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TRAINING REPORT

ON
(Comparative study of consumers behavior towards Home
Loans of SBI And HDFC BANK)

Submitted to:
Satyug Darshan Institute of Engineering and
Technology

By:

ISHAN CHUGH

Batch 2015 2018

In Partial Fulfillment of
Bachelor of Business Administration
(IIFSB)

MAHARSHI DAYANAND UNIVERSITY


ROHTAK (HARYANA)

(November, 2016)
Satyug Darshan Institute of Engineering and
Technology
Bhupani Lalpur Road, Village Bhupani
Faridabad - 121002, NCR, Haryana, India

DECLARATION

I, Mr. Ishan Chugh hereby declare that this summer training


report is the record of authentic work carried out by me
during the period from ---------- to -----and has not been
submitted to any other University or Institute for the award
of any degree / diploma etc.

(Signature)
Name of the student

Date:
BONAFIDE CERTIFICATE

This is to certify that Mr. / Ms. Name of the student of Satyug


Darshan Institute of Engineering and Technology has successfully
completed the project work titled (Title of the report in CAPITAL)
in partial fulfillment of requirement for the completion of Bachelor
in Business Administration (BBA IIFSB) course as prescribed by
the Maharshi Dayanand University, Rohtak, (HARYANA).

This project report is the record of authentic work carried out by


him/her during the period from ------- to -------. He / She has worked
under my guidance.

(Signature)
Mr. Paramjeet Singh Ahuja
Assistant Professor, BBA Department
Project Guide (Internal)
Date:

Counter signed by
(Signature)
Mr. Ravi Bakshi
Department Coordinator (BBA Department)
Date:

S.NO PARTICULARS PAGE NO.

1 Introduction to the study

2 Company Profile

3 Research Methodology
Objectives of the Study
Scope of the Study
Research Design
Method of Data Collection
Limitations of the Study
4 Data Processing & Analysis

5 Conclusion and Suggestions

6 Bibliography

7 Annexure
TABLE OF CONTENT

Chapter-1
INTRODUCTION TO STUDY
HOME LOAN

1) Customer must be at 21 year of age when the loan is sanctioned.


2) The loan must terminate before or when you twin 65 year of age or before
retirement,
Whichever is earlier.
3) Customer must be employed or self employed with regular source of income

LOAN AMOUNT

A number of factors are taken into account when assessing repayment


capacity.
Customer income, age, number of dependents, qualification, asset
&liabilities, stability and continuity of customer employment. Business is
one of them. However there are ways by which you can enhance your
eligibility.
If the customer spouse is earning put he/she as a co-appSBIant. the
additional income shall be included to enhance the loan amount.
Incidentally, if there are any co owners they must necessarily be co-
appSBIant customer fiances income can also be considered sanctioning
the loan on your combined
Income .the disbursement of the loan, however will be done only after
the submit proof of Marriage. Providing additional security like bonds,
fixed deposits & SBI poSBIies may also help to enhance Eligibility.
While there is no need for guarantor, it could be that having one might
enhance your credibility with us. If so, our loan officer would provide
customer with positive necessary details.
The final act to be sanctioned will depend on your repayment capacity.
However, what customers ultimately are entitled to will have to conform
within the limits fixed for each loan.
Also when the company looks at the total cost, registration charges,
stamp duty, transfer charges are also included.

HOMELOAN

We at HDFC bank understand the value of owing your house. Our affordable
home loans can make all the difference to their dreams of owing home.

FIND THE RIGHT HOME

Provide facility for search of free online property. A one stop shop for all their
Real Estate needs.

WHAT YOU GET

0% brokerage on first sale properties access the entire market under our roof site
visits to the properties short listed by you. Help in negotiating the best price.
Help the legal documentation.
LISTINGS BELOW ARE THE STEP INVOLVED IN AVAILING OF A
HOMELOAN

A person applies for a home loan


The executive meets the appSBIant & briefs him the entire loan process,
requirements & the various options available.
The appSBIant chooses a housing finance company (HFC) & handover
the income
Document to the executive are the income documents are headed over to
the HFC for eligibility & approval.
The HFC verifies the documents & checks the repaying capacity, saving
habits, tenure of services etc. of the appSBIant & approves the loan
amount.
After approval an offer letter is given to the appSBIant by the HFC,
along with list of original title documents that have to hand over to the
HFC.
The appSBIant gives the original property title document to the HFC
The HFC scrutinizes the legal & the technical aspects of the original title
document.
If the HFC is satisfy as to the legal & technical aspect of the document
then the appSBIant is called to sign the loan agreement
The loan disbursement schedule is decided by the HFC according to the
stage of construction (If property under construction) or a onetime
payment is made if property is ready for Possession.
The appSBIant gets possession of the property depending upon the level
of completion of the property.
The appSBIant can start paying the EMIs.

DISBURSEMENT

Customer loan will be disbursed after you identify & select the property or the
home that customer are purchasing and on their submission of the requisite legal
documents.
While the customer may be under impression that the list of documents asked for
it is rather extensive. Each and every single document asked for will be verified
& check to ensure their safety. This may take some time but the banks want to
ensure a clear title and will complete all the legal & technical verification to
ensure that they have full right to their home.
The 230 a clearance of the sellers or 371 clearance from the appropriate income
tax authorities (if appSBIable) is also needed on satisfactory completion of
above, on registration of conveyance deed and on the investment of your own
contribution, the loan amount (as warranted by the stage of construction) will be
disbursed by HDFC
The disbursement will be in favor of the builder/seller.

At HDFC Bank Home Loans, we disburse the loan amount after you identify
and select the property or home that you are purchasing and submit the requisite
legal documents.
While you may be under the impression that the list of documents asked for is
rather extensive, please note that it is for your own good. Each and every single
document asked for will be verified and checked to ensure your safety.
This may take some time but we want to ensure a clear title and will complete all
the legal and technical verifications to ensure that you have full rights to your
home.
Your loan will be disbursed after you identify and select the property or home
that you are purchasing and on your submission of the requisite legal documents.
The 230 A Clearance of the seller and / or 37I clearance from the appropriate
income tax authorities (if appSBIable) is also needed.
On satisfactory completion of the above, on registration of the conveyance deed
and on the investment of your own contribution, the loan amount (as warranted
by the stage of construction) will be disbursed by HDFC Bank.

Disbursement Documents

Property documents (as per P&D for respective states and as asked by
empanelled lawyers for individual cases)
Facility Agreement
Disbursal Request Form
Cheque Submission Form for Pre EMI and EMI cheques
ECS or Auto Debit for HDFC Bank account holders or Post Dated Cheques for
EMI / Pre EMI
Personal Guarantors Documents (PG Form, Photograph, Identity Proof,
Address Proof, Signature Verification and Income documents, if appSBIable)

In case of property is owned by a company


Memorandum of Entry
Form 8
NOC

AMOUNT

This largely depend on a no. of facts like ones age ,profession, salary, the city
one reside is among other such factors. it varies between 2.1lakh to 1crore
depending on the lender- as the rule of the thumb, depending on HFC one have
to cough up 15% - 20% of the loan amount as the down payment. For smaller
amount, this may not be much. But for figure remaining into lakh this could
make loads of difference. For e.g. an apartment of costing Rs 10 lakh may get
85% financing, so one will have to arrange for remaining Rs 15 lakh. If one
takes this into amount the additional thousands will definitely put a strain on
ones finances
.

TENURE
Generally the maximum tenure of home loans is 15 years, with a few lenders
offering tenure of 20 years or more.HDFC offers 15 year loan. The longer the
tenure, the more one pay in total interest but ones monthly payment will be less.
So depending ones earning potential & bank balance one can choose an
appropriate tenure. An important requirement of most of the banks/ HFCs is that
one pays up the entire loan before one retires. One can always prepay ones entire
loan amount before it is due. There is a trend to do away with the pre-payment
penalty being imposed by some lenders. So its best one checks on this as well.

INTEREST RATE

Without doubt the most important parameter to factor into ones calculations. The
interest rates may vary from institution to institution. Repayment is in the form
of EMIs (equated monthly installment). The longer the tenure, the more one
pays in interest, but ones monthly payment will be less. The interest rate of
HDFC is

Tenure Interest Type Interest Rate

.15 -20 Fixed 13.75 %


10 -15 Fixed 16 %
5 - 10 Fixed 16 %
1-5 Fixed 16 %
1-5 Floating 16 %
5 - 10 Floating 11.25 %
10 - 15 Floating 16 %
15 - 20 Floating 16 %

REFINANCE

This is concept that is yet to catch on in the home loan market but is bound to be
a major service in the months to come. Under this facility, one can take a new
loan from another bank/HFC to pay back another loan before its natural tenure.
It gives one the opportunity of prepaying ones high cost debt and get a lower
cost one. In todays falling interest rate scenario one should use this vehicle to
lower ones debt payment as much as possible. The lender facilitates the shift by
paying the outstanding and transferring the asset to other portfolio.

MISCELLANEOUS CHARGES
The interest rates and EMIs are not only the cost factor. Never underestimate
how much the processing fee and administration fees amount to. A 0.5%
administration fees and 0.5% processing fee on say, a Rs.500000 loan would be
Rs.5000. other timesit could be just one fee (either administration or processing
but could yet work out to be much more if it is considerably higher at, say, 2.5%
or 3%. The various other fees, which one is required to pay along with the
margin amount are:

INTEREST TAX:

This is tax payable on the interest paid on a home loan and not the principal.
This is sometimes included in the interest rate of the loan, or may be charged
separately as interest tax.

PROCESSING CHARGE

It is the fee payable to the lender on applying for a loan. It is either a fixed
amount not linked to the loan or may be a percent of the loan amunt. The loan
amount received by you can be less than processing fee.

PREPAYMENT PENALTIES

When the loan is paid back before the nd of the agreed duration a penality is
charged by some banks or companies, which is usually between 1% and 2% of
the amount being prepaid.

OTHERS

It is quite possible that some lends may levy a documentation or consultant


charge.

HDFC BANK ANNOUNCES ITS BASE RATE, VALID FROM JULY 1,


2010
HDFC Bank has announced a shift in the existing benchmark rate from Floating
Reference Rate (FRR)/ I-BAR the Base Rate (I-Base). The same will be
effective for all its mortgage products from July 1, 2010.
The HDFC Bank Base Rate (I-Base) has been fixed at 7.50%. This is the
minimum rate that HDFC Bank will charge to its new customers.

BENEFITS

Some of our key benefits are:


Guidance through out the process
Home loan amounts suited to your needs
Home Loan tenure upto 20 years
Simplified documentation
Doorstep delivery of home loan papers
Sanction approval without having selected a property.
Free Personal Accident Insurance (Terms & Conditions)
Insurance options for your home loan at attractive premium
OBJECTIVE OF THE STUDY:

The main objective of the study is to find out the tariff changes charges by other
banks in comparison to HDFC bank.

