Contents

INTRODUCTION ................................ ................................ ................................ ................................ . 2 Overview of Housing Finance Across Emerging Markets:................................ ................................ .... 2 Overview of Housing Finance in India: ................................ ................................ ............................... 4 NHB Residex ................................ ................................ ................................ ................................ ...... 9 Issues in Housing Finance Industry................................ ................................ ................................ ... 10 Problems faced by consumer in Housing Finance:................................ ................................ ............ 12 HDFC COMPANY PROFILE ................................ ................................ ................................ ................ 14 BALANCE SHEET ANALYSIS ................................ ................................ ................................ ............... 15 RATIO ANALYSIS ................................ ................................ ................................ .............................. 17 Sources of Funds................................ ................................ ................................ .............................. 20
Revenue model of HDFC:................................ ................................ ................................ ................ 22

Products of HDFC Ltd ................................ ................................ ................................ ....................... 23 Processing of Loan Application at HDFC: ................................ ................................ .......................... 30 Documents required for all loans: ................................ ................................ ................................ .... 34 COMPETITIVE ANALYSIS ................................ ................................ ................................ ................... 35
PNB Home Loan ................................ ................................ ................................ ............................. 35 SBI Home Loan ................................ ................................ ................................ ............................... 37

DETAILED ANALYSIS BETWEEN HDFC & SBI ................................ ................................ ...................... 38 FUTURE OF HDFC LTD. ................................ ................................ ................................ ..................... 41 Bibliography ................................ ................................ ................................ ................................ .... 44

INTRODUCTION
As per para 2(L) of the Housing Finance Companies (NHB) Directions 2000 an HFC is defined as: Housing Finance company means a company incorporated under the Companies Act, 1956 which primarily transacts or has as one of its principal objects, the transacting of the business of providing finance for housing, whether directly or indirectly. A housing Finance company is regulated by National Housing Bank (NHB), which is a wholly owned subsidiary of the Reserve Bank of India. Characteristics of Housing Finance: Housing finance is long term finance with repayments spread of over 15-20 years. Most people prefer loans at fixed interest rate. In todays scenario, market is becoming very competitive after the entry of banks in retail lending. As a result the spreads for the players providing housing finance are declining due to competition becoming intense. For most of the housing finance companies and banks, sources of funds include Public deposits (which are subject to the regulatory stipulations of NHB), Institutional borrowings (from banks etc.), refinance from NHB and their own capital.

Role of Housing Finance Company: As per National Housing and Habitat Policy 1998, HFCs are expected to:
y y y

Redefine their role and move away from their traditional approach to housing finance Develop and expand their reach to meet the needs of people Devise schemes to lend at affordable rates to those who are in direct need of housing finance support

y y

Mobilise resources from PFs, insurance funds, MFs etc for house building activities. Develop innovative instruments to mobilise domestic savings

Overview of Housing Finance Across Emerging Markets:

Housing finance is prospering in emerging markets despite the economic slowdown and the mortgage crisis in many of the developed economies. According to the report, lessons from the crisis will impact the way finance for housing is provided in every country, but its

development remains critical and access to housing finance continues to be a challenge for all emerging economies. According to Loic Chiquier, Manager of the World Bank's Non-Bank Financial Institutions Group, the existing housing stock and urban infrastructure is already coming under severe pressure resulting in the spread of slums and damage to economic growth. Also Substantial investment will be required in the coming years just to keep up with growing demand. India, for example, expects to have 590 million people living in cities by 2030, twice the current population of the United States. Therefore World Bank Group has multiple projects in India and around the world working to address these needs. In India, the concept of minimortgages has been introduced where products are offered to low and lower-middle income borrowers who are creditworthy but do not have access to housing finance due e.g. to undocumented or irregular income. The objective is to expand financial access in a prudent manner, without exposing the financial institutions to unnecessary risk. Current state of housing in Asia. Creating a strong and healthy housing market is essential for a countrys socioeconomic development and for generating the resources necessary for reducing poverty. However, emerging Asia's housing markets are quite underdeveloped. The mortgage debt-to-gross domestic product (GDP) ratio, a measure of the depth of a country's housing market, is well below 15% in a number of countries. This statistic is particularly striking when compared with other emerging market regions. For example, the average mortgage debt-to-GDP ratio in South Asia is 2.9%, and in East Asia and the Pacific it is only 1.5%. This compares with a mortgage debt-to-GDP ratio of 7% in Latin America and the Caribbean, and 11% in subSaharan Africa. Demographic changes are placing strains on many urban areas in Asia and the Pacific in the form of congestion, pollution, and poverty. As a result, there are serious shortages of

adequate housing throughout the region. Moreover, there is a crowding-out phenomenon, whereby people of higher-income brackets are living in housing. In India, for example, it was estimated in 2007 that there was a shortage of 24.71 million housing units in urban areas and 47.43 million units in rural areas. In Indonesia, the government estimates that there is a current backlog of 8.1 million houses with a need for approximately 800,000 additional units on an annual basis. Therefore urban centers are expected to increasingly become strained as

the pace of urbanization accelerates. Thus by 2013, the urbanization rate in Asia is expected to increase to 45%, with 1.45 billion people living in urban areas. Housing systems are complex with a number of interrelated components that impact the degree to which these markets function. In Asia, factors that have hindered the development of housing markets at various times include unstable macroeconomic environments, low stocks of housing, weak legal and regulatory frameworks, lack of long-term sources of funding for mortgages, and limited knowledge of the housing sector and mortgage lending. While the economies of many Asian countries are growing and there have been efforts by governments to strengthen the legal and regulatory frameworks pertaining to housing finance and real estate markets, there are a number of issues that remain to be addressed if Asia is to meet its current and future housing requirements. The lack of longer-term funding sources coupled with a limited understanding of housing finance causes financial institutions to restrict mortgage lending in terms of volumes and market segments. This results in a lack of understanding of a particular market's needs, as well as untapped opportunities. Because of lenders' conservative practices, and due to the difficulties in obtaining standard credit information, financial institutions often do not have the capacity and tools to assess creditworthiness of individuals, particularly those who are self-employed, which serves to reinforce higher-income lending practices that are currently notable in many markets throughout Asia.

