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CHAPTER – I INTRODUCTION 1

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Page 1: Home Loans Hdfc

CHAPTER – I

INTRODUCTION

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INTRODUCTION

Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and

above all gathering funds little by little to afford 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,

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Page 3: Home Loans Hdfc

tiling and flooring, grills and aluminium windows. HDFC finances up to 85% of the cost of

renovation (100% for existing customers).

Current status is that HDFC reduced home loan rates by 50 basis points for all its

existing floating rate customers.

ADVANTAGES OF HOME LOANS:-

The various benefits of home loans arising to the customers are:-

(i) Attractive interes 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, liberlise 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.

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(v) Loan period:-

There are many banks which provide maximum loan tenures upto 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.

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

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(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 delay

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 some times 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.

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OBJECTIVES OF STUDY

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)2) To analyze the history of hdfc ltd. To analyze the history of hdfc ltd.

3) Generating good business to the company by promoting and selling the products of HDFC

LTD.

4) To know the ideas of customers about home loan products and services.

5) To make comparative study of Disbursement of home loans by

Commercial banks.

6) Fixing the appointments with the customers.

7) To study the satisfaction level of customers about home loans.

8) To study the problems faced by customers in obtaining the home loans.

9) Visiting the customers and closing the deal.

10) To learn about various aspect of hdfc home loan ltd. To learn about various aspect of hdfc home loan ltd.

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PURPOSE OF THE STUDY

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.

To learn about various aspect of HDFC home loan ltd. To learn about various aspect of HDFC home loan ltd.

SCOPE OF STUDY

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.

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RESEARCH METHODOLOGY OF THE STUDY

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-

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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 commercial

banks.

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 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;-

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.

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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.

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.

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.

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LIMITATIONS OF THE STUDY:-

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.

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CHAPTER – II

REVIEW OF LITERATURE

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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,

13

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tiling and flooring, grills and aluminium windows. HDFC finances up to 85% of the cost of

renovation (100% for existing customers).

Current status is that HDFC reduced home loan rates by 50 basis points for all its

existing floating rate customers.

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:-

However, if one is a resident or non-resident individual who is planning to buy a

house in India, one can apply for a home loan. If a person has decided to buy a property in the

near future, 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 coowner 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 co-

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applicants 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.

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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

judgement 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

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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.

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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 availment 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.

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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.

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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

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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 self-employed

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.

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(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 certificate-

retainership 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

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• 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

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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.

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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.

SUMMARY:-

• 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 2009)

• Government taking various steps to encourage people to go toward home loans .

(Haavio, Kauppi 2000)

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• Growth of home loans are due to increase of living standard of people, shifting from

joint family to nuclear family .(Lacourr, Micheal 2008)

• 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 2007).

• SBI provide 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 (2011) examined in his study taken from 2001 to 2009 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 2008 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.

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Vandell, Kerry D (2009) analysis the sharp rise and than suddenly drop down home prices

from the period 1998- 2009. 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 certain other

mortgage products.

La courr, Micheal (2008) analysis in his study the factors affected the increase in the level

of Annual percentages rates (APR) spread reporting during 2006 over 2005. 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 2006, though

indirect, wholesale originations did significantly increase. Finally, given a model of the

factors affecting results for 2005-2006, we predict that 2007 results will continue to show an

increase in the percentage of loans that are higher priced when final numbers are released in

September 2008.

La cour Micheal (2007) 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

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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.

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.

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.

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

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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 else where.

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 of individual basis).

Banking Commission (1972) reviewed bank operating methods and procedures and made

recommendations for improving and modernizing these, particularly relating to customers

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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.

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CHAPTER-III

INDUSTRY AND COMPANY

PROFILE

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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. 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

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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

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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 .

Home Loan Procedure in India :-

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.

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.

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.

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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.

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.

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.

Payment Procedure: - Once all the above mentioned process, the borrower is entitled to take

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.

