2.2 SCOPE OF STUDY
The Indian housing finance industry has grown by leaps and bound in few years. Total home loan disbursements by banks has risen which witnesses phenomenal growth from last 5 years. There is 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.
The scope of the study is confined in studying extent of HDFC Ltd. services in successful achievement of the customer satisfaction and also comparing the public sector and private sector banks in terms of customer satisfaction level. The study will be undertaken on the basis of sample survey.
CHAPTER -3
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 perception 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 compare HDFC with other market players.
3.1- RESEARCH DESIGN:-
This project is based on exploratory study as well descriptive study. It was an exploratory study when the customer satisfaction level was studied to suggest new methods to improve the services of HDFC LTD in providing home loans and it was descriptive study when detailed study was made for comparison of disbursement of home loans by HDFC and SBI.
3.2 – SOURCES 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 my study nature does not permit to apply observational method.
In survey approach I used the questionnaire method for taking customers view because it is feasible from the point of view of subject & survey purpose. I conducted 50 sample of survey in my project to judge the satisfaction level of customers which took home loans.
• Sample size;-
For the questionnaire I have taken the sample size of 60 customers.
B – SECONDARY SOURCE:-
. The literature review is a secondary data type. Other sources include books, periodicals, websites, printed literature etc.The secondary data was collected on the basis of organizational file, official records, news papers, magazines, management books, preserved information in the company’s database and website of the company.
3.3- SAMPLING :-
Sampling refers to the method of selecting a sample from a given universe with a view to draw conclusions about that universe. A sample is a representative of the universe selected for study.
SAMPLE SIZE :-
Large sample gives reliable result than small sample. However, it is not feasible to target entire population or even a substantial portion to achieve a reliable result. So, in this aspect selecting the sample to study is known as sample size. Hence, for my project my sample size was 50.
SAMPLING TECHNIQUE:-
Random sampling technique was used in the survey conducted.
TOOLS OF ANALYSIS:-
Data has been presented with the help of bar graph, pie charts, line graphs etc.
PLAN OF ANALYSIS:-
Tables were used for the analysis of the collected data. The data is also neatly presented with the help of statistical tools such as graphs and pie charts. Percentages and averages have also been used to represent data clearly and effectively.
3.4 DATA COLLECTION INSTRUMENT DEVELOPMENT :-
The mode of collection of data will be based on Survey Method and Field Activity. Primary data collection will base on personal interview. I have prepared the questionnaire according to the necessity of the data to be collected.
3.5 LIMITATIONS OF THE STUDY:-
This study also includes some limitations which have been discussed as follows:
i) The sample size of 50 customers and 2 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 a bit 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-4
CHAPTER – 4
REVIEW OF LITERATURE
SUMMARY:-
After going through various studies on 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 is low the demand for home loans increases. (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 attached 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 banks are not fulfilling. (Lacour Micheal 2006).
• SBI provides a very low interest rate on home loans as compared to other banks. (SBI May 2000)
Now after this conclusion the details of reviews are below-
Berstain David (2009) examined in his study taken from 2001 to 2008 that in this period there is increase use of home loans as compared to private mortgage insurance (PMI).he have divided his study into four sections. Section 1 describes why people are going more for home loans than PMI. The main reason for this is that now home loan markets 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 of shifting towards home equity market without any PMI coverage. PMI can protect lenders from most losses up to 80% of LTV and the absence of PMI will result in considerable losses in an environment. Section 3 tells the measures in changes of type of loans. For this he have taken the data from the 2001 and 2007 AHS a joint project by HUD and Census The results of this analysis presented in Table One reveal a sharp increase in the Prevalence of owner-occupied properties with multiple mortgages among properties with Newly originated first mortgages. Section 4 describe the Financial status of single-lien and multiple-lien households and for this he have taken the survey of consumer finance and show that financial position is more weaker in multiple loans than the single loans.
Vandell, Kerry D (2008) analyzes the sharp rise and then suddenly drop down home prices from the period 1998- 2008.Changes in prices are for the reasons such as 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; the problem was not in the excess supply of credit in aggregate, or the increase in sub prime per se, but rather in the increased or reduced presence of certain other mortgage products.
La courr, Micheal (2007) analysis in his study the factors affected the increase in the level of Annual percentages rates (APR) spread reporting during 2005 over 2004. the three main factors are changes in lender business practices; (2) changes in the risk profile of borrowers; and (3) changes in the yield curve environment. The result show that after controlling for the mix of loan types, credit risk factors, and the yield curve, there was no statistically significant increase in reportable volume for loans originated directly by lenders during 2005, though indirect, wholesale originations did significantly increase. Finally, given a model of the factors affecting results for 2004-2005, we predict that 2006 results will continue to show an increase in the percentage of loans that are higher priced when final numbers are released in September 2007.
Ramamurthy (1998), in his technical paper on the profitability and productivity in Indian banking stated that the banking structure and profitability structure of the banking system across the country have a bearing on the profitability of the banks. When banks are considered as groups in terms of big, medium and small, bigger banks have greater scope for economies of scale. The author opined that one of the main determinants of banks’ profitability is the network of branches, frequently termed as franchise strength. The researcher concluded that Indian banks have-
Higher interest spreads than banks abroad;
Higher operating costs than banks abroad; and
Higher risk provision level.
Pathak (2003), while comparing the financial performance of private sector banks since 1994-95, explained that the private sector banks have delivered a new banking experience. Looking to the growing popularity of services provided by them, their public sector counterparts have started emulating them. He studied the performance of these banks in terms of financial parameters like deposits, advances, profits, return on assets and productivity. In this paper, the author made an attempt to have an insight into the financial operation of these institutions. A sample of 5 banks has been taken for financial analysis. Financial track record of all these banks was evaluated, and their financial performance was compared. The working of all the constituents was satisfactory but the HDFC Bank emerged as a top performer among them followed closely by the ICICI Bank.