Overview of Housing Finance in India:

The implementation of housing finance policies pre-supposes efficient institutional arrangements. Although there were a large number of agencies providing direct finance to individuals for house construction, there was no well established finance system till mid-80s, in as much as it had not been integrated with the main financial system of the country. The NHB was established in July 1988 under the National Housing Bank Act 1987 as an apex bank, on the lines of IDBI and as a wholly owned subsidiary of RBI. It is the principal agency to promote housing finance institutions at the regional and local levels and to provide financial and other support to such institutions connected with the housing and human settlements. The system has also been characterized by the emergence of several specialized financial institutions, which are considerably strengthened the organization of housing finance system in the country. At present there are 320 housing finance companies of which

32 are regi tered under NHB which accounts for 98% of the countrys total housing dis ursement The second pillar of the initial stage was the cooperative movement catering largely to the private sector. Households were encouraged to form cooperative societies invest initial capital for land purchase and then were financed by the level apex cooperative housing finance companies which in turn were financed by the LIC which set aside a particular quantum of their investible resources for this purpose. The third pillar was the housing building advance made to employees of the public sector cooperation and financial institutions as well as to civil servants. Capital formation in housing for the rest of the private sector is left almost entire to the market forces. It is estimated that about Rs. 7000 crores has been the total formal sectors finance for housing which are netting out internal sectoral flows workout out to roughly half the gross figure i.e. Rs 3500 crores. Housing finance as a financial intermediate process commenced only in 1978, which begin with the establishment of Housing Development Finance Corporation (HDFC as a

speciali ed leader to households and corporate entities specifically for housingpurpose? State housing boards like MHADA were introduced further for promotion of housing industry. The robust growth in the demand for housing finance in the recent years has been remarkable. Lower interest rates, tax incentives home ownership, massive competition by p roviders of housing finance has helped consumers considerably. The primary market for housing finance has now matured. We need to move on to the next stage very quickly.
1970 HUDCO set up to finance Housing & Infrastructure activities 1988 NHB set up to regulate & promote HF & provide refinance

1977 HDFC incorporated as 1st Private sector mortgage player

1989 LIC & GIC set up HF arms

Further HFC have undergone a transitional change with three phases which as below:

Factors Effecting Indian Housing Finance Industry: Government During recession the government and the Reserve Bank of India announced set of measures to stimulate the economy, after having announced a few measures in December 2008. The package focused on: 1. Reviving demand for the housing sector by facilitating Rs.4,000 crore renancing facility for National Housing Bank (NHB), granting priority sector lending status to loans upto a maximum limit of Rs.20 lakh per dwelling per family by housing nance companies with the approval of NHB, concessional treatment to commercial real estate loans which have been restructured upto 30 June 2009 and lowering the interest rates on home loans upto Rs.20 lakh. 2. The package will not provide a major boost to the residential market immediately as property prices play an important role while making a buying decision. Property prices continue to remain high with an average home in metro cities costing well above Rs.20 lakh, the upper limit of the amount on which interest rate concession is granted. 3. The government eased the external commercial borrowing (ECB) norms by allowing non-banking finance companies and housing finance companies to raise money overseas through FCCBs subject to RBI approval.

Social The mortgage penetration continues to remain abysmally low in India the mortgage to GDP ratio is at around 6% (in FY08) against over 51% in the USA. Even if one were to benchmark against more comparable counterparts, the ratio ranges from 15% to 20% for most South East Asian nations. High down payment requirement and non-availability of the title deeds in the absence of land records are some of the reasons responsible for the inability of the companies in reaching out to the vast population living in rural areas. Demographic Housing finance assistance of formal institutions has been limited to the middle-income and high- income groups. Companies have also not been able to penetrate the rural areas.

End users The housing finance sector in India has undergone unprecedented change over the past two decades. The consumption pattern amongst the Indian population is expected to change 2013. The strivers are less but aspirers and rich are significant higher compared to 2003.

Role of NHB in Indian Housing Finance: The National Housing Bank (NHB) was established on 9th July 1988 under an Act of the Parliament viz. the National Housing Bank Act, 1987 to function as a principal agency to promote Housing Finance Institutions and to provide financial and other support to such institutions NHB, as the Apex level financial institution for the housing sector in the country, performs the following roles:

1. Promotion and Development: NHB operates as a multifunctional Development Finance Institution (DFI) for the housing sector. The Bank's policies are directed towards promotion and development of housing finance institutions. NHB has framed guidelines for HFCs with a view to promoting their development on sound and healthy lines. The guidelines are reviewed and modified from time to time in the light of developments in the financial and housing sectors. 2. Regulation and Supervision: NHB exercises regulatory and supervisory authority over the HFCs in the matter of acceptance of deposits by them pursuant to the powers vested in it under the Act. As per the amendments to certain provisions of the Act, which came into effect from June 12, 2000, NHB is vested with powers to grant Certificate of Registration to companies for commencing/carrying on the business of a housing finance institution. Besides, NHB regulates the deposit acceptance activities in accordance with the Housing Finance Companies (NHB) Directions, 2001, amended from time to time, in the matter of ceiling on borrowings (including public deposits, rate of interest, period, liquid assets, etc). NHB has also issued Directions on prudential norms in regard to capital adequacy, asset classification, concentration of credit, income recognition, provisioning for bad and doubtful debts etc. NHB supervises the working of HFCs through on-site inspection and off-site surveillance. 3. Financing: NHB raises resources for the housing sector towards increasing new housing stock and provides refinance to a large set of retail lending institutions. These include scheduled commercial banks, scheduled state cooperative banks, scheduled urban cooperative banks, specialised housing finance institutions, apex co-operative housing finance societies and agriculture and rural development banks. Refinance is provided by NHB under various schemes, which are formulated taking into account, several aspects of the National Housing Policy, the constraints facing the sector etc. NHB has also a window for direct lending to Public Agencies such as, State Level Housing Boards and Area Development Authorities for large scale integrated housing projects and slum redevelopment projects. NHB is also operating a special window for extending financial assistance to the people affected by natural calamities viz. earthquake, cyclone etc. The need for long term finance for housing in the country is met by the following institutions: 1. Scheduled Commercial Banks

2. Scheduled Cooperative Banks 3. Regional Rural Banks 4. Agriculture and Rural Development Banks 5. State Level Apex Co-operative Housing Finance Societies 6. Housing Finance Corporations

NHB Residex:
In the recent years the real estate and the housing sectors have been one of the prime areas for generating both financial and physical assets that would in turn contribute to gross National Wealth accumulation. Hence keeping this in mind there was a need in order to create and monitor a mechanism or process that would regulate and keep a watch on price shifts that the housing segment experiences. The National Housing Bank as directed by the Finance Ministry researched in order to determine the feasibility of organizing such an index is possible nationally. Thus, based on the results of the pilot study that was conducted the NHB Residex was launched for regulating and tracking the price structure of the residential holding or properties in India.

NHB Residex Structure: Presently NHB Residex is being operated and governed only for the residential housing segment. Going forward, at a more matured stage perhaps the same would be expanded for a wider expanse. The scope and opportunities of the same then can be further expanded for separate domains like commercial land holdings as well as properties. The same can be put together to determine the real price cost index. Features of the NHB Residex The important and the salient features of the NHB Residex can be explained as below:1. The year 2001 was considered as the foundation year of the study. This was compared with the CPI and WPI. The price changes on a year to-year basis has been analyzed and projected in the study, and was updated till 2007. 2. The pilot study thus included 5 cities, which are Kolkata, Bhopal, Mumbai, Bangalore and Delhi that was representing the different regions across the country. 3. The initial inputs on the housing costs were accumulated from the real estate agents. These data was in turn taken from the private consultancies by offering them incentives as well as commissions.

