A STUDY ON HOME LOANS

A project Submitted to
University of Mumbai for partial completion of the
degree of
B. Com (Banking & Insurance)
Under the Faculty of Commerce

By
Shrikanya B. Thenge

Under the Guidance of

Prof. Rupal Patel
Shailendra Education Society`s Arts, Commerce &
Science College,

Shailendra Nagar, Dahisar (East), Mumbai – 400 068

April 2019
 Table of contents

Chapter Chapter Name Page

No. No.

1 INTRODUCTION & OBJECTIVES OF THE STUDY

RESEARCH METHODOLOGY
2

REVIEW OF LITERATURE
3

INDUSTRY PROFILE
4

COMPARATIVE STUDY OF DISBURSEMENT OF HOME

5 LOANS BY COMMERCIAL BANKS

ANALYSIS & INTERPRETATION

6

FINDINGS
7

CONCLUSION
8

RECOMMENDATIONS AND SUGGESTIONS

9

BIBLIOGRAPHY
10

11 ANNEXVRES
 DECLARATION BY LEARNER

The undersigned Mr/Ms Shrikanya Balasaheb Thenge here by, declare that the
work embodied in this project work titled “A STUDY ON HOME LOANS” forms my
own contribution to the research work carried out.
under the guidance of Prof. Rupal Patel is a result of my own research
work & has not been previously submitted to any other University for any other
Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of other, it has been clearly

indicated as such & included in the bibliography.

I, here by further declare that all information of this document has been obtained

& presented in accordance with academic rules & ethical conduct.

Shrikanya Thenge
Certified by
Prof. Rupal Patel
ACKNOWLEDGEMENT

To list who all have helped me in difficult because they are so numerous & depth is so
enormous.

I would like to acknowledge the following as being idealistic channels & fresh dimensions in
the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.

I would like to thank my Principal, Dr. Swati Pitale for providing the necessary facilities
required for completion of this project.

I take this opportunity to thank our Coordinator Prof. Dr. Shraddha Shukla, for her moral
support & guidance.

I would also like to express my sincere gratitude towards my project guide Prof. Rupal Patel,
whose guidance & care made the project successful.

I would like to thank my College Library, for having provided various reference books 7
magazines related to my project.

Lastly, I would like to thank each & every person who directly or indirectly helped me in the
completion of the project especially my Parents & Peers who supported me throughout my
project.
 CHAPTER 1

1.1 INTRODUCTION TO HOME LOANS

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

1.2 ADVANTAGES OF HOME LOANS:

The various benefits of home loans arising to the customers are:-
(i) Attractive interest rates:
The various banks offer attractive interest rates to boost and help their customers. Many banks
provide loans on fixed or floating rates to facilitate consumers as per their needs.
(ii) Help in owning a home:
The home availed by a person with the help of banks, because they provide technical and
financial assistance to customers for owning their dream home.
(iii) No requirement of guarantor:
The commercial banks now a day liberalize their laws regarding home loans. Some of banks
don’t even require the guarantor to grant loan to their consumers. They also make consumers free
by reliving him to find a guarantor to complete the proceedings of availing loan.
(iv) Door-Step Services:
These door to step services are provided from enquiry stage to the final disbursement takes place
such services are beneficial for customers in present busy life. Banks like ICICI bank and
standard chartered bank provide door to step services to customers to borrow loan.
(v) Loan period:
There are many banks which provide maximum loan tenures up to 15-20 years based on the loan
amount and the creatibility of customers. This relieves the customers to repay loan amount till a
long period.
(vi) For accidental death insurance :
Some banks provide free accidental death insurance with housing loan which is also beneficial
for the customers. These benefits or advantages of home loans are responsible for making than so
popular among customer that a person who don’t have their home and want to buy, they do it
with home loan. Home loans help such persons in making their dream home.

1.3 DISADVANTAGES OF HOME LOANS:

The main disadvantages of home loans are high lightened as below:
(i) Delays in processing :
Many times, there are huge delays in processing of providing home loans because various
formulations to be fulfilled in this process. Due to these delays customers feel mentally as well
as financially weak.
(ii) Fluctuating interest rates :
Some banks give home loans at floating rates, which fluctuate at Different intervals due to some
reasons. These changes sometimes, may lead to increase in interest rate which will increase the
cost of home loans to the customers
(iii) High Cost:
The public sector banks charge high processing cost for home loan’s sanctioning. They are
forced to pay serious charges at various stages to fulfill the requirements. Some consumers are
not able to pay such charges so such people could not avail the benefits of home loan schemes.
(iii) Problems in disbursement:
There are many problems in disbursement of home loan amount. There are some delays in
disbursement of loan amount to the customers due to legal formalities. This causes problems to
the customers. These are limitations or disadvantages of home loans. But sometimes some banks
charges high installments to repay loan amount. Such also causes problem to customers. These
limitations can be removed by providing good and promote services to the customers.

1.4 DISBURSEMENT OF HOME LOANS :

The every bank has its own procedure to disburse the loan amount among customers. After
choosing your right home, the next step is disbursement of home loans. The loan amount is
disbursed after identifying and selecting the property or home that are purchased and submit the
requisite legal documents. In the disbursement of home loans a clear title and full verification to
ensure that a person has full rights on his house. The 230A clearance of seller and /or 371
clearances from the appropriate authority of income tax is also needed.

(I) Eligibility criteria:

he/she can apply for a loan before even selecting the property. Once the maximum amount to put
into the property has been decided, the Housing Finance Institutions or Banks will let the
customer know that how much he/she is eligible for and this helps to plan out the budget.

(ii) Conditions regarding co-applicants:

All Housing Finance Institutions lay down conditions on who can be co-applicants. all co-owners
to the property. need to be co-applicants to the loan necessarily. These institutions do not permit
minors to join in as either co-owner or as co-applicants because a minor is not eligible to enter
into a contact as per law. They do not permit even friends or relatives who are not blood relatives
to take a property jointly. However, Income of coapplicants can be clubbed together to get higher
loan eligibility. Given below is a Table that throw light on acceptable relationship of a co-
applicant for clubbing of income.
Income Clubbing of Co-applicants: It is as follows: Combination Income Clubbing:
 Husband-Wife: Income of husband-wife can be clubbed.
 Parent - son: It can be clubbed if only son is there but not if any male sibling exists.
 Brother-Brother: If they are currently staying together and intend to stay together in
the new property, then only, their income-can be clubbed for above purposes.
 Brother-Sister: No clubbing-is possible.
 Sister-Sister : No clubbing is possible.
 Parent-Minor- Child: No clubbing is possible in this case also.

(iii) General Terms and Conditions: The following are the terms and conditions applicable
to the basic home loan product only. These are likely to change on the basis of the variations of
the home loan product. Typically, in general home loans, the following conditions are applicable:

1) The loan to value ratio (LTV) cannot exceed a particular percentage. This differs from
product to product and from one Housing Finance Institutional Bank (HFI/B) to another. The
components of the value of the Property calculated here are covered under cost of property.
2) The maximum tenure of the bank is nominally fixed by HFI/Bs. However, HFls/Bs do
provide for different tenures with different terms and conditions.
3) The installment that one pay is normally restricted to about-50-per cent of the monthly gross
income of the candidate.
4) The total monthly outflow towards all the loans that have been availed of, including the
current loan is normally restricted to 50% of the gross monthly income.
5) One will be eligible for a loan amount which is the lowest as per one's eligibility. This is
calculated as per the LTV norms, the HR, norms and the FOIR norms as mentioned above.
6) Most HFls/Bs consider the profile before they judge the repayment capacity. The
judgment is based on age, qualifications, number of dependents, employment details,
employer credentials, work experience, previous track record of repayment of any loans
that have been availed of, occupation, the industry to which the candidate's business relates
to, if he/she is self-employed, then the turnover in the last 3-4 years etc.
7) Some HFIs/Bs insists on guarantees from other individuals for the repayment of the
loan. In such cases, the customers has to arrange for the personal guarantee before the
disbursement of the loan takes place.
8) The property should be technically clear before the HFIs/Bs disburses the loans
amount. Most of institutions and banks have a teams of technical experts who visit the site
to get a technical report before the disbursement of loan. This is also beneficial to the
customer as they check for the technical quality and compliance with local laws.
9) The property should be legally clear before one can avail of a disbursement of the loan
amount. Housing-Finance Institutions /Banks (HFIs/Bs) take legal clearance from their
lawyers before the disbursement of amount. This proves to be beneficial to the customers
as a legal expert checks his/her documentation to ensure that he/she get a proper title to the
property.
10) The disbursement of the loan is as per the progress of construction of the property
unless it is a ready property in which case the disbursement will be by one single cheque.
PEMI or simple interest on the loan amount disbursed to the customer in case of a part
disbursement will be payable by the customer on the disbursement.
11) The disbursement in most cases will be favoring the builder or the seller or the society
or the development authority as the case may be. The disbursement will come in the customer's
favour under special circumstances only.
12) The repayment of loan can be made either through deduction against salary, post-dated
cheques, standing instructions or Auto debit instructions to bank.
13) The principle is amortized either on annual reducing or monthly reducing basis as the
case may be. The above terms and conditions are generally true for most Housing finance
Institutions/Banks with respect to the general Home Loans. However, the specific terms
and conditions vary with respect to special Housing Finance Institutions or Banks.