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INTEREST RATES PROVIDED BY VARIOUS BANKS

Finance InstitutionLoan Period

(in years)Fixed

EMI / Lakh

(INR)Floating

EMI / Lakh

(INR)

 

Bank of Baroda

Up to 5 9.00 2086 8.00 2028

6 to 10 9.25 1230 8.25 1227

11 to 15 9.50 1054 8.25 970

16 to 20 9.50 932 8.50 868

 

State Bank Of India

Up to 5 9.50 2100 8.75 2074

6 to 10 9.75 1300 9.25 1280

11 to 15 - - 9.25 1029

16 to 20 - - 9.75 949

 

HDFC

Up to 5 11 2175 9.50 2101

6 to 10 11 1375 9.50 1294

11 to 15 11 1137 9.50 1055

16 to 20 11 1033 9.50 933

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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 1055

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 1054

16 to 20 11 1032 9.50 932

 

PNB Housing Finance

Up to 5 9.00 2086 10.50 2150

6 to 10 9.00 1267 10.50 1350

11 to 15 9.25 1030 10.50 1107

16 to 20 9.50 933 10.50 999

16 to 20 11 1032 9.50 932

PNBHousing Finance Up to 5 9.00 2086 10.50 2150

6 to 10 9.00 1267 10.50 1350

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11 to 15 9.25 1030 10.50 1107

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.

Lock-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 your 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.

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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.

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.

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:-

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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.

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 .

5.4 I ndian Market for Home loans is more than Rs.500,000 crore:-

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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:-

STAGES OF HOME LOAN

41

MunirkaHUB

Login Scanning

DataEntry

RecommendationOver(ROVR)DoubleChecking

Over(DCOVR)Fixedcharges

Disbursement of loanThe Loan

Application

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COMPANY PROFILE

HDFC HOSING DEVELOPMENT FINANCE CORPORATION

LTD

INTRODUCTION:-

Housing Development Finance Corporation Limited , founded 1977 by Ravi

Maurya and Hasmukhbhai Parekh, is an Indian NBFC, focusing on home mortgages. HDFC's

distribution network spans 243 outlets that include 49 offices of HDFC's distribution

company, HDFC Sales Private Limited. In addition, HDFC covers over 90 locations through

its outreach programmes. HDFC's marketing efforts continue to be concentrated on

developing a stronger distribution network. Home loans are also Sharcket through HDFC

Sales, HDFC Bank Limited and other third party Direct Selling Agents (DSA).

HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since

emerged as the largest residential mortgage finance institution in the country. The corporation

has had a series of share issues raising its capital to Rs. 119 Crores. The gross premium

income for the year ending March 31, 2008 stood at Rs. 2,856 Crores and new business

premium income at Rs. 1,624 Crores. The company has covered over 8,77,000 lives year

ending March 31, 2008.

HDFC operates through almost 450 locations throughout the country with its

corporate head quarters in Mumbai, India. HDFC also has an International Office in Dubai,

UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing

company in India for the last 27 years.

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SNAPSHOT-I

Incorporated in 1977 as the first specialized Mortgage Company in India.

Almost 90% of initial shareholding in the hands of domestic institutes and retail

investors. Current 77% of shares held by foreign institutional investors.

Besides the core business of mortgage HDFC has evolved into a financial

conglomerate with holdings In:

GRAPH:- 6.1

HDFC Standard Life insurance Company- HDFC holds 72.26 %.

HDFC Asset Management Company – HDFC holds 60%

HDFC Bank- HDFC holds 23.26%.

Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.

HDFC LTD

72.26% HDFC

STANDARDLIFE

60% HDFCASSET

MANAGEMENT

23.26% HDFC

BANK (inclusive of warrants)

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HDFC Chubb General Insurance Company – HDFC holds 74%

SNAPSHOT-II

Loan Approvals Rs. 806 billion.

(Up to Dec 2008) (US $ 18.30 bn.)