La cour Micheal (2006) examined the home purchase mortgage product preferences of LMI households. Objectives of his study to analyze the factors that determined 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 found that broker originated loans close faster.The effect of mortgage brokers on pricing and other market outcomes is fertile ground for additional research.
Veronica Cacdac Warnock and Francis E.Warnock (2008) in their Journal of Housing Economics examined the extent to which markets enable the provision of housing finance across a wide range of countries. Housing is a major purchase requiring long-term financing, and the factors that are associated with well functioning housing finance systems are those that enable the provision of long-term finance. Across all countries, controlling for country size, we find that countries with stronger legal rights for borrowers and lenders (through collateral and bankruptcy laws), deeper credit information systems, and a more stable macroeconomic environment have deeper housing finance systems. These same factors also help explain the variation in housing finance across emerging market economies. Across developed countries, which tend to have low macroeconomic volatility and relatively extensive credit information systems, variation in the strength of legal rights helps explain the extent of housing finance. We also examine another potential factor--the existence of sizeable government securities markets--that might enable the development of emerging markets' housing finance systems, but we find no evidence supporting that.
Peter Neuteboom (2003) in his paper “A European comparison of the costs and risks of mortgages for owner-occupiers” examined that mortgage take-up by homeowners differs enormously across Europe. The loan-to-value and loan-to-income ratios are quite dissimilar, ranging from some 20% and 0.9 respectively in Italy to more than 90% and 3.5 respectively in some countries in northwest Europe. In addition, the mortgage characteristics vary from a short-term serial loan to a high-risk endowment mortgage based on shares. To a certain extent, a statistical comparison of the loan-to-value and loan-to-income ratios can provide a good indication of the risks that owner-occupiers run in financing their own home. At the same time, this kind of comparison ignores the causes of the risks, namely the volatility or uncertainty of future interest rates, house prices and changes in income. It also disregards the main mortgage characteristics, the cost of taking out a mortgage, and the direct and indirect subsidies, including interest deductibility, factors that have a big influence on the real costs and risks for homeowners. A Monte Carlo simulation model (simulating house prices, interest rates and inflation for the duration of the mortgage) was used to calculate the netmortgage repayments and the associated mortgage risk. This simulation was undertaken for each of the countries concerned, using the typical mortgagecharacteristics, etc. The costs and risks of a mortgage in various countries of Europe could then be compared.
Dr. Rangarajan C. (2001) said that the financial system of India built a vast network of financial institutions and markets over times and the sector is dominated by banking sector which accounts for about two-third of the assets of organized financial sector.
Kiel (2005) in his paper “Investment and credit effects of land titling and registration” analyzes the importance of legal property documents in providing tenure security, enhancing agricultural investment incentives and easing access to credit. While theory predicts that better property rights on land can increase investment through increased security, enhanced trade opportunities and increased collateral value of land, the presence and size of these effects depend crucially on whether those rights are properly enforced. In Nicaragua, a troubled history of land expropriation and invasion has undermined the credibility of the legal property regime. The variation in legal ownership status due to a land titling and regularization programme is studied to identify the effects of legal ownership documents. Possession of a registered document is found to increase the probability of carrying out land-attached investments by 35%. No difference is found in the effect of public deeds and agrarian reform titles provided they are both registered and we find no strong evidence of a credit supply link, thus suggesting security of tenure as the channel through which formal land ownership has an effect on investment.
Haavio, Kauppi (2000) stated that countries where a large proportion of the population lives in owner – occupied housing are experiencing higher unemployment rates. Than countries where the majority of people live in private rental housing, which might suggest that rental housing enhances labour mobility. In this paper, they develop a simple inter temporal two region model that allow us to compare owner occupied housing markets to rental markets and to analyze how these alternative arrangements allocate people in space and time. announced that it will offer loans for Rs. 2-10 lakh at 12.5 percent the lowest rate offered by any housing finance provider, big brother SBI has taken the rate war in the home loans category to new heights. This is because, apart from the low rate, the interest on these loans is calculated on principal, which is reduced every month unlike other housing finance companies which calculate interest on annually reducing basis.
Zanforlin (2008) stated that in “The Rise and Fall of the U.S. Mortgage and Credit Markets”, renowned finance expert James Barth offers a comprehensive examination of the mortgage meltdown. Together with a team of economists at the Milken Institute, he explores the shock waves that have rippled through the entire financial sector and the real economy. Deploying an incredibly detailed and extensive set of data, the book offers in-depth analysis of the mortgage meltdown and the resulting worldwide financial crisis. This authoritative volume explores what went wrong in every critical area, including securitization, loan origination practices, regulation and supervision, Fannie Mae and Freddie Mac, leverage and accounting practices, and of course, the rating agencies. The authors explain the steps the government has taken to address the crisis thus far, arguing that we have yet to address the largerissues.
Narasimham Committee (1991) points out that although the banking system in our country has made rapid progress during the last two decades, there is decline in productivity and efficiency and erosion of profitability.The committee strongly make indications of liberlising, deregulating economy to make Indian baking system more competitive and efficient.
Ojha (1987) in his paper "Modern international caparison of Productivity and Profitability of pubic sector banks of India" making Comparison on the basis of per employee indicators and taking examples of state bank group and Punjab National bank noted that Indian banks are the lowest in all accounts. However such international comparison will not be fair for numbers of reasons.
Godse (1983) in his essay, “looking a fresh at banking productivity” observe that productivity aspect is only at the Conceptualization stage in banking industry. He suggested improvement in productivity and procedures, costing of operations and capital expenditure etc.