The aim of the study is to help HDFC to know where it lacks in loans and how
for the performance of other banks is better so that HDFC figure out the
common problems being faced by the customers while dealing in the
loan department so that further HDFC can improve its services and
schemes offered by them to their customers.

PROFITABLE PROPOSITION

The overall demand in residential sector has grown by about 7-8% in the past
few months as compared to the same period last year. The growth is on account
of two main factors:

One, income tax exemption.


Two, with no similar rebates available for individuals in the high income
group, they are creating a second asset.

Add to this the stable property prices over the last year and plunging interest
rates, planning for dream,] home could not have been better timed. Rock-bottom
interest rates, standardization of periodicity of interest calculation across lenders
(which make it easier to compare loans), lower interest charges, waiver of loan
appSBIation processing fee and a customer friendly attitude is reason enough to
celebrate the ascension of the home loan consumer as the king.

In response, private players like HDFC Bank, IDBI Bank, Standard Chartered
Bank and few others too lowered their rates.

Market leader HDFC also brought down its interest rate to 8.75% very recently,
to participate in the interest rate war. If one is still not satisfied with the lowered
loan rates theres more. Some industry watchers believe that the floating home
loan rate will slip to 8% for long term loans another two or three years.

Most banks have changed the way the interest is calculated from annual rest to
monthly rests. Under the annual rest method, the EMIs (equal monthly
installment) one pay through a year, are factored in as part-repayment of the
principal component only at the end of each year. In other words one has to pay
interest even on the installments one has paid until they are reduced from the
principal at the end of each year. Under monthly rests, the principal is lowered
by the appropriate amount each month. The thumb rule being that the more
frequently interest is calculated, the better for the creditor.

HDFC added monthly rests on its fixed interest loans apart from annul rests. As
a result the fall in the EMIs on fixed interest loans (where the interest rate is
constant for the entire tenure of the loan, irrespective of the changes in the
lending rates) is more pronounced than on floating rate loans (where the loan
interest rate varies with the changes in the interest rate). For example, the EMI
on a fifteen year fixed interest loan for Rs. 15 lakh has come down by Rs. 15
lakh has come down by Rs. 840, the corresponding fall in the EMI on a floating
rate loan is only 4165. apart from lowering the cost of ones loan, the switchover
to monthly rests has another advantage : it makes it easier to compare loans.

HOME LOAN

Home loans are loans you have access to, depending on whether you want to buy
or build a house and can also be used to repair or extend an existing house.

Who can avail of these loans?


According to lending institutions, any Indian resident who is over 21 years
of age at the beginning of the loan and below 65at its maturity can avail of the
loan. Salaried Employees as well as Self- Employed citizens can apply. NRI
Salaried and RBI Self Employed, under RBI guidelines, can approach only
nationalized banks and other HDFC for loans.

Why should one option for a loan to buy a house?

Taking a loan seems like a good option when the money at hand is insufficient to
buy the house of your dreams. Consider couples in their twenties and thirties.
They enjoy a good income currently, buy their accumulated capital isnt enough
to purchase a house. Whereas a home loan can give them access to capital their
current earnings.
Also, if you take a 10 years old loan when you are thirty, you could repay it by
the time youre forty. So you dont have to be burdened with the interest and are
free to plan your retirement savings.

The Quantum of loan that one can avail of :

Loan sanctioned depend on your repayment capacity which is based on your


current income and your future repayment capacity. You would include your
spouses name to enhance the loan amount.The maximum loan can be sanctioned
varies with each bank/institutions and ranges from Rs.10 lakhs to Rs. 1 crore.

Benefits of taking a home loan:

A home loan is very different from a personal loan like a car loan for instance.
You can utilize a home loan for financing an asset that will hold its value and
even appreciate over the period of the loan. Though its price could fluctuate in
the short terms, Total Estate will show capital appreciation over the years. The
value of your house generally while the loan remains constant. If you had opted
to wait, save up and buy a house, it would, in the long run cost you much more;
home loans also come with many tax benefits.

Tax benefits of taking a home loan:

The income tax authorities look with favor upon those servicing a housing loan
from specified financial institutions. And, it is up to you to be wise enough to
take advantage of this.

Section 24 of the Income Tax:


Interest on loan till Rs.1.5 lakhs per annum is exempted form income tax (under
section 23/24(1) of the Income tax act).

Section 88 of Income Tax Act:

You get a 20% rebate on repayment of principle during a financial year. Once
again, over the years, the principle repayment eligible for rebate has been
enhanced from Rs.10,000 to the current limit of Rs.20,000 Stamp duty,
registration fee or transfer of such house property to the assesses is also
considered under this amount.

Financial Institutions, which give, home loans:

Leading Banks Housing finance companies

FINANCIAL IMPSBIATIONS OF AVAILING A LOAN (SMALL OR BIG)

There are several expenses involved apart from repayment of the actual loan
amount:

1. Processing fees- A processing fee (PF) is charges at the time of submission


of the appSBIation form and covers expenses incurred for processing the
appSBIation form. This fee has to be paid upfront by the customer in some
cases, it is non-refundable.
2. Administration fees- to meet operating expenses.
3. Pre-EMI- A simple interest calculated on the disbursement amount in case
of a plot under construction.
4. EMI- The EMI is an abbreviated form of the equated money installment
and is simply referred to as monthly installment in common parlance. And, being
a self-explanatory term that is exactly what it is. The amount you will have to
pay you financier every month when repaying your loan. Being a monthly
payment, at the end of the year, you would have paid 12 EMIs.

TYPES OF LOANS AVAILABLE

Broadly two types- fixed rate and variable rate loans; while the former deals
with a fixed rate of interest over the entire duration of the loan, the latter has the
rate of interest changing according to the fluctuations in the market.

LOAN THAT ONE CAN AVAIL


Up to 85-90% of the total cost based primarily upon the individuals payback
capacity.

GENERAL CONDITIONS THAT GOVERN A HOME LOAN:

These are likely to vary with respect to the different types of housing loans:

The maximum period of the loan is normally fixed by HFIs. However,


HFIs do provide for different tenors with different terms and conditions.
The Installment that you pay is normally restricted to amount 45% of
your monthly gross income.
You will be eligible for a loan amount, which is the lowest as per your
eligibility. This is calculated on the basis of your gross income and
payback capabilities.
Some HFIs insist on guarantees from other individuals for due repayment
of your loan. In such cases you have to arrange for the personal
guarantee before the disbursement of your loan tasks place.
Most HFIs have a panel of lawyers who go through your property
documents to ensure that the documents are clear and are not
misrepresented. This is an added benefit that you get when you avail of a
loan from an HFI.
You repay the loan either through Deduction against Salary, Post dated
cheques, and standing instructions or by Cash/DD.

WHAT ALL ONE CAN TAKE THE LOAN FOR?

There are different types of home loan tailored to meet ones needs heres all
some of them.

Home purchase loan: This is the basic home loan for the purchase of
new home.
Home improvement loans: These loans are given for implementation
repair works & renovation in a home that has already been purchased by
the client.
Home construction loan: This is available for the construction of new
home.
Home extension loan: This is given for expanding or extending an
existing home for e.g.: addition of an extra room etc.
Home conversion loan: This is for those who have financed the present
home with home loan & wish to purchase& move to another home for
which some extra funds are required through home on version loan
,existing loan is transferred to the new home including the extra amount
required eliminating the pre payment of the previous loan.
Land purchasing loan: this loan is available for the purchasing of land
for both construction and investment purpose.
Bridge loan: these are designed for those people who wish to sell the
existing home & purchase another one. The bridge loan help finance the
new home, until a buyer is found for the home.

CHAPTER-2
COMPANY PROFILE
HDFC BANK

INTRODUCTION

HDFC (Home Development Finance Corporation) Home Loan, India have been
serving the people for around 3 decades and providing various housing loan
according to their varied needs at attractive and reasonable interest rates. Owing
to their wide network of financing, HDFC Home Loans provide services at
doorstep and helps you find a home as per your requirements.

COMPANY PROFILE

HDFC Limited founded in 1997 by Ravi Maurya and Hansmukh bhai Parekh, is
an Indian NBFS focusing on home loans. HDFC operates through almost 450
locations throughout the country with its corporate head quarters in Mumbai,
India. HDFC also has an international office in Dubai, UAE with service
associates in Kuwait. HDFC is the largest housing company in India for the last
27 years.
HDFC was amongst the first to receive an in principal approval from RBI to set
up a bank in the private sector, as a part of the RBIs liberalization of the Indian
banking industry. It was incorporated on 30th august 1994 in the name of HDFC
Bank Limited, with its registration office in Mumbai. HDFC began its
operations as a scheduled commercial bank on 16th January 1995.
ABOUT THE PROMOTER

HDFC, the promoter, is Indias premier housing finance company and enjoy an
impeccable track record in India as well as in international markets.

Since its inception in 1997, HDFC has maintained a consistent growth in its
operation and profitability. Its outstanding loan portfolio covers over a million
dwelling units. HDFC has developed significant expertise in retail mortgage
loans to different market segment and also has a large corporate client base in
relation to its housing related credit facilities and its investment in portfolio.

With its tremendous brand equity, the strong reputation in the Indian and
international financial services market, large shareholder base and unique
consumer franchise, HDFC was ideally positioned to promote a bank in the

Indian environment. HDFC (together with its fully owned subsidiary HDFC
Investment Limited) owns about 31 % of the equity. They had started with a
strategic alliance with the Natwest group in UK with 20% equity, which has
divested later on. The bank has also signed a memorandum of understanding for
strategic business collaboration with chase Manhattan Bank in Feb. 2, 1999.
BUSINESS PHILOSOPHY

The mission of the HDFC Bank is to be world class Indian bank. This would
imply a bank that would meet various financial needs of its customers in a
convenient and cost effective manner at international standard of service.

The bank seeks to achieve the status of a preferred organization among its
major constituents- customers, shareholders, regulators, employees, suppliers
etc. while maintaining the highest level of integrity and corporate governance.

The business philosophy at HDFC bank is based on four core values: operational
excellence, customer focus, and product leadership and people competitors.

The Bank faces the strong competition in all of their principal lines of business.
Their primary competitors are large pubSBI sector banks, other private sector
banks, foreign banks and in some product areas, non-banking financial
institutions.

WHOLESALE BANKING

Principal competitors in wholesale banking are pubSBI and new private sector
banks as well as foreign banks. The large pubSBI sector banks have traditionally
been the market leaders in the commercial lending. Foreign banks have focused
primarily on serving the needs of multinational companies and the Indian
corporations with cross- border financing requirements including trade,
transactional and foreign exchange services, while the large pubSBI sector banks
have extensive branch networks and large local currency funding capabilities.

RETAIL BANKING

In retail banking, their principal competitors are the large pubSBI sector banks,
which have much larger deposit bases and branch networks,, other new private
sector banks and foreign banks in case of retail loan products. The retail deposit
shares of the foreign banks are quite small in comparison to the pubSBI sector
banks, and have also declined in the last five years, which we attribute
principally to the competition from new private sector banks. However, some of
the foreign banks have a significant presence among non-resident Indians and
also compete for non-branch based products such as auto loans and credit cards.
They face significant competition primarily from foreign banks. In provision of
debit cards and also expect to face competition from foreign banks when we
begin offering credit cards. In mutual fund sales and other investment related
products, their principal competitors are brokers and foreign private banks.

