Hdfc Bank Prooo

C ACKNOWLEDGEMENT

There is always a sense of gratitude which one express towards others for their help and supervision in achieving the goals. This formal piece of acknowledgement is an attempt to express the feeling of gratitude towards people who helpful me in successfully completing of my training.

I would like to express my deep gratitude to Mr. Aseem Vivek, the Deputy General Manager, HDFC Limited. He gave me the unique and indispensable opportunity of being summer trainee at HDFC Limited.

Secondly I would also like to thank Mr. Gaurav Sharma, Senior Officer Operation, who looked after me during our entire summer training. This project would not have been anywhere close to being successful had it not been for his help. His guidance has been vital in my learning here at HDFC Limited. He was always there with his competent guidance and valuable suggestion throughout the pursuance of this project.

I would like to thank Mrs. Anjali Nigam and Mr. Robin Sahu along with the entire staff of HDFC Limited, Aliganj Branch who provided me with key learning points at every step of the way. My learning experience would have not been the same had it not been for their support and willingness to teach me all that they could.

ARPIT VERMA

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INTRODUCTION TO HOME LOANS

Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and above all gathering funds little by little to afford one’s dream. Home is one of the things that everyone one wants to own. Home is a shelter to person where he rests and feel comfortable.

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

Many banks are providing home loans at cheapest rate to attract consumers towards them. The more customer friendly attitude of these banks, currently offer to consumers cheapest loan over homes. In view of acute housing shortage in the country, and keeping in mind the social –economic role of commercial banks in the present times, the RBI advised banks to encourage the flow of credit for housing finance.

With the RBI reducing bank rate, the home loan market rates nose-diving by 50 basis points. The HDFC Bank and Standard chartered bank has become the first player in this sector to announce a housing loan for a 20 years period. No doubt it will enhance the end cost people to plan their house over longer duration now; it has been made easy for a person to buy that dream house which he dreamt of long ago.

HDFC also provides with Home Improvement Loan for internal and external repairs and other structural improvements like painting, waterproofing, plumbing and electric works, tiling and flooring, grills and aluminum windows. HDFC finances up to 85% of the cost of renovation (100% for existing customers).

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INDUSTRY OVERVIEW

Housing is one of the bare necessities of life and is part of the basic level of Maslow’s Hierarchy Theory. Having established that, it is near about impossible to imagine human beings without a shelter above their heads. Through the years, this basic housing achieved many forms and value. Looking through ages, it all started with the caves, but now, mansions are and cemented housing is the rule of the day. In this rat race, every individual wishes to have a house or a property in their lifetime. Moreover, this has also become a social status in the society today. Having invested in this asset, people consider themselves to be financially stable. Hence, the fulfillment of this basic human need is essential for all.

Home financing is the first step that is taken to attaining this fundamental human desire. Financing is a major part of this process as this investment is most of the times long term and requires a heavy cash flow.

India is part of a global trend that is advancing towards an increasing urbanization, according to which more than half of the world's population is living in towns and cities. After 1950, the Government of India formulated ten five year plans aimed towards housing and urban development, which led to the launch of Urban Poverty and Alleviation Programme of Nehru Rojgar Yojana (NRY). These plans laid emphasis on institution building and on construction of houses for government employees and weaker sections. The Industrial Housing Scheme was widened to cover all workers. As a follow-up of the Global Shelter Strategy (GSS), National Housing Policy (NHP) was announced in 1988, whose long term goal was to eradicate the problem of lack of housing, improve the housing conditions of the inadequately housed, and provide a minimum level of basic services and amenities to all. The role of Government was conceived, as a provider for the poorest and vulnerable sections, and as a facilitator for other income groups and private sector by the removal of constraints and the increased supply of land and services.

Against the milieu of rapid urbanization and a changing socio-economic scenario, the demand for housing has grown explosively. The importance of the housing sector in the economy can be illustrated by a few key statistics. According to the National Building Organization (NBO), the total demand for housing is estimated at 2 million units per year and the total housing shortfall is estimated to be 19.4 million units, of which 12.76 million units is from rural areas and 6.64 million units from urban areas. The housing

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industry is the second largest employment generator in the country. It is estimated that the budgeted 2 million units would lead to the creation of an additional 10 million man-years of direct employment and another 15 million man-years of indirect employment.

Having identified housing as a priority area in the Ninth Five Year Plan (1997-2002), the National Housing Policy has envisaged an investment target of Rs. 1,500 billion for this sector. In order to achieve this investment target, the Government needs to make low cost funds easily available and enforce legal and regulatory reforms.

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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 that required lifetime saving and a difficult decision to make. Today the new h o me 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 %.

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Again, there are different types of home loans available today. The interest rate available is also of two different types. One is the fixed rate loan and the other is the floating rate loan. In the fixed rate loan, whatever interest is fixed on the start of loan is carried on for the complete period. However, in the other one, the interest rate is not fixed and as the interest rate goes up or low the effect is directly transferred to the person who is taking the loan. In the last few years the floating interest rate has been a favorite among most of the people taking home loans.There is also a trend to opt for home construction loan. This loan is available to those who want to design their homes according to their requirement and taste. In other words, this loan is meant for those who themselves want to construct their new home.As shared earlier, taking a loan is not a difficult task. However, before taking a loan, one must realize that the relationship with the bank will be for a longer period usually 15 to 20 years so one must ensure faith and integrity in bank. Apart from low rate of interest, the bank should also provide some value added services. The other thing is to look into is the property that is to be brought. Making sure that the builder has all sanctions and facility to build a good building is very important.Taking home loans these days has become simpler. With the RBI regularly bring down interest rates; taking home loans have become extremely easy. Housing loans which were 16.5% to 18% a few years ago fell by 11.5% to 13%. With interest rates going down, people increasingly number apply to take these loans. Some of the leading banks offering home loans in India, including ICICI Bank, IDBI Bank, HDFC Bank , Bank of Baroda, SBI, Standard Chartered Bank and Axis Bank .

1.2 ADVANTAGES OF HOME LOANS:-The various benefits of home loans arising to the customers are:-(i) Attractive interest rates:- The various banks offer attractive interest rates to boost and help their customers. Many banks provide loans on fixed or floating rates to facilitate consumers as per their needs.(ii) Help in owning a home:- The home availed by a person with the help of banks, because they provide technical and financial assistance to customers for owning their dream home.(iii) No requirement of guarantor:- The commercial banks now a day, 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

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present busy life. Banks like ICICI bank and standard chartered bank provide door to step services to customers to borrow loan.(v) Loan period:- There are many banks which provide maximum loan tenures 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 them so popular among people who don’t have their home and want to buy, they do it with home loan. Home loans help such persons in making their dream home.

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

These are limitations or disadvantages of home loans. But sometimes some banks charges high installments to repay loan amount. Such also causes problem to customers. These limitations can be removed by providing good and promote services to the customers.

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In dian Market for H o me loa n s is m o r e t han Rs.500,000c r o r e:

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:-G R A P H :- 1

Indian home loans Industry:-

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

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GRAPH :- .2

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

GRAPH: 3

The India Mortgage industry until recently was an unorganized sector. But today organized mortgage sector is witnessing steady growth. It is estimated to be US $18

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billion industry. Huge real estate requirements and its subsequent development has fueled its growth. 

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

GRAPH:4

Sources: RBI

Real Estate is currently sought of as a great means of Investment, the prices of residents have shot up very high which is clearly shown in the figure below, the major cities have witnesses lot of development and price appreciation which demonstrates the growing demand . more and more people are migrating to cities for work / business. More and more jobs are created and price index rise becomes inevitable.Price I n d e x: FIG - 5

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

I m p act of sl o w d o w n on h o m e loan m a r ket in Indi a :-The fear of a recession looms over the United States. And as the clinch goes, whenever the US sneezes, the world catches a cold. This is evident from the way the Indian markets crashed taking a cue from a probable recession in the US and a

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global economic slowdown. U.S slowdown has affected almost all sectors not only in US but to all over the world. Indian economy has also been affected by this slowdown because India is a growing country and almost in all sectors various multinational companies have major contribution. So the role of this slowdown is a major issue to be discussed while talking about Home Loan Market in India.Bankers who were earlier falling over each other to dole out home loans, even for soft furnishings, have suddenly become choosy. Banks like SBI, ICICI Bank, UTI Bank, IDBI Bank and leading mortgage firm HDFC are now apparently making a conscious attempt to curb their aggression in the home loan market.situation is like that if a customer who recently approached a private sector bank for a home loan of about Rs 10 lakh for a tenure of 15 years found, to his shock, that the eventual loan disbursement was just Rs 5 lakh. Most bankers aren't willing to confirm any slowdown in their home loan portfolio. On record, they attribute the marginal dip in home loan disbursements to the recent hike in interest rate.Privately, however, they have a different story to tell. "The slowdown in the home loan market for select players like ICICI Bank was evident from January. ICICI Bank's average home loan disbursement in a month is around Rs 2,500 crore in a month, which has come down to almost Rs 2,000 crore in March," said a private sector banker. ICICI Bank officials denied any slowdown in their home loan portfolio and they say that the recent dip in interest rates has had some impact on disbursals. However, in absolute terms, it is still low. Even this slowdown the deposit growth for the sector as a whole is around17%, while credit is growing at almost 28%, forcing banks to become selective. Institutions now charge a floating rate of 8 to 8.25 per cent on home loans above Rs 20 lakh. Initial estimates by bankers suggest that the increase in rate for home loans and other segments would be around 25-50 basis points (0.25% to 0.5%). Even as the provisioning requirement has gone up around 60 basis points, the hike in interest rates may be lower as the impact would be felt for the first year. It would also depend on how well capitalized the banks are as the rise in provisioning and risk weightage would affect the return on equity for banks. Weaker banks and banks with a large portfolio of these loans are likely to be more affected and may hike rates first.Home loan growth of disbursals were at 20 per cent in 2007-08 according to a study by the credit rating agency CRISIL, a Standard & Poor’s company. This rate is lower than the 30 per cent annual increase seen in the past three years, but in absolute terms represents a substantial expansion. The slower growth reflects the impact of rising property prices and interest.

Inte r est and m a r ket t r ends in year 200 9 :- Home loan interest rates, especially on new home loan accounts, started softening from the beginning of this year when the Reserve Bank of India (RBI) announced

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sharp cuts in the repo rate and cash reserve ratio (CRR). The RBI started slashing the key policy rates since October last year, after taking into account the worsening liquidity situation of banks here. The central bank has reduced its key policy interest rates (repo and reverse repo) and reserve ratio (CRR) four times in the last six months. The cut in the repo rate meant commercial banks would have funds available at a lower cost. On the other hand, the cut in the CRR meant banks would have to keep less money with the RBI and hence they had more money to lend. Analysts believe that interest rates have not yet bottomed out and there will be further cuts in borrowing rates over the next few months.While the interest rate cut expectation is a thing of the past, the question is will it go back to the old levels of 7-8 percent which contributed to a property boom? Consensus is already building up for the fact that we are headed towards a low interest rate regime in the coming couple of years, in line with global trends. In the case of the domestic economy, the trigger for low interest rates has already happened on the deposit front with banks reducing the rate by 1-2 percent in the last few weeks. Now, the deposit rate has come down to single digit even with respect to long term deposits (on 3-5 years) and that would mean banks have access to cheaper funds. With inflation too sliding down at a rapid pace, there is hope for continuance of a cheaper rate regime.Following in State Bank of India’s (SBI’s) footsteps, other state-run banks may also come out with scheme offering home loan at a fixed rate of 8%. The Indian Banks’ Association (IBA) would review the response of borrowers towards the SBI scheme after three weeks and if it finds that there has been a good response, other banks will follow suit.Last week, SBI had announced that it would offer home loans at a flat rate of 8% to all borrowers and would freeze this rate for one year. The chairman of one of the major banks, who asked not to be named, said SBI can afford to lend at such cheap rate as it has one of the best current and savings account (CASA) deposit ratio. CASA deposits are the cheapest source of funds for a bank and a high CASA deposit ratio brings down their average cost of funds. This in turn helps the bank in offering cheaper credit while maintaining their net interest margin (NIM). NIM is the difference between the rates at which banks borrow and lend.State-owned banks started cutting their home loan rates after country's largest lender; State Bank of India froze its new home loan rates at eight per cent for one year recently.

