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A PROJECT REPORT ON LONG TERM FINANCING 45 Days Summer Training Project with “Rajasthan Rajya Vidhyut Utpadan Nigam Ltd.”
Submitted by: Vijay singh choudhary BBA – III Year
PARISHKAR COLLEGE OF GLOBAL EXC. Near Technology Park, Shipra Path, Mansarover, Jaipur
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PARISHKAR COLLEGE OF GLOBAL EXC. Near Technology Park, Shipra Path, Mansarover, Jaipur Acknowledgement
As Per the curriculum of 4th semester of MBA, we have to undergone through a detailed project study. I wish to express my gratitude to Rajasthan Technical University for giving me an opportunity to be a part of such kind of learning experience, which will surely enhance my knowledge and skills.
I would like to express my gratitude for the people who were part of this Project Report, directly or indirectly people who gave unending support right from the stage the idea was conceived.
In particular, I would like to thank Mr. M.K. Khandelwal (I/A A/c’s), Mr. Y Upadhyay (COA W&M), Mr. P.N. Sharma (AO Cash) and Mr. Rakesh Sharma (AO A/c’s) Rajasthan Rajya Vidhyut Utpadan Nigam Ltd., Jaipur for helping me to decide the topic and providing their full cooperation in completing this report.
I would also like to thank Mr. Amish Dugar and Ms. Sangeeta Choudhary for the preparation of the report and helping me achieve the best of my potential. Then I would like to thank all my friends for her unending support for the report.
I am also greatly thankful to Mr. R.K. Agarwal for giving us the opportunity to get practical exposure of the real business world and working in the public company.
--------- KAPIL GUPTA
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PREFACE
This project is prepared on the basis of awareness of HDFC Home Loans in market and understanding the requirement of proper guidance to customers. Housing is the big Industry in the world and it is constantly changing. Housing has played a major role world over in increasing productivity across a wide. Estimates suggest that the industry provides employment to ten percent of the total work force of the country. This sector is highly fragmented and is dominated by the presence of a large number of traditional formats. HDFC offers loans for homes-for buying or constructing your home, refinance a home loan availed from other institutions or even to extend or improve your existing home. This project helps me to better understanding of market and financial products and their benefits. Now I am feeling the great pleasure in delivering this project because of a better skill of handling the situation and customer understanding. As I submit this Report I am sure that the orientation of the research that has been conducted is correct and the findings of it will prove to be quite beneficial to the organization.
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Executive summary
The project study is a part of the curriculum of the Rajasthan Technical University, Kota for Master of Business Administration Course. It is aimed to provide the student an industrial exposure. Students are expected to learn the technical aspects of theoretical studies applied in the organizations. This report is the outcome of project held at HDFC LTD, JAIPUR. I ANOOP VERMA undertook this project as a part of my college curriculum. This project was an immense learning to me in terms of forming a practical as well as theoretical base.. We are proud to work under MR. ABHISHEK DEORA (REGIONAL MANAGER - HDFC GUJRAT, PUNJAB and RAJASTHAN). I affirm that the result of this report is independent and true to the best of my knowledge I also believe that this project help me a lot in proving my efficiency and professional skill which would make my future bright in corporate sector. The report focuses on HDFC LTD and its efficacies in the housing loan sectors. The report also focuses on COMPARATIVE STUDY OF HOUSING FINANCE COMPANIES WITH HDFC LIMITED.
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Cover Page Certificate of the Company Preface Acknowledgement Executive summary CONTENTS 1. Introduction to the Industry. 2. Introduction to the company. 3. Research methodology
Title of the Study Duration of the study Objective of the Study Type of the Study Sample size Scope of the Study Limitation of the study
4. Fact and finding. 5. Analysis and interpretations. 6. SWOT analysis. 7. Conclusions. 8. Recommendation and Suggestions. 9. Appendix. 10.Bibliography.
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INTRODUCTION TO THE INDUSTRY
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INTRODUCTION TO THE INDUSTRY
HOUSING FINANCE IN INDIA
Housing finance industry is recognized as a vital arm of the financial services due to its potential in tapping more business & also to overcome the current housing shortage of the nation .In this mode the competition among the financial institutions have been increased since the banks realized that home loans form more stable assets than commercial loans The housing finance industry is getting increasingly commoditised. Competition within the sector is ensuring that players offer consumers flexibility and features to choose from. Features such as adjustable rate plans, lower processing fees, monthly rest, low interest rates, low EMI, lower margin money, no pre-payment penalty have become common across the industry. HDFC is the oldest private housing finance company (HFC) in India. It has developed from a predominantly local institution to a joint-stock financing institution majority owned by international shareholders. HDFC belongs to the 10 largest listed corporations in India. Moreover, Housing finance is the main business area of the HDFC group. Thus in the present booming & volatile scenario it is often required to assess the strengths, weakness, threats & opportunities form the internal & external environments for HDFC Ltd in a developing city like Jaipur. A detailed SWOT analysis is to be carried and risks are quantified, and remedial measures are to be taken out to outsmart the major players in this field to increase their market share in jaipur In May 1998 the national housing policy was announced. The policy reflected the thirst, the government wished to give the housing sector and pointed out that housing was not merely consumption expenditure but also productive investment which would provide economic activity create base for attaining several national policy such as providing shelter and raising the quality of life. The national housing policy also envisaged that an impetus given to housing world stimulate economic activity through creation of substantial employed opportunities.
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A working group on housing sector finance has projected a storage of 71 million housing units by the turn of century and that the resources required by housing sector in the 10th five year plan. It would be of the order of 107350 crores. The organized sector account for only about 30 % of the total need of housing finance in the country. This includes the listed and unlisted housing finance companies. 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 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 manyears of direct employment and another 15 million man-years of indirect employment. Having identified housing as a priority area in the 11th Five Year Plan (2008-2013), the National Housing Policy has envisaged an investment target of Rs. 1,900 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.
PAST Housing situation
The total housing stock in the country was 148 million units in 1991, as compared with 116.7 million units in 1981. However, the usable housing stock was only 133.8 million units in 1991 and 101.5 million units in 1981. The usable housing stock rose by 31.9% during the period 1981-91. In comparison, the total number of households was 153.2 million in 1991 and 123.4 million in 1981. The number of households increased by 24% during the decade 198191. It has been estimated that the usable housing stock will grow by 23% during the period 1991-2001, and the households will grow by 16.5% during the same period.
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Thus, the usable housing stock is estimated to be around 264 million and the number of households around 278 million by the year 2010.
India continues to face the problem of a shortage of housing units in the country. The housing shortage was 23.3 million units in 1981, and it came down to 22.9 million in 1991. It is estimated that the shortage may come down to a level of 19.4 million units by the year 2001. While the growth rate in dwellings continues to be relatively lower in the rural areas, it has been showing an increasing trend in the urban areas, thereby indicating greater tendencies of urbanization. The current period has also been witnessing an increased influx of population from the rural to urban areas, leading to unorganized settlements due to which there has been tremendous pressure on the infrastructure and services available in the urban areas.
Housing Shortage
Housing shortage has been estimated on the basis of the number of households (including homeless households), available housing stock, acceptable housing stock, aspects of congestion and overcrowding. The population census provides background information on households, including homeless households, housing stock and acceptable housing stock (material of wall and roof). Overcrowding and congestion is assessed on the basis of number of living rooms in the dwelling unit, number of members and number of married couples in the households. The National Building Organisation has estimated urban housing needs (backlog) of 8.23 million units as of March 1, 1991. Using the regression growth rates, the present housing shortage has been estimated at 20.41 million.
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Recent trends in the Housing Finance Sector
Housing is one of the fundamental demands for living. Access to acceptable housing is one among the elementary human needs as well as one of the keys to peace and happiness. In every country, resolving housing issues has political, social and economic significance. Housing is a significant engine for growth and development of the economy. Home to roughly 1.1 billion people, India is the second most populous country after China and is expected to overtake it by 2030; roughly one in every sixth person on earth lives in India. The growth rate of the population is still rapid which will result in an unfavorable landman ratio reflecting high density in pockets. The disproportionate urbanization leads to steady migration of people from rural to urban areas at the aggregate level. This in turn resulted in a huge demand on the infrastructure of the cities, besides causing pressure on the land. It is evident from Table 1 that one in every three Indians is under the age of 15, and only one in three is older than 35. When comparing with other countries such as China, USA and Japan, India has the unique advantage of a higher level of middle aged and lower level of aged people. Indian GDP has grown at 6% for the past 10 years and 8% for the last three years and interestingly the service sector accounts for 60% of GDP. India has the lowest figure for house mortgages as a percentage of GDP. Amongst the Asian countries, Hong Kong has the highest ratio, followed by Taiwan, Malaysia, Thailand and Korea. It could be inferred from Exhibit 1 that the consumption pattern amongst the Indian population is expected to change 2013. The strivers are less but aspirers and rich are
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significant higher compared to 2010. The housing finance sector in India has undergone unprecedented change over the past two decades.
The housing finance requirements in the country are catered for by the following types of institutions: * Scheduled Commercial Banks * Scheduled Cooperative Banks * Regional Rural Banks * Agriculture and Rural Development Banks * Housing Finance Companies * State Level Apex Co-operative Housing * Finance Societies Housing finance as a financial service is relatively young in India. The growth in housing and housing finance activities in recent years reflect the buoyant state of the housing finance market in India. The real estate sector is the second largest employment generator in the country. The government's support to housing had traditionally been centralised and directed through the State Housing Boards and Development Authorities.
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In 2009, the National Housing Bank (NHB) was established as a 100% subsidiary of the Reserve Bank of India, (the central bank of the country), to promote housing finance through a refinance mechanism to banks, housing finance companies (HFCs) and other institutions and also to function as the supervisory and regulatory body for housing finance firms. Currently there are 29 HFCs approved for refinance assistance from NHB. Although commercial banks were the largest mobiliser of savings in the country, traditionally banks were rather reluctant to lend for housing as they preferred financing the working capital needs of the industry. Several banks had set up housing finance subsidiaries which functioned as independent units with little support or interest from their parent bank.
Growth Trends
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The lower interest rate regime, rising disposable incomes, stable property prices and fiscal incentives made housing finance attractive business for commercial banks. Further, housing finance traditionally has been characterized by low nonperforming assets (NPAs) and given the vast demand for housing loans, almost all the major commercial banks plunged into the business of housing finance. The robust growth
During the last decade has been triggered by a number of factors, some of which are listed below: The prime property prices in India is likely to increase by 12-15% in 2010. Giving a global view on the performance of prime residential property markets with a focus on the key regions in the Asian Pacific property markets, the Mumbai and New Delhi realty markets held a significant level of promise for potential investors. There are growing prime markets in every city of India. But, South Mumbai and South New Delhi are the markets, which are the highest in terms of prices followed by Bangalore, Chennai and Hyderabad. The housing industry in India has grown on the back of fast developing housing segment. In fact, it is the most dynamic segment of the real estate industry compared to commercial and other property development segments. With the entry of corporate houses like DLF, Parsvnath and Omaxe, easy finance options from financial institutions and government support, the housing industry in India has rapidly grown over the past few years. The housing construction industry is poised for tremendous growth in coming years in the backdrop of large population base, rising income level, increasing demand for housing units, fast changing rural housing landscape. In addition, the housing construction industry is expected to overtake other industrial sectors in terms of contribution to GDP growth in the next few years. Although the Indian housing industry will see slowdown in 2009 due to after effects of global financial crisis, it is anticipated to
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attain earlier growth trajectory by the end of 2010 on account of precautionary measures.
SBI is the Biggest Player in the Home Loan Sector
With the teaser rate tenure coming to an end, it is time to gather the market share earned by the different players during the reign. Of the total amount of Rs. 45000 crore lent as cheap loan, SBI seems to have gathered the biggest chunk of the pie by sanctioning a colossal 67% of the total loan amount offered during 2009. The trump card used by the banking sector this year has been the teaser home loan rates. SBI has lent a prodigious amount of Rs. 30,000 crore this year as a part of the teaser loan regime. HDFC has secured a distant second position with a total sanction of Rs. 9,000 to Rs. 9,600 crore under the home loan segment. Teaser loans from other banks however did not receive such good response. While Bank of India could sanction only Rs. 289 crore in a time frame of seven months, Punjab National Bank, IDBI Bank and Union Bank disbursed nearly Rs. 1,050 crore, Rs. 1,500 crore and Rs. 1,600 crore respectively over a time span of six months. Many banks had stopped the teaser rate regime after the RBI announced a hike in the cash reserve ratio by 75 basis points. Despite the varied response received by various banks on sanctions, all banks seem to be happy by the results of teaser rates.
Fund Raising for Housing Finance Institutions and govt. step
The staggering dimension of the housing storage in the country, urban as well as rural can never be solved by devising ad-hoc solutions. Long term goals and strategies are needed to solve this eternal problem. In fact a specialised financial institution with dedicated funds for housing development is the need of the hour.
In India the government must create a National Housing Fund on top priority basis. The
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government, through National Housing Bank, Should create such a dedicated fund for the development of housing stock in the country. Even a fraction of amount from the turnover of big public sector organisations like LIC, ONGC and the likes can bring about a sea change on front. Corporate India contribute to the corpus of the national housing fund. Millions upon millions of home seekers are fed up with slogans like, “shelter for all by the year so. We can also adopt the Singapore model to create funds for housing for tapping provident funds and other such avenues. A tiny percentage from the various taxes the government collects, can also be invested for creating the fund; which can fund the development of housing to different groups, especially the low income and the middle classes , on reasonable terms for a variety of shelter options. The task force of the planning commission on shelter must take the lead in this matter and evolve the clear cut strategy in consultation with National Housing Bank. The fund can also be enhanced by the government sponsored Real Estate Mutual Funds. The housing front is most vital for national economy and human settlement. National Housing Policy has clearly admitted this fact and has stressed the need for all out efforts for the development of the housing stock in the country. Shelter concerns all and hence deserves orchestrated and dedicated efforts form the government through its various organisations. A centralised housing fund is acute to build the nation .
Market Profile
The Indian housing finance sector is crowded with players of all sizes and nature: government organisations, insurance companies, banks, housing finance companies and co-operative organisations like NHB. Major players in the industry are HDFC, LIC housing finance, Dewan housing, homes, SBI home finance and Gujarat rural housing. The youngest entrant into the industry, which is penetrating rapidly, is ICICI. Interestingly, both can Fin homes limited and its parent Canara Bank are in to housing
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finance. It is the same with quite a few banks , for example, SBI and SBI home finance limited, Bank of Baroda and BOB finance, Vyasa bank housing . Although HDFC and ICICI have their banking arms, they compete with each other in t housing loans. The industry comprises of nearly 383 housing finance companies although disbursements from only the leading 29 institutions are eligible for re-finance from national housing bank ,which is the regulatory body of these companies. These housing finance companies (HFCs) constitute nearly 95% of the total disbursement by the industry.
Fund Raising
The primary sources of funds for Housing Finance Companies include NHB refinance schemes, public deposits, debentures, private placement of bonds and borrowing from banks and financial institution. Efficient financial management has a key role to play in the housing finance industry. The various sources of finance are explained below. As an apex refinance institution, the principal focus of NHBs programmes is to generate large scale of involvement of various primary lending institutions to serve as dedicated outlets for assistance to the housing sector. These institutions include schedule banks (both commercial and co-operative), regional rural banks and the state apex cooperative housing finance societies. NHB has formulated schemes to support all these agencies and help them to cater to the housing needs of the community at large. NHB also under takes direct financing in respect of government sponsored bodies/institutions for projects only. The refinance assistance provided by NHB to HFCs has enabled them to increase their operations and cover a larger section of the population. The Housing loan portfolios of NHB approved HFCs have witnessed significant growth. For instance, the public
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deposits of the NHB approved HFCs increased from Rs 12196.03 crore, as on March 31, 2009 to Rs 11204.30 crore, as on Jan 31, 2010 The need for easy flow of institutional credit for housing in rural areas has been considered necessary for some time. This formed the background for the announcement of a separate scheme for financial rural housing by the government of India. NHB formulated the Swarna Jayanti Rural housing finance scheme which was launched in August 1997. The scheme envisaged provision of institutional credit to individuals desirous of constructing or acquiring new dwelling units and for extension or repairs of existing units, in the rural areas of the country. In view of a flexible approach needed to modulate the options according to the shelter needs of different sections of the population, the terms of the loan under the scheme were suitably framed and operated through the banking sector, co-operative sector institutions and the HFCs, which possessed a substantial geographic coverage, functional reach and necessary infrastructure to ensure its effective operation. In this context , conscious about the long term nature of housing finance, sufficient backup was in-built by way of refinance facility from NHB to all eligible institutions in order to supplement their efforts. The targets of financing 50000 and 100000 dwelling units during the first two years of operation of the scheme were successfully achieved by the various institutions.
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Interest Rate scheme. The National housing Bank, in its new liberalized refinance scheme (LRS), lowered the interest rates for the best rated housing finance companies (HCFs) and scheduled banks (SBI) by almost .200 basis points across all the loan slabs, besides introducing floating interest rates. NHB also introduced an internal credit rating for the HFCs in order to determine the company‟s eligibility, exposure, security and interest rate on refinance assistance. The scheme provides refinance assistance with respect to prospective housing loans to be disbursed by HFCs and banks in addition to the loans already disbursed . It also offers reduced interest rates for shorter times. On the other hand, the scheme allows HFCs and banks to switch over from fixed to floating rate of interest and viceversa on payment of the requisite fee. Apart from this , the repayment levy has also been reduced. The HCFs ,which have tapped the markets, include HDFC Ltd and ICICI home finance ltd. more are expected to tap the market during the coming months, some could for repeat issues. The way financial sector has evolved over the last few years has forced HFCs to look for changes to survive and grow. Boundaries between different sections of the financial sector have gradually disappeared. Be it a bank, development institution, HFC or NBFC, there appears to be no area of financial intermediation that is taboo. Retail loans, asset management companies, banking and insurance are all areas where a single group operates under a variety of companies. It is just varying regulatory requirements that have different companies under the same umbrella carrying on different activities. The same trend in pushing more stand alone HFCs to look at other areas of financial intermediation to leverage on the name and data base coming from the housing loan business, HFCs are likely to see a gradual growth in the importance of non-housing business in their earnings over the next few years. While housing finance is likely to
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remain the core area of the business, revenue from the other lines of financing should pay a more important role in stand-alone HFCs such as HDFC. The disappearing differential in interest rates between different categories of HFCs is almost inevitably going to lead a squeeze on the interest spreads of smaller HFCs because they will not be able to raise resources at as low cost as HDFC and ICICI home finance. Housing finance is likely to remain a low risk, low margin business that records fast growth in the foreseeable future. The market is likely to get a little more broad based in the sense that HDFCs market share may be eaten into by others such as ICICI. But the industry will continue to be dominated by a handful of big players. HFCs associated with NBFCs and the housing finance division of banks may carve their own niches, but there is unlikely to be radical change in the basic structure of the sector for some time.
PROCEDURE OF DISTRIBUTION OF LOANS BY HFC'S
Almost all housing finance companies, which provide long term finance for construction or purchase of houses in India for residential purpose comes under the preview of NHB. So, all the lending of these companies should be sound, healthy and must satisfy all the norms, guidelines and direction of NHB. Any proposal is considered only if the applicant satisfies all the following conditions stipulated by NHB as test of eligibility. Broadly the eligibility criteria are as follows: The loan should be directed to an individual or group of individuals. A co applicant, if there is any, either the spouse or the applicant or son or brother or daughter, co-applicant may be a co-owner of property. minor cannot be a co applicant. Residential active life of the applicant reckoned at 60 years should cover the repayment period. Appraisal
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Having decided upon the eligibility, the application is expected with the processing fees along with the necessary document. The third step consists of appraisal of proposal. The appraisal is broadly divided as 1 credit appraisal 2 legal appraisals 3 technical appraisals
Credit appraisal The main objective of this appraisal is to access the applicant's repayment capacity over the period. The main point for consideration is income age academic background assets and liabilities servicing records in respect of other institutional burrowing saving history number of departments Income and expenditure pattern.
Legal appraisals In legal appraisal all the documents like deeds, revenue receipts, encumbrance search certificates for the past 30 years are verified by an experience lawyer to confirm that the withholder can create an equitable mortgage in favor of housing finance company by simple deposits of title deeds.
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Technical appraisals The technical officers will firstly verify the original documents and counter check upon all the furnished information, records approval, clearance, certificates and others. The applicants should submit all the document relating to guarantees , collateral securities, the need documents differ from case to case depending upon, whether the house being purchased and, if so from whom or whether it is a self construction.
Following document required:Layout plan Approval plan no. encumbrance certificate Commencement certificate, if applicable A detail estimate of cost of production NOC for mortgage of said property in case purchase is from development authority or any govt. allotted scheme.
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Eligibility 1.
Salaried Employee a) Any individual who is in permanent service in Government reputed company? b) c) Clubbing of income of wife and husband is permitted. Applicant in all the cases should be above 18 years of age at the time of loan and up to the age of superannuation.
2.
Professionals a) Professionals Architects, (Doctors, Chartered Engineers, Dentists, Cost
Accountants,
Accountants, Company Secretary, Management Consultant) can apply. b) c) Clubbing of income of husband and wife is permitted. Applicant in all the cases should be above 18 years of age at the time of loan and up to 70 years or less at the time of loan maturity.
3.
Self Employed Individuals a) b) c) Self employed individuals can only apply. Clubbing of income is not permitted. Applicant in all the cases should be above 18 years of age at the time of loan and up to 70 years or less at the time of loan maturity.
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INTRODUCTION TO THE COMPANY
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INTRODUCTION TO THE INDUSTRY
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 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 30 years. The primary 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. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. HDFC is a professionally managed organisation 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. HDFC selected as the 'Top Indian Company in FIs / NBFCs / Financial Services sector' for the Dun & Bradstreet – Rolta Corporate Awards 2009.
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Company History and Milestone
1977 On October 17th HDFC was incorporated as a Public Limited Company. HDFC was promoted by the Industrial Credit and Investment Corporation of India. The company got the certificated of commencement of Business on 3rd December. HDFC provides housing finance in India. The corporation provides long term housing loans mainly to low and middle income individuals and corporate bodies. It has also provided a modest amount of construction finance to housing developers. 1986-87.
1986- During the period corporation issued, IV & Vth series of bonds for Rs.10 crores and Rs. 5 crores respectively. During the same year corporation started offering a new service called Advanced Processing Facility (APF) under which property developers who are undertaking a residential project can finance individuals buying a dwelling unit in their project. 5,00,000 Rights equity shares issued at par in prop. 1:2. Subsequently, another 5,00,000 No. of equity shares were offered a par for public subscription.
1987 - During the year HDFC issued its New Corporate Bonds - Series I for Rs. 20 crores. Also VI, VII and VIII series bonds for an aggregate amount of Rs. 20 crores were issued during the year.
1988- During the year National Housing Bank was set up as an apex body to ensure orderly growth and functioning of housing finance system in India.Two new facilities viz., the Telescopic Loan Plan and Short Term Bridging Loan were introduced mainly for younger borrowers.HDFC entered into an arrangement with the Bank of India whereby HDFC was to receive fixed rate counterpart rupee funds in lieu of the USdollars deposited with Bank of India in New York. The Home Loans Account scheme was to be launched in co-operation with scheduled banks with effect from July 1, 1989.The Centre for Housing Finance unit proposed to design specific programme contents to suit different purposes and institutions.
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1989- During the year Krditanstalt Fur Wiederauflau of Germany, sectioned A line of credit of DM 25 million to fund loans disbursed by HDFC for low cost housing project directed to economically weaker section households. Two new types of loans namely, Home Improvement Loans (HIL) and Home Extension Loans (HEL) were launched.
1990- During November, the company issued 13, 77,500 equity shares of Rs.100 each at a premium of Rs.85 per share to the public. And also 72,500 shares were reserved for employees of the company. Simultaneously, the corporation offered 10,00,000
equity shares of Rs. 100 each at a premium of Rs. 75 per share to the then existing shareholders in proportion 1:2. The Company allotted 25,00,000 No. of equity shares (both rights and public offer). The Company negotiated a borrowing of US 100 million from IFC. - To commemorate the beginning of the second decade the HDFC, it was proposed to establish a shelter assistance fund to encourage and support activities related to shelter problems, in general and to the needs of the poorer and economically weak sections in particular. - Forfeiture on 970 No. of equity shares annulled. Issued 14,50,000 No. of equity shares (prem. Rs. 85 per share) to the public and 10,50,000 shares (prem. Rs 75 per share) as rights in December.
1992 - 23,62,500 No. of equity shares allotted on conversion of `B' part of FCD.
1993- During the year, the Corporation launched a new deposit product Easy Way Savings, a unique product providing households with flexible maturity choice as well as saving profile. During the year, the Corporation signed a MOU with General Electric Corporation of USA, to promote a new joint venture for understanding the business of Consumer finance. HDFC and General Electric Corporation, have an equity stake of Rs. 15 crores each.
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1994 - The Corporation promoted the educational loan facility to provide financial support to students pursuing higher education. As a joint venture in the GE capital (USA) HDFC promoted a consumer finance company in March for provision of range of financial product. 9,00,000 No. of equity shares of Rs 100 each allotted to ICICI and UTI on private placement basis.
1995 - During the year, the Corporation undertook to set up its first Overseas branch office in Dubai.
1996 - During the year corporation introduced Flexi-Rate Individual Housing Loan. During March, HDFC launched India‟s first captive auto finance company named Maruti Countrywide Auto Financial Services Ltd., with the objective of exclusively financing Maruti Vehicles in India. This is joint venture between DFC, Maruthi Udyog & GE Capital India.
1997 - 50,00,000 Cumulative Redeemable Non-convertible pref. shares redeemed during the year. - Government of Rajasthan, Infrastructure Leasing and Finance Services and Housing Development Finance Corporation has signed a memorandum of understanding in Mumbai to set up Project Development Corporation. The Housing Development Finance Corporation (HDFC), India's premier housing finance institution, has stepped up its programme to mobilize deposits in Goa, by setting up an organised network of agents as part of its efforts to offer safe and attractive deposit options. The Housing Development Finance Corporation (HDFC) has tied up with the Rajasthan government to set up a new company.
1998 - The Housing Development and Finance Corporation (HDFC) is in talks with an Asian offshore institutional investor for setting up a joint venture company in anticipation of the government opening up the real estate sector for foreign direct investment (FDI).
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The Housing Development Corporation (HDFC), one of India's leading housing finance companies, floated its maiden debenture issue through the private placement route on 14th July.
1999 - HDFC will enter into a memorandum of understanding for strategic business collaboration with Chase Manhattan bank.Housing Development Finance Corporation (HDFC) and Chase Manhattan have entered into an agreement where, in the event of the two funds
2000 - The Company and State Bank of India would be entering into a MOU to set up a Credit Information Bureau jointly in technical and financial collaboration with Dun & Bradstreet Information Services India Pvt. Ltd. and Trans Union International Inc. the leading providers of Business and Credit Information services. The Company has acquired the housing finance business of Gujarat Ambuja Cement Ltd for a total consideration of Rs. 60 crores. HDFC have hiked their housing loan rates by 50 basis points.
2001- The UB group has tied up with Housing Development Finance Corporation (HDFC) and Infrastructure Leasing and Finance Services (IL & FS) to raise Rs.60 crore to part fund the acquisition of Associated Breweries & Distillers (ABD).
2002 - RVS Rao reappointed as Executive Director of Housing Development Finance Corporation.
2003 -Housing Development Finance Corporation (HDFC) has asked chairman Deepak Parekh to continue for three more years with effect from March 03. The service of Renu S Karnad, executive director, has also been extended for another five years with effect from March 2003. Besides, the corporation is revising upwards the remuneration package of its top management
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2004 to 2010 -Becomes the first private corporate to raise Rs 1,000 crore debt in a single tranche and in a single option The Company has received disclosures from Mr. D S Parekh – Chairman and Mr Susir Kumar - Company Secretary of their acquisitions.
Forbes Group ties up with HDFC to set up media firm. Housing Development Finance Corporation (HDFC) may join hands with Apollo Hospitals to set up two-three superspecialty hospitals in Mumbai quarter ended December 31, 2009, the bank posted net revenues of RS 3076.9 Crores (12.4%high)
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AWARD IN 2010
Euro money private Banking And wealth management poll 2010 Financial Insights Innovation Awards 2010 Global Finance Award 2 Banking Technology Awards 2009 SPJIMR Marketing Impact Awards (SMIA) 2010
1) Best local Bank in India (second year in a row) 2) Best Private Bank service overall (moved up from no.2 last year
Innovation in Branch Operations - Server Consolidation Project
Best Trade Finance Provider in India for 2010 1) Best Risk Management Initiative and 2) Best Use of Business Intelligence. 2nd Prize
Business Today Listed in top 10 Best Employers in the country Best Employer Survey
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Sr. Name of Director No.
Category*
No. of Directorship**
No. of Committees*** Member 7 1 0 9 1 1 7 6 10 0 2 2 Chairperson 5 1 0 5 1 1 0 1 4 0 0 2
1 2 3 4 5 6 7 8 9
Mr. Deepak S. Parikh Mr. Keshub Mahindra Mr. Shirish B. Patel Mr. B. S. Mehta Mr. D. M. Sukthankar Mr. D. N. Ghosh Dr. S. A. Dave Dr. Ram S. Tarneja Mr. N. M. Munjee
Executive Chairman Independent Independent Independent Independent Independent Independent Independent Independent Independent Nonexecutive Independent+ Joint Managing Director Vice Chairman & M.D
12 5 1 14 4 4 11 11 13 0 9 5
10 Dr. Bimal Jalan 11 Dr. J. J. Irani 12 Mr. D. M. Satwalekar
13 Ms. Renu Sud Karnad
13
5
2
14 Mr. K. M. Mistry
12
9
3
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Mr Deepak Parekh, Chairman, HDFC, and Mr K. M. Mistry, Managing Director
VISION
To be the best housing finance company in the country.
MISSION
Provide secured housing finance at the affordable cost, maximizing shareholders value with high customer sensitivity.
VALUES
Transformation to a knowledge organization. The company is committed to the growing use and sharing of knowledge as a driver of business success. Sense of ownership At the company, they believe that superior performance comes from a feeling of ownership, and ownership comes from empowerment. Quality and autonomy in operation The company is committed to delegation in decision making whereby relevant initiatives can be taken closet to the customer. Fair and transparent business practices
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Ethics and transparency form the basis of the business of HDFC housing finance. On the macro level, the company complies with all the laws of the lands in
which it operates, on the micro level; the company respects the dignity of each individual.
STRUCTURE
The original structure of HDFC Ltd. has the shape of an inverted pyramid. The company‟s structure starts with the appraiser, the person in touch with the consumers and thus the most important person. Organisation is driven towards supporting frontrunner. The other department of HDFC Ltd. are technical marketing, recovery department, etc. The base of inverted pyramid is the deputy General Manager of that business unit. The company has done away with structural hierarchy, So the front-runner doesn‟t need to seek permission to interact with the CEO of the company. The flow of information is in both ways vertical and horizontal which enriches every one about development taking place in company. The activities of the different functional department are directed in such a way that it meets the goal of the organisation. The various activities of the company are well coordinated, organized and directed at the same time integrated too. Decision-making has been made at the headquarter level.
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STRUCTURE OF A HEAD-QUARTER OF HDFC LTD. IN STATE
APPRAISAL
DISBURSEMENT OFFICER
FRONT LINE
PROCESSING HUB
TECHNICAL
ACCOUNTS
OPERATIONS
MARKETING
RECOVERY
DEPUTY GENREAL MANAGER
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Funding
Construction
Purchase
Constructed Property
Purchase and Construction
Take over or Balance transfer 80%
85% 80% 85% funding 85% funding funding funding 85 In case of construction HDFC can give 85% funding of the estimate.
85% funding 80% funding
85% funding 85% of the In case of take over HDFC do the funding of 80%funding market value. 80% funding
Mode of Payment
HDFC accept only Post dated Cheques. List of Caution (Negative) Profiles According to the HDFC
STD booth operators. Video Parlour Operators. Cable Operators. Consultants w/o professional qualifications. Ayurvedic / Unani doctors.
Astrologers.
Owners and employees of small courier company
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Documents Required
Salaried Customers Self Employed Professionals Self Employed Businessman
Application form Application form with photograph with photograph Identity and Identity and Residence Proof Residence Proof
Application form with photograph
Identity and Residence Proof
Latest Salary-slip
Education Qualifications Certificate Education Qualifications Certificate and Proof of business existence and Proof of business existence Last 3 years Income Tax returns Business profile (self and business) Last 3 years Income Tax returns (self and business) Last 3 years Profit /Loss and Balance Sheet Last 6 months bank statements (self and business) Processing fee cheque
Form 16
Last 6 months bank Last 3 years Profit /Loss and statements Balance Sheet
Processing cheque
fee
Last 6 months bank statements
Processing fee cheque
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HDFC Ltd business strategy following: Increase market share in India‟s expanding banking industry by following a disciplined growth Strategy focusing on quality and not on quantity and delivering high quality customer service. and financial services
Leverage on technology platform and open scalable systems to deliver more products to more customers and to control operating costs. Disciplined credit risk management. Develop innovative products and services that attract the targeted customers and address inefficiencies in the Indian financial sector. Continue to develop products and services that reduce bank‟s cost of funds. Focus on high earnings growth with low volatility.
ABOUT THE BUSINESS OF HOME LOANS The home loans of the company have been categorised in to four types Loans to purchase/construct a house Loans for home extension Loans for home repairs/ renovations Loans for purchase of plot/land
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TYPES OF SCHEMES Home Improvement Loan
Features Purpose Tiling and flooring Internal and external painting Plumbing and electrical work Waterproofing and roofing Grills and aluminium windows Waterproofing on terrace Construction of underground/overhead water tank Paving of compound wall (with stone/tile/etc.) Bore well
Maximum loan
Existing Customer
100% of the cost of improvement
New Customer
85% of the cost of improvement
Maximum Term 15 years subject to your 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.
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Home Extension Loan
Features 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.
Maximum loan 85% of the cost of extension
Maximum Term 20 years subject to your 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 need not be co- owners.
Adjustable Rate Home Loa 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*.
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Short term bridging loan
Short-Term Bridging loan makes you realize your dream of buying a bigger and better home and gives you time to sell your 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. You can take the loan even if you are an existing customer of HDFC.
Features Maximum loan 90% of cost of new property
Maximum Term 2 years
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 need not be co-owners.
Fees
0.50% of the loan amount plus applicable service tax and cess
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Land Purchase Loan
Features Maximum loan 85% of cost of the land and based on the repayment capacity of the customer.
Maximum Term 15 years subject to your 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 need not be co-owners.
Adjustable Rate Home Loan 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 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.
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Security
Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary.
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Loans to Professionals for Non Residential Premises Loan
Purpose Purchase, Construction, Improvement of Office, Clinic
Eligible Doctors Chartered Accountants Lawyers Other self-employed professional
Maximum loan 85% of cost of the property
Maximum Term 10 years Improvement 5 years. Non residential premises maximum term is 15 years, NRP improvement remains 5 years.
Applicant and Co - Applicant to the loan Loans can be applied for either individually or jointly. Proposed owners of the property will have to be co-applicants. However, the co-applicants need not be coowners.
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Adjustable Rate Home Loan 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 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.
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Home Equity Loans
HDFC Home Equity Loans helps you Ancash the present market value of the property by taking a loan by mortgaging the property.
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
Property Residential Non Residential - Should be Fully Constructed - Should be a Freehold property having a clear and marketable title.
Adjustable 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 equity loan disbursed will not change. If the interest rate increases, the interest component in an EMI will increase and principal component will reduce resulting in an extension of term of the loan, and vice versa when
Maximum Loan - Existing Customers - Balance of 60% of the market value and present loan outstanding
New Customers - 50% 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 andRs.7.50 Lacs for Non Residential Property Repayment Capacity of the customer
HDFC Home Loan Advantage
Home Loan Counselling - Sharing of over 30 years of home loan experience We have been a part of a 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, we look forward to sharing with you and this service is absolutely free.
Our project approval facility provides our customers the comfort of purchasing properties from builders who have complied with all basic documentation.
Door Step Service We offer door step service. Please call HDFC Home Line call for our Sales Executive to assist you or get in touch with the HDFC Office near you.
We help you find your dream home You can buy, sell, lease residential or commercial properties through HDFC Realty.
Wide Product Range
We provide loans to meet all your requirements for you to make that house a 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 on Adjustable Rate, Fixed Rate.
Multiple Repayment Options-:
Step Up Repayment Facility Helps young executives take a much bigger loan today based on an increase in their future income, this helps executives buy a bigger home today!
Flexible Loan installments Plan 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 instalment reduces upon retirement of the earning parent.
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, to help customer save this interest, we have introduced a special facility of trance Based EMI. Customers can fix the installments they wish to pay till the property is ready. The minimum amount payable is the interest on the loan amount drawn. Anything over and 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 you a great opportunity to repay the loan faster by increasing the EMI.
Whenever you get an increment, increase in your disposable income or have lump sum funds for loan prepayment, you can benefit by: 1. Increase in EMI means faster loan repayment 2. Saving of interest because of faster loan repayment 3. You can invest lump sum funds rather than use it for loan prepayment. The return from the investments also gives you the comfort of paying the increased EMI..
Wide network of financing With over 200 offices, 90 outreach programs - HDFC is able to provide home loans in over 2400 locations in India. You can apply at your local HDFC office for properties in locations where we finance.
Post Disbursement Services Income tax Certificate to enable you to claim the tax benefits are sent to you. This service is absolutely free. Loan Repayment
ECS facility Post dated cheques - No charges for replacement of cheques Loan repayment at any HDFC offices
A new home brings with it new hopes, joys and emotions. At HDFC, we have shared new hopes, joys and emotions with over 32 Lakh customers. Every customer has a specific and unique concern. Having earned an experience of customized to provide you
30 years in home loans, Our home loan product is solutions for your unique concern.
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 your 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 need not be co owners.
Adjustable Rate Home Loan Loan under Adjustable Rate is linked to HDFC's Retail Prime Lending Rate (RPLR). The rate on your n 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.
Purpose of the Home Loan Flat, row house, bungalow from developers Existing freehold properties Properties in an existing or proposed co-operative housing society or apartment owner's association.
Fees
1% of the loan amount applied plus applicable services taxes
No Charges for Replacement of cheques Income Tax Certificates Accelerated Repayment Option
Redemption Charges
Adjustable Rate Home Loan [ARHL] If a prepayment is made within 3 years of the first disbursement*, under Adjustable Rate Home Loan (ARHL) option early redemption charges of 2% of the amount being prepaid is payable if the amount being repaid is more than 25% of the opening balance.
Fixed Rate Home Loan Redemption charges of 2% of the amount being prepaid is payable if the amount being repaid is more than 25% of the opening balance Incase of commercial refinance under both the FRHL and ARHL an early redemption charge of 2% is payable. You may be required to submit copies of your Bank Statements or any other documents that HDFC deems necessary to verify the source of prepayment.
TERMS AND CONDITIONS
Repayment
1 repayment period for home loans shall not exceed 20 years. 2 repayment periods of pre allotment bookings of housing loans shall not exceed 1.5 years. 3 repayment period of improvement/extension of existing property shall not exceed 10 years.
Security Equitable mortgage of the property to be financed, by way of deposit of title deeds. Where the individual building is build on plot of land, which is already charged, to the bank, there is no further requirement of collateral security.
Disbursement The loan will be disbursed in full or in suitable instalments, taking into account the requirement of funds and progress of construction, as assessed by the bank directly to seller/local development authority/supplier of material etc.
Processing Charges / Admission Fee Processing fee equivalent to 1% of the loan amount and in 0.5% in some products will be collected along with application
Penalty for early closure 2% of principal outstanding in case of takeover by other bank. The terms and condition mentioned above and elsewhere under the scheme are subject to modification from time to time solely at banks discretion.
Calculation of Loan Eligibility
This is the main part of the appraisal process, in which the CPA calculate the loan eligibility of the customer that whether he is able to get the loan amount he has applied for or not.
Calculation of loan amount eligibility includes following steps -:
STEP 1:STEP 2:STEP 3:STEP 4:STEP 5:STEP 6:STEP 7:-
Calculate the Net Income of the applicant. Find out his instalment to income ratio.. Find how much EMI the applicant can pay. Deduct any other EMI from the current eligible EMI. Find out for how many years the loan can be sanctioned. Find out the EMI per lacs according to the rate of interest. Divide the EMI per lacs from the Net EMI.
The amount thus obtained is the loan amount for which the applicant is eligible.
Example -: Suppose the net income of the applicant is 12000/- per month. He requiresRS.8, 00,000/- and suppose he is the salaried person. Then according to the instalment to income ratio slab he can pay 50% of his net salary as an EMI. And the rate of interest for the loan is 9.25%.
NET EMI
= =
50% of the Net Income Rs. 6000/he
Suppose ha has already taken a personal loan from another bank, in which is paying Rs. 1200 /- as a monthly instalment, in that condition
NET EMI payable = =
Rs. (6000-1200) Rs. 4800
From the EMI chart the EMI per lacs for the 20 years at ROI 9.25% is Rs. 916.
Loan amount
= =
4800 / 916 Rs. 5.24 lacs
So, the applicant is only eligible for 5 lacs 24 thousand as a loan.
Home Loan File Process
Flow Chart for Obtaining Housing Loan
Application with full requirement (cost of application Rs.)
Application Submitted to office with full requirement and processing fee
Personal discussion with the applicant Preliminary inspection of the property by office Sanction and issue of loan offer
Acceptance of loan offer terms and conditions and payment of administrative fee
Submission of original title deeds and title verification/investigation
Acceptance of title
Applicant's share of investment on the construction / purchase of property
Valuation of property
Compliance of requirements for disbursement and documentation
Release of loan cheque towards first instalment or first and final instalment.
RESEARCH METHODOLOGY
Research methodology
The study of housing finance companies is not an easy job. For such a study huge amount of secondary data was required, conducted personal interview with the credit managers. These interview„s were of great source of knowledge. Much information like HDFC organisation background and overview was collected through internet and official websites of the companies. Others thing like eligibility for taking loan, amount of loan, duration of loan, interest rate, EMI and other related forms and condition were given in the companies‟ brochures. Necessary information regarding housing finance as thing to be noted before taking loan and benefits of home loan, Calculating EMI and pre- EMI were collected through internet. In this report both type of data primary and secondary are used.
TITLE OF THE STUDY- A COMPARATIVE ANALYSIS OF HOUSING
FINANCE COMPANIES WITH HDFC LIMITED
DURATION OF THE PROJECT
This entire project is done during the session of IV semester by doing survey in Jaipur city with the 10 DAY‟ S
OBJECTIVE OF THE STUDY To understand, analyze the housing finance market. To collect & study the appropriate data through market survey in the form of questionnaire and interviews To carry out a detailed SWOT Analysis of HDFC Ltd. & its major competitors To know how the organization works.
To find out the different rate of interest of the banks and their other requirements.
To find out the services that attracts the customers most. To find out which home loan organization would the customers prefer in terms of services & other benefits. To know do we have a system capable of fulfilling their stated and implied needs which is constantly changing with time. To get more business
RESEARCH TYPE –
This research report is a descriptive research as it explains the concept of home loans and determines how the very concept is used effectively to provide fruitful results in order to increase the organizational productivity. It describes characteristics of population. This seeks to determine the answer as to Who, what, when, where and how questions. It is based on some previous findings of the nature of the stated problem.
Sample size and data collection method -: 50
Sampling involves any procedure that uses a 50 number of items or a portion of population to make a conclusion regarding the whole population.
PRIMARY DATA – Data is collected primarily through personal contact, meeting, interview and questionnaire with the concerned authority of the organization and investors‟. SECONDARY DATA – Data are collected through secondary modes such as various published data, reports, related books and websites.
Need of the study-:
Housing is a significant engine for growth and development of the economy. Housing and housing finance activities in India have witnessed tremendous growth over the years. Some of the factors that have led to this growth are - tax concessions to borrowers, increase in disposable income levels, changing age profile of the borrowers, easy availability of loans, nuclear families and urbanization, etc. The proportion of Mortgages to the Gross Domestic Product (GDP) ratio for India is much lower than that for developed countries.
In this context it is important to note that that the organized housing finance industry barely accounts for 30% of the home loans disbursed in the country. The major players in Indian housing finance industry are the Housing Finance Companies, Scheduled Commercial Banks, and Co-operative Banks. Out of these HDFC has been recognized as a specialised mortgage company in India which remains in the top slot over a few years. As it is operating in a highly competitive environment such as public sector banks and other organizations a competitive mapping is strictly required to assess its competitor‟s moves and act strategically to achieve its objective of providing adequate housing to urban & rural households.
Scope of the study-:
With the objective of assessing housing finance companies and its future growth potential, this survey comprises of seven respondents from various institutions. It addresses various issues such as interest rates, network, agents, commissions& incentives, marketing philosophies, volumes and business deals, asset management etc. with the help of such aids the top management can effectively figure out their strategies and lead in their business. A brief analysis is carried out on the data gathered on and is processed with tools such as SWOT analysis so as to assist in making and delivering better products & services, tapping new segments, increase in market penetration in this home loan section of jaipur reality.
Limitation of the study-:
The survey was confined to only certain parts of city, which Included DSA/ AGENTS and marketing, sales personnel. This is limited only for the few major competitors considering HDFC proposal and the inference cannot be drawn for the whole industry The questionnaire & interviews taken up focuses on questions which are up to interest of HDFC Ltd. Denial & restriction of access through some channels existed based upon the confidentiality of the matter Time Period of survey is very Limited The entire credibility and legibility of the data collected by primary & secondary channels solely depends on the knowledge of the interviewed person views, knowledge, web data etc.
COMPARATIVE ANALYSIS AMONG DIFFERENT BANKS
PRIVATE BANK 1. HDFC 2. LIC 3. ICICI 4. IDBI 5. BANK OF COMMERCE 6. OTHERS
NATIONALIZE BANKS 1. SBI 2. SBBJ 3. PNB 4. BANK OF BARODA 5. OTHERS
ICICI BANK
ICICI Ltd. was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses.
ABOUT THE BUSINESS OF HOME LOANS
The home loans of the company have been categorized under four different schemes.
They are as follows
Loans to purchase / construct a house Loans for home extension Loans for Repairs / Renovation Loans for purchase of Plot / Land
ELIGIBILITY At least 21 years of age when the loan is sanctioned. The loan must terminate before or when the concerned person turns 65 years of age or before retirement, whichever is earlier. Must be employed or self-employed with a regular source of income.
LOAN AMOUNT
Restricted to a maximum of 80% of the cost of the property or the cost of construction as applicable.
Repayment capacity takes into consideration factors such as income, age, qualifications, number of dependants, spouse's income, assets, liabilities, stability, continuity of occupation and savings history.
MARGIN
15-25% of project cost
REPAYMENT PERIOD
up to 25 years provided reach the age of 65 years Retire within that period.
PROCESSING FEES 0.5% of the loan amount
SECURITY As per bank instructions INTEREST RATES Floating rate of interest -13.25%. PLR for Home Loans - 15.25%.
STATE BANK OF INDIA
The State Bank of India is the largest commercial bank in India in terms of profits, assets, deposits, branches and employees. SBI is one of the country‟s oldest and a premier Public Sector Bank which works actively in line to the guidelines of Reserve Bank of India and also of Government of India. SBI stands strong with about own 10000 branches and over 5100 branches of its associated banks thus offering the largest banking network to the Indian customer. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings The Bank's domestic branches represent approximately 14% of all bank branches in India. About 46% of the Bank's branches are located in rural areas, 27 % in semiurban areas and 16% and 11% are located in urban and metropolitan areas respectively. ABOUT THE BUSINESS OF HOME LOANS The home loans of the company have been categorized into five sub-categories. They are as follows Home loans for both Indian and NRI customers at fixed and floating rate of interest. Loans to purchase / construct a new house Loans for home extension Loans for repairs / renovations Loans for purchase of Plot/ Land
ELIGIBILITY :- SBI home loans are available for purchase or construction of house or flat; purchase of a plot of land for construction of house; extension, repair, renovation, alteration of an existing house or flat; purchase of furnishings and consumer durables as a part of the project cost, takeover of an existing loan from other banks or housing finance companies
AGE
Minimum age of applicant is 18 years as on the date of sanction and maximum age limit for a home loan borrower is 70 years, i.e. the age by which the loan should be fully repaid. LOAN AMOUNT Applicants aged between 18 and 45 years, can get 60 times Net Monthly Income (NMI) or 5 times Net Annual Income (NAI) and for applicants aged over 45 years of age; it is 48 times NMI or 4 times NAI.
MARGIN The SBI home loan borrower should pay 20% of the cost of home for loans up to Rs 1 crore and 25% for loans above Rs 1 crore. REPAYMENT PERIOD The maximum repayment period for home loan is 20 years for applicants below 45 years and 15 years for applicant above 45 years.
PROCESSING FEES 0.5 % of Loan amount and capitalisation Fees of 10,000 SECURITY As per bank instructions.
PUNJAB NATIONAL BANK
Established in
MINIMUM HOME LOAN AMOUNT OF DIFFERENT BANK
HDFC PNB ICICI SBI
20,000
25,000
25,000
20,000
(Amount in thousands)
25 20 15 10 5 0
AMOUNT
HDFC
PNB
ICICI
SBI
SOME FEATURE OF LOAN FACILITY
BANK HDFC FEATURES
LOAN TAKEOVER YES YES YES YES
ICICI
SBI
PNB
DOWN PAYMEENT NO NO NO NO
PROCESSING TIME
5-7
DAY
7
DAY
7-9
DAY
10
DAY
INSURANCE
YES
YES
N.A.
NO
DISTRIBUTION CHANNELS
BRANCH NETWORK, DSA, DSE
BRANCH SALE MANAGER, DMA
BRANCH NETWORK, HOME LOAN AGENT
DSA, DSE
DATA ANALYSISIS AND INTERPRETATIONS THROUGH PEOPLE OPINION 1. Do you go for home loans through financial institution?
a) YES - 67 %
2. Do you know about HDFC Home Loans?
a) Yes – 62% b) No-38%
70% 60% 50% 40% 30% 20% 10% 0% YES NO
3. If yes, how did you come to know about HDFC Home Loansa) Advertisement 49%
c) Website d) Friends e) Others
12% 20% 19%
Sales
19 % 49 %
Advertisement
Website
20 %
12 %
friends
others
4. For which purpose you want to take housing Loans? a) Construction c) Improvement b) Land Purchase
Housing Loan
11 %
construction
46 % 43 %
land purchase
improvement
5.
Which institution do you refer? HDFC LIC IDBI AXIS SBI OTHERS 13% 14% 8% 8% 51% 6%
Sales
6% 51 % 13 % 14 % 8%
HDFC LIC IDBI AXIS SBI OTHERS
6. If referred HDFC? Satisfied with service?
27 %
73 %
10.
If yes, what loan Pls, specify in which Bank you have taken? a) SBI c) BOB b) d) PNB any other
PI s
10 % 18 % 46 %
SBI
PNB
26 %
BOB
OTHERS
SWOT ANALYSIS
HDFC STRENGTH
customer satisfaction working environment and technological advancement timely completion of procedures availability and continuity easy sanction of loan competitive pricing encouraged executives superb price and product policies Ability to maintain good margins & asset quality Robust credit assessments with focus on quality Loans to corporate and individuals. Good rapport with local builders/developers.
WEAKINESS
Fluctuation in market. no exact theories and fundamentals. sometimes more flexibility. time of processing. high interest rates. Higher rate of interest. Few agents with less network of branches. More time for scrutiny & approval of loan documents. Lack of incentives packages to agents. Lack of tax saving products, marketing support.
OPPORTUNITIES
Large market yet to be unexplored. Consumer today only wants satisfaction and best services.
Lot of facilities to customers. Enhancement to productivity. Could extend penetration to more branches. An applied research centre to create more opportunities in home loans. Maintain good profit margins by slight reduction in Rate of interest. Contests/schemes to increase loan lending. To increase awareness among masses from its niche base.
THREATS
Some lack in loan theory. Uncertainty about market. Public faith in govt. organization. Increased competition from LIC and SBI. Entry of players from Govt banks/foreign banks. Delay by detailed & time consuming appraisal procedures. No particular scheme to attract govt/pvt sector employees.
RECOMMENDATION S AND SUGESSTIONS
The company has its existence in the market majorly through the operation of HDFC sales Ltd, HDFC Bank, DSA‟S, and so it is barely a necessity to attract the masses, middleclass segments. But in order to increase their market presence and profit margins, it is essential to motivate the agents to work as it‟s only through these agents cooperation that the company shall be able to increase their market presence and profit margins. HFCs should try to pay stamp duty on behalf of its customers. They should start TOLL FREE TELEPHONE NUMBER so that that customer can frequently take a step while applying for loan. HFCs should given all the necessary information regarding loan in one brochure. HFCs should start one HINDI WEBSITE for the convenience of its customers India being predominantly Hindi knowing country. Even MNCs are preferring Hindi in their Ads.
The main focus of the agents is regarding the kind of return for the investment of time and efforts that they would make if they do business for the company. So the biggest alluring factor to attract DSA‟S will be to provide competitive returns that are in-line with the other market options else these agents would have no additional incentive to work for HDFC in particular. They would very well work with other companies in the same business if they get better returns with them. Thus the company should revise their commission rates periodically as well as bring in attractive incentive packages that are in line with the competitive rates available in the market.
The next biggest issue that needs immediate attention is regarding the rate of interest. One of the biggest hindrances that agents face in convincing the potential customers is the rate of interest which is the return for the customers investment, any rational consumer would invariably like to maximize his/her return and therefore they misinterpret the agent‟s efforts to convince them to
invest with HDFC as that they might be getting higher commission rates from the company and that is why they are posing hindrance in maximizing their returns.
The Company must focus upon to provide better processing services and must minimize the delays at every cost as many of them feel dejected due to such delays that are generally followed by lack of communication of the agent ID and other essential details that force them to forget HDFC as an option to do their business. Thus such delays must be avoided at every cost.
Some of the agents do feel that during their initial phases of establishment they do need some help in terms of understanding the nitty-gritty of the business and also to learn the skills of convincing and motivating potential customers to invest with them only. Thus it would be prudent on part of the company to provide some sort of brief training sessions that will not only help the agents to gain better skills to work with but will also help to develop emotional bonding with the company as they shall be able to associate more with them.
The Company must also keep in touch with all its agents at regular intervals even though they have not till date been able to contribute much business. Such links can be made through phone calls, sms or even by sending e-mails that are extremely cost-effective. Sending greetings on festive occasions, timely informing about the changes in the rate of interest, incentive plans, contests etc. will not only make them to feel associated with the company but shall also indirectly motivate them to contribute into the business as its widely common that repetitive reminders invariably pushes the individual to work !
The company should also aim to create hassle-free minimal levels of documentation that does not make the entire registration process cumbersome
for the end-customers. And at the same time it must also train its agents about the need behind making all such documentation so that they can explain the same to their customers who should feel that all such efforts are made with genuine intentions to serve them in a better way.
The Company can also render help to its newly recruited agents by giving them a small database to contact some of the potential customers. This step shall help them in their initial tenure of establishment which shall be helpful to the company in the long run.
A majority section feel that any company to succeed in this particular business of home loans there are 3 important criteria‟s can must be considered and a tremendous growth in the business is likely to follow: 1. RATE OF INTEREST 2. COMMISSION RATES 3. QUICK SERVICES It‟s considered that if the above mentioned criteria are fulfilled the company need not focus upon the advertisement and visibility concepts, however due to presence of stiff competitive players in the market and all of the companies aim to improve their image focusing on the same above criteria, the company would then invariably have to work towards improving their visibility factor. In order to promote its business, the company can conduct camps in developing areas where the company representatives can convince and educate the masses about the benefits of home loan products. Now-a-days, FM Radios have also gained importance as a medium of advertisements and is also quite cost effective with respect to the other mediums like – television and newspaper adds. So what ideally can be done is- in some educative radio show, one of the company officials can conduct a small interview
over the show explaining the product features and their competitive edge over other companies. Another important source that is quite cost-effective and another good medium of advertisement is MOBILE-SMS i.e. a bulk list of people can be sent sms featuring the company‟s product and the applicable rates. Since the company‟s prospective target market can be salaried professionals from institutions like- schools, bank offices, private sectors etc they can be offered with special rebates if possible in processing/administration fees. Complimentaries to the high performing agents & greetings to important customers on auspicious occasions, which will also contribute in creating emotional bonding between them. Running an organization without adequate market needs, information reduces business decision in guesswork. Most business fall dose so because they have not obtained, analyzed or acted upon market information that is readily available if efforts are taken to gather invaluable information. No matter whatever industry is whether it is manufacturing or service industry all need marketing plan to cover the product specification and its relation to customer needs and requirements , handling interest and EMI, documentation requirements, segmentation. each of these requires information from the market to serve its customers in the efficient manner and get a competitive edge: The procedure for getting loan is complicated; it is a difficult to have a complete understanding at a glance. Therefore HDFC should do something in this direction. to mask this process simple by handling all complication itself. All time many files of customer are unnecessarily pending. They should check the files time to time and know the reason of the pending work. this will help firm to cut down the waiting of loan disbursement. the channel for approval of loan at times become too long that can be cut down by HDFC.
The rate of interest should be kept some percent less than other banks to keep the market alive.
Second loans for a customer should be encouraged by HDFC because mainly people had taken their first loan from there department.
Handling of customer in proper manner and giving good service should be a prime objective of an organization. Existing customers should also made aware of various other loans that they can avail like top-up loan etc. Advertising awareness should be increased by creating ads onto electronic media on popular channels and the print media like newspapers and even magazines.
Organization needs to stress upon hording and its ads should be published in the newspaper. Colanders should replace the expenditure on posters. Colanders are more practical and useful.
CONCLUSION
Many housing finance companies & commercial banks have been emerged with the objective of getting business by granting home loans to the eligible borrowers; while HDFC Ltd. has been the market leader in this portfolio with an outstanding network, services, and products and is recognised as a specialised mortgage company in India. Thus in order to retain its leadership and presence in the market which is intensively competitive from the major players, the company needs to understand, analyse it Strengths, Weakness, Opportunities, Threats of thyself and its competitors. The recommendations & suggestions made were purely based upon the survey carried out within the interests of HDFC Ltd. To conclude with, working as a management trainee for HDFC Ltd. was a great learning experience, in fact it was a right blend of fun and learning. I have now got a good insight about the operation of business of home loans in India by both banking and non-banking sectors.
APPENDIX
NAMEADDRESSPHONE NO.-
1. Do you go for home loans through financial institution?
A. YES B. NO
2) Do you know about HDFC Home Loans? A. YES B. NO
3) If yes, how did you come to know about HDFC Home LoansA. ADVERTISEMENT B. WEB SITE C. FRIENDS D. OTHERS
4) For which purpose you want to take housing Loans?
A. Construction B. Land Purchase C. Improvement
5) Which institution do you refer?
HDFC LIC IDBI AXIS SBI OTHERS -
-
6. If referred HDFC? Satisfied with service? a) YES b) NO -
7) What’s your monthly income? a) 10,000 – 20,000 b) 20,000 – 30,000 c) 30,000 – 40,000 d) More than that 40,000 –
8) Do you have any property or immovable assets for giving security of the loan? a) Yes (Specify them) b) No
9)
Do you have any other loan, PL/Vehicle loan?
a) Yes
b) No 10) If yes, what loan Pls, specify in which Bank you have taken? a) SBI c) BOB b) d) PNB any other
BIBLIOGRAPHY
WEBSITES
http:/ /www sbihomeloans.com www.wikipedia.com www.google.com http:/ /www pnbhomeloans.com http:/ /www icicihomeloans.com http:/ /www lichomeloans.com http:/ /www indiahousing.com HDFC WEBSITES (WWW.HDFC.COM)
OTHER SOURCES:-
1. HDFC HOUSING BROCHURES 2. FROM HDFC STAFF 3. HDFC ANNUAL REPORT
Submitted by: Vijay singh choudhary BBA – III Year
PARISHKAR COLLEGE OF GLOBAL EXC. Near Technology Park, Shipra Path, Mansarover, Jaipur
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PARISHKAR COLLEGE OF GLOBAL EXC. Near Technology Park, Shipra Path, Mansarover, Jaipur Acknowledgement
As Per the curriculum of 4th semester of MBA, we have to undergone through a detailed project study. I wish to express my gratitude to Rajasthan Technical University for giving me an opportunity to be a part of such kind of learning experience, which will surely enhance my knowledge and skills.
I would like to express my gratitude for the people who were part of this Project Report, directly or indirectly people who gave unending support right from the stage the idea was conceived.
In particular, I would like to thank Mr. M.K. Khandelwal (I/A A/c’s), Mr. Y Upadhyay (COA W&M), Mr. P.N. Sharma (AO Cash) and Mr. Rakesh Sharma (AO A/c’s) Rajasthan Rajya Vidhyut Utpadan Nigam Ltd., Jaipur for helping me to decide the topic and providing their full cooperation in completing this report.
I would also like to thank Mr. Amish Dugar and Ms. Sangeeta Choudhary for the preparation of the report and helping me achieve the best of my potential. Then I would like to thank all my friends for her unending support for the report.
I am also greatly thankful to Mr. R.K. Agarwal for giving us the opportunity to get practical exposure of the real business world and working in the public company.
--------- KAPIL GUPTA
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PREFACE
This project is prepared on the basis of awareness of HDFC Home Loans in market and understanding the requirement of proper guidance to customers. Housing is the big Industry in the world and it is constantly changing. Housing has played a major role world over in increasing productivity across a wide. Estimates suggest that the industry provides employment to ten percent of the total work force of the country. This sector is highly fragmented and is dominated by the presence of a large number of traditional formats. HDFC offers loans for homes-for buying or constructing your home, refinance a home loan availed from other institutions or even to extend or improve your existing home. This project helps me to better understanding of market and financial products and their benefits. Now I am feeling the great pleasure in delivering this project because of a better skill of handling the situation and customer understanding. As I submit this Report I am sure that the orientation of the research that has been conducted is correct and the findings of it will prove to be quite beneficial to the organization.
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Executive summary
The project study is a part of the curriculum of the Rajasthan Technical University, Kota for Master of Business Administration Course. It is aimed to provide the student an industrial exposure. Students are expected to learn the technical aspects of theoretical studies applied in the organizations. This report is the outcome of project held at HDFC LTD, JAIPUR. I ANOOP VERMA undertook this project as a part of my college curriculum. This project was an immense learning to me in terms of forming a practical as well as theoretical base.. We are proud to work under MR. ABHISHEK DEORA (REGIONAL MANAGER - HDFC GUJRAT, PUNJAB and RAJASTHAN). I affirm that the result of this report is independent and true to the best of my knowledge I also believe that this project help me a lot in proving my efficiency and professional skill which would make my future bright in corporate sector. The report focuses on HDFC LTD and its efficacies in the housing loan sectors. The report also focuses on COMPARATIVE STUDY OF HOUSING FINANCE COMPANIES WITH HDFC LIMITED.
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Cover Page Certificate of the Company Preface Acknowledgement Executive summary CONTENTS 1. Introduction to the Industry. 2. Introduction to the company. 3. Research methodology
Title of the Study Duration of the study Objective of the Study Type of the Study Sample size Scope of the Study Limitation of the study
4. Fact and finding. 5. Analysis and interpretations. 6. SWOT analysis. 7. Conclusions. 8. Recommendation and Suggestions. 9. Appendix. 10.Bibliography.
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INTRODUCTION TO THE INDUSTRY
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INTRODUCTION TO THE INDUSTRY
HOUSING FINANCE IN INDIA
Housing finance industry is recognized as a vital arm of the financial services due to its potential in tapping more business & also to overcome the current housing shortage of the nation .In this mode the competition among the financial institutions have been increased since the banks realized that home loans form more stable assets than commercial loans The housing finance industry is getting increasingly commoditised. Competition within the sector is ensuring that players offer consumers flexibility and features to choose from. Features such as adjustable rate plans, lower processing fees, monthly rest, low interest rates, low EMI, lower margin money, no pre-payment penalty have become common across the industry. HDFC is the oldest private housing finance company (HFC) in India. It has developed from a predominantly local institution to a joint-stock financing institution majority owned by international shareholders. HDFC belongs to the 10 largest listed corporations in India. Moreover, Housing finance is the main business area of the HDFC group. Thus in the present booming & volatile scenario it is often required to assess the strengths, weakness, threats & opportunities form the internal & external environments for HDFC Ltd in a developing city like Jaipur. A detailed SWOT analysis is to be carried and risks are quantified, and remedial measures are to be taken out to outsmart the major players in this field to increase their market share in jaipur In May 1998 the national housing policy was announced. The policy reflected the thirst, the government wished to give the housing sector and pointed out that housing was not merely consumption expenditure but also productive investment which would provide economic activity create base for attaining several national policy such as providing shelter and raising the quality of life. The national housing policy also envisaged that an impetus given to housing world stimulate economic activity through creation of substantial employed opportunities.
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A working group on housing sector finance has projected a storage of 71 million housing units by the turn of century and that the resources required by housing sector in the 10th five year plan. It would be of the order of 107350 crores. The organized sector account for only about 30 % of the total need of housing finance in the country. This includes the listed and unlisted housing finance companies. 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 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 manyears of direct employment and another 15 million man-years of indirect employment. Having identified housing as a priority area in the 11th Five Year Plan (2008-2013), the National Housing Policy has envisaged an investment target of Rs. 1,900 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.
PAST Housing situation
The total housing stock in the country was 148 million units in 1991, as compared with 116.7 million units in 1981. However, the usable housing stock was only 133.8 million units in 1991 and 101.5 million units in 1981. The usable housing stock rose by 31.9% during the period 1981-91. In comparison, the total number of households was 153.2 million in 1991 and 123.4 million in 1981. The number of households increased by 24% during the decade 198191. It has been estimated that the usable housing stock will grow by 23% during the period 1991-2001, and the households will grow by 16.5% during the same period.
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Thus, the usable housing stock is estimated to be around 264 million and the number of households around 278 million by the year 2010.
India continues to face the problem of a shortage of housing units in the country. The housing shortage was 23.3 million units in 1981, and it came down to 22.9 million in 1991. It is estimated that the shortage may come down to a level of 19.4 million units by the year 2001. While the growth rate in dwellings continues to be relatively lower in the rural areas, it has been showing an increasing trend in the urban areas, thereby indicating greater tendencies of urbanization. The current period has also been witnessing an increased influx of population from the rural to urban areas, leading to unorganized settlements due to which there has been tremendous pressure on the infrastructure and services available in the urban areas.
Housing Shortage
Housing shortage has been estimated on the basis of the number of households (including homeless households), available housing stock, acceptable housing stock, aspects of congestion and overcrowding. The population census provides background information on households, including homeless households, housing stock and acceptable housing stock (material of wall and roof). Overcrowding and congestion is assessed on the basis of number of living rooms in the dwelling unit, number of members and number of married couples in the households. The National Building Organisation has estimated urban housing needs (backlog) of 8.23 million units as of March 1, 1991. Using the regression growth rates, the present housing shortage has been estimated at 20.41 million.
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Recent trends in the Housing Finance Sector
Housing is one of the fundamental demands for living. Access to acceptable housing is one among the elementary human needs as well as one of the keys to peace and happiness. In every country, resolving housing issues has political, social and economic significance. Housing is a significant engine for growth and development of the economy. Home to roughly 1.1 billion people, India is the second most populous country after China and is expected to overtake it by 2030; roughly one in every sixth person on earth lives in India. The growth rate of the population is still rapid which will result in an unfavorable landman ratio reflecting high density in pockets. The disproportionate urbanization leads to steady migration of people from rural to urban areas at the aggregate level. This in turn resulted in a huge demand on the infrastructure of the cities, besides causing pressure on the land. It is evident from Table 1 that one in every three Indians is under the age of 15, and only one in three is older than 35. When comparing with other countries such as China, USA and Japan, India has the unique advantage of a higher level of middle aged and lower level of aged people. Indian GDP has grown at 6% for the past 10 years and 8% for the last three years and interestingly the service sector accounts for 60% of GDP. India has the lowest figure for house mortgages as a percentage of GDP. Amongst the Asian countries, Hong Kong has the highest ratio, followed by Taiwan, Malaysia, Thailand and Korea. It could be inferred from Exhibit 1 that the consumption pattern amongst the Indian population is expected to change 2013. The strivers are less but aspirers and rich are
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significant higher compared to 2010. The housing finance sector in India has undergone unprecedented change over the past two decades.
The housing finance requirements in the country are catered for by the following types of institutions: * Scheduled Commercial Banks * Scheduled Cooperative Banks * Regional Rural Banks * Agriculture and Rural Development Banks * Housing Finance Companies * State Level Apex Co-operative Housing * Finance Societies Housing finance as a financial service is relatively young in India. The growth in housing and housing finance activities in recent years reflect the buoyant state of the housing finance market in India. The real estate sector is the second largest employment generator in the country. The government's support to housing had traditionally been centralised and directed through the State Housing Boards and Development Authorities.
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In 2009, the National Housing Bank (NHB) was established as a 100% subsidiary of the Reserve Bank of India, (the central bank of the country), to promote housing finance through a refinance mechanism to banks, housing finance companies (HFCs) and other institutions and also to function as the supervisory and regulatory body for housing finance firms. Currently there are 29 HFCs approved for refinance assistance from NHB. Although commercial banks were the largest mobiliser of savings in the country, traditionally banks were rather reluctant to lend for housing as they preferred financing the working capital needs of the industry. Several banks had set up housing finance subsidiaries which functioned as independent units with little support or interest from their parent bank.
Growth Trends
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The lower interest rate regime, rising disposable incomes, stable property prices and fiscal incentives made housing finance attractive business for commercial banks. Further, housing finance traditionally has been characterized by low nonperforming assets (NPAs) and given the vast demand for housing loans, almost all the major commercial banks plunged into the business of housing finance. The robust growth
During the last decade has been triggered by a number of factors, some of which are listed below: The prime property prices in India is likely to increase by 12-15% in 2010. Giving a global view on the performance of prime residential property markets with a focus on the key regions in the Asian Pacific property markets, the Mumbai and New Delhi realty markets held a significant level of promise for potential investors. There are growing prime markets in every city of India. But, South Mumbai and South New Delhi are the markets, which are the highest in terms of prices followed by Bangalore, Chennai and Hyderabad. The housing industry in India has grown on the back of fast developing housing segment. In fact, it is the most dynamic segment of the real estate industry compared to commercial and other property development segments. With the entry of corporate houses like DLF, Parsvnath and Omaxe, easy finance options from financial institutions and government support, the housing industry in India has rapidly grown over the past few years. The housing construction industry is poised for tremendous growth in coming years in the backdrop of large population base, rising income level, increasing demand for housing units, fast changing rural housing landscape. In addition, the housing construction industry is expected to overtake other industrial sectors in terms of contribution to GDP growth in the next few years. Although the Indian housing industry will see slowdown in 2009 due to after effects of global financial crisis, it is anticipated to
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attain earlier growth trajectory by the end of 2010 on account of precautionary measures.
SBI is the Biggest Player in the Home Loan Sector
With the teaser rate tenure coming to an end, it is time to gather the market share earned by the different players during the reign. Of the total amount of Rs. 45000 crore lent as cheap loan, SBI seems to have gathered the biggest chunk of the pie by sanctioning a colossal 67% of the total loan amount offered during 2009. The trump card used by the banking sector this year has been the teaser home loan rates. SBI has lent a prodigious amount of Rs. 30,000 crore this year as a part of the teaser loan regime. HDFC has secured a distant second position with a total sanction of Rs. 9,000 to Rs. 9,600 crore under the home loan segment. Teaser loans from other banks however did not receive such good response. While Bank of India could sanction only Rs. 289 crore in a time frame of seven months, Punjab National Bank, IDBI Bank and Union Bank disbursed nearly Rs. 1,050 crore, Rs. 1,500 crore and Rs. 1,600 crore respectively over a time span of six months. Many banks had stopped the teaser rate regime after the RBI announced a hike in the cash reserve ratio by 75 basis points. Despite the varied response received by various banks on sanctions, all banks seem to be happy by the results of teaser rates.
Fund Raising for Housing Finance Institutions and govt. step
The staggering dimension of the housing storage in the country, urban as well as rural can never be solved by devising ad-hoc solutions. Long term goals and strategies are needed to solve this eternal problem. In fact a specialised financial institution with dedicated funds for housing development is the need of the hour.
In India the government must create a National Housing Fund on top priority basis. The
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government, through National Housing Bank, Should create such a dedicated fund for the development of housing stock in the country. Even a fraction of amount from the turnover of big public sector organisations like LIC, ONGC and the likes can bring about a sea change on front. Corporate India contribute to the corpus of the national housing fund. Millions upon millions of home seekers are fed up with slogans like, “shelter for all by the year so. We can also adopt the Singapore model to create funds for housing for tapping provident funds and other such avenues. A tiny percentage from the various taxes the government collects, can also be invested for creating the fund; which can fund the development of housing to different groups, especially the low income and the middle classes , on reasonable terms for a variety of shelter options. The task force of the planning commission on shelter must take the lead in this matter and evolve the clear cut strategy in consultation with National Housing Bank. The fund can also be enhanced by the government sponsored Real Estate Mutual Funds. The housing front is most vital for national economy and human settlement. National Housing Policy has clearly admitted this fact and has stressed the need for all out efforts for the development of the housing stock in the country. Shelter concerns all and hence deserves orchestrated and dedicated efforts form the government through its various organisations. A centralised housing fund is acute to build the nation .
Market Profile
The Indian housing finance sector is crowded with players of all sizes and nature: government organisations, insurance companies, banks, housing finance companies and co-operative organisations like NHB. Major players in the industry are HDFC, LIC housing finance, Dewan housing, homes, SBI home finance and Gujarat rural housing. The youngest entrant into the industry, which is penetrating rapidly, is ICICI. Interestingly, both can Fin homes limited and its parent Canara Bank are in to housing
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finance. It is the same with quite a few banks , for example, SBI and SBI home finance limited, Bank of Baroda and BOB finance, Vyasa bank housing . Although HDFC and ICICI have their banking arms, they compete with each other in t housing loans. The industry comprises of nearly 383 housing finance companies although disbursements from only the leading 29 institutions are eligible for re-finance from national housing bank ,which is the regulatory body of these companies. These housing finance companies (HFCs) constitute nearly 95% of the total disbursement by the industry.
Fund Raising
The primary sources of funds for Housing Finance Companies include NHB refinance schemes, public deposits, debentures, private placement of bonds and borrowing from banks and financial institution. Efficient financial management has a key role to play in the housing finance industry. The various sources of finance are explained below. As an apex refinance institution, the principal focus of NHBs programmes is to generate large scale of involvement of various primary lending institutions to serve as dedicated outlets for assistance to the housing sector. These institutions include schedule banks (both commercial and co-operative), regional rural banks and the state apex cooperative housing finance societies. NHB has formulated schemes to support all these agencies and help them to cater to the housing needs of the community at large. NHB also under takes direct financing in respect of government sponsored bodies/institutions for projects only. The refinance assistance provided by NHB to HFCs has enabled them to increase their operations and cover a larger section of the population. The Housing loan portfolios of NHB approved HFCs have witnessed significant growth. For instance, the public
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deposits of the NHB approved HFCs increased from Rs 12196.03 crore, as on March 31, 2009 to Rs 11204.30 crore, as on Jan 31, 2010 The need for easy flow of institutional credit for housing in rural areas has been considered necessary for some time. This formed the background for the announcement of a separate scheme for financial rural housing by the government of India. NHB formulated the Swarna Jayanti Rural housing finance scheme which was launched in August 1997. The scheme envisaged provision of institutional credit to individuals desirous of constructing or acquiring new dwelling units and for extension or repairs of existing units, in the rural areas of the country. In view of a flexible approach needed to modulate the options according to the shelter needs of different sections of the population, the terms of the loan under the scheme were suitably framed and operated through the banking sector, co-operative sector institutions and the HFCs, which possessed a substantial geographic coverage, functional reach and necessary infrastructure to ensure its effective operation. In this context , conscious about the long term nature of housing finance, sufficient backup was in-built by way of refinance facility from NHB to all eligible institutions in order to supplement their efforts. The targets of financing 50000 and 100000 dwelling units during the first two years of operation of the scheme were successfully achieved by the various institutions.
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Interest Rate scheme. The National housing Bank, in its new liberalized refinance scheme (LRS), lowered the interest rates for the best rated housing finance companies (HCFs) and scheduled banks (SBI) by almost .200 basis points across all the loan slabs, besides introducing floating interest rates. NHB also introduced an internal credit rating for the HFCs in order to determine the company‟s eligibility, exposure, security and interest rate on refinance assistance. The scheme provides refinance assistance with respect to prospective housing loans to be disbursed by HFCs and banks in addition to the loans already disbursed . It also offers reduced interest rates for shorter times. On the other hand, the scheme allows HFCs and banks to switch over from fixed to floating rate of interest and viceversa on payment of the requisite fee. Apart from this , the repayment levy has also been reduced. The HCFs ,which have tapped the markets, include HDFC Ltd and ICICI home finance ltd. more are expected to tap the market during the coming months, some could for repeat issues. The way financial sector has evolved over the last few years has forced HFCs to look for changes to survive and grow. Boundaries between different sections of the financial sector have gradually disappeared. Be it a bank, development institution, HFC or NBFC, there appears to be no area of financial intermediation that is taboo. Retail loans, asset management companies, banking and insurance are all areas where a single group operates under a variety of companies. It is just varying regulatory requirements that have different companies under the same umbrella carrying on different activities. The same trend in pushing more stand alone HFCs to look at other areas of financial intermediation to leverage on the name and data base coming from the housing loan business, HFCs are likely to see a gradual growth in the importance of non-housing business in their earnings over the next few years. While housing finance is likely to
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remain the core area of the business, revenue from the other lines of financing should pay a more important role in stand-alone HFCs such as HDFC. The disappearing differential in interest rates between different categories of HFCs is almost inevitably going to lead a squeeze on the interest spreads of smaller HFCs because they will not be able to raise resources at as low cost as HDFC and ICICI home finance. Housing finance is likely to remain a low risk, low margin business that records fast growth in the foreseeable future. The market is likely to get a little more broad based in the sense that HDFCs market share may be eaten into by others such as ICICI. But the industry will continue to be dominated by a handful of big players. HFCs associated with NBFCs and the housing finance division of banks may carve their own niches, but there is unlikely to be radical change in the basic structure of the sector for some time.
PROCEDURE OF DISTRIBUTION OF LOANS BY HFC'S
Almost all housing finance companies, which provide long term finance for construction or purchase of houses in India for residential purpose comes under the preview of NHB. So, all the lending of these companies should be sound, healthy and must satisfy all the norms, guidelines and direction of NHB. Any proposal is considered only if the applicant satisfies all the following conditions stipulated by NHB as test of eligibility. Broadly the eligibility criteria are as follows: The loan should be directed to an individual or group of individuals. A co applicant, if there is any, either the spouse or the applicant or son or brother or daughter, co-applicant may be a co-owner of property. minor cannot be a co applicant. Residential active life of the applicant reckoned at 60 years should cover the repayment period. Appraisal
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Having decided upon the eligibility, the application is expected with the processing fees along with the necessary document. The third step consists of appraisal of proposal. The appraisal is broadly divided as 1 credit appraisal 2 legal appraisals 3 technical appraisals
Credit appraisal The main objective of this appraisal is to access the applicant's repayment capacity over the period. The main point for consideration is income age academic background assets and liabilities servicing records in respect of other institutional burrowing saving history number of departments Income and expenditure pattern.
Legal appraisals In legal appraisal all the documents like deeds, revenue receipts, encumbrance search certificates for the past 30 years are verified by an experience lawyer to confirm that the withholder can create an equitable mortgage in favor of housing finance company by simple deposits of title deeds.
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Technical appraisals The technical officers will firstly verify the original documents and counter check upon all the furnished information, records approval, clearance, certificates and others. The applicants should submit all the document relating to guarantees , collateral securities, the need documents differ from case to case depending upon, whether the house being purchased and, if so from whom or whether it is a self construction.
Following document required:Layout plan Approval plan no. encumbrance certificate Commencement certificate, if applicable A detail estimate of cost of production NOC for mortgage of said property in case purchase is from development authority or any govt. allotted scheme.
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Eligibility 1.
Salaried Employee a) Any individual who is in permanent service in Government reputed company? b) c) Clubbing of income of wife and husband is permitted. Applicant in all the cases should be above 18 years of age at the time of loan and up to the age of superannuation.
2.
Professionals a) Professionals Architects, (Doctors, Chartered Engineers, Dentists, Cost
Accountants,
Accountants, Company Secretary, Management Consultant) can apply. b) c) Clubbing of income of husband and wife is permitted. Applicant in all the cases should be above 18 years of age at the time of loan and up to 70 years or less at the time of loan maturity.
3.
Self Employed Individuals a) b) c) Self employed individuals can only apply. Clubbing of income is not permitted. Applicant in all the cases should be above 18 years of age at the time of loan and up to 70 years or less at the time of loan maturity.
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INTRODUCTION TO THE COMPANY
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INTRODUCTION TO THE INDUSTRY
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 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 30 years. The primary 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. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. HDFC is a professionally managed organisation 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. HDFC selected as the 'Top Indian Company in FIs / NBFCs / Financial Services sector' for the Dun & Bradstreet – Rolta Corporate Awards 2009.
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Company History and Milestone
1977 On October 17th HDFC was incorporated as a Public Limited Company. HDFC was promoted by the Industrial Credit and Investment Corporation of India. The company got the certificated of commencement of Business on 3rd December. HDFC provides housing finance in India. The corporation provides long term housing loans mainly to low and middle income individuals and corporate bodies. It has also provided a modest amount of construction finance to housing developers. 1986-87.
1986- During the period corporation issued, IV & Vth series of bonds for Rs.10 crores and Rs. 5 crores respectively. During the same year corporation started offering a new service called Advanced Processing Facility (APF) under which property developers who are undertaking a residential project can finance individuals buying a dwelling unit in their project. 5,00,000 Rights equity shares issued at par in prop. 1:2. Subsequently, another 5,00,000 No. of equity shares were offered a par for public subscription.
1987 - During the year HDFC issued its New Corporate Bonds - Series I for Rs. 20 crores. Also VI, VII and VIII series bonds for an aggregate amount of Rs. 20 crores were issued during the year.
1988- During the year National Housing Bank was set up as an apex body to ensure orderly growth and functioning of housing finance system in India.Two new facilities viz., the Telescopic Loan Plan and Short Term Bridging Loan were introduced mainly for younger borrowers.HDFC entered into an arrangement with the Bank of India whereby HDFC was to receive fixed rate counterpart rupee funds in lieu of the USdollars deposited with Bank of India in New York. The Home Loans Account scheme was to be launched in co-operation with scheduled banks with effect from July 1, 1989.The Centre for Housing Finance unit proposed to design specific programme contents to suit different purposes and institutions.
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1989- During the year Krditanstalt Fur Wiederauflau of Germany, sectioned A line of credit of DM 25 million to fund loans disbursed by HDFC for low cost housing project directed to economically weaker section households. Two new types of loans namely, Home Improvement Loans (HIL) and Home Extension Loans (HEL) were launched.
1990- During November, the company issued 13, 77,500 equity shares of Rs.100 each at a premium of Rs.85 per share to the public. And also 72,500 shares were reserved for employees of the company. Simultaneously, the corporation offered 10,00,000
equity shares of Rs. 100 each at a premium of Rs. 75 per share to the then existing shareholders in proportion 1:2. The Company allotted 25,00,000 No. of equity shares (both rights and public offer). The Company negotiated a borrowing of US 100 million from IFC. - To commemorate the beginning of the second decade the HDFC, it was proposed to establish a shelter assistance fund to encourage and support activities related to shelter problems, in general and to the needs of the poorer and economically weak sections in particular. - Forfeiture on 970 No. of equity shares annulled. Issued 14,50,000 No. of equity shares (prem. Rs. 85 per share) to the public and 10,50,000 shares (prem. Rs 75 per share) as rights in December.
1992 - 23,62,500 No. of equity shares allotted on conversion of `B' part of FCD.
1993- During the year, the Corporation launched a new deposit product Easy Way Savings, a unique product providing households with flexible maturity choice as well as saving profile. During the year, the Corporation signed a MOU with General Electric Corporation of USA, to promote a new joint venture for understanding the business of Consumer finance. HDFC and General Electric Corporation, have an equity stake of Rs. 15 crores each.
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1994 - The Corporation promoted the educational loan facility to provide financial support to students pursuing higher education. As a joint venture in the GE capital (USA) HDFC promoted a consumer finance company in March for provision of range of financial product. 9,00,000 No. of equity shares of Rs 100 each allotted to ICICI and UTI on private placement basis.
1995 - During the year, the Corporation undertook to set up its first Overseas branch office in Dubai.
1996 - During the year corporation introduced Flexi-Rate Individual Housing Loan. During March, HDFC launched India‟s first captive auto finance company named Maruti Countrywide Auto Financial Services Ltd., with the objective of exclusively financing Maruti Vehicles in India. This is joint venture between DFC, Maruthi Udyog & GE Capital India.
1997 - 50,00,000 Cumulative Redeemable Non-convertible pref. shares redeemed during the year. - Government of Rajasthan, Infrastructure Leasing and Finance Services and Housing Development Finance Corporation has signed a memorandum of understanding in Mumbai to set up Project Development Corporation. The Housing Development Finance Corporation (HDFC), India's premier housing finance institution, has stepped up its programme to mobilize deposits in Goa, by setting up an organised network of agents as part of its efforts to offer safe and attractive deposit options. The Housing Development Finance Corporation (HDFC) has tied up with the Rajasthan government to set up a new company.
1998 - The Housing Development and Finance Corporation (HDFC) is in talks with an Asian offshore institutional investor for setting up a joint venture company in anticipation of the government opening up the real estate sector for foreign direct investment (FDI).
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The Housing Development Corporation (HDFC), one of India's leading housing finance companies, floated its maiden debenture issue through the private placement route on 14th July.
1999 - HDFC will enter into a memorandum of understanding for strategic business collaboration with Chase Manhattan bank.Housing Development Finance Corporation (HDFC) and Chase Manhattan have entered into an agreement where, in the event of the two funds
2000 - The Company and State Bank of India would be entering into a MOU to set up a Credit Information Bureau jointly in technical and financial collaboration with Dun & Bradstreet Information Services India Pvt. Ltd. and Trans Union International Inc. the leading providers of Business and Credit Information services. The Company has acquired the housing finance business of Gujarat Ambuja Cement Ltd for a total consideration of Rs. 60 crores. HDFC have hiked their housing loan rates by 50 basis points.
2001- The UB group has tied up with Housing Development Finance Corporation (HDFC) and Infrastructure Leasing and Finance Services (IL & FS) to raise Rs.60 crore to part fund the acquisition of Associated Breweries & Distillers (ABD).
2002 - RVS Rao reappointed as Executive Director of Housing Development Finance Corporation.
2003 -Housing Development Finance Corporation (HDFC) has asked chairman Deepak Parekh to continue for three more years with effect from March 03. The service of Renu S Karnad, executive director, has also been extended for another five years with effect from March 2003. Besides, the corporation is revising upwards the remuneration package of its top management
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2004 to 2010 -Becomes the first private corporate to raise Rs 1,000 crore debt in a single tranche and in a single option The Company has received disclosures from Mr. D S Parekh – Chairman and Mr Susir Kumar - Company Secretary of their acquisitions.
Forbes Group ties up with HDFC to set up media firm. Housing Development Finance Corporation (HDFC) may join hands with Apollo Hospitals to set up two-three superspecialty hospitals in Mumbai quarter ended December 31, 2009, the bank posted net revenues of RS 3076.9 Crores (12.4%high)
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AWARD IN 2010
Euro money private Banking And wealth management poll 2010 Financial Insights Innovation Awards 2010 Global Finance Award 2 Banking Technology Awards 2009 SPJIMR Marketing Impact Awards (SMIA) 2010
1) Best local Bank in India (second year in a row) 2) Best Private Bank service overall (moved up from no.2 last year
Innovation in Branch Operations - Server Consolidation Project
Best Trade Finance Provider in India for 2010 1) Best Risk Management Initiative and 2) Best Use of Business Intelligence. 2nd Prize
Business Today Listed in top 10 Best Employers in the country Best Employer Survey
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Sr. Name of Director No.
Category*
No. of Directorship**
No. of Committees*** Member 7 1 0 9 1 1 7 6 10 0 2 2 Chairperson 5 1 0 5 1 1 0 1 4 0 0 2
1 2 3 4 5 6 7 8 9
Mr. Deepak S. Parikh Mr. Keshub Mahindra Mr. Shirish B. Patel Mr. B. S. Mehta Mr. D. M. Sukthankar Mr. D. N. Ghosh Dr. S. A. Dave Dr. Ram S. Tarneja Mr. N. M. Munjee
Executive Chairman Independent Independent Independent Independent Independent Independent Independent Independent Independent Nonexecutive Independent+ Joint Managing Director Vice Chairman & M.D
12 5 1 14 4 4 11 11 13 0 9 5
10 Dr. Bimal Jalan 11 Dr. J. J. Irani 12 Mr. D. M. Satwalekar
13 Ms. Renu Sud Karnad
13
5
2
14 Mr. K. M. Mistry
12
9
3
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Mr Deepak Parekh, Chairman, HDFC, and Mr K. M. Mistry, Managing Director
VISION
To be the best housing finance company in the country.
MISSION
Provide secured housing finance at the affordable cost, maximizing shareholders value with high customer sensitivity.
VALUES
Transformation to a knowledge organization. The company is committed to the growing use and sharing of knowledge as a driver of business success. Sense of ownership At the company, they believe that superior performance comes from a feeling of ownership, and ownership comes from empowerment. Quality and autonomy in operation The company is committed to delegation in decision making whereby relevant initiatives can be taken closet to the customer. Fair and transparent business practices
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Ethics and transparency form the basis of the business of HDFC housing finance. On the macro level, the company complies with all the laws of the lands in
which it operates, on the micro level; the company respects the dignity of each individual.
STRUCTURE
The original structure of HDFC Ltd. has the shape of an inverted pyramid. The company‟s structure starts with the appraiser, the person in touch with the consumers and thus the most important person. Organisation is driven towards supporting frontrunner. The other department of HDFC Ltd. are technical marketing, recovery department, etc. The base of inverted pyramid is the deputy General Manager of that business unit. The company has done away with structural hierarchy, So the front-runner doesn‟t need to seek permission to interact with the CEO of the company. The flow of information is in both ways vertical and horizontal which enriches every one about development taking place in company. The activities of the different functional department are directed in such a way that it meets the goal of the organisation. The various activities of the company are well coordinated, organized and directed at the same time integrated too. Decision-making has been made at the headquarter level.
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STRUCTURE OF A HEAD-QUARTER OF HDFC LTD. IN STATE
APPRAISAL
DISBURSEMENT OFFICER
FRONT LINE
PROCESSING HUB
TECHNICAL
ACCOUNTS
OPERATIONS
MARKETING
RECOVERY
DEPUTY GENREAL MANAGER
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Funding
Construction
Purchase
Constructed Property
Purchase and Construction
Take over or Balance transfer 80%
85% 80% 85% funding 85% funding funding funding 85 In case of construction HDFC can give 85% funding of the estimate.
85% funding 80% funding
85% funding 85% of the In case of take over HDFC do the funding of 80%funding market value. 80% funding
Mode of Payment
HDFC accept only Post dated Cheques. List of Caution (Negative) Profiles According to the HDFC
STD booth operators. Video Parlour Operators. Cable Operators. Consultants w/o professional qualifications. Ayurvedic / Unani doctors.
Astrologers.
Owners and employees of small courier company
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Documents Required
Salaried Customers Self Employed Professionals Self Employed Businessman
Application form Application form with photograph with photograph Identity and Identity and Residence Proof Residence Proof
Application form with photograph
Identity and Residence Proof
Latest Salary-slip
Education Qualifications Certificate Education Qualifications Certificate and Proof of business existence and Proof of business existence Last 3 years Income Tax returns Business profile (self and business) Last 3 years Income Tax returns (self and business) Last 3 years Profit /Loss and Balance Sheet Last 6 months bank statements (self and business) Processing fee cheque
Form 16
Last 6 months bank Last 3 years Profit /Loss and statements Balance Sheet
Processing cheque
fee
Last 6 months bank statements
Processing fee cheque
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HDFC Ltd business strategy following: Increase market share in India‟s expanding banking industry by following a disciplined growth Strategy focusing on quality and not on quantity and delivering high quality customer service. and financial services
Leverage on technology platform and open scalable systems to deliver more products to more customers and to control operating costs. Disciplined credit risk management. Develop innovative products and services that attract the targeted customers and address inefficiencies in the Indian financial sector. Continue to develop products and services that reduce bank‟s cost of funds. Focus on high earnings growth with low volatility.
ABOUT THE BUSINESS OF HOME LOANS The home loans of the company have been categorised in to four types Loans to purchase/construct a house Loans for home extension Loans for home repairs/ renovations Loans for purchase of plot/land
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TYPES OF SCHEMES Home Improvement Loan
Features Purpose Tiling and flooring Internal and external painting Plumbing and electrical work Waterproofing and roofing Grills and aluminium windows Waterproofing on terrace Construction of underground/overhead water tank Paving of compound wall (with stone/tile/etc.) Bore well
Maximum loan
Existing Customer
100% of the cost of improvement
New Customer
85% of the cost of improvement
Maximum Term 15 years subject to your 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.
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Home Extension Loan
Features 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.
Maximum loan 85% of the cost of extension
Maximum Term 20 years subject to your 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 need not be co- owners.
Adjustable Rate Home Loa 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*.
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Short term bridging loan
Short-Term Bridging loan makes you realize your dream of buying a bigger and better home and gives you time to sell your 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. You can take the loan even if you are an existing customer of HDFC.
Features Maximum loan 90% of cost of new property
Maximum Term 2 years
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 need not be co-owners.
Fees
0.50% of the loan amount plus applicable service tax and cess
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Land Purchase Loan
Features Maximum loan 85% of cost of the land and based on the repayment capacity of the customer.
Maximum Term 15 years subject to your 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 need not be co-owners.
Adjustable Rate Home Loan 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 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.
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Security
Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary.
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Loans to Professionals for Non Residential Premises Loan
Purpose Purchase, Construction, Improvement of Office, Clinic
Eligible Doctors Chartered Accountants Lawyers Other self-employed professional
Maximum loan 85% of cost of the property
Maximum Term 10 years Improvement 5 years. Non residential premises maximum term is 15 years, NRP improvement remains 5 years.
Applicant and Co - Applicant to the loan Loans can be applied for either individually or jointly. Proposed owners of the property will have to be co-applicants. However, the co-applicants need not be coowners.
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Adjustable Rate Home Loan 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 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.
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Home Equity Loans
HDFC Home Equity Loans helps you Ancash the present market value of the property by taking a loan by mortgaging the property.
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
Property Residential Non Residential - Should be Fully Constructed - Should be a Freehold property having a clear and marketable title.
Adjustable 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 equity loan disbursed will not change. If the interest rate increases, the interest component in an EMI will increase and principal component will reduce resulting in an extension of term of the loan, and vice versa when
Maximum Loan - Existing Customers - Balance of 60% of the market value and present loan outstanding
New Customers - 50% 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 andRs.7.50 Lacs for Non Residential Property Repayment Capacity of the customer
HDFC Home Loan Advantage
Home Loan Counselling - Sharing of over 30 years of home loan experience We have been a part of a 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, we look forward to sharing with you and this service is absolutely free.
Our project approval facility provides our customers the comfort of purchasing properties from builders who have complied with all basic documentation.
Door Step Service We offer door step service. Please call HDFC Home Line call for our Sales Executive to assist you or get in touch with the HDFC Office near you.
We help you find your dream home You can buy, sell, lease residential or commercial properties through HDFC Realty.
Wide Product Range
We provide loans to meet all your requirements for you to make that house a 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 on Adjustable Rate, Fixed Rate.
Multiple Repayment Options-:
Step Up Repayment Facility Helps young executives take a much bigger loan today based on an increase in their future income, this helps executives buy a bigger home today!
Flexible Loan installments Plan 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 instalment reduces upon retirement of the earning parent.
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, to help customer save this interest, we have introduced a special facility of trance Based EMI. Customers can fix the installments they wish to pay till the property is ready. The minimum amount payable is the interest on the loan amount drawn. Anything over and 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 you a great opportunity to repay the loan faster by increasing the EMI.
Whenever you get an increment, increase in your disposable income or have lump sum funds for loan prepayment, you can benefit by: 1. Increase in EMI means faster loan repayment 2. Saving of interest because of faster loan repayment 3. You can invest lump sum funds rather than use it for loan prepayment. The return from the investments also gives you the comfort of paying the increased EMI..
Wide network of financing With over 200 offices, 90 outreach programs - HDFC is able to provide home loans in over 2400 locations in India. You can apply at your local HDFC office for properties in locations where we finance.
Post Disbursement Services Income tax Certificate to enable you to claim the tax benefits are sent to you. This service is absolutely free. Loan Repayment
ECS facility Post dated cheques - No charges for replacement of cheques Loan repayment at any HDFC offices
A new home brings with it new hopes, joys and emotions. At HDFC, we have shared new hopes, joys and emotions with over 32 Lakh customers. Every customer has a specific and unique concern. Having earned an experience of customized to provide you
30 years in home loans, Our home loan product is solutions for your unique concern.
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 your 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 need not be co owners.
Adjustable Rate Home Loan Loan under Adjustable Rate is linked to HDFC's Retail Prime Lending Rate (RPLR). The rate on your n 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.
Purpose of the Home Loan Flat, row house, bungalow from developers Existing freehold properties Properties in an existing or proposed co-operative housing society or apartment owner's association.
Fees
1% of the loan amount applied plus applicable services taxes
No Charges for Replacement of cheques Income Tax Certificates Accelerated Repayment Option
Redemption Charges
Adjustable Rate Home Loan [ARHL] If a prepayment is made within 3 years of the first disbursement*, under Adjustable Rate Home Loan (ARHL) option early redemption charges of 2% of the amount being prepaid is payable if the amount being repaid is more than 25% of the opening balance.
Fixed Rate Home Loan Redemption charges of 2% of the amount being prepaid is payable if the amount being repaid is more than 25% of the opening balance Incase of commercial refinance under both the FRHL and ARHL an early redemption charge of 2% is payable. You may be required to submit copies of your Bank Statements or any other documents that HDFC deems necessary to verify the source of prepayment.
TERMS AND CONDITIONS
Repayment
1 repayment period for home loans shall not exceed 20 years. 2 repayment periods of pre allotment bookings of housing loans shall not exceed 1.5 years. 3 repayment period of improvement/extension of existing property shall not exceed 10 years.
Security Equitable mortgage of the property to be financed, by way of deposit of title deeds. Where the individual building is build on plot of land, which is already charged, to the bank, there is no further requirement of collateral security.
Disbursement The loan will be disbursed in full or in suitable instalments, taking into account the requirement of funds and progress of construction, as assessed by the bank directly to seller/local development authority/supplier of material etc.
Processing Charges / Admission Fee Processing fee equivalent to 1% of the loan amount and in 0.5% in some products will be collected along with application
Penalty for early closure 2% of principal outstanding in case of takeover by other bank. The terms and condition mentioned above and elsewhere under the scheme are subject to modification from time to time solely at banks discretion.
Calculation of Loan Eligibility
This is the main part of the appraisal process, in which the CPA calculate the loan eligibility of the customer that whether he is able to get the loan amount he has applied for or not.
Calculation of loan amount eligibility includes following steps -:
STEP 1:STEP 2:STEP 3:STEP 4:STEP 5:STEP 6:STEP 7:-
Calculate the Net Income of the applicant. Find out his instalment to income ratio.. Find how much EMI the applicant can pay. Deduct any other EMI from the current eligible EMI. Find out for how many years the loan can be sanctioned. Find out the EMI per lacs according to the rate of interest. Divide the EMI per lacs from the Net EMI.
The amount thus obtained is the loan amount for which the applicant is eligible.
Example -: Suppose the net income of the applicant is 12000/- per month. He requiresRS.8, 00,000/- and suppose he is the salaried person. Then according to the instalment to income ratio slab he can pay 50% of his net salary as an EMI. And the rate of interest for the loan is 9.25%.
NET EMI
= =
50% of the Net Income Rs. 6000/he
Suppose ha has already taken a personal loan from another bank, in which is paying Rs. 1200 /- as a monthly instalment, in that condition
NET EMI payable = =
Rs. (6000-1200) Rs. 4800
From the EMI chart the EMI per lacs for the 20 years at ROI 9.25% is Rs. 916.
Loan amount
= =
4800 / 916 Rs. 5.24 lacs
So, the applicant is only eligible for 5 lacs 24 thousand as a loan.
Home Loan File Process
Flow Chart for Obtaining Housing Loan
Application with full requirement (cost of application Rs.)
Application Submitted to office with full requirement and processing fee
Personal discussion with the applicant Preliminary inspection of the property by office Sanction and issue of loan offer
Acceptance of loan offer terms and conditions and payment of administrative fee
Submission of original title deeds and title verification/investigation
Acceptance of title
Applicant's share of investment on the construction / purchase of property
Valuation of property
Compliance of requirements for disbursement and documentation
Release of loan cheque towards first instalment or first and final instalment.
RESEARCH METHODOLOGY
Research methodology
The study of housing finance companies is not an easy job. For such a study huge amount of secondary data was required, conducted personal interview with the credit managers. These interview„s were of great source of knowledge. Much information like HDFC organisation background and overview was collected through internet and official websites of the companies. Others thing like eligibility for taking loan, amount of loan, duration of loan, interest rate, EMI and other related forms and condition were given in the companies‟ brochures. Necessary information regarding housing finance as thing to be noted before taking loan and benefits of home loan, Calculating EMI and pre- EMI were collected through internet. In this report both type of data primary and secondary are used.
TITLE OF THE STUDY- A COMPARATIVE ANALYSIS OF HOUSING
FINANCE COMPANIES WITH HDFC LIMITED
DURATION OF THE PROJECT
This entire project is done during the session of IV semester by doing survey in Jaipur city with the 10 DAY‟ S
OBJECTIVE OF THE STUDY To understand, analyze the housing finance market. To collect & study the appropriate data through market survey in the form of questionnaire and interviews To carry out a detailed SWOT Analysis of HDFC Ltd. & its major competitors To know how the organization works.
To find out the different rate of interest of the banks and their other requirements.
To find out the services that attracts the customers most. To find out which home loan organization would the customers prefer in terms of services & other benefits. To know do we have a system capable of fulfilling their stated and implied needs which is constantly changing with time. To get more business
RESEARCH TYPE –
This research report is a descriptive research as it explains the concept of home loans and determines how the very concept is used effectively to provide fruitful results in order to increase the organizational productivity. It describes characteristics of population. This seeks to determine the answer as to Who, what, when, where and how questions. It is based on some previous findings of the nature of the stated problem.
Sample size and data collection method -: 50
Sampling involves any procedure that uses a 50 number of items or a portion of population to make a conclusion regarding the whole population.
PRIMARY DATA – Data is collected primarily through personal contact, meeting, interview and questionnaire with the concerned authority of the organization and investors‟. SECONDARY DATA – Data are collected through secondary modes such as various published data, reports, related books and websites.
Need of the study-:
Housing is a significant engine for growth and development of the economy. Housing and housing finance activities in India have witnessed tremendous growth over the years. Some of the factors that have led to this growth are - tax concessions to borrowers, increase in disposable income levels, changing age profile of the borrowers, easy availability of loans, nuclear families and urbanization, etc. The proportion of Mortgages to the Gross Domestic Product (GDP) ratio for India is much lower than that for developed countries.
In this context it is important to note that that the organized housing finance industry barely accounts for 30% of the home loans disbursed in the country. The major players in Indian housing finance industry are the Housing Finance Companies, Scheduled Commercial Banks, and Co-operative Banks. Out of these HDFC has been recognized as a specialised mortgage company in India which remains in the top slot over a few years. As it is operating in a highly competitive environment such as public sector banks and other organizations a competitive mapping is strictly required to assess its competitor‟s moves and act strategically to achieve its objective of providing adequate housing to urban & rural households.
Scope of the study-:
With the objective of assessing housing finance companies and its future growth potential, this survey comprises of seven respondents from various institutions. It addresses various issues such as interest rates, network, agents, commissions& incentives, marketing philosophies, volumes and business deals, asset management etc. with the help of such aids the top management can effectively figure out their strategies and lead in their business. A brief analysis is carried out on the data gathered on and is processed with tools such as SWOT analysis so as to assist in making and delivering better products & services, tapping new segments, increase in market penetration in this home loan section of jaipur reality.
Limitation of the study-:
The survey was confined to only certain parts of city, which Included DSA/ AGENTS and marketing, sales personnel. This is limited only for the few major competitors considering HDFC proposal and the inference cannot be drawn for the whole industry The questionnaire & interviews taken up focuses on questions which are up to interest of HDFC Ltd. Denial & restriction of access through some channels existed based upon the confidentiality of the matter Time Period of survey is very Limited The entire credibility and legibility of the data collected by primary & secondary channels solely depends on the knowledge of the interviewed person views, knowledge, web data etc.
COMPARATIVE ANALYSIS AMONG DIFFERENT BANKS
PRIVATE BANK 1. HDFC 2. LIC 3. ICICI 4. IDBI 5. BANK OF COMMERCE 6. OTHERS
NATIONALIZE BANKS 1. SBI 2. SBBJ 3. PNB 4. BANK OF BARODA 5. OTHERS
ICICI BANK
ICICI Ltd. was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses.
ABOUT THE BUSINESS OF HOME LOANS
The home loans of the company have been categorized under four different schemes.
They are as follows
Loans to purchase / construct a house Loans for home extension Loans for Repairs / Renovation Loans for purchase of Plot / Land
ELIGIBILITY At least 21 years of age when the loan is sanctioned. The loan must terminate before or when the concerned person turns 65 years of age or before retirement, whichever is earlier. Must be employed or self-employed with a regular source of income.
LOAN AMOUNT
Restricted to a maximum of 80% of the cost of the property or the cost of construction as applicable.
Repayment capacity takes into consideration factors such as income, age, qualifications, number of dependants, spouse's income, assets, liabilities, stability, continuity of occupation and savings history.
MARGIN
15-25% of project cost
REPAYMENT PERIOD
up to 25 years provided reach the age of 65 years Retire within that period.
PROCESSING FEES 0.5% of the loan amount
SECURITY As per bank instructions INTEREST RATES Floating rate of interest -13.25%. PLR for Home Loans - 15.25%.
STATE BANK OF INDIA
The State Bank of India is the largest commercial bank in India in terms of profits, assets, deposits, branches and employees. SBI is one of the country‟s oldest and a premier Public Sector Bank which works actively in line to the guidelines of Reserve Bank of India and also of Government of India. SBI stands strong with about own 10000 branches and over 5100 branches of its associated banks thus offering the largest banking network to the Indian customer. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings The Bank's domestic branches represent approximately 14% of all bank branches in India. About 46% of the Bank's branches are located in rural areas, 27 % in semiurban areas and 16% and 11% are located in urban and metropolitan areas respectively. ABOUT THE BUSINESS OF HOME LOANS The home loans of the company have been categorized into five sub-categories. They are as follows Home loans for both Indian and NRI customers at fixed and floating rate of interest. Loans to purchase / construct a new house Loans for home extension Loans for repairs / renovations Loans for purchase of Plot/ Land
ELIGIBILITY :- SBI home loans are available for purchase or construction of house or flat; purchase of a plot of land for construction of house; extension, repair, renovation, alteration of an existing house or flat; purchase of furnishings and consumer durables as a part of the project cost, takeover of an existing loan from other banks or housing finance companies
AGE
Minimum age of applicant is 18 years as on the date of sanction and maximum age limit for a home loan borrower is 70 years, i.e. the age by which the loan should be fully repaid. LOAN AMOUNT Applicants aged between 18 and 45 years, can get 60 times Net Monthly Income (NMI) or 5 times Net Annual Income (NAI) and for applicants aged over 45 years of age; it is 48 times NMI or 4 times NAI.
MARGIN The SBI home loan borrower should pay 20% of the cost of home for loans up to Rs 1 crore and 25% for loans above Rs 1 crore. REPAYMENT PERIOD The maximum repayment period for home loan is 20 years for applicants below 45 years and 15 years for applicant above 45 years.
PROCESSING FEES 0.5 % of Loan amount and capitalisation Fees of 10,000 SECURITY As per bank instructions.
PUNJAB NATIONAL BANK
Established in
MINIMUM HOME LOAN AMOUNT OF DIFFERENT BANK
HDFC PNB ICICI SBI
20,000
25,000
25,000
20,000
(Amount in thousands)
25 20 15 10 5 0
AMOUNT
HDFC
PNB
ICICI
SBI
SOME FEATURE OF LOAN FACILITY
BANK HDFC FEATURES
LOAN TAKEOVER YES YES YES YES
ICICI
SBI
PNB
DOWN PAYMEENT NO NO NO NO
PROCESSING TIME
5-7
DAY
7
DAY
7-9
DAY
10
DAY
INSURANCE
YES
YES
N.A.
NO
DISTRIBUTION CHANNELS
BRANCH NETWORK, DSA, DSE
BRANCH SALE MANAGER, DMA
BRANCH NETWORK, HOME LOAN AGENT
DSA, DSE
DATA ANALYSISIS AND INTERPRETATIONS THROUGH PEOPLE OPINION 1. Do you go for home loans through financial institution?
a) YES - 67 %
2. Do you know about HDFC Home Loans?
a) Yes – 62% b) No-38%
70% 60% 50% 40% 30% 20% 10% 0% YES NO
3. If yes, how did you come to know about HDFC Home Loansa) Advertisement 49%
c) Website d) Friends e) Others
12% 20% 19%
Sales
19 % 49 %
Advertisement
Website
20 %
12 %
friends
others
4. For which purpose you want to take housing Loans? a) Construction c) Improvement b) Land Purchase
Housing Loan
11 %
construction
46 % 43 %
land purchase
improvement
5.
Which institution do you refer? HDFC LIC IDBI AXIS SBI OTHERS 13% 14% 8% 8% 51% 6%
Sales
6% 51 % 13 % 14 % 8%
HDFC LIC IDBI AXIS SBI OTHERS
6. If referred HDFC? Satisfied with service?
27 %
73 %
10.
If yes, what loan Pls, specify in which Bank you have taken? a) SBI c) BOB b) d) PNB any other
PI s
10 % 18 % 46 %
SBI
PNB
26 %
BOB
OTHERS
SWOT ANALYSIS
HDFC STRENGTH
customer satisfaction working environment and technological advancement timely completion of procedures availability and continuity easy sanction of loan competitive pricing encouraged executives superb price and product policies Ability to maintain good margins & asset quality Robust credit assessments with focus on quality Loans to corporate and individuals. Good rapport with local builders/developers.
WEAKINESS
Fluctuation in market. no exact theories and fundamentals. sometimes more flexibility. time of processing. high interest rates. Higher rate of interest. Few agents with less network of branches. More time for scrutiny & approval of loan documents. Lack of incentives packages to agents. Lack of tax saving products, marketing support.
OPPORTUNITIES
Large market yet to be unexplored. Consumer today only wants satisfaction and best services.
Lot of facilities to customers. Enhancement to productivity. Could extend penetration to more branches. An applied research centre to create more opportunities in home loans. Maintain good profit margins by slight reduction in Rate of interest. Contests/schemes to increase loan lending. To increase awareness among masses from its niche base.
THREATS
Some lack in loan theory. Uncertainty about market. Public faith in govt. organization. Increased competition from LIC and SBI. Entry of players from Govt banks/foreign banks. Delay by detailed & time consuming appraisal procedures. No particular scheme to attract govt/pvt sector employees.
RECOMMENDATION S AND SUGESSTIONS
The company has its existence in the market majorly through the operation of HDFC sales Ltd, HDFC Bank, DSA‟S, and so it is barely a necessity to attract the masses, middleclass segments. But in order to increase their market presence and profit margins, it is essential to motivate the agents to work as it‟s only through these agents cooperation that the company shall be able to increase their market presence and profit margins. HFCs should try to pay stamp duty on behalf of its customers. They should start TOLL FREE TELEPHONE NUMBER so that that customer can frequently take a step while applying for loan. HFCs should given all the necessary information regarding loan in one brochure. HFCs should start one HINDI WEBSITE for the convenience of its customers India being predominantly Hindi knowing country. Even MNCs are preferring Hindi in their Ads.
The main focus of the agents is regarding the kind of return for the investment of time and efforts that they would make if they do business for the company. So the biggest alluring factor to attract DSA‟S will be to provide competitive returns that are in-line with the other market options else these agents would have no additional incentive to work for HDFC in particular. They would very well work with other companies in the same business if they get better returns with them. Thus the company should revise their commission rates periodically as well as bring in attractive incentive packages that are in line with the competitive rates available in the market.
The next biggest issue that needs immediate attention is regarding the rate of interest. One of the biggest hindrances that agents face in convincing the potential customers is the rate of interest which is the return for the customers investment, any rational consumer would invariably like to maximize his/her return and therefore they misinterpret the agent‟s efforts to convince them to
invest with HDFC as that they might be getting higher commission rates from the company and that is why they are posing hindrance in maximizing their returns.
The Company must focus upon to provide better processing services and must minimize the delays at every cost as many of them feel dejected due to such delays that are generally followed by lack of communication of the agent ID and other essential details that force them to forget HDFC as an option to do their business. Thus such delays must be avoided at every cost.
Some of the agents do feel that during their initial phases of establishment they do need some help in terms of understanding the nitty-gritty of the business and also to learn the skills of convincing and motivating potential customers to invest with them only. Thus it would be prudent on part of the company to provide some sort of brief training sessions that will not only help the agents to gain better skills to work with but will also help to develop emotional bonding with the company as they shall be able to associate more with them.
The Company must also keep in touch with all its agents at regular intervals even though they have not till date been able to contribute much business. Such links can be made through phone calls, sms or even by sending e-mails that are extremely cost-effective. Sending greetings on festive occasions, timely informing about the changes in the rate of interest, incentive plans, contests etc. will not only make them to feel associated with the company but shall also indirectly motivate them to contribute into the business as its widely common that repetitive reminders invariably pushes the individual to work !
The company should also aim to create hassle-free minimal levels of documentation that does not make the entire registration process cumbersome
for the end-customers. And at the same time it must also train its agents about the need behind making all such documentation so that they can explain the same to their customers who should feel that all such efforts are made with genuine intentions to serve them in a better way.
The Company can also render help to its newly recruited agents by giving them a small database to contact some of the potential customers. This step shall help them in their initial tenure of establishment which shall be helpful to the company in the long run.
A majority section feel that any company to succeed in this particular business of home loans there are 3 important criteria‟s can must be considered and a tremendous growth in the business is likely to follow: 1. RATE OF INTEREST 2. COMMISSION RATES 3. QUICK SERVICES It‟s considered that if the above mentioned criteria are fulfilled the company need not focus upon the advertisement and visibility concepts, however due to presence of stiff competitive players in the market and all of the companies aim to improve their image focusing on the same above criteria, the company would then invariably have to work towards improving their visibility factor. In order to promote its business, the company can conduct camps in developing areas where the company representatives can convince and educate the masses about the benefits of home loan products. Now-a-days, FM Radios have also gained importance as a medium of advertisements and is also quite cost effective with respect to the other mediums like – television and newspaper adds. So what ideally can be done is- in some educative radio show, one of the company officials can conduct a small interview
over the show explaining the product features and their competitive edge over other companies. Another important source that is quite cost-effective and another good medium of advertisement is MOBILE-SMS i.e. a bulk list of people can be sent sms featuring the company‟s product and the applicable rates. Since the company‟s prospective target market can be salaried professionals from institutions like- schools, bank offices, private sectors etc they can be offered with special rebates if possible in processing/administration fees. Complimentaries to the high performing agents & greetings to important customers on auspicious occasions, which will also contribute in creating emotional bonding between them. Running an organization without adequate market needs, information reduces business decision in guesswork. Most business fall dose so because they have not obtained, analyzed or acted upon market information that is readily available if efforts are taken to gather invaluable information. No matter whatever industry is whether it is manufacturing or service industry all need marketing plan to cover the product specification and its relation to customer needs and requirements , handling interest and EMI, documentation requirements, segmentation. each of these requires information from the market to serve its customers in the efficient manner and get a competitive edge: The procedure for getting loan is complicated; it is a difficult to have a complete understanding at a glance. Therefore HDFC should do something in this direction. to mask this process simple by handling all complication itself. All time many files of customer are unnecessarily pending. They should check the files time to time and know the reason of the pending work. this will help firm to cut down the waiting of loan disbursement. the channel for approval of loan at times become too long that can be cut down by HDFC.
The rate of interest should be kept some percent less than other banks to keep the market alive.
Second loans for a customer should be encouraged by HDFC because mainly people had taken their first loan from there department.
Handling of customer in proper manner and giving good service should be a prime objective of an organization. Existing customers should also made aware of various other loans that they can avail like top-up loan etc. Advertising awareness should be increased by creating ads onto electronic media on popular channels and the print media like newspapers and even magazines.
Organization needs to stress upon hording and its ads should be published in the newspaper. Colanders should replace the expenditure on posters. Colanders are more practical and useful.
CONCLUSION
Many housing finance companies & commercial banks have been emerged with the objective of getting business by granting home loans to the eligible borrowers; while HDFC Ltd. has been the market leader in this portfolio with an outstanding network, services, and products and is recognised as a specialised mortgage company in India. Thus in order to retain its leadership and presence in the market which is intensively competitive from the major players, the company needs to understand, analyse it Strengths, Weakness, Opportunities, Threats of thyself and its competitors. The recommendations & suggestions made were purely based upon the survey carried out within the interests of HDFC Ltd. To conclude with, working as a management trainee for HDFC Ltd. was a great learning experience, in fact it was a right blend of fun and learning. I have now got a good insight about the operation of business of home loans in India by both banking and non-banking sectors.
APPENDIX
NAMEADDRESSPHONE NO.-
1. Do you go for home loans through financial institution?
A. YES B. NO
2) Do you know about HDFC Home Loans? A. YES B. NO
3) If yes, how did you come to know about HDFC Home LoansA. ADVERTISEMENT B. WEB SITE C. FRIENDS D. OTHERS
4) For which purpose you want to take housing Loans?
A. Construction B. Land Purchase C. Improvement
5) Which institution do you refer?
HDFC LIC IDBI AXIS SBI OTHERS -
-
6. If referred HDFC? Satisfied with service? a) YES b) NO -
7) What’s your monthly income? a) 10,000 – 20,000 b) 20,000 – 30,000 c) 30,000 – 40,000 d) More than that 40,000 –
8) Do you have any property or immovable assets for giving security of the loan? a) Yes (Specify them) b) No
9)
Do you have any other loan, PL/Vehicle loan?
a) Yes
b) No 10) If yes, what loan Pls, specify in which Bank you have taken? a) SBI c) BOB b) d) PNB any other
BIBLIOGRAPHY
WEBSITES
http:/ /www sbihomeloans.com www.wikipedia.com www.google.com http:/ /www pnbhomeloans.com http:/ /www icicihomeloans.com http:/ /www lichomeloans.com http:/ /www indiahousing.com HDFC WEBSITES (WWW.HDFC.COM)
OTHER SOURCES:-
1. HDFC HOUSING BROCHURES 2. FROM HDFC STAFF 3. HDFC ANNUAL REPORT