TREASURY

In treasury advisory services for corporate clients, the compete principally with
foreign banks in foreign exchange and derivatives trading as well as SBI and
other pubSBI sector banks ion the foreign exchange and money market business.

LOANS

HDFC brings back you a wide range of loans to cater your financial needs.
The bank offers the following loans:

1) Personal loans.
2) Consumer loans.
3) Auto loans
4) Loans against shares
5) Loans against RBI bonds
6) Loans against insurance poSBIy
7) E- Instant loans give the facility of loans approval in the 60 second on
the internet.
8) HDFC has offices spread all over the country. This extensive network
helps HDFC in providing services to large and well spread out clients.
This network of interconnected offices (on data circuits) helps HDFC to
process appSBIation for purchase of property anywhere in India. HDFC
has further established an office in Dubai and service associates in
Kuwait, Oman and Quarter to make to easier for Middle East based non-
resident Indians to apply for loan to HDFC-India.
9) HDFC is pioneer of housing finance in India and has been a leader in
business for the last 23 years. HDFC has vast experience and a very
committed and skilled staff to handle housing loan appSBIations and
solving customer problems.

HDFC LOAN SCHEME PURPOSE

HDFC Limited offers loans for the following purposes:

Land purchase
Home construction/purchase
Home extension
Home improvement loans
Short-term bridge loans
Non-resident premises loans for professionals.

LOAN AMOUNT

You can avail of maximum of up to 85% of the cost of the property, including
the cost of the land.

LOAN TENURE

You can repay the loan over a maximum period of 20 years under both FRHL
and ARHL. Repayment will not ordinarily extend beyond your age of retirement
(if you are employed) or on your reaching 65 years of age, whichever is earlier.
However, HDFC will endeavor to determine the repayment period to suit your
convenience.

RATE OF INTEREST

The rate of interest of HDFC is 8.75%.under the monthly rest option, interest is
calculated on monthly rests. Principal repayment is credited at the end of every
month.
At HDFC you have the choice between the normal FRHL and the innovative
ARHL. Alternatively you can also avail the part of the loan under FRHL and
balance under ARHL.
HDFC also offers you the option to switch between schemes for the nominal fee.
Interest rates on ARHL will be linked to HDFCs Retail Prime Lending Rate
(RPLR) which currently is 13.75% .The rate on your loan will be revised every
three months from the date of first disbursement, if there is a change in RPLR,
i.e. 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 the term of the loan, and vice versa when the interest
rate decreases).customer will be provided with an annual statement indicating
the details of the interest and principal payment made during the year.

SECURITY

Security for the loan normally is first mortgage of the property to be financed
and/or such other collateral security as may be necessary. Interim security may
be required, if the property is under construction. Collateral or interim security
could be assigned to HDFC of life insurance poSBIies, the surrender value of
which is at least equal to the loan amount, guarantees from sound and solvent
guarantors, pledge of shares and such other investments that are acceptable to
the HDFC.

Loans from HDFC are available even if you are availing a housing loan from
your employer. HDFC has already entered into arrangements with several
employers enabling employees to avail of loans both from the employer as well
as HDFC for the same property. Please do ensure that the title of the property is
clear, marketable and free from encumbrance. To elaborate there should not be
any existing mortgage, loan or litigation which is likely to affect the title to the
property adversely.
DOCUMENTS/SUPPORTING DOCUMENTS TO BE ATTATCHED:

FOR ALL THE APPSBIANTS:

1) Allotment letter of the o-operative society/association of the apartment


owners.
2) Copy of approved drawings of proposed
construction/purchase/extension.
3) Agreement for sale/sale deed/detailed cost estimate from
architect/engineer for the property to be
purchased/constructed/extended/renovated.
4) If you have been in your present employment/business or profession for
less than a year, mention an a separate sheet details of the of the
occupations for previous five years, giving position held, reason for
change and period of same.
5) AppSBIable processing fees.
6) Proof of residence: attested copy of any one of the following:

a) Ration card
b) Passport
c) Driving SBIense
d) Voters identity card
e) Current telephone bill/electricity bill/gas bill
7) Proof of identity: attested copy of ay one of the following:
a) Passport
b) Driving SBIense
c) Voters identity car5d identity card issued by the employer (if
employed in state/central government)
d) PAN card
8) Certificate of loan outstanding issued by the lender (for refinance cases
only)
9) Any other information regarding your repayment capacity that is
necessary and will assist HDFC in appraising the loan proposal.

ADDITIONALLY

IF YOU ARE EMPLOYED:

1) Verification of the employment form with only part I filled in.


2) Latest original salary slip/salary certificate showing all deductions.
3) If your job is transferable, permanent address where correspondence
relating to the appSBIation can be mailed.
4) A letter from your employer agreeing to deduct the EMI towards the
repayment of the loan from your salary. This will expedite the processing
of your loan appSBIation.
5) Your updated original bank pass book/s or original bank statement/s
showing salary and saving entries for the last six months.
6) A photo-copy of your Form-16 (issued by your employer) for the last
assessment year.

IF YOU ARE SELF EMPLOYED:


1) Balance Sheets and Profit & Loss Accounts of the business/profession
along with copies of individual income tax returns for the last three years
certified by the Chartered Accountant.
2) A note giving information on the nature of your business/profession,
form of organization, clients, suppliers, etc.
3) Copies of individual tax chalans for the last three years
4) Copy of advance tax chalan (if any)
5) Your updated original Bank Pass Book/s or Original Bank Statement/s
showing saving s entries for the last twelve months.

TAX BENEFIT

You are eligible for certain tax benefits on principal and interest components of a
loan under the Income Tax Act, 1961.

ELIGIBILITY

The repayment capacity as determined by the HDFC will help in deciding how
much we can borrow (the cost of the property or Rs.1crore whichever is lower).
Repayment capacity takes into consideration factors such as income, age,
qualifications, number of dependents, spouses income, assets, liabilities,
stability and continuity of occupation and saving history. And, of course,
HDFCs main concern is to make sure you can comfortably repay the amount
you borrowed.

ABOUT THE PRODUCT

HDFCs Home Loans offers you various unique benefits and are easy to arrange
and repayable in easy monthly installments. The terms of the loan can be
structured according to the customer requirement.

Home loans can be applied for by either individually or jointly. Proposed owner
of the property, in respect of which the loan is being sought, will have to be co-
appSBIants. However, the co-appSBIants need not be co-owners. Loans can
avail up to a maximum of 85% of the cost of the property (including the cost of
the land). HDFC lends up to a maximum of Rs. 10000000 on a home loan to an
individual. You can repay the loan over a maximum period of 20 years. They
determine the loan amount after evaluating the repayment capacity of the
individual. HDFCs main concern is to help individuals comfortably repay the
borrowed amount.

SUPERIOR PROCESSING CAPACITY:

HDFC has over the years invested substantially into the computer systems and
training. This has enabled HDFC to respond to customer needs and build up
capabilities to approve loan on the spot or disburse them fast.

BRANCH NETWORK:

HDFC has offices spread all over the country. This extensive network helps
HDFC in providing service to large and well spread out clients. This network of
interconnected offices (on data circuits) helps HDFC to process appSBIations for
purchase of property anywhere in India. HDFC has further established an office
in Dubai and service associates in Kuwait, Oman, Qatar, Bahrain and Saudi
Arabia to make it easier for Middle east based non-resident Indians to apply for
the loan to HDFC-India.

EXPERIENCED TRAINED STAFF:

HDFC is a pioneer of housing finance in India and has been a leader in the
business for the last 25 years. HDFC has vast experienced and very committed
and skilled staff to handle housing loan appSBIations and solving customer
problems.

FREE COUNSELLING:

HDFC believes that it is in the business of providing solutions to an individuals


need for owing a house, and not just in the business of providing finance.
Keeping this in mind HDFC will provide free counseling to on how and where
to buy a house in India (property services) or what are the prices and trends in
the real estate market or what precautions one should take before buying a
house. This service is offered at any of the HDFCs offices.

LEGAL AND TECHNICAL GUIDANCE:

HDFC has qualified legal and technical staffs who liaise with developer to
collect and scrutinize the property documents and permissions. We have master
files of most projects being developed by the reputed developers. It has always
been HDFCs endeavor to protect the interest of the borrower, as we believe that
the buying a house is one of the most Important decisions in this life.

FLEXIBLE (CUSTOMIZED) REPAYMENT SCHEMES:

Keeping in mind the fact that each individual has unique problem requiring
unique solution, HDFC has developed various repayment options like Step Up
Repayment Facility (SURF), Flexible Loan Installment Plan (FLIP) Balloon
Payment plan and Structured Repayment Plan.

STEP UP REPAYMENT FACILITY

HDFC Ltd has a hitherto with you, right through .This statement HDFC
proves time and Again by developing close relationship with individual
customers and by constantly
Developing and marketing in the market new and innovative products that
increase the
Comfort level of the customers. Along the same philosophy HDFC came up with
Step Up Repayment Facility which once again reassures customers that HDFC
helps you achieve your dream.

This facility is especially helpful to those customers who want to get a loan on
an amount
that is not falling within the permissible limit of their repayment capacity. It also
is in line with HDFCs aim to provide greater degree of personalization in service
and the tools. Hence there can be the situation wherein the appSBIant is not in
the position to pay the required EMI which is calculated by the ILPS (Individual
loan processing system).HDFC in this case offers to let the appSBIant use one of
the two plans to repay the loan amount.

The EMI Chooser 1

In this plan the appSBIant gets the advantage from HDFC to select the amount
that
he wants to pay as his fist EMI. This means that HDFC will let the appSBIant
decide
what amount he can comfortably pay to HDFC in the first term of his Loan
Repayment Schedule. The system will calculate the next two EMIs for the next
two terms

The customer can hence decide when he wants to repay the maximum amount of
the Loan to HDFC and when he wants to repay minimum leftover or remaining
amount of the loan in the form of still smaller EMIs.
The EMI Chooser 2

This plan is an extension of the aforementioned plan .In this plan HDFC helps
the AppSBIant by letting him choose two EMIs .This means that the AppSBIant
can select the amount that he wants two pay for both the First and the Second
terms of his repayment schedule. This translates into more help and more
convenience to the appSBIant. However the benefits of these plans dont stop
here.

The AppSBIant can also allocate the term length for which he wants to pay what
amount
This translates into a great advantage to the AppSBIant .He can now link

1. His current salary


2. The rate of average increment,
3. His existing and expected obligations,
4. His existing and expected expenses
5. The length of the term among others.

HDFC can hence assist the AppSBIant in developing a much more personalized
loan plan as compared to its competitors in the Housing Loan market.