4. The NHB Residex has been spread out, that covers ten more cities now. They are namely Surat, Ahmedabad, Chennai, Pune, Faridabad, Kochi, Lucknow, Hyderabad, Patna and Jaipur. 5. The NHB Residex has been developed based on the average weighted methodology in the Price Relative Method. 6. Going forward, the index has the year 2007s information at the base. The NHB Residex has been upgraded to 2009. 7. In its first phase the NHB Residex was spread over 35 cities with over a million population. 8. The index is planned to be updated half yearly at the present. 9. The recent proposal with the NHB Residex is to extend the same to 63 cities. 10. The cost structures have been well researched for differ property tax zones, administrative zones comprising each city. NHB Residex The future Presently the NHB Residex has completed its mandate of covering 15 cities in the initial phase. It aims at covering 35 cities in the near future. The agenda here is to develop an index for residential plot in the Indian cities to project the changes in the house prices at various levels and circumstances. Attempts are being taken to make it more useful keeping in mind the Indian scenario of the housing market. Consistent attempts too are being taken to update it from time to time. At the same time a team has been assigned in or der research on the probable areas that can be identified for the index to expand do. Keeping this mind the team is undertaking an in-depth research on the commercial land holdings and properties in India. Attempts and initiatives are made in the direction in making the NHB Residex more useful to people with substantial details as well as relevant inputs

Issues in Housing Finance Industry

Housing Finance industry is facing tough competition from banks and witnessing declining spread (for HFCs). Hence, the players should have sustainable advantages to remain profitable in the long-term.

1. Cost of Funds Cost of funds is the most crucial determinant of profitability for HFCs in the housing finance business. After the entry of banks in this business, which have access to low cost deposits through their banking channels, the spread of the HFCs has come under pressure. 2. Intermediation cost Intermediation cost or cost of operation is also critical in determining the profitability, more importantly from the point of view of HFCs. The average intermediation cost of HFCs ranges from 0.7 per cent to 1 per cent of average total assets (one time cost). Banks are also expected to have the average operating cost for housing finance operation in similar range. 3. Management of NPAs: The average gross NPA of the industry is estimated at around 2-2.5 per cent of outstanding portfolio. However, within the industry, the NPA levels vary from less than 1 per cent to 7 per cent. With declining spreads, one of the crucial factors determining the profitability of HFCs will be the management of NPAs and their recovery. Hence, credit appraisal mechanism and recoveries will assume significant importance. 4. Product Features Housing Finance industry is being increasingly commoditised. Features like adjustable rate plans, lower processing fees, monthly rest, low interest rates, low EMI, lower margin money, have become common across the industry. As a result, loan products can be differentiated by offering free add-ons. However, in future, add-ons may not remain the differentiating factor for the products. To make the loan products more attractive, finance companies have also begin to include the cost of registration, stamp duty, society charges and other associated costs while sanctioning loans. 5. Distribution reach Distribution reach is critical for HFCs for deposit mobilization as well as loan disbursements. Banks enjoy a distinct advantage over the Housing Finance Companies in terms of having a branch presence across the country. 6. Market Dynamics Market dynamics play a pivotal role in determining the lending rates. The entry of banks into the housing finance sector has posed a serious threat to already existent players in the field. Key issues affecting the Profitability of HFCs in the long term, t he profitability of the housing finance industry will depend on the certain issues such as: 7. Declining Spreads

The spreads in the business have declined significantly after the aggressive entry of banks in direct lending. Banks have the advantage of lower cost of funds due to access to retail deposits. As a result, they have been aggressively cutting the interest rates on housing loans. Apart from lower interest rates banks offer lower or no processing fees (processing fees accounts for a large portion of administration cost of HFCs), monthly or daily rest loans and lower pre-payment charges, which affects the yields of the housing finance industry. In the medium term, the pressure on housing finance spread is expected to increase as banks are expected to compete on interest rates with the HFCs for increasing their market share. 8. Pre-payment Pre-payment is undertaken largely on the higher yield loans when the interest rates are on a downward trend, due to refinancing of the outstanding loan amount by another HFC/Bank. This erodes the portfolio of the HFCs. Pre-payment results into a lower than expected profitability for a Housing Finance Company. Pre-payment penalty is largely applicable on the fixed rate loans while, adjustable rate loans have zero pre-payment charge.

Problems faced by consumer in Housing Finance:

1. Rejection at the first stage Strange but true, many of the home loan applications do not pass even the first test. They are out rightly rejected due to incompatibility between the borrower's qualifications and lenders requirements. It could be the age criteria, income criteria, proper documents not being submitted, the bank not being able to verify your details properly, not passing the field investigations conducted by the bank and many more. The best way to avoid being rejected in this way is to check the eligibility requirements of lending banks carefully and apply only to that bank which matches your profile. Keeping proper documents ready and providing accurate, verifiable details to the banks will ensure that you sail through the preliminary verification process. 2. Processing fee not refunded

With every application form for home loans, banks require about 0.25% to 1% of the loan amount to be submitted as the processing fees. This processing fees is generally NOT REFUNDABLE. In simple words this means that for whatever reasons, if the bank finds that you don't deserve the home loan, this fees won't be returned. This is the cost of applying for home loans. 3. Desired loan not sanctioned

The loan amount sanctioned is based mostly on repayment capacity of the borrower. Many things come into picture, when the bank decides how much home loan a person can get. The monthly income, financial history, other unpaid loans with the borrower, past repayment record, credit card usage history if any, bounced checks, average balance with the banks, continuity in present employment, total years in employment, nature of employment etc. These factors all clubbed together help the bank to decide whether it will be able to recover its money satisfactorily or not. 4. The interest rate dilemma Whether to go for a fixed rate or floating rate interest for home loans is a dilemma which almost every home loan borrower faces. Even after deciding on a particular loan regime, the home loan terms and condition fine prints can create havoc with your interest rates. For example even if a borrower has opted for fixed rate home loan and the bank has promised him a rate which he feels is good, the catch is in the fine prints which authorizes the bank to vary this fixed rate every 2 years, things can go worse for the fixed rate borrower. Similarly if the bank doesn't pass you the benefit of lowered interest rates in floating interest rate regime, it will be of a little value. 5. Difference in property valuation The bank has its own experts for legal, technical and financial appraisal of the property in question. It evaluates the property on its own established parameters and assigns a value to it. This value can be significantly lower than the price you quoted for the property. Thus the bank will only lend you up to the amount it valued. This can cause a significant gap between what you need and what the bank is willing to lend. 6. The down payment Banks require the borrower to fund at least 10% to 20% (varying from bank to bank) of the entire loan amount as the down payment for the home loan. This amount has to be deposited before the disbursal of the home loan. In the absence of such down payment the bank will refuse home loan to the borrower. For a home loan of 10 lacs this could mean anything between 1 to 2 lacs. This amount must be readily available with the borrower. In a scenario where the valuation of the property by bank is considerably lower than the market price of the property, the balance will also have to be paid by the borrower. This effectively increases the down payment. 7. Title deeds and NOC Documentation Problems

The title deeds and NOC documents have to be furnished in the bank's format. Borrowers who don't provide such documents in proper format, will ruin the entire exercise and won't get any home loan.

