed individuals we further classify them into

Professionals and non-professionals .
• Professionals:- Comprising doctors, chartered accountants, lawyers,

architects, etc.
For calculation of eligibility of professional's income is computed by most
HFIs
using the gross professional receipts instead of the Net profit as in the
case of self-
employed non-professionals.
• Non-Professionals: - The income of non-professionals is normally calculated

by
HFIs in the following manner: -
Average of the net profits of last 2 years as it appears in the profit and loss
account
(Returns need to be filed for the same. They should be filed regularly before the
due date
is over).
Less: - Any income, which is unusual and non-recurring in nature like sale of some
asset,
etc which affects profits substantially,
Add: - Any expense that is unusual and non-recurring in nature like repairs and
maintenance that has not been capitalized and effect profit adversely.
Add: - 50 per cent of the average depreciation of the last two years. The above
income is
calculated for the calculation of eligibility using IIR and FOIR norms.
For calculation of FOIR the installments of all the loans that one has availed of
currently
for which repayment is being made is taken into account and the eligibility is
worked out.
The lower of the two eligibilities is considered as the
maximum repayment capacity.
(vi) Credit documentation:-

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Given below is the exhaustive list of credit documents- that need to be

submitted for
a general home loan product. The documents vary from one HFI/B to another based on
one's employer, qualifications experience etc. the general requirements are as
follows: -
(a) Income Documents : -
For salaried slips for the last three months appointments letter-salary
certificate-
retainership agreement, if appointed as a consultant-Form 16 issued by the employer
in
customer's name income document for self employee - last three years profit and
loss
account statement duly attested by Chartered Accountants. Last three years Balance
Sheets
duly attested by Chartered Accountant, last three years Income Tax Returns with
computation chart duly filed and certified by the Income Tax authorities.
b) Proof of employment : -
Identify card issued by the employer- Visiting card.
(c) Employer's details (In case of private limited companies) : -
Profile of employer on employers letterhead (to be signed by a senior person

in the
organization) comprising
• Name of promoter/directors
• Background of promoters/directors
• Nature of business activity of your employer
• Number of employees
• List of branches/factories
• List of suppliers
• List of clients/customers
• Turnover of employer
• Annual reports of the employer for the last two to three years.
(d) Proof of age (Anyone of the following) : -
Passport- Voter's ID card-PAN card-Ration card-Employer's identity card-

School
leaving certificate-Birth certificate.
(e) Proof of residence (Anyone of the following) : -

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Ration card-Passport- PAN card-Rent agreement, if the customer is staying

currently
on rent- Bank Pass book-Allotment letter from the company if he/she is residing in
company quarters.
(f) Proof of name change (If applicable) : -
A copy of the official gazette –A copy of a newspaper advertisement

publicizing
the name change-Marriage certificates.
(g) Proof if investment (If required) :-
Bank statement for the last six months of all operating and salary
accounts - Bank
statements for the last six months of all current accounts, if self-employed-any
other
photocopies of investments held, if required by the HFC.
(vii) Legal documentation :-
Legal Documentation the typical legal documents that need to be

submitted to
the HFC arc discussed here. Given below is a list of legal property documents that
need to
be submitted to the HFC for mortgage of the property. The name and the list of
documents
vary from state to state and also depend on the type of property being financed. A
broad
outline of the documents required is given below.
a) Acceptance copy of the offer letter issued by the HFC/B.
b) Title documents of the property that include -sale agreement duly
Registered-Own contribution receipts - Allotment letter-Registration receipt-Land

documents indicating ownership, if applicable- Possession letter-Lease agreement,
if
applicable (Property bought from a development authority) - Mortgage deed if the
HFC
opts for a registered mortgage.
c) No Objection Certificate from the developer, society or development authority as

applicable.
d) Personal Guarantees, if applicable.
e) In case of alternator additional security, documents for the same depending upon
the
security details.
f) Post dated cheques for the EMls.

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The above documents are only indicative in nature and do not cover the entire list.
It may,
also be noted that in a resale case, the previous chain of agreement also need to
be taken.
(viii) The tax benefits that are applicable to housing loans for individuals :-
Currently Tax Benefits to individuals are available only for the Home Loans and
Home
Extension Loans products. The benefits available are covered under these sections.
Property Insurance :-
Is it compulsory to insure the property? some HFls insist on a mortgage redemption

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

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CHAPTER-2

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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.

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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 are as follows :-
• To know the ideas of customers about home loan products and services.
• 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 has risen which witnesses phenomenal growth from
last 5 years. There are greater number of borrowers of home loans. so by this study
we can
find out satisfaction level of customers and problems faced by them in obtaining
home.

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CHAPTER -3

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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 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 :-

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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 100 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.

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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 was 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.