Loan Disbursements Rs.669 billion

(Up to Dec. 2008) (US $ 15.20 bn)

Housing Units financed 2.5 million.

Distribution

Offices 181

Outreach Programs 90

HDFC Limited

Type Public (BSE: 500010)

Founded 1977

Headquarters Mumbai,India

Key people Ravi Maurya

Hasmukhbhai Parekh

Industry Housing Finance

Revenue US$ 1.49 billion (2009)

Employees 1,029

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KEY EXECUTIVE HDFC HOUSING DEVELOPMENT FINANCE CORP LTD :-

Mr. Deepak S Parekh: - serves as Executive Chairman and Chief Executive Officer of the

Board of Housing Development Finance Corp. Ltd., (HDFC). He joined HDFC Limited in a

senior management position in 1978. He was inducted as a whole-time director of HDFC

Limited in 1985 and was appointed as its Executive Chairman in 1993. He is the Chief

Executive Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of Chartered

Accountants (England & Wales).

Mr. K.m mistry: - The Managing Director of the Corporation. He has been employed with

the Corporation since 1981 and was the executive director of the Corporation since 1993. He

was appointed as the deputy managing director in 1999 and the Managing Director in 2000.

He is also a member of the Investors’ Grievance Committee of Directors.

Ms. Renu S. Karnad: - The Executive Director of the Corporation. She has been employed

with the Corporation since 1978 and was appointed as the Executive Director of the

Corporation in 2000. She is responsible for overseeing all aspects of lending operations of

HDFC.New Delhi.

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BOARD OF DIRECTORS:-

Mr. D S Parekh - Chairman   Mr. D N Ghosh

Mr. Keshub Mahindra - Vice Chairman  Dr. S A Dave

Ms. Renu S. Karnad - Executive Director  Mr. S Venkitaramanan

Mr. K M Mistry - Managing Director  Dr. Ram S Tarneja

Mr. Shirish B Patel Mr. N M Munjee

Mr. B S Mehta Mr. D M Satwalekar

GROUP COMPANIES:-

HDFC Bank: World Class Indian Bank- among the top private banks in India.

HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.

Intelenet Global: BPO services for international customers.

CIBIL: Credit Information Bureau India Limited.

HDFC Chubb: Upcoming Private companies in the field of General Insurance.

HDFC Mutual Fund

HDFC reality.com: Helps to search properties in all major cities in India

HDFC securities

HDFC Standard Life Insurance Company Ltd Aug, 2000

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JOINT VENTURE

HDFC Standard Life Insurance Company Limited was one of the first companies to

be granted license by the IRDA to operate in life insurance sector. Reach of the JV player is

highly rated and been conferred with many awards. HDFC is rated ‘AAA’ by both CRISIL

and ICRA. Similarly, Standard Life is rated ‘AAA’ both by Moody’s and Standard and

Poor’s. These reflect the efficiency with which HDFC and Standard Life manage their asset

base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively.

HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000.

HDFC is the majority stakeholder in the insurance JV with 81.4% staple and Standard of as a

staple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture.

HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private Life

Insurance Companies, which offers a range of individual and group insurance solutions. It is

a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.)

India’s leading housing finance institution and the Standard Life Assurance Company, a

leading provider of financial services from the United Kingdom. Both the promoters are will

known for their ethical dealings and financial strength and are thus committed to being a

long-term player in the life insurance industry- all important factors to consider when

choosing your insurer.

ORGANISATIONAL GOALS:- HDFC's main goals are to :-

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a) develop close relationships with individual households,

b) maintain its position as the premier housing finance institution in the country,

c) transform ideas into viable and creative solutions,

d) provide consistently high returns to shareholders, and

e) to grow through diversification by leveraging off existing client base.

In addition to home building loans, HDFC also offers home extension, home improvement

and home conversion loans. It also helps to identify and value properties. HDFC also offers

depository services in form of term deposits.

Types of Products offered

HDFC provide loans to meet all your requirements for you to make that house a home.