The AppSBIant can also save money by using these plans .This is because the
total Outflow in case of a regular plan is more as compared to these special
plans. The AppSBIant will hence obtain more benefit in case of Prepayment and
elsewhere.

C. All Loans from HDFC Ltd are subject to Tax exemption and be treated as
Rebate. Hence HDFC lets the customer save their hard earned money.

FLEXIBLE LOAN INSTALMENT PLAN (FLIP)

Another First of its kind product from HDFC .This is also to assist the
AppSBIant to easily secure a loan in the following condition. FLIP is used when
the appSBIant and co-appSBIant want to jointly repay the loan. There is
however a problem in the situation which would otherwise not allow the loan to
be sanctioned. There are two appSBIants hence two incomes .Therefore in the
joint payment they can combine their income to repay the loan .Let there be Mr.
A and B who want to take a loan for 14 years .A is the father and B is the son of
A .Now consider the situation in which A and B want to take a loan and jointly
repay it .But A is 52 years old and B is only 25 .Hence A will retire after 8 years
and will not be repaying the EMI but B can continue to repay the loan. In that
case although there will be a problem at other places but in HDFC this is solved
by taking different incomes in the terms. Hence the income that will be
considered earlier will be the fathers income and at his retirement or at any
other selected stage of repayment we will begin to consider only the income of
the son.

The advantage of FLIP in terms of the AppSBIant is that of joint payment,


personalization, easy repayment, and freedom from many possible problems. In
the Illustration the father is going to pay only for 105 months and after that we
are to consider the sons salary only for the next remaining 60 months.

PARI PASSU/SECOND MORTGAGE ARRANGEMENT:

HDFC has a tie-up with a large number if pubSBI sector organizations and
banks which enable us to offer loans to your employees with the flexibility of
their spouse also availing a loan from his/her own employer.

SAFE DOCUMENT STORAGE FACILITIES:

HDFC has state of art storage facilities which are theft and fire proof, at various
locations where loan and property documents are stored. In this way valuable
documents are stored safely over the period of the loan and are released almost
immediately after a customer repay his loan.
ELECTRONIC MAIL:

HDFC through its E-mail services can promptly respond to queries. In addition,
HDFC can promptly send its appSBIation form cum brochure and other detail on
its loan products by e-mail to interested individuals. For Non-resident Indians
our interactive website offers another means of contacting us. In our effort to
reach out globally dispersed Non-resident Indians, we will continuously enhance
our website.

HOME CONVERSION LOAN:

HDFC offer the option of a home conversion loan to its existing customer who
are interested in moving to a new house. Through this scheme the customer can
apply to have their existing loan transferred towards the purchase of the new
home. Customers may also apply for an additional loan amount for the purchase
of the new house. This gives the customers the option of selling t6heir existing
house if they wish to, without having to repay their old loan
APPSBIATION CAN BE MADE BEFORE SELECTING THE
PROPERTY:

Individuals may make an appSBIation for the loan even if the property has not
been selected or the construction has not commenced. HDFC can provide
assistance in locating an appropriate house to such customers.

HOME IMPROVEMENT LOANS:

As an exclusive offer to its existing customers HDFC offers Home Improvement


Loan up to 100% of the improvement cost as compared to the home
improvement loans up to 70% of the improvement cost offered to the general
pubSBI.

FEE:

A processing fee of 0.5% of the loan amount applied for rs.5 per rs.1000 of the
loan applied for is payable when the appSBIation form is submitted to HDFC.
This fee is in the respect of costs incidental to the appSBIation. For example:

Loan applied for


fees

Rs.20000
Rs.100
Rs.100000 Rs.
500

On approval of the loan, a loan offer is made to you on acceptance of the offer.
You have to pay an administrative fee of Rs.0.5% of the loan approved. You can
also pay the processing fee and administrative fee upfront i.e. 1% of the loan at
the time of submission of the loan appSBIation itself. This fee is in respect of the
costs incidental to the appSBIation. Taxes as appSBIable will be charged on the
fees collected.

CHARGES:

For Fixed Rate Home Loan (FRHL) an early redemption charge of 2% of the
amount being prepaid is payable, if the amount being repaid is more than 25% of
the opening balance. However under Adjustable Rate Home Loan (ARHL)
option early redemption charges of 2% is payable only in case of commercial
refinance. You may be required to submit the copies of your Bank Statements or
any other documents that HDFC deems necessary to verify the source of
prepayment.
You can make payment for fees and charges by cheque marked payees account
only drawn on a bank in a city where HDFC has an office or by demand draft
(payable at par to HDFC).

HOW TO APPLY

Customer can either download (in PDF format) the appSBIation form or get the
appSBIation form by E-mail. Alternately the customers can collect the
appSBIation form from any of your nearest HDFC offices. Customer need to
submit it along with supporting documents and processing fee at any HDFC
office that is convenient to the customer. Customers can make payments by the
cheque marked payees account only drawn on a bank in a city where the
HDFC has an office, by demand draft (payable at part to HDFC) or by cash.
Customer can make an appSBIation at any time after they have decided to
acquire a house even when the house has not been selected or construction has
not commenced.
HDFC will consider your appSBIation, make enquiries as it deems necessary
and convey its decision to you. On acceptance of the offer, you will have to pay
an administrative fee for the loan approved. Customer can take the disbursement
of the loan after the property has been completed and you have invested your
own contribution in full (own contribution is the total cost of the property less
HDFCs loan). The loan will be disbursed in full or in suitable installments
(normally not exceeding three in number)taking into account the requirement of
the funds and the progress of the construction, as assessed by HDFC and not
necessarily according to the builders agreement.
STATE BANK OF INDIA

INTRODUCTION

State Bank of India (SBI) is India's largest commercial bank. SBI has a vast
domestic network of over 9000 branches (approximately 14% of all bank
branches) and commands one-fifth of deposits and loans of all scheduled
commercial banks in India. The State Bank Group includes a network of eight
banking subsidiaries and several non-banking subsidiaries offering merchant
banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance. The eight banking subsidiaries
are: State Bank of Bikaner and Jaipur (SBBJ),State Bank of Hyderabad
(SBH).State Bank of India (SBI),State Bank of 13 Indore (SBIR),State Bank of
Mysore (SBM),State Bank of Patiala (SBP),State Bank of Saurashtra (SBS) and
State Bank of Travancore (SBT). Today, State Bank of India (SBI) has spread its
arms around the world and has a network of branches spanning all time zones.
SBI's International Banking Group delivers the full range of cross-border finance
solutions through its four wings - the Domestic division, the Foreign Offices
division, the Foreign Department and the International Services division.

PROFILE

The SBIs powerful corporate banking formation deploys multiple channels to


deliver integrated solutions for all financial challenges faced by the corporate
universe. The Corporate Banking Group and the National Banking Group are the
primary delivery channels for corporate banking products.

The Corporate Banking Group consists of dedicated Strategic Business Units


that cater exclusively to specific client groups or specialize in particular product
clusters. Foremost among these a specialized group is the Corporate Accounts
Group (CAG), focusing on the prime corporate and institutional clients of the
countrys biggest business centers. The others are the Project Finance unit and
the Leasing unit. The National Banking Group also delivers the entire spectrum
of corporate banking products to other corporate clients, on a nationwide
platform. The bank is also looking at opportunities to grow in size in India as
well as internationally. It presently has 82 foreign offices in 32 countries across
the globe. It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP
Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a
formidable group in the Indian Banking scenario. It is in the process of raising
capital for its growth and also consolidating its various holdings. Throughout all
this change, the Bank is also attempting to change old mindsets, attitudes and
take all employees together on this exciting road to Transformation. In a recently
concluded mass internal communication programme termed Parivartan the
Bank rolled out over 3300 two day workshops across the country and covered
over 130,000 employees in a period of 100 days using about 400 Trainers, to
drive home the message of Change and inclusiveness. The workshops fired the
imagination of the employees with some other banks in India as well as other
PubSBI Sector Organizations seeking to emulate the programme.

HISTORY

The origins of State Bank of India date back to 1806 when the Bank of Calcutta
(later called the Bank of Bengal) was established. In 1921, the Bank of Bengal
and two other Presidency banks (Bank of Madras and Bank of Bombay) were
amalgamated to form the Imperial Bank of India. In 1955, the controlling
interest in the Imperial Bank of India was acquired by the Reserve Bank of India
and the State Bank of India (SBI) came into existence by an act of Parliament as
successor to the Imperial Bank of India.

Today, State Bank of India (SBI) has spread its arms around the world and has a
network of branches spanning all time zones. SBI's International Banking Group
delivers the full range of cross-border finance solutions through its four wings - the
Domestic division, the Foreign Offices division, the Foreign Department and the
International Services division.

SBI RECENT ACHIVEMENTS AND MILESTONES:


AWARDS:
SBI has been the proud recipient of the ICRA Online Award - 8 times, CNBC
TV 18, Crisil Award 2006 - 4 Awards, The Lipper Award (Year 2005-2006) and
most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year Award
2007 and 5 Awards for our schemes.

SBI Card reaches three million milestones:


SBI Card, a joint venture between State Bank of India and GE Money,
announced yet another landmark achievement of crossing the three million
cardholders-marks. Roopam Asthana, CEO-SBI Card, said, "This milestone is
even more remarkable as we have added one million cardholders in just ten
months. Our objective is to accelerate the pace of growth by extending the
benefits to a broader range of consumers in Tier II cities, along with improved
value propositions for the urban affluent customers." SBI Card recently signed
up Indian cricketer Yuvraj Singh as its brand ambassador.

SBI joins Chinese bank to touch 10,000 branches:

PubSBI sector State Bank of India on Sunday became only the second bank in
the world to have 10,000 branches when Union Finance Minister P
Chidambaram inaugurated its latest branch here. Speaking on the occasion,
Chidambaram said China's ICBC Bank was the other bank to have 10,000
branches. Opening 10,000 branches was a great feat. "It is not an easy milestone
though the SBI was the bank of the government and Indian people even before
other banks were nationalised," he said. People all over the world, including the
Chinese, would now know about this small village where the 10000th branch of
the SBI had been opened, he said adding they would be amazed by the bank's
growth. The bank should be proud of the achievement he said and wished that
the bank opened one lakh branches. The Minister said out of the over 100 crore
people, seventy 75 per cent did not have any type of insurance. Similarly, 50 per
cent of the 11 crore farmers did not have bank account. Banks should go to the
people and enroll them as account holders. 'That is what economists say is
financial inclusion,' he said.