HDFC COMPANY PROFILE

Housing Development Finance Corporation limited (HDFC) came into existence on 17th October, 1977 by Hansmukhbhai Parekh with an initial share capital of Rs. 100 million. Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his financial career at Harkisandass Lukhmidass - a leading stock broking firm. The firm closed down in the late seventies, but, long before that, he went on to become a towering figure and a ray of hope for the Indian financial scene. He was a true development banker. His building up HDFC without any government assistance is itself a brilliant chapter in financial history. His wisdom and warmth drew people from all walks of life to him, for advice, guidance and inspiration. HDFC has provided home loans to more than three million customers. Since their setup, their objective has been to enhance residential housing stock and promote home ownership. In recent times, the scope of service has increased from hassle free home loans and deposit products to property related services and training facility. HDFC has always been market-oriented and dynamic with respect to resource mobilization as well as its lending programmed. This renders it more than capable to meet the new challenges that have emerged. Over the years, 1-IDEC 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. Business Objectives
y

The fore most 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.

To increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.

To anticipate the customers needs and desires to work out ways by which affordable homes can be a reality, not a dream.

Organization Goal:  To develop close relationships with individual households  Maintain its position as the premier housing finance institution in the country  Transform ideas into viable and creative solutions  Provide consistently high returns to shareholders

BALANCE SHEET ANALYSIS:

BALANCE SHEET ANALYSIS:

Balance Sheet ------------------ in Rs. Cr. -----------------Mar '06 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Mar '07 % Mar '08 % Mar '09 % Mar '10

249.56 249.56

253 253

1.38 1.38

284.03 284.03

12.26 12.26

284.45 284.45

0.15 0.15

287.11 287.11

0.94 0.94

0 0 4,218.77 0 4,468.33 31,344.00 15,377.35 46,721.35 51,189.68 Mar '06

0 0 5,298.39 0 5,551.39 39,668.70 17,524.33 57,193.03 62,744.42 Mar '07 24.2 26.6 14 22.4 22.6 25.6

0 0 11,663.31 0 11,947.34 51,736.68 17,414.54 69,151.22 81,098.56 Mar '08 115.2 30.42 -0.63 20.91 29.25 120.1

0 0 12,852.94 0 13,137.39 55,180.08 28,676.00 83,856.08 96,993.47 Mar '09 9.96 6.66 64.7 21.3 19.6 10.2

0 0 14,910.55 0 15,197.66 63,605.65 32,959.66 96,565.31 1,11,762.97 Mar '10

16

15.7 15.3 14.9 15.2 15.2

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets 515.37 268.06 247.31 31.6 3,876.34 0 2.19 195.1 197.29 493.1 -4.32 280.03 4.47 488.57 280.07 208.5 40.4 6,915.01 0 129 42.5 43.5 2.01 360.98 362.99 -60 29.83 28.24 -0.92 0.014 -2.14 152.2 88.61 493.85 290.45 1.08 3.71 524.46 302.34 222.12 0 10,727.45 0 0.73 489.57 490.3

6.2 4.09 9.2

213.07 -13.8 16.02 -49.3 3,666.23 -5.42 0 5.02 278.03 283.05

203.4 -2.45 0 10,468.75 0 27.77 1282 963.1 990.87 167 173 -100 51.4

2.47

-97 -49 -51

Mar '06 Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneou s Expenses Total Assets Contingent Liabilities Book Value (Rs)

Mar '07

Mar '08

Mar '09

48,100.37 60,352.36 1,006.52 1,095.32

25.47 76,530.52 8.822 416.76

26.8 89,290.35 16.7 1,00,466.99 -62 755.44 81.3 4,734.57

12. 2 526.

49,304.18 61,730.73 0 1,162.61 1,107.14 2,269.75 0 1,539.70 1,341.93 2,881.63

25.2 77,310.27 0 32.43 21.21 26.96 1,960.58 1,415.03 3,375.61

25.2 91,036.66 17.8 1,05,691.86 0 27.3 5.45 17.1 2,935.27 49.7 1,780.08 25.8 4,715.35 39.7 0 2,656.16 2,222.30 4,878.46

16.1

- .51 24.84 3.459 16. 9

47,034.43 58,849.10 0 0

25.12 73,934.66 0 22.57 81,098.57

25.6 86,321.31 16.8 1,00,813.40 0 0

51,189.68 62,744.42

29.3 96,993.46 19.6 1,11,762.97

15.23

559.04 179.05

305.37 -45.38 219.42 22.55

450.29 420.62

47.5 91.7

750.74 66.7 461.85 9.8

633.08 529.33

-15.

14.61

RATIO ANALYSIS

Mar '10

RATIO ANALYSIS
Key Financial Ratios ------------------ in Rs. Cr. ------------------

Mar '06 nvestment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs ) Net Operating Profit Per Share (Rs ) Free Res erves Per Share (Rs ) Bonus in Equity Capital 10 20

Mar '07

Mar '08

Mar '09

Mar '10

10 22

10 25

10 30

10 36

162.96

222.91

277.69

375.1

382.52

170.87

232.23

287.86

386.52

394.91

98.9

119.16

310.06

329.46

355.11

48.87

48.2

42.93

42.87

42.47

Profitability Ratios Operating Profit Margin(%) 95.37 Profit Before n teres t And Tax Margin(%)

95.98

96.46

97.04

96.86

ros s Profit Margin(%)

Cas h Profit Margin(%) Adjus ted Cas h Margin(%) Net Profit Margin(%) Adjus ted Net Profit Margin(%)

94.61

95.35

96.03

96.68

96.51

37.01

33.7

96.26

96.88

96.7

29.82

26.92

21.77

18.92

25.1

29.99 29.38

26.95 26.63

21.77 29.72

18.92 20.71

25.1 24.87

29.55

26.65

29.72

20.71

24.87

Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Debtors Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio

10.11

9.84

5.62

5.83

5.81

1.63 10.46 1.63 1.51

1.54 10.3 1.54 1.43

1.52 5.79 1.53 1.47

1.39 6.38 1.39 1.3

1.56 6.35 1.56 1.4

2,615.59 13.69 0.08 8.32

1,631.10 23.38 0.09 11.98

2,326.66 -0.1 16.83

738.38 --22.36

795.51 --21.79

Number of Days In Working Capital

3,970.81

3,605.77

3,255.30

2,826.40

3,200.91

Profit & Loss Account Ratios Selling Distribution Cost Composition Expenses as Composition of Total Sales 0.75 0.36 0.51 0.49 0.45 0.21 0.32 0.16 0.25 0.2

Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times 45.26 44.6 55 55.65 36.41 41.46 41.01 58.57 59.03 35.99 34.1 33.86 53.02 53.46 38.74 43.55 43.21 51.94 52.34 40.21 42.64 42.36 57.48 57.75 33.85

Sources of Funds
The major sources of funds are loan funds i.e. borrowings. The major sources of borrowings are:
y y y y y

Bonds and Debentures Domestic Term Loans Deposits International Borrowings FCCB

Borrowings as at March 31, 2010 amounted to Rs. 96,565 crores as against Rs 83,856 crores in the previous year - an increase of 15.2 %. Borrowings constituted 86% of funds employed as at March 31, 2010. Of the total borrowings, bonds and debentures constituted 42%, domestic term loans 32%, deposits 24%, international borrowings 2% and FCCB 2%.