(iv) Charges applicable to home loans : The different kinds of charges applicable to home
loans are discussed below:
a) Processing fees :
First of all, comes the process fee. This is a charge that is levied by most HFls/Bs. This has to be
paid at the time of submission of the application form. It's normally charged as a percentage of
the loan amount sanctioned. Some HFls also charge a flat fee based on the loan amount instead
of a percentage. When a lower amount is sanctioned the excess fees paid at the time of
submission of the application is adjusted with the charges, which one make to the HFI/B
subsequently. Most HFls/Bs refund the processing fee if the loan application is rejected.
b) Administrative fees :
This charge is again, normally, a percentage of the loan amount sanctioned. It is
collected by the HFI/B for the maintenance of customer's records, issuing interest certificates,
legal charges, technical charges, etc. though the tenure of the loan. It is payable by the customer
when he/she accepts the offer letter given by the HFI/B. This payment has to be made before the
a ailment of the disbursement. The mode of collection of these fees varies from one HFI/B to
another.
c) Rate of interest :
This is the rate of interest applicable on the loan amount through the tenure of the loan.
It is charged on the principal monthly reducing method. Most HFIs/Bs give an option to
select either a fixed rate of interest or a variable rate of interest.
d) Legal Charges:
Some HFIs/Bs mainly Public Sector Banks levy legal charges that they incur on
getting the property documents vetted by their panel of lawyers.
e) Technical Charges:
These charges are also levied by certain Housing Finance Institutions/Banks (HFIs/Bs) to meet
their expenses on the technical site visits to the customer's property. This ensures quality of
construction and construction within the norms as stipulated by the respective approval authority.
f) Stamp duty and registration charges:
HFIs that go in for a registered mortgage pass these charges on to the customer. These
are rather heavy in certain states depending on the laws laid down by the state where one
buy a property.
g) Personal Guarantee from Charges :
Since the personal guarantee provided by the customer need to be stamped, these
charges are also recovered from the customer. They are charged to him by HFIs who
demand for Guarantees.

h) Cheque Bounce Charges : In case the cheques through which one make a payment to
HFls get dishonored, some minimum charges are levied by the HFI. The same are recovered
from the customer.
(i) Delayed payment charges :
HFls/Bs charge delayed payment charges from the customer if he/she delays the payment of
installments beyond the due date.
(j) Additional charges :
These are levied as a percentage on the delayed payment charges by most HFls. They are levied
if one fail to pay the dues within the stipulated time after a delay has taken place.
(k) Incidental charge :
This is payable in case the HFI/B sends a representative from their organization to collect their
outstanding dues. It is normally charged at a flat rate per visit. These charges are levied by most
HFls/Bs.
l) Prepayment Charges :
This is a penalty charged by HFls/Bs from when one makes either a part prepayment or a full
repayment of the loan. This charge is levied only on lump sum payments and not on the EMls
that one pays. This charge is levied on the amount prepaid by one and not on the entire
outstanding principal. These charges are gradually being discount. So, these are the charges
levied by most Housing Finance Institutions and Banks while granting home loan to the
customers. Now, the decision on the repayment capacity shall be talked about as follows.

(v) Judgement regarding repayment capacity on the basis of income :

To understand how the income of a customer is considered to arrive at his repayment
capacity, it is first necessary to classify customers into salaried and self employed
individuals.
a) The income of the salaried individual is considered in the following manner: Gross monthly
income as it appears on the salary slip
Less: Any non regular variable income appearing on the salary slip (including overtime etc.)
Add : 50 per cent of the average variable income of the last six months.
Add: Any fixed cash/voucher payments for which proof can be submitted.
Add: 50 per cent of the average variable cash/voucher payments with proof like traveling
reimbursement etc.
Add : HRA receivable if not being received already in the salary slip. The above income
calculated for the calculation of eligibility using IIR and FOIR norms. For calculation of FOIR,
the installments of all the loans that one has availed of currently for which repayment is being
made is taken into account as well. The lower of the two eligibilities is considered as the
maximum repayment capacity.
b) To consider income of Self-employed individuals we further classify them into
Professionals and non-professionals .
Professionals: Comprising doctors, chartered accountants, lawyers, architects, etc.
For calculation of eligibility of professional's income is computed by most HFIs using the gross
professional receipts instead of the Net profit as in the case of selfemployed
non-professionals.

Non-Professionals : The income of non-professionals is normally calculated by

HFIs in the following manner:
Average of the net profits of last 2 years as it appears in the profit and loss account
(Returns need to be filed for the same. They should be filed regularly before the due date is
over).
Less: Any income, which is unusual and non-recurring in nature like sale of some asset, etc
which affects profits substantially
Add: Any expense that is unusual and non-recurring in nature like repairs and
maintenance that has not been capitalized and effect profit adversely.
Add: 50 per cent of the average depreciation of the last two years. The above income is
calculated for the calculation of eligibility using IIR and FOIR norms. For calculation of FOIR
the installments of all the loans that one has availed of currently for which repayment is being
made is taken into account and the eligibility is worked out. The lower of the two eligibilities is
considered as the maximum repayment capacity.
(vi) Credit documentation:
Given below is the exhaustive list of credit documents- that need to be submitted for a general
home loan product. The documents vary from one HFI/B to another based on one's employer,
qualifications experience etc. the general requirements are as follows:
(a) Income Documents :
For salaried slips for the last three months appointments letter-salary certificateretainership
agreement, if appointed as a consultant-Form 16 issued by the employer in customer's name
income document for self employee - last three years profit and loss account statement duly
attested by Chartered Accountants. Last three years Balance Sheets duly attested by Chartered
Accountant, last three years Income Tax Returns with computation chart duly filed and certified
by the Income Tax authorities.
b) Proof of employment :
Identify card issued by the employer- Visiting card.
(c) Employer's details (In case of private limited companies) :
Profile of employer on employers letterhead (to be signed by a senior person in the
organization) comprising
• Name of promoter/directors
• Background of promoters/directors
• Nature of business activity of your employer
• Number of employees
• List of branches/factories
• List of suppliers
• List of clients/customers
• Turnover of employer
• Annual reports of the employer for the last two to three years.
(d) Proof of age (Anyone of the following) :
Passport- Voter's ID card-PAN card-Ration card-Employer's identity card-School
leaving certificate-Birth certificate.
(e) Proof of residence (Anyone of the following) :
Ration card-Passport- PAN card-Rent agreement, if the customer is staying currently on rent-
Bank Pass book-Allotment letter from the company if he/she is residing in company quarters.
(f) Proof of name change (If applicable) :
A copy of the official gazette –A copy of a newspaper advertisement publicizing the name
change-Marriage certificates.
(g) Proof if investment (If required) :
Bank statement for the last six months of all operating and salary accounts – Bank statements for
the last six months of all current accounts, if self-employed-any other photocopies of investments
held, if required by the HFC.