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COMPANY PROFILE

Housing Development Finance Corporation limited (HDFC) came into existence on 17 th

October, 1977 by Hansmukhbhai Parekh with an initial share capital of Rs. 100 million.

Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his financial career at Harkisandass Lukhmidass - a leading stock broking firm. The firm closed down in the late seventies, but, long before that, he went on to become a towering figure and a ray of hope for the Indian financial scene. He was a true development banker. His building up HDFC without any government assistance is itself a brilliant chapter in financial history. His wisdom and warmth drew people from all walks of life to him, for advice, guidance and inspiration.

HDFC has provided home loans to more than three million customers. Since their setup, their objective has been to enhance residential housing stock and promote home ownership. In recent times, the scope of service has increased from hassle free home loans and deposit products to property related services and training facility.

HDFC has always been market-oriented and dynamic with respect to resource mobilization as well as its lending programmed. This renders it more than capable to meet the new challenges that have emerged. Over the years, 1-IDEC 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.

When Mr. Deepak Parekh took over as Chairman from Hasmukhbhai, he said: "Taking over from H.T. Parekh is a formidable task; his vision brought about not only an institution, but an entire concept which has proved itself to be of lasting importance."

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, 2007 stood at Rs. 2,856

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Crores and new business premium income at Rs. 1,624 Crores. The company has covered over 8,77,000 lives year ending March 31, 2007. 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.

Business Objectives

The fore most objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership.

To increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.

To anticipate the customer’s needs and desires to work out ways by which affordable homes can be a reality, not a dream.

ORGANIZATION GOAL

To develop close relationships with individual households Maintain its position as the premier housing finance institution in the country Transform ideas into viable and creative solutions Provide consistently high returns to shareholders

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Widely quoted definition by the World Business Council for Sustainable Development states that 'Corporate Social Responsibility (CSR) is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large'. Although the term 'CSR' is of relatively recent vintage, it is this commitment, which HDFC has exemplified with zeal, perseverance and enthusiasm since its nascent years. Some of the initiatives undertaken by the Corporation from its earliest days are Shelter Assistance Reserve, initiatives undertaken by HDFC employees, continued bulk lending operations in the area of micro-finance and low-income housing.

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MILE STONES

HDFC has already Crossed Rs. 1, 00,000 Crore in Home Loan Approvals. Padma Bhushan for HDFC Chairman Deepak Parekh. The ICAI Award Ms. Renu SudKarnad, Executive Director, HDFC receiving the

ICAI Award from Mr. P C Gupta, Honorable Union Minister of State for Company Law Affairs.

ICAI confers gold shield to HDFC for 'The Best Presented Accounts'. HDFC ranked 3rd amongst the Asian Banking and Finance Sector for ‘Highest

Return on Equity’ by Asia-money. HDFC Ranked amongst the Top 3 Best Managed Companies by Finance-Asia –

2007.

Associate Companies

• HDFC Bank - HDFC holds 23.26% HDFC Mutual Fund HDFC Standard Life Insurance Company- HDFC holds 76%• HDFC SALES• HDFC Chubb General Insurance Company Ltd. - HDFC holds 79%• Intel net Global Services Ltd. - HDFC holds 50%

Other Companies Co-Promoted by HDFC HDFC Trustee Company Ltd.• HDFC Developers Ltd.• GRUH Finance Ltd.• HDFC property ventures Ltd.• HDFC Ventures Trustee Company Ltd.• HDFC Investments Ltd. HDFC Holdings Ltd.• Credit Information Bureau (India) Ltd.• HDFC Ergo General Insurance

HDFC is a professionally managed organization with a board of directors consisting of eminent persons who represent various fields including finance, taxation, construction and urban policy & development. The board primarily focuses on strategy formulation, policy and control, designed to deliver increasing value to shareholders.

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Board of Directors

HDFC has a staff strength of approximately 1506 (as on 31st March, 2010), which includes professionals from the fields of finance, law, accountancy, engineering and marketing.

Sr.No.

Name of Director Category No. of Directorship

No. of Committees

Member Chairperson

1 Mr. Deepak S. Parekh Executive Chairman

12 7 5

2 Mr. Keshub Mahindra Independent

5 1 1

3 Mr. Shirish B. Patel Independent

1 0 0

4 Mr. B. S. Mehta Independent

14 9 5

5 Mr. D. M. Sukthankar Independent

4 1 1

6 Mr. D. N. Ghosh Independent

4 1 1

7 Dr. S. A. Dave Independent

11 9 0

8 Dr. Ram S. Tarneja Independent

13 7 2

9 Mr. N. M. Munjee Independent

13 9 4

10 Dr. Bimal Jalan Independent

0 0 0

11 Dr. J. J. Irani Non-executive

10 2 0

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12 Mr. D. M. Satwalekar Independent

5 2 2

13 Ms. Renu Sud Karnad Joint Managing Director

13 5 2

14 Mr. K. M. Mistry Vice Chairman & Managing Director

12 8 3

Consultancy Services

HDFC is a unique example of a housing finance company which has demonstrated the viability of market-oriented housing finance in a developing country. It is viewed as an innovative institution and a market leader in the housing finance sector in India. The World Bank considers HDFC a model private sector housing finance company in developing countries and a provider of technical assistance for new and existing institutions, in India and abroad. HDFC’s executives have undertaken consultancy assignments related to housing finance and urban development on behalf of multilateral agencies all over the world.

Consultancy Assignments Undertaken:

Project Title Project Country Agency

State Mortgage Investment Bank Russia USAID

Review of Operations of Bank Tabunga Negara

IndonesiaWorld Bank

Detailed Analysis of Housing Situation

BhutanGovt. of Bhutan

Study of Housing Finance Sector Ghana

Govt. of Ghana/World Bank

Management and Operations Audit Thailand C D C

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Technical Assistance for Alliance Housing Bank

Oman Direct

Feasibility of Establishing a New Mortgage Finance Company

Mauritius C D C

Feasibility Study for a Second Building Society

Malawi Direct

Workshop on ‘Housing Finance & Managerial Effectiveness’ for Housing Professionals

GhanaWorld Bank

Review of Nepal Housing Development Finance Company Limited (NHDFC)

NepalUSAID & UNDP

Evaluation of an investment proposal of Commonwealth Development Corporation in Turks & Caicos Islands

Turks & Caicos Islands

C D C

Evaluation of Caribbean Housing Finance Corporation Limited, Jamaica

Jamaica C D C

Review of Mortgage Underwriting and Servicing Manuals developed for Bulgaria

BulgariaThe Urban Institute

Workshop on Credit Appraisal & Loan Recovery

PhilippinesThe Asian Coalition

Development of Mortgage Servicing Manual

RussiaAbt. Associates Inc.

HDFC Sales

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HDFC Sales is a subsidiary of HDFC Ltd. It was created with the aim of providing doorstep service to potential clients of HDFC. HDFC Sales offers financial management solutions to individuals encompassing among other products Home Loans, Life Insurance, Mutual Funds, Fixed Deposits and property solutions. HDFC Sales values integrity, commitment, teamwork and excellence in customer service. Our most valuable assets are our Human Resources. We are truly proud that today we have a highly motivated team of sales persons and that we have the lowest employee turnover rate in the Industry.

Financial Management: HDFC Sales offers financial management solutions in 9 cities and is continuously expanding its reach. HOEC Sales employs sales persons across all spectrums of financial management enabling them to meet a range of financial needs.

HDFC Realty : HDFC Sales manages the HDFC Realty business and the Website (hdfcrealty.com) which offers property solutions — buying, selling, leasing to Individuals and Corporate. HDFC Realty is present in all the major cities in India as well as in Dubai. The company mirrors the philosophy and values of its parent, HDFC.

ARRANGEMENTS WITH HDFC BANK

Arrangement to leverage on the strengths of the two organizations

HDFC’s expertise in credit, legal, technical appraisal & cost structure.

• HDFC Bank’s network and customer base• HDFC Bank sources home loans for a fee• Loans originated in the books of HDFC offers 70% of the disbursed loans

for sale to HDFC Bank through issue of ‘AAA’ rated Mortgage Pass through Certificates.

• HDFC retains a spread towards administration arid servicing of the loans.• The arrangement leads to incremental loan business for HDFC.

Business Grow th:-

The company commands a market share of over 60% in the housing finance sector.

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Leveraging on its brand equity HDFC has also entered the Indian Mutual Fund scene quite recently. HDFC was the only applicant to be given clearance by the government, to enter the Rs 250 bn life insurance business. This in itself speaks volumes about the management’s professional reputation.Financial year 2000 proved to be a boon for housing finance companies, as the tax benefits announced in the budget, coupled with the low real estate prices and rising disposable incomes, spurred housing demand. As a result, demand for housing finance too has registered high rates of growth. The housing sector has now been recognized as an engine of economic growth and HDFC is well placed to capitalize on this surge in demand. Against this backdrop, HDFC logged in an excellent performance. The company’s approvals and disbursements during the first half of financial year 2001 witnessed a year on year growth of 33% and 32% respectively. The robust growth in itself is a conclusion that HDFC’s business is far less susceptible to any economy downturn.

(TABLE:-6.2) Financial Snapshot

Growth ratios FY98 FY99 FY00 1HFY01

Operating income 13.7% 21.6% 15.2% 21.1%

Other income 331.7%

-24.6% -54.0% 346.8%

Net profits 18.3% 13.8% 20.4% 19.8%

Approvals 28.9% 25.2% 30.3% 33.4%

Disbursements 31.1% 24.4% 31.2% 31.5%

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BALANCE SHEET ANALYSIS:

2005-06 2006-07 % 2007-08 absolute change %

TOTAL SOURCES OF FUNDS 55325.71 69932.49 26% 92583.01 22650.52 32%

Shareholder's funds 4925.52 6448.93 31% 12801.4 6352.47 99%

share capital 249.56 253 1% 284.03 31.03 12%

reserves and surplus 4675.96 6195.93 33% 12517.37 6321.44 102%

Policy liabilities 2342.41 4605.9 97% 8425.9 3820 83%

Loan funds 47845.14 58590.16 22% 70915.42 12325.26 21%

Minority interest 212.63 286.91 35% 440.29 153.38 53%

Deferred tax liability 0.01 0.59 5800% 0 -0.59 -100%

Application of funds 55325.71 69932.49 26% 92583.01 22650.52 32%

Loans 46062.18 57892.71 26% 74773.53 16880.82 29%

Investments 5791.49 8750.38 51% 15443.34 6692.96 76%

Deferred tax assets 83.41 133.46 60% 156.51 23.05 17%

Current assets,loans and Advances 5486.08 6159.54 12% 6073.84 -85.7 -1%Less:Current liabilities and provisions 2692.33 3600.11 34% 4515.81 915.7 25%

Net current assets 2793.75 2559.43 -8% 1558.03 -1001.4 -39%

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COMPARATIVE ANALYSIS STATEMENT (HDFC LTD.)