Main SBI Home Loan Schemes

SBI Realty : Purchase of plot of land


SBI Optima : Loan to existing home loan borrowers
SBI Green Home Loan : For homes that fight against the adverse
climate change, SBI offers 0.25% concession in interest rate and waiver
of processing fees
SBI Flexi : Combination of floating and fixed interest rate, in a pre
determined ratio
NRI Home Loans : Loans for NRIs and PIOs
SBI Freedom : Pledging other financial security than mortgaging the
house
SBI Max Gain : Operate your home loan account like your SB or
Current Account

PRODUCT RANGE OF COMPANY/INDUSTRY:

The products and services provided by the SBI are in various fields, such as:
Banking services
NRI services
International banking
Corporate banking
Agricultural banking
International banking

SBI HOUSING LOAN


Features
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 appSBIant's spouse and
children to compute the eligible loan amount.
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
appSBIant.
If all the required documents are submitted by the appSBIant, SBI Home
Loan is sanctioned within 6 days of the date of submission.
The appSBIant 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.
SCHEMES PROVIDED BY SBI

The Most Preferred Home Loan provider SBI Bank offers a Home Loan with
Attractive Interest Rates with Latest Schemes and Benefits. SBI also provides a
Housing loan with different schemes. Schemes Are:-

1. SBI Easy Home Loan


2. SBI Advantage Home Loan
3. SBI Housing Finance Scheme
4. SBI Happy Home Loans
5. SBI Life Style Loan
6. SBI Green Home Loan
7. SBI Home Plus
8. SBI Home Line
9. SBI MY HOME CAMPAIGN

PRODUCTS

'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 SBI
poSBIies or NSCs.

ELIGIBILITY

The minimum age of the appSBIant is 18 years, on the date of the sanction of the
loan. The maximum age limit for a Home Loan appSBIant is 70 years. It is the
maximum age limit, within which the loan should be fully repaid. The
appSBIant should consist of sufficient, regular and continuous source of income
for repaying the loan.

DOCUMENTS
Completed AppSBIation Form with one Passport Size Photograph
Identity Proof - the appSBIant can make use of his/her PAN Card/Voter ID/
Passport/Driving SBIense, for the purpose.
Residence Proof - the appSBIant can make use of his/her Recent Telephone Bill/
Electricity Bill/Property tax receipt/Passport/Voters ID
Proof of business address in respect of businesspersons/ industrialists
Sale Deed, Agreement of Sale, Letter of Allotment, Non Encumbrance
Certificate, Land/Building Tax paid receipt etc.
Copy of Approved Plan and approval from the Local Body
Statement of Bank Account/ Pass Book for last 6 months
INTEREST RATE (SBAR is currently 11.75%)

Year 1 - 8% fixed
Year 2 & 3 - 9% fixed
Year 4 onwards - For loans up to 50 lakhs, 9.25% floating.
For loan amount over 50 lakhs, 9.75% floating

Eligibility Criteria & Documentation required for SBI Home Loan

Salaried Self employed


Age 21years to 60years 21years to 70years
Income Rs.1,20,000 (p.a.) Rs.2,00,000 (p.a.)
Loan Amount
5,00,000 - 1,00,00000 5,00,000 - 2,00,00000
Offered
Tenure 5years-20years 5years-20years
Current
2years 3years
Experience
1) AppSBIation form with
1) AppSBIation form with
photograph
photograph
2) Identity & residence proof
2) Identity & residence
3) Education qualifications
proof
certificate & proof of business
3) Last 3 months salary
Documentation existence
slip
4) Business profile,
4) Form 16
5) Last 3 years profit/loss &
5) Last 6 months bank
balance sheet
salaried credit statements
6) Last 6 months bank statements
6) Processing fee cheque
7) Processing fee cheque

Other Products from SBI (State bank of India)


1) SBI Personal Loan
2) SBI Card
3) SBI Home Loan
4) SBI Housing Loan

LOAN TENURE

You can repay the loan over a maximum period of 25 years under both FRHL
and ARHL in SBI . Repayment will not ordinarily extend beyond your age of
retirement (if you are employed) or on your reaching 65 years of age, whichever
is earlier.

PROCESSING FEE

FEES
RUPEES

Upto 5 lakh
Rs. 1000
5lakh-10lakh
Rs. 2000
10lakh-20lakh
Rs. 5000
20lakh-50lakh
Rs. 7000
50lakh-1crore
Rs.8000
1crore-5crore
Rs.10, 000
Above 5 crore
Rs.20, 000

PREPAYMENT CHARGES

If paid from own source- Nil,


In other cases- 2% on principal amount prepaid

LATE PAYMENT CHARGES


If paid from own source- Nil,
In other cases- 2% on principal amount prepaid

CHAPTER-3
RESEARCH METHODOLOGY
OBJECTIVES OF STUDY

The study mainly aims at studying the housing activities in Faridabad and
financing by SBI & HDFC in FARIDABAD. In addition to measuring the service
quality being provided by SBI & HDFC.

The study specifically aims at :

Studying the importance of housing, demand for housing and house


finance in India.
Evaluation of the role of SBI & HDFC in financing of houses in
FARIDABAD.
To identify the popular schemes of SBI & HDFC.
To analyze the trends in housing finance by SBI & HDFC.

To ascertain the problems of borrowers of SBI & HDFC while availing


housing loans.
To evaluate the impact of tax considerations on housing finance with
respect to SBI & HDFC.
Measuring the service quality being provided by SBI & HDFC to its
customers in FARIDABAD.

SCOPE OF THE STUDY


The scope of the proposed study is restricted to FARIDABAD divisions of
both SBI and HDFC. FARIDABAD divisions of these organizations extend the
facilities of housing finance to its clients belonging to FARIDABAD region in the
State of Andhra Pradesh.

1) SBI HOUSING FINANCE LIMITED (SBI):

SBI Housing Finance Limited (SBI) as a subsidiary of STATE BANK OF


INDIA (SBI) was incorporated on June 19th 1989, to accelerate the development of
housing. SBI is the second largest Housing Finance Company in India.

To each one a home of his own is the main objective of SBI. It renders
liberal financial assistance to holders and others for purchase/construction of
residential houses/flats. The following are the other objectives of SBI:

(i) To provide loans to sector/private sector employees to construct


residential accommodation for their employees.
(ii) To mobilize insurance linked long term savings from the pubSBI to
deploy such funds in long-term finance in the housing sector.
(iii)To facilitate approval of builders in advance and offer them construction
finance to enhance customer servicing with a real estate market
information.
36

SBI Housing Finance provides longterm finance to resident individuals of


India and Non-Resident Indians (NRIs) for the purchase, construction, repair and
renovation of new / existing flats / houses and mortgage. The Company is the only
one of its kind that offers a Life Insurance PoSBIy as collateral security to back its
loans. SBI also provides finance on existing property of business / personal needs.
The company has been growing steadily over the last two decades both in terms of
business and profits.

There are 6 Regional Offices, 112 Area Offices consisting of Operating


Offices and Extension Counters spread across Nation. SBI has got its Registered and
Corporate Office at Mumbai. It has a total team of 2,500 dedicated employees in the
Country.

With these SBI had widest network amongst all the Housing Finance
Companies in India. FARIDABAD branch of SBI was established in the year 1993
with just 20 employees and today it has a total of 6 branches in FARIDABAD at
various places like Ameerpet, Dilsukhnagar, Gacchibowli, Himayathnagar,
Kukatpally, and Secunderabad. There are about 107 fulltime employees in SBI,
FARIDABAD branches and more than 500 company appointed Direct Sales Agents
4
(DSAs) and Home Loan Agents (HLAs) working under FARIDABAD branches .

2) HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC):

The Housing Development Finance Corporation (HDFC) was formally


promoted and incorporated on October 17, 1977 under the chairmanship of
Deepak S. Parekh. HDFC was promoted by HDFC, the International Finance
Corporation and His Royal Highness Aga Khan. Each party had contributed 5% of
the equity of the Corporation.

HDFC from its very first day of its operations was built as a principle centered
organization. An organization built on the basis of fairness and kindness, efficiency and
effectiveness. It has gradually built trust among the people strengthening
3
7

communications and participative management style. Trust is the very cement for
meaningful relationships and an open and creative management style. It is the very
foundation for measuring worth.

Objective of HDFC is to enhance residential housing stock and to promote


house ownership by providing individual household/families with long term housing
loans at commercially viable rate. More specifically, the objectives of HDFC are:

i. To finance mainly low and middle income group of people to


purchase/construct a single family dwelling unit primarily for self
occupation, and
ii. Granting loans to the co-operative sector for housing their employees.

HDFC provides longterm finance to individuals for the purchase, construction,


repair and renovation of new/existing flats/houses and mortgage loans. HDFC is
specialized in the field of housing. Its own name was constituted from three words the
interlocking of three areas of housing, finance and development. HDFC being a pioneer
organization in the field of housing finance is a leading institution in retail lending
housing finance at time when no other major player was in the field. HDFC has
consistently endeavored to provide top notch service to its customers through its
extensive network of 87 offices which inter linked Nation wide, and introduced
innovative value added products to enhance both its range and quality of service.

HDFCs FARIDABAD branch was opened in the year 2000 and with just 15
employees and today HDFC has got 6 branches in FARIDABAD and Secunderabad
at various places like Basheerbagh, Dilsukhnagar, Gacchibowli, Kukatpally,
Panjagutta and Tarnaka with 200 fulltime employees and many Marketing Agents
5
working under these branches .
I INTRODUCTION:

This chapter aims at studying the need for the study, objectives of the study
and the selection of the sample. The study also deals with method of collection of
data, tabulation and the preparation of the report. The limitations of the study and
the literature survey are also given.
Shelter is a basic human need. Securing ownership of a house can raise the
welfare of the household that lives in it and it enhances productivity, efficiency and
creativity. But housing development has been slow. Because housing is a large
investment, it requires long-term finance. Other factors hindering housing
development are inflation, interest rate controls, instability of financial markets and
the inadequate legal system. Housing in India has been one of the important
economic activities which serve to fulfill many of the plan objectives: providing
shelter to the needy, raising an environment conduct for better health and sanitation,
creating additional employment and achieving urban, rural and interpersonal equity
in terms of standard of living. Further, housing could lead to the generation of
additional savings at all levels. Shelter, like food and clothing, is one of the most
important inputs which have a profound impact on the socio-economic and physio-
psychological development of human beings. Housing is important service
development in both economic and welfare terms. It is not only consumption good
but also a productive investment

Research design
Research Design: A research design is the specification of methods and
procedures for acquiring the information needed. It is the overall operational
pattern or framework of the project that stipulates what information is to be
collected from which source by what procedures. Research design denotes the
description of the research design. The aim was to collect relevant information,
which fulfill our requirement and can be analyzed at a later stage of study
without any problem. This was to be done in minimum expenditures and least
efforts and in a set period of time. For my research I select DESCRIPTIVE
RESEARCH DESIGN to know the Comparative Study Of The Home Loan
Scheme Offered By SBI Bank And HDFC Bank and Assessing The level of
Consumer Satisfaction in FARIDABAD City. This helped us in having enough
provision for protection against bias and maximizes reliability.
Descriptive study, as its name implies, is designed to describe something for
example, the characteristics of the users of a given product, the degree to which
product use varies with income, age, or other characteristics.

Advantages Of Descriptive Study:

Involve relatively large number of observations.

Analysis is more objective.

Averages and percentages are calculated.