Fanning (1982), while examining bank productivity of British banks observed that although the productivity of the UK clearing banks is improving, they are still heavily over manned as compared with similar banks elsewhere.
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.
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 on individual basis).
Banking Commission (1972) reviewed bank operating methods and procedures and made recommendations for improving and modernizing these, particularly relating to customers services, credit procedure and internal control systems. It observed that present methods of working out branch profitability are not appropriate and an integrated costing and financial reporting system is needed.
Department of Banking operations and development, RBI : Bombay observed that the rapid expansion of banks activities since 1970 called for a phase of consolidations to improve the quality of banks operational efficiency, productivity and customer services.
CHAPTER-5
2.1 INTRODUCTION TO THE BANKING SECTOR
Banking, the business of providing financial services to consumers and businesses. The basic services a bank provides are checking accounts, which can be used like money to make payments and purchase goods and services; savings accounts and time deposits that can be used to save money for future use; loans that consumers and businesses can use to purchase goods and services; and basic cash management services such as check cashing and foreign currency exchange. A broader definition of a bank is any financial institution that receives, collects, transfers, pays, exchanges, lends, invests, or safeguards money for its customers.
Definition:
Section 5(b) of the Banking Regulation Act, 1949 defines banking as ‘the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise.”
Section 5(c) of the Banking Regulation Act, 1949 defines a banking company’ as “any company which transacts the business of banking in India”.
- Engaging in the business of keeping money for savings and checking accounts or for exchange or for issuing loans and credit etc.
- Transacting business with a bank; depositing or withdrawing funds or requesting a loan etc.
- A banker or bank is a financial institution that acts as a payment agent for customers, and borrows and lends money.
- A banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money.
Banking Industry in India
The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:
- Early phase from 1786 to 1969 of Indian Banks
- Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
- New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.
INDIAN BANKING INDUSTRY
Banking in India falls mainly under two categories, viz. Commercial banks and Cooperative banks, while commercial banks cater to the needs of industry and trade largely; the cooperative banks play a major role in financing agriculture and allied activities in rural areas, and trade and services in urban areas.
The commercial banks may be classified into four group in terms of ownership:
1) Public Sector Banks
2) Regional Rural
3) Indian Private Sector Banks and
4) Banks incorporated outside India.
The commercial banks can be further classified into Scheduled banks and Non
Scheduled Banks. Scheduled Banks are those listed in the second schedule to the Reserve Bank of India Act 1934.These banks satisfy the criteria laid down under section 42 (6) of the RBI Act that they should have capital and reserve of Rs. 5lakhs and their activities should not be detrimental to the interests of depositors. The scheduled banks are required to maintain cash reserves equal to 5 % of DTL which can go up to 15 % under section42 (1). Those, which are not included in the 2nd schedule, are called the non-scheduled banks. The number of take- oven/liquidation as also in some cases up gradation into scheduled banks category.
5.1 THE HISTORY OF INDIAN HOME LOANS:-
Home loans in India have made people Buy Property in India in spite of the skyrocketing prices. Today, we find considerable Real Estate Investment in India, either in the field of Residential Property in India or Commercial Properties in India. Home Loans in India are disbursed by many Banks as Loan Banking is on of the most important function of the Financial Services in India. 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 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 8.5 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 .
Background
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.
HDFC was incorporated in 1977 as the first specialized Mortgage Company in India with primary objective of meeting a social need that of promoting the home ownership by providing long term finance to households for meeting their housing needs.
Its services are aimed at individuals as well as companies availing loans for purposes.It also provides lease finance to companies and to development authorities for financing infrastructure and other assets along with its property related services.
HDFC Bank's objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values: Operational Excellence, Customer Focus, Product Leadership and People.
Capital Structure
Distribution Network
HDFC Bank is headquartered in Mumbai. As on March 31, 2011, the Bank has a network of 1986 branches in 996 cities across India. All branches are linked on an online real-time basis. Customers in over 800 locations are also serviced through Telephone Banking. The Bank’s expansion plans take into account the need to have a presence in all major industrial and commercial centres, where its corporate customers are located, as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing / settlement bank to various leading stock exchanges, the Bank has branches in centres where the NSE / BSE have a strong and active member base.
The Bank also has a network of 5471 ATMs across India. HDFC Bank’s ATM network can be accessed by all domestic and international Visa / MasterCard, Visa Electron / Maestro, Plus / Cirrus and AmericanExpressCredit/Chargecardholders.
VISION OF THE ORGANISATION
“HDFC is an organization that strives for excellence, with the twin objectives of enhancing customer satisfaction and shareholder value.”
VISION OF HDFC
- To enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner and to promote home ownership.
- To increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.
PROMOTERS
HDFC is India’s premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the markets leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed a significant expertise in retail mortgage loans to different market segments and also had a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
ORGANISATIONAL GOALS
- Develop close relationships with individual households.
- Maintain its position as the premier housing finance institution in the country.
- Transform ideas into viable and creative solutions
- Provide consistently high returns to shareholders.
- To grow through diversification by leveraging off the existing client base.
ORGANISATION AND MANAGEMENT
HDFC is professionally managed with a board of directors consisting of eminent persons who represents various fields including finance, taxation, construction and urban policy and development. The board primarily focuses on strategy formulation, policy and control designed to deliver increasing value to shareholders.
Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.
BOARD OF DIRECTORS
AWARDS AND RECOGNITIONS
Housing finance is a part of financial service which has emerged strongly due to growth of banking industry and housing finance institution or companies. The housing finance is a type of installment credit which forms the largest single source of housing finance. Under installment credit scheme, the customer repays the loan in equal periodic or monthly installments (EMI). EMI means the amount of monthly payment necessary to amortize the loan with interest within the tenure of loan.