Deposits

As at March 31, 2010, outstanding deposits stood at Rs. 23,081 crores as against Rs. 19,375 crores in the previous year, representing an increase of 19%. During the year, deposits accounted for 55% of the incremental borrowing of the Corporation. The depositor base stood at approximately 10 lac depositors. CRISIL and ICRA have for the fourteenth consecutive year, reaffirmed their AAA rating for HDFCs deposits. This rating represents highest safety as regards timely repayment of principal and interest.

FCCB
HDFC has in earlier years availed of foreign currency borrowings from ADB under the Housing Finance Facility Project - ADB II (USD 100 million), from the KfW (DM 25 million and Euro 15.33 million), from DEG, a member of the KfW Group of Germany (USD 50 million) and from International Finance Corporation (IFC), Washington (USD 200 million).

Domestic Term Loans

During the year, HDFC raised loans from commercial banks aggregating to Rs. 16,197 crores. Out of this, loans amounting to Rs. 9,084 crores qualify for priority sector allocation. HDFC raised a further Rs. 2,676 crores from the banking sector as FCNR (B) loans. As at March 31, 2010, the total loans outstanding from banks, financial institutions and the National Housing Bank amounted to Rs. 25,037 crores as compared to Rs. 23,175 crores as at March 31, 2008.

Non-Convertible Debentures (NCDs)

During the year, the Corporation issued NCDs amounting to Rs. 8,567 crores on a private placement basis. The Corporations NCD issues have been listed on the Wholesale Debt Market segment of the National Stock Exchange of India Limited (NSE). The Corporations NCDs have the highest rating of AAA by both CRISIL and ICRA.

RATIOS
y y y y y

Dividend per Share increased from 30 in March 2009 to 36 in March 2010. Net Profit Margin increased from 20.72% in March 2009 to 24.87% in March 2010. EPS increased from 80.24 in March 2009 to 98.45 % in March 2010. Debt Equity ratio decreased from 6.38 in March 2009 to 6.35 in March 2010. Return on Assets increased from 461.85 in March 2009 to 529.33 in March 2010.

Compliance of Prudential Norms by HDFC Housing Finance: NHB has issued guidelines to HFCs on prudential norms for income recognition, provisioning, asset classification, provisioning for bad and doubtful debts, capital adequacy and concentration of credit/investments. HDFCs position with respect to the guidelines is as follows: 1. HDFCs capital adequacy ratio stood at 15.1% of the risk weighted assets, (of which Tier 1 capital was 13.2%) as against the minimum requirement of 12%. Therefore HDFC is in compliance with the limits prescribed by NHB in respect of concentration of credit, exposure to investment in real estate and capital market exposure other than on its investment in HDFC Bank wherein NHB has granted the Corporation time for such compliance as the Corporation is a promoter of HDFC Bank. Revenue model of HDFC:
y

Interest Income a) Interest rates of 9-11.25% on home loans b) The rates are higher for Top-Ups on home loans

Processing Charges a) Range of 0.5 to 1.5% depending upon the size b) And 2 to 2.5% in case of Home equity loans and Top-ups

Investment Income a) Investments in SLR securities generate interest income b) Yield for HDFC stood at 10.38% for FY 09

Foreclosure Charges a) Mainly to cover opportunity cost of deploying funds

Referral Income b) FEE earned on referring clients to subsidiaries.

Distribution Model followed by HDFC: Today, customers are significantly more discerning. With a rise in the number of players in the housing finance industry, banks and housing finance institutions have to reach out to customers rather than vice versa. Banks have the inherent advantage of capitalizing on their large network, but the quality of service rendered may lack focus as housing loans are one of the many activities performed by a bank. For a dedicated housing finance company, building

up a large network is often time consuming and expensive. While HDFC no doubt had a head-start over its competitors, it has developed a unique distribution model. HDFC has a total office network of 173 offices across the country and one international office in Dubai to service non-resident Indian clients. Of the 173 offices, 22 are parent branches while the rest are service centres. A service centre is a small office, typically manned by two or three individuals who perform all front office functions, but back office activities are supported by the parent branch. In addition, HDFC also conducts outreach programmes which essentially are like mobile offices. Outreach programmes are conducted at regular intervals in locations where HDFC does not have a permanent presence but where there is scope for business. If business from these outreach programmes exceeds the target and there is potential for incremental business, the location gets converted into a service centre. This model has helped to effectively reach out to more customers

Products of HDFC Ltd

Fixed Deposit: Long-term investments form the chunk of everybodys plans. An alternative to simply applying for loans, fixed deposit allows to borrow from their own funds for a limited period, thus fulfilling needs as well as keeping savings secure. By investing in a HDFC Ltd Fixed Deposit, money not only stays secure but also accumulates good interest over the period of deposit. Partial withdrawal from Fixed Deposits before the date of maturity can help in times of need. HDFC has been able to mobilize deposits from over 10 lakh depositors. Outstanding deposits grew from Rs. 1,458 crores in March 1994 to Rs 23,081 crores in March 2010. Much of this success can be attributed to its strong brand image, superior services, security and above all,

the significant contribution made by HDFCs 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 SIXTEENTH consecutive year, representing highest safety as regards timely payment of principal and interest. Benefits of an HDFC Fixed Deposit & Variable Deposits:
y y y y y y y y

Highest Safety Tax Benefits Attractive Returns Quick Loan Facility Nomination Facility Demand Draft Facility High Service Standards Electronic Clearing Service

Trust Deposits HDFC offers a wide range of deposit products, a secure investment option, with attractive returns. Deposits are accepted from Charitable Trusts, Religious Trusts, Educational Institutions, Employees' Welfare Trusts and others as decided by the management

Benefits of Fixed Deposit Rates & Variable Rate Deposit 1. Highest Safety 2. Attractive Returns 3. Tax Benefits 4. Quick Loan Facility 5. High Service Standards 6. Demand Draft Facility 7. Electronic Clearing Service

Home Loan Products 1. Home loan

Purchase of:
y y y

Flat, row house, bungalow from developers. Existing freehold properties. Properties in an existing or proposed co-operative housing society or apartment owners association.

First Power of Attorney purchases in Delhi for DDA flats allotted before 1992.