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CHAPTER-4

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CHAPTER – 4
REVIEW OF LITERATURE
SUMMARY:-
• After going through pervious 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 provide 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-

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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.
Vandell, Kerry D (2008) analysis the sharp rise and than suddenly drop down home
prices
from the period 1998- 2008. changes in prices are for the reasons as such economic
fundamentals , the problem was not sub prime lending per se, but the Fed‘s dramatic
reductions, then increases in interest rates during the early- mid-2000 , the
housing ―boom
was concentrated in those markets with significant supply-side restrictions, which
tend to
be more price-volatile; he problem was not in the excess supply of credit in
aggregate, or
the increase in sub prime per se, but rather in the increased or reduced presence
of certain
other mortgage products.
La courr, Micheal (2007) analysis in his study the factors affected the increase in
the level
of Annual percentages rates (APR) spread reporting during 2005 over 2004. the three
main
factors are changes in lender business practices; (2) changes in the risk profile
of
borrowers; and (3) changes in the yield curve environment. The result show that
after
controlling for the mix of loan types, credit risk factors, and the yield curve,
there was no
statistically significant increase in reportable volume for loans originated
directly by
lenders during 2005, though indirect, wholesale originations did significantly
increase.
Finally, given a model of the factors affecting results for 2004-2005, we predict
that 2006
results will continue to show an increase in the percentage of loans that are
higher priced
when final numbers are released in September 2007.
La cour Micheal (2006) examined the home purchase mortgage product preferences of
LMI households. Objectives of his study to analysis the factors that determined
factors
their choice of mortgage product , is different income groups have some specified
need to
met particular product. The role pricing and product substitution play in this
segment of the
market and do results vary when loans are originated through mortgage brokers? For
this
they have use the regression analysis and the results are high interest risk reduce
loan
value. Self employed borrower chooses reduce documented loans than salaried
workers.use
of this product type seems to be more prevalent among borrowers with substantial
funds
for down payment and better credit scores. In case of pricing Multi families
requires price
premium and larger loans carry lower rate. And the role of time, particularly, the
time
required for the loan to proceed from application to closing it is find that
government

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lending taking the longest time and Nonprime loans the shortest time.Multi family
properties take longer time in closing. And during peak season take longer time to
close.
And for last objective it is find that broker originated loans close faster.The
effect of
mortgage brokers on pricing and other market outcomes is fertile ground for
additional
research.
Dr. Rangarajan C. (2001) said that the financial system of India built a vast
network of
financial institutions and markets over times and the sector is dominated by
banking sector
which accounts for about two-third of the assets of organized financial sector.
Haavio, Kauppi (2000) stated that countries where a large proportion of the
population
lives in owner – occupied housing are experiencing higher unemployment rates. Than
countries where the majority of people live in private rental housing, which might
suggest
that rental housing enhances labour mobility. In this paper, they develop a simple
inter
temporal two region model that allow us to compare owner occupied housing markets
to
rental markets and to analyze how these alternative arrangements allocate people in
space
and time. announced that it will offer loans for Rs. 2-10 lakh at 12.5 percent the
lowest rate
offered by any housing finance provider, big brother SBI has taken the rate war in
the
home loans category to new heights. This is because, apart from the low rate, the
interest
on these loans is calculated on principal, which is reduced every month unlike
other
housing finance companies which calculate interest on annually reducing basis.
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
make
indications of liberlising, 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

37
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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.

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CHAPTER-5

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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.
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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

41
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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
Up to 5 9.50 2100 8.75 2064

6 to 10 9.75 1300 9.25 1280
State Bank Of India
11 to 15 - - 9.25 1029
16 to 20 - - 9.75 949
Up to 5 11 2175 9.50 2101

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

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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
6 to 10 9.00 1267 10.50
1350
PNB Housing Finance
11 to 15 9.25 1030 10.50
1106
16 to 20 9.50 933 10.50
999
16 to 20 11 1032 9.50
932
Up to 5 9.00 2076 10.50

2150
6 to 10 9.00 1267 10.50
1350
PNBHousing Finance
11 to 15 9.25 1030 10.50
1106
16 to 20 9.50 933 10.50
999
The above table illustrates the comparison between the interest rates from
various
Housing Finance Companies and banks. It can be seen that if one wishes to go for
floating
loans, the bank which gives the best deal as far as the interest rate is concerned
is HDFC
followed by PNB Housing Finance with the lower rates.
Lock-in facility by banks :-

A lock-in, also called a rate-lock or rate commitment, is a 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

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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

44
j j j jj jj j
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

45
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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.
GRAPH:- 5.2
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
.

46
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GRAPH:-5.3
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

47
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Sources: RBI
Real Estate is currently sought of as a great means of Investment, the

prices of
residents have shot up very high which is clearly shown in the figure below, the
major
cities have witnesses lot of development and price appreciation which demonstrates
the
growing demand . more and more people are migrating to cities for work / business.
More
and more jobs are created and price index rise becomes inevitable.
Price Index: FIG-5.5

48
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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
FIG:- 5.6
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 2009 with
2007-
08. This kind of comparison gives the result which helps us to understand the
trends of
market of any industry. Apart from the impact of present and past economic ups and
down
also affect the trends. Today the US slowdown is the major issue which has affected
almost

49
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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 growth 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.

50
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GRAPH :5.7
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

51
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per cent. The good news is that transactions could start picking up in the second
half of
2009 now that property prices have started trending down as have interest rates.
But although the home loan major believes it can manage a growth of 20 per
cent in
2009-10, analysts are not so sure. CLSA points out that HDFC’s loan growth (pre-
securitisation) would be around 15-17 per cent. One reason for this is that HDFC
Bank
may now hold back a higher proportion of loans that it originates; the bank
currently
sources just over a fourth of HDFC’s loans.
As a result HDFC’s operating income may increase by about 15 per cent in

2009-10
while its net profits should grow by about 10-12 per cent. HDFC has always scored
when it
comes to keeping bad loans in check, which is why a few delays or even defaults
will not
hurt the balance sheet. At Rs 1,653,the stock trades at around 2.8 times the
estimated
adjusted book value for 2009-10.
5.8 Interest and market trends in year 2009:- 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

52
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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:-

53
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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.