HDFC offers Loans for Homes-for buying or constructing homes, refinancing a home loan availed from another institution or to extend or improve an existing home. HDFC also finances purchase of land approved agencies to help construct a home. HDFC also helps a customer in acquiring a self contained flat in an existing or proposed cooperative society, in an apartment owners’ association or even an independent single family or multifamily bungalow or row house. HDFC Homes Loans have serve 26lakh customers over a period of 29 years.
Compared with other nations India lags behind in terms of Mortgage Penetration which directly demonstrates the potential in Indian market for Housing mortgage finance companies.
BALANCE SHEET OF HDFC LTD (ASSETS)
Total Liabilities Rs 1,675.20 bn (PY Rs 1392.42 bn)
SOURCES OF MORTGAGE AT HDFC LTD.
From the above diagram,it is quite clear that 89% of mortgages are sourced by HDFC itself or through its affiliates.
FUND RAISING AT HDFC
Total Borrowings – Rs 1,391.28 bn (PY Rs 1,151.12 bn)
5.9 Types of home loans: -
Housing loans offered by banks are of different types:-
- Home Purchase Loans
- Home Construction Loans
- Home Improvement Loans
- Home Extension Loans
- Home Conversion Loans
- Land Purchase Loans
- Stamp Duty Loans
- Bridge Loans
- Balance Transfer Loans
- Refinance Loans
- Loans to NRIs
Home purchase loans:-
This is the basic for the purchase of a new home. If you want to buy a flat in some society or some already built house, banks and HFCs sanction you home purchase loans for this process.
Home construction loans:-
This loan is available for the construction of a new home on a said property. The documents that are required in such a case are slightly different from the ones you submit for a normal . If you have purchased this plot within a period of one year before you started construction of your house, most HFCs will include the land cost as a component, to value the total cost of the property. In cases where the period from the date of purchase of land to the date of application has exceeded a year, the land cost will not be included in the total cost of property while calculating eligibility.
Home improvement loans:-
These loans are given for implementing repair works and renovations in a home that has already been purchased, for external works like structural repairs, waterproofing or internal work like tiling and flooring, plumbing, electrical work, painting, etc. One can avail of such a loan facility of a home improvement loan, after obtaining the requisite approvals from the relevant building authority. the following are coming under the home improvement loans:
- External repairs
- Tiling and flooring
- Internal and external painting
- Plumbing and electrical work
- Waterproofing and roofing
- Grills and aluminum windows
- Waterproofing on terrace
- Construction of underground/overhead water tank
- Paving of compound wall (with stone/tile/etc.)
- Borewell.
Home extension loans:-
An extension loan is one which helps you to meet the expenses of any alteration to the existing building like extension/ modification of an existing home; for example addition of an extra room etc. One can avail of such a loan facility of a , after obtaining the requisite approvals from the relevant municipal corporation.
Home conversion loans:-
This is available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through a home conversion loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need for pre-payment of the previous loan.
Land purchase loans:-
This loan is available for purchase of land for both home construction or investment purposes.
Stamp duty loans:-
This loan is sanctioned to pay the stamp duty amount that needs to be paid on the purchase of property.
Bridge loans:-
Bridge Loans are designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home.
Balance- transfer loans:-
Balance Transfer is the transfer of the balance of an existing home loan that you availed at a higher rate of interest (ROI) to either the same HFC or another HFC at the current ROI a lower rate of interest.
Refinance loans:-
Refinance loans are taken in case when a loan for your house from a HFI at a particular ROI you have taken drops over the years and you stand to lose. In such cases you may opt to swap your loan. This could be done from either the same HFI or another HFI at the current rates of interest, which is lower.
NRI home loans:-
This is tailored for the requirements of who wish to build or buy a home or property in India. The HFCs offer attractive housing finance plans for 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.
HDFC HOME LOANS
Home loans offered by HDFC Bank encompasses a wide range of loan options which are subject to various parameters like term of loan, financial status of the individual seeking loan and the purpose of loan. Owing to these diversifications, HDFC Home loans have grown in popularity over the years.
HDFC is India’s largest housing finance company with a market share of 55% in loan disbursals. Being in the business for over 25 years; HDFC has an impressive loan portfolio for varied housing finance needs. In the home loan segment, HDFC offers loans for individuals to purchase (fresh/resale) or construct houses.
There is a great flexibility and variety in the home loans as it is open to salaried and self employed individuals alike, to both resident and non-resident Indians and requires no guarantor, charges one time processing fees and offers choice of variable and fixed rate loans. It offers loans to construct/buy a new home, loans for home extension, home repairs and purchase of plots.
In addition to the attractive loan schemes, HDFC customers can avail of a host of related benefits like Loan Cover Term Assurance Plan, automated repayment of home loan EMI and in-house scrutiny of property documents. Existing HDFC Bank home loan customers can avail of other loans such as Personal loans and Car loans at lower interest loans.
The advantages associated with HDFC Home Loans are:
- An individual can undergo a Home Loan Counseling where HDFC shares its experiences of providing Home Loans for 29 years.
- Wide range of products which offers multiple choices to an individual to choose the loan plan that suits him/her the best.
- Multiple Repayment Options gives a customer a wider scope of repayment according to his/her financial situations.
- Ease of documentation : Pre- Approved projects only. Less Documentation
- Wide network of financing also enables the individuals to get his/her loan sanctioned from a place of his/her choice and also pay the installments duly no matter where he/she is.
- HDFC also launched “Move in Home loans” to assist customers to get loans quickly to buy a “Ready to move in new property or a Resale property”.