Self Construction: Features:

y

Maximum loan 85% of the cost of the property (including the cost of the land) and based on the repayment capacity of the customer.

y y

Maximum Term 20 years subject to the customer retirement age. Applicant and co-applicant to the loan-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 applicants need not be co-owners.

2. Home Improvement Loan Purpose:

y y y y y y y y y y

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

Maximum Loan
y y y

Existing Customer 100% of the cost of improvement New Customer 85% of the cost of improvement Subject to market value of the property

Maximum Term
y

15 years subject to your retirement age

3. Home Extension Loan Purpose

y

HDFC Home Extension Loan makes it convenient for you to extend or add space to your home. Be it an additional room, a larger bathroom, or even enclosing an open balcony.

Maximum Loan
y

85% of the cost of extension

Maximum Term
y

20 years subject to your retirement age

4. Short Term Bridging Loan Purpose

y

Short-Term Bridging loan makes the customer realize their dream of buying a bigger and better home and gives them time to sell their existing property to pay off the loan.

This is a short term loan to help customers with the interim period between the sale of your old home and the purchase of a new home. They can take the loan even if they are an existing customer of HDFC.

Maximum Loan
y

90% of the cost of the new property

Maximum Term
y

2 years

5. Land Purchase Loan Purpose

y

To purchase a plot of land

Maximum Loan
y

85% of cost of the land and based on the repayment capacity of the customer.

Maximum Term

15 years subject to customer retirement age.

6. Non-Residential Premises Loan Purpose

y Purchase, Construction, Improvement of Office, Clinic

Eligible
y y y y

Doctors Chartered Accountants Lawyers Other self-employed professional

Maximum Loan
y

85% of cost of the property

Maximum Term
y 10 years Improvement 5 years. Non residential premises maximum term is 15 years,

NRP improvement remains 5 years.

7. Home Equity Loan (Lap) Purpose Loan can be for any purpose. However, the funds should not be used for speculation or any illegal purposes. Customers have benefited by taking loans to meet the following funding requirements
y y y

Education Marriage Expenses Medical Expenses

Property
y y

Residential Non residential - Should be Fully Constructed - Should be a Freehold property having a clear and marketable title

Maximum Loan
y

Existing Customers Balance of 60% of the market value and present loan outstanding

New Customers 50% of the market value of the property (including the cost of the land)

Subject to: Minimum Market Value of the property being Rs.5,00,000 for Residential property and Rs.7.50 Lacs for Non Residential Property Repayment Capacity of the customer

Maximum Term Property Type Residential Non Residential Residential and Non Residential
y

Repayment Option EMI Based EMI Based Simple Interest

No. of Years 15 10 2

Subject to retirement age of the customer

8. Top-Up Loan This product offers an existing resident Indian customer a loan against the mortgage of the existing property. Purpose
y

It helps customers in encashing the investment in a house without having to dispose it off to fund various needs related to Higher Education, Purchase of Furniture, Business Requirements, etc.

Maximum Loan
y

60 % of the market value of the property less the outstanding loan

Maximum Term
y

Current loan eligibility.

9. NRI loans (for Professional & Non-professional) Purpose

y y

To purchase a flat Extension

y y y

Construction Improvement of a dwelling unit To purchase a plot

Maximum Loan
y

A maximum of 85% of the cost of dwelling unit (70% for land purchase)

Maximum Term
y y

Up to 20 years for Professionals Up to 7 years for Non Professionals

For all types of home loans:

y

Loan under Adjustable Rate is linked to HDFCs Retail Prime Lending Rate (RPLR). The rate on your loan will be revised every three months from the date of first disbursement, if there is a change in RPLR, the interest rate on your loan may change. However, the EMI on the home loan disbursed will not change*. If the interest rate increases, the interest component in an EMI will increase and the principal component will reduce resulting in an extension of term of the loan, and vice versa when the interest rate decreases.

Fees
o 1% o f the loan amount applied plus applicable service taxes and cess.

Processing of Loan Application at HDFC:

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; proof helps in quick and easy processing of the data. It also helps to very easily and quickly share d with other ata 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 Name of borrower, Name of co-borrower, Income details, Family background and permanent address etc. It also contains various important entries like Gross Salary, Rental, Other incomes, Obligations, Remarks etc. 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, address proof and can also be shared and utilised by other employees of HDFC Ltd.

DATAENTRY 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 file 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 referred 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 be low. 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 possess experience.

SANCTIONING An authorized sanctioning authority within HDFC itself will review the remarks of Double Checker and Sanctioning authority .If it considers the loan suitable to be sanctioned it gives its approval .After it has given its approval stamp the ILPS system will automatically send a letter to the Applicant that his loan has been sanctioned. After this approval the Applicant can go to whichever Service Centre which he selects to get his loan disbursed.
SPECIAL CASE

A special case can arise if the applicant has not mentioned the property for which he wants to take a loan .In that case the applicant can let the case be remain pending. This means that the Applicants loan request will be considered to be complete even though he has not decided the property. However the Applicant is expected to finalize 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.

Ratios calculated while giving a loan:

y y y y

L.C.R. : Loan to Cost Ratio. Max. 85% L.T.V. : Loan to Value Ratio. I.I.R. : Income to Instalment Ratio. Max. 35% - 40% F.O.I.R. : Fixed Obligation to Income Ratio. Max. 50%

EXAMPLE: A person wanting a loan of Rs. 10,00,000 for a period of 20 years @ 8.75% p.a. for a flat worth Rs. 12,00,000 has a Net salary of Rs. 28,000 and Gross salary of Rs. 35,000 and also has a car loan on him for which he pays Rs. 6000 as E.M.I. will have the following ratios: A loan of Rs. 10 lacs for 240 months @ 8.75% p.a. will have an E.M.I. of Rs. 8838. L.C.R. : I.I.R. : F.O.I.R. :
      

Thus the applicant is credit worthy to be given the loan in case of fulfilment of other rules and regulations.

Documents required for all loans:

Salaried Customers Self Professionals Application photograph Identity Proof Latest Salary-Slip and form with Application photograph Residence Identity Proof Education and form Employed Self Businessmen with Application photograph Residence Identity Proof Qualification Education Qualification and Residence form with Employed

Certificate and Proof of Certificate and Proof of Business Existence Form 16 Business Existence

Last 3 years Income Tax Business Profile Returns (self and business)

Last

months

bank

Last 3 years Income Tax Last 3 years Profit and Loss Returns(self and business) and Balance Sheet Last 3 years Profit and Loss and Balance Sheet

statement

Processing Fee Cheque Last 6 months bank Last 6 months bank statement Processing Fee Cheque statement Processing Fee Cheque

Multiple Repayment Option for Home Loans Step up repayment facility (SURF) This facility gives loans to customers based upon the increase in their income that one will have in the future. Flexible Loan Installment Plan (FLIP) Often customers, parents and their children, wish to purchase properties together. The parent is nearing retirement and their children have just started working. This option helps such

customers combine the incomes and take a long-term home loan where in the installment reduces upon retirement of the earning parents.