BALANCE SHEET (RUPEES IN CRORES)

Fixed assets

Gross block 939.09 1022.89 9% 991.15 -31.74 -3%

Less: Depriciation 415.32 493.47 19% 499.81 6.34 1%

net block 523.77 529.42 1% 491.34 -38.08 -7%

Goodwill on consolidation 69.13 66.1 -4% 159.9 93.8 142%

Miscellaneous expenditure 1.98 0.99 -50% 0.36 -0.63 -64%

2008-09 absolute change %

TOTAL SOURCES OF FUNDS 110109.1 17526.12 19%

Shareholder's funds 13843.74 1042.34 8%

share capital 284.45 0.42 0%

reserves and surplus 13559.29 1041.92 8%

Policy liabilities 9869.68 1443.78 17%

Loan funds 85940.64 15025.22 21%

Minority interest 455.07 14.78 3%

Deferred tax liability 0 0

Application of funds 110109.1 17526.12 19%

Loans 87292.57 12519.04 17%

Investments 19892.68 4449.34 29%

Deferred tax assets 225.06 68.55 44%Current assets,loans and Advances 7992.56 1918.72 32%Less:Current liabilities and provisions 5971.15 1455.34 32%

Net current assets 2021.41 463.38 30%

Fixed assets

23

Gross block 1082.71 91.56 9%

Less: Depriciation 575.71 75.9 15%

net block 507 15.66 3%

Goodwill on consolidation 170.23 10.33 6%

Miscellaneous expenditure 0.18 -0.18 -50%

We can see that the sources of funds are increasing every year. For the year 05-06 they were Rs. 55325.71 and it increased by 26% in the year 06-07, 32% in the year 07-08 and by 19% in the year 08-09 to Rs.110109.1 crores.The main reason for this substantial increase in the funds were

due to shareholders fund which increased by 99% in the year 07-08 and is currently Rs.13843.74 crores.

Reserves and surplus were increased by 102% in the year 07-08 and are currently valued at Rs.13559.29 crores.

Policy liabilities and Loan funds which are the primary sources of funds also increased 17% and 21% respectively in the financial year 08-09. They are currently valued at Rs. 9869.68 and 85940.64 crores respectively.

Now coming to the application of funds part we can see that it increased from Rs. 55325.71 crores in the year 05-06 to Rs. 110109.1 crores in the financial year 08-09.The main reasons were:

Increase in Loans given. They increased by 26% then by 29% and in the year 08-09 by 17% to Rs. 87292.57. the fall in the percentage increase may be seen as an outcome of the sub prime crisis in the real estate sector.

Investments also rose by 51% in 06-07, 76% in 07-08 and 29% in the year 08-09 to Rs.19892.68 crores.

There was a negative change in the net current assets in the year 06-07 and 07-08. This was because of the reason that there was no :

increase in the number of employees or offices in these years. But in the year 08-09, net current assets increased by 30% to Rs. 2021.41 as the company went into expansion by a small margin.

Coming to the Fixed assets we can see that there was harldy any major change in it. It rose from 939.09 in the year 05-06 to Rs 1082.71 crores in the year 08-09.

24

One important point to be considered here is that the goodwill on consolidation rose by 142% which is a huge margin. The primary reason was the trust HDFC enjoys and its sound management which made profits during the recession phase.

Total approvals during the year stood at Rs. 49,166 crores as against Rs. 42,520 crores in the previous year, representing a growth of 16%. Disbursements during the year were Rs. 39,650 crores against Rs. 32,875 crores in the previous year representing a growth of 21%. The demand for individual home loans continued despite the overall economic slowdown and uncertainty. The average size of individual loans increased to Rs. 15.4 lacs during the year.

Ratio Analysis As on 31-Mar-09 31-Mar-08 31-Mar-07

Profitablility

Interest Income/Total Income (%) 83.20 81.60 81.40

Non Interest Income/Total Income (%) 16.80 18.40 18.60

Reported Net Profit/Total Income (%) 11.40 12.80 14.00

Net Interest Income/Total Income (%) 37.80 42.20 42.50

Net Interest Margin (%) 7.50 8.20 7.40

Return Related

ROE (%) 14.90 13.80 17.70

ROA (%) 1.20 1.20 1.30

Leverage & Capital Measures

Customer loans/deposits (%) 69.20 62.90 68.70

Investments/Deposits (%) 41.20 49.00 44.80

25

Total Liabilities/Networth 12.50 11.60 14.20

Growth (%)

Growth in Interest Income 61.47 52.15 48.55

Growth in Interest Expenses 82.34 53.71 64.78

Growth in Employee cost 71.99 67.51 59.58

Growth in PAT 41.17 39.31 31.08

Growth in Deposits 41.72 47.54 22.40

Growth in Borrowings -- 59.08 --

Per Share

Book Value Per Share (Rs) 344.30 324.40 201.40

Earnings Per Share (Rs) 52.80 44.90 35.70

Dividend Per Share (Rs) 10.00 8.50 7.00

26

Products of HDFC Ltd27

FIXED DEPOSIT:

Long-term investments form the chunk of everybody’s plans. An alternative to simply applying for loans, fixed deposit allows to borrow from their own funds for a limited period, thus fulfilling needs as well as keeping savings secure. By investing in a HDFC Ltd Fixed Deposit, money not only stays secure but also accumulates good interest over the period of deposit. Partial withdrawal from Fixed Deposits before the date of maturity can help in times of need.

HDFC has been able to mobilize deposits from over 10 lakh depositors. Outstanding deposits grew from Rs. 1,458 crores in March 1994 to Rs 10,384 crores in March 2007. Much of this success can be attributed to its strong brand image, superior services, security and above all, the significant contribution made by HDFC’s deposit agents. HDFC has over 50,000 deposit agents and distributes all its retail savings (deposit) products primarily through this channel.

HDFC has been awarded “AAA” rating for its deposits from both CRISIL and ICRA for the THIRTEENTH consecutive year, representing highest safety as regards timely payment of principal and interest

There are various schemes offered under Fixed Deposits. They are listed below:

28

Plan Period (Month

s)

Rate of Interest (%) Maximum Deposit without TDS (Rs.)

Minimum Deposit

Amount (Rs.)

Individual & Trust

Senior Citizens

Individual Senior Citizens

Annual Income Plan

15

10.55 10.80 47,000 46,00010,000

20

30

45 10.30 10.55 48,000 47,000

Monthly Income Plan

15

10.10 10.35 49,000 48,00040,000

20

30

45 9.85 10.10 50,000 49,000

Non-Cumulative –

Quarterly Option

15

10.15 10.40 49,000 48,00020,000

20

30

45 9.90 10.15 50,000 49,000

Non-Cumulative- Half Yearly

Option

15

10.30 10.55 48,000 47,00010,000

20

30

45 10.05 10.30 49,000 48,000

Plan Periods (Months)

Rate of Interest (% p.a.)

Maturity Amount for a Deposit of Rs. 10,000

Maximum Deposit without TDS (Rs.)

Cumulative Option

15 10.55 10.80 11,364.58 11,379.16 46,000

45,000

29

20 11,832.54 11,877.76 44,000

43,000

30 12,865.98 12,939.58 40,000

39,000

45 10.30 10.55 14,455.83 14,579.68 37,000

35,000

Minimum Deposit Amount – Rs. 10,000 (Interest Compounded Annually)

TRUST DEPOSITS

HDFC offers a wide range of deposit products, a secure investment option, with attractive returns. Deposits are accepted from Charitable Trusts, Religious Trusts, Educational Institutions, Employees' Welfare Trusts and others as decided by the management.

Tenure (in months)

Annual/Cumulative

Half YearlyOption

QuarterlyOption

MonthlyOption

12-60 10.15% 9.90% 9.75% 9.70%Minimum Deposit Amt 10,000 10,000 10,000 20,000

Table 12 - Regular deposit: Fixed and variable rates

ROLE OF DEPOSITS IN HDFC LTD

Analysis of the Balance Sheet from the Annual Report:

Year 1999-2000 2006-07 2007-08 2008-09Deposits (In crores) 6223.85 10384.42 11296.25 19374.67Corporate Deposits (In crores)

NA NA 2057.88 1561.33

30

Loans Disbursed (In crores)

4492.74 26177.99 32874.99 39650

Table 13 - Balance sheet

In 2007-2008 total disbursement of loan was Rs 32874.99Cr in 2008-2009 it increased to Rs 39650Cr which shows that there was an increase of Rs 6775.01Cr in disbursement of loan. If we come to deposits of HDFC Ltd total deposits with it in 2007-2008 were Rs11296.25Cr and in 2008-2009 they were Rs19374.67Cr which means in 1 year it increase of Rs 8078.42Cr. As we compare the past performance of disbursement of loan of HDFC Ltd since it has started lending loans there have been a continuous increase over the years when it started its operations in 1999-2000 at that time HDFC Ltd disbursed loans of Rs4492.74 Cr and in 2008-2009 it have disbursed Rs 396500Cr. But in case of deposits the pace is not continuous. In some years it had more deposits and in some years it had less. HDFC Ltd started its operations in 1999-2000 with Rs 6223.85Cr and now it has deposits of Rs 19374.67Cr. In case of corporate deposits in 2007-2008 HFDC Ltd Rs2057.88Cr but in next financial year it had Rs 1561.33Cr of corporate deposits which means a decrease of Rs 496.55Cr.

Customers can be tension-free about the safety of their deposit money as HDFC Ltd. utilizes the deposit amounts in the loan disbursement. Their loan products have AAA rating by CRISIL that stands for the highest level of security and stability. Moreover, HDFC Ltd. deposit products have FAAA rating from CRISIL which is the highest rating for a fixed deposit scheme.

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Home Loan Products

1. Home loan

Purchase of:

•Flat, row house, bungalow from developers.

•Existing freehold properties.

•Properties in an existing or proposed co-operative housing society or apartment owner’s association.

•First Power of Attorney purchases in Delhi for DDA flats allotted before 1992.

Self Construction:

Features:

Maximum loan 85% of the cost of the property (including the cost of the land) and based on the repayment capacity of the customer.

Maximum Term 20 years subject to the customer retirement age.

Applicant and co-applicant to the loan-Home Loans can be applied for either individually or jointly. Proposed owners of the property will have to be co-applicants. However, the co-applicants applicants need not be co-owners.

2. Home Improvement Loan

32

2.1 Purpose:

External repairs Tiling and flooring Internal and external painting Plumbing and electrical work Waterproofing and roofing Grills and aluminum windows Waterproofing on terrace Construction of underground/overhead water tank Paving of compound wall (with stone/tile/etc.) Borewell

2.2 Maximum Loan

Existing Customer – 100% of the cost of improvement New Customer – 85% of the cost of improvement Subject to market value of the property

2.3 Maximum Term

15 years subject to your retirement age

3. Home Extension Loan

3.1 Purpose

HDFC Home Extension Loan makes it convenient for you to extend or add space to your home. Be it an additional room, a larger bathroom, or even enclosing an open balcony.

3.2 Maximum Loan

85% of the cost of extension3.3 Maximum Term

20 years subject to your retirement age

4. Short Term Bridging Loan

4.1 Purpose

33

Short-Term Bridging loan makes the customer realize their dream of buying a bigger and better home and gives them time to sell their existing property to pay off the loan.