54
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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)

55
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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.

56
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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

57
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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 instalment reduces upon retirement of the earning
parent.
Tranche Based EMI - Customers purchasing an under construction property need to

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

• Saving of interest because of faster loan repayment
• You can invest lump sum funds rather than use it for loan prepayment.
The return
from the investments also gives you the comfort of paying the increased
EMI...
Documents Required :-
Salaried Customers Self Employed Professionals Self Employed

Businessman
Application form
Application form with photograph Application form with
photograph
with photograph
Education Qualifications Certificate Education

Qualifications Certificate
Latest Salary-slip
and Proof of business existence and Proof of business
existence
Last 3 years Income Tax returns

Form 16 Business profile
(self and business)

58
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Last 3 years Income Tax

returns (self
Last 6 months bank Last 3 years Profit /Loss and and business)
statements Balance Sheet Last 3 years Profit
/Loss and
Balance Sheet
Last 6 months bank
statements (self
Processing fee Last 6 months bank statements
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 persons salary. They contain various components like Basic pay,
HRA etc.
Deductions :- It contains an exhaustive list of various components that are

deducted from
the persons Earnings. They contain various components like Income tax, Provident
fund,
Employee Loans etc.
2) BANK STATEMENTS(6 MONTHS CURRENT) ;- The bank statement contains the

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

reveals the structure of incomes and/or the various earnings of the tax returnee
.It also

59
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shows the various deductions that will not be included and it also contains the
Rebates on
which he earns tax benefit.
5) RESIDENCE PROOF :- The residence proof includes the Electricity bill, Telephone
bill, Ration Card ,Passport.
6) PHOTO ID PROOF :- The photo proof includes the Pancard ,Voter ID card, Employee
ID card, Passport etc.
7) AGE PROOF: - The age proof includes the Pan card, Passport, Photo ID.
8) LOAN APPLICATION FORM DULY FILLED :- It can also be downloaded from

HDFCs user friendly web based portal.
9) CHARGES FOR PROCESSING FEES :- This is a standard and nominal fees to be

paid at the time of applying for loan
Fees structure. 0.5% of loan amount

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

60
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Their credit appraisal is carried out as follows:-

Their latest available Profit and Loss A/c is reviewed by the credit appraiser.
This account
has two sides a Profit side which reveals all earnings and gains .There is also a
Loss side
which shows all taxes, liabilities and losses.
We refer to the Profit side a the Gross Receipts.These includes components
revealing the
nature and amount of the Prime income and other earnings Eg Consultation fees in
case of
Doctor .
From the Gross Receipts we calculate the Gross Profits and thereon move to
calculate Loan
eligibility .Which is the loan amount that can be conveniently sanctioned to the
applicant.
Loan Eligibility = Gross Profit * 2

Another important consideration is that the Annual outflow of EMIs should not
exceed the
NET PROFIT. The Net Profit is computed by deducting the various costs and losses
from
the Gross profit.
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 callcentre 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 diectly to the Branch Manager .In the India habitat centre the
HLSIL
team is under the leadership of a team leader who reports directly to Mr. Prashant
Malik(Branch MgrIHC /Ranked 2nd in the prestigious National Corporate Challenge
2005
conducted annually by HDFC )
3) DSAs and BSAs; - These are respectively the Direct selling agents and the
Business
selling agents.the DSAs refer to organizations which work in agreement with HDFC
and
forwards them the loan requests of applicants they contact or those that contact
them on the
other hand BSAs usually forward loan requests and assist HDFC by forwarding them
the
names addresses contact nos etc of various probable needfuls of home loans BSAs
usually
are Builders who book houses for sale in the future. they may also include
Brokers.Egs for
DSAs are Nishk,Chatrath,BKM.etc

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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
DataEntry
Login
Scanning

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Recommendation
DoubleChecking
Over(ROVR)
Disbursement
Fixed Over(DCOVR)
of loan
The Loan charges
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.

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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.

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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.

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CHAPTER-6

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CHAPTER-6
COMPANY PROFILE

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

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HDFC
LTD
72.26% 60% 23.26%

HDFC HDFC HDFC
STANDARD ASSET BANK (inclusive
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

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• Loan Approvals Rs. 805 billion.

(Up to Dec 2007) (US $ 18.30 bn.)
• Loan Disbursements Rs.669 billion
(Up to Dec. 2007) (US $ 15.20 bn)
• Housing Units financed 2.5 million.
• Distribution
 Offices 181
 Outreach Programs 90
jjjjjjjj
HDFC Limited
Type Public (BSE: 500010)

Founded 1977
Headquarters Mumbai,India
Ravi Maurya
Key people
Hasmukhbhai Parekh
Industry Housing Finance
Revenue US$ 1.49 billion (2008)
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.

