A Study On A study on Housing Finance schemes of HDFC bank & SBI bank A Project Report Submitted for the Partial Fulfillment of the Requirement for the Award of the Degree of Master of Business Administration (MBA) Supervised By: Submitted By: Dr. B.D.Mishra Rahul Yadav
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A Study On
A study on Housing Finance schemes of
HDFC bank & SBI bank
A Project Report Submitted for the
Partial Fulfillment of the Requirement for the Award of the Degree of
Master of Business Administration (MBA)
Supervised By: Submitted By:
Dr. B.D.Mishra Rahul Yadav
Associate Professor Roll Number-
2012
Department of Management Studies
Guru Ghasidas Vishwavidyalaya, Bilaspur (C.G.)
Certificate by the Student
This is to certify that I, Rahul Yadav, a student of MBA Fourth Semester of
the batch 2010-12 (Roll No. - _________ ) have carried out a project entitled
“A study on Housing Finance schemes of HDFC bank & SBI bank”
under the supervision of Dr. B.D.Mishra, Associate Professor, in the
Department of Management Studies, Guru Ghasidas Vishwavidyalaya,
Bilaspur (C G). This is an original work carried out by me and the report has
not been submitted to any other University for the award of any degree or
diploma.
Date: _____________ (Name and Signature of the Student)
Place: Bilaspur Rahul Yadav
MBA IV Sem.
Roll No.-______________
Certificate by the Supervisor
This is to certify that, Mr. Rahul Yadav , a student of MBA Fourth Semester
of the batch 2010-12 (Roll No. - ___________ ) have carried out a project entitled
“A study on Housing Finance schemes of HDFC bank & SBI bank” under my
supervision and guidance. It is also certified that the student has complied with all
the guidelines designed for the project report. To the best of my knowledge this
report is an authentic record of the work carried out by the student and it is
considered fit for being referred for evaluation.
Date: ____________ (Name and Signature of the Supervisor)
Place: Bilaspur Dr.B.D.Mishra
Department of Management Studies
Guru Ghasidas Vishwavidyalaya,
Bilaspur (C G)
SYNOPSIS
Title of the project:-
“A study on housing finance schemes of HDFC Bank & SBI Bank.”
Objective of the project:-
1) To analysis housing loan schemes of HDFC Bank & SBI Bank.
2) To examine the opinion of customers regarding housing loan offered by HDFC &SBI
Bank.
3) To understand the housing loan schemes.
4) To compare the housing loan schemes of HDFC & SBI Bank.
Significance of the project:-
It provides knowledge about the banking finance strategy of bank in housing finance sector.
Data sources & Methodology:-
Primary sources: - Information & data will be collected from HDFC & SBI Bank.
Secondary sources: - Information & data will be collected through internet.
Methodology:-Study has considered two major institutions involved in providing housing
loan, viz. HDFC & SBI Bank. Cross table are arrange in terms of purpose of loan, tenure of loan,
cost of loan, repayment schedule, awareness about interest rates, time taken for processing the
application, procedural formalities and security for getting the loan. These opinions have been
arranged and calculated to make a comparative presentation.
Chapter Plan:-
Chapter 1:- Introduction.
Chapter 2:- Housing finance in India.
Chapter 3:- Company profile of HDFC Bank & SBI Bank.
Chapter 4:-Analysis of data home loan of HDFC Bank & SBI Bank
Chapter 5:-Conclusion
Chapter Plan
Chapter 1 INTRODUCTION OF HOUSING FINANCE
INSTITUTIONAL FRAMEWORK OF HOUSING FINANCE
STRUCTURE OF HOUSING FINANCE INDUSTRY
HOME LOAN TYPES
OBJECTIVES
Chapter 2
HOUSING FINANCE IN INDIA TAX BENEFITS ON HOME LOANS WHY TAKE A HOME LOAN?