This is a short term loan to help customers with the interim period between the sale of your old home and the purchase of a new home. They can take the loan even if they are an existing customer of HDFC.

4.2 Maximum Loan 90% of the cost of the new property

4.3 Maximum Term

2 years

5. Land Purchase Loan

5.1 Purpose

To purchase a plot of land5.2 Maximum Loan

85% of cost of the land and based on the repayment capacity of the customer.5.3 Maximum Term

15 years subject to customer retirement age.

6. Non-Residential Premises Loan

6.1 Purpose

Purchase, Construction, Improvement of Office, Clinic

6.2 Eligible

Doctors Chartered Accountants Lawyers Other self-employed professional

6.3 Maximum Loan

34

85% of cost of the property

6.4 Maximum Term

10 years Improvement 5 years. Non residential premises maximum term is 15 years, NRP improvement remains 5 years.

7. Home Equity Loan (Lap)

7.1 Purpose

Loan can be for any purpose. However, the funds should not be used for speculation or any illegal purposes. Customers have benefited by taking loans to meet the following funding requirements

Education Marriage Expenses Medical Expenses

7.2 Property

Residential Non residential

- Should be Fully Constructed - Should be a Freehold property having a clear and marketable title

7.3 Maximum Loan

Existing CustomersBalance of 60% of the market value and present loan outstanding

New Customers50% of the market value of the property (including the cost of the land)

Subject to: Minimum Market Value of the property being Rs.5,00,000 for Residential

property and Rs.7.50 Lacs for Non Residential Property Repayment Capacity of the customer

7.4 Maximum Term

Property Type Repayment Option No. of Years

35

Residential EMI Based 15

Non Residential EMI Based 10

Residential and Non Residential

Simple Interest 2

Subject to retirement age of the customer

8. Top-Up Loan

This product offers an existing resident Indian customer a loan against the mortgage of the existing property.

8.1 Purpose

It helps customers in encashing the investment in a house without having to dispose it off to fund various needs related to Higher Education, Purchase of Furniture, Business Requirements, etc.

8.2 Maximum Loan

60 % of the market value of the property less the outstanding loan8.3 Maximum Term

Current loan eligibility.

9.NRI loans (for Professional & Non-professional)

9.1 Purpose

To purchase a flat Extension Construction Improvement of a dwelling unit To purchase a plot

9.2 Maximum Loan

36

A maximum of 85% of the cost of dwelling unit (70% for land purchase)9.3 Maximum Term

Up to 20 years for Professionals

Up to 7 years for Non Professionals

For all types of home loans:

Loan under Adjustable Rate is linked to HDFC’s Retail Prime Lending Rate (RPLR). The rate on your loan will be revised every three months from the date of first disbursement, if there is a change in RPLR, the interest rate on your loan may change. However, the EMI on the home loan disbursed will not change*. If the interest rate increases, the interest component in an EMI will increase and the principal component will reduce resulting in an extension of term of the loan, and vice versa when the interest rate decreases.

Fees

o 1% o f the loan amount applied plus applicable service taxes and cess.

Interest Rates:

Type of Loan Fixed Interest Rate Floating Interest Rate

Home Loan 13.75% 8.75%

Home Improvement Loan

13.75% 8.75%

Home Extension Loan 13.75% 8.75%

Education Equity Loan 9.75%

Land Purchase Loan 9.25%

Non Residential Premises Loan

11.25

Home Equity Loan 11.25%

Top Up Loan 10.25%

37

Ratios calculated while giving a loan:

L.C.R. : Loan to Cost Ratio. Max. 85% L.T.V. : Loan to Value Ratio. I.I.R. : Income to Instalment Ratio. Max. 35% - 40% F.O.I.R. : Fixed Obligation to Income Ratio. Max. 50%

EXAMPLE: A person wanting a loan of Rs. 10,00,000 for a period of 20 years @ 8.75% p.a. for a flat worth Rs. 12,00,000 has a Net salary of Rs. 28,000 and Gross salary of Rs. 35,000 and also has a car loan on him for which he pays Rs. 6000 as E.M.I. will have the following ratios:

A loan of Rs. 10 lacs for 240 months @ 8.75% p.a. will have an E.M.I. of Rs. 8838.

L.C.R. : 10,00,000÷12,00,000=0.83=83 %

I.I.R. : 8838÷35000=0.25=25 %

F.O.I.R. : (8838+6000 )÷35,000=0.42=42 %

Thus the applicant is credit worthy to be given the loan in case of fulfilment of other rules and regulations.

38

ADVANTAGES OF HDFC HOME LOAN:

HDFC has been a part of a 30 year journey with 33 lakh customers.

1. Home Loan Counselling

We have been a part of 30 year journey with our 33 Lakh customers. Our home loan counsellors offer you the time tested advice. Be it legal documentation, project or builder approvals, and technical advice. HDFC looks forward to sharing with its customers and this service is absolutely free. HDFC project approval facility provides its customers the comfort of purchasing properties from builders who have complied with all basic documentation.

2. Door to Door Service

HDFC offers door step service. Various Sales Executives assist customers for this service. HDFC helps its customers to find their dream home. Customers can buy, sell, lease residential or commercial properties through HDFC Realty.

3. Wide Product Range

HDFC provides loans to meet all the requirements that a customer might have to make a plot of land their home. Home Loans, Home Improvement Loans, Home Extension Loans, Loans to professionals for office or clinic, Home Equity Loans (Loan against Property), Loan against Rent receivables, Short Term Bridging Loan. Loans are available on either adjustable or fixed rate.

4. Wide network of financing

With over 200 offices, 90 outreach programs, HDFC is capable of providing home loans in over 2400 locations in India. Customers can apply at their local HDFC office for properties in locations where HDFC finances.

5. Post Disbursement Services

Income tax certificate to enable the customers to claim the tax benefits that are sent to them. This service is provided without a charge.

39

6. Other facilities:

a. ECS facility

b. Post dated cheques – no charges for replacement of cheques

c. Loan repayment at any HDFC offices

Documents required for all loans:

Salaried Customers Self Employed Professionals

Self Employed Businessmen

Application form with photograph

Application form with photograph

Application form with photograph

Identity and Residence Proof

Identity and Residence Proof

Identity and Residence Proof

Latest Salary-Slip Education Qualification Certificate and Proof of Business Existence

Education Qualification Certificate and Proof of Business Existence

Form 16 Last 3 years Income Tax Returns (self and business)

Business Profile

Last 6 months bank statement

Last 3 years Profit and Loss and Balance Sheet

Last 3 years Income Tax Returns(self and business)

Processing Fee Cheque

Last 3 years Profit and Loss and Balance Sheet

Last 6 months bank statement

Last 6 months bank statement

Processing Fee Cheque Processing Fee Cheque

40

Multiple Repayment Option for Home Loans

STEP UP REPAYMENT FACILITY (SURF)

This facility gives loans to customers based upon the increase in their income that one will have in the future.

FLEXIBLE LOAN INSTALLMENT PLAN (FLIP)

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

TRANCHE BASED EMI

Customers purchasing an under construction property need to pay interest (on the loan amount drawn based on level of construction) till the property is ready for use. To help customer save this interest, they have introduced a special facility of Tranche Based EMI. Customers can fix the installments they wish to pay till the time the property is ready for possession. The minimum amount payable is the interest on the loan amount drawn. Anything over above the interest paid by the customer goes towards Principal repayment. The customer benefits by starting EMI and hence repays the loan faster.

ACCELERATED REPAYMENT SCHEME

Accelerated Repayment Scheme offers the customer a great opportunity to repay the loan faster by increasing the EMI. Whenever they get an increment, increase in their disposable income or have lump sum funds for loan prepayment, they can benefit by:

Increase in EMI means faster loan repayment Saving of interest because of faster loan repayment

The customer can invest lump sum funds rather than use it for loan prepayment. The return from the investments also gives them the comfort of paying the increased EMI.

41

SOURCES OF LOAN APPLICANTS

1) W ALK IN :- This refers to the Applicants who apply for the loan by going to the service centre or regional branch office .They may have come to know about HDFC s home loan service from any source but this is their first contact with HDFC is in absence of any intermediary like friends, sales men etc.The applicants who contact through or by the Website are also included in the walk in category. Walk-In applicants are given concessions on fees and charges which is applicable from time to time.

2) CAL L CENTRE LE A D S : - The callcentre leads refer to the applicants that come in contact with HDFC through HDFC Bank or through HLSIL .HDFC bank is the banking section of HDFC which informs HDFC Ltd about persons who it thinks to needing a loan .HLSIL which has been started by HDFC Ltd and refers to Housing Loan Services India Limited.This organization has been especially started by HDFC to assist persons searching for home loans at easy rates and good service.HLSIL contacts probable needfuls of home loan, contacts them, explains them the various advantages of an HDFC home loan and get their loan application filled. Every HDFC service centre has its own team which is managed by leader who reports directly to the Branch Manager .In the India habitat centre the HLSIL team is under the leadership of a team leader who reports directly to Mr. Prashant Malik(Branch MgrIHC /Ranked

2nd in the prestigious National Corporate Challenge 2005 conducted annually by HDFC )

3) D SAs a nd B S A s ; - These are respectively the Direct selling agents and the Business selling agents. The DSAs refer to organizations which work in agreement with HDFC and forwards them the loan requests of applicants they contact or those that contact them on the other hand BSAs usually forward loan requests and assist HDFC by forwarding them the names addresses contact nos etc of various probable needful of home loans BSAs usually are Builders who book houses for sale in the future they may also include Brokers.

42

LOGIN

Q.D.E

A.P.P.R

D.D.E. + SCAN

L.A.R., T.A.R., C.I.B.I.L., F.C.I.

R.O.V.R

D.C.O.V.

SANCTION

STAGES OF HOME LOAN PROCESS

HUB

IF NOT OK

OK

43

L IST O F A B BREVI A T IONS

A B BREVI A TIONS E X P ANSION

ROVR RECOMMENDED OVER

QDE QUICK DATA ENTRY

APPR APPRAISAL

DDE DETAIL DATA ENTRY

LAR LEGAL APPRAISAL REPORT

TAR TECHNICAL APPRAISAL REPORT

CIBILCREDIT INFORMATION BUREAU

(INDIA) LIMITED

FCI FIELD INVESTIGATION

DCOV DOUBLE CHECKING OVER

44

COMPARATIVE ANALYSIS OF DIFFERENT HOUSING FINANCE COMPANIES IN INDIA

Thanks to economic liberalization and ensuing policy changes, the housing finance industry has undergone a paradigm shift over the last decade. Gone are the days, when taking a loan meant entering a labyrinth of documentation and dealing with condescending bank officials. Today, in the backdrop of intense competition, housing finance companies are falling over each other to woo potential customers. Housing finance being one of the safest lending avenues has also contributed to the emergence of new players in the market.The unique place that a house has in an individual's life plus the high proportion of the customer's own money in the house provides considerable comfort for home loan companies. In the present times, people are increasingly taking to credit, because of rising annual incomes and the series of tax sops that have become an annual ritual in the Union Budget. With the constant rise in demand for residential and commercial complexes, the growth of the real estate sector in India has witnessed at an exponential rate over last five years. Cut-throat competition among Indian housing finance companies has brought down the interest rates by a few notches.. Today, apart from the resident Indians, even NRI's can apply for a home loan. An applicant applying for a loan can either opt for fixed or floating or a combination of both rates. The loan rates of companies today are in between 7.50% to 12 %, depending on the repayment years.Following are the major players in this sector:

Birla Home Finance Limited Bank Of Baroda Home Loan (BOB) Canara Bank Home Loan Dewan Housing Home Loan General Insurance Corporations Home Loan (GIC) Housing Development Finance Corporation Home Loan (HDFC) HSBC Home Loan Industrial Credit and Investment Corporation of India Home Loan (ICICI) Industrial Development Bank of India Home Loan (IDBI)

45

Life Insurance Corporation Home Loan (LIC) Punjab National Bank Home Loan (PNB) State Bank of India Home Loan (SBI) Axis Bank Home Loan Induslnd Bank Ltd. Home Loan Kotak Mahindra Bank Ltd. Home Loan

LATEST HOME LOAN INTEREST RATES IN INDIA

ON THE BASIS OF TIME PERIOD

Lender  Fixed Rate p.a.   Floating Rate p.a. 