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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

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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 14th 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

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Growth ratios FY98 FY99 FY00 1HFY01
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

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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.
GRAPH:-6.3
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,

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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 2008, HDFC Bank board approved the merger with

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

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_ Wholesale banking Retail banking Treasury operations
• Financials (as per Indian GAAP) for the half year ended Sept 30,
2008
– Total net revenues: Rs 48.26 bn, increase of 51% over previous
year
– PAT: Rs 9.92 bn, increase of 44% over the previous year
HDFC Standard Life Insurance Company Ltd. (HDFC-SL) :-
Structure: - Strong and stable partnership:-

• Tie up with Standard Life Assurance Company, U.K.
• HDFC holds 72.26% of the equity of HDFC-SL
Products: - Diversified product portfolio covering all life stages and needs:-
• Offers 20 individual products and 5 group plans along with 5 optional riders
• Offers 8 fund options with market linked products
Premium income and growth: - Values driven growth:-

Total premium income of Rs. 48.59 bn for FY 07-08 (Previous year Rs 28.56 bn);
reflecting a growth of 70% Q1 08-09 growth in total premium of 34% over Q1 07-08
Funds under management of group new business increased by 8% in as at June 30, 2008
as
against the previous year.
Coverage: - Committed to increasing coverage in an under-insured market :-

Achieved a total sum assured of Rs. 33.12 bn in respect of 0.25 million lives
covered in Q1
09 taking the cumulative sum assured to Rs. 907.5 bn covering over 3.66 million
lives
Claims other than withdrawals/surrenders 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 09 Strong bank assurance tie-ups with public,
private, co-
operative and foreign banks amongst the leading players in the pensions
segment
Leveraging technology to strengthen processes.
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• Workflow system awarded the best technology innovation

• Web based facility to service customers and channel partners
HDFC ASSET MANAGEMENT:-
• Tie-up with Standard Life Investments (SLI)

• HDFC holds 60% of HDFC Asset Management
• HDFC MF offers 34 equity and debt oriented products
• Earned a Profit after Tax of Rs 1.18 billion for FY08; Return on Equity: 75%
• Paid a dividend of 150% for FY08 to equity shareholders
• Total assets under management (AUM) as at September 30, 2008, stood at Rs.
647
bn which is inclusive of portfolio management and advisory
Services of Rs. 170 bn.
• Equity assets as a proportion of the mutual fund’s AUM is 35%.
HDFC PROPERTY FUND:-
• Launched in March 2005

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

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CONSOLIDATED EARNINGS:-
(As at March 31, 2008)
HDFC consolidated
Return on Equity 27.8% 28.2%
Return on Average Assets 2.7% 2.7%
Earnings per share (Rs) 85 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 programmes.
Distribution
channels form an integral part of the distribution network with home loans being
distributed through HSPL, HDFC Bank Limited and other third party direct selling
associates.
To cater to non-resident Indians, HDFC has offices in London and Dubai and service
associates in Kuwait, Oman, Qatar, Sharjah, Abu Dhabi and Al Khobar, Jeddah and
Riyadh
in Saudi Arabia.

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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

j j j jj jj j
AWARDS & ACCOLADES:-
• Goldman Sachs has listed HDFC as one among top 7 financial services
organization in 2008.
• HDFC ranked among the top 3 Best Managed Companies in India by Finance Asia
in 2007
• Selected as the best Indian company in the FIs / NBFCs / Financial Services
sector
at the Dun & Bradstreet – American Express Corporate Awards 2006 and 2007.
• Best Investment Management Company in India by EUROMONEY 2007
• HDFC was awarded a rating of 4 out of 5 in Karmayog's ‘Corporate Social
Responsibility Ratings’ in 2007.
• HDFC is featured in the Limca Book of Records 2006, for the landmark
achievement of Rs. One trillion in home loan approvals
• HDFC was awarded the Gold Shield in the Finance Sector by ICAI for
excellence
in Financial Reporting in 2005. This is the 14th time HDFC has been selected
for
this award.
• HDFC has been awarded the 'Business Superbrand' status.
• HDFC has been awarded the 'Best Home Financier' title by Outlook Money –
2005
• Economic Times Corporate Citizen of the Year Award - November 2004.
FUTURE: - HDFC has always been market-oriented and dynamic with respect to
resource mobilisation as well as its lending programme. this renders it more than
capable to
meet the new challenges that have emerged. Over the years, HDFC has developed a
vast
client base of borrowers, depositors, shareholders and agents, and it hopes to
capitalize on
this loyal and satisfied client base for future growth. Internal systems have been
developed
to be robust and agile, to take into account changes in the volatile external
environment.
HDFC has developed a network of institutions through partnerships with some of the
best
institutions in the world, for providing specialized financial services. Each
institution is
being fine-tuned for a specific market, while offering the entire HDFC customer
base the
highest standards of quality in product design, facilities and service.

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CHAPTER-7

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CHAPTER- 7
DISBURSEMENT OF HOME
LOANS BY HDFC HOUSING DEVELOPMENT FINANCE
CORPORATION LIMITED
This chapter contains results and discussion on disbursement of Home

loans by
HDFC LTD. It is divided into two parts one part is related to the
disbursement of home
loans by HDFC LTD and the second part included the comparative study of
disbursement
of home loans made by commercial banks.
Disbursement of Home loans by HDFC LTD:-
GRAPH-7.1 HDFC: Housing loan spreads:-
2.35%
2.30%
2.25%
2.20%
2.15%
2.10%
2.05%
1QO4 2QO4 3QO4 4QO4 1QO5 2QO5 3QO5 4QO5 1QO6 2QO6 1QO7 2QO7 1QO8 2QO8 1Q09
• 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.
• 4Q09: 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.