Chapter 3COMPANY PROFILE:- HDFC BANK STATE BANK OF INDIA
Chapter 4ANALYSIS OF DATA:- HOME LOAN OF HDFC BANK HOME LOAN OF STATE BANK OF INDIA COMPARING HOME LOAN SCHEMES OF HDFC & STATE BANK OF INDIA HOUSING LOAN SCHEMES OF DIFFERENT BANKS
Chapter 5 FINDING CONCLUSION
Bibliography
Appendices
PREFACE
My research project deals with “A study on housing finance schemes of HDFC Bank & SBI
Bank.”In this report, I have studied & evaluated the consumer perception regarding the
Electronic Bikes.The first section deals with the concept of consumer perception and the factors
which influence the behavior of the consumer and rol of consumer in marketing. In this section, I
have given a brief explanation about the Automobile (Electronic bikes) Industry . It also contains
the Company profile of Electrotherm India Ltd. and its products special focus on Auto division
i.e. E-Bikes. This section of my report deals with a detailed company profile. It includes the
company’s history: its activities and operations, organizational structure, etc. this section
attempts to give detailed information about the company and the nature of its functioning.
In the second section of my report, contains the various tool & techniques used by me to
accomplish the study successfully. I have conducted a research study to determine the factors
which influence or prevents a customer to purchase Electronic Bikes.
The third and fourth section of this report consists of data analysis & interpretations of
collected data and information it also contains major findings of the study, conclusion and
Suggestions for the organizations. Findings is comprises f Benefit of E-Bikes on Conventional
Bikes and SWOT Analysis of Yo-Bikes (Electrotherm India Ltd.).
Rahul Yadav
ACKNOWLEDGEMENT
At the outset, I wish to express my sincere thanks to almighty for showering his blessing
on me to develop this project.
Preparing a project of this nature is an arduous task and I was fortunate enough to get
support from a large number of people to whom I shall always remain grateful. I would like to
express my sincere thanks to Dr.B.D.Mishra, Associate Professor, who gave me the opportunity
for under taking the project.
I wish to thank my internal guide Dr. B.D.Mishra in MBA Department for his help and
encouragement in the development and refinement of the project. I also would like to show my
gratitude to Dr. S.V.S. Chauhan Sir (Professor & Head of the Department) and Dr. L.P. Pateriya
Sir (Professor) for their immense support & guidance for completion of the project.
Rahul Yadav
INDEX
Chapter No. Chapter Name Page No.
1. INTRODUCTION 01
A study on Housing Finance schemes of
HDFC bank & SBI bank
2. INSTITUTIONAL FRAMEWORK OF HOUSING
FINANCE
03
3. STRUCTURE OF HOUSING FINANCE INDUSTRY 04
4. HOME LOAN TYPES 05
5.OBJECTIVE OF THE PROJECT
06
6.SIGNIFICANCE OF THE PROJECT
06
7. METHODOLOGY 06
8. CONCLUSION 66
9. BIBLIOGRAPHY 67
10. APPENDICES 68
CHAPTER- 1
INTRODUCTION OF HOUSING FINANCE
INSTITUTIONAL FRAMEWORK OF HOUSING FINANCE
STRUCTURE OF HOUSING FINANCE INDUSTRY
HOME LOAN TYPES
OBJECTIVES
SIGNIFICANCE
METHODOLOGY
INTRODUCTION
Housing is one of the best human needs of the society. It is closely linked with the process of
overall socio-economic development of a country. India, being a highly populated country, there
is a great need and scope for the development of Housing Sector. Unfortunately, for some
reasons or the other, the housing sector in India has remained underdeveloped in the past,
however, it is hoped that there would be improvement in the near future.
Housing is a growing industry. There is substantial gap between demand and supply and is
persisting for a very long period According to an estimate by the National Building
Organization, the cumulative shortage of total dwelling houses in the country by the end of 1991
was 31 million. It is further estimated by this organization that the demand for housing will be
around 4.5million units, leaving a gap of one million housing units annually. Hence, based up on
this estimate, the cumulative shortage of housing may reach to41million units by the end of this
century.