The HDFC Bank with its varied offering of house loan and home finance offers the buyers an opportunity to select the perfect loan as per their individual needs. There is a wide range of home loans available with HDFC to choose from according to the needs of the buyers:
-
Home Extension Loans: HDFC provides Home Extension Loans for adding more space to your existing home. HDFC Home Extension Loan makes it convenient for you to extend or add space to your home. Be it an additional room, a larger bathroom, or even enclosing an open balcony.
FEATURES:
Maximum loan: The maximum amount of the loan is 80% of the cost of extension.
Maximum term: 20 years subject to your retirement age
-
Land Purchase Loan: These loans are available for purchasing land for both construction and investment purposes.
FEATURES:
Maximum loan: The maximum amount of the loan is 85% of the cost of the land and based on the repayment capacity of the customer.
Maximum term: The maximum term of the loan is 15 years subject to the age of your retirement.
-
HOME IMPROVEMENT LOANS: These loans are available for improvement of the house. For Example: External Repairs, Tiling and Flooring,etc.
FEATURES:
Maximum loan:
For existing customers the maximum amount of loan is 100% of the cost of improvement.
For new customers the maximum amount of the loan is 85% of the cost of improvement.
Maximum term: The maximum term of the loan is 15 years subject to the age of your retirement.
-
SHORT TERM BRIDGING LOAN: It makes you realize your dream of buying a bigger and better home and gives you time to sell your existing property to pay off the loan.
This is a short term loan to help customers with the interim period between the sale of your old home and purchase of a new home. You can take the loan even if you are an existing customer of HDFC.
FEATURES:
Maximum loan: The maximum amount of the loan is 90% of the cost of property.
Maximum term: The maximum term of the loan is 2 years.
- NON RESIDENTIAL PREMISES LOAN FOR PROFESSIONALS
HDFC offers loans exclusively for professionals such as doctors, chartered accountants, lawyers and other self-employed professionals for construction, purchase, extension or renovation of their office or clinic.
FEATURES:
Maximum loan: 80% of the cost of the property. This is however subject to valuation of the property as assessed by HDFC.
Maximum Term: For non residential premises, maximum term is 15 years.
REPAYMENT FACILITIES:
HDFC provides Multiple Repayment Facilities to its customers. These facilities include Step up Repayment Facility, Flexible Loan Installments Plan, Tranche Based Equated Monthly Installments, and Accelerated Repayment Scheme.
- Step Up Repayment Facility:
This facility helps young executives a much bigger loan today based on an increase in their future income, this helps executives buy a bigger home today.
- 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 installments reduces upon retirement of the earning parent.
-
Tranche Based Equated Monthly Installments:
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 customers save this interest, they have introduced a special facility of Tranche Based Equated Monthly Installments (EMIs).Customers can fix the installments they wish to pay till the property is ready.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 customer benefits by starting EMI and hence repays the loan faster.
-
ACCELERATED REPAYMENT SCHEME:
Accelerated repayment Scheme offers you a great opportunity to repay the loan faster by increasing the EMI, whenever you get an increment, increase in your disposable income or have lump sum funds for loan repayment, you can benefit by:
Increase in EMIs 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.
CONDITIONS OF HOME LOAN
You must be at least 21 years of age when the loan is sanctioned. The loan must terminate before or when you turn 65 years of age or before retirement, whichever is earlier. You must be employed or self-employed with a regular source of income.
Rate of Interest:- The current applicable rate of interest is as follows:
- Adjustable Rate Home Loan
Loan under Adjustable Rate is linked to HDFC's Retail Prime Lending Rate (RPLR). The rate on your loan will be revised every three months from the date of first disbursement, if there is a change in RPLR, the interest rate on your loan may change. However, the EMI on the home loan disbursed will not change*. If the interest rate increases, the interest component in an EMI will increase and the principal component will reduce resulting in an extension of term of the loan, and vice versa when the interest rate decreases.
-
Fixed First Home Loans
Under HDFC's ‘Fixed First’ Home Loans product, the borrower can avail a home loan at a fixed interest rate (options A & B) and thereafter, the loan will switch automatically to HDFC’s Adjustable Rate Home Loan (ARHL) product. This option is for customers seeking to lock in their home loan interest rates and not take risk on interest rates moving up in the initial years.
Under the option A of the product, the fixed rate will be available up to 30th November 2014 while under the option B the Fixed rate will be available up to 30th November 2016. After the completion of the fixed rate period, the loan will switch to HDFC’s ARHL product, linked to HDFC’s RPLR. The rate of interest applicable during the ARHL period of the loan shall depend on the RPLR at the time of the switch of the loan to ARHL.
Eligibility:
The Fixed First Home Loans can be availed of by all the customer segments - Resident as well as Non-Resident Indians and all the employment segments - Employed, Self-employed Professionals and Self-employed Non-Professionals.
.
Documents Required :-
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 column: - It contains an exhaustive list of the various components that are added to the persons salary. They contain various components like Basic pay, HRA etc.
Deductions :- It contains an exhaustive list of various components that are deducted from the persons Earnings. They contain various components like Income tax, Provident fund, Employee Loans etc.
2) BANK STATEMENTS(6 MONTHS CURRENT) ;- The bank statement contains the various transactions that the applicant performs in his bank account. It has 3 components:
- Date
-
Descriptions ;- It contains the brief and standardized description of the activity or the account related to the transaction .Eg. Clearing cheque 166129, Transfer deposit.
-
Deposits: - It contains the amounts that were credited to the account
-
Withdrawal ;- It contains the amounts that were debited to the account. This is carefully studied to find out about any regular withdrawals or a series of checks so that any existing loans may be revealed and there can be a correct estimate of the repayment capacity.