10 yr 15 yr 10 yr 15 yr

Axis Bank Ltd. 13.75 % 13.75 % 8.75 % 8.75 %

Bob Housing Finance Ltd. 9.75 % 10.00 % 8.75 % 8.75 %

CanFin Homes Ltd. 12.25 % 12.25 % 8.75 % 8.75 %

CitiBank (India) Ltd. - - 9.00 % 9.00 %

Corporation Bank Ltd. 11.00 % 11.00 % 10.00 % 10.00 %

Dewan Housing Finance Ltd. - - 8.50 % 8.50 %

GIC Housing Finance Ltd. 14.00 % 14.00 % 10.50 % 10.50 %

HDFC Ltd. 14.00 % 14.00 % 8.75 % 8.75 %

HSBC (India) Ltd. 13.00 % 13.00 % 9.00 % 9.00 %

HUDCO 12.00 % 12.00 % 8.50 % 8.50 %

ICICI Bank Ltd. 14.50 % 14.50 % 8.75 % 8.75 %

IDBI Bank Ltd. - - 8.75 % 8.75 %

IDBI Home Finance Ltd. - - 8.75 % 8.75 %

IndusInd Bank Ltd. - - 9.50 % 9.50 %

Kotak Mahindra Bank Ltd. - - 8.50 % 8.50 %

LIC HOUSING - - 8.75 % 8.75 %

46

PNB Housing Finance Ltd. - - 9.00 % 9.25 %

Standard Chartered Bank (India) Ltd. 13.00 % 13.00 % 8.50 % 8.50 %

State Bank of India (SBI) 10.75 % - 8.50 % 8.50 %

*ONLY MAJOR BANKS INCLUDED IN THE ABOVE TABLE

ON THE BASIS OF AMOUNT

Bank name Interest Type

Interest Rates for various loan amount

upto 5

lakh

5-20 lakh

20-30 lakh

30-50 lakh

50-75 lakh

>75 lakh

ICICI Bank Floating 8.75 8.75 8.75 9.0 9.5 9.5

ICICI Bank - Special Scheme Floating 8.25 8.25 8.25 NA NA NA

ICICI Bank Fixed 16.0 16.0 16.0 16.0 16.0 16.0

HDFC Floating 8.75 8.75 8.75 9.0 9.25 9.25

HDFC Fixed 14.25 14.25 14.25 14.25 14.25 14.25

HDFC - Special Scheme Floating 8.25 8.25 8.25 8.25 8.25 8.25

SBI Advantage Home Loan Fixed NA NA NA NA 8.0 8.0

SBI - Home Loan Fixed 8.0 8.0 8.0 8.0 NA NA

SBI - Home Loan Floating 8.0 8.0 8.0 8.0 NA NA

SBI Advantage Home Loan Floating NA NA NA NA 8.0 8.0

SBI Floating 9.75 9.75 9.75 10.25 10.25 10.5

Axis Bank Floating 8.75 8.75 8.75 9.25 NA NA

Axis Bank Fixed 14.0 14.0 14.0 14.0 NA NA

Bank of Baroda Floating 9.0 9.0 9.0 9.75 9.75 9.75

Union Bank of India Floating 9.5 9.5 9.5 9.75 10.25 10.25

LIC Fix-o-Floaty Floating 8.9 8.9 8.9 8.9 8.9 8.9

LIC Housing Finance Floating 9.75 9.75 9.75 9.75 9.75 9.75

Central Bank of India Floating 9.75 9.75 9.75 10.25 10.25 10.25

IDBI Home Finance Floating 8.25 8.25 8.25 8.25 8.25 8.25

Bank of India - Floating Floating 9.25 9.25 9.25 10.25 11.0 11.0

HSBC Bank Floating 9.0 - 14.0

9.0 - 14.0

9.0 - 14.0

9.0 - 14.0

9.0 - 14.0

9.0 - 14.0

47

Kotak Bank Floating 8.5 8.5 8.5 8.5 8.5 NA

Reliance Home Finance Floating 9.25 9.25 9.25 9.25 9.25 9.25

IDBI Bank Fixed 11.0 11.0 11.0 11.0 11.0 11.0

PNB Housing Finance Ltd Floating 9.5 9.5 10.0 10.0 10.0 10.0

PNB Housing Finance Ltd Fixed 13.0 13.0 13.0 13.0 13.0 13.0

GIC Housing Finance Fixed 15.0 15.0 15.0 15.0 15.0 15.0

GIC Housing Finance Floating 10.5 10.5 10.5 10.5 10.5 10.5

Dena Bank Floating 9.25 9.75 9.75 9.75 9.75 9.75

Dena Bank Fixed 10.25 10.75 11.0 11.0 11.0 11.0

Allahabad Bank Fixed 12.25 12.25 12.25 12.25 12.75 12.75

Allahabad Bank Floating 9.25 9.25 10.0 10.0 10.5 10.5

Andhra Bank Floating 9.75 9.75 10.5 10.5 10.5 10.5

Canara Bank Fixed 11.5 11.5 11.5 11.75 11.75 11.75

Canara Bank Floating 9.25 9.25 9.25 10.0 10.0 10.0

Bank of Maharashtra Floating 9.0 9.0 9.0 9.75 9.75 9.75

Bank of Rajasthan Fixed 9.5 9.5 9.5 9.5 9.5 9.5

Bank of Rajasthan Floating 8.0 8.0 8.0 8.5 8.5 8.5

Punjab National Bank Fixed 10.5 10.5 10.75 10.75 10.75 10.75

Punjab National Bank Floating 9.25 9.25 9.75 9.75 9.75 9.75

Oriental Bank of Commerce Floating 9.25 9.25 9.5 10.25 10.25 10.25

Oriental Bank of Commerce Fixed 10.25 10.25 10.5 NA NA NA

Federal Bank Floating 8.25 8.5 8.5 8.75 9.0 9.0

Federal Bank Fixed 9.25 9.5 9.5 9.75 10.0 10.0

Catholic Syrian Bank Floating 11.0 11.0 13.0 13.0 NA NA

UCO Bank Fixed 10.75 - 11.0

10.75 - 11.0

11.25 - 11.5

12.0 - 12.25

12.0 - 12.25

12.0 - 12.25

UCO Bank Floating 9.0 - 9.5

9.0 - 9.5

9.5 - 10.0

10.0 - 10.5

10.0 - 10.5

10.0 - 10.5

Vijaya Bank Floating 10.0 10.0 10.0 10.75 10.75 10.75

State Bank of Mysore Floating 9.5 9.5 9.5 9.75 9.75 9.75

Indian Bank Fixed 10.75 10.75 10.75 11.0 11.0 11.0

Indian Bank Floating 10.5 10.5 10.0 10.5 10.5 10.5

Indian Overseas Bank Floating 8.75 8.75 8.75 10.25 NA NA

State Bank of Patiala Floating 9.25 9.25 9.25 10.25 10.25 10.25

Deutsche Postbank - Scheme I Floating 8.75 8.75 8.75 9.0 9.0 9.0

Deutsche Postbank - New Fixed Floating 8.75 8.75 8.75 8.75 8.75 8.75

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Floating SchemeCorporation Bank Floating 9.75 9.75 9.75 10.5 10.75 10.75

Corporation Bank Fixed 11.0 11.0 11.0 11.5 11.5 11.5

Syndicate Bank Floating 8.75 8.75 9.5 10.0 10.0 10.0

J & K Bank Floating 11.5 11.5 12.25 12.25 12.25 NA

DCB Floating NA 8.75 8.75 8.75 8.75 8.75

Punjab & Sind Bank Floating 10.0 10.0 10.25 10.5 10.5 10.5

State Bank of Bikaner& Jaipur Floating 9.75 9.75 9.75 10.25 10.25 10.25

State Bank of Hyderabad Floating 9.5 9.5 9.5 10.75 10.75 10.75

State Bank of Hyderabad - Special Scheme

Floating 8.5 8.5 8.5 8.5 8.5 8.5

State Bank of Indore Floating 9.75 9.75 9.75 11.75 11.75 12.0

State Bank of Travancore Floating 9.75 9.75 9.75 10.5 10.5 10.5

United Bank of India Fixed 10.0 10.0 11.0 11.75 NA NA

United Bank of India Floating 9.5 9.5 9.75 10.0 NA NA

Dhanalakshmi Bank Ltd Floating 12.0 12.0 13.0 13.0 13.0 13.0

South Indian Bank Fixed 12.75 12.75 12.75 13.5 13.5 13.5

South Indian Bank Floating 11.75 11.75 11.75 12.5 12.5 12.5

Updated as on 15 June, 2010. 

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Documents required and Procedure of Major Competitors of H.D.F.C.

1. BOB Home Loan

Bank of Baroda offers a wide range of retail loans to meet your diverse needs. Right from home and car loans to education and career development loans, there is something for everyone to turn their dreams to reality. Talking about the home loan, BOB Housing Finance Limited was set up in December, 1990 by Bank of Baroda in association with National Housing Bank. It was only on March 31, 2006, that the company became a wholly owned subsidiary of Bank of Baroda. In the following lines, we have listed the various types of home loan and the terms and conditions to be followed to avail the loan.Types Of Home LoanBOB Housing provides loan for purchase of residential plots/site by individuals from Govt. /statutory bodies, such as housing boards, Development Authorities/CIDCO etc. The maximum loan amount can be up to Rs. 1 crore and the loan finances 85% of the cost/purchase price of the land. BOB offers loans for purchase/construction/extension of non-residential property by professionals / businessmen. The loan amount can be up to Rs. 20 Lacs or 85% of purchase price / cost of construction. All professionals/businessmen in operation with minimum of 3 yrs. experience are eligible for the loan.BOB provides loans for purchase or construction of new/old houses by individuals. The maximum loan amount can be 85% of cost of construction, Rs. 1 crore or 42 times of gross salary for salaried employees, whichever is least. The age of applicant's can't be more than 65 years. BOB Home Improvement Loans are meant for repairs and renovation of existing house. The maximum loan amount can be 85% of cost of repairs / renovation or Rs. 5 Lacs, whichever is less. The upper age limit for applicants is 70 years.

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Terms & Conditions

For home loan up to Rs 5 lacs for a maximum period of 20 years, the margin is 10%. No processing fee and pre payment charge /penalty is charged and it also includes free personal accidental death and property insurance cover.

For home loan above Rs 5.00 lac and upto Rs 20.00 lac for a maximum period of 20 years, the margin is 15%. There are no processing charges and pre payment charges / penalty and the loan also includes free personal accidental death and property insurance cover.