Questionnaires:
This method of data collection is quite popular, particularly in case of big
enquiries. A questionnaire is a method of obtaining specific information about a
defined problem so that data, after analysis and interpretation, results in a better
appreciation of the problem. In order to motivate respondents and to get best of
the information from them, I was tried to build questionnaire that is interesting,
serve my objective, unambiguous and easy to complete and is not burdensome.
The aim was to enable ease in analysis and facilitate easy classification of
response to get meaningful outcome within acceptable limits.
A few were in disguised, where the true purpose was hidden but was
sufficient to bring in the right information from respondents. Depending on the
requirement, the questionnaire was prepared. The sequence of questions in
questionnaire was kept in a logical order. It included questions based on Simple
Category scale, Multiple Choice Single Response scale, Likert Scale and Rank
Order scale. After following a series of Trial and changes the finally evolved
questionnaire was being used for survey work.
METHODOLOGY

Proposed study is an empirical one and is based on secondary data.

1) Secondary Data:
The sources of secondary data include Annual Reports, manuals, official
records, and other published sources pertaining to SBI & HDFC.
Informal discussions held with the borrowers and officials to eSBIit the
information with a view to gain deeper in-sights into the operational aspects of
housing finance in the selected areas of the study.

2) Sample:

There are many housing finance institutions in India. As it is difficult to


cover the beneficiaries of all the housing finance institutions, two major players in
India like Life Insurance Corporation Housing Finance Limited (SBI) and Housing
Development Finance Corporation (HDFC) are selected for the proposed study. As
many as 500 questionnaires were distributed among 500 beneficiaries of SBI and
HDFC to obtain information in FARIDABAD region.

3) Statistical Tools:
The data collected will be analyzed in one way and two way tables and
through Statistical techniques such as percentages, averages and growth rate.
LIMITATIONS OF STUDY

Following are the limitations of the study:

1. The study covered only geographical boundaries of FARIDABAD City only which come
under FARIDABAD Municipal Corporation (FMC).

2. Due to the problem of illiteracy some house loan appSBIants and loan takers could not
respond to questionnaire properly. However care was taken to eSBIit their opinion as far as
possible.

3. While studying the aspects of respondents of SBI and HDFC about


performance appraisal, certain items of investigation had to be dropped in view of non-
response from the respondents. Therefore, the study of respondents (borrowers) perception is
limited to the items which received enough response from them.
ANALYSIS OF DATA

The home loans provided by the banks are more or less same at the basic level. The banks
generally try to go ahead of other banks in terms of attracting number of customers to their
countries. For this they are trying to offer some unique services as per the unique
requirements of the unique important customers.

COMPARITIVE STATEMENT OF HOME LOAN

PARTICULARS HDFC SBI


ROI(FIXED) 1 -5 Yrs. -16% Year 1 - 8%
5 - 10 Yrs. - 16 % 10 -15 Year 2 & 3 - 9%
Yrs. - 16%
15 -20Yrs-13.75%

ROI(FLOATING) Up to 30lakh-8.75% Year 4 onwards -


30 lakh-50lakh-9% up to 50 lakh-9.25%
Above50lakh-9.25% over 50 lakhs-9.75%

PROCESSING FEE 0.5% 0.5%

PENALTY 2% 2%

TENURE 25 years 25 years

MINIMUM AGE 21 25

MAXIMUM AGE 60 55
COMPARISON OF MAJOR PLAYERS

The markets for home loans have been sizzling in India. The spurt in growth in recent years
and the prospect of continued buoyancy in demand have attracted many players to the
industry which till a couple of years back had two major players- HDFC and SBI Housing
Finance. The result is cut-throat competition, which has benefited the loan seekers. The home
loan market has grown at a compounded rate of over 40% over the last four years. And from
what industry experts believe that there is a little chance that there will be any significant
decline in the growth rates going forward. So what have been the key factors in triggering of
this high growth period?
There are several reasons for the same on the demand side:-

Faster rise income as compared to property prices, thus making housing more
affordable.
Decline interest rates, which have greatly reduced the cost of borrowing (both o0n
interest and capital).

Then there are factors on the supply side too which have supported this growth:-

More competition in the housing finance sector resulted in companies charging lower
interest rates, sometimes even at the cost of spread (i.e. profit margin)
The fee for getting the home loan has reduced dramatically over the last couple of
years. From over 2% of the loan amount to as long as 0.25% (some companies are
known to wave of the fee entirely). Housing Finance Companies have introduced
several new products to meet the needs of wide variety of customers. One such
scheme, the Step up Loan, where EMIs increases as the income of the individual
increases has been a big hit with the individuals just starting off with their careers.
One other factor is increasing collaboration between Housing Finance Companies and
builders. Such partnership minimizes the service and funding related issues
significantly thus making it easier to buy property.
One innovation in the housing finance sector has been the introduction of floating rate home
loan simply put the cost of such home loan or the interest rate not fixed during the tenure of
the loan. Instead interest rate is benchmarked against some index/ indicator. So as the
benchmark rate moves up or down, the cost of your loan too changes, at some predetermined
frequency (usually once a quarter).

Ideally loan seekers should opt for a floating rate home loan when it is expected that the
interest rate will decline going forward. Fixed rate loans should be preferred when the
interest rates are expected to rise.

But is the choice that simple? In todays environment when there is a lot of talk about rising
interest rate, should investor shun floating rate home loan. Altogether is there still some merit
in this instrument? In the last one year, there was a trend of floating rate home loans being
more popular as compared to the fixed rate loan. As of now, this trend is continuing says Mr.
Suresh Menon , GM (Mumbai region), HDFC Limited.

There are three important issues which one needs to consider before opting for one type of a
loan over the other:-
First, an important determinant of what you go in for should be the long term
expectation of interest rate. For example if you (or the experts) expects the rates to
rise for the next one year, but then decline gradually over the next several years a
floating rate product may be preferable. The other option for going in for a fixed rate
product and then switching at the end of the year will entail costs (there could be
penalty of 1%-2% of the outstanding loan amount) and may not make financial sense.
Moreover floating rate home loans do not change the rate of interest every quarter
(even though they review the rate every quarter). Mr. Menon points out The
attraction of a floating rate home loan is that it does not attract a part prepayment
charge. This could appeal to individuals who get lump sum bonuses which they can
use to reduce their loan exposure.
Second, the issue whether fixed rate home loan are actually fixed rate. When
considering a fixed rate home loan over floating rate of home loan a strong selling
point is that if interest rate were to rise dramatically you will be protected.
Apparently the reality is some what different. It seems that companies that have given
out fixed rate home loans can revise their rates upwards in exceptional circumstances
(significant rise in interest rate for one) so if you think interest rate will remain rage
bound over the near term and decline over the long term, you are still better off with
the floating rate product.
Third, a fixed rate loan is generally priced higher as compared to the floating rate
product. This holds true in the current environment where the fixed rate loan is at a
higher interest rate as compared to the floating rate loan. The difference is currently
about 0.25% to 21%. So if you expect that interest rate are likely to move up, but only
to the extent of this differential, then you should ideally be in different between the
two types of loan. The deciding factors then should be when you think the rates will
increase and also the long term expectations of interest rates.

As always there is no one answer to whether you should go in for floating or a fixed rate
home loan. If you are a person with very little appetite for risk or negative surprises, opt for
fixed rate home loan. But in case you can take on some risk a floating rate home loan is
worth a look.

Five steps to take a right loan:-

1) Gather data on interest rate. Get interest rate information from morethan one source
and get the same information from each so you can compare the offers.
2) Get information on fees. Find out about processing fees, administration charges and
other costs that may be involved in taking the home loan. A written statement of all
the fees from the housing finance companies will ensure that there will be no
surprises later on. Use the lowest amount of fees to negotiate with the other lenders.
3) Get pre-approval letter. This gives you substantial leverage as you are then seen as
serious buyer by the seller of the property. Also, having the letter in your hand will
set a limit to the amount of money you can commit to the property. This will help in
identifying the right property.
4) Bargain for a lower rate of interest. Housing finance will reduce their rack rates for
customers with the good credit record. A bargain deal will easily fixed a home loan at
significantly lower rates (at times you can get a discount of as high as 0.50 percent).
Here again get a confirmation of the rate (and for how long it will remain fixed) via a
letter.

5) Watch out for a predatory lending. Dont include false information on your home
loan appSBIation to get quick approval. Also do not borrow more money than you
need or can afford.

A floating interest rate allows customer to take advantage of interest rate movements. They
get immunity from adverse movements and read the benefits of any fall in interest rate but a
floating rate loan makes sense only when interest rate are high so that they can take
advantage of possible fall. But predicting interest rate movement could confound even
seasoned market watchers.
If they are looking for a home loan, be prepared to cough up a pretty sum as down payment.
The RBI, in a recent meeting with the bankers cautioned banks against lending 100% of the
property value. That is because of increasing competition in home loan some banks have
been funding even 110% of the agreement value. This means your loan not only pay for the
property, it helps with the stamp duty and registration charges and even furnishing. Its being
sweet deal so for, as borrower not only need have no access to other funds, they also get tax
breaks.

The RBIs position is that lending such sums will remain additional risk for the bank. In case
of default, the bank may not have sufficient collateral security to recover dues and may have
to write off the additional borrowings. However, the bankers do not seen unduly worried.
Non performing assets in the housing segment are quite low below 1% and that, say bankers,
is due to the higher asset quality.

SWOT ANALYSIS OF HOUSING FINANCE INDUSTRY

STRENGTHS

1) The industry has been witnessing very fast growth rate, which is 6% growth in the
first
2) Quarter of 2002-2003 as against 3-5% growth recorded in the first quarter of 2001-
2002
3) The market faces a high demand curve, thoroughly mismatched by a low supply
curve
4) Investment is based in assets that are securities & those that have historically
appreciate rapidly.
5) Tax benefit & other facilities provided on loan repayments.

WEEKNESSES
1) The foreclosure rules of court of law such as provision regarding the ownership of not
more than one house (in Delhi) binds the industry.
2) The healthy of an HFC depend upon its ability to mob up low cost funds.
3) AN HFC is unable to tap the rural market due to lack of proper retrieval procedures
so whilst
4) The rural market offers a higher rate of return; it has a higher risk & default rate.
5) Many legal impendent exist, deferring purchase of certain types of property beyond a
6) Certain extent thereby negatively impacting weak mortgage laws, resulting in an
increase in risk compo ending this.

OPPORTUNITIES

1) The housing industry faces a severe shortage of houses. The total demand for houses
is Expected to touch around 19.40 million units by the year 2003 of these 12.8 million
2) Dwelling units (65-98%) would be in rural areas & 6.6 millions dwelling units
(34.02%) in urban areas.
3) While the loan facility is backed by the security of property this sector represent a
low margin But on the low margin but on the same line low risk segment. The address
this
4) Market the ones lies on the HFCS to device bold & innovative alternatives like
mortgage Based securities use of method such as door to door collection of
installments assessing the Creditworthiness of the prospective client and providing for
group securities.
5) The roles of NHB in refinancing & providing regulation of housing finance system.
6) The governments initiatives to promote the sector & its contribution in uplifting the
sector.