Home Improvement Loan

Home Extension Loan

Loans to professionals for office or clinic.

Home Equity Loans (Loan Against Property)

Loan against Rent receivables

Short Term Bridging Loan.

Loans to professionals for non-residentials premises loan

Key Associates and Subsidiaries: - These are:-

HDFC BANK:-

23.26% owned by HDFC(inclusive of warrants)

Market Cap US $ 11 billion

ADRs listed on NYSE

In February 2009, HDFC Bank board approved the merger with

Centurion Bank of Punjab {CBOP} (1 share of HDFC Bank for 29

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Shares of CBOP)

1,412 branches, 528 cities, 2,890 ATMs

Over 12 million customer accounts

Key business areas. Wholesale banking Retail banking Treasury operations

Financials (as per Indian GAAP) for the half year ended Sept 30,

2009

– Total net revenues: Rs 48.26 bn, increase of 51% over previous

year

– PAT: Rs 9.92 bn, increase of 44% over the previous year

HDFC Standard Life Insurance Company Ltd. (HDFC-SL) :-

Structure: - Strong and stable partnership:-

Tie up with Standard Life Assurance Company, U.K.

HDFC holds 72.26% of the equity of HDFC-SL

Products: - Diversified product portfolio covering all life stages and needs:-

Offers 20 individual products and 5 group plans along with 5 optional riders

Offers 8 fund options with market linked products

Premium income and growth: - Values driven growth:-

Total premium income of Rs. 48.59 bn for FY 08-09 (Previous year Rs 28.56 bn); reflecting a

growth of 70% Q1 09-10 growth in total premium of 34% over Q1 08-09 Funds under

management of group new business increased by 8% in as at June 30, 2009 as against the

previous year.

Coverage: - Committed to increasing coverage in an under-insured market :- Achieved

a total sum assured of Rs. 33.12 bn in respect of 0.25 million lives covered in Q1 10 taking

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the cumulative sum assured to Rs. 908.5 bn covering over 3.66 million lives Claims other

than withdrawals/surrenders amounted to Rs 0.10 bn .

Distribution: - Diversified distribution network to cater to customer preference: - HDFC

network is used to cross sell by offering customized products Operates out of 575 offices

across the country serving over450 locations Network of over 1,62,000 financial consultants,

379 corporate agents and other sales intermediaries .

Market share: - Market share of 7.3% (private sector) and 4.7% (overall) in terms of

Effective Premium.

Key performance indicators and business practices: -A diversified distribution mix

including the tied agency and alternate channels

Banks, brokers, telemarketing, direct sales force Tied agency contributed 64%

effective premium in Q1 10 Strong bank assurance tie-ups with public, private, co-

operative and foreign banks amongst the leading players in the pensions segment

Leveraging technology to strengthen processes.

Workflow system awarded the best technology innovation

Web based facility to service customers and channel partners

HDFC ASSET MANAGEMENT:-

Tie-up with Standard Life Investments (SLI)

HDFC holds 60% of HDFC Asset Management

HDFC MF offers 34 equity and debt oriented products

Earned a Profit after Tax of Rs 1.18 billion for FY09; Return on Equity: 75%

Paid a dividend of 150% for FY09 to equity shareholders

Total assets under management (AUM) as at September 30, 2009, stood at Rs.647bbn

which is inclusive of portfolio management and advisory

Services of Rs. 170 bn.

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Equity assets as a proportion of the mutual fund’s AUM is 35%.

HDFC PROPERTY FUND:-

Launched in March 2006

First Scheme: HDFC India Real Estate Fund

– Fund corpus: US $ 250 million – fully invested

– Domestic, 7 year close ended fund

– Funds managed by HDFC Venture Capital Limited

HDFC International Fund

– Fund Corpus: US$ 800 million

– International, 9 year close ended fund

– Targeted at premier institutions and funds across the world

Interested in taking an exposure in Indian real estate.