(vii) Legal documentation :

Legal Documentation the typical legal documents that need to be submitted to the HFC arc
discussed here. Given below is a list of legal property documents that need to be submitted to the
HFC for mortgage of the property. The name and the list of documents vary from state to state
and also depend on the type of property being financed. A broad outline of the documents
required is given below.
a) Acceptance copy of the offer letter issued by the HFC/B.
b) Title documents of the property that include -sale agreement duly Registered-Own
contribution receipts - Allotment letter-Registration receipt-Land documents indicating
ownership, if applicable- Possession letter-Lease agreement, if applicable (Property bought from
a development authority) - Mortgage deed if the HFC opts for a registered mortgage.
c) No Objection Certificate from the developer, society or development authority as applicable.
d) Personal Guarantees, if applicable.
e) In case of alternator additional security, documents for the same depending upon the security
details.
f) Post dated cheques for the EMls.
The above documents are only indicative in nature and do not cover the entire list. It may, also
be noted that in a resale case, the previous chain of agreement also need to be taken.

(viii) The tax benefits that are applicable to housing loans for individuals:
Currently Tax Benefits to individuals are available only for the Home Loans and Home
Extension Loans products. The benefits available are covered under these sections.
Property Insurance :
Is it compulsory to insure the property?
some HFls insist on a mortgage redemption life insurance policy. In this case the customer
gets a benefit of an interest rate reduction. Though the HFI may not insist, it is better to go in for
property insurance to safeguard the asset against any sort of damage or loss. The customer can
select the tenure for the property insurance. The insurance premium is changed up front. Most
insurance companies provide for huge discounts on the rate of premium for larger tenures. The
premium charged currently is seventy-seven for every lakh of property for a year. So a customer
has to fulfill various conditions to be eligible for availing home loan from a Housing Finance
Institution/Bank After fulfilling these conditions, a customer can avail loan at low interest rate
i.e. fixed rate floating rate. A decision on whether one should go in for a fixed-rate loan or a
floating-rate loan now is a function of two factors i.e. One's perception of where interest rates in
the economy are headed and one' capacity to ride the interest rate changes. A floating-rate loan
let one take advantage of further falls in interest rates but one stand to loose if interest rate, rise
again. However this decision is based on the perception of the consumer.

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

PURPOSE :
The main purpose of this study is to attain the knowledge of the processing system of home
loans. the main purpose of the study are as follows :
To know the ideas of customers about home loan products and services.
To study the satisfaction level of customers about home loans.
To study the problems faced by customers in obtaining the home loans

SCOPE :
The Indian housing finance industry has grown by leaps and bound in few years. Total home
loans disbursements by banks has risen which witnesses phenomenal growth from last 5 years.
There are greater number of borrowers of home loans. so by this study we can find out
satisfaction level of customers and problems faced by them in obtaining home.
 CHAPTER 2

2.1 RESEARCH METHODOLOGY :

Research methodology is a way to systematically show the research problem. It may be
understood as a science of studying how research is done scientifically. It is necessary for the
researcher to know not only the research methods but also the methodology. This Section
includes the methodology which includes. The research design, objectives of study, scope of
study along with research methodology and limitations of study etc.
To know the Customers perceptions about home loans of HDFC housing development finance
corporation LTD.
To study the satisfaction level of customers about home loans.
To study the problems faced by customers in obtaining the home loans.
To make comparative study of disbursement of home loans by commercial banks, the
study shall be conducted in the manner enumerated below

2.2RESEARCH DESIGN:
This project is based on exploratory study as well descriptive study. It was an exploratory study
when the customer satisfaction level was studied to suggest new methods to improve the services
of HDFC LTD in providing home loans and it was descriptive study when detailed study was
made for comparison of disbursement of home loans by commercial banks.

2.3SOURCES OF DATA :
To fulfill the information need of the study. The data is collected from primary as well as
secondary sources

A ) PRIMARY SOURCE:
I decided primary data collection method because our study nature does not permit to apply
observational method. In survey approach we had selected a questionnaire method for taking a
customer view because it is feasible from the point of view of our subject & survey purpose. We
conducted 100 sample of survey in our project to judge the satisfaction level of customers which
took home loans.

• Sample size:
For the questionnaire I have taken the sample size of 100 customers of HDFC LTD.

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

SAMPLING : Sampling refers to the method of selecting a sample from a given universe with a
view to draw conclusions about that universe. A sample is a representative of the universe
selected for study.
SAMPLE SIZE :
Large sample gives reliable result than small sample. However, it is not feasible to target entire
population or even a substantial portion to achieve a reliable result. So, in this aspect selecting
the sample to study is known as sample size. Hence, for my project my sample size was 100. The
Sample Size consists of both the Professional and Business class people. IT peoples, Doctors,
Jewelers, Timber Merchants & Real estate Agents are taken as Sample.

SAMPLING TECHNIQUE:
Random sampling technique was used in the survey conducted.

2.4 TOOLS OF ANALYSIS:

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

2.5 PLAN OF ANALYSIS:

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

2.6 DATA COLLECTION INSTRUMENT DEVELOPMENT :

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

2.7 LIMITATIONS :
This study also includes some limitations which have been discussed as follows:
i) The sample size of 100 customers and 4 banks might prove a limitation because of difficulty in
generalization of results.
ii) To collect the data from various banks was quite difficult due to non- cooperation of some
banks. This proved to be major limitation of the study.
iii) To access such a large number of customers was difficult because of non-cooperative attitude
of respondents.
iv) Lack of data was also the other limitation of the study as some of banks do not have proper
data on topic.
v) There was limitation of time to conduct such a big survey in limited available time.
vi) Ignorance and reluctant attitude of customers was also a major limitation in this study. Thus
above all were the limitations in this research study. The maximum efforts were made to
overcome these limitations in the study.
 CHAPTER 3

REVIEW OF LITERATURE

3.1SUMMARY:
• After going through pervious studies of Home loans I came to conclude that-
• There is growth of home loans after 2001.
• Home loans have an inverse relation with interest rates i.e. when interest rate low
the demand of home loans increase. (Ojha 1987)
• People are going more towards home loans than private mortgage insurance
.(Berstain 2008)
• Government taking various steps to encourage people to go toward home loans
.(Haavio, Kauppi 2000)
• Growth of home loans are due to increase of living standard of people, shifting
from joint family to nuclear family .(Lacourr, Micheal 2007)
• There are some problems also attach with these home loans such as time i.e filling
of application of loan to closing ,people have their own specified needs from these home
loans which are not fulfilling. (Lacour Micheal 2006).
• SBI provide a very low interest rate on home loans as compared to other banks.
(SBI May 2000)

3.2Now after this conclusion the details of reviews are below:

1)Berstain David: examined in his study taken from 2001 to 2008 that in this period there is
increase use of home loans as compared to private mortgage insurance (PMI).he have divided his
study into four sections. Section 1 describes why people are going more for home loans than
PMI. the main reason for this that now home loans market provide Piggybank loans for those
people who don’t have 20% of down payment. Section 2 tells the factors responsible for the
growth of home loans and the risks on shifting toward home equity market without any PMI
coverage. PMI can protect lenders from most losses up to 80% of LTV and the absence of PMI
will result in considerable losses in an environment. Section 3 tells the measures in changes of
type of loans. For this he have taken the data from the 2001 and 2007 AHS a joint project by
HUD and Census The results of this analysis presented in Table One reveal a sharp increase in
the Prevalence of owner occupied properties with multiple mortgages among properties with
Newly originated first mortgages. Section 4 describe the Financial status of single-lien and
multiple-lien households and for this he have taken the survey of consumer finance and show
that financial position is more weaker in multiple loans than the single loans.

2)Vandell, Kerry D: analysis the sharp rise and than suddenly drop down home prices
from the period 1998- 2008. changes in prices are for the reasons as such economic fundamentals
, the problem was not sub prime lending per se, but the Fed‘s dramatic reductions, then increases
in interest rates during the early- mid-2000 , the housing ―boom was concentrated in those
markets with significant supply-side restrictions, which tend to be more price-volatile; he
problem was not in the excess supply of credit in aggregate, or the increase in sub prime per se,
but rather in the increased or reduced presence of certainother mortgage products.

3)La courr, Micheal: analysis in his study the factors affected the increase in the level of
Annual percentages rates (APR) spread reporting during 2005 over 2004. the three main factors
are changes in lender business practices; (2) changes in the risk profile of borrowers; and (3)
changes in the yield curve environment. The result show that after controlling for the mix of loan
types, credit risk factors, and the yield curve, there was no statistically significant increase in
reportable volume for loans originated directly by lenders during 2005, though indirect,
wholesale originations did significantly increase. Finally, given a model of the factors affecting
results for 2004-2005, we predict that 2006 results will continue to show an increase in the
percentage of loans that are higher priced when final numbers are released in September 2007.

