Strategies for Marketing High Ticket Housing Loan

STRATEGIES FOR MARKETING HIGH TICKET HOUSING LOAN IN RACPC WITH SPECIAL

EMPHASIS ON BUILDERS TIE-UP

Sovan Kundu

PGDM – E.Business (Marketing)

Roll Number - 42

ABOUT SBI

• State Bank of India (SBI) is a multinational banking and financial services company based in India. It is a government-owned corporation with its headquarters in Mumbai.

• SBI group has 45,000 ATM as on October 2013 and 21,500 branches as on March 2012.

• SBI is a regional banking behemoth and has 20% market share in deposits and loans among Indian commercial banks.

• Slogans: "PURE BANKING, NOTHING ELSE", "WITH YOU - ALL THE WAY", "A BANK OF THE COMMON MAN", "THE BANKER TO EVERY INDIAN", "THE NATION BANKS ON US".

METHODOLOGY

• The methodology adopted for the research included compilation and analysis of both secondary and primary data and consultation with bankers, builders associations and other stakeholders.

• Housing finance companies, both in the public sector and private sector were approached to obtain the required data. The study has also relied heavily on published and unpublished empirical research studies on information and data.

HOUSING PROBLEMS

• Housing finance is basically required by both suppliers (builders) and users. The builders need finance for land acquisition, purchase of building materials and construction related activities.

• The household-users need finance for purchase/ construction of new house or flat or house-site, for repairs, renovation or extension of already existing houses. Housing being a long durable asset, the finance required is generally a long term credit in nature.

POSITION OF SBI

• State Bank of India, the Banker to every Indian, as it claims, leads with a market share of 26 percent. It has the largest number of housing loan accounts - 8.82 lakh and the amount lent is Rs.36,800 crore as on March 2008.

• The housing loans disbursement has increased only 3.8 fold.

• As against this, the growth performance in the private commercial banks are more than 39 fold. Although, there was six fold increases in the housing finance by both the State Bank of India group and other nationalized banks.

BUILDERS TIE-UPThe sites we visited and their locations are as follows:

• Ideal Aquaview, New Town, Bidhannagar

• 4-Sight Model Town, Kolkata

• 4-Sight Prestige, Kolkata

• Active Acres, Kolkata

• Atri Bliss, Kolkata

• Avani Aspire, Kolkata

• Bellagio, Kolkata

• Devaloke De Casa, Kolkata

• Diamond City South, Kolkata

• Ideal Grand, Howrah

Considering the projects the different associates include:

• Marketing Agencies

• Architects

• Consultants

• Landscape Architects

• Consultant for Environment Impact Assessment Study

• Solicitors

• Financial Partner

Tie-ups with reputed builders enable the banks to bring in their books borrowers with relatively low risk profile i.e.; HNIs/Affluent NRIs/ Highly paid executives/ IT sector professionals, etc. Arrangement with builders enables bank to publicize their schemes as well as business directed to them.

PROBLEMS IDENTIFIED FROM BUILDERS AND OTHER ASSOCIATES

• State Bank of India is comparatively late in tie-ups and by the time they approach the builders, the tie-ups are already done by the competing banks.

• Not only that, but also few builders actually are apprehensive in tying up with SBI owing to the following reasons:

Higher turn-around time.

Greater documentation hassles.

Delayed approval & sanctioning of loans.

Lesser commission to the marketing associates at the project sites.

• Inefficient customer service

SURVEY REPORT

The above Pie Chart depicts that 74% of the respondents are opting for Housing Finance while the remaining 26% aren’t opting for it.

Yes

No

Respondents opting for Housing Finance

Total Number of Respondents were: 37

19% people chose SBI

24% people chose ICICI

38% people chose HDFC

16% people chose PNB

3% people chose Other Banks

S B I IC IC I HDFC P NB O th e r s

19

24

38

16

3

PREFERRED BANK

Percentage

Total Number of Respondents were: 37

65% of the respondents knew about the terms and conditions in detail.

35% of the respondents didn’t know about the terms and conditions in detail.

Y e s No

65

35

AWARENESS OF TERMS & CON-DITIONS

Percentage

Total Number of Respondents were: 37

22% came to know from Newspapers

16% came to know from Television

30% came to know from Internet

32% came to know from Other Resources

Newspaper Television Internet Others0

5

10

15

20

25

30

35

AWARENESS DERIVED

Percentage

The above graph shows that according to 37 respondents 14% believe ICICI Bank provides the most optimal interest rates followed by SBI and PNB, while 43% believe HDFC provides the best optimal interest rates.

SBI ICICI HDFC PNB0

5

10

15

20

25

30

35

40

45

50

22

14

43

22

OPTIMAL INTEREST RATES

Percentage

The above Pie-Chart shows 27% prefer Low Interest Rates, 22% prefer After Sales Service, 19% prefer Value Added Services, 13% prefer Less Turn Around Time, 11% prefer Less Documentation while 8% prefer Maximum Return Period.

27%

8%

11%

13%

19%

22%

FEATURES PREFERRED

Low Interest Rates Maximum Return Period Less Documentation

Less Turn-Around-Time Value Added Services After Sales Service

The above Bar Graph shows that 40% of the respondents prefer SBI as their long term finance partner followed by PNB and HDFC while 16% preferred ICICI.