HDFC ERGO GENERAL INSURANCE COMPANY LTD:-

HDFC holds 74% and ERGO (Germany) holds 26%

The company offers Auto Insurance, Home Insurance, Group Accident Insurance,

Group Travel Insurance, Commercial Insurance which includes Fire and Marine and

Specialty Insurance Products like Directors & Officers Liability .

Achieved Gross Written Premium of Rs. 2.4 bn.

Operates out of 28 locations across the country

HDFC network is used to cross sell Home Insurance & Accident Insurance

HDFC and HDFC Bank database is used to cross sell Accident Insurance.

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TABLE:-6.4

CONSOLIDATED EARNINGS:-

(As at March 31, 2011)

HDFC consolidated

Return on Equity 27.8% 28.2%

Return on Average Assets 2.7% 2.7%

Earnings per share (Rs) 85 95

Profit after Tax (Rs in billion) 24.36 27.13

Total Assets (Rs in billion) 810.99 925.83

DISTRIBUTION NETWORK: - HDFC’s distribution network spans 254 outlets that

include 54 offices of HDFC’s distribution company, HDFC Sales Private Limited (HSPL). In

addition, HDFC covers over 90 locations through its outreach programmes. Distribution

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channels form an integral part of the distribution network with home loans being distributed

through HSPL, HDFC Bank Limited and other third party direct selling associates.

To cater to non-resident Indians, HDFC has offices in London and Dubai and service

associates in Kuwait, Oman, Qatar, Sharjah, Abu Dhabi and Al Khobar, Jeddah and Riyadh

in Saudi Arabia.

HDFC HOME LOAN ADVANTAGE :-

Home loan counselling sharing over 30 years of home loan experience

Door step service

Helps in finding Dream home

Wide Product Range

Multiple Repayment Option

Wide Network of financing

Post disbursement service

Loan repayment option

AWARDS & ACCOLADES:-

Goldman Sachs has listed HDFC as one among top 7 financial services organization

in 2009.

HDFC ranked among the top 3 Best Managed Companies in India by Finance Asia in

2008

Selected as the best Indian company in the FIs / NBFCs / Financial Services sector at

the Dun & Bradstreet – American Express Corporate Awards 2007 and 2008.

Best Investment Management Company in India by EUROMONEY 2008

HDFC was awarded a rating of 4 out of 5 in Karmayog's ‘Corporate Social

Responsibility Ratings’ in 2008.

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HDFC is featured in the Limca Book of Records 2007, for the landmark achievement

of Rs. One trillion in home loan approvals

HDFC was awarded the Gold Shield in the Finance Sector by ICAI for excellence in

Financial Reporting in 2006. This is the 14th time HDFC has been selected for this

award.

HDFC has been awarded the 'Business Superbrand' status.

HDFC has been awarded the 'Best Home Financier' title by Outlook Money – 2006

Economic Times Corporate Citizen of the Year Award - November 2005.

FUTURE: - HDFC has always been market-oriented and dynamic with respect to resource

mobilisation as well as its lending programme. this renders it more than capable to meet the

new challenges that have emerged. Over the years, HDFC has developed a vast client base of

borrowers, depositors, shareholders and agents, and it hopes to capitalize on this loyal and

satisfied client base for future growth. Internal systems have been developed to be robust and

agile, to take into account changes in the volatile external environment. HDFC has developed

a network of institutions through partnerships with some of the best institutions in the world,

for providing specialized financial services. Each institution is being fine-tuned for a specific

market, while offering the entire HDFC customer base the highest standards of quality in

product design, facilities and service.

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CHAPTER-V

ANALYSIS & INTERPRETATION

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ANALYSIS & INTERPRETATION

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

AGE GROUP OF SURVEYED RESPONDENTS

TABLE 5.1:

Age group No. of Respondents

18 - 25 years 127

26 - 35 years 67

36 - 49 years 46

50 - 60 years 24

More than 60 years 6

CHART-5.1:

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Analysis:- From the chart above we find that 47% of the respondents fall in the age group of

18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36

– 49 years.