THREATS
The industry faces increased competition as more & more foreign backs & Housing
Finance Companies are providing loan facility.
SWOT ANALYSIS OF HDFC HOME FINANACE

STRENGTH

1) Save substantial interest.


2) Prepay whenever the customer.
3) Reduce their loan outstanding.
4) Access the surplus finds anytime.
5) Use surplus funds to invest when the right opportunities arises.

WEAKNESS

Product is very good but it is mainly suitable for higher income group & is not suitable for
the Middle income group

OPPORTUNITIES

There is ample scope for financing flats & apartments for the salaried class in the higher
income Group.

THREATS

1) Nationalized banks like SBI, Union Bank, PNB.


2) Private Banks likes HDFC & standard chartered & Citi Bank with its home credit scheme.
REVIEW OF LITERATURE

Ben R. Craig had studied about the Federal Home Loan Bank Lending to Community Banks,
are Targeted Subsidies Necessary? The Gramm-Leach-Bliley Act of 1999 amended the
lending authority of the Federal Home Loan Banks to include advances secured by small
enterprise loans of community financial institutions. Three possible reasons for the extension
of this selective credit subsidy to community banks and thrifts are examined, including the
need to: subsidize community depository institutions, stabilize the Federal Home Loan
Banks, and address a market failure in rural markets for small enterprise loans. They
empirically investigate whether funding constraints impact the small-business lending
decision by rural community banks. Specifically, they estimate two empirical models of
small-business lending by community banks. The data reject the hypothesis that access to
increased funds will increase the amount of small-business loans made by community banks.

2) In December 2006 Fulbag Singh and Reema Sharma had studied about the housing
Finance in India. Housing, as one of the three basic needs of life, always remains on the top
priority of any person, economy, government and society at large. In India, majority of the
population lives in slums and shabby shelters in rural areas. 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 PoSBIy (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 paper is based on the case study of SBI Housing Finance Ltd., which analyzes region-
wise disbursements of individual house loans, their portfolio amounts and the defaults for the
last ten years, i.e., from 1995-96 to 2004-05 by working out relevant ratios in terms of
percentages and the compound annual growth rates. A relevant chart has also been prepared
to highlight the results.

3) In May 18, 2007 Michael LaCour-Little had studied about the Economic Factors Affecting
Home Mortgage Disclosure Act Reporting. The pubSBI release of the 2004-2005 Home
Mortgage Disclosure Act data raised a number of questions given the increase in the number
and percentage of higher-priced home mortgage loans and continued differentials across
demographic groups. Here we assess three possible explanations for the observed increase in
2005 over 2004: (1) changes in lender business practices; (2) changes in the risk profile of
borrowers; and (3) changes in the yield curve environment. Results suggest that after
controlling for the mix of loan types, credit risk factors, and the yield curve, there was no
statistically significant increase in reportable volume for loans originated directly by lenders
during 2005, though indirect, wholesale originations did significantly increase. Finally, given
a model of the factors affecting results for 2004-2005, we predict that 2006 results will
continue to show an increase in the percentage of loans that are higher priced when final
numbers are released in September 2007.

4) In May 1991 Stephen F. Borde had studied about the Is the Savings and Loan Industry
Facing Extinction? This article tells about the saving and loan crisis. Proposed solutions are
discussed in the context of the industry as it currently stands. With a somewhat similar
liability structure to that of banks (mainly short-term deposits), the asset structure of S&Ls is
quite different. Whereas banks assets consist of short-term loans, S&L assets consist largely
of long-term loans, such as home ownership mortgages. Therefore, in the absence of
adequate hedging measures, S&Ls are more vulnerable to interest rate risk, which can lead to
lower profits when interest rates rise.

5) In June 29, 2001 Joshua Rosner had studied about the Housing in the New Millennium: A
Home without Equity is Just a Rental with Debt. They studied about the prospects of the U.S.
housing/mortgage sector over the next several years. Based on our analysis, we believe there
are elements in place for the housing sector to continue to experience growth well above
GDP. However, we believe there are risks that can materially distort the growth prospects of
the sector. Specifically, it appears that a large portion of the housing sector's growth in the
1990's came from the easing of the credit underwriting process. Such easing includes: * The
drastic reduction of minimum down payment levels from 20% to 0% * A focused effort to
target the "low income" borrower * The reduction in private mortgage insurance
requirements on high loan to value mortgages * The increasing use of software to streamline
the origination process and modify/recast delinquent loans in order to keep them classified as
"current" * Changes in the appraisal process which has led to widespread over
appraisal/over-valuation problems If these trends remain in place, it is likely that the home
purchase boom of the past decade will continue unabated. Despite the increasingly more
difficult economic environment, it may be possible for lenders to further ease credit standards
and more fully exploit less penetrated markets. Recently targeted populations that have
historically been denied homeownership opportunities have offered the mortgage industry
novel hurdles to overcome. Industry participants in combination with eased regulatory
standards and the support of the GSEs (Government Sponsored Enterprises) have overcome
many of them. If there is an economic disruption that causes a marked rise in unemployment,
the negative impact on the housing market could be quite large. These impacts come in
several forms. They include a reduction in the demand for homeownership, a decline in real
estate prices and increased foreclosure expenses. These impacts would be exacerbated by the
increasing debt burden of the U.S. consumer and the reduction of home equity available in
the home. Although we have yet to see any materially negative consequences of the
relaxation of credit standards, we believe the risk of credit relaxation and leverage can't be
ignored. Importantly, a relatively new method of loan forgiveness can temporarily alter the
perception of credit health in the housing sector. In an effort to keep homeowners in the home
and reduce foreclosure expenses, holders of mortgage assets are currently recasting or
modifying troubled loans. Such poSBIy initiatives may for a time distort the relevancy of
delinquency and foreclosure statistics. However, a protracted housing slowdown could
eventually cause modifications to become uneconomic and, thus, credit quality statistics
would likely become relevant once again. The virtuous circle of increasing homeownership
due to greater leverage has the potential to become a vicious cycle of lower home prices due
to an accelerating rate of foreclosures.

6) In December 2002 Melissa B. Jacoby had studied about the Home Ownership Risk beyond
a Sub prime Crisis: The Role of Delinquency Management. They studied that PubSBI
investment in and promotion of homeownership and the home mortgage market often relies
on three justifications to supplement shelter goals: to build household wealth and economic
self-sufficiency, to generate positive social-psychological states, and to develop stable
neighborhoods and communities. Homeownership and mortgage obligations do not
inherently further these objectives, however, and sometimes undermine them. The most
visible triggers of the recent surge in sub prime delinquency have produced calls for
emergency foreclosure avoidance interventions (as well as front-end regulatory fixes).
Whatever their merit, I contend that a system of mortgage delinquency management should
be an enduring component of housing poSBIy. Furtherance of housing and household poSBIy
objectives hinges in part on the conditions under which homeownership is obtained,
maintained, leveraged, and - in some situations - exited. Given that high leverage or trigger
events such as job loss and medical problems play significant roles in mortgage delinquency
independent of loan terms, better origination practices cannot eliminate the need for
delinquency management. One function of this brief essay is to identify an existing rough
framework for managing delinquency. Legal scholarship should no longer discuss mortgage
enforcement primarily in terms of foreclosure law and instead should include other debtor-
creditor laws such as bankruptcy, industry loss mitigation efforts, and third-party
interventions such as delinquency housing counseling. In terms of analyzing this framework,
it is tempting to focus on its impact on mortgage credit cost and access or on the absolute
number of homes temporarily saved, but my proposed analysis is based on whether the
system honors and furthers the goals of wealth building, positive social psychological states,
and community development. Because those ends are not inexorably linked to ownership
generally or owning a particular home, a system of delinquency management that honors
these objectives should strive to provide fair, transparent, humane, and predictable strategies
for home exit as well as for home retention. Although more empirical research is needed, this
essay starts the process of analyzing mortgage delinquency management tools in the
proposed fashion.

7) In 1999 Yoko Moriizumi had studied about the Current Wealth, Housing Purchase and
Private Housing Loan Demand in Japan. Japanese households accumulate wealth for down
payments at a high rate. Therefore, current wealth plays an important role in home
acquisition as pubSBI loans whose direct mortgage lending is a strong support for home
purchasers. We estimate the wealth effect on private mortgage debt as well as housing
consumption by applying a model where mortgage debt demand is derived from house
purchase decisions and is determined jointly with housing consumption. We use a
simultaneous equation Tobit estimation method. Wealth effects on private mortgage debt,
likelihood of borrowing, and housing consumption are not elastic. On the other hand, a
change in housing consumption affects the likelihood of borrowing elastically much more
than the private mortgage amount of borrowers. Housing and private mortgage markets
fluctuate very closely with the number of participants in the mortgage market. Therefore, the
number of housing starts is linked strongly to the private mortgage market.

8) Robert B. Avery and Allen N. Berger had studied about the Loan commitments and bank
risk exposure. They studied about the Loan commitments increase a bank's risk by obligating
it to issue future loans under terms that it might otherwise refuse. However, moral hazard and
adverse selection problems potentially may result in these contracts being rationed or sorted.
Depending on the relative risks of the borrowers who do and do not receive commitments,
commitment loans could be safer or riskier on average than other loans. the empirical results
indicate that commitment loans tend to have slightly better than average performance,
suggesting that commitments generate little risk or that this risk is offset by the selection of
safer borrowers.

9) Sumit Agarwal,Souphala Chomsisengphet and John C. Driscoll had studied about the
Loan commitments and private firms. They studied that, most loans are in the form of credit
lines. Empirical studies of line demand have been compSBIated by their use of data on
pubSBIly traded firms, which have a wide menu of financing options. We avoid this problem
by using a unique proprietary data set from a large financial institution of loan commitments
made to 712 privately-held firms. We test Martin and Santomero's (1997) model, in which
lines give firms the speed and flexibility to pursue investment opportunities. Our findings are
consistent with their predictions. Firms facing higher rates and fees have smaller credit lines.
Firms with higher growth commit to larger lines of credit and have a higher rate of line
utilization. Firms experiencing more uncertainty in their funding needs commit to smaller
credit lines. Almost all firms convert unused credit line portions into spot loans and take out
new lines.

10) Faik Koray and Eric T. Hillebrand had studied about the Interest Rate Volatility and
Home Mortgage Loans. They studied that The U.S. economy has experienced substantial
fluctuations in real and nominal interest rates since the 1970s. This paper investigates
empirically the relationship between home mortgage loans and volatility in mortgage rates
for the period 1971:02 through 2003:03. Contrary to common wisdom, we find a positive
relationship between mortgage rate volatility and home mortgage loans. Further investigation
indicates that this is due to volatility in the bond market. In times of high interest volatility,
households disinvest in government securities and invest in real assets, which yield a positive
relationship between mortgage rate volatility and home mortgage loans.