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 for use. To help customer save this interest, they have 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 above the interest paid by the customer goes towards Principal repayment. The customer benefits by starting EMI and hence repays the loan faster.

Accelerated Repayment Scheme Accelerated Repayment Scheme offers the customer a great opportunity to repay the loan faster by increasing the EMI. Whenever they get an increment, increase in their disposable income or have lump sum funds for loan prepayment, they can benefit by:
y y

Increase in EMI means faster loan repayment Saving of interest because of faster loan repayment

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

COMPETITIVE ANALYSIS
PNB Home Loan PNB Housing Finance Limited is a wholly owned subsidiary of Punjab National Bank, one of the leading nationalized banks of India. PNB provides a wide array of home loans to address varied customer needs. The bank provides loans to individuals against mortg age of their existing residential immovable property situated in urban/semi-urban/metro centers. By mortgaging their existing immovable property, borrowers can avail of loans for purposes such as education, marriage of children, family function, foreign travel, medical expenses etc. Go through the following National lines to get Bank information on PNB Home Loan. Loans

Punjab Products

Housing

PNB Apna Ghar Yojana home loans are meant for construction or for acquisition/purchase of house/flats. The minimum loan amount would be Rs.50000 and maximum loan amount depends on the repayment capacity of the borrower. In case of joint application, income of borrowers /co-borrowers is clubbed together for calculation of loan eligibility. The loan repayment is in Equated Monthly Installments (EMI) over a maximum period of 20 years.

PNB Ghar Sudhar Yojana home loans are offered for up gradation, renovation or repair of house/flat. It includes among others, internal and external repairs, water proofing, roofing, flooring, electrical, woodwork etc. The loan amount ranges from a minimum of Rs 50,000 to a maximum of Rs. 1000000. Borrower's minimum contribution will be 25% of the estimated cost of repairs/renovations.

Features
y

PNB provides home loans for the construction or purchase of house/flat, purchase of house/flat on First Power of Attorney basis from the original allottee.

The home loan can also be availed for carrying out repairs, renovations, additions, alterations to the existing house or flat of the applicant.

A special feature of PNB Housing Loan is that it provides life insurance cover on payment of one time premium.

The bank finances 75% money required for the construction of house or for the purchase of house/flat.

If an individual avails home loan from the bank for the purpose of repairs/renovation/additions/alterations of his/her home, then 75% of the estimated cost is financed by the bank, subject to a maximum limit of Rs 20 lakhs.

y y

The bank provides loan up to Rs 20 lakhs for the purchase of land or plot. If the applicant wants to furnish his/her house, then he/she can opt for PNB Home Loan and avail of a maximum of Rs 2 Lakh loan amount.

Eligibility

To qualify for PNB Apna Ghar Yojna, the applicants (residents of India or NRIs) should be in a permanent service or having their own business.

In case of service class, the age of the applicant should not cross 60 years, while the maximum age limit for the applicant if he/she is business person or self-employed is 65 years, at the time of the sanction of the loan.

The self-employed or business person, not exceeding 60 years of age can apply for PNB Ghar Sudhar Yojna.

1. SBI Home Loan State Bank of India (SBI), the largest nationalized bank in India, is one of the market leaders in the home loan segment. Apart from its myriad products and services, SBI offers home loans for a variety of purposes, including purchase/construction of new house/flat, purchase of an existing house/flat, purchase of a plot of land for construction of house and extension/repair/renovation/alteration of an existing house/flat. SBI home loans come with some unique features that make them stand out in the competition. Besides the standard package of home loans, SBI has some customized home loan products in its kitty, which address the needs of niche customer segments. Explore the article to know all about State Bank of India housing loans.

SBI Features
y

Housing

Loans

SBI Home Loan provides no cap on maximum loan amount for the purchase/construction of house/flat.

There is an option to club the income of the applicant's spouse and children to compute the eligible loan amount.

y y y y

The bank provides free personal accident insurance cover. A complimentary international ATM cum Debit card is also provided by SBI. On the spot "in principle" approval is a special provision for the applicant. If all the required documents are submitted by the applicant, SBI Home Loan is sanctioned within 6 days of the date of submission.

The applicant can also consider SBI's Home Loan as a Term Loan or as an Overdraft facility, in case he/she wants to save on interest and maximize gains.

SBI Home Loan also provides free personal accident insurance cover up to Rs 40 Lakhs.

Repayment is permitted up to 70 years of age, which is an added advantage of SBI Home Loan.

Products
y

'SBI-Flexi' Home Loans are designed to enable borrowers to hedge their Home Loan against unfavorable movement in interest rates and gives the customers a one time irrevocable option to choose one of the three customized combinations of fixed and floating interest rates.

'SBI-Freedom' Home Loans are customized for high net worth individuals and offer benefits such as 100 per cent finance of the project and no mortgage of the property, provided the individual could show liquid securities such as LIC policies or NSCs.

Eligibility
y y

The minimum age of the applicant is 18 years, on the date of the sanction of the loan. The maximum age limit for a Home Loan applicant is 70 years. It is the maximum age limit, within which the loan should be fully repaid.

The applicant should consist of sufficient, regular and continuous source of income for repaying the loan.

DETAILED ANALYSIS BETWEEN HDFC & SBI

Basis Processing Fees HDFC 0.5% of Principal Amount Vikas/ LDA SBI 0.5% of Principal Amount and Avas Vikas/ LDA

Home loans for Society or Avas Avas Vikas/LDA Slab Rates Society

Amount < 30 Lakhs 8.75% Amount > 30 Lakhs 9.00%

Amount<30Lakhs 8.5%, Amount >30 lakhs 8.75%

Legal Procedures

Contract signed by both the Contract signed by both parties the parties

Technical Fees LCR/LTV rates

No technical fees 85% of value of property

No technical fees 85% of value of property Net Income

Loan given on Net/Gross Gross Income Income Default Penalty

1.5 per month on default 1.5 per month on default amount amount 7 to 10 days

Loan Sanctioning Time Repayment Procedures

7 to 10 days

Part payment or payment in Part payment or payment whole in whole 60 years(salaried), 70

Maximum age for loan 65 years repayment Conversion Fees Hidden Costs 0.5% of Principal Amount No Hidden Costs

years(self employed) 0.5% of Principal Amount Default Penalty after a month is increased to 2%

Prepayment Charges Governing Body

2% National Housing Board

2% Reserve Bank of India

ANALYSIS & FINDINGS OF THE STUDY

y

HDFC Ltd. is the leader in the Home Loan Market, having a market share of 35%, followed by SBI and ICICI Bank Ltd. with 22% and 20% respectively.

The main competitors of HDFC Ltd. are SBI, ICICI Bank Ltd. and PNB Housing Finance Ltd.

In future it may also face stiff competition from Axis Bank Ltd. and BOB Housing Finance Ltd.