Presently, funds required per dwelling shelter are so high that the individual's saving is not
adequate to meet the expenditure of house building. As a result, there is great demand for
external housing finance.
Housing was given due priority only in 1988 when a National Housing Policy was announce.
The policy reflected the trust that housing was not merely a consumption expenditure but also a
productive investment which would provide economic activity in the country. Besides this, the
policy also envisaged that an impetus given to housing would stimulate economic development
through creation of substantial employment opportunities. Consequently, the institutional
mechanism for housing was strengthened by the establishment of National Housing Bank (NHB)
by the Reserve Bank of India.
INSTITUTIONAL FRAMEWORK OF HOUSING FINANCE
The setting up of the National Housing Bank marked the new era in housing finance as a new
fund based financial service in the country. A large number of financial institutional/companies
in the public, private and joint sector entered in this field. For example, Life Insurance
Corporation of India and General Insurance Corporation came with various schemes for
financing the housing units. In 1970, Housing and Urban Development Corporation (HUDCO), a
wholly government owned enterprise, was setup with the objective of housing and urban
development as well as infrastructure development. After that, in 1977, another Corporation
named Housing Development Finance Corporation (HDFC) was setup in private sector.
Housing was given due priority only in 1988 when a National Housing Policy was announced.
The policy reflected the trust that housing was not merely a consumption expenditure but also a
productive investment which would provide economic activity in the country. Besides this, the
policy also envisaged that an impetus given to housing would stimulate economic development
through creation of substantial employment opportunities. Consequently, the institutional
mechanism for housing was strengthened by the establishment of National Housing Bank (NHB)
by the Reserve Bank of India.
STRUCTURE OF HOUSING FINANCE INDUSTRY
Housing Finance
HOME LOAN TYPES
Formal Sector Informal Sector
Household
savings
Disposal of
Existing
properties
Borrowings from
friends, relatives
and money lenders
Government Banking Non-Banking
Central
Govt.
State
Govt.Public
Authorities
Commercial
Banks
Cooperative
Banks
Other
Banks
HUDCO
Non-Banking
Finance
Companies
(NBFCs)
House Finance
Companies
(HFCs)
Non-Banking
Housing
Finance
Companies Insurance
LIC/GIC
Specialised
Institution
HDFC
Owning a piece of land or property is a lifetime dream for every individual. There are many
home loans provider in the market to make your dream come true. But before you opt for any
home loan provider, you need to consider certain factors related to property that you are
interested in buying and also about the salient features offered by a home loan provider and also
study some Home Loans and Home Insurance FAQs which helps in applying a Home Loan in
India.
And the most important thing is you should know about each and every term related with Home
Loans before applying for a Loan. It is always advisable to consult a home loan expert or
consultant before applying for a home loan or purchasing a property.
You can take different types of home loans like Bridge Loans, Home construction Loans, Home
Equity Loans, Home Extension Loans, Home Improvement Loans, Land Purchase Loans etc for
different schemes available in the market. There are different types of home loans tailored to
meet your needs.
Home Purchase Loans: These are the basic forms of home loans used for purchasing of
a new home.
Home Improvement Loans: These loans are given for implementing repair works,
healing and renovations in a home that has already been purchased.
Home Construction Loans: These loans are available for the construction of a new
home.
Home Extension Loans: These loans are given for expanding or extending an existing
home. For eg: addition of an extra room etc.
Home Conversion Loans: These loans are 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 home conversion loan, the existing loan is
transferred to the new home including the extra amount required, eliminating the need of
pre-payment of the previous loan.
Land Purchase Loans: These loans are available for purchasing land for both
construction and investment purposes.
Bridge Loans: Bridge loans are designed for people who wish to sell the existing home
and purchase another one. The bridge loans help finance the new home, until a buyer is
found for the home.
OBJECTIVE OF THE PROJECT:-
1) To analysis housing loan schemes of HDFC Bank & SBI Bank.
2) To examine the opinion of customers regarding housing loan offered by HDFC &SBI
Bank.