4)La cour Micheal: examined the home purchase mortgage product preferences of LMI
households. Objectives of his study to analysis the factors that determined factors their choice of
mortgage product , is different income groups have some specified need to met particular
product. The role pricing and product substitution play in this segment of the market and do
results vary when loans are originated through mortgage brokers? For this they have use the
regression analysis and the results are high interest risk reduce loan value. Self employed
borrower chooses reduce documented loans than salaried workers. Use of this product type
seems to be more prevalent among borrowers with substantial funds for down payment and
better credit scores. In case of pricing Multi families requires price premium and larger loans
carry lower rate. And the role of time, particularly, the time required for the loan to proceed from
application to closing it is find that government lending taking the longest time and Nonprime
loans the shortest time. Multi family properties take longer time in closing. And during peak
season take longer time to close. And for last objective it is find that broker originated loans
close faster. The effect of mortgage brokers on pricing and other market outcomes is fertile
ground for additional research.

5)Dr. Rangarajan C.: said that the financial system of India built a vast network of financial
institutions and markets over times and the sector is dominated by banking sector which accounts
for about two-third of the assets of organized financial sector.

6)Haavio, Kauppi: stated that countries where a large proportion of the population lives in
owner – occupied housing are experiencing higher unemployment rates. Than countries where
the majority of people live in private rental housing, which might suggest that rental housing
enhances labour mobility. In this paper, they develop a simple inter temporal two region model
that allow us to compare owner occupied housing markets to rental markets and to analyze how
these alternative arrangements allocate people in space and time. announced that it will offer
loans for Rs. 2-10 lakh at 12.5 percent the lowest rate offered by any housing finance provider,
big brother SBI has taken the rate war in the home loans category to new heights. This is
because, apart from the low rate, the interest on these loans is calculated on principal, which is
reduced every month unlike other housing finance companies which calculate interest on
annually reducing basis.
7)Narasimham Committee: points out that although the banking system in our country has
made rapid progress during the last two decades, there is decline in productivity and efficiency
and erosion of profitability. The committee strongly make indications of liberlising, deregulating
economy to make Indian baking system more competitive and efficient.
8)Ojha : in his paper "modern international caparison of productivity and Profitability of pubic
sector banks of India" making Comparison on the basis of per employee indicators and taking
examples of state bank group and Punjab National bank noted that Indian banks are the lowest in
all accounts. However such international comparison will not be fair for numbers of reasons.

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

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

11)Kulkarni (1979): in his study “Development responsibility and profitability of banks”

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

12)Varde and Singh (1979): in a study "profitability of commercial banks" over 15 years
gave consideration to two types of factors that effects interest rates levels i.e. internal factors
(including operational and managerial efficiency of individual basis).

13)Banking Commission (1972): reviewed bank operating methods and procedures and
made recommendations for improving and modernizing these, particularly relating to customers
services, credit procedure and internal control systems. It observed that present methods of
working out branch profitability are not appropriate and an integrated costing and financial
reporting system is needed.

14)Department of Banking operations and development, RBI: Bombay observed that

the rapid expansion of banks activities since 1970 called for a phase of consolidations to improve
the quality of banks operational efficiency, productivity and customer services.
 CHAPTER 4

THE HISTORY OF INDIAN HOME LOANS:

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

4.2 Home Loan Procedure in India :

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

2)Validation of the Information: In the next stage, HFCs validate the information provided
by the customer on the application form. They usually conduct checks on the residential address
of the customer, the place of employment of the customer, and credentials of the employer. Some
HFCs may insist on a personal interview with the customer and perform a reference check on the
references provided by the customer on the application form.

3)Issue of Sanction Letter : After due appraisal of customer profile, a sanction letter is
issued which contains details such as loan amount, rate of interest, annual / monthly reducing
balance, tenor of the loan, mode of repayment and general terms and conditions of the loan. This
is the actually the approval of the money lending procedure by the company. However, the
money is sanctioned only after the documents and the property on behalf of which the loan is
being granted is thoroughly verified.

4)Submission of Documents: Once the sanction letter is passed, the customer is required to
leave the entire set of original documents pertaining to the property being purchased with the
HFC as security for the loan amount sanctioned. These documents remain in the custody of the
HFC till the time the loan is fully repaid. Once the documents are handed over to the HFC, they
send all the documents for a thorough legal scrutiny.
5)Validation of Property: Prior to disbursement, the HFC also conducts a site visit to the
customer's property to ensure that all construction norms have been adhered to properly. Once
the HFC is satisfied that the property is legally and technically clear, they disburse the loan
amount. The disbursement from the HFI is on the basis of the stage of construction of the
property.

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

4.3 INTEREST RATES PROVIDED BY VARIOUS BANKS:

Finance Institution Loan Period Fixed EMI / Lakh Floating EMI / Lakh
(in years) (INR) (INR)

Bank of Baroda Up to 5 9.00 2076 8.00 2028

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

State Bank Of India Up to 5 9.50 2100 8.75 2064

6 to 10 9.75 130 9.25 1280
11 to 15 - - 9.25 1029
16 to 20 - - 9.75 949

HDFC Up to 5 11.00 2175 9.50 2101

6 to 10 11.00 1375 9.50 1294
11 to 15 11.00 1137 9.50 1045
16 to 20 11.00 1033 9.50 933

ICICI Bank Up to 5 10.75 2162 9.50 2101

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

LIC Housing Finance Up to 5 10.50 2149 9.50 2100

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

PNB Housing Finance Up to 5 9.00 2076 10.50 2150

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

PNB Housing Finance Up to 5 9.00 2076 10.50 2150

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

The above table illustrates the comparison between the interest rates from various Housing
Finance Companies and banks. It can be seen that if one wishes to go for floating loans, the bank
which gives the best deal as far as the interest rate is concerned is HDFC followed by PNB
Housing Finance with the lower rates.

4.3Lock-in facility by banks :

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

1)Oral or written lock-in agreement? :

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

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

Types of lock-in:

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

2)Locked-in Interest Rate-Floating Points: Under this option, the lender lets you lock in
the interest rate, while permitting or requiring the points to rise and fall (float) with changes in
market conditions. If market interest rates drop during the lock-in period, the points may also
fall. If they rise, the points may increase. Even if you float your points, your lender may allow
you to lock-in the points at some time before settlement at whatever level is then current. (For
instance, say you’ve locked in a 10½ percent interest rate, but not the 3 points that went with that
rate. A month later, the market interest rate remains the same, but the points the lender charges
for that rate have dropped to 2½. With your
lender’s agreement, you could then lock in the lower 2½. Points.) If you float your points and
market interest rates increase by the time of settlement, the lender may charge a greater number
of points for a loan at the rate you’ve locked in. In this case, the benefit you might have had by
locking in your rate may be lost because you’ll have to pay more in up-front costs.
Indian Economy is growing at a nice pace (8% p.a) which is also driving per capita income
rise. The demand of real estate has reached at a new peak according to ninth five year plan there
is a shortage of 42million houses .But in India the figures to GDP are smaller in comparison to
the other countries Contribution of housing to GDP is close to 8%. Sources: NHB

4.4 Indian Market for Home loans is more than Rs.500,000 crore:
Today, not only the metros are witnessing the housing crunch even the second tier cities like-
Jaipur, Bhubneshwar, Lucknow, Trivendrum etc. are falling into the dearth of living space and
wanting for more expansion.

India Report:
Indian credit report in comparison to the other Asian countries is shown in the statistics
below, which is among the lowest. It is Indian psyche that credit is termed bad, Indian are
traditionally not inclined to take credit this reflects in the figures below:
GRAPH:4.1

Domestic Credit as a % of GDP

% od GDP

153 150

136

114
103

77

30

China Taiwan Malaysia Australia Singapore Korea India

4.5 Indian home loans Industry:

Indian Home loans industry is growing at a fast pace 30% per annum, this can be seen in the stats
shown below with average ticket size (loan size) and Amount disbursed is rising every year the
opportunities have become more dominant for different organization in India. The demand
drivers are fast growing middle class population, rise in working women workforce, bigger
aspirations of youth, Tax saving, Transparency in the real estate market.
GRAPH: 4.2 Amount Disbursed
in '000us$

18

13
12

2015-16 2016-17 2017-18

Still in comparison to other nations India has a long way to go, The figures shown below shows
that even the GDP/mortgage ratio is low which indicates that credit is not well sought as figure
below shows the average percentage of mortgage to GDP.