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• 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: 4Q09 Summary
Rs mn 4Q09A Y/Y Q/Q
Income from Operations 30,715 42% 6%

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

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GRAPH-7.3
HDFC: Y/Y Disbursement growth:-
45%
40%
35%
30%
25%
20%
15%
1QOO 2QOO 3QOO 1QO1 2QO1 3QO1 1QO2 2QO2 1QO3 1QO4 1QO5 1QO6 1QO7
1QO8 1QO9
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.

84
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CHAPTER-8

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CHAPTER-8
COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS

BY COMMERCIAL BANKS
8.1 - Disbursement of Home loans by different banks:-
HDFC LTD :-
Years No. of Home Home loan Disbursed

loan (in crore Rs.)
account
holders. Distributed Recovered
Balance
2004-05 700 90.07 63.05

27.02
2005-06 950 120.00 91.20

28.8
2006-07 1130 144.67 127.31

17.36
2007-08 1435 180.33 165.90

14.43
2008-09 1594 240.00 228.12

11.88
Interpretation:-
On the above table, it is evident that there are increase in No. of account
holders
from 700 to 1594 in the year 2008-09. The loan amount distributed among home loan
account holder has also increased from Rs.90.07 crore in 2004-05 to Rs.240 crore in
2008-
09. The recovery procedure for home loans is also strengthening due to increment in
recovered amount, i.e. Rs.63.05 crore to Rs.288.12 crore. So it nut shall there are
upward
trend in number of accountholders and disbursement of home loans.

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Punjab National Bank :-

loan account (in crores Rs.)
holders. Distributed Recovered
Balance
2004-05 810 120.15 97.28

22.87
2005-06 950 183.26 150.00

33.26
2006-07 1120 213.65 185.86

28.05
2007-08 1433 240.87 231.07 9.80
2008-09 1500 265.15 265.05 9.10
Interpretation:-
The Punjab National Bank is Public sector Bank. It comes second after State
Bank
of India in its branch location and expansion. From the Table, the figures show
that there
are increasing trend in customer base from 810 in the year 2004-05 to 1500 in the
year
2008-09. The bank also show enhancement in loan amount up to Rs.265.15 crore in the
year 2008-09. The recovery process of loans in past is slow but now it is
increasing.

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Standard Chartered Bank :-

loan (in crores Rs.)
account Distributed Recovered
Balance
holders
2004-05 106 6.21 5.27
0.94
2005-06 130 11.55 10.16

1.38
2006-07 154 17.06 14.35

2.70
2007-08 180 20.09 18.68

1.41
2008-09 260 24.10 23.91

0.48
Interpretation:-
The standard chartered bank is a private sector bank. It has also upgraded
its
position in banking sector in DEHRADUN. The figures shown in table reveals that
there is
upward shift in customer base of Bank from 106 customers to 260 customers. The bank
has
also increased its share in housing finance by distributing Rs. 24.10 crores in
2008-09. The
recovery procedure of Home loan is very sound.

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ICICI BANK:-
Years No. of Home loan Disbursed

Home (in crores Rs.)
loan account Distributed Recovered
Balance
holders
2004-05 650 104.33 98.12
6.21
2005-06 853 123.24 105.00

18.24
2006-07 1019 150.65 133.46

17.19
2007-08 1132 176.75 144.65

32.10
2008-09 1434 224.00 209.16

14.84
Interpretation :-
The amount reveal that there is tremendous increase in Home loan

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

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No. of Home loan account holders ;-
Table 8.2(a)
Years HDFC LTD Punjab Standard

ICICI
National chartered Ban
Bank
Bank
2004-05 700 810 106

650
2005-06 950 950 130

853
2006-07 1130 1120 154

1019
2007-08 1435 1433 180

1132
2008-09 1594 1500 260

1434
Average of No. of accounts holders: - Total of home loan customers

= --------------------------------------
No. of year
Table 8.2 (b)
Name of Bank Average (Rs)

Percentage of
Accountholders

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HDFC LTD 1109 32
Punjab National Bank 1163 34
Standard Chartered 166 5

Bank
1018 29
ICICI BANK
Total 3456 100
GRAPH:- 8.2
Home loan holders of HDFC LTD and commercial banks
35
30
25
percentage of
20
home loan
holdes 15
10
5
0
HDFC LTD PNB SCB ICICI BANK
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

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customers base from 2004 to 2008.but HDFC LTD comes as market leader in the
home
loan cases.
Home loans distributed by HDFC and Commercial banks:-
Table 8.3 (a)

ICICI BANK
National chartered Bank
Bank
2004-05 120.15 90.07 6.21

104.33
2005-06 183.26 120.00 11.55

123.24
2006-07 213.65 144.67 17.06

150.65
2007-08 240.87 180.33 20.09

176.75
2008-09 265.15 240.00 24.10

224.00
(Rs.in crore)
Average of home loans granted
Total home loans granted

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

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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
Standard Chartered Bank 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

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Home loans granted by HDFC LTD and commercial

banks
40
35
30
percentage 25
of home
20
loan
granted 15
10
5
0
HDFC PNB SCB ICICI
LTD BANK
Interpretation:-
There is no doubt that every bank tries to maximize its home loan
disbursement.
But on the basis of data it is concluded that HDFC LTD shows high average of loan
grants
Rs. 20.62 crore as compared to ICICI, standard charted bank and PNB respectively.
Rs155.01, Rs. 15.80 and Rs. 155.79 crores. On this analysis the HDFC LTD are higher
loan provider as compared to other sector banks.