As security against the loan amount, the bank would take an equitable mortgage of the housing property and/or other suitable securities.

There would be no fees charged on part prepayment / full prepayment of the loan amount, from own sources.

In case of full prepayment or foreclosure (other than from own sources), fees will be charged at 0.5%, for each year of the residual period, subject to maximum of 2%.

The loan can be repaid in a maximum period of 15 / 25 years taken under fixed / floating rate option subject to the period up to age of retirement, in case of salaried persons and 65 years, in case of others.

Income Criteria

Monthly Income Modified CriteriaUp to Rs. 20,000/- 36 times of monthly incomeMore than Rs.20,000/- & upto Rs. 1 lac48 times of monthly incomeMore than Rs. 1 lac 54 times of monthly income

MarginMonthly income Purpose MarginUp to Rs. 20, 000/- Purchase of plot 20%

House/flat already constructed from own resources

25%

All other cases 20%Above Rs. 20, 000/- Purchase of plot 20%

House/flat already constructed from own resources

20%

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All other cases 15%

2. Dewan Housing Home Loan

Established in 1984, Dewan Housing Finance Corporation Limited (DHFL) is the second largest housing finance company in the private sector in India. Over the years, DHFL has built up a considerable business portfolio with products such as Home loan, Home extension loan, Home improvement loan, Plot loan, Mortgage Loan Leased Rental Finance and Aashray deposit. DHFL Home Loans are offered to individuals, co-operative societies, corporate bodies and associations of persons. The maximum loan offered by DHFL can go up to Rs 1 crore and the home loan finances up to 85% maximum of the cost of the property. In the following lines, we have provided in detail analyses of DHFL's home loan.

Determining Factors For Loan Amount

Repayment capacity Age Educational qualifications Stability and continuity of income Number of dependents Co-applicant's income Assets Liabilities Saving habits

Types Of DHFL Home Loans

DHFL's Home Improvement Loans are offered to individuals to facilitate renovation and repairing of homes. The tenure of the loan ranges from 1 to 10 years.

DHFL's Home Extension Loans are offered to individuals, who want to extend the existing accommodation by adding a room/bathroom/kitchen/prayer room. The tenure of the loan ranges from 1 to 20 years.

NRI Home Loans are offered to Non Resident Indians (NRIs), who wish to purchase, construct, improve or extend their home. The tenure of the loan ranges from 1 to 15 years.

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DHFL's Mortgage Loans are for professionally qualified individuals, who are salaried or self employed. It is given against the mortgage of their residential property. The tenure of the loan ranges from 1 to 7 years.

DHFL's Non Residential Property Loans (NRPL) is aimed at professionals such as doctors, chartered accountants, architects and solicitors among others. The loans would help them either buy or construct a property to operate their lines of business. The tenure of the loan ranges from 1 to 10 years.

Common Factors In All Home Loans

The maximum loan offered by DHFL can go up to Rs 1 crore, but not exceeding 85% of the cost of the extension.

The term however does not extend beyond the retirement age or 60 years whichever is earlier (65 years for the self employed individuals).

Prepayment of the loan partly or fully, is permitted subject to payment of nominal fees / charges, as stipulated by DHFL.

Samarth (Home Loan For Self Employed)This is a special type of home loan initiated by DHFL, especially for the self employed. One of the most ignored housing finance communities, self employed are a generally rejected lot, as they have variable monthly income (some months with no income at all) and even if they have the money, they do not have the necessary documentation to prove the same. As such, DHFL has pioneered a process, which facilitates the assessment of income through an independent source, other than the income tax authority.

Eligibility Criteria

The self employed person should be more than 18 years and less than 65 years of age.

The applicant is self employed /trader or engaged in service industry. The applicant should have been in the same line of business for a minimum

period of 5 years or should have inherited the business from parents. The applicant should be able to contribute at least 40% of the total sum required. Sales Tax Registration or any other registration of business required by statutory

authorities / local laws is mandatory. The business premises should be owned / inherited. Business premises should not be on encroachment land without title to property

or deviated in construction from approved plans.

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3. GIC Home Loan

GIC Housing Finance Limited was established as 'GIC Grih Vitta Limited' on December 12, 1989 with the objective of granting housing loans to individuals and to persons/entities engaged in construction of houses/flats for residential purposes. GIC Housing Finance was promoted by the General Insurance Corporation of India, along with financial institutions like UTI, ICICI, IFCI and HDFC. GICHFL has presence in 23 locations across the country for business. It has got a strong marketing team, which is further assisted by sales associates (SAs). The company also has tie-ups with builders to provide finance to individual borrowers. To get in detailed information about the various types of loans, read through the following lines.

Types Of Home Loan

Fixed SchemeGIC Fixed Scheme allows applicants to draw a maximum loan amount of 50 Lakhs, against fixed rate of interest. As per this type of home loan, the rate of interest remains unchanged for the entire duration of the loan. It will not be affected by any fluctuation in the rate of interest in the market i.e. even if the rate of interest drops or rises. The minimum and maximum tenure of repayment for such type of loan is 5 to 20 years.

Floating SchemeGIC Floating Scheme allows applicants to draw a maximum loan amount of 50 Lakhs, against floating rate of interest. In this scheme, the interest rate on the loan varies from time to time depending on the Prime Lending Rate fixed by the Reserve Bank. The minimum and maximum tenure of repayment for such type of loan is 5 to 20 years.

Flexi-Fixed SchemeGIC home loans also provide the option of Flexi-Fixed rates of interest. In such a scheme, applicants can avail the option of having their loan requirement split up into two portions, one portion with a Floating rate of interest and the other with a fixed rate of interest. The ratio of Floating to Fixed is purely dependent upon the convenience and desire of the applicant, but care would be taken to round off the respective amounts to the next upper Rs. 1000/-. A maximum loan amount of 50 Lakhs is sanctioned. The minimum and maximum tenure of repayment for such type of loan is 5 to 20 years.

Step Up/Down SchemesGIC's Step Up/Down schemes are unique for the flexible repayment options. Borrowers have the option to pay smaller amounts (EMI) initially and proportionally larger amounts

54

(EMI) during the later part of the tenure of the loan or vice-versa. Thus, these schemes benefit both aspiring individuals moving up the career ladder and seasoned executives approaching their retirement age. A maximum loan amount of 50 Lakhs is sanctioned, under this scheme. The minimum and maximum tenure of repayment for such type of loan is 5 to 20 years.

Mortgage SchemeThis type of home loan is given against property and is simed at solving only the commercial purpose of the borrower. The maximum loan amount sanctioned for this type of scheme is 50 Lakhs, against floating rate of interest. The applicants, in this scheme do not have the facility of Step up/Step Down or Zig Zag Mode of Payment. The minimum and maximum tenure of repayment for such type of loan is 5 to 10 years. There is no free insurance cover against this loan.

Eligibility For Loan Amount

The amount of loan repayment that you can afford to make every month. A percentage of the cost of the property. Existing loan would affect the repayment capacity, thereby affecting eligibility

criteria. The age should not exceed 60 years (as per the retirement age defined at the

firm) for salaried employees and not exceed 65 years for self employed professionals.

4. ICICI Home Loan

Since making its maiden venture in the home loan segment in 1999, ICICI Bank has been breathing down the neck of market leader HDFC, with its aggressive marketing strategy. Quality and value-added service - rather than interest rate - have been the hallmark of ICICI, with the company capitalizing on the absence of `door delivery' for housing loans. In a marked shift from the existing industry norms, ICICI carved a niche for itself by going to the potential borrower rather than waiting for him to come to them. Check out more information on the housing loans provided by ICICI bank.

ICICI Housing Loans

Products

ICICI 'MaxMoney' Home Loans offer the unique advantage of higher loan eligibility, with a lower initial installment. One can get up to 30% higher amount

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against one's current income and the installment amount gets stepped up over the years.

ICICI 'SmartFix' Home Loans combine the safety of fixed rates plus the advantages of floating rates. For the first 3 years the borrower gets a fixed interest rate and the fourth year onwards, the loan gets switched to the prevailing floating interest rate.

ICICI Bank offers Home Improvement Loans for renovation /refurbishment of one's home. One can avail of loan up to Rs. 50 Lakhs and the interest rate is same as that of the Home Loans. The loan covers up to 70% of the cost of improvement and the repayment period is 15 years.

Features

ICICI bank offers home loans for the first purchase in ready construction, under construction property, purchase in re-sale, self construction and extension of existing living space.

The loan amount can be up to 80% of the Cost of Property. The applicant can conveniently repay the loan over a period up to 25 years. The bank provides the choices of both Floating rate of Interest or at the Fixed

rate of Interest or at the combination of both Fixed & Floating rates, for the repayment of the home loan.

Eligibility

The loan must terminate before or when the borrower turns 65 years of age or before retirement, whichever is earlier.

The applicant must be 21 years of age, at the time when the loan amount is sanctioned.

The applicant must be either self employed or salaried individual, with a regular source of income.

An Indian resident, whether salaried or self-employed, can apply for ICICI Home Loan. In case if the applicant is an NRI, he/she should be salaried.

Documents Required

For Salaried Applicant

Duly Completed Application Form with One Passport Size Photograph Identity, Residence Address and Age Proof

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Fee Cheque Signature Verification Proof Last 3 months Salary Slip Form 16 Bank Statement for last 6 months from Salary Account Repayment Track record of existing loans / Loan closure letter

For Self-Employed Applicant

Duly Completed Application Form with One Passport Size Photograph Identity, Residence Address and Age Proof Income Tax Return / Computation of Total Income / Auditors Report / Balance

Sheet / Profit & Loss Account certified by Chartered Accountant for last 2 years (3 years for Home Equity) (both for business and personal of partners/directors)

Bank Statement for last 6 month from operating account Repayment Track record of existing loans / Loan closure letter Board Resolution in case of a company Signature Verification is required to be provided for all the main partners /

directors.

Benefits

ICICI home loans come with benefits like easy interest rates, simplified documentation, doorstep service and free personal accident insurance.

The facility of 'Loan On Phone' is beneficial for salaried or self-employed residents of India, applying for an ICICI Home Loan. The facility provides easy loan to the customer, with minimum documentation.

5. IDBI Home Loan

IDBI is one of the premier lending institutions in the home loan segment in India. The bank provides home loans for constructing a home, purchasing a ready built house/flat, residential plot and for re-financing existing loans the customer may have availed from other banks or housing finance companies. In case you want to construct or purchase your dream home, then you can resort to avail the home loan facility, then approach IDBI bank, complete few simple formalities and submit the required documents. To know more about IDBI Home Loan, go through the following lines.

IDBI Housing Loan

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Eligibility

To qualify for a home loan sanctioned by IDBI, the applicant (resident Indian) has to be a salaried employed, with regular source of income.

The applicant can also be self employed or a businessperson, residing in India. NRIs are also eligible to apply an IDBI Home Loan.

Documents Required

For Salaried Applicant

Completed Application Form with one Passport Size Photograph Identity and Residence Proof Latest Salary Slip Form 16 Last 6 months Bank Statements Processing Fee Cheque

For Self-Employed

Completed Application Form with one Passport Size Photograph Identity and Residence Proof Education Qualifications Certificate and Proof of Business Existence Business Profile Last 3 years Profit/Loss and Balance Sheet Last 6 months Bank Statements Processing Fee Cheque

Features

The tenure of an IDBI home loan can be up to 25 years for a resident Indian. For NRIs, the tenure of the home loan is 15 years.

The bank finances up to 90% maximum of the property value subject to credit discretion.