GRAPH:4.3

Mortgage as a % of GDP
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

4%
4%
24% 7%

7%

7%

15%
9%

13% 10%
Comparison with other nations India fall behind in terms of Mortgage Penetration which directly
demonstrates the potential in Indian market for Housing mortgage finance companies.

GRAPH:4.4 Amount Disbursed:

MORTGAGE PENETRATION

51
49

36 36

12

5.6

INDIA CHINA SINGAPORE EUROPE HONGKONG USA

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

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

Price Index: FIG-4.5 Residential Price in India:

20000

15000 Delhi
Mumbai
10000 Calcutta
Chennai
5000
Pune
0 Bangalore
2012 2013 2014 Hyderabad
2015
2016
2017
2018
The above figure shows the rise in prices of space per sq feet in different major cities.

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

FIG:- 4.6

Housing shortage in India

Ruralin million Column1 Urban million

20
19
18.5
18

19.7
19
18
16
2012
2014
2016
2018

4.6 Recent trends of home loan in India:-

In order to understand the recent trends we need to know or understand various factors. These
factors play vital role in Indian home loan market. These include interest rate on which banks
provide home loan, tax rebate on home loan and its impact. Apart from this to understand the
recent trend we need to compare the trends of home loan of different years. Here we have
compared the interest and other market trends of year 2009 with 2007-08. This kind of
comparison gives the result which helps us to understand the trends of market of any industry.
Apart from the impact of present and past economic ups and down also affect the trends. Today
the US slowdown is the major issue which has affected almost all the industry. So we have also
discussed this issue in terms to define trend of home loan market in India.

4.7 Types of home loans:

Housing loans offered by banks are of different types:-

Home Purchase Loans
Home Construction Loans
Home Improvement Loans
Home Extension Loans
Home Conversion Loans
Land Purchase Loans
Stamp Duty Loans
Bridge Loans
Balance Transfer Loans
Refinance Loans
Loans to NRIs

1)Home purchase loans:

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

2)Home construction loans:

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

3)Home improvement loans:

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

4)Home extension loans:

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

5)Home conversion loans:

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

6)Land purchase loans:

This loan is available for purchase of land for both home construction or investment purposes.

7)Stamp duty loans:

This loan is sanctioned to pay the stamp duty amount that needs to be paid on the purchase of
property.

8)Bridge loans:
Bridge Loans are designed for people who wish to sell the existing home and purchase another.
The bridge loan helps finance the new home, until a buyer is found for the old home.

9)Balance- transfer loans:

Balance Transfer is the transfer of the balance of an existing home loan that you availed at a
higher rate of interest (ROI) to either the same HFC or another HFC at the current ROI a lower
rate of interest.

10)Refinance loans:
Refinance loans are taken in case when a loan for your house from a HFI at a particular ROI you
have taken drops over the years and you stand to lose. In such cases you may opt to swap your
loan. This could be done from either the same HFI or another HFI at the current rates of interest,
which is lower.

11)NRI home loans:

This is tailored for the requirements of Non-Resident Indians who wish to build or buy a home or
property in India. The HFCs offer attractive housing finance plans for NRI investors with
suitable repayment options. On would be entitled for home loans in the range of Rs 5 lakh to a
maximum of Rs 1 crore, based on the repayment capacity, previous credit history and the cost of
the property. The bank may provide a maximum of 85% of the cost of the property or the cost of
construction as applicable and 75% of the cost of land in case of purchase of land. The
repayment capacity is calculated taking into account factors such as:
Age
Income/Salary
Qualifications
Dependant/(s)
Assets/Liabilities
Credit History
Stability / continuity of your employment/business
Income of co-applicant/(s)
Taking home loans these days has become simpler. With the RBI regularly bring down interest
rates; taking home loans have become extremely easy. Housing loans which were 16.5% to 18%
a few years ago fell by 11.5% to 13%. With interest rates going down, people increasingly
number apply to take these loans. Some of the leading banks offering home loans in India,
including ICICI Bank, IDBI Bank, HDFC Bank State Bank, Bank of Baroda, Kotak Bank, SBI,
Standard Chartered Bank and Axis Bank.

4.8 HDFC Home Loan:

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

B)Eligibility: HDFC home loans are available for:

Purchase of flat, row house, bungalow from developers
Purchase of existing freehold properties
Purchase of properties in an existing or proposed co-operative housing society or apartment
owner's association
Purchase of first Power of Attorney purchases in Delhi for DDA flats allotted before 1992.
Construction of own house
HDFC home loans can be applied for either individually or jointly. Proposed owners of the
property will have to be co-applicants. However, the co-applicants need not be co-owners.
Maximum tenure is 20 years subject to retirement age.

C)Loan Amount:
85% of the cost of the property (including the cost of the land) and based on the repayment
capacity of the customer.

D)Rate of Interest : The current applicable fixed rate of interest in respect of the total loan
approved is as follows:

For loans up to Rs.2, 00,000 :

 Term of Loan Rate Per Annum
(No. of Years) (%p.a)
Up to 5 10
6-10 10.75
11-15 11

For loans greater than Rs.2, 00,000

Term of Loan Rate Per Annum
(No. of Years) (%p.a)
5 10
10 11
15 11.25

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

Term of Loan Rupees

(No. of Years)
5 2199
10 1416
15 1175

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

4.9Repayment Period:

Repayment Options ;

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

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

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

4.10 Documents Required :

Salaried Customers Self Employed Professionals Self Employed Businessman

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

The Credit Appraisal is an important step in sanctioning loan applications .Hence the Credit
Appraiser needs to have certain important documents to compute the credit worthiness of the
applicant .In the case of salaried person these include the following :

1)SALARY SLIPS (3 MONTHS CURRENT) : The salary slip is usually a printed sheet of
paper that contains 2 components

Income/Earnings collumn: It contains an exhaustive list of the various components that

are added to the persons salary. They contain various components like Basic pay, HRA etc.

Deductions : It contains an exhaustive list of various components that are deducted from the
persons Eanings. They contain various components like Income tax, Provident fund, Employee
Loans etc.

2) BANK STATEMENTS(6 MONTHS CURRENT) ;- The bank statement contains the

various transactions that the applicant performs in his bank account. It has 3 components

Descriptions ;- It contains the brief and standardized description of the activity or the
account related to the transaction .Eg. Clearing cheque 166129, Transfer deposit.
Deposits: It contains the amounts that were credited to the account

Withdrawal : It contains the amounts that were debited to the account. This is carefully
studied to find out about any regular withdrawals or a series of checks so that any existing loans
may be revealed and there can be a correct estimate of the repayment capacity.

Balance : It shows effect of transaction on the pre existing account balance


Special feature : HDFC will not consider any loan s with out standing EMI of or below 6
months.

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

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

5) RESIDENCE PROOF : The residence proof includes the Electricity bill, Telephone bill,
Ration Card ,Passport.

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

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

8) LOAN APPLICATION FORM DULY FILLED : It can also be downloaded from HDFCs
user friendly web based portal.

9) CHARGES FOR PROCESSING FEES : This is a standard and nominal fees to be paid at
the time of applying for loan Fees structure. 0.5% of loan amount + Service tax of 12%
(Less)Education Less of 3% OR 5618/- HDFC takes from applicant whichever is less. This is
applicable time to time.

10) PHOTOCOPIES OF PROPERTY PAPERS.

NON RESIDENT INDIAN

SALARIED/EMPLOYED: An NRI is a person with Indian citizenship but residing in another

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

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

etc. In these cases HDFC will put them in the special category of Self Employed Professionals.
Their credit appraisal is carried out as follows:

Their latest available Profit and Loss A/c is reviewed by the credit appraiser. This account
has two sides a Profit side which reveals all earnings and gains .There is also a Loss side which
shows all taxes, liabilities and losses.
We refer to the Profit side a the Gross Receipts. These includes components revealing the
nature and amount of the Prime income and other earnings Eg Consultation fees in case of
Doctor .
From the Gross Receipts we calculate the Gross Profits and thereon move to calculate Loan
eligibility .Which is the loan amount that can be conveniently sanctioned to the applicant. Loan
Eligibility = Gross Profit * 2
Another important consideration is that the Annual outflow of EMIs should not exceed the
NET PROFIT. The Net Profit is computed by deducting the various costs and losses from
the Gross profit.