-
Balance :- It shows effect of transaction on the pre existing account balance
-
Special feature :- HDFC will not consider any loans 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 Pancard ,Voter ID card, Employee ID card, Passport etc.
7) AGE PROOF: - The age proof includes the Pan card, Passport, Photo ID.
8) LOAN APPLICATION FORM DULY FILLED :- It can also be downloaded from HDFCs user friendly web based portal.
9) CHARGES FOR PROCESSING FEES :- This is a standard and nominal fees to be paid at the time of applying for loan.
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.
COMPARISON OF HDFC LTD WITH OTHER MARKET PLAYERS
STATE BANK OF INDIA
Features & Benefits of
- Purchase/ Construction of House/ Flat
- Purchase of a plot of land for construction of House
-
Lowest ..
- Extension/ repair/ renovation/ alteration of an existing House/ Flat
- Purchase of Furnishings and Consumer Durables as a part of the project cost
-
Takeover of an existing loan from other Banks/
- Interest charged on the daily reducing balance
-
No penalty on prepayments of
- No hidden costs
- Option to club income of your spouse and children to compute eligible loan amount
- Low processing charges.
- No hidden costs or administrative charges.
- No prepayment penalties.
- Actual loan amount will be determined taking into consideration factors such as applicant’s income and repaying capacity, age, assets and liabilities, cost of the proposed house/flat etc.
- Security: Equitable mortgage of the property.
- Repayment permitted upto70 years of age
CURRENT RATE OF INTEREST
Current floating rates of SBI on home loans are:-
Switching Home Loan From Old Rate To New Rate
State Bank of India (SBI) has decided to offer a facility to their existing home loan customers where they can switch to lower interest rate i.e current interest rate. SBI introduced this service to retain their old customers who are paying higher interest rate on there home loan as compare to new customers.
SBI customers who took home loan at SBAR (State Bank Advance Rate or prime lending rate) are paying approximately 2% to 3% extra rate of interest than customers who’s took loan at floating rate that is linked to the base rate. Currently base rate of SBI is 10% whereas SBAR is 14.75% which is the reason home loan customers linked with SBAR are paying much higher than new customers. Now using this facility existing home loan customers can also switch to new interest rate by paying 1% of the outstanding amount as conversion fee. And this will take down the monthly interest payment of old customers by as much as 2% points. This will be a substantial reduction in monthly interest payment of a borrower. While switching, customers can also decide whether to reduce the loan tenor or the amount of loan. And the only condition for switching home loan at SBI is that the customer should not be a defaulter. If so, then he or she needs to pay the default amount before initiating the process to switch to new interest rate.
ELIGIBILITY CRITERIA & DOCUMENTATION REQUIRED
HDFC home loan at Just 8.25% rate of interest
HDFC (Housing Development Finance Corp), has decided to give loans at a fixed rate of 8.25% per annum. HDFC’s new offer will be for all new loans taken before April 1, 2010, and the 8.25% Home Loan rates will remain fixed till March 2012. Thereafter, depending upon the loan amount, the customer will move to a floating rate structure, applicable on April 1, 2012. NRIs and PIOs can also get loans at this reduced rate.
Over the last few months, SBI had been offering home loan at as low as 8% fixed for the first year and afterward moving to a higher rate. Compared to HDFC’s 8.25% offer, SBI offers home loans of up to Rs 30lakh at 8% for the first year, 8.5% for second year and from third year onward it moves to a floating rate, the bank said. The hugely advertised 8% rate from SBI had generated substantial interest among home buyers since it was launched.
According to industry estimate, for a 20-year loan of Rs 30lakh and considering present rate formation is valid when customers move from fixed to a floating rate, the effective interest rate for the tenure of the SBI home loan will be 9.24% per annum compared to 8.63% in HDFC. In the Rs 30lakh to Rs 50lakh bracket, the effective rates work out to 9.24% for SBI and 8.81% for HDFC. And for loans of Rs 50lakh and above, effective rate for SBI will be 9.5% compared to 9% for HDFC. A lower rate leads to savings on the part of the customer.
All the customers who apply home loan and take a part-disbursement before March 31, 2010, will get this rate. The rate is fixed for loans of all amount but after March 2012, prevailing rates as per the amount of the loan will be applicable to the home buyers, an HDFC release said. At present, HDFC has three slabs: loans up to Rs 30 lakh, above Rs 30 lakh to below Rs 50 lakh and Rs 50 lakh and above.
HOME LOANS - INTEREST RATES
[Print Page]
All Rate are floating only (Base Rate= 10.00% p.a.)
.
5.3 INTEREST RATES PROVIDED BY VARIOUS BANKS
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.
Eligibility Criteria : Home Loan
Docs Required : Home Loan
Other Charges : Home Loan
Charges for late payment of EMI : 2% per month
Cheque swapping charges : Rs.500/-
Bounce Cheque Charges : Rs.500/-
Duplicate Statement Charges (per statement) : Rs.100/- per page, Maximum Rs.300/-
Issue of Duplicate Provisional Interest Certificate : Rs.300/-
Issue of Duplicate Interest Certificate : Rs.300/-
Duplicate Balance Certificate : Rs.300/-
Issue of Amortization Schedule (Duplicate) : Rs. 300/-
Switch from Variable to Fixed : Not Applicable
Switch from Fixed to Variable : Not Applicable
Photocopy of Documents : Rs.500/-
s
CHAPTER-9
CHAPTER-9
ANALYSIS & INTERPRETATION
The analysis is based on the responses given by customers through questionnaires.
1) PARTICIPANTS’ PROPORTION
Analysis :
From the table and graph above it can be seen that
68% respondents are male.