11) In november2000 Michelle J. White and Emily Y. Lin had studied about the Bankruptcy
and the Market for Mortgage and Home Improvement Loans. They studied that this paper
investigates the relationship between bankruptcy exemptions and the availability of credit for
mortgage and home improvement loans. We develop a combined model of debtors' decisions
to file for bankruptcy and to default on their mortgages and show that the theory predicts
positive relationships between both the homestead and personal property exemption levels
and the probability of borrowers being denied mortgage (secured) and home improvement
loans. We test these predictions empirically and find strong and statistically significant
support when evidence from cross-state variation in bankruptcy exemption levels is used.
AppSBIants for mortgages are 2 percentage points more likely to be turned down for
mortgages and 5 percentage points more likely to be turned down for home improvement
loans if they live in states with unlimited rather than low homestead exemptions. These
relationships also hold when we introduce state fixed effects into the model.

12) In October 14, 2008 David P. Bernstein had studied about the Home Equity Loans and
Private Mortgage Insurance: Recent Trends & Potential ImpSBIations. They studied about
the impact of increased use of home equity lines and decreased private mortgage insurance
(PMI) on mortgage markets. The data confirms that in the years leading up to the mortgage
crisis home buyers and lenders have aggressively used piggyback loans to avoid taking out
PMI on first mortgages. Multiple-mortgage financing packages as a percent of newly
originated mortgages (mortgages originated within the previous five years) went from 14.8%
in survey year 2001 to 21.5% in survey year 2007. The multiple-mortgage percentage for
seasoned mortgages (mortgages originated more than five years prior to the origination date)
also increased by a modest amount. Further comparisons reveal a large decrease in the
proportion of mortgages with PMI with the largest decreases in PMI coverage occurring
among newly originated multiple-lien packages. Data from the SCF was used to compare
five financial characteristics (credit card debt, installment loans, consumer credit, home-
owners equity, and liquid assets) for multiple-lien versus single-lien households. The
comparisons suggest single-lien households tend to have slightly stronger financial variables
than multiple-lien households. The data does not support the view that homeowners with
multiple liens are less risky and should therefore be allowed to avoid PMI. The reduced use
of PMI and the increased use of home equity loans increased mortgage holder risk in several
different ways and was a contributing factor to the 2008 mortgage and financial crisis. This
change in lending and borrowing behavior is not a sub prime market problem.

13) In August 2007 Michael LaCour-Little had studied about the Home Purchase Mortgage
Preferences of Low- and Moderate-Income Households. Housing poSBIy in the United
States has long supported homeownership, yet variation persists across income groups. This
article employs recent mortgage origination data to focus on the revealed preferences of low-
and moderate-income (LMI) households in home purchase mortgage choice. I identify the
factors associated with conventional conforming, FHA, nonprime and specially targeted
programs. Empirical results show that individual credit characteristics and financial factors,
including pricing, generally drive product choice, with some variation evident when loans are
originated through brokers. Results also indicate that targeted conventional programs
effectively compete with government-insured products in the LMI segment.

14) In 24 October 2008 David C. Wheelock had studied about the Government Response to
Home Mortgage Distress: Lessons from the Great. They studied about the Great Depression
was the worst macroeconomic collapse in U.S. history. Sharp declines in household income
and real estate values resulted in soaring mortgage delinquency rates. According to one
estimate, as of January 1, 1934, fully one-half of U.S. home mortgages were delinquent and,
on average, some 1000 home loans were foreclosed every business day. This paper
documents the increase in residential mortgage distress during the Depression, and discusses
actions taken by state governments and the federal government to reduce mortgage
foreclosures and restore the functioning of the mortgage market. Many states imposed
moratoria on both farm and nonfarm residential mortgage foreclosures. Although moratoria
reduced farm foreclosure rates in the short run, they appear to have also reduced the supply
of loans and made credit more expensive for subsequent borrowers. The federal government
took a number of steps to relieve residential mortgage distress and to promote the recovery
and growth of the national mortgage market. The Home Owners Loan Corporation (HOLC)
was created in 1933 to purchase and refinance delinquent home loans as long-term,
amortizing mortgages. Between 1933 and 1936, the HOLC acquired and refinanced one
million delinquent loans totaling $3.1 billion. The HOLC refinanced loans on some 10
percent of all nonfarm, owner-occupied dwellings in the United States, and about 20 percent
of those with an outstanding mortgage. The Great Depression experience suggests how
foreclosures might be reduced during the present crisis.

15) In March 2001 Tullio Jappelli and Maria Concetta Chiuri had studied about the Financial
Market Imperfections and Home Ownership: A Comparative Study. They explore the
determinants of the international pattern of home ownership using the Luxembourg Income
Study (LIS), a collection of microeconomic data on fourteen OECD countries. In most, the
cross-section is repeated over time and includes several demographic variables carefully
matched between the different surveys. This allows us to construct a truly unique
international dataset, merging data on more than 400,000 households with aggregate panel
data on mortgage loans and down payment ratios. After controlling for demographic
characteristics, country effects, cohort effects and calendar time effects, we find strong
evidence that the availability of mortgage finance - as measured by outstanding mortgage
loans and down payment ratios - affects the age-profile of home ownership, especially at the
young end. The results have important impSBIations for the debate on the relationship
between saving and growth.

16) In 10 December 2007 Irina Paley and Chau Do had studied about the Explaining the
Growth of Higher-Priced Loans in HMDA: A Decomposition Approach. The period 2004-
2005 showed a significant increase in Home Mortgage Disclosure Act (HMDA) rate spread
reporting. Following the Oaxaca (1973), Blinder (1973), and Fairlie (2005) decomposition
techniques, this study identifies the fraction of the increase due to the flattening of the yield
curve. Even after controlling for changes in borrower risk characteristics, the findings reveal
that during 2004-2006, the flattening of the yield curve explains a significant amount of the
increase in rate spread reportable loans. This is the case for both prime and sub prime
originations.

17) In Feb. 1 2009 Vincent W. Yao and Eric Rosenblatt and Michael LaCour-Little had
studied about the unique paired loan dataset containing information on multiple conventional
conforming mortgage loans of households to examine home equity extraction decisions over
the period 2000-2006. The main question addressed is how much households borrow when
refinancing their current mortgage debt in a cash-out transaction. We also provide estimates
of the marginal effect of certain borrower characteristics. Results contribute both to the
literature on refinancing behavior and the role of house price appreciation in providing funds
that may be used for consumer spending or other purposes.

18) In august2004 Mark Carey and Greg Nini had studied about the Corporate Loan Market
Globally Integrated? A Pricing Puzzle. We offer evidence that interest rate spreads on
syndicated loans to corporate borrowers are economically significantly smaller in Europe
than in the U.S., other things equal. Differences in borrower, loan and lender characteristics
associated with equilibrium mechanisms suggested in the literature do not appear to explain
the phenomenon. Borrowers overwhelmingly issue in their natural home market and bank
portfolios display significant home "bias." This may explain why pricing discrepancies are
not competed away, but the fundamental causes of the discrepancies remain a puzzle. Thus,
important determinants of loan origination market outcomes remain to be identified, home
"bias" appears to be material for pricing, and corporate financing costs differ in Europe and
the U.S.

19) In July 2005 Gwilym B.J. Pryce and Patric H. Hendershott had studied about the
Sensitivity of Homeowner Leverage to the Deductibility of Home Mortgage Interest.
Mortgage interest tax deductibility is needed to treat debt and equity financing of homes
equally. Countries that limit deductibility create a debt tax penalty that presumably leads
households to shift from debt toward equity financing. The greater the shift, the less is the tax
revenue raised by the limitation and smaller is its negative impact on housing demand.
Measuring the financing response to a legislative change is compSBIated by the fact that
lenders restrict mortgage debt to the value of the house (or slightly less) being financed.
Taking this restriction into account reduces the estimated financing response by 20 percent (a
32 percent decline in debt vs. a 40 percent decline). The estimation is based on 86,000 newly
originated UK loans from the late 1990s.

20) In 1 NOVEMBER 2007 Marsha Courchane studied about The Pricing of Home
Mortgage Loans to Minority Borrowers: How Much of the APR Differential. The pubSBI
releases of the 2004 and 2005 HMDA data have engendered a lively debate over the pricing
of mortgage credit and its impSBIations regarding the treatment of minority mortgage
borrowers. We provide a unique empirical assessment of this issue by using aggregated
proprietary data provided to us by lenders and an endogenous switching regression model to
estimate the probability of taking out a sub prime mortgage, and annual percentage rate
("APR") conditional on getting either a sub prime or prime mortgage. We find that up to 90
percent of the African American APR gap, and 85 percent of the Hispanic APR gap, is
attributable to observable differences in underwriting, costing and market factors that
appropriately explain mortgage pricing differentials. Although any potential discrimination is
problematic and should be addressed, our analysis suggests that little of the aggregate
differences in APRs paid by minority and non-minority borrowers are appropriately
attributed to differential treatment.

21) In 1991 Susan M. Wachter and Paul S. Calemhad studied about the Community
Reinvestment and Credit Risk: Evidence from an Affordable Home Loan Program. This
study examines the performance of home purchase loans originated by a major depository
institution in Philadelphia under a flexible lending program between 1988 and 1994. We
examine long-term delinquency in relation to neighborhood housing market conditions,
borrower credit history scores, and other factors. We find that likelihood of delinquency
declines with the level of neighborhood housing market activity. Also, likelihood of
delinquency is greater for borrowers with low credit history scores and those with high ratios
of housing expense to income, and when the property is unusually expensive for the
neighborhood where it is located.
CONCLUSION

The Indian customer has come a long way from purchasing to fulfilling their needs from
buying a house customers now grab everything that comes their way but they do their own
survey of optimum loans; same is the case with banks & housing loans. With innumerable
choices before him, the customer is needed then king. It is therefore imperative that if the
bank has to succeed in competitive world, it should be technological starry. Customer centric
progressive driven by highest standard of cooperative governance & guided by sound ethical
values & above all should have personalized customer services. There is scope of exploiting
the vast middle income group by releasing loans with special interest rate, which would be
beneficial to both parties.
RECOMMENDATION

The following suggestions are strongly recommended:

To broaden the customer base the vast middle income strata should be fully exploited.
Simplify the procedure, reduce service charges & demand only the basic essential
proof.
Most banks are reluctant to advance loan to the service class. E.g. law years, poSBIe
officers etc. this aspect must be exploited.
Adoption of flexible & more lenient penalty should the
Customer fails to deposit the payment on time. The penalty should be case to case
basis rather than the same for the entire customer base.
Restriction to be reduced to bare minimum for loan advances & for repayment. For
e.g. offers Long term repayment facilities & have no age restriction to choosing
repayment. The maximum age for repayment could be increase to 65-70 years of age.
Such facility will grow fast retail segment of the bank.
Offer multiple repayment loans services. Class to be exploited by offering special
reduced
Rates & linking the repayment from the source where the pay cheque to the employee
is issued. This need to undergo special contract with government organization to
ensure implementation.