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Strategies for Marketing High Ticket Housing Loan

Oct 19, 2014

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Real Estate

Strategies for Marketing High Ticket Housing Loan with Special Emphasis on Builder Tie-ups

Strategies for Marketing High Ticket Housing Loan in RACPC with Special Emphasis on Builders Tie-up

Strategies for Marketing High Ticket Housing Loan in RACPC with Special Emphasis on Builders Tie-up Sovan KunduPGDM E.Business (Marketing)Roll Number - 42

ABOUT SBIState Bank of India(SBI) is a multinationalbankingandfinancial servicescompany based in India. It is a government-owned corporationwith its headquarters inMumbai.

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%marketshare 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".MethodologyThe 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 The study has also relied heavily on published and unpublished empirical research studies on information and data.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 ProblemsHousing 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 sbiState 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.

From the table, it may be seen that the public sector banks have the lion's share in housing loans.

This clearly shows that in recent years, the private sector banks have become very aggressive in the housing loan segment. The growth in the housing finance in recent years was driven mainly by the private sector banks.5Builders tie-upThe sites we visited and their locations are as follows:Ideal Aquaview, New Town, Bidhannagar4-Sight Model Town, Kolkata4-Sight Prestige, KolkataActive Acres, KolkataAtri Bliss, KolkataAvani Aspire, KolkataBellagio, KolkataDevaloke De Casa, KolkataDiamond City South, KolkataIdeal Grand, Howrah

.

The ultimate aim of the developers as well as the marketing firm is to sell the flats irrespective of whom their clients are seeking Housing Finance from. Every developer has their preferred marketing agencies, architects, consultants, landscape architects, solicitors and financial partner.

Approval /Tie-up arrangements are aimed to reduce Turnaround Time of Loan applications by avoiding duplication of certain works in respect of the processing of loan applications in respect of the units in such projects.

6Considering the projects the different associates include:

Marketing AgenciesArchitectsConsultantsLandscape ArchitectsConsultant for Environment Impact Assessment StudySolicitorsFinancial 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.

The ultimate aim of the developers as well as the marketing firm is to sell the flats irrespective of whom their clients are seeking Housing Finance from. Every developer has their preferred marketing agencies, architects, consultants, landscape architects, solicitors and financial partner.

Approval /Tie-up arrangements are aimed to reduce Turnaround Time of Loan applications by avoiding duplication of certain works in respect of the processing of loan applications in respect of the units in such projects.

7Problems identified from builders and other associatesState 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 serviceThe builders also reported that the officials of SBI arent responsible enough to follow up the prospective borrowers which result in a bad image for the builder too. Even the queries raised by the prospective borrowers arent escalated suitably to the concerned officers and executives.

8Survey reportThe above Pie Chart depicts that 74% of the respondents are opting for Housing Finance while the remaining 26% arent opting for it.

Total Number of Respondents were: 37

19% people chose SBI24% people chose ICICI38% people chose HDFC16% people chose PNB3% people chose Other Banks

Total Number of Respondents were: 37

65% of the respondents knew about the terms and conditions in detail.35% of the respondents didnt know about the terms and conditions in detail.

Total Number of Respondents were: 37

22% came to know from Newspapers16% came to know from Television30% came to know from Internet32% came to know from Other Resources

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.

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.

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.

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 timeCompetitor AnalysisWhile 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.

Market leader: SBI has 20% market share in deposits and loans among Indian commercial banks. SBI controls 22.35% in business as on RBI. The bank has a merged with State Bank of Saurashtra, State bank of Indore and the bank is planning to go further acquisition in the current FY2013.

Government owned: Government owns 60% stake in SBI, this gives SBI an edge over private banks in terms of customer security. They are automatically immune from failure because they have access to Central Government support.

Wide distribution Network: SBI has more than 27000 ATM and SBI group i.e. including associate banks has about 45,000 ATM whereas total no. of ATM as on October 2013 are 104500. 18WEAKNESSES(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 Banks 11.11 crore HSBC banks 11.35 crore and Citi banks 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 customersSBI fails