32% respondents are female.
2) AGE GROUP OF SURVEYED RESPONDENTS
Analysis:- From the chart above we find that 44% of the respondents fall in the age group of below 30 years, 40% fall in the age group of below 30-40 years and 16% fall in the age group of 40 – 50 years. Therefore most of the respondents are relatively young (below 40 years of age) and 16% respondent’s age are 40-50 years.
3) CUSTOMER PROFILE OF SURVEYED RESPONDENTS
Analysis :
From the table and graph above it can be seen that 41% of the respondents are salaried, 31% are professional and 22% are self-employed, 6% of the respondents are others.
4) ANNUAL HOUSE HOLD INCOME
Analysis:
From the table and graph above it can be seen that
46% respondent’s annual household income is less than 2 lacs.
36% respondent’s annual household income is between 2 to 4 lacs.
12% respondent’s annual household income is between 4 to 6 lacs.
6% respondent’s annual household income is more than 6 lacs.
5) From which of yhe following banks have you got your home loan financed ?
To understand the response more effective and closely, it has been showed diagrammatically as follows :-
Interpretation:-
The analysis showed that a large number of customers prefer HDFC LTD as compared to others. The data shows that 24% of customers took loan from SBI, 36% of customers fall under the category of ‘Others’ which includes Jammu and Kashmir Bank and Punjab National Bank and 40% of customers took loan from HDFC LTD .
The data shows that most of people prefer HDFC LTD as compared to public sector banks and other private banks. This is because of the extra services provided by HDFC LTD. However, there is less difference in figures of HDFC Bank and other public sector banks. But there is considerable difference in figures of the HDFC and SBI. Reason for this difference is specialized services in home loans, more amounts of loans, and efficient query handling by HDFC LTD.
However, the analysis showed that the people prefer HDFC LTD for home loan because of their services and excessive feat compared to other banks.
6) Amount of loan you applied for?
7) Factors considered by customers while taking loan :
Interpretation:-
The analysis shows that 60% customers mainly consider the service provided by the particular bank and give second preference to interest rates & schemes.
5. Reason for taking loan ?
Analysis:
To interpret the response of the question, the figures shows that most of the customers find the problem in availability of funds i.e. 40% and less number of customers found problem in paying cash in one go is 34%, customers get housing loan for tax benefits is 20%. This was the expected response because a large number of people find a problem of availability of funds which works as an obstacle in owning a dream home.
In today's life, people hardly earn both means and ends of life and they don't have much of money to buy a home or a land to construct house because of cost of property. So, they take the advantage of home loans provided by different banks at different terms feasible to the customers. There are very less number of people, who don't own home even when they have sufficient funds and they take the advantage of home loans because they don't want to pay huge cash in one go.
On the basis of study, it is concluded that most of people lack of money in fulfilling their dreams and few of them were reluctant to pay cash in one go and wanted to pay their home loans slowly in installments.
6. How did you come to know about the specific financial institution offering home loan?
Percentage of source of information about home loan schemes
Interpretation:-
The data shows that around 40% of customers got information from friends and relatives i.e. word of mouth, only 6% of customers from internet and 24% of customers got information about home loans schemes under 'Any other source' and 30% through existing employees.
7. What problem did you face while getting home or personal loan?
Analysis :
The data shows that around 20% of customers say that they didn’t had the required documents as required by the bank for home loan, 30% say that there are procedural delays and non-cooperative staff and 50% come under the category of “Lack of knowledge”.
8. Which bank easily provides home loan?
ANALYSIS:
Among 50 respondents, 36% persons say that HDFC Bank easily provides home loan, 24% persons says that SBI easily provides home loan and 40% persons says that other banks easily provide home loan.
9. Which bank provides flexible repayment period?
Analysis:
The data shows that around 34% respondents say that SBI provides flexible repayment period, 32% say that others provide flexible repayment period and 30% say that HDFC provides flexible repayment period.
10. Which bank charges lower processing fees?
Analysis :
The data shows that 34% respondents say that HDFC bank charges lower processing fees, 32% persons say that it is low in case of SBI and 34% say that other banks charge lower processing fees. There is not so big difference in the proportion because processing fees is almost same for all banks.
11. Did you face any problem after sanction of loan?
Analysis :
The data shows that among 50 respondents 74% are satisfied with their respective banks and had no problem in loan approval and disbursement while 26% respondents are not satisfied with the home loan procedure of their respective banks.
12. According to you which bank provides better services?
Analysis :
The data shows that among 50 respondents,20% say that other banks provide good service, only 26% say that SBI is good service provider while as 54% say that HDFC LTD is the best service provider because of their services and excessive feat as compared to other banks. This indicates that 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.
Factor Analysis Results
1. Correlation Matrix : Correlation matrix represents the correlation among the variables. Diagonal of correlation matrix is always 1.
Interpretation:-
The correlation coefficient between a variable and itself is always 1.It can be seen in the matrix that correlation between a variable and itself is also 1.Hence the principal diagonal of the matrix contains 1s.The correlation coefficients above and below the principal diagonal are the same.
2. Kaiser-Meyer-Olkin Measure of Sampling Adequacy :
The Bartlett’s test of sphericity and the Kaiser-Meyer-Olkin (KMO) are adopted to determine the appropriateness of the data for factor analysis. KMO is used to test sampling adequacy. Its value lies between 0.5 – 1. A value close to 1 indicates that patterns of correlation are relatively compact and so factor analysis should yield distinct and reliable factors. As per our analysis the value is 0.782, which is good.
Interpretation:-
According to the output, KMO value is 0.782.The value KMO (0.782) indicates that the data is appropriate for factor analysis.