Loan repayment can be done through Equated Monthly Installments (EMIs) comprising both principal and interest.

IDBI housing loans come with IDBI insurance cover, which is a group life insurance protection scheme. Under this scheme, the borrower can insure himself up to the amount (maximum Rs 50 lakhs) and tenure (maximum 25

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years) of the loan availed. This risk cover is made available in specially discounted insurance premium rates.

The common parameters considered for the sanction of an IDBI Home Loan shall include the applicant's age, income, number of dependents, financial stability and the co-applicant's income.

The attractive rate of interest makes IDBI Home Loan one of the attractive products of the bank.

Benefits

IDBI Home Loan customers enjoy the flexibility of choosing between Floating or Fixed interest rate.

The bank provides personalized doorstep service for a hassle-free experience. Other assorted benefits of availing a home loan from IDBI bank include legal and

technical assistance, and reassessment and adjustment of applicant's loan eligibility in case of change of income and residence status.

The bank provides legal and technical assistance to its customers. Maximum funding is one of the key benefits of IDBI Home Loans. Simple documentation enables the applicant easier to repay and complete all the

formalities for the sanction of the loan. In case of change of income or the residence status, the applicant's loan

eligibility is reassessed and adjusted, which is another benefit of IDBI Home Loan.

6. LIC Home Loan

LIC Housing Finance Limited is one of the leading players in the home loan segment. Incorporated on June 19, 1989 and promoted by the Life Insurance Corporation of India, LIC Housing Finance Limited boasts of an extensive distribution network and a massive brand presence, by virtue of being one of the earlier entrants in the market for housing loans. LIC offers home loans for construction/purchase of house/flat and for renovation of existing flat/house as well. To know more about LIC Home Loan, go through the following lines.

Life Insurance Corporation Of India Housing Loans

Products

LIC Griha Prakash and Griha Laxmi loans are for purchase and construction of properties and the maximum loan offered can go up to Rs 1 Crore. In both the

59

cases, the home loan finances up to 85% maximum of the cost of the property, which is inclusive of agreement value, stamp duty and registration charges.

LIC Griha Sudhar Loan facilitates repairs/renovation of properties. The maximum loan amount can be up to Rs.10 lakhs and the loan to property cost won't exceed 85% of Cost of Repairs or 25% of Market Value of Property, whichever is lower.

LIC Griha Prakash loans are meant for extension of residential units and the loan amounts range from Rs. 25,000 to Rs.1,00,00,000. The company finances up to 85% of the total cost of the property including Stamp Duty and Registration Charges. The maximum repayment period can be up to 20 years or retirement age or 70 years of age, whichever is earliest.

The minimum loan amount of LIC Griha Shobha is Rs. 500000. The maximum loan term for a non-professional applicant is 10 years, while it is 15 years for a professional. The product offers the facility of Equated Monthly Installments (EMI) to its applicant.

Eligibility

The net income of salaried as well as self-employed applicant should be Rs 150000 per annum.

The minimum age limit for salaried employee is 25 years, while the maximum age limit is 58 years. On the other hand, a self-employed person can apply for LIC Home Loan, between the age of 21 and 70 years.

In case if the applicant is an NRI, he/she should have a valid Indian Passport.

Documents Required

Completed application form for the sanction of LIC Home Loan Copy of sanctioned plan and sanction letter. Copy of NA permission/ULC clearence, wherever applicable One guarantor form and his/her salary certificate in our format. If guarantor is in business or profession, a copy of his/her latest

I.T.returns/assessment order is required. Bank Pass-book or statements for the last two years Power of Attorney, wherever applicable In case the applicant purchases house from a builder, then he/she has to provide

a copy of Agreement for Sale, copy of Registration Receipt, Copies of Receipts Of Payment already made and NOC from builders.

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Additional Requirements

For Salaried Employees

Employer's salary certificate in our format/and latest salary slip. Identity card of applicant TDS certificate of applicant PF/ESIS slip of applicant

For Businessmen Or Self-Employed Applicant

Three years' income tax returns/assessment orders along with computation of income and statements of accounts certified by C.A.

7. PNB Home Loan

PNB Housing Finance Limited is a wholly owned subsidiary of Punjab National Bank, one of the leading nationalized banks of India. PNB provides a wide array of home loans to address varied customer needs. The bank provides loans to individuals against mortgage of their existing residential immovable property situated in urban/semi-urban/metro centers. By mortgaging their existing immovable property, borrowers can avail of loans for purposes such as education, marriage of children, family function, foreign travel, medical expenses etc. Go through the following lines to get information on PNB Home Loan.

Punjab National Bank Housing Loans

Products

PNB Apna Ghar Yojana home loans are meant for construction or for acquisition/purchase of house/flats. The minimum loan amount would be Rs.50000 and maximum loan amount depends on the repayment capacity of the borrower. In case of joint application, income of borrowers /co-borrowers is clubbed together for calculation of loan eligibility. The loan repayment is in Equated Monthly Installments (EMI) over a maximum period of 20 years.

PNB Ghar Sudhar Yojana home loans are offered for up gradation, renovation or repair of house/flat. It includes among others, internal and external repairs, water proofing, roofing, flooring, electrical, woodwork etc. The loan amount ranges from

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a minimum of Rs 50,000 to a maximum of Rs. 1000000. Borrower's minimum contribution will be 25% of the estimated cost of repairs/renovations.

Features

PNB provides home loans for the construction or purchase of house/flat, purchase of house/flat on First Power of Attorney basis from the original allottee.

The home loan can also be availed for carrying out repairs, renovations, additions, alterations to the existing house or flat of the applicant.

A special feature of PNB Housing Loan is that it provides life insurance cover on payment of one time premium.

The bank finances 75% money required for the construction of house or for the purchase of house/flat.

If an individual avails home loan from the bank for the purpose of repairs/renovation/additions/alterations of his/her home, then 75% of the estimated cost is financed by the bank, subject to a maximum limit of Rs 20 lakhs.

The bank provides loan up to Rs 20 lakhs for the purchase of land or plot. If the applicant wants to furnish his/her house, then he/she can opt for PNB

Home Loan and avail of a maximum of Rs 2 Lakh loan amount.

Eligibility

To qualify for PNB Apna Ghar Yojna, the applicants (residents of India or NRIs) should be in a permanent service or having their own business.

In case of service class, the age of the applicant should not cross 60 years, while the maximum age limit for the applicant if he/she is business person or self-employed is 65 years, at the time of the sanction of the loan.

The self-employed or business person, not exceeding 60 years of age can apply for PNB Ghar Sudhar Yojna.

8. SBI Home Loan

State Bank of India (SBI), the largest nationalized bank in India, is one of the market leaders in the home loan segment. Apart from its myriad products and services, SBI offers home loans for a variety of purposes, including purchase/construction of new house/flat, purchase of an existing house/flat, purchase of a plot of land for construction of house and extension/repair/renovation/alteration of an existing house/flat. SBI home loans come with some unique features that make them stand out in the competition. Besides the standard package of home loans, SBI has some customized home loan

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products in its kitty, which address the needs of niche customer segments. Explore the article to know all about State Bank of India housing loans.

SBI Housing Loans

Features

SBI Home Loan provides no cap on maximum loan amount for the purchase/construction of house/flat.

There is an option to club the income of the applicant's spouse and children to compute the eligible loan amount.

The bank provides free personal accident insurance cover. A complimentary international ATM cum Debit card is also provided by SBI. On the spot "in principle" approval is a special provision for the applicant. If all the required documents are submitted by the applicant, SBI Home Loan is

sanctioned within 6 days of the date of submission. The applicant can also consider SBI's Home Loan as a Term Loan or as an

Overdraft facility, in case he/she wants to save on interest and maximize gains. SBI Home Loan also provides free personal accident insurance cover up to Rs

40 Lakhs. Repayment is permitted up to 70 years of age, which is an added advantage of

SBI Home Loan.

Products

'SBI-Flexi' Home Loans are designed to enable borrowers to hedge their Home Loan against unfavorable movement in interest rates and gives the customers a one time irrevocable option to choose one of the three customized combinations of fixed and floating interest rates.

'SBI-Freedom' Home Loans are customized for high net worth individuals and offer benefits such as 100 per cent finance of the project and no mortgage of the property, provided the individual could show liquid securities such as LIC policies or NSCs.

Eligibility

The minimum age of the applicant is 18 years, on the date of the sanction of the loan.

The maximum age limit for a Home Loan applicant is 70 years. It is the maximum age limit, within which the loan should be fully repaid.

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The applicant should consist of sufficient, regular and continuous source of income for repaying the loan.

Documents

Completed Application Form with one Passport Size Photograph Identity Proof - the applicant can make use of his/her PAN Card/Voter ID/

Passport/Driving License, for the purpose. Residence Proof - the applicant can make use of his/her Recent Telephone Bill/

Electricity Bill/Property tax receipt/Passport/Voters ID Proof of business address in respect of businesspersons/ industrialists Sale Deed, Agreement of Sale, Letter of Allotment, Non Encumbrance

Certificate, Land/Building Tax paid receipt etc. Copy of Approved Plan and approval from the Local Body Statement of Bank Account/ Pass Book for last 6 months.

9. Axis Bank Home Loan

Features and benefits of Axis Bank Home Loan • Attractive Home loan rate of interest• Balance Transfer Facility• You can choose between floating rate of interest and fixed rate of interest• Loan can be sanctioned if you want to purchase any residential plot or a new house/flat• Pre approved loan facility

Documentation and eligibility

Salaried Self EmployedAge 24 years to 60 years 24 years to 65 yearsLoan Amount Offered

Rs.1lac to 50lacs Rs.1lac to 50lacs

Processing Fee   0.5% + Service tax as applicable

Nil

Documentation 1) Application form with photograph

2) Identity & residence

1) Application form with photograph2) Identity & residence proof3) Education qualifications certificate & proof of business existence

64

proof 3 )Latest salary slip,4) Form 165) Last 6 months bank statements6) Processing fee cheque

4) Business profile, Last 3 years profit/loss & balance sheet5) Last 6 months bank statements6) Processing fee cheque

Documents Required

The following documents are required along with your loan application:

Purpose Salaried Others

Proof of identity Voter's ID card or driving license or PAN card or photo credit card or employees ID card or defense or police or government department ID card

Voter's ID card or driving license or PAN card or photo credit card

Proof of income Latest salary slip showing all deductions or Form 16 along with recent salary certificate

IT returns for the last 2 years and computation of income for the last 2 years certified by a CA

Proof of residence

Bank account statement or latest electricity bill or latest mobile or telephone bill or latest credit card statement or latest LIC policy or insurance premium receipt or employers letter certifying the current mailing address or latest NSC or other similar instruments indicating the address or existing house lease agreement

Bank account statement or latest electricity bill or latest mobile or telephone bill or latest credit card statement or latest LIC policy or insurance premium receipt or latest NSC

65

or other similar instruments indicating the address

Bank statement or Pass Book where salary or income is credited

Last 6 months Last 6 months

Guarantor form Optional Optional

COMPARISON OF COMPETITORS ON THE BASIS OF EMI’SLoan Amount Rs.10,00,000Loan Period 15 yrs.Interest Rate Floating

1. Finance Company: H.D.F.C. Ltd., B.O.B. Housing Finance Ltd., L.I.C. Housing, I.D.B.I. Home Finance Ltd., Axis Bank Ltd. and I.C.I.C.I. Bank Ltd.