3) To understand the housing loan schemes.
4) Comparing the housing loan schemes of HDFC & SBI Bank.
SIGNIFICANCE OF THE PROJECT:-
It provides knowledge about the banking finance strategy of bank in housing finance sector.
METHODOLOGY:-
Study has considered two major institutions involved in providing housing loan, viz. HDFC &
SBI Bank. Cross table are arrange in terms of purpose of loan, tenure of loan, cost of loan,
repayment schedule, awareness about interest rates, time taken for processing the application,
procedural formalities and security for getting the loan. These opinions have been arranged and
calculated to make a comparative presentation.
CHAPTER PLAN:-
Chapter 1:- Introduction.
Chapter 2:- Housing finance in India.
Chapter 3:- Company profile of HDFC Bank & State Bank of India
Chapter 4:-Analysis of data home loan of HDFC Bank & State Bank of India
Chapter 5:-Conclusion
CHAPTER-2
HOUSING FINANCE IN INDIA
TAX BENEFITS ON HOME LOANS
WHY TAKE A HOME LOAN?
HOUSING FINANCE IN INDIA
The Home loan sector in India is the pivotal role player in the growth of the real estate scenario
in India. With tax incentives given to the housing finance sector in the annual budget of 2001
transactions related to buying and selling of residential properties increased considerably and
was much higher as compared to previous years
Since the new class of buyers are relatively younger set of customers who are more aware about
legal documentation and approvals, buyers are now more 'end-users' rather than investors the
property market in India undergoes transformation to align itself with global standards with an
increased emphasis on quality & cost control and documentation methods. In the current
economy of India, the real estate sector has the maximum propensity to generate income and
demand for materials equipment and services. It can be said that housing finance companies
were formed for co-existing with buyer's requirements of housing loans for investing in
properties. Home loans are made available by financial institutions to both Indian and NRI
customers at floating and fixed rate of interest and also at attractive EMI options.
For construction or buying a new home
For home repairs and renovations
For purchase of plots
Against mortgage of property
No tax benefits are available for NRI customers unless you file returns and there by become
eligible to avail of the tax benefits.
Besides home loans, Commercial property loans are also available and different financial
institutions a India provide commercial loans at different rates and different upper limits.
Real estate loans are available to builders, promoters and real estate developers. The experience
and financial standing of the builders is taken into account before the loan is granted which is to
be returned with the minimum installments.
Today, the amount of money that a city dweller spends on rent is roughly the same, or only
slightly less than the amount he pays as an EMI on a housing loan. Earlier the home loan sector
in India was solely dependent on nationalized and public sector banks, but the entry of public
sector banks into the housing finance business marked the beginning of the first round of interest
rate cuts. And this reduction in interest rates has enhanced the borrowing power of customers.
Moreover, HFCs are offering incentives to attract investors like
Some companies sanction the housing loan without requiring you to identify property as
a pre-requisite for eligibility
Free accident insurance & property insurance
Waiving of pre-payment penalty
Waiving of processing fee
There are a few documents which the finance companies require for setting up criteria for
eligibility of Home loans.
Salaried Employee Self –Employed
The latest salary slip showing story
deductions. \
Computation of income for the previous two
years, certified by a Chartered Accountant.
Form16 (showing tax deducted at \
Source by employer)
\Profit & Loss Account and Balance Sheet for
the previous two years, certified by a
Chartered Accountant.
Proof of age (birth certificate/voter identity
card/passport/school leaving certificate/valid
Proof of age (birth certificate/voter identity
card/passport/school leaving certificate/valid
driving license driving license
Proof of residence (phone bill /electricity
bill/ration card).
Proof of residence (phone bill/electricity
bill/ration card).
The realty boom in India has given a new dimension to the finance sector in India - both in
Home Loans and Home Insurance segments. This has not only given a competitive edge to the
finance companies to provide attractive options to customers but has also contributed to the
increased investments in the real estate sector. This has resulted in 13 new institutions for saying
in to the housing finance business in the last three years.