3. Bartlett's Test of Sphericity :
The Bartlett’s test of sphericity is used to test hypothesis.
H0: There is no correlation between variables.
H1: There is correlation between variables.
Here chi-square value = 235.799 , p-value = .000, α = 0.05 i.e. p-value < 0.05
So, Null hypothesis is rejected. In other words, we can say that there is a correlation among variables.
4. Analysis Of Variance:
Extracts only those factors having Eigen value > 1.According to the output, only 4 components are selected.
Interpretation :
Factor 1 explains 21.087 % of variance i.e. 21.087 % of the total variance (total information) is explained by the extracted factor 1. Similarly 28.893 %, 14.317 % and 12.807 is explained by the extracted factor 2, extracted factor 3 and extracted factor 4 respectively. Cumulative percentage of 69.104 indicates that 69.104 % of total variance is explained by the 4 extracted factors together. Rest 30.896 % is unexplained.
Scree Plot :
The scree plot is a graph of Eigen values against all the factors. The graph is useful for determining how many factors to retain.
Interpretation:
The point of interest is where the curve starts to flatten. It can be seen that the curve begins to flatten between factors 4 and 5. It is so because Factor 5 has an Eigen value of less than 1, so only 4 factors have been retained.
5. Rotated Component Matrix: The next output from the analysis is the Rotated Component Matrix. The idea of rotation is to reduce the number factors on which the variables under investigation have high loadings. Rotation does not actually change anything but makes the interpretation of the analysis easier.
Interpretation:-
Looking at the table above, we can see that
Extracted Factor 1 is a linear combination of Lower interest rate.
Extracted Factor 2 is a linear combination of Proper Financing and Transparency.
Extracted Factor 3 is a linear combination of Speedy process of loan and Flexibility in procedures. Hence Factor 3 can be named as Flexible Loan Procedure.
Extracted Factor 4 is a linear combination of Cooperative staff and Complaints entered and solved. Hence Factor 3 can be named as Service Provided.
Conclusion:-
The SPSS has extracted four of the factors, however it is a statistical tool and we have to judge ourselves as to what factors are important and what are to be left out. Based on thumb rule the factors having value above 0.5 are marked as true and they are recommended to the management.
Overall the results reveal that Factor Analysis is useful for studying the factors that customers consider important while applying for home loan. It implies that the 4 factors i.e.Lower interest rate, Flexible loan procedure, Proper financing and Service provided are important determinants of customer satisfaction. Therefore, various financial institutions and banks should lay more emphasis on the stated factors to remain competitive in market
PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS
Everything in the world has good or bad points. No doubt banking industry/ company has made many efforts to enhance the customer satisfaction but customers still faced some problems. These are high lightened as below:
1) Customers don’t 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 a lot. This will crush the curtsy of customers to avail the home loan.
3) The attitude of bank employees sometimes becomes 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 some of the problems faced by customers while availing home loans.
CHAPTER-11
RECOMMENDATIONS AND SUGGESTIONS
These suggestions have been discussed as follows:-
1) To increase their customer base, 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, 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 as compared to its competitors. 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 are based 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 provides 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) Restrictions to be reduced to bare minimum for loan advances and for repayment. For e.g. offer long-term repayment facilities and have no age restriction for
choosing repayment
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)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 areas.
So,these are the main suggestions provided to the HDFC LTD. By considering these suggestions, HDFC LTD can strengthen their customer base in home loan 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 even more.
CHAPTER-12
CHAPTER-12
CONCLUSION
1) In my study we came to know that many people 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
REFERENCES
REVIEWS
- Berstain David(2008), “Home equity loans and private mortgage insurance: Recent Trends & Potential Implications”, Vol.3 No.2, August 2008, Pp. 41 - 53
- Dr. Rangarajan C. (2001), “A Simple Error Correction Model of House Price”.Journal of Housing Economics Vol. 4, No. 3,pp 27 – 34
- Fanning (1982), “The Demand for Home Mortgage Debt” Journal of Urban Economics, Vol 11 No 2, November, pp. 770-774
- Godse (1983), “looking a fresh at banking productivity”, Journal of Real Estate Literature, Vol. No. 13, Page 141 to 164.
- Haavio, Kauppi(2000) , “Residential Lending to Low-Income and Minority Families: Evidence from the 1992 HMDA Data," Federal Reserve Bulletin,Vol no 80(2), December 2000 Pp-79-108
- Kulkarni (1979), “Development responsibility and profitability of banks” Journal of Economic Perspectives, Vol 9 No 1 ,pp. 26-32.
- La courr, Micheal(2007) , “Economic Factors Affecting Home Mortgage Disclosure Act Reporting” The American Real Estate and Urban Economics Association, Vol.2 No. 2 May 18, 2007, Pp. 45 -58
- La cour Micheal(2006) , “The Home Purchase Mortgage Preferences Of Lowand-Moderate Income Households”, Forthcoming in Real Estate Economics , Vol 18, No 4 , December 20, 2006, p. 585.
- Vandell ,kerry D(2008), “Subprime lending and housing bubble:tail wag dog?”International Journal of Bank Marketing, vol 21,no 2, pp. 53-7
- Brochure on home loans from HDFC LTD
NEWS PAPERS
WEB PAGES:-
companies/hdfc.html
http://www.thinkplaninvest.com/2009/01/hdfc-will-cut-home-loan-rates/
http://ayaanbayaan.com/hdfc-ltd-financial-results-indian-gaap-for-the-period-april-to-june-2009/
http://www.valuenotes.com/press/pr_HDFC_250ct05.asp?ArtCd=70013&Cat=C&Id=100
ANNEXURE
QUESTIONNAIRE
.
Lovely Professional University
by
arbinhassan (student)
