DESSERTATION PROJECT ON COMPARATIVE STUDY AND ANALYSIS OF HOME LOAN SCHEMES OFFERED BY DIFFERENT BANKS SUBMITTED TO

Batch: 2011-13
UNDER THE GUIDANCE OF BY
PROFALOK KUMAR

PREPARED
PRATIKSHA YADAV

Batch: 2011-13 Roll No. GM. 11091

Declaration
I (Pratiksha Yadav ) hereby declare that the Project work entitled COMPARATIVE STUDY AND ANALYSIS OF HOME LOAN SCHEMES OFFERED BY DIFFERENT BANKS. Submitted by me for the Dissertation Program during the Post Graduate Diploma in Management to G.L. Bajaj Institute of management and research greater Noida. It is the result of my own work. I also acknowledge the other words / publications cited in the report.

Name of Student: ________________ Signature of Student: _____________

Name of Company Mentor: Signature of Company Mentor: ____

Date: Place:

Date: Place:

CONTENTS

Acknowledgement Introduction Objective of Study Bank Industry in India Research methodology ICICI BANK HDFC BANK IDBI BANK Analysis of Data Comparison Conclusion Recommendation Limitation Bibliography Questionnaire

ACKNOWLEDGEMENT

The Research will be incomplete without giving my sincere; gratitude to all persons who have helped me in the preparation of the report .It is often the result of valuable contributors of a number of individuals in a direct or indirect manner, which helps in shaping and achieving an objective. Here we can not resist the temptation of expressing our thanks to those who have contributed greatly accomplishing this task.

I am highly thankful to Alok Kumar (College Mentor) who give the full support to me preparing the research report.

I would like to pay my gratitude to Mr. Rajesh Shukla (Internal Guide) for his kind attention , support and giving an opportunity to research work on COMPARATIVE STUDY AND ANALYSIS OF HOME LOAN SCHEMES OFFERED BY DIFFERENT BANKS.

Again, I greatly appreciate the diligent support provided by all the faculty of G .L .BAJAJ and my friends for their whole heart support and cooperation.

Date: Place:

OBJECTIVE OF THE STUDY

The objective of this research is--1-To analyze the home loans with a view to arrive at the most popular loan schemes offered by the banks.

2- To conclude from the analysis the best possible schemes which would keep the bank ahead of competition?

3-To find the critical factors that are essential for any housing loan to become the most favored scheme in the Indian scenario.

4-To analyze repayment policy also affect of age factor on repayment influence on customer when they choose home loan scheme.

5-To analyze the importance of standard comparison provided by different agency on customer when choosing home loan scheme.

6- To analyze the affect of current home loan scheme on customer.

7- To analyze the preference of customer on choosing particular home loan scheme.

INTRODUCTION
A roof over one's head and ground beneath one's feet count as the bare necessities of life. Theres nothing quite like owning a home, however humble, to give one that warm and glowing feeling. But when one buys a home, one has much more than a feel-good purchase in mind: its also a crucial investment decision, perhaps the biggest spending decision of one's life. There are ample opportunities today for young salaried investors to plan their moves early and buy a house at the right time and at the right price. In the process, not only do they fulfill that cherished dream of owning a house, but also put themselves on the path to acquiring property that would meet the needs and aspirations of their growing family, even as it leads to wealth creation. Every individual aspires to own a home. But many either spend a lifetime saving to purchase a house or exhaust money on monthly house rents.

Take a house loan and let the monthly rent (easily converted into affordable EMIs) build dream home .

Profitable Proposition

The overall demand in the residential sector has grown by about 7-8 per cent in the past few months as compared to the same period last year. The growth is on account of two main factors:

One, income-tax exemption;

Two , with no similar rebates available for individuals in the high-income group, they are creating a second asset.

Add to this the stable property prices over the last year and plunging interest rates, planning for dream home could not have been better timed. Rock-bottom interest rates, standardization of the periodicity of interest calculation across lenders (which makes it easier to compare loans), lower interest charges, waiver of loan application processing fees and, a customer-friendly attitude is reason enough to celebrate the ascension of the home loan consumer as the king.