94
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Recovery of Home loans:-
Table 8.4 (a)
Years HDFC Punjab Standard ICICI

BANK
BANK (Rs in National chartered (Rs
in crore)
crore) Bank( Rs in Bank (Rs in
crore) crore)
2004-05 97.28 63.05 5.27
98.12
2005-06 150.00 91.20 10.16

105.00
2006-07 185.86 127.31 14.35

133.46
2007-08 231.07 165.90 18.68

144.65
2008-09 256.05 228.12 23.91

209.16
Average recovery of home loans

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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
Standard Chartered Bank 14.47
3
ICICI BANK 138.08
28
Total 471.80
100
It is more clear with the help of this diagram:- GRAPH:- 8.4

96
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Home loans recovered by HDFC LTD and commercial

banks
40
35
30
25
percentage
20
of recovery
15
10
5
0
HDFC LTD PNB SCB
ICICI BANK
Interpretation:-
In the previous years the recovery process of granting loans are very
unorganized
and inefficient. So there are less recovery of home loans by the commercial banks.
But it is
evident from the table that every bank whether public or private showed increase
HDFC
LTD has the greatest recovery of home loans i.e. 39%, thereafter Punjab national
bank
recovered the 30% of sanction amount. The standard chartered bank is having lowest
recovery of their granted amount as home loans.
Outstanding Balance :-
Table 8.5 (a)

ICICI BANK(Rs
(Rs in crore) National chartered
in crore)
Bank(Rs in Bank(Rs in
crore) crore)

97
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j
2004-05 22.87 27.02 0.94

6.21
2005-06 33.26 28.8 1.38

18.24
2006-07 28.05 17.36 2.70

17.19
2007-08 9.80 14.43 1.41

32.10
2008-09 9.10 11.88 0.48

14.84
Average of balance due
Total of Balance due in 5 years

= --------------------------------------
No. of years
Table 8.5 (b)
Name of Bank Average

Percentage of
(Rs)
balance due (Rs in crore)
HDFC LTD 20.61

34
PNB 19.89
33
Standard Chartered Bank 1.38

2
ICICI BANK 17.72

31
Total 59.15
100
Average of one bank

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%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
35
30
25
percentage
20
of balance
15
due
10
5
0
HDFC LTD PNB SCB
ICICI
BANK
Interpretation:-
From the above table and figure it shows that standard chartered bank has been less
outstanding balance among other banks. The HDFC LTD got high balances due to large
customer base, not proper recovery process and lack of modernisation of activities.
The
public sector bank PNB is having more balance due i.e. 33% as compared to standard
chartered bank and icici bank.

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CHAPTER-9

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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 127
26 - 35 years 67
36 - 49 years 46
50 - 60 years 24

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More than 60 years 6
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
6%
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 Respondents Percentage
1 Married 140 70%
2 Unmarried 60 30%
Total 200 100%
Base 200
respondents
CHART-9.2

102
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Interpretation
From the table and graph above it can be seen that
 70% respondent’s are married.
 30% respondent’s are unmarried.
Educational qualification of respondent’s
TABLE-9.3
1 Under graduate 50 25%
2 Graduate 80 40%
3 Post graduate 70 35%
Total 200 100%
Base 200
respondents
CHART-9.3

103
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Interpretation
 25% respondent’s are under graduate.
 40% respondent’s are Graduate.
 35% respondents are Post graduate.
Number Of year’s Are You in Dehradun?
TABLE-9.4
1 Less than five years 78 39%
2 More than five years 122 61%
Total 200 100%
Base 200
respondents
CHART-9.4

104
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Staying years in Dehradun
39%
less
than
five
years
more
61% than
five
years
Interpretation
 39% respondent’s are in Dehradun is less than five year’s.
 61% respondent’s are in Dehradun is more than five year’s.
CUSTOMER PROFILE OF SURVEYED RESPONDENTS
TABLE 9.5:
Customer profile No. of respondents
Student 7

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Housewife 5
Working Professional 116
Business 49
Self Employed 24
Government service employee 24
Chart-9.5
student
11% 3%
11%
housewife
2%
22%
working
professional
business
51% self-empoyed
government
service
Interpretation
From the table and graph above it can be seen that:-
51% of the respondents are working professionals, 22% are into business and 11% are
self-
employed, 11% of the respondent’s are government service employee and 3% of the
respondents are student and 2% of the respondents are house-wife.
ANNUAL HOUSE HOLD INCOME?
TABLE-9.6
1 Less than 2 lacs 98 49%
2 Between 2 to 5 lacs 62 31%
3 Between 5to 8lacs 30 15%
4 More than 8 lacs 10 5%
Total 200 100%

106
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Base 200
respondents
CHART-9.6
Interpretation
 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 164

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No 16
CHART:-9.7
Awareness about HDFC LTD
9%
YES
NO
91%
Interpretation:-
 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

j j j jj jj j
Sr.No. Number of Reasons

Percentage
a. Non-availability of funds
36
b. Reluctancy to pay cash in one go

35
c. Tax benefit
24
d. Any other
5
GRAPH:- 9.8
40
35
30
25
percentage of
customers
20
15
10
5
0
non- reluctancy tax benefit any
other
availability of
funds
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