SOURCES OF LOAN APPLICANTS

1) WALK IN : This refers to the Applicants who apply for the loan by going to the service
centre or regional branch office .They may have come to know about HDFC s home loan
service from any source but this is their first contact with HDFC is in absence of any
intermediary like friends, sales men etc. The applicants who contact through or by the Website
are also included in the walk in category. Walk-In applicants are given concessions on fees and
charges which is applicable from time to time.
2) CALLCENTRE LEADS : The call centre leads refer to the applicants that come in contact
with HDFC through HDFC Bank or through HLSIL .HDFC bank is the banking section of
HDFC which informs HDFC Ltd about persons who it thinks to needing a loan. HLSIL which
has been started by HDFC Ltd and refers to Housing Loan Services India Limited.
This organization has been especially started by HDFC to assist persons searching for home
loans at easy rates and good service. HLSIL contacts probable need full of home loan, contacts
them, explains them the various advantages of an HDFC home loan and get their loan application
filled. Every HDFC service centre has its own team which is managed by leader who reports
directly to the Branch Manager .In the India habitat centre the HLSIL team is under the
leadership of a team leader who reports directly to Mr. Prashant Malik(Branch MgrIHC /Ranked
2nd in the prestigious National Corporate Challenge 2005 conducted annually by HDFC )

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

Deposits: Individuals: - these are;

Fixed Rate Deposits
Variable Rate Deposits

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

STAGES OF HOME LOAN:

 •Application
1

2
•Loging

•Scanning
3

•DataEntry
4

•RecommendationOver(ROVR)
5

•DoubleChecking Over(DCOVR)
6

•Fixed charges
7

•Disbursement of Loan
8

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

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

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

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

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

4)RECOMMENDATION OVER (ROVR): The Recommendation OVER is also referred to as

the First Appraisal at this stage certain specially appointed persons have been given the
responsibility of recommending a loan. These people have to take special care of reviewing
every document, and all the small details that need to be considered before considering the loan
application to be valid. After this the file is sent to another specially appointed person as
explained below. At this stage if any correction or mistake is present it can be sent back to the
Service Centre.
5)DOUBLE CHECKING OVER: As the name suggests at this stage a specially appointed
person will double check all the past proceedings .He will examine the Loan file for any
discrepancies ,any missing and /or misplaced documents, the Credit Appraisal results, etc.
this is a very important stage and must be handled with exceptional care. This is because a
mistake at this stage can cause a great loss to the company. The Double checker is responsible
for the ultimate sanctioning of the loan .If any mistake is done at this stage there is no going back
and hence no protection. HDFC takes great care while appointing double checkers .They should
have completed a select number of years with the company and should have shown exemplary
performance and must posses experience.

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

7)SPECIAL CASE : A special case can arise if the applicant has not mentioned the property
for which he wants to take a loan .In that case the applicant can let the case be remain pending .
this means that the Applicants loan request will be considered to be complete even though he has
not decided the property. However the Applicant is expected to finalize the property in a short
time.
A Property Address is necessary to 1. get the loan disburse 2. Process the Legal and Technical
Appraisal of the property and its Papers.

8)DISBURSEMENT: The last and final stage in the Home Loan process is that of
disbursement. after the sanctioning has taken place the applicant becomes a registered customer
of HDFC Ltd .
He can now take the disbursement of the loan from any of the various service centre of HDFC
.The loan shall be disbursed in one Lump sum or in suitable installments to be decided by HDFC
with reference to the need and/or progress of construction (which decision shall be final and
binding on the borrower).The borrower hereby acknowledges the receipt of the loan disbursed as
indicated in the receipt.
 CHAPTER 5

COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY

COMMERCIAL BANKS:

5.1 Disbursement of Home loans by different banks:

A)HDFC LTD:
Years No. of Home Home loan Disbursed
loan (in crore Rs.)
account
holders.
Distributed Recovered Balance
2013-2014 700 90.07 63.05 27.02

2014-2015 950 120.00 91.20 28.8

2015-2016 1130 144.67 127.31 17.36

2016-2017 1435 180.33 165.90 14.43

2017-2018 1594 240.00 228.12 11.88

Interpretation:
On the above table, it is evident that there are increase in No. of account holders from 700 to
1594 in the year 2018-18. The loan amount distributed among home loan account holder has also
increased from Rs.90.07 crore in 2004-05 to Rs.240 crore in 2017-18. The recovery procedure
for home loans is also strengthening due to increment in recovered amount, i.e. Rs.63.05 crore to
Rs.288.12 crore. So it nut shall there are upward trend in number of accountholders and
disbursement of home loans.

B)Punjab National Bank:

Years No. of Home Home loan Disbursed
loan account (in crores Rs.)
holders. Distributed Recovered Balance

2013-2014 810 120.15 97.28 22.87

2014-2015 950 183.26 150.00 33.26

2015-2016 1120 213.65 185.86 28.05

2016-2017 1433 240.87 231.07 9.80

2017-2018 1500 265.15 265.05 9.10

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

C)ICICI BANK:
Years No. of Home loan Disbursed
Home (in crores Rs.)
loan account Distributed Recovered Balance
holders
2013-2014 650 104.33 98.12 6.21

2014-2015 853 123.24 105.00 18.24

2015-2016 1019 150.65 133.46 17.19

2016-2017 1132 176.75 144.65 32.10

2017-2018 1434 224.00 209.16 14.84

Interpretation :
The amount reveal that there is tremendous increase in Home loan accountholders. The amount
distributed as home loan is also increased from Rs. 104.33 in 2004-05 to Rs. 224 crore in 2017-
18. But the recovery mechanism of the Bank is not so good that’s why the outstanding amount
shows fluctuating trend.

5.2COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY

COMMERCIAL BANKS:
There are number of schemes and products, offered by commercial banks to attract
the customers. The comparison among different commercial banks which offer home loans
in regard of Disbursement of home loans are as:

No. of Home loan account holders:

Table 5.2 (a)
Years HDFC LTD Punjab ICICI
National Bank
Bank
2013-14 700 810 650

2014-15 950 950 853

2015-16 1130 1120 1019

2016-17 1435 1433 1132

2017-18 1594 1500 1434

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

No. of year

Table 6.2 (b)

Name of Bank Average (Rs) Percentage of
Accountholders
HDFC LTD 1109 32

Punjab National Bank 1163 34

ICICI BANK 1018 29

Total 3290 93

HOME LOAN HOLDERS OF HDFC & COMMERCIAL BANKS

34
33
32
31
30
29
28
27
26

HDFC LTD Percentage of home loan holdes

PNB
ICICI BANK

Interpretation:-
 The figure reveals that HDFC LTD is having large number of home loan accountholders. So
it ranks first among other banks. But government sector PNB is not behind so much with 31%
also market leader. The banks have shown increase in their customers base from 2004 to
2008.but HDFC LTD comes as market leader in the home loan cases.