SBI has an advantage of high level of reach to customers, including both urban and rural people and especially in the rural area.

The loan procedure of HDFC Ltd. is so effective and complete that the default rate of HDFC Ltd. is lowest as compared to other Housing Finance Corporations.

y y

The main reason of this is due to availability of sound and quality manpower. HDFC Ltd. has only 1506 number of employees, because of which the employee turnover ratio is very high.

HDFC Ltd. employees works on a software built by their own employees, from the I.T. department, on Oracle which helps them to work efficiently and also notifies immediately in case of any default.

In terms of interest rates, its main competitors are SBI and other private players like Dewan Housing Finance Ltd. which offer home loan at interest rate as low as 8.00%.

y y y

HDFC Ltd. has a good brand image in the minds of customers. Most of the customers are not aware of the products of HDFC home loans. Some of the customers felt that the interest rates are high. However, as we analyzed this was primarily due to lack of awareness on the part of the customers. Customers were not aware of the governing body of HDFC which is National Housing Board (NHB) and not Reserve Bank of India. HDFC is governed by NHB because it is a non banking financial company. Despite of this, some customers were understanding of the current high interest rate as they were aware of the current economic situation and also that this was not under control for HDFC.

y y

Some of the customer not having good faith on private banks. Most of the people are directly go to HDFC to apply a home loan due to its brand image.

y y y

Customer awareness is medium about HDFC products. HDFC LTD providing good services to their customers. There is a high scope of home loans in the rural sector, but still rural people are reluctant to take loans from corporations and banks because of documentation involved as majority of them is ill-literate.

The sales team of HFDC Ltd. does not indulge in any unethical practices just for the sake of achieving targets. They are a part of the company and not outsourced as in case of some private banks. Same goes for the recovery team of HDFC Ltd.

The legal team consists of lawyers who are appointed by HDFC Ltd. only. This leads to a fair legal valuation on the part of legal assessment.

Quality of portfolio of loans is also very good. HDFC Ltd. does not entertain any dubious or risky cases.

After (post) disbursement services of HDFC Ltd. are one of the main factors which not only distinguish it with other H.F.C.s but also give it an upper edge from others. The customers are made feel welcome when they come to deposit P.D.C.s or come

for I.T. Statements which is not the case in other banks, where I personally saw some customers waiting for hours to get I.T. Statement.
y

HDFC Ltd. are the market leaders in home loans. Most of H.F.C.s finance those projects which are approved by H.D.F.C. Ltd. first.

The post disbursement services of HDFC are also very good and are one of the most differentiating factors when compared to other Housing Finance Corporations.

MARKET TRENDS The housing sector is witnessing a clash between major players. HDFC has ruled this sector with a lions stranglehold for all these years, but since the entry of ICICI home loans and other banks and private players the market share has gone on decreasing for HDFC. But still it has the majority share i.e. of 35%. However the industry is witnessing a boom at present boosted by generous budget sops. Growth has been largely concentrated on urban areas and in the middle to high income groups, focusing on salaried class. Nearly 25-30 lakh houses are built every year in India. But, the nations requirement is around 67 lakh houses per annum. The housing sector in India is facing an estimated shortage of 4.1 crore houses, which will require an estimated investment of Rs. 170,570 crores. Recent experience demonstrates that the formal housing finance sector continues to grow, but still it is elusive for the lower- income groups. This issue needs to be addressed by the State by taking appropriate measures.

FUTURE OF HDFC LTD.

HDFC Ltd. has always been market oriented and dynamic with respect to resource mobilization as well as its lending programme. This renders it more than capable to meet the new challenges that have emerged. Over the year, HDFC Ltd. 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 Ltd. 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 customers the highest standards of quality in product design, facilities and services.

Recommendations
y

One of the major problems that came to the forefront was the lack of knowledge about the governing body of HDFC Limited. Thus, customers should be told about National Housing Board and how is slightly different from the Reserve Bank of India.

Emphasis should be laid upon the differentiating characteristic of HDFC Limited which is the stability with respect to its employee base. Customers can almost be certain that they will be dealing with the same employee for the entire term of their loan. This assures them consistency in their relations with HDFC. Changing employees is a major concern for a lot of customers and a firm employee base is the strength of HDFC Limited.

The value of one to one interaction time with the customers is immense and thus employees should vouch for personal time with them to understand their needs and problems better.

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. Turn Over Time (TAT) issues must be given the highest priority while aiming to provide the customers with highly satisfying services. There were many complaints regarding delays in construction and extension loan approval.

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.

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.

To explore new segments such as packages for professionals like doctors. The prime customers of HDFC Ltd. are salaried individuals. Shifting focus to other segments will provide productive results.

Promote online services among customers further by educating them about the benefits of online transactions. As a majority of dissatisfaction arose due to the delays occurring in the organization due to heavy customer pressure at the HDFC Ltd. office, online solutions like Electronic Clearing System (ECS) must be made mandatory for customers.

Interest rate should be charged the same with new as well as the old customer because it gives a negative impact to the old customer, they think that this is a policy of the company to attract the new customer and no importance is given to them. Losing an old customer is more costly to the company than new because they will stop other prospects to take loan from the company.

The number of employees should be increased in the branches dealing with disbursements. Presently, mostly 2 employees are there in every disbursement branch. It should be increased especially in the last week of every month as disbursement cases are highest during this time and due to unavailability of enough staff, customers have to wait for a long period of time, which sometimes leads to dissatisfaction of customers.

Conclusion The housing finance is currently one of the most competitive industries in India where it is difficult to survive especially after the negative effects of recession which was brought about by the subprime crisis. With such cut throat competition, it is imperative that HDFC Limited stands strong and does not lose out upon customers. This can be ensured by providing customers with what they want and how they want it. In short, customer supremacy is what is required. With this in mind, HDFC needs to differentiate itself with the use of this service and continue to forge headstrong into the housing finance market. Home loans have long period when compare to other personal loans and other loans. So peoples are confused to take a home loan. Even though the interest rates are high peoples are willing to take a loan from HDFC LTD due to the reasons mentioned above. The interest rates also somewhat high when compare to other banks. The loan sanction process is also fast

when compared to other banks. For disbursement process is also it will take less time when compare to other banks. The changes mentioned are minor tweaks that can be brought about in the operation of HDFC Limited which can help to develop a positive outlook towards HDFC Ltd..

Bibliography
NEWS PAPERS

Economic Times of India

Financial Express

WEB PAGES:-

http://www.hdfcindia.com/

http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_08.ht ml

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

http://investing.businessweek.com/research/stocks/people/people.asp?ric=HDFC.B O http://www.economywatch.com/companies/forbes-list/india/housing-

development- finance-corporation.html

http://www.hdfcindia.com/loans/home-loan.asp

http://www.indianpropertyloans.com/home-loan-india.asp

http://ayaanbayaan.com/hdfc-ltd-financial-results-indian-gaap-for-the-period-aprilto- june-2010/

http://india.gov.in/citizen/housing.php