109
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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
Standard Chartered Bank 07
ICICI BANK 20
Any other 03
To understand the response more effective and closely, it has been showed
diagrammatically as follows :-
GRAPH:- 9.9

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From where you have got your home financed
60
50
40
percentage of
30
customers
20
10
0
HDFC PNB SCB ICICI any
LTD BANK other
Interpretation:-
The analysis showed that a large number of customers prefer HDFC LTD as
compared to others. The data shows that 7% of customers took loan from Standard
Chartered Bank, 20% of customers from ICICI BANK, 15% Customers took loan from
Punjab National Bank, 55% of customers took loan from HDFC LTD and a 3% of
customers fall under the category of 'Any other' which included State Bank of
India,
Canara Bank, Punjab and Sind Bank, etc.
The data shows that most of people prefer HDFC LTD compared to public sector
banks and other private banks. This is because of the extra services provided by
HDFC
LTD. However, there is less difference in figures of ICICI Bank and Punjab National
Bank.
But there is considerable difference in figures of the two private sector banks
i.e. ICICI
bank and Standard Chartered Bank. As ICICI is the market leader in the home loans
sector.
This may be the reason for such difference in Standard Chartered Bank's percentage
and
ICICI Bank's percentage. Another reason for specialized services in home loans,
more
amounts of loans, and efficient query handling.
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

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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

112
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4%
20%
newspaper
49%
magazines
11%
16%
banners
word
of
mouth
any
other
source
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

113
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Opinion about the services of HDFC LTD
Services of HDFC LTD Percentage of customers agreeing
Strongly Agree Neutral

Disagree Strongly
agree
disagree
a. Professionally 86% 10% 4%

- -
managed
b. Reliable & 67% 33% -

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

4% -
d. Customer care 20% 68% 8%

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

- -
GRAPH-9.11

114
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Opinion of customers about HDFC LTD
90
80
70
60
50
strongly agree
percentage of
customers
agree
40
neutral
30
disagree
20
strongly disagree
10
0
a b c d e
factor
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

115
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Opinion of customers about home loan schemes
HDFC LTD :-
Services of HDFC Percentage of customers agreeing

LTD
Strongly Agree Neutral Disagree
Strongly
agree
disagree
a. Amount of loan 60% 35% 5% -
-
b. Legal formalities 42% 45% 14% -

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

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

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

-
f. Installments 55% 40% 5% -

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

1%
h. Processing for 55% 24% 18% 3%

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

116
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70
60
50
percentage of
40
strongly agree
customers
agree
30
neutral
20
disgree
strongly disagree
10
0
a b c d e f g h
factors
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

117
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DATA GIVES PREFERENCE OF RESPONDENTS OF

HOME LOANS
COMPANIES AND BANKS
NO.OF
COMPANY’S NAME (%)
RESPONDENTS
HDFC LTD 78 78
STANDARD CHARTERED
2 2
BANK
ICICI BANK 10 10
PNB 7 7
SBI 3 3
TOTAL 100 100
GRAPH:-9.13
NO. OF RESPONDENTS
80
70
60
50
percentage of 40
customers
30
20
10
0
HDFC LTD SCB ICICI BANK PNB
SBI
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

118
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There are everything in the world has good or bad points. No doubt banking
industry/ company has made many efforts to enhance the customer satisfaction but
customer still faced some problems. These are high lightened as below:
1) The customer does not have proper knowledge about different home loan
products so they face problem in making a good deal.
2) There are procedural delays, which harass the customers lot. This will
crush the
curtsy of customers to avail the home loan.
3) The attitude of bank employees some times non cooperative and it creates
a
hurdle in building trust and Confidence among customers about banks.
4) The banks do not take into account the paying capacity of customers. So
some
customers are not able to get amount of loan needed by them.
So above discussed are the problems which faced by customers while availing home
loans.
CHAPTER-10

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CHAPTER-10
FINDINGS
1. HDFC LTD having good brand image in the minds of customers.

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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 Standard
chartered bank, HSBC bank etc.
6. Most of the people are directly go to HDFC to apply a home loan
7. Some of the customer of HDFC already benefited through HDFC home loan
products and services
8. Customer awareness is medium about HDFC products.
9. HDFC LTD providing good services to their customers.
CHAPTER-11

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CHAPTER-11
RECOMMENDATIONS AND SUGGESTIONS
These suggestions have been discussed as follows:-

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

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

about the
products and services among the customers.
7) Charges: The Company has to reduce the mortality and administration

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

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

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CHAPTER-12

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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.