Interest Rate 8.75% Monthly EMI Rs 9994/-

REPAYMENT SCHEDULE

Years Principal (Start)

Interest Principal Repayment

Principal (End)

Total Annual Repayment

1 1000000 86167 33767 966233 119934

2 966233 83091 36843 929391 119934

3 929391 79735 40199 889192 119934

4 889192 76073 43861 845331 119934

5 845331 72077 47856 797474 119934

6 797474 67718 52216 745258 119934

7 745258 62961 56973 688286 119934

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8 688286 57771 62163 626123 119934

9 626123 52109 67825 558298 119934

10 558298 45930 74004 484294 119934

11 484294 39188 80745 403549 119934

12 403549 31833 88101 315448 119934

13 315448 23807 96127 219321 119934

14 219321 15051 104883 114438 119934

15 114438 5496 114438 0 119934

2. Finance Company: S.B.I. and Dewan Housing Finance Ltd.

Interest Rate 8.5% Monthly

EMI Rs 9847/-

REPAYMENT SCHEDULE

Years

Principal (Start)

Interest

Principal Repayment

Principal (End)

Total Annual Repayment

1 1000000 83677 34492 965508 118169

2 965508 80628 37541 927967 118169

3 927967 77310 40859 887108 118169

4 887108 73698 44471 842638 118169

5 842638 69767 48401 794236 118169

6 794236 65489 52680 741557 118169

7 741557 60833 57336 684221 118169

8 684221 55765 62404 621817 118169

9 621817 50249 67920 553897 118169

10 553897 44245 73923 479974 118169

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11 479974 37711 80458 399516 118169

12 399516 30599 87569 311947 118169

13 311947 22859 95310 216637 118169

14 216637 14435 103734 112903 118169

15 112903 5266 112903 0 118169

3. Finance Company: P.N.B. Housing Finance Ltd.

Interest Rate 9.25% Monthly

EMI Rs 10292/-

REPAYMENT SCHEDULE

Years Principal (Start)

Interest

Principal Repayment

Principal (End)

Total Annual Repayment

1 1000000 91151 32352 967648 123503

2 967648 88028 35475 932174 123503

3 932174 84604 38899 893275 123503

4 893275 80850 42653 850621 123503

5 850621 76733 46770 803851 123503

6 803851 72218 51285 752566 123503

7 752566 67268 56235 696331 123503

8 696331 61840 61663 634668 123503

9 634668 55888 67615 567052 123503

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10 567052 49361 74142 492911 123503

11 492911 42205 81298 411612 123503

12 411612 34358 89145 322467 123503

13 322467 25753 97750 224717 123503

14 224717 16318 107185 117531 123503

15 117531 5972 117531 0 123503

4. Finance Company: G.I.C. Housing Finance Ltd.

Interest Rate 10.5% Monthly

EMI Rs 11054/-

REPAYMENT SCHEDULE

Years

Principal (Start)

Interest Principal Repayment

Principal (End)

Total Annual Repayment

1 1000000 103630 29018 970982 132648

2 970982 100432 32216 938766 132648

3 938766 96882 35766 903000 132648

4 903000 92940 39708 863292 132648

5 863292 88564 44084 819208 132648

6 819208 83706 48942 770267 132648

7 770267 78312 54335 715931 132648

8 715931 72325 60323 655608 132648

9 655608 65677 66971 588637 132648

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10 588637 58296 74352 514285 132648

11 514285 50102 82545 431739 132648

12 431739 41006 91642 340097 132648

13 340097 30906 101742 238356 132648

14 238356 19694 112954 125402 132648

15 125402 7246 125402 0 132648

DETAILED ANALYSIS BETWEEN HDFC & SBI

Basis HDFC SBIProcessing Fees 0.5% of Principal Amount 0.5% of Principal AmountHome loans for Society or Avas Vikas/LDA

Avas Vikas/ LDA and Society Avas Vikas/ LDA

Slab Rates Amount < 30 Lakhs – 8.75%Amount > 30 Lakhs – 9.00%

Amount<30Lakhs – 8.5%, Amount >30 lakhs 8.75%

Legal Procedures Contract signed by both the parties

Contract signed by both the parties

Technical Fees No technical fees No technical fees LCR/LTV rates 85% of value of property 85% of value of propertyLoan given on Net/Gross Income

Gross Income Net Income

Default Penalty 1.5 per month on default amount

1.5 per month on default amount

Loan Sanctioning Time 7 to 10 days 7 to 10 daysRepayment Procedures Part payment or payment in

wholePart payment or payment in whole

Maximum age for loan repayment

65 years 60 years(salaried), 70 years(self employed)

Conversion Fees 0.5% of Principal Amount 0.5% of Principal Amount

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Hidden Costs No Hidden Costs Default Penalty after a month is increased to 2%

Prepayment Charges 2% 2%Governing Body National Housing Board Reserve Bank of India

ANALYSIS & FINDINGS OF THE STUDY HDFC Ltd. is the leader in the Home Loan Market, having a market share of

35%, followed by SBI and ICICI Bank Ltd. with 22% and 20% respectively. The main competitors of HDFC Ltd. are SBI, ICICI Bank Ltd. and PNB Housing

Finance Ltd. In future it may also face stiff competition from Axis Bank Ltd. and BOB Housing

Finance Ltd. SBI has an advantage of high level of reach to customers, including both urban

and rural people and especially in the rural area. The loan procedure of HDFC Ltd. is so effective and complete that the default

rate of HDFC Ltd. is lowest as compared to other Housing Finance Corporations.

The main reason of this is due to availability of sound and quality manpower. HDFC Ltd. has only 1506 number of employees, because of which the employee

turnover ratio is very high. HDFC Ltd. employees works on a software built by their own employees, from

the I.T. department, on Oracle which helps them to work efficiently and also notifies immediately in case of any default.

In terms of interest rates, its main competitors are SBI and other private players like Dewan Housing Finance Ltd. which offer home loan at interest rate as low as 8.00%.

HDFC Ltd. has a good brand image in the minds of customers.

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Most of the customers are not aware of the products of HDFC home loans. Some of the customer’s felt that the interest rates are high. However, as we

analyzed this was primarily due to lack of awareness on the part of the customers. Customers were not aware of the governing body of HDFC which is National Housing Board (NHB) and not Reserve Bank of India. HDFC is governed by NHB because it is a non banking financial company. Despite of this, some customers were understanding of the current high interest rate as they were aware of the current economic situation and also that this was not under control for HDFC.

Some of the customer not having good faith on private banks. Most of the people are directly go to HDFC to apply a home loan due to its

brand image. Customer awareness is medium about HDFC products. HDFC LTD providing good services to their customers. There is a high scope of home loans in the rural sector, but still rural people are

reluctant to take loans from corporations and banks because of documentation involved as majority of them is ill-literate.

The sales team of HFDC Ltd. does not indulge in any unethical practices just for the sake of achieving targets. They are a part of the company and not outsourced as in case of some private banks. Same goes for the recovery team of HDFC Ltd.

The legal team consists of lawyers who are appointed by HDFC Ltd. only. This leads to a fair legal valuation on the part of legal assessment.

Quality of portfolio of loans is also very good. HDFC Ltd. does not entertain any dubious or risky cases.

After (post) disbursement services of HDFC Ltd. are one of the main factors which not only distinguish it with other H.F.C.’s but also give it an upper edge from others. The customers are made feel welcome when they come to deposit P.D.C.’s or come for I.T. Statements which is not the case in other banks, where I personally saw some customers waiting for hours to get I.T. Statement.

HDFC Ltd. are the market leaders in home loans. Most of H.F.C.’s finance those projects which are approved by H.D.F.C. Ltd. first.

The post disbursement services of HDFC are also very good and are one of the most differentiating factors when compared to other Housing Finance Corporations.

MARKET TRENDSThe housing sector is witnessing a clash between major players. HDFC has ruled

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this sector with a lion’s stranglehold for all these years, but since the entry of ICICI home loans and other banks and private players the market share has gone on decreasing for HDFC. But still it has the majority share i.e. of 35%. However the industry is witnessing a boom at present boosted by generous budget sops. Growth has been largely concentrated on urban areas and in the middle to high income groups, focusing on salaried class. Nearly 25-30 lakh houses are built every year in India. But, the nations requirement is around 67 lakh houses per annum. The housing sector in India is facing an estimated shortage of 4.1 crore houses, which will require an estimated investment of Rs. 170,570 crores. Recent experience demonstrates that the formal housing finance sector continues to grow, but still it is elusive for the lower- income groups. This issue needs to be addressed by the State by taking appropriate measures.

FUTURE OF HDFC LTD.HDFC Ltd. has always been market oriented and dynamic with respect to resource mobilization as well as its lending programme. This renders it more than capable to meet the new challenges that have emerged. Over the year, HDFC Ltd. 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 Ltd. 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 customers the highest standards of quality in product design, facilities and services.

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Recommendations One of the major problems that came to the forefront was the lack of knowledge

about the governing body of HDFC Limited. Thus, customers should be told about National Housing Board and how is slightly different from the Reserve Bank of India.

Emphasis should be laid upon the differentiating characteristic of HDFC Limited which is the stability with respect to its employee base. Customers can almost be certain that they will be dealing with the same employee for the entire term of their loan. This assures them consistency in their relations with HDFC. Changing employees is a major concern for a lot of customers and a firm employee base is the strength of HDFC Limited.

The value of one to one interaction time with the customers is immense and thus employees should vouch for personal time with them to understand their needs and problems better.

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. Turn Over Time (TAT) issues must be given the highest priority while aiming to provide the customers with highly satisfying services. There were many complaints regarding delays in construction and extension loan approval.

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

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interest rates. Needles to say, that the bank which is having lower interest rates, have the maximum clients for loans.

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.

To explore new segments such as packages for professionals like doctors. The prime customers of HDFC Ltd. are salaried individuals. Shifting focus to other segments will provide productive results.

Promote online services among customers further by educating them about the benefits of online transactions. As a majority of dissatisfaction arose due to the delays occurring in the organization due to heavy customer pressure at the HDFC Ltd. office, online solutions like Electronic Clearing System (ECS) must be made mandatory for customers.

Interest rate should be charged the same with new as well as the old customer because it gives a negative impact to the old customer, they think that this is a policy of the company to attract the new customer and no importance is given to them. Losing an old customer is more costly to the company than new because they will stop other prospects to take loan from the company.

The number of employees should be increased in the branches dealing with disbursements. Presently, mostly 2 employees are there in every disbursement branch. It should be increased especially in the last week of every month as disbursement cases are highest during this time and due to unavailability of enough staff, customers have to wait for a long period of time, which sometimes leads to dissatisfaction of customers.

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Conclusion

The housing finance is currently one of the most competitive industries in India where it is difficult to survive especially after the negative effects of recession which was brought about by the subprime crisis. With such cut throat competition, it is imperative that HDFC Limited stands strong and does not lose out upon customers. This can be ensured by providing customers with what they want and how they want it. In short, customer supremacy is what is required. With this in mind, HDFC needs to differentiate itself with the use of this service and continue to forge headstrong into the housing finance market.

Home loans have long period when compare to other personal loans and other loans. So peoples are confused to take a home loan. Even though the interest rates are high peoples are willing to take a loan from HDFC LTD due to the reasons mentioned above. The interest rates also somewhat high when compare to other banks. The loan sanction process is also fast when compared to other banks. For disbursement process is also it will take less time when compare to other banks.

The changes mentioned are minor tweaks that can be brought about in the operation of HDFC Limited which can help to develop a positive outlook towards HDFC Ltd..

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