Therefore most of the respondents are relatively young (below 26 years of age). and 6%

respondent’s age are 50-60 years and 2% respondent’s age are 60 to above years.

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

TABLE-52

Sr. No. Category No. of Respondents Percentage

1 Married 140 70%

2 Unmarried 60 30%

Total 200 100%

Base 200 respondents

CHART-5.2:

Interpretation

From the table and graph above it can be seen that

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70% respondent’s are married.

30% respondent’s are unmarried.

Educational qualification of respondent’s

TABLE-5.3

Sr. No. Category No. of Respondents Percentage

1 Under graduate 50 25%

2 Graduate 80 40%

3 Post graduate 70 35%

Total 200 100%

Base 200 respondents

CHART-5.3

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Interpretation

From the table and graph above it can be seen that

25% respondent’s are under graduate.

40% respondent’s are Graduate.

35% respondents are Post graduate.

Number Of year’s Are You in Dehradun?

TABLE-5.4

Sr. No. Category No. of Respondents Percentage

1 Less than five years 78 39%

2 More than five years 122 61%

Total 200 100%

Base 200 respondents

CHART-5.4

Staying years in Dehradun

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Interpretation

From the table and graph above it can be seen that

39% respondent’s are in Dehradun is less than five year’s.

61% respondent’s are in Dehradun is more than five year’s.

CUSTOMER PROFILE OF SURVEYED RESPONDENTS

TABLE 5.5:

Customer profile No. of respondents

Student 7

Housewife 5

Working Professional 116

Business 49

Self Employed 24

Government service employee 24

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Chart-5.5

Interpretation

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

51% of the respondents are working professionals, 22% are into business and 11% are self-

employed, 11% of the respondent’s are government service employee and 3% of the

respondents are student and 2% of the respondents are house-wife.

ANNUAL HOUSE HOLD INCOME?

TABLE-5.6

Sr. No. Category No. of Respondents Percentage

1 Less than 2 lacs 98 49%

2 Between 2 to 5 lacs 62 31%

3 Between 5to 8lacs 30 15%

4 More than 8 lacs 10 5%

Total 200 100%

Base 200 respondents

CHART-5.6

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Interpretation

From the table and graph above it can be seen that

49% respondent’s annual household income is less than 2 lacs.

31% respondent’s annual household income is between 2 to 5 lacs.

15% respondent’s annual household income is between 5 to 8 lacs.

5% respondent’s annual household income is more than 8 lacs.

Do you know about HDFC housing development finance corporation LTD?

TABLE 5.7:

Category No. of Respondents

Yes 164

No 16

CHART:-5.7

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Awareness about HDFC LTD

Interpretation:-

From the table and graph above it can be seen that

91% respondent’s are known about HDFC LTD

9% respondent’s are not known about HDFC LTD

o Table 5.8:-

Reasons for getting the home financed

Sr.No. Number of Reasons Percentage

a. Non-availability of funds 36

b. Reluctancy to pay cash in one go 35

c. Tax benefit 24

d. Any other 5

GRAPH:- 5.8

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Interpretation :-

To interpret the response of the questions, the figures shows that most of the

customers find the problem in availability of funds i.e. 36% and very less number of

customers found problem in paying cash in one go is 35%, customers get housing loan for tax

benefits is 24%. 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

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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 fulfiling

their dreams and few of them were reluctant to pay cash in one go and wanted to pay their

home loans slowly in installments.