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

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

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 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
 Kulkarni (1979), “Development responsibility and profitability of banks”
Journal of
Economic Perspectives, Vol 9 No 1 ,pp. 26-32.
 La courr, Micheal(2007) , “Economic Factors Affecting Home Mortgage Disclosure
Act Reporting” The American Real Estate and Urban Economics Association, Vol.2
No. 2 May 18, 2007, Pp. 45 -58
 La cour Micheal(2006) , “The Home Purchase Mortgage Preferences Of Lowand-
Moderate Income Households”, Forthcoming in Real Estate Economics , Vol 18,
No 4 , December 20, 2006, p. 585.
 Vandell ,kerry D(2008), “Subprime lending and housing bubble:tail wag
dog?”International Journal of Bank Marketing, vol 21,no 2, pp. 53-7
 Brochure on home loans from HDFC LTD
NEWS PAPERS
 The Times of India
 Financial Express
WEB PAGES:-
http://www.hdfcindia.com/
http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_08.html
www.hdfc.com
http://www.iloveindia.com/real-estate/housing-finance- companies/hdfc.html
http://www.loansnews.info/Home-loan/hdfc-home-loans/
http://www.hdfcindia.com/loans/hm-loan-documents.asp
http://www.thinkplaninvest.com/2009/01/hdfc-will-cut-home-loan-rates/
http://www.suncorp.com.au/suncorp/personal/home_loans/tips/faq.aspx

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http://investing.businessweek.com/research/stocks/people/people.asp?ric=HDFC.BO
http://www.economywatch.com/companies/forbes-list/india/housing-development-
finance-corporation.html
http://www.hdfcindia.com/loans/home-loan.asp
http://docs.google.com/gview?a=v&q=cache:woJTMDV1HLYJ:www.hdfc.com/pdf/32
AGM%2520speech.pdf+hdfc+housing+finance+development+product&hl=en&gl=in
http://www.munichre.com/en/press/press_releases/2007/2007_10_30_profile_hdfc.aspx
http://www.hdfc.com.mv/faq.htm
http://ayaanbayaan.com/hdfc-ltd-financial-results-indian-gaap-for-the-period-april-
to-
june-2009/
http://www.valuenotes.com/press/pr_HDFC_250ct05.asp?ArtCd=70013&Cat=C&Id=1
00

129
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QUESTIONNAIRE
Dear Sir/ madam
I am Rajni doing MBA from G.G.S.I.P University. I m preparing a project on A STUDY

ON HOME LOANS. For this I have designed a Questionniare to know your views and

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

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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?
Standard Chartered Bank [ ] 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)...........................................

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17. What problems did you face while getting home loans?
a. Lack of knowledge
b. Procedural delays and non cooperation
c. Any other (please specify) ........................................
18. Did you face any problem after sanction of loan?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
19. What suggestions do you want to give for improvements in home loans Scheme?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
THANKS

133

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

Rukmini Devi Institute of Advanced Studies 1

Rukmini Devi Institute of Advanced Studies 2

This is to certify that the project titled “A STUDY ON HOME LOANS” is

Mr. Amit Kumar Gupta (Project Guide)

Rukmini Devi Institute of Advanced Studies 3

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

I would like to express my deep gratitude to Mr.Amit Khanna my training coordinator

Rukmini Devi Institute of Advanced Studies

Home is a dream of a person that shows the quantity of efforts, sacrifices

In case of second objective i.e. customer satisfaction level it is found that

And problems face by customers in obtaining home loans are

Rukmini Devi Institute of Advanced Studies

Some of the suggestions are

• The public sector banks should improve their overall services to

Rukmini Devi Institute of Advanced Studies

Student Declaration …………………………………………………….. i

CHAPTER 2: OBJECTIVES OF THE STUDY………………………... 13

CHAPTER 3: RESEARCH METHODOLOGY……………………….. 16

CHAPTER 4: REVIEW OF LITERATURE…………………………… 20

CHAPTER 5: INDUSTRY PROFILE………………………………….. 22

Rukmini Devi Institute of Advanced Studies 7

5.7 Impact of slowdown on home loan market in India…………31

CHAPTER 6: COMPANY PROFILE……………………………………48

CHAPTER 7: DISBURSEMENT OF HOME LOANS BY HDFC …….62

CHAPTER 8: COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS

CHAPTER 9: ANALYSIS & INTERPRETATION …………………… 80

CHAPTER 11: RECOMMENDATIONS AND SUGGESTIONS…….. 98

CHAPTER 12: CONCLUSION………………………………………….100

BIBLIOGRAPHY ……………………………………………………….. 101

Rukmini Devi Institute of Advanced Studies 8

5.2 Financial Snapshot

5.4 CONSOLIDATED EARNINGS (As at March 31, 2008)

7.2 HDFC: 4Q09 Summary

8.1 Disbursement of home loans by different banks

8.2 No. of Home loan account holders

8.3 Home loans distributed by HDFC and commercial banks

8.4 Recovery of Home loans:-

8.5 Outstanding balance

9.1 Age group of surveyed respondents

9.2 Gender classification of surveyed respondents

9.3 Education qualification of respondent’s

9.4 No .of years are you in Dehradun

9.5 Customer profile of surveyed respondents

9.6 Annual household income

9.7 Do you know about HDFC LTD

9.8 Reasons for getting Home financed

9.9 From where you have got your Home financed

Rukmini Devi Institute of Advanced Studies 9

9.10 Source of information home loans scheme

9.11 Opinion about the services of HDFC LTD

9.12 Opinion of customers about Home loan scheme

9.13 Data gives preferences of respondents of Home loans

Rukmini Devi Institute of Advanced Studies 10

GRAPH NO TITLE PAGE NO

5.3 Indian Market for Housing mortgage finance 30

5.6 Housing shortage in India 32

6.3 HDFC Up, up and away 55

7.1 HDFC housing loan spreads 62

Rukmini Devi Institute of Advanced Studies 11

9.11 Opinion about the services of HDFC LTD 91

Rukmini Devi Institute of Advanced Studies 12