S B I IC IC I P NB HDFC

40

16

22

22

LONG TERM FINANCE PARTNER

Percentage

The above Pie-Chart shows that 40% of the respondents want SBI to improve their customer service, 27% want SBI to reduce the interest rates, 19% asked SBI to focus more on Sales Promotions while 14% asked SBI to lower the sanctioning time

40%

14%

27%

19%

SUGGESTIVE MEASURES

Customer Service Lower Sanctioning Time

Reduction of Interest Rates Sales Promotion

COMPETITOR ANALYSIS

While most of the private sector banks charge a processing fee of 1-2% of the total loan amount, SBI charges a flat Rs.500 on loans applied for properties which SBI has already tied up with.

Penalty Charges by private sector banks like HDFC & ICICI Bank: Home Loans : 2% per month Home OD : 1.5% of the outstanding amount subject to minimum of Rs. 500/- & Maximum of Rs.5000/-. While SBI charges Rs. 0 as penalty charge subject to certain terms & conditions like time period of late payments.

As in value added services, private banks provide customer loyalty rewards in terms of Movie Tickets, Online Shopping Vouchers, Holiday Packages(in case of high ticket loans only), Restaurant Vouchers. SBI doesn’ provide any such benefits.

SWOT ANALYSISSTRENGTHS (INTERNAL, POSITIVE FACTORS)

• SBI is the largest bank in India in terms of market share, revenue and assets. The bank has its presence in 32 countries engaging currency trade all over the world.

• Market leader: SBI has 20% market share in deposits and loans among Indian commercial banks. SBI controls 22.35% in business as on RBI.

• Transparency is one of the paramount feature that State Bank of India possess. No hidden charges are there in the various processes of sanctioning the home loans.

• Brand Name: SBI bank has earned a reputation in the market over the period of time. Also being there since the 1800s, it has stood the test of times and have won the trust of millions of Indians.

WEAKNESSES (INTERNAL, NEGATIVE FACTORS)

• Business per employee of SBI is 6.36 crore against industry average of Rs. 8.373. In contrast, business per employee of ICICI bank stood at 10.29 crore, while Axis Bank’s 11.11 crore HSBC bank’s 11.35 crore and Citi bank’s per employee contribution was 19.7 crore during 2009-2010.

• Employees show reluctance to solve issues quickly due to higher job security and customers’ waiting period is long when compared to private banks.

• SBI is lagging behind in speedy processing of housing loan as its TAT- Turn Around Time is 7 days which is less than other banks.

• Extensive documentation and verification process often leads to avoidance in opting for SBI home loans from upper society-economic class. Also frequent follows up leads to annoyance from the customers

OPPORTUNITIES (EXTERNAL, POSITIVE FACTORS)

• As Kolkata is a developing city when it comes to more penetration of IT companies and small to real estate market is promising with more and more housings being built. So more builder tie-ups can be done before other banks tie-up with them.

• Value Added Services (VAS)

• Targeting the age group of 28-37 years with faster turn-around-time and lesser hassles in documentation and sanctioning

• Celebrity endorsements as done by AXIS Bank (Deepika Padukone) and ICICI Bank (Amitabh Bachchan) attracts youth towards services provided by such banks.

THREATS (EXTERNAL, NEGATIVE FACTORS)

• Increased Competition from Private bank: Their DSA’s have strict sales target every month and hence move faster to improve their performance. SBI employees are not bothered about this.

• The way private banks deals with their customer has made banking easier and less torturous. Instead of customer standing in queues at banks, the private banks started service to the customer at their doorsteps.

RECOMMENDATIONS & CONCLUSION From the interaction with the builders and marketing agencies the following are recommended to State Bank Of India for Marketing of High Ticket Housing Loans:

• SBI needs to decrease the turn-around-time and the documentation hassles. The entire process of builders tie-up including the Title Investigation Report(TIR) and Valuation Report takes a lot of time to be completed which makes builders apprehensive to associate with SBI. So that needs to be decreased.

• As the project is soft-launched, SBI should position a home loan sales executive at the project site as the maximum enquiries about the property and financing takes place from the moment the project is launched and decreases gradually

From the survey report the following are recommended to State Bank Of India for Marketing of High Ticket Housing Loans:

• Though 74% of the respondents are interested in Housing Finance when buying a property in the SBI approved projects. Of the 74%, only 19% prefer SBI as their preferred bank. This is because SBI incurs a greater turn-around-time in 1st degree enquiries made by the potential borrowers.

• The processing time (including the approval and sanctioning time) that SBI puts into practice (highest amongst the banks we took into survey), is usually 25-30 days when compared to the private banks like ICICI Bank, HDFC Bank and AXIS Bank who process in within 7-9 business days.

• SBI also has a huge documentation verification process which requires frequent follow-ups from the customers. SBI can offer doorstep verification process at the customers’ ease and preferred time.

• The ad-campaign be it in print and digital media or in social media needs to be improved. SBI can rope in brand ambassadors as AXIS Bank roped in Deepika Padukone while ICICI Bank roped in Amitabh Bachchan. Lately they are into social media. But campaigns aren’t run. Few aspects like service enquiries, feedbacks can be obtained and answered from Facebook & Twitter.

• Also attractive offers as recently launched by AXIS Bank namely “Happy Ending Home Loans” and Value-Added Services like Movie Tickets, Online Shopping Vouchers, Holiday Packages(in case of high ticket loans only), Restaurant Vouchers should be provided to attract customers to opt for SBI Home Loans.

• Home loan being a long term affair between the bank and the customer, it is very essential that the bank co-operates with the customer at every level of their queries and difficulties. So, SBI should have a department catering to the queries of the home loans customers and work rigorously to provide them a better service.

THANK YOU.