Table-5.9

From where you have got your home financed

Name of Banks / company Percentage of customers

HDFC LTD 55

Punjab National Bank 15

Standard Chartered Bank 08

ICICI BANK 20

Any other 03

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To understand the response more effective and closely, it has been showed diagrammatically

as follows :-

GRAPH:- 5.9

From where you have got your home financed

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Interpretation:-

The analysis showed that a large number of customers prefer HDFC LTD as

compared to others. The data shows that 7% of customers took loan from Standard Chartered

Bank, 20% of customers from ICICI BANK, 15% Customers took loan from Punjab National

Bank, 55% of customers took loan from HDFC LTD and a 3% of customers fall under the

category of 'Any other' which included State Bank of India, Canara Bank, Punjab and Sind

Bank, etc.

The data shows that most of people prefer HDFC LTD 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 ICICI Bank and Punjab National Bank. But

there is considerable difference in figures of the two private sector banks i.e. ICICI bank and

Standard Chartered Bank. As ICICI is the market leader in the home loans sector. This may

be the reason for such difference in Standard Chartered Bank's percentage and ICICI Bank's

percentage. Another reason for specialized services in home loans, more amounts of loans,

and efficient query handling.

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However, the analysis showed that the people prefer HDFC LTD for home loan

because of their services and excessive feat compared to other banks.

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CHAPTER-V

FINDINGS, SUGGESTIONS AND

CONCLUSION

FINDINGS

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

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

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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.

RECOMMENDATIONS AND SUGGESTIONS

These suggestions have been discussed as follows:-

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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.

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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.

CONCLUSION

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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

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REFERENCES

REVIEWS

Berstain David(2009), “Home equity loans and private mortgage insurance: Recent

Trends & Potential Implications”, Vol.3 No.2, August 2009, 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-79-109

Kulkarni (1979), “Development responsibility and profitability of banks” Journal of

Economic Perspectives, Vol 9 No 1 ,pp. 26-32.

La courr, Micheal(2008) , “Economic Factors Affecting Home Mortgage Disclosure

Act Reporting” The American Real Estate and Urban Economics Association, Vol.2

No. 2 May 18, 2008, Pp. 45 -58

La cour Micheal(2007) , “The Home Purchase Mortgage Preferences Of Lowand-

Moderate Income Households”, Forthcoming in Real Estate Economics , Vol 18, No

4 , December 20, 2007, p. 585.

Vandell ,kerry D(2009), “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

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NEWS PAPERS

The Times of India

Financial Express

WEB PAGES:-

http://www.hdfcindia.com/

http://www.hdfcindia.com/others/popup/news/hdfc_fin_result_june_30_09.html

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/2011/01/hdfc-will-cut-home-loan-rates/

http://www.suncorp.com.au/suncorp/personal/home_loans/tips/faq.aspx

http://investing.businessweek.com/research/stocks/people/people.asp?ric=HDFC.BO

http://www.economywatch.com/companies/forbes-list/india/housing-development-

finance-corporation.html

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

http://docs.google.com/gview?a=v&q=cache:woJTMDV1HLYJ:www.hdfc.com/pdf/

32AGM%2520speech.pdf+hdfc+housing+finance+development+product&hl=en&gl=in

http://www.munichre.com/en/press/press_releases/2008/2008_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-to-

june-2011/

http://www.valuenotes.com/press/pr_HDFC_250ct06.asp?ArtCd=70013&Cat=C&Id=100

QUESTIONNAIRE

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Dear Sir/ madam

I am Rakesh chette doing MBA from OSMANIA UNIVERCITY. I m preparing a project on A

WORKING OF HOUSING FINANCE COMPANY. For this I have designed a Questionniare 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)……………… (M)………………………

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 lakhs (b) 2-4 lakhs

(c) 4-6 lakhs (d) 6 lakhs 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

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(d) Centurion bank of Punjab (e) others

7. Are you Satisfied with the services provided? (on 5 point scale)

_____________________________________________________________________

Highly dissatisfied Neutral satisfied highly

dissatisfied dissatisfied

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

(a) Interest rates (b) Service Provided

(c) Pay back 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 lakhs (b) 1-5 lakhs

(c) 5-10 lakhs (d) more than 10 lakhs

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 [ ]

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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?

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______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

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

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

THANKS

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