Home loans distributed by HDFC and Commercial banks:

Table 5.3 (a) (Rs.in crore)
Years HDFC Punjab National Standard chartered ICICI BANK
LTD Bank Bank
2013-14 120.15 90.07 6.21 104.33

2014-15 183.26 120.00 11.55 123.24

2015-16 213.65 144.67 17.06 150.65

2016-17 240.87 180.33 20.09 176.75

2017-18 265.15 240.00 24.10 224.00

Average of home loans granted

Total home loans granted
= ---------------------------------
No. of years

Table. 5.3 (b)

Name of Bank Average (Rs) Percentage of home
loans granted (Rs in crore)
HDFC LTD 204.62 39

Punjab National Bank 155.01 29

Standard Chartered 15.80 3

Bank

ICICI BANK 155.79 29

Total 531.22 100

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

GRAPH: 5.3
 Home loans granted by HDFC LTD and
commercial bank

40
35
30
25
20 Home loans granted by
15 HDFC LTD and commercial
bank
10
5
0
HDFC Punjab Standard ICICI Bank
LTD National Chartered
Bank Bank

Outstanding Balance:
Table 5.5 (a)
Years HDFC LTD Punjab National Standard chartered ICICI BANK(Rs
(Rs in crore) Bank(Rs incrore) Bank(Rs incrore) in crore)
2013-14 22.87 27.02 0.94 6.21

2014-15 33.26 28.8 1.38 18.24

2015-16 28.05 17.36 2.70 17.19

2016-17 9.80 14.43 1.41 32.10

2017-18 9.10 11.88 0.48 14.84

Average of balance due

Total of Balance due in 5 years
= --------------------------------------
No. of years

Table 5.5 (b)

Name of Bank Average Percentage of
(Rs) balance due (Rs in crore)
HDFC LTD 20.61 34

PNB 19.89 33

Standard Chartered Bank 1.38 2

ICICI BANK 17.72 31

Total 59.15 100

Average of one bank

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

GRAPH:5.5
The diagrammatically presentation of data is as:

percentage
of balance
due

40
30
20
10 percentage
of balance
0 due
HDFC percentage…
PNB
BANK SCB
ICICI BANK

Interpretation:
From the above table and figure it shows that standard chartered bank has been less outstanding
balance among other banks. The HDFC LTD got high balances due to large customer base, not
proper recovery process and lack of modernization of activities. The public sector bank PNB is
having more balance due i.e. 33% as compared to standard chartered bank and icici bank.
 CHAPTER 6

ANALYSIS & INTERPRETATION

TABLE 6.1:
The analysis is based on the responses given by customers through questionnaires.

Age group No. of Respondents Percentage

18 - 25 years 53 42%

26 - 35 years 67 32%

36 - 49 years 26 21%

50 - 60 years 6 5%

CHART 6.1:

NO. OF RESPONDENTS
18-25 YEAR 26-35 YEAR 36-49 YEAR 50-60 YEAR

32%

21%
26%

42% 5%

Analysis:- From the chart above we find that 42% of the respondents fall in the age group of 18
– 25 years, 32% fall in the age group of 26 – 35 years and 21% fall in the age group of 36 – 49
years. Therefore most of the respondents are relatively young (below 26 years of age). and 5%
respondent’s age are 50-60 years.

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

TABLE 6.2

Sr. No. Category No. of Respondents Percentage

1 Married 91 60%

2 Unmarried 62 40%

Total 152 100%

Base 152 respondents

CHART 6.2

PERCENTAGE

40%

MARRIED
UNMARRIED
60%

From the table and graph above it can be seen that

60% respondent’s are married.
40% respondent’s are unmarried.

Educational qualification of respondent’s

TABLE6.3

Sr. No. Category No. of Percentage

Respondents
 1 Post graduate 12 8%

2 Graduate 80 53%

3 Under graduate 60 39%

Total 152 100%

CHART 6.3

RESPONDENT %
POST GRADUATE GRADUATE UNDER GRADUATE

8%

39%

53%

Interpretation
From the table and graph above it can be seen that
39% respondent’s are under graduate.
53% respondent’s are Graduate.
8% respondents are Post graduate.

Number Of year’s Are You in MUMBAI?

TABLE 6.4

Sr. No. Category No. of Respondents Percentage

1 Less than five 20 13%
years
2 More than five 132 87%
years
TOTAL 152 100%
CHART 6.4

% OF RESPONDENTS
Less than five years More than five years

13%

87%

Interpretation
From the table and graph above it can be seen that
13% respondent’s are in MUMBAI is less than five year’s.
87% respondent’s are in MUMBAI is more than five year’s.

CUSTOMER PROFILE OF SURVEYED RESPONDENTS

TABLE 6.5:

Customer profile No. of respondents Percentage

Student 53 35%

Housewife 20 13%

Business 7 5%

Working Professional 67 44%

Government service employee 5 3%

Chart 6.5
 No. of respondents
3%

Student
35%
Housewife

44% Business
Working Professional
Government service employee

13%
5%

Interpretation
From the table and graph above it can be seen that:-
44% of the respondents are working professionals, 5% are into business and 3% of the
respondent’s are government service employee and 35% of the respondents are student and 13%
of the respondents are house-wife.

ANNUAL HOUSE HOLD INCOME?

TABLE 6.6

Sr. No. Category No. of Percentage

Respondents
1 Less than 2 lack 53 36%

2 Between 2 to 5 lack 74 50%

3 Between 5to 8lack 19 13%

4 More than 8 lack 6 1%

Total 152 100%

 % of respondents
1%

13%
36%
Less than 2 lacs
Between 2 to 5 lacs

50% Between 5to 8lacs

More than 8 lacs

Interpretation
From the table and graph above it can be seen that
36% respondent’s annual household income is less than 2 lack.
50% respondent’s annual household income is between 2 to 5 lack.
13% respondent’s annual household income is between 5 to 8 lack.
1% respondent’s annual household income is more than 8 lack.

Do you know about HDFC housing development finance corporation

LTD?
TABLE 6.7:

Category No. of Respondents Percentage

Yes 128 78%

No 24 22%

CHART: 6.7
 Awareness about HDFC LTD

22%

yes
no

78%

Interpretation:
From the table and graph above it can be seen that
78% respondent’s are known about HDFC LTD
22% respondent’s are not known about HDFC LTD

From where you have got your home financed?

Table 7.8:
Name of Banks / company Percentage of customers

HDFC LTD 28%

Punjab National Bank 27%

Standard Chartered Bank 5%

ICICI Bank 30%

Any other 10%

GRAPH: 6.8
 % of customers

30%

20%

10%

0%
HDFC LTD % of customers
Punjab
National Standard
Chartered ICICI Bank
Bank Any other
Bank

Interpretation:-
The analysis showed that a large number of customers prefer HDFC LTD as compared to others.
The data shows that 5% of customers took loan from Standard Chartered Bank, 30% of
customers from ICICI BANK, 27% Customers took loan from Punjab National Bank, 28% of
customers took loan from HDFC LTD and a 10% of customers fall under the category of 'Any
other' which included State Bank of India, Canara Bank, Punjab and Sind Bank, etc.

Sources of information about Home Loans Scheme?

Table 6.9

Sources of information Percentage of customers

49%
Newspapers

Magazines 16%

Banners/Hoardings/Pamphlets 11%

Any other source 04%

By Internet 20%
 Percentage of customers

Newspapers
20%
4% Magazines
49%
11% Banners/Hoardings/Pamphl
ets
16% Any other source

By Internet

Interpretation :
The data shows that around 20% of customers got information from source of Internet. 49%
of customers got information from newspapers, only 16% of customers from magazines and 4%
of customers got information about home loans schemes under 'Any other source' and 11%
through Banners/ Hoardings/Pamphlets .

Opinion about the services of HDFC LTD?

Table 6.10

Services of Percentage of customers agreeing

HDFC LTD Strongly Agree Neutral Disagree Strongly
agree disagree
a. Professionally 86% 10% 4% - -
managed
b. Reliable & 67% 33% - - -
transparent
c. Socially 75% 10% 15% 4% -
responsible
d. Customer care 20% 68% 8% - -

e. Query 20% 76% 4% - -

handling
 Opinion of customers about HDFC LTD
100%
90%
80% Strongly
70% agree
60% Agree
50%
40% Neutral
30%
20% Disagree

10%
Strongly
0%
disagree
a. b. Reliable & c. Socially d. Customer e. Query
Professionally transparent responsible care handling
managed

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

Opinion of customers about home loan schemes

Table 6.11

Services of HDFC Percentage of customers agreeing

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

b. Legal formalities 42% 45% 14% - -

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

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

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

f. Installments 55% 40% 5% - -

g. Services 45% 30% 18% 6% 1%

h. Processing for 55% 24% 18% 3% -
sanction of loan

GRAPH: 6.11

70

60

Strongly
50
agree

40 Agree

30 Neutra

20 Disagree

10
Strongly
disagree
0
a. Amount b. Legal c Interest d. e. Security f.
of loan formalities rates Repayment demanded Installments
options

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

DATA GIVES PREFERENCE OF RESPONDENTS OF HOME LOANS

COMPANIES AND BANKS:
TABLE: 6.12
COMPANY’S NAME NO.OF RESPONDENTS
HDFC LTD 78%

STANDARD CHARTERED BANK 2%

ICICI BANK 10%

PNB 7%

SBI 3%

TOTAL 100%
 NO.OF RESPONDENTS
NO.OF RESPONDENTS

78

2 10
7
HDFC LTD 3
STANDARD
CHARTERED ICICI BANK
PNB
BANK
SBI

INTERPRETATION:
From the table and graph above it can be seen that:-
78% of the people contacted prefer HDFC LTD to any other and therefore it is ranked no.1 by
that percent of respondents.

PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS:

There are everything in the world has good or bad points. No doubt banking industry/ company
has made many efforts to enhance the customer satisfaction but customer still faced some
problems. These are high lightened as below:
1) The customer does not have proper knowledge about different home loan products so they
face problem in making a good deal.
2) There are procedural delays, which harass the customers lot. This will crush the curtsy of
customers to avail the home loan.
3) The attitude of bank employees some times non cooperative and it creates a hurdle in building
trust and Confidence among customers about banks.
4) The banks do not take into account the paying capacity of customers. So some customers are
not able to get amount of loan needed by them.
So above discussed are the problems which faced by customers while availing home loans.
 CHAPTER 7

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

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

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

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

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

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

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

8. Customer awareness is medium about HDFC products.

9. HDFC LTD providing good services to their customers

 CHAPTER 8

RECOMMENDATIONS AND SUGGESTIONS

These suggestions have been discussed as follows:

1) To increase their customers, the HDFC LTD should provide specialized services in this sector.
These services can be such as proper guidance to the customer regarding the processing of loans,
especially for the customers who are illiterate.
2) To satisfy their customers and for good dealings in future, the HDFC LTD should make
prompt disbursement of loan amount to the customers so that they can buy or construct their
dream home as early as possible.
3) The HDFC LTD should use easy procedure, or say, less lengthy procedure for the sanctioning
of loan to the customer. There should be less number of legal formalities, in case this exists,
then, these should be completed in less time. This will be helpful in attracting more customers.
4) Although the interest rates on specific norms, yet customers seek less interest rate which can
lower their cost of house. So banks should try to lower their interest rates. Needles to say, that
the bank which is having lower interest rates, have the maximum clients for loans.
5) HDFC LTD provide loan according to the repaying capacity of the customer and his/her
eligibility. Due to which, some customers are not able to get amount of loan needed by them. So,
the HDFC LTD should soften their norms regarding the loan amount.
6) Create awareness: The Company has to take care of awareness creation about the products and
services among the customers.
7) Charges: The Company has to reduce the mortality and administration charges.
8) The company has to reduce their interest rates on home loan products and services.
9) The company has to identify the potential customers.
10) Company should consider the present competition and should act according to the customer
needs.
11) The HDFC LTD should try to provide proper knowledge regarding their home loan schemes,
even to people who don't know about such schemes and their benefits especially in rural areas.
So they should provide knowledge to the ignorant customers, especially in rural areas and
backward urban area So, above are the main suggestions provided to the HDFC LTD. By
considering these suggestions, the HDFC LTD can strengthen their customer base in home loans
sector. They should improve their services and reduce legal proceedings and should be friendly
to their customers. All this will be helpful to satisfy their customers.
 CHAPTER 9

CONCLUSION:

1)In my study we came to know that many peoples are interested to take a home loan from
HDFC LTD to construct their homes.

2) Home loans have long period when compare to other personal loans and other loans. So
peoples are confused to take a home loan.

3) Even though the interest rates are high peoples are willing to take a loan from HDFC
LTD due to some reasons.

4) The interest rates also some what high when compare to other banks

5) The loan sanction process is low when compare to other banks.

6) For disbursement process is also it will take low time when compare to other banks.

Finally the whole research was carried out in a systematic way to reach at exact results.
The whole research and findings were based on the objectives. However, the study had some
limitations also such as lack of time, lack of data, non-response, reluctant attitude and illiteracy
of respondents, which posed problems in carrying out the research. But proper attention was
made to Carry out research in proper way and to make accurate conclusion for the HDFC LTD
which may beneficial for banks to enhance their customer base.
 BIBLIOGRAPHY 10

REFERENCES

10.1)REVIEWS:
Berstain David(2008), “Home equity loans and private mortgage insurance: Recent Trends &
Potential Implications”, Vol.3 No.2, August 2008, Pp. 41 – 53
Dr. Rangarajan C. (2001), “A Simple Error Correction Model of House Price”.Journal of
Housing Economics Vol. 4, No. 3,pp 27 – 34
Fanning (1982), “The Demand for Home Mortgage Debt” Journal of Urban Economics, Vol
11 No 2, November, pp. 770-774
Godse (1983), “looking a fresh at banking productivity”, Journal of Real Estate Literature,
Vol. No. 13, Page 141 to 164.
Haavio, Kauppi(2000) , “Residential Lending to Low-Income and Minority Families:
Evidence from the 1992 HMDA Data," Federal Reserve Bulletin,Vol no 80(2), December 2000
Pp-79-108
Kulkarni (1979), “Development responsibility and profitability of banks” Journal of
Economic Perspectives, Vol 9 No 1 ,pp. 26-32.
La courr, Micheal(2007) , “Economic Factors Affecting Home Mortgage Disclosure Act
Reporting” The American Real Estate and Urban Economics Association, Vol.2 No. 2 May 18,
2007, Pp. 45 -58
La cour Micheal(2006) , “The Home Purchase Mortgage Preferences Of Low and Moderate
Income Households”, Forthcoming in Real Estate Economics , Vol 18, No 4 , December 20,
2006, p. 585.
Vandell ,kerry D(2008), “Subprime lending and housing bubble:tail wag dog?”International
Journal of Bank Marketing, vol 21,no 2, pp. 53-7
Brochure on home loans from HDFC LTD.

10.2)NEWS PAPERS
The Times of India
Financial Express

10.3)WEB PAGES:

http://www.hdfcindia.com/
http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_08.html
www.hdfc.com
http://www.iloveindia.com/real-estate/housing-finance- companies/hdfc.html
http://www.loansnews.info/Home-loan/hdfc-home-loans/
http://www.hdfcindia.com/loans/hm-loan-documents.asp
http://www.thinkplaninvest.com/2009/01/hdfc-will-cut-home-loan-rates/
http://investing.businessweek.com/research/stocks/people/people.asp?ric=HDFC.BO
http://www.economywatch.com/companies/forbes-list/india/housing-developmentfinance-
corporation.html
http://www.hdfcindia.com/loans/home-loan.asp
http://docs.google.com/gview?a=v&q=cache:woJTMDV1HLYJ:www.hdfc.com/pdf/32
AGM%2520speech.pdf+hdfc+housing+finance+development+product&hl=en&gl=in
http://www.munichre.com/en/press/press_releases/2007/2007_10_30_profile_hdfc.aspx
http://www.hdfc.com.mv/faq.htm
http://ayaanbayaan.com/hdfc-ltd-financial-results-indian-gaap-for-the-period-april-tojune-
2009/
 ANNEXVRES 11

QUESTIONNAIRE

Dear Sir/ madam

I am shrikanya doing bbi from Mumbai University. I m preparing a project on A STUDY
ON HOME LOANS. For this I have designed a Questionnaires to know your views and
satisfaction level of home loans .please fill the given as per your thinking and experiences
with this. I will be thankful to you for this.

Name: ………………………………………………………………………..
Address: ……………………………………………………………………..
Contact No :®………………( O)………………
City: ………...............Pin: ………………….State: ……………………….

1. Name: ____________________

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

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

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

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

5. Have you ever taken Home loan before?

(a) Yes (b) No

6. If yes, from which Bank/company?

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

7. Are you Satisfied with the services provided? (on 5 point scale)
A)Highly dissatisfied b) Neutral satisfied c)Dissatisfied d) highly dissatisfied

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

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

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

10. How much loan amount you took?

(a) Less than 1 lacks (b) 1-5 lacks (c) 5-10 lacks (d) more than 10 lacks
11. Even if the Interest rate is high for the Home loans, you will go for it?
(a) Yes (b) No

12. Do you own a home…?

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

13. Have you get it financed?

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

14. What is reason for getting it financed?

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

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

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

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

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

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

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