CHAPTER I

CONCEPTUAL BACK GROUND

A home loan is a long term commitment of 15-20 years, several factors like expertise, quality of service, in-depth domain knowledge and the companys level of commitment and transparency right through, the loan procedures, the fine print, quality of services offered and safe retrieval of the title deed are critical. There are lot many banks and financial institutions through which one can easily avail of a home loan at reasonable rate of interest. From the last decade, the Government of India has been continuously trying to strengthen the housing sector by introducing various housing loan schemes for rural and urban population. The first attempt in this regard was the National Housing Policy (NHP), which was introduced in 1988. The National Housing Bank (NHB) was set up in 1988 as an apex institution for housing finance and a wholly-owned subsidiary of Reserve Bank of India (RBI). The main objective of the bank is to promote and establish the housing financial institutions in the country as well as to provide refinance facilities to housing finance corporations and scheduled commercial banks. Moreover, for the salaried section, the tax rebates on housing loans have been introduced. The purpose of this paper is to analyze the customer satisfaction regarding home loan of HDFC bank and ICICI bank. The research was carried out among 50 bank customers by using a structured questionnaire. For the purpose of analysis various statistical tools has been applied like percentage, mean score value, t-test and chi-square test.

REVIEW OF LITERATURE
PURPOSE
To build the conceptual framework for housing finance practices in India, literature survey has been conducted: W.Boyd et al (1994) the result of the study reveal that reputation, interest charged on loans, interest on saving accounts are viewed as having more importance than other criteria such as friendliness of employees, modern facilities, and drive-in-service. Machauer, A. and Morgner, S. (2001) prefers segmentation by expected benefits and attitudes could enhance a banks ability to address the conflict between individual services and cost saving standardization. Using cluster analysis, segments were formed based on combinations of customer ratings for different attitudinal dimensions and benefits of bank services. Devlin (2002) investigates the relative importance of choice criteria according to consumers and also analyze difference in the importance of choice criteria with respect to a number of demographic and relative factors. The study shows that choosing a home loan institution on the basis of professional advice is the most frequently cited choice criteria, closely followed by interest rates. Difference in the importance of choice criteria with respect to gender, class, household income, educational attainment, ethnicity and financial maturity are apparent.

SOURCES

In order to achieve the specific objectives of the study, primary data has been collected with the help of structured questionnaire containing questions on various aspects of housing finance. The present study of home loan is based on a sample of 50 customers, 25 customers has been selected of each HDFC and ICICI bank. The geographical coverage of the sample profile is confined to branches of HDFC and ICICI bank located in Kurukshetra and Karnal

districts of Haryana. Data collected from different sources were tabulated and classified so as to make the study systematic and scientific. Different tables were prepared for the purpose to concentrate on each and every aspect of the study. After tabulation of the data, an analysis was made using different statistical tools such as percentage, average, T-test and Chi Square test so that reliable conclusions might be drawn

CHAPTER II

INDUSTRIAL PROFILE

The basic needs of mankind have been the food, shelter and clothing. Keeping this in mind, lots of efforts have been made to provide food through the poverty alleviation programmes since substantial portion of the Indian population are still in the clutches of object poverty. The poverty alleviation programmes both credit oriented and non-credit oriented ones described in earlier Units would have thrown light on the efforts taken in providing food for the poor which is primary among the basic needs. However, it is an irony of life that a large section of the population in India and other developing countries do not afford these needs both in their quantitative as well as qualitative dimensions. In fact, non-affordability of these facilities is a sine quo non of poverty. This Unit highlights the need for housing and the efforts taken by the Government in housing. The responsibility to provide housing finance largely rested with the Government of India till the mid-eighties. The setting up of the National Housing Bank (NHB), a fully owned subsidiary of the Reserve

Bank of India (RBI) in 1988, as the apex institution, marked the beginning of the emergence of housing finance as a fund-based financial service in the country. It has grown in volume and depth with the entry of a number of specialized financial institutions / companies in the public, private and joint sectors, although it is at an early stage of development. The implementation of housing finance policies presupposes 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 the mideighties in as much as it had not been integrated with the main financial system of the country. The setting-up of the National Housing Bank (NHB), a fully owned subsidiary of the Reserve Bank of India, as an apex institution was the culmination of the fulfillment of a long overdue
6

need of the housing finance industry in India. The system has also been characterised by the emergence of several specialised financial institutions that have considerably strengthened the organisation of the housing finance system in the country. At present, there are about 320 housing finance companies, of which 26 are registered with the NHB and which account for 98 per cent of the total housing loan disbursed.

CENTRAL AND STATE GOVERNMENTS

Till the mid-eighties, the responsibility to provide housing finance rested, by and large, with the government. The Central and state Governments indirectly support the housing building effort. The Central Government has introduced, from time to time, various social housing schemes. The role of the Central Government visa-versa these schemes is confined to laying down broad principles, providing necessary advice and rendering financial assistance in the form of loans and subsidies to the state governments and union territories. The Central Government has set up the Housing and Urban Development Corporation (HUDCO) to finance and undertake housing and urban development programmes, development of land for satellite towns, besides setting up of a building materials industry. The Central Government provides equity support to the HUDCO and guarantees the bonds issued by it Apart from this, both Central and state Governments provide house building advances to their employees. While the Central Government formulates housing schemes, the State Governments are the actual implementing agencies.

HOUSING PATTERN IN INDIA

It is a known fact that year after year more people are added to the category of homeless as the population is on the increasing trend. The weaker sections that constitute this group are handicapped in getting shelter at affordable cost. Housing, as such, in any country depends or the following factors:

Demand factor - Growth in population, formation of households, development of new townships, and increase in income.

Supply factor - Availability of institutional credit, cost of construction, availability of land and building materials, and fiscal and legal provisions affecting building construction. Though both the type of factors play their role equally, it is to be understood that

everyone wants to have a house constructed either through own money or borrowed funds. But the growing population makes it impossible to construct houses and satisfy this need for all the people in desired proportions. The National Sample Survey 44th Round compiled data on the types of dwellings in India. Some aspects of these data are presented in Table 1. Table 1. Types of Dwellings in India Types Percentage Distribution Rural % a. b. c. d. Total Independent houses Flats Chawls Others 82.6 2.7 3.0 11.7 100 Urban % 52.4 17.2 10.8 90.6 100

From the above table it could be seen that the rural areas have more independent houses compared to urban centers. However, there has been some tendency to go in for flats also, trend of which is more perceptible in urban areas. This pattern is due to the fact that while some space is available for construction of small dwellings in rural areas, it is a critical constraining factor in urban areas. This necessitates the urban house aspirants to go in for flats. The NSS further observed that in rural India, 39.4% houses are kutcha houses, 34% semi-pucca and 27% pucca

ones while in urban areas the percentages for the above categories of houses being 11, 18 and 71 respectively. This also shows that an urbanite is interested to have a pucca house while a ruralite is prepared to live in a house in whatsoever may be the type of construction. Again, the socio-economic conditions of the ruralites do not permit them to go in for a big permanent dwelling. Yet another observation made by the NSS indicates that in the past three decades, there has been an increase in the pucca houses in the rural areas on one hand and the kutcha houses are on a declining trend in urban centers on the other. Some trends and progress in housing in India over years as reported by the NSS are presents in Table 2:

Year

No of house holds R U 12.3 15.6 20.9 29.3 T 65.9 84.5 100.5 123.4

No

of

occupied

addition Decades - house holds R 15.0 10.7 14.5 U 3.3 5.3 8.4 T 18.6 16.0 22.9

during residential houses R U T 54.1 65.1 72.7 88.7 10.3 13.8 18.1 28.0 64.4 78.9 90.8 116.7

1951 1961 1971 1981

53.6 68.9 79.6 94.1

R Rural, U Urban, T - Total The conclusions that emerge from the table are as follows:
#

On an average, about 90% of the total households have occupied residential houses

throughout the past.

#

within this overall pattern the percentage of occupied residential houses is more in rural

areas as compared to urban centers.

The number of households added during decades had shown fluctuations in rural areas

but there was a steady increase in urban centers. The addition to the number of households was more during the decade of 1971-81. While indicating the relative growth of housing stock in the inter-censor period, the NSS report analysed whether the growth in the housing stock is commensurate with the growth in the population. The Table 3 seeks to provide an answer to the above issue. Inter census period Annual growth of the dwelling per 1000 increase in the population Rural 1951-61 1961-71 1971-81

Urban 5.2 4.5 7.9

Total 3.3 2.4 4.0

3.4 1.9 3.4

The growth of the dwellings per 1000 increase in population was slow during the

period 1961-71. It needs to be noted that during this period, the total population growth was more than yester years. The percentage increase in population during this decade was 24.8% which was, in fact, the highest during the period under reference.

The rate of addition of dwellings in relation to the population in rural areas was lower

as compared with the urban centers.

The decade of 1971 -81, witnessed a large increase in the annual growth of dwellings per

- 1000 population and like the earlier patterns, the increase was more in urban centers. It is interesting to mention here that during this period, the increase in urban population was as high as 50% which was almost three times of 18% experienced in rural area

All these facts lead to the conclusion that the growth rate in housing did not keep pace

with the rate of growth in population in the entire country. The extent of shortfall was more pronounced in rural areas.

10

The ultimate result has been the housing shortage in both rural and urban areas. In 1971, the Banking Commission, headed by Shri. Bhabatosh Datta submitted its report on the NonBanking Financial Intermediaries. This report, besides other aspects of banking systems, dealt at length with the present and prospective housing finance and the need for a specialised institution for housing. The Commission made the following observations:
a.

The house construction, as indicated earlier, depends on the demand and supply factors

with the demand side including the population, income etc. and the supply side covering institutions, policy etc.

The following are the three indicators for housing shortage: The first indicator was provided by the proportion of pucca dwellings to the total housing stock. According to an estimate, this proportion in India was only 23% as compared to 96-99% in some of the Western countries like USA, Canada and Japan. An idea of the overcrowding in dwellings could be obtained from the fact that about 77% of the total dwellings are of 1-2 room size, whereas in developed countries only about 5% of the houses are in this category (Palvia, 1969). The second indicator for the housing shortage was the comparison between the number of dwellings and the number of households. At the end of 1967, the report indicated that there were an estimated 6.2 million urban pucca housing units for an estimated 18 million urban households. Thus there was only one pucca house for every three households in urban areas. In rural areas, for an estimated 81.6 million households, the number of pucca housing units was only 12 million. The estimated rate of living constructions in India was around two dwellings per 1000 population per annum as against 10 per 1000 population as recommended by the United Nations in developing countries during the development decade

11

of 1961-71.

The third indicator, according to this report, was the investment in housing as proportion of the total investment in the public and private sectors. The percentage of total investments allocated to the housing sector had declined from 34% in the First Plan to 12% in Fourth Plan.

The Table 4 giving the housing scenario will further indicate the housing shortage in the past and the prospective housing shortage by 2001. Housing shortage in India Rural 1981 a. No. of house 94.1 holds b. Households adjusted c. for 88.7 106.2 128 28 42.6 64.8 116.7 148.8 193 94.1 113.5 137 30.7 47.17 72.2 124.8 160.6 209 1991 113.5 2001 137 Urban 1981 1991 29.3 45 2001 69 Total 1981 123.4 1991 158.4 2001 206

congestion Housing stock

d.

Of

which 77.8

92.9

112

23.7

36.7

56.7

101.5

129.6

168

acceptable e. Housing gap 16.3 20.6 25.5 7 10.4 15.5 23.3 31 41

The above table leads to the following inferences: A sizable number of people are without any house and every year more and more

people continue to be added to the category of homeless.

12

The housing gap goes on increasing over years. This was indicated earlier by the fact

that the annual growth rate in number of dwellings for every 1000 increase in population was very less leading to housing shortage.

The housing gap was prominent in rural areas as compared to urban centers. This might,

be due to the reason that in rural areas still people are inclined to go in for independent: houses whereas there is a trend towards flats in urban centers. Besides the needs and likings of the rural people regarding separate houses, it should also be remembered that the flat system of houses which needs a multi-storied structure requires a special infrastructure which is just not available in rural areas at present.

The houses of acceptable conditions were almost 86% of the housing stock in both the

rural and urban areas.

Each of the households had on average 5-6 members both in rural as well as urban

areas.

The report also indicated that more number of persons lives in a room and lack of privacy

connotes the need to augment housing supply. An analysis was made in various studies on the cause for the housing shortage in developing countries like India. The conclusion arrived at by studies has been that developing countries are giving low priority to housing and this is again due to factors like large capital resources required, high capital-output ratio and top priority given to sectors like the agriculture, industries, power, communication etc. as compared to housing. All these go to show that there is a need to give priority to housing since it is the basic need for the mankind. The growing rate of population needs more investment in the housing sector. The importance of finance as a factor in house construction may also be examined from the point of view of individual who wants to own a house. Houses can not usually be built out of the current

13

income of the individual. It is estimated that in India, 4.9 years' income of an unskilled labour is require to get 30 sq.m. House. It is also indicated that in an economy like ours, about 75% of house-buying involves loan finance and over 5C% of all new and old houses are encumbered with debt. The rate of interest charged also plays a role in housing finance. All these go to indicate the need for housing finance and assistance for a common Indian. How far our planning has taken care of the housing sector over years is given in the succeeding paragraphs

HOUSING AND FIVE YEAR PLANS

Even though housing sector got a relatively low priority in the allocation of public outlay in the five year plans, the sector is not altogether neglected. In fact, over the years, housing has been recognised as an important element in the poverty alleviation programmes. This section highlights the treatment given to the housing in different Five Year Plans. The First Five Year Plan (1950-56) aimed at enhancing the housing stock of minimum standards over next few years. It suggested reducing the cost of construction of houses especially with regard to material and labour by encouraging economical, architectural and structural designs. The First Plan gave due consideration to the role of private sector to help solving the problem of housing shortage. Two schemes viz., Subsidised Industrial Housing Scheme (1952) and Low Income Group Housing Scheme (1954) were introduced during this period. The Second Five Year Plan (1956-61) continued its emphasis on the Subsidised Industrial Housing and Low Income Group Housing Schemes. Seven specific schemes were introduced during this period. They are as follows: Plantation Labour Housing Scheme (1956)

14

Slum Clearance and Improvement Scheme (1956) Village Housing Project Scheme (1957) Middle Income Group Housing Scheme (1959) Land Development and Assistance Scheme (1959) Rental Housing Scheme for State Government Employees (1959) Jhuggee and Jhopri Removal Scheme (1960) It should be noted that all the above mentioned schemes aimed at improving the quality

of housing for lower income category of population. The Third Five Year Plan (1961-66) aimed at land acquisition and development as also an effective control on urban land. The Annual Plans (1966-69) brought in the concept of "economically weaker sections". The annual plans integrated this concept with the Subsidised Industrial Housing Scheme which was in operation since the First plan. Up to 1970, the bulk of funds were provided by the Government of India and Life Insurance Corporation of India as loans and subsidies. The schemes of housing have social objectives because they were meant for people belonging to the SC/STs or to the specified classes of employees and income groups. The extent of finance made available was usually 80% of the cost of construction as maximum and this varied from scheme to scheme. In case of Land Acquisition and Development Scheme, 100% financial assistance as loan was given to Local Bodies / Urban Estate Department. The Fourth Five Year Plan (1969-74) emphasised the low cost housing schemes in view of (a) High cost of construction of the dwelling units (b) Insufficient contribution by the private and Cooperative sectors to meet the growing needs

15

of houses for the poorer sections, and (c) Deteriorating condition of older slums.

It was in April 1970, that the Housing and Urban Development Corporation (HUDCO) was started. Various State Governments started Housing Boards funded through State budgetary allocation and the Slum Clearance Schemes were initiated. The Housing Boards of the States started issuing debentures on State Government Guarantee to which institutions like the nationalised banks contributed. The Housing Boards are essentially construction agencies and not funding agencies. This function is to create and manage the housing stocks. It was during 1977, that the Housing Development Finance Corporation (HDFC) was started for housing finance. It was an important addition to this sector. The Fifth Plan (1975-80) aimed at providing house sites to four million landless labour and intensifying research on low cost housing mainly through manufacture of low cost building materials. It decided to enhance the financial assistance to the State Housing Board* and Local Bodies. A scheme for improving the existing housing was also introduced during the Fifth Plan. In 1974, the Minimum Needs Programme and in 1975, the Twenty Point Economic Programme were launched which emphasised providing housing for the poor and housing construct through wage employment. The Sixth Plan (1980-85) attempted to use the public sector resources in such a way that they yield optimum results and provide maximum possible houses to absolutely shelter less people. The Seventh Plan (1985-90) estimated the housing shortage at 24.7 million units. It called for establishment of proper and diversified institutional credit for housing and construction to cater to the needs of housing development. It also stressed the need to strengthen
16

the HUDCO and creation of new Cooperative Building Societies. The plan period added a feather in the cap of housing by the establishment of National Housing Bank in 1988. This gave a new direction to the decentralised housing finance system by promoting housing finance institutions and facilitating proper cooperation amongst various agencies relating to housing. The data in Table 5 indicate the relative share of housing in the investment in the economy during the Plan periods. Plans Total Investment in the Investment plan (Rs. Crores ) First Second Third Fourth Fifth Sixth Seventh 3340 6750 10,400 22,635 47,561 1,56,000 3,49,148 Housing (Rs. Crores) 1150 1300 1550 2800 4436 19,491 31,438 in Percentage Housing Investment 34.2 19.2 14.9 12.4 9.3 12.5 9.0 to of total

The conclusion that could be drawn from the above table is: - The First Plan gave top priority to housing next to food since majority of the population was poor. - There have been fluctuations in percentage of housing investments to the total investment in economy during different periods. - There has been a decline in the investment in housing during VII Plan which was disproportionate to the total investment in economy. The Eighth Plan (1992-97) covered the strategy of creating an enabling environment

17

for housing activity by eliminating various constraints and providing direct assistance to the disadvantaged groups consisting of the rural and urban poor, self employed, physically handicapped, widows and single women. It was during the 8th Plan, that the Shelter Up gradation Scheme under the Prime Minister's Integrated Poverty Eradication Programme was initiated with a loan component of Rs. 10000/- to be arranged from the HUDCO/any other financial institution including Commercial Banks, subject to the condition that the borrower holds the title to the land. This has a subsidy component too. The 8th Plan outlay on housing has been Rs.20000 - 25000 cores. During 1995-96, the HUDCO sanctioned Rs.1967 cores as loans and actually released Rs. 1229.5 cores. About 90% was spent on dwellings for the weaker sections and low income groups.

The Ninth Plan Approach paper indicates that housing will be given priority as one of the seven principles of development. The analysis of the above facts on housing and investments during the plan periods indicates the need for more funds for housing. Therefore, the role of institutional finance for housing has assumed vital importance and many agencies are drawn into the fold of housing finance.

NATIONAL HOUSING POLICY

According to an estimate made by the Sub group of Urban Ministry on the "Magnitude of Housing Problem", about 64.4 million new houses will be needed by 2001. The total funding to create so many units is estimated to be around Rs 2, 35,000 crores based on the price index of 1985. This being a herculean task, it needs the cooperation of Centre and the States and the private sector to increase the availability of houses at affordable rates. For this purpose, a comprehensive policy on housing was felt essential. Hence the Comprehensive National Housing Policy prepared by the Ministry of Urban Development was placed before the

18

Parliament in 1988 and was discussed subsequently in 1990 at the Home Ministers Conference. The objectives of the National Housing Policy (NHP) are as follows:

To assist all people and in particular the homeless and inadequately housed and

vulnerable sections, to secure for themselves affordable shelter through access to developed land, building materials, finance and technology;

To create an enabling environment for housing activity by eliminating constraints and by

developing an efficient system for delivery of housing inputs;

To expand infrastructural facilities in rural and urban areas in order to improve the

environment of human settlement, increase the access of poorer households to basic services and to increase the supply of developed land for housing;

To undertake, within the overall context of policies for poverty alleviation and

employment, steps for improving the housing situation of the poorest sections and vulnerable groups by direct initiative and financial support of the state;

To help mobilise resources and facilitate expansion of investment in housing in

order to meet the needs of housing construction and up-gradation and augmentation of infrastructure, and To promote a more equal distribution of land and houses in urban and rural areas

and to curb speculation in land and housing in consonance with the macro-economic policies for efficient and equitable growth. To achieve these objectives, the Government should take initiatives for directing the activities of public agencies towards increasing the supply of serviced land for various groups and essential purposes directing towards poorer sections. The weakness of the NHP

19

has been that it did not set any time bound targets owing to resources constraints. In order to achieve the NHP, the following steps were taken. Setting up of an apex institution - National Housing Bank (NHB) as a subsidiary

of Reserve Bank of India under the NHB Act, 1987. Floating of specialised housing finance subsidiaries by the Scheduled

Commercial. Banks. Large flow of credit through the Housing and Urban Development Corporation

(HUDCO). Emergence of LIC as an important contributor of housing Finance. Financing for housing through Government Schemes.

Involving the private sector in housing finance

For the past decade, the Government of India attempted to strengthen the housing sector by introducing various loan schemes for the rural and urban population. The first attempt in this regard was the National Housing Policy (NHP), which was introduced in 1988. However, the growing realization of the insufficiency of public funds to meet the demands for financial schemes in the housing sector is evident in the aims of the 2007 policy. Innovative financial instruments that will spur the flow of funds from the private sector is one of the focal points of this policy. Until now, most financial companies were reluctant to lend to low-income groups because the small amounts do not justify the costs. Profit is the overarching goal, and these institutions try to efficient in the mobilisation, disbursement and recovery of funds. Finance companies are able to mobilize funds from shareholders and investors by offering competitive rates of interests. These funds will be disbursed to those who are deemed eligible, after assessment of application forms and personal interviews. There are difficulties in assessing

20

credit risks and a lack of clarity on recoveries, land title and possession. These problems have led to a scenario where the popular perception was that the requirements of low-income housing were incompatible with formal housing finance.

Whereas today, in low-cost housing, the government is the sole financier, the Ministry of Urban Development is exploring a new financial architecture that will make loans for low-cost houses affordable for both the lenders and borrowers. Despite the frenetic pace of growth in housing finance over the past 5 years in India, mortgage penetration as a percentage of GDP continues to remain low, at 4 percent. This means that there are considerable growth opportunities in housing finance. This is further corroborated by the fact that despite the impressive rate of growth in the housing finance sector in the recent period, financing through the organised sector continues to account for only 25 percent of the total housing investment in India.

The lending criteria set out by formal financiers are more appropriate to the life style of the middle-level income group. To obtain a housing loan, a combination of conventional (assets that can be mortgaged) and non-conventional collateral such as peer pressure is required. Lack of mortgage insurance is also a reason why the private formal sector bypasses the low-income segment

DEVELOPMENT OF HOUSING FINANCE IN INDIA

The early development of housing finance in India is a result of the housing policies implemented by the government. In the first Five Year Plan (1951-56), housing was introduced into the policy framework at the national level. Affordability was emphasized, and government support through subsidies and loans were deemed necessary. This plan in fact became the benchmark for subsequent Five Year Plans for the next two decades.
21

The second plan (1956-61) strengthened the schemes of the first plan by expanding coverage, and gave rise to State Housing Boards that still remain in existence. Despite these efforts, by the fourth plan (1969-74), the government was faced with the dual problem of a rapidly growing population and a slow growing housing stock. For the first time, the government decided to encourage private and co-operative housing schemes by providing financial assistance. However, the majority of activity still remained within the public sector. The government also recognized the need to provide housing finance to low-income groups and thus set up the Housing and Urban Development Corporation (HUDCO) in 1970. HUDCOs mandate was to provide such groups with loans below peak interest rates and with longer repayment periods.

It was during the fifth plan (1974-79) that as a completely private sector initiative, in 1977, the first retail housing finance company, Housing Development Finance Corporation (HDFC) was set up, seeking to provide financial assistance to individuals, groups, co-operative societies and companies for staff housing.

During the Sixth Plan period, other housing finance companies also entered the market. Towards the mid and late 1980s a few housing finance companies were set up either as private limited companies (e.g. Dewan Housing Finance Limited) or as a joint venture with partnership from the state government (e.g. Gujarat Rural Housing Finance Corporation) or bank sponsored housing finance companies (e.g. Can Fin Homes, SBI Home Finance, PNB Housing Finance). Even state owned insurance companies like the Life Insurance Corporation and the General Insurance Corporation of India set up housing finance arms. The seventh plan period saw the UN Global Shelter Strategy, of which India subscribed to, being passed in the UN General

22

Assembly in 1988. This gave the impetus to the drafting of a National Housing Policy for the first time. Another major reform that took place at the time was the founding of the National Housing Bank (NHB) in 1988. The NHB was founded to promote and regulate housing finance companies and to mobilize additional resources for housing.

The National Housing Bank (NHB) was established in July 1988 under an act of Parliament viz. the National Housing Bank Act, 1987. The act empowers the National Housing Bank to first, issue directions to housing finance institutions to ensure their growth on sound lines. Secondly, make loans and advances or render financial assistance to scheduled banks and housing finance institutions or to any such authority established by or under any central, state or provincial act and engaged in slum improvement. It may also formulate schemes for the purpose of mobilisation of resources and extension of credit for housing.

Public housing finance corporations have schemes that encourage beneficiaries to invest their own money in their dwellings, but do not offer opportunities for beneficiaries to deposit savings. The beneficiaries are granted larger housing loans, than what may be available from informal sources. To make housing loans affordable for the urban poor, direct subsidies are given for construction cost (e.g. the VAMBAY scheme) and/or indirect subsidies on interest rates are provided. The latter could be in the form of the interest differential subsidy amounts being remitted directly in the HFC loan accounts of the borrowers, so as to bring down their loan liability. These loans are characterised by conventional mortgage lending, have a longer-term tenor and repayments are in equal monthly installments (EMIs). The eighth plan recommended that reforms be made on both, the financial and legal aspects to allow the mortgage market to develop further. It laid special emphasis on government incentives to enhance the flow of credit to the housing sector through housing

23

finance institutions. Both the ninth (1997-2002) and tenth (2003-2007) plan recommended further reforms to enable the government to play its role as a facilitator and encourage the development of the mortgage market. Emphasis was particularly laid on market friendly reforms for improving both taxes and infrastructure to help increase investments into housing. The ninth and tenth five-year plans are also characterised by the aggressive entry of commercial banks into housing finance.

HOUSING FINANCE: INSTITUTIONS, SCHEMES & SUPPORT

COMMERCIAL BANKS
The trend of commercial banks lending to individuals for housing emerged in the wake of the report of the working group on the Role of Banking System in Providing Finance for Housing Schemes. (R C Shah Working Group, the RBI, 1978). They have been lending to the housing sector based on annual credit allocations made by the RBI. In terms of the RBI guidelines, scheduled commercial banks are required to allocate 1.5 per cent of their incremental deposits for disbursing as housing finance every year. Of this allocation, 20 per cent has to be by way of direct housing loans of which again at least half, that is, 10 per cent of the allocation has to be in rural and semi-urban areas. Another 30 per cent could be for indirect lending by way of term loans to housing finance institutions (HFIs), housing finance companies (HFCs) and public housing agencies for the acquisition and development of land and to private builders for construction. The balance 50 per cent is for subscription to the HUDCO, and the NHB bonds.

HOUSING FINANCE THROUGH COMMERCIAL BANKS

24

The Reserve Bank of India has brought the Commercial Banks too under the fold of housing finance which did not exist prior to 1979. The basic question that needs to be debated is as to why the commercial banks are interested in extending loans for the housing facilities particularly to the poorer sections of the society. In general it is believed that the residential house is a non-productive asset. It does not generate any income by itself so as to make the loan self liquidating. The question is to be understood in the larger developmental context. The investment decision and the activity pattern of any family are influenced to a large extent by the location and type of residential accommodation. The banker's relationship with the prospective borrowers for a productive activity is of long term nature and the banker has to communicate with the borrower before the loan disbursement and more so during the post loan period. The settled borrower, therefore, is a lesser risk for the banker. The reasonable housing facility is one of the facilitating factors for the borrower to take up and maintain a productive enterprise. The housing finance for the poor people, therefore, is capable of creating a better production environment. All these factors have induced the policy makers in India to include the housing loan for the poor in the priority sector lending. The RBI in its priority sector lending guidelines clearly stated that 1.5% of the Bank's incremental deposit as at the end of the previous financial year should be earmarked for housing and ensures that the bank finance for housing flows to the needy segments of the society. The finance will be in terms of both direct and indirect mode. Thirty per cent of the total allocation for housing should be by way of direct finance and of which half should be extended as direct housing loans in rural and semi urban areas. Further 30% will be utilized by way of term loans to housing finance companies, housing boards and other public housing agencies. The balance 40% of the allocation for housing should be provided in the form of subscription to guaranteed bonds and debentures of the National Housing Bank and HUDCO only.

25

The "housing finance'' by the banks is granted for the following types of construction: Residential houses to be constructed by public housing agencies like the HUDCO,

Housing Boards, local bodies, individuals, Cooperative Societies or employers, priority being given for economically weaker sections, low and middle income groups.

Educational, health, social, cultural other institutions/centers which are part of housing

project and which are necessary for the development of settlements or townships.

Shopping Complexes, markets and such other centers catering to the day-to-day needs of

the residents of housing colonies and forming part of a housing project.

Construction meant for improving the condition of the slum areas for which credit is

extended directly to the slum dwellers on the guarantee of the Government or indirectly to them through the State Government. To bodies constituted for undertaking repairs and for individuals either singly or

collectively, in buildings owned or occupied backed by security or guarantee. There is no ceiling on housing finance for housing construction. Banks may consider additional finance as per their terms and conditions too. Housing finance is extended to persons affected by natural calamities for house repairs / constructions also. For regular housing finance, the repayment period is fixed at not exceeding 15 years (including a moratorium, at the option of the beneficiary, till the completion of construction or 18 months from the disbursement of the loan, whichever is earlier) with graduated installments. Some of Government sponsored schemes like the Differential Rate of Interest have the component for housing for the weaker sections. In the DRI scheme, housing finance can be given to an individuals belonging to SC/ST up to Rs.5000/- which is besides the normal

26

assistance. In schemes like the PIUPEP, Shelter Up-gradation Scheme with a loan component of Rs. 10000/- is arranged through HUDCO/any other financial institution and a subsidy of Rs.2500/- per unit was given. Under the Nehru Rozgar Yojana, the Government provides a subsidy of Rs.1000/- per household for up-gradation of housing of urban poor along with a loan from the HUDCO. In the Jawahar Rozgar Yojana, a non-credit linked programme, less than one of its components viz., Indira Awaas Yojana, emphasis has been laid on housing finance. During 1996-97, a sum of Rs.1194 crores was allotted under the Indira Awaas Yojana. The Indira Awaas Yojana provides houses for the poverty sticken people and those belonging to SC/ST and freed bonded labour in rural areas. During 1995-96, about 8.64 lakh houses were constructed and till October, 1996, 2.82 lakh houses were constructed and 3, 56 lakh houses were under progress against which Rs.424.78 crores was spent. The banks extend loans to the housing finance institutions as indirect advance. These are term loans given taking into consideration the institution's debt-equity ratio, track record, recovery performance and other relevant factors. The term loans are given to HUDCO, HDFC and Housing Finance Companies promoted/sponsored by the commercial banks. Banks extend loans to the State Housing Boards and other public agencies for housing also. In view of the need to increase the availability of land and housing sites for increasing the housing stock, the banks are extending finance to the public agencies for acquits ion and development of land, provided, that it is a part of the complete project for infrastructural development. A major development in the area of housing in recent years has been the entry of the commercial banks by establishing subsidiaries either on their own or in collaboration with other financial institutions including HUDCO and HDFC which have done pioneering work in the fied of housing finance. The public sector banks like the State Bank of India, Canara Bank, Punjab National Bank, Indian Bank, Bank of Baroda and Central Bank of India from the public sector and Vysya Bank limited from the private side have started separate subsidiaries for
27

housing finance. The amount of public deposits which the housing companies can raise under the Housing Companies (NHB) Directions, 1989, is equal to 10 times of their Net Owned Funds. With the emergence of housing subsidiaries together with the apex institution- National Housing Bank, the housing finance scenario has taken a new turn.

HOUSING FINANCE THROUGH OTHER INSTITUTIONS

Some specific Organizations are extending housing finance as described below:

LIFE INSURANCE CORPORATION OF INDIA

The LIC of India is the oldest organizations connected with housing finance. It gives long term credit for housing. It makes available every year certain amount to Central Government for financing certain specified housing schemes of various State Governments. The Government of India makes allocation to different states out of the said amount. The LIC also advances to the Apex Cooperative Housing Finance Societies on guarantee from the State Governments and those societies in turn make advance to the Primary Cooperative Housing Finance Societies for house construction, in addition, the LIC has "Own Your House" scheme for its policy holders against mortgage of immovable property. It also finances for approved parties for construction of housing/commercial/office complexes, to public limited companies for the purchase of houses for their employees. The LIC spent Rs.1570 crores during Seventh Plan towards housing.

HOUSING AND URBAN DEVELOPMENT CORPORATION (HUDCO)

Established as a Government of India undertaking in 1970, the chief objective of HUDCO is to finance housing and urban development particularly for the poorer sections of the society. It provides finance for the schemes formed by the State Housing Boards, State Finance Societies in the urban and rural areas and Improvement Trusts. HUDCO's loan

28

schemes are on soft terms, the repayment period extending up to 22 years and interest rate ranging from 4% to 15% per annum.

INTRODUCTION
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 ones 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.

29

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.

HOUSING REFINANCE
The National Housing Bank extends refinance to the Commercial Banks on the housing finance extended by them. The rate of interest charged by the NHB to the banks on the refinance is linked to the purpose of loan and the geographic regions. For instance, the refinance rate o interest for acquisition or construction of new units in rural areas ranges from 10 to 15% and 11. to 15 per cent in urban areas. The corresponding rate for the loans for the upgradation in run areas is 10% while it is 11 to 13.5 per cent in urban areas. However, except in up-gradation i rural areas where there is a ceiling for charging interest from bank to borrower,

30

for others, the banks are free to fix the rates of interest. The refinance provided by the NHB up to March, 1995 was of the order of Rs.2254.04 crores. Considering the Golden Jubilee of Indian Independence, a Golden Jubilee Rural He Refinance Scheme has been introduced by the NHB. The objective of the scheme is to provide refinance to the institutions that finance for housing in rural areas which would facilitate the ruralites for access to housing credit to build modest new house or to improve or add to the old dwelling. This scheme is applicable to Scheduled Commercial Banks, State Cooperative Bank, Regional Rural Banks, State Cooperative Agriculture and Rural Development Banks, Cooperative Housing Finance Societies and Housing Finance Companies. The NHB will be extending 100% refinance under the scheme. The aggregate amount of assistance from the NHB will in no case exceed the aggregate amount of outstanding housing loans from the primary lending institutions to the borrowers (excluding overdues).

SCOPE
Refinance would be provided only in respect of direct lending to individuals/groups of individuals (formal or informal, including cooperative housing societies). Overdue loans/bought over loans from any other HFCs banks, loans given for acquisition of old housing units/second sale would, however, not be eligible for refinance under the scheme.

Eligibility Criteria
(i) Only such HFCs that conform to the 'Guidelines for Extending Refinance Support to

Housing Finance Companies', as amended from time to time, and which have been approved by the NHB (discussed earlier) for the purposes of refinance support are eligible to avail

31

refinance from the NHB, (ii) Overdue housing loans of the HFCs, including those covered under the NHB refinance,

should not exceed 10 per cent of the total housing demand (including overdues) for the preceding twelve months. The level of overdues should be assessed, taking into account only the amounts overdue for over three months, (iii) The percentage of net non-performing assets should not exceed risk weighted assets by

more that 5 per cent.

Period of Refinance
Refinance from NHB to HFCs would be repayable during a period not exceed 15 years, based on the weighted average period of housing loans (WAPOL) in respect of which refinance is claimed.

Security for Refinance

Refinance from the NHB would be secured by charge on the book debts of the HFC. Additional security such as charge on immovable properties/movable properties, guarantee of promoters, additional margins and so on may be stipulated at the NHB's discretion. If at any time the NHB is of the opinion that the security provided by the HFC has become inadequate to cover the outstanding refinance, it may advise the HFC to provide and furnish to the satisfaction of the NHB, such additional security as may be acceptable to the NHB to cover such deficiency. The NHB may get the loan accounts and associated documents verified, either by its own officers or a firm of chartered accounts appointed by it for the purpose, with respect to the loans included in a particular refinance application. It may, at its discretion, recover the cost of such verification from the concerned HFC.

PROCEDURE

32

Application for Annual Refinance Limit

The refinance operations of the NHB are centralised at New Delhi. Refinance, in a particular year, is released on the basis of the refinance limit sanctioned to the HFC for the year (July to June). Any HFC approved for the purpose of refinance should submit to the NHB its annual projections for sanction of refinance limit, in the prescribed annual credit review format, together

Other Terms and Conditions

Separate Books Separate and proper books of accounts, registers and so on should be maintained branch-wise by the HFC with respect to housing loans for which refinance has been extended by the NHB and these should be kept up-to-date. The list of loan accounts along with necessary details, in terms of the NHB's refinance, should be readily available with the respective branches.

Life Span of Dwelling Units

Since the repayment period should not exceed the life span of the house/unit financed out of the housing loan, it should be ensured that the construction is pucca/semi-pucca, with a life span of not less than 30 years.

Post-disbursal Discipline
There should be proper post-disbursement supervision and follow-up of housing loans to ensure proper end use of funds as also timely and regular repayment of the loans. It should conduct its business with due diligence and efficiency and have due regard to these principles in the conduct of its business.

Maintenance of Recovery

33

Performance Continuance of refinance facility under the scheme would be subject to maintenance of satisfactory a recovery performance by the HFC, from the beneficiaries.

Recall of Refinance
The NHB reserves the right to recall the refinance in the event of diversion of the relative funds for purposes other than housing or for suppression of any material information by the borrowing bank.

NHB's Right to Modify the Scheme

The NHB may modify the clauses of the Refinance Scheme in respect of all HFCs, or in respect of any one HFC, depending on its performance. Such modifications are being brought out in the form of circulars/letters, from time to time, and have become part of the scheme.

NHB's Right to Call for Information

The NHB may call for any information or returns from the HFC availing of refinance, in respect of housing loans and refinance sanctioned under this scheme. It would also have the right to collect such information directly from the HFC's constituents, its lenders, auditors, credit rating agencies and so on.

Insisting on Deposits from Borrowers

The HFCs availing of refinance from the NHB should not insist that borrowers place part of the housing loans disbursed to them in deposit accounts or retain the entire proceeds disbursed as deposits or insist on deposits as a precondition for sanctioning housing loans.

Borrowings from Institutions other than the NHB

34

In case the HFC borrows funds from banks/financial institutions other than the NHB, it should inform the NHB about the same, giving particulars about the security offered for such borrowings and obtain a 'no objection' from the NHB. They are required to follow the necessary procedures and furnish details of their borrowings.

Compliance with HFCs (NHB) Directions, Guidelines on Prudential Norms

The HFC (NHB) Directions, 2001, as amended from time to time, prudential norms for income recognition, accounting standards, provisioning for bad and doubtful debts, capital adequacy and concentration of credit/ investments, 2001 and guidelines for refinance support to HFCs, as amended from time to time, should be deemed to be a part of this refinance scheme.

NATIONAL HOUSING BANK (NHB)

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. The Act, inter alia, empowers NHB to: Issue directions to housing finance institutions to ensure their growth on sound lines

35

Make loans and advances and render any other form of financial assistance to scheduled banks and housing finance institutions or to any authority established by or under any Central, State or Provincial Act and engaged in slum improvement and

Formulate schemes for the purpose of mobilisation of resources and extension of credit for housing

Management
The general superintendence, direction and management of the affairs and business of the.NHB are vested in its Board of Directors, which exercises all powers and executes all acts and things on its behalf. Subject to the provisions of the NHB Act, the Board, while discharging its functions, has to act on business principles, with due regard to public interest. In general, (a) the Chairman, if he is a whole-time Director or if he is holding offices both as a Chairman and a Managing Director (CMD) or (b) the MD, if the Chairman is not whole-time director or is absent, can also exercise these powers of the Board. The MD has to follow, in the discharge of his powers and functions, all directions given by the Chairman. In the discharge of its functions, the NHB is to be guided by the directions given in writing by the Government in consultation with the RBI, or by the RBI in matters of policy involving public interest.

The Board of Directors of the NHB consists of (i) (ii) a Chairman and a Managing Director (CMD), two Directors from amongst experts in the field of housing, architecture, engineering,

sociology, finance, law, management and corporate planning, or in any other field, special knowledge of which is considered useful to the NHB,
(iii)

two Directors who are persons with experience in the working of institutions involved

in providing finance for housing or engaged in housing development or have experience in the working of financial institutions/banks,

36

(iv)

two Directors elected by shareholders other than the RBI/Government/other institutions

owned/controlled by Government, (v) (vi)

(vii)

two Directors from out of the RBI Directors, three Directors from amongst Central Government officials and Two Directors from amongst State Governments' officials. The CMD an other

Directors, excepting the RBI's Directors and those elected by the shareholders, are appointed by the Government in consultation with the RBI. The RBI nominates its Directors on the NHB.

BUSINESS ACTIVITIES NHB, as the Apex level financial institution for the housing sector in the country, performs the following roles:

(a) 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. All HFCs registered with the National Housing Bank u/s 29A of the National Housing Bank Act, 1987 and inter alia having minimum net owned funds of Rs.10.0 crores are eligible for refinance support. It has also contributed to the equity capital of five HFCs. NHB has a dedicated Training Division which organises regular training programmes in areas relating to housing and housing finance for development of management capabilities of officials working in the sector.

37

NHB's promotional endeavors are also directed towards capacity building for the housing finance system besides enlarging the credit absorption capacity.

(b) 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.

(c) 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

38

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.

(d) Resources of NHB

NHB raises resources from diversified sources, both domestic and external by issuing Bonds/ debentures, borrowing from RBI and financial institutions/organisations etc. Under the Act, NHB is authorised to issue and sell Bonds with or without the guarantee of the Central Government for the purpose of carrying on its functions. (e) Rural Housing: NHB launched the "Swarna Jayanti Rural Housing Finance Scheme" to mark the golden jubilee of India's Independence. The Scheme seeks to provide improved access to housing loans to borrowers for construction/acquisition/ up-gradation of a house in rural areas of the country.

(f) Recent Initiatives

Securitisation of mortgage loans of the retail lending institutions facilitates for channelising household savings into the housing sector is seen as a potentially viable market oriented alternative. Support to Mortgage backed securitisation is a major policy initiative of the Government as manifested in its National Housing and Habitat Policy announced in 1998. This policy emphasises NHB's lead role in mortgage-backed securitisation and development of a secondary mortgage market in the country. As the apex body in housing finance sector in

39

India, NHB has been playing a lead role in the sector in matters relating to policy environment as also operational mechanism for the development of a secondary mortgage market in India. In order to resolve the twin problems of affordability and accessibility affecting the growth of the housing finance business and the prospect of home ownership, NHB has been entrusted with the responsibility of launching a Mortgage Credit Guarantee Scheme for protecting the lenders against default.

HFCs Promotion and Development

The principal mandate of the Bank is to promote housing finance institutions to improve/strengthen the credit delivery network for housing finance in the country. The Bank has played a facilitator role in this regard instead of itself opening such dedicated housing finance institutions. For this purpose, NHB has issued the Model Memorandum and Articles of Association. NHB has also issued guidelines for participating in the equity of housing finance companies. All housing finance companies registered with NHB u/s 29A of the National Housing Bank Act, 1987 and scheduled commercial/co-operative banks are eligible for refinance support subject to terms and conditions as laid down under the respective refinance schemes.

As a part of its promotional role NHB has also formulated a scheme for guaranteeing the bonds to be issued by the housing finance companies.

Considering the need for trained personnel for the sector NHB has designed and conducted various training programmes.

40

CHAPTER III
41

RESEARCH METHODOLOGY

GENERAL METHODOLOGY
Research Methodology used here is purely exploratory. It is used when one is seeking insight into the general nature of the problem, possible decision alternatives and relevant variables that need to be considered.

The research methodology is highly flexible, unstructured & informal in nature undertaken to gain background information. The procedure followed in the study consists of following steps:

1) The research includes figurative and diagrammatic interpretation for easy comparison. 2) Understanding of Housing finance in global and domestic scenario. 3) Analysis of Government policy towards Housing finance. 4) Financial Performance Analysis that includes: a) Determination of growth equilibrium of Housing finance to find internal liquidity to fund its current position. b) Multiple discriminates analysis to evaluate the likely position of bankruptcy of Housing finance.

42

SAMPLING PLAN There has been no sampling plan as such as the study involves understanding the various processes and analyzing them. The study involved the detailed analysis of the secondary data collected from various source and therefore no. sample size considered. is 135 and plan has been

SOURCES OF DATA
Data has been collected from primary as well as from secondary sources.

PRIMARY DATA SOURCES:

Primary data sources include information gathered through interview and discussions with the head and employees of various departments.

SECONDARY DATA SOURCES:

Below mentioned are secondary data sources used in present study-

Internet Magazines Books

43

ANALYSIS OF DATA
For the analysis of data, Excel sheet is used. Simple tables are prepared for the purpose of comparison and help of graph is also taken for making the interpretation easier.

44

CHAPTER IV

45

DATA ANALYSIS AND ITS INTERPRETATION

DATA PROCESSING AND ANALYSIS PLAN Data processing is an intermediary stage of work between data collection and data analysis. The raw data, after collection, has been processed and analyzed in accordance with the outline laid down for the purpose of the study. Tabulation is the process of summarizing raw data and displaying them on compact statistical table for further analysis. Data is further classified and categorized for analysis. ANALYSIS OF DATA: MEANING The analysis of data is the most skilled task in the research process. It calls for the researchers own judgment and skill. Analysis means a critical examination of the assembled and grouped data for studying the characteristics of the object under study and for determining the patterns of relationships among the variables relating to it. PURPOSE OF STATISTICAL ANALYSIS Statistical analysis of data serves several major purposes. It summarizes large mass of data into understandable and meaningful form. This is the role of descriptive statistics. The reduction of data facilitates further analysis. Statistics makes exact descriptions possible. For example, when we say that the educational level of people in X district is very high, the description is not specific; but when statistical measures like the percentages of literate among males and females, and the like are available, the description becomes exact. Statistical analysis aids the drawing of reliable inferences from observational data. Data are collected and analyzed in order to predict or make inferences about situations that have not been measured in full. Statistical analysis also helps making estimations or generalizations from the results of sample surveys. The analysis and interpretation of the data collected has been arranged in the following format
46

for better understanding and scrutiny. Title of the table Graphic representation Concept Analysis Inference of the table

47

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

S.No. 1 2 3 4

Topic Below 2 lakhs 2-4 lakhs 4-6 lakhs 6 lakhs and above

Percentage (%) 50 25 20 5

5% 20% Below 2 lakhs 2-4 lakhs 50% 25% 4-6 lakhs 6 lakhs and above

Analysis: It can concluded from the result that 50% of the respondent income is below 2 lakhs followed by 25% of the respondent whose annual income is 2-4 lakhs Interpretation: From the table and graph above it can be seen that

50% respondents annual household income is below than 2 lakhs . 25% respondents annual household income is between 2 to 4 lakhs. 20% respondents annual household income is between 4 to lakhs. 5% respondents annual household income is more than 8 lakhs.

48

2. Have you ever taken Home loan before?

S.No. 1 2

Topic Yes No

Percentage (%) 45 55

45% Yes No 55%

Analysis: It can concluded from the result that 55% of the respondent did not have taken loan Interpretation:From the table and graph above it can be seen that 55% respondents have never taken home loan 45% respondents have taken home loan 3. If yes, from which Bank/company?

S.No. 1 2 3

Topic ICICI HDFC UTI

Percentage (%) 25 55 10

49

4 5

Centurion bank of Punjab Others

5 5

Analysis: It can concluded from the result that 55% of the respondent have taken loan from HDFC bank& 25% of the respondent have taken loan from ICICI bank. Interpretation:From the table and graph above it can be seen that 55% respondents have taken home loan from HDFC bank,25% from ICICI bank,10% from UTI,5% from Centurion bank of Punjab & 5% from others

50

4. Are you satisfied with the services provided?

S.No. 1 2 3 4

Topic Highly Satisfied Neutral satisfied Highly Dissatisfied Dissatisfied

Percentage (%) 40 10 25 25

40 40 35 30 25 20 15 10 5 0 Highly Satisfied Neutral satisfied Highly Dissatisfied Dissatisfied 10 25 25

Analysis: It can concluded from the result that 40% of the respondents are highly satisfied for the loan services Interpretation:From the table and graph above it can be seen that 40% respondents are satisfied with the services of loan 25% respondents are highly dissatisfied & dissatisfied with the services of loan 10% respondents are neutral satisfied with the services of loan

51

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

S.No. 1 2 3 4 5

Topic Interest rates Service provided Payback period Schemes Others

Percentage (%) 55 15 10 15 5

15%

5% Interest rates Service provided Payback period

10% 15%

55%

Schemes Others

Analysis: It can concluded from the result that 55% of the respondents will take loan in interest rate

Interpretation:From the table and graph above it can be seen that

52

respondents take loan of, 55% to interest rates, 15% to schemes and services provided, 10% to payback period. So, customer didn't give response regarding the services of the bank / company except to the amount of loan and legal formalities

6. How much loan amount you took?

S.No. 1 2 3 4

Topic Less than 1 lakhs 1-5 lakhs 5-10 lakhs more than 10 lakhs

Percentage (%) 32 48 12 8

12%

8% 32% Less than 1 lakhs 1-5 lakhs 5-10 lakhs more than 10 lakhs 48%

Analysis: It can concluded from the result that 48% of the respondents take loan for 1-5 lakhs& 32% of the respondents take loan for less than 1 lakhs

53

Interpretation:From the table and graph above it can be seen that 48% respondents will take loan for 1-5 lakhs 32% respondents will take loan for less than 1 lakhs 8% respondents will take loan for more than 10 lakhs 12% respondents will take loan for 7. Even if the Interest rate is high for the Home loans, you will go for it?

S.No. 1 2

Topic Yes No

Percentage (%) 35 65

35% Yes No 65%

Analysis: It can concluded from the result that 65% of the respondents will not take loan in high interest rate

54

Interpretation:From the table and graph above it can be seen that 65% respondents will not take loan in high interest rate 35% respondents will not take loan in high interest rate

8. If you get a chance to get a loan which bank will you prefer?

S.No. 1 2 3 4 5

Topic Standard Chartered Bank State Bank of India ICICI Bank HDFC LTD Others

Percentage (%) 15 25 10 45 5

Analysis: It can concluded from the result that 45% of the respondents will take loan from HDFC bank

Interpretation:From the table and graph above it can be seen that:-

55

45% of the people contacted prefer HDFC LTD to any other and therefore it is ranked no.1 by that percent of respondents. The analysis showed that a large number of customers prefer HDFC LTD as compared to others. The data shows that 15% of customers took loan from Standard Chartered Bank, 10% of customers from ICICI BANK, 25% Customers took loan from State Bank of India, 5% of customers fall under the category of 'Any other' which included Canara Bank, Punjab and Sind Bank, etc

9. From where have you got information about home loans scheme?

S.No. 1 2 3 4 5

Topic Newspapers Magazines Hoarding/banners Word of mouth Others

Percentage (%) 58 12 10 15 5

56

60 50 40 30 20 10 0

58

12

15 10 5

New spapers

Magazines

Hoarding/banners

Word of mouth

Others

Analysis: It can concluded from the result that 58% of the respondents have get information about home loans scheme through newspaper

Interpretation :The data shows that around 15% of customers got information from source of 'Word of Mouth' which includes information from friends, relatives, colleagues etc. 58% of customers got information from newspapers, only 12% of customers from magazines and 5% of customers got information about home loans schemes under 'Any other source' and 11% through Banners/ Hoardings/Pamphlets .

57

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

Majority of the people got loans from HDFC LTD only

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

Some of the customers felt that the interest rates are somewhat high

Some of the customer not having good faith on private banks likes Standard Chartered bank, HSBC bank etc.

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

Some of the customer of HDFC already benefited through HDFC home loan products and services

Customer awareness is medium about HDFC products.

HDFC LTD providing good services to their customers.

58

CHAPTER V

59

CONCLUSION
The past studies have indicated that any point of time there has been housing shortage in India and it grows at an alarming proportion to the population is increasing year after year, lots of efforts are being made to provide housing finance to the poor who represent the majority of those facing housing problems .the NHP was the first efforts in this direction .besides that ,several other organizations like the LIC of India, HUDCO, HDFC are also involved to a greater extension to housing finance. All those efforts, it is hoped would reduce the housing shortage in India to a greater extend.

60

SUGGESTIONS

Since Housing finance is highly vulnerable to the fluctuation in London Metallic Exchange so in order to reduce this volatility HDFC should try to enter into forward contract with suppliers along with other possibilities.

In India, bank is preferred to housing in bank sector..

Cash is utmost requirement for any banks. If the collection period of the company could be reduced to 10-15 days from its present level, more cash will be available with the company and will increase cash in hand position.

61

ANNEXURES QUESTIONNAIRE

NAME..AGE GENDER.PROFESSION. ADDRESS... CONTACT NO.

1. Which income group do you belong? (Per annum) (a) Below 2 lakhs [ ] (c) 4-6 lakhs [ ] 2. Have you ever taken Home loan before? (a) Yes [ ] 3. If yes, from which Bank/company? (a) ICICI [ ] (b) HDFC [ ] (c) UTI [ ] (e) others [ ] (b) No [ ] (b) 2-4 lakhs [ ] (d) 6 lakhs and above [ ]

(d) Centurion bank of Punjab [ ]

4. Are you satisfied with the services provided? (a) Highly Satisfied [ ] (c) Highly Dissatisfied [ ] (b) Neutral satisfied [ ] (d) Dissatisfied [ ]

62

5. While taking loan, which things attract you the most? (a) Interest rates [ ] (c) Payback period [ ] (e) Others [ ] 6. How much loan amount you took? (a) Less than 1 lakhs [ ] (c) 5-10 lakhs [ ] (b) 1-5 lakhs [ ] (d) more than 10 lakhs [ ] (b) Service provided [ ] (d) Schemes [ ]

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

8. If you get a chance to get a loan which bank will you prefer? (a) Standard Chartered Bank [ ] (c) ICICI Bank [ ] (b) State Bank of India [ ] (d) HDFC LTD [ ]

(e) Any other (please specify)...........................................

9. From where have you got information about home loans scheme? (a)Newspapers [ ] (c) Hoarding/banners [ ] (b) Magazines [ ] (d) Word of mouth [ ]

(e) any other (please specify)...................................

63

BIBLIOGRAPHY
1. Financial services 3rd edition - M. Y. Khan

2. Practical banking advances

UBS publishers ltd

3. Report of the study group on non-banking financial institutions and company.

4. Report on trends and progress of housing in India.

WEBSITE VISITED

1. www.nhb.org.in

2.

www.google.com

3. www.business-standard.com

4.

www.unece.org

5.

www.hinduonnet.com

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