Major Home Loan Providers
Banks & Public
Sector Housing
Finance Companies
State Bank of India, Corporation Bank ,Punjab National bank Central
Bank Dena Bank ,Allahabad Bank ,Bank of Maharashtra ,Bank of
Baroda Housing Finance, Can Fin Homes, GIC Housing
Finance ,LIC Housing Finance, PNB Housing Finance ,SBI Home
Finance, Centbank Home Finance ,HUDCO, LIC, etc.
Financial Institution HDFC, ICICI Ltd, Citibank, IDBI Bank ,etc
TAX BENEFITS ON HOME LOANS
As the Indian real estate market makes an upward swing, and investors opt for housing finance
or home loans, tax benefits obtained from them is a lucrative option. Customers availing of
Home Loans can claim a certain portion of the interest and principal that they pay towards the
loan installments for reducing tax liability. Resident Indians are eligible for certain tax benefits
on principal and interest components of a loan under the Income Tax Act, 1961.Moreover, an
added tax benefits under Sec 80 C on repayment of principal amount up to Rs. 1,00,000p.a. can
be availed that can further reduce your tax liability by about Rs. 30,000p.a.
Tax benefits can be claimed on both the principal and interest components of the home loan as
per the Income Tax Act, 1961. These deductions are available to assesses, who have taken a loan
to either buy or build a house, under Section 24(b). Interest on borrowed capital is deductible up
to Rs 150,000 if the following conditions are satisfied:
Capital is borrowed on or after April 1, 1999for acquiring or constructing a property.
The acquisition/construction should be completed within 3 years from the end of the
financial year in which capital was borrowed.
The person, extending the loan, certifies that such interest is payable in respect of the
amount advanced for acquisition or construction of the house
A loan for refinance of the principle amount outstanding under an earlier loan taken for
such acquisition or construction.
If the conditions stated above are not fulfilled, then the interest on borrowed capital is deductible
upto Rs 30,000 though the following conditions have to be satisfied:
Capital is borrowed before April 1, 1999 for purchase, construction, reconstruction
repairs or renewal of a house property.
Capital should be borrowed on or after April 1, 1999 for reconstruction, repairs or
renewals of a house property.
If the capital is borrowed on or after April 1, 1999, but construction is not completed
within 3 years from the end of the year, in which capital is borrowed.
In addition o the above, principal repayment of the loan/capital borrowed is eligible for a
deduction of up to Rs 100,000 under Section 80C from assessment year 2006-07.
Tax Limitation on Home Loans
Income Tax act 1961, provides two section where you can use home loans for the Tax Savings
purpose. The two sections are :
Section 80c
Under this section maximum of Rs.100000 (one lac) can be exempted from the Income Tax on
repayment of principal on home loans.
Example 1
If your Taxable Income is Rs.500000 and your yearly home loans principal repayment is
Rs.80000, then your Taxable Income is Rs.500000 – Rs.80000 = Rs.420000.
Example 2
If your Taxable Income is Rs.500000 and your yearly home loans principal repayment is
Rs.100000, then your Taxable Income is Rs.500000 – Rs.100000 = Rs.400000.
Example 3
If your Taxable Income is Rs.500000 and your yearly home loans principal repayment is
Rs.140000, then your Taxable Income is Rs.500000 – Rs.100000 = Rs.400000. Because you can
exempt maximum of one lac under this section.
Other savings
Note that under this section (80c) you can show other savings like Public Provident Fund
(PPF), etc. Maximum limit Rs.100000 includes all the savings. If you are declaring Rs.100000
as the principal payment, then you can not include other savings.
Section 24b
Under this section maximum of Rs.150000(1.5 lac) can be declared as the interest payable on the
Home Loans. As we have shown the examples, here as well the rule is same. You can exempt
maximum of Rs.150000.
Terms and conditions for availing Tax benefits on Home Loans
1. Tax deductions can be claimed on housing loan interest payments, subject to an upper limit of
Rs 150,000 for a financial year. Interest on the fresh loan can be claimed as a deduction, subject
of the stated upper limit.
2. An additional loan for extension/addition to the same house and the person's deductions on the
existing loan are less than Rs 150,000; he can claim further benefits from the additional loan
taken, subject to the upper limit of Rs 150,000 for a financial year.
3. Tax benefits under Section 24 and deduction under section 80C of the Income Tax Act can be
claimed only when the payment is made. If a person fails to make EMI payments, he cannot
claim tax benefits for the same.
4. According to the Income Tax Act, only the person who has taken the loan can claim tax
rebates.
5. The interest on home loans taken for repairs, renewals or reconstruction, also qualifies for the
deduction of Rs 150,000.
6. A husband and wife, both of whom are tax-payers with independent income sources, get tax
deduction benefits, with respect to the same housing loan; to the extent of the amount of loan
taken in their own respective name.
7. If a person buys a house and sells it within the same year/after 3 years, and if any profit is
made, then a capital gains tax liability arises on the same for which the individual is liable to pay
short-term capital gains tax since the sale took place in the same year. But, if the sale had taken
place after 3 years, then along-term capital gains tax liability would have arisen.
8. If it is proved that the home loan is simply an arrangement between the loan-seeker and the
builder or with a third party for the purpose of claiming tax benefits, then tax benefits will not be
allowed and benefits, previously claimed , will be clubbed to the income and taxed accordingly.
9. Tax benefits on interest on housing loans are allowable only for the original loan and for a
second loan taken to repay the first loan and not for subsequent loans. This means that if you
have already availed of one loan to refinance the original loan and want to now avail a third loan
to refinance the second loan, tax rebate on interest payments will not be permissible. This is
because the Section 24 (1) only talks of the second loan and not of subsequent loans. Even if you
take the second loan at a rate of interest higher than the original loan, you will be eligible for a
tax rebate on the second loan.
WHY TAKE A HOME LOAN?
Taking a home loan now days has become very simpler. The RBI has been regularly slashing
interest rates, with the result that housing finance loans that came at an interest rate of 16.5% to
18%four years ago are now available at 11.5%to 13%or lower. Each year the Finance Minister's
generosity during the Budget seems to be solely concentrated for the housing sector and
construction sector .The Budget 2000's allowed interest payment up to Rs 1 lakh and principal
payment of Rs 20,000 to be exempted from income tax. To top it all, the Housing Finance
Companies (HFCs) are aggressively wooing customers .
CHAPTER-3
COMPANY PROFILE:-
HDFC BANK
STATE BANK OF INDIA
COMPANY PROFILE
HDFC BANK
HDFC Bank Limited (BSE: 500180,) is a major Indian financial services company based in
India, incorporated in August 1994, after the Reserve Bank of India allowed establishing private
sector banks. The Bank was promoted by the Housing Development Finance Corporation, a
premier housing finance company (set up in 1977) of India. HDFC Bank has 1,725 branches and
over 5,000 ATMs, in 780 cities in India, and all branches of the bank are linked on an online
real-time basis. As of 30 September 2008 the bank had total assets of Rs.1006.82 billion. For the
fiscal year 2008-09, the bank has reported net profit of 2,244.9 crore (US$498.37 million), up
41% from the previous fiscal. Total annual earnings of the bank increased by 58% reaching at
19,622.8 crore (US$4.36 billion) in 2008-09.[4]
It is one of the Big Four banks of India, along with State Bank of India, ICICI Bank and Punjab
National Bank—its main competitors.
History
HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation Limited
(HDFC), India's largest housing finance company. It was among the first companies to receive
an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private
sector. The Bank started operations as a scheduled commercial bank in January 1995 under the
RBI's liberalisation policies.
Times Bank Limited (owned by Bennett, Coleman & Co. / Times Group) was merged
with HDFC Bank Ltd Provision to club expected rent accruals from property proposed to
compute eligible loan amount
Provision to finance cost of furnishing and consumer durables as part of project cost