In response, private players like ICICI Bank , IDBI Bank and HDFC Bank also brought down its interest rates to 12.00%, very recently, to participate in the interest rate war. If one is still not satisfied with the lowered loan rates, theres more. Some industry watchers believe the floating home loan rate will slip to 8 per cent for long-term loans in another two to three years.

The expansion of bank branches to far-flung areas resulted in an explosion of sorts in volumes of transactions and posed a severe strain on all resources. More particularly, the inter-branch reconciliation became one area that defied manual handling. It was in this background that the first steps towards mechanization were taken in late 50s/early sixties in the Calcutta office of the SBI for the reconciliation of inter-branch transactions.

The pace of branch expansion was so fast that by early sixties this equipment was also considered inadequate and the Bank went in for the first computer. The whole system of reporting and reconciliation of transactions was revamped and modernized. Other larger nationalized Banks also followed suit. Interestingly, at that time, no immediate need was felt for automation of Branch and customer related activities or for that matter head office/corporate office operations.

With increasing volumes of transactions, manual handling of these led to dwindling customer service and increasing complaints. However, mechanization of any kind was opposed by the Unions and resulted in slowing down of computerization drive in Indian Banks. The need for information technology is felt most in routine technology and repetitive commercial chores which modern man is finding increasingly difficult to handle all by himself.

To understand this difficulty all you have to do is walk into a public sector bank anywhere in this country. It takes close to half and hour to fill out a demand draft, another half hour to withdraw cash and sometimes, more than twenty days to get an up-country cheque credited to your account. Add to this the irritation you get from harassed bank clerks and when you walk away they feel they are actually doing you a favor by keeping your money with them.

Look at it from another angle. You are a bank employee burdened with monotonous, uninspiring work. All you do is post entries to a ledger, count out soiled, half-torn currency notes and monitoring interest accruals on loans given out to a thousand customers. If a bank opts for a high level of computerization, even if it were to be achieved in a phased manner, they would not only be able to service customers better but would also reap bigger profits.

Most banks have changed the way interest is calculated from annual rests to monthly rests. Under the annual rests method, the EMIs (equated monthly installments) one pays through a year are factored in as part-repayment of the principal component only at the end of each year. In other words, one has to pay interest even on the installments one has paid until theyre reduced from the principal at the end of each year. Under monthly rests, the principal is lowered by the appropriate amount each month. The thumb rule being that the more frequently interest is calculated, the better for the creditor. Recently, HDFC added monthly rests on its fixed-interest loans apart from annual rests. As a result, the fall in EMIs on fixed-interest loans (where the interest rate is constant for the entire tenure of the loan, irrespective of changes in the lending rates) is more pronounced than on floating-rate loans (where the loan interest rate varies with changes in the interest rates). For example, the EMI on a 15-year, fixed-interest loan for Rs.15 lakhs has come down by Rs 840; the corresponding fall in the EMI on a floating-rate loan is only Rs 465. Apart from lowering the cost of one's loan, the switchover to monthly rests has another advantage: it makes it easier to compare loans.

INDUSTRY SCENARIO

The housing finance industry , encompassing banks and housing finance companies (HFCs), has exhibited a 36 per cent growth between April and December 2004 despite the high prepayment levels experienced by some HFCs.

Were it not for prepayments, the industry's outstanding assets would have grown at a higher 43 per cent. Aggressive marketing efforts of banks and HFCs have further precipitated this trend. Banks have an inherent advantage in retail finance,

especially in housing loans, because of the lower cost of funds, existing retail relationships in liability products and large branch network.

It is expected that banks will further increase their market share in the housing finance sector in the medium term.

It is also expected that the housing finance sector will maintain its high growth rates in future given that the key growth drivers the government's thrust on the housing sector in terms of fiscal incentives for individual housing loans coupled with the demand-supply gap in housing - would remain strong.

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BANKING INDUSTRY IN INDIA

Banking Industry in India has always revolved around the traditional function of deposits and credit. Their role had been defined as to assist the overall economic growth with majority of share being controlled by the Government of India in most of the banks. But with the process of liberalization, and the technological revolution the banking industry has also undergone tremendous change in the last 5 years. The market, which was largely controlled by the public sector banks, has now been facing stiff competition not only from foreign players but also from the new generation private sector banks. The rules of the game have been changing with the RBI introducing new norms to make banks more accountable and to adopt the practices followed worldwide.

Most of the banks have now been trying to function on the concept of a Universal Bank. Apart from the traditional functions of a commercial bank, they are taking steps to build themselves into a one stop financial center wherein all the financial products would be available. Banks have started catering to the retail segment to improve their deposit portfolio. In order to have a maximum share in this segment, most of the banks have been introducing new products. The delivery channels have also been shifted from branches to ATMs, phone banking, net banking etc.

Technology has become an important medium of not only attracting new customers but also in retaining them. The new generation private sector banks have made a strong presence in the most lucrative business areas in the country because of technology up gradation while, their operating expenses have been falling as compared to the PSU banks, their efficiency ratios (employees productivity and profitability ratios) have also improved significantly.

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Structure Of Indian Banking Industry

The Indian Banking Industry can be broadly classified into:

Public Sector Banks

The Indian Banking industry is largely dominated by the public sector banks. These banks till the early 90s were involved in the traditional banking business of deposits and credit lending. They performed a supportive role in the overall growth of the economy. While most of these banks used to focus on the growth of balance sheet, profitability was not a significant factor in the competition. In most of the banks, the government has a holding of 100% whereas in the few banks, the stake has fallen because of a public issue in the post liberalization period. The government is proposing to bring out a bill wherein its share in all these banks would stand reduced to 33% from the current levels.

The public sector banks have a strong distribution network all over the country. But the strength of the earlier periods has now become a concern for these banks. As compared to the tech-equipped distribution network of the new private sector banks and the foreign banks, these banks have found it difficult to upgrade them on the technology front. These banks are also facing the problem of surplus manpower. Most of these banks are now coming out with a VRS to bring down their number of employees and improve the efficiency ratios.

The public sector banks still control a major share in the banking operations of the country. Their inefficiencies have been exposed only when the market was throw open for competition and new players started eating up

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their share. But given their size and the strong network, most of these banks can change their perception. The recent thrust on reduction of government stake, VRS settlement schemes etc have been some of the steps in this direction. The public sector banks have a strong distribution network all over the country. Since the growth of the economy is largely dependent on the performance of these banks, even with the growth of new private and foreign players, these banks will have an important role to play

Private Sector Banks

The Banking Regulation Act was amended in 1993 permitting the entry of new private sector banks.

With emphasis on service and technology, it is for the first time that Indian banks are challenging the foreign banks. These banks are making heavy use of technology to give good service on par with foreign banks but to a much wider audience e.g. branch size has been reduced considerably by using technology and having less manpower. In addition the ATM etc helps are drawing large customers to one branch.

The new private banks are on an expansion phase and are now moving into semi-urban areas and satellite towns to fulfill their branch expansion norms. Their technological edge and product innovation has seen them gaining market share from the slower, less efficient older banks.

The new private banks have been consistently gaining market share from the public sector banks. The major beneficiary of this has been corporate clients who are most sought after now.

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The private sector banks have been able to make significant inroads in the retail market of the public sector banks. During the year, the two leading banks in this sector had set a new trend in the Indian banking sector. HDFC Bank, as a part of its expansion plans had taken over Times Bank. ICICI Bank became the first bank in the country to list its shares on NYSE.

Foreign Banks

Foreign banks have been doing the normal banking business in the country. During the period of nationalization, the entry of new foreign banks and expansion by existing foreign banks were prohibited. Even, when the norms were relaxed later on, RBI was very slow in granting any further approvals to these banks. But most of these banks have concentrated on the metropolitan cities of the country and have been able to do reasonably well. These banks have used the latest technology to compensate for the limited number of branches they have.

In the post liberalization period, a number of new players have entered and the existing players have consolidated their position in the market. In the last couple of years, some of the foreign banks have entered the retail segment and introduced a number of new products in the market. This has intensified the competition in the banking sector and has made most of the old players rethink their strategy.

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RESEARCH METHODOLOGY
Research Methodology is an important part of every project. Because it help in knowing how to select representative sample from the world or the general population, the right research tools and techniques to complete the research.

To satisfy the customer the study of consumer behavior is important because he is the king. The Research Process is based on survey method, so in order to implement the survey we go to Service Provider and the Services user which is the customers.

The research involves the following steps :-

Define the problem & research objective - The problem and objective is to assess the services offered by various service provider and what the consumer wants.

Developing the research Plan - The second stage of research methodology is to develop a research plan.The research plan desigined to take decesion on the data soruces, research approaches, research, instruments, sampling plan and contact methods.

Survey Research It was a descriptive research.

Research Instrument The use of an effective research instrument is very important. Because through this instrument we collect data. In this project through observations & personal interviews were conducted.

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 Personal Interview As we were doing direct selling. we interacted with my customers are asked about there views in selecting a service and what are there wants and expectations from a service provider

Sampling Plan - After finalizing the research approach and instruments a sampling must be designed.

Sampling Unit data have been collected from banks

Sample size It has been collected from four banks. Sampling Procedure: - What process should be used to collect the sample. So, representation samples, convenience sampling is used.

Collect the Information:-After completing all the steps, the data are collected from different sources.

Analyze the Information:-After the data is collected they are analyzed to Know the findings. The data is then tabulated to develop frequency distribution.

Present the findings:-As the last step, the findings are presented that are relevant to the major marketing decision.

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ICICI HOME FINANCE COMPANY LIMITED

Consumer friendly housing finance company History:

ICICI Home Finance Company Limited was incorporated on May 28, 1999 as 100% subsidiary of ICICI Personal Financial Services Limited (ICICI PFS). ICICI Home Finance Company Limited, was set up with the objective of providing long term housing loans to individuals and corporate. The Company was registered on March 30, 2000 with National Housing Bank (NHB) under National Housing Bank Act, 1987 in terms of Housing Finance Companies (NHB) Directions, 1989. With effect from May 3, 2002, ICICI Home Finance has become a 100% subsidiary of ICICI Bank Limited.

Overview:

ICICI Home Loans are at present available to customers in 150 cities/towns across the country. Loans are offered for purchase of new homes, purchase of resale homes and home improvement. Besides, the company also offers loans for commercial property and loans against existing property. The loans are offered for tenors up to 30 years. The company has also introduced several customer friendly services such as 'door-step' service, 'know your loan on phone' facility and 'ICICI Home Search' - free property brokerage services.

ICICI Personal financial services limited (ICICI PFS), FORMERLY ICICI- CREDIT, was one of the first four companies to obtain registration as a non-banking financial company (NBFC) from the Reserve Bank of India (RBI) on September 10, 1997 under the new section 45 IA of the Reserve Bank of India Act, 1934.

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In view of this reorientation of the business, the name of the company was changed from ICICI CREDIT CORPORATION LIMITED to ICICI PERSONAL FINANCIAL SERVICES LIMITED (ICICI PFS) effective March 22, 1999.

ICICI commenced its custodial services business in 1992 and played a pioneering role in the business when it accepted the custodian role for the first ever GDR issue by an Indian corporate (Reliance Industries Limited). ICICI has a major market share in the segment and acts as custodian of 41 ADR/GDR issues and, in the process, has established relationships with all the major overseas depository banks operating in the Indian Market. After its success in the GDR segment, ICICI expanded its custodial operations by offering custodial services to overseas institutional investors including foreign institutional investors (FIIS) and as on June 30, 1999, the value of assets held in our custody exceeded US 2 billion. At present, ICICI offers a full range of custodial services for primary and secondary market operations pertaining to debt, equity, money market instruments GDR/EURO issues conversions and GDR arbitrage to:

PERSONAL BANKING:

At ICICI BANK, they are committed to making banking a pleasure. This commitment is manifested in the services they offer a wide range of accounts, investment schemes, and facilities. Each service offers their customers security, flexibility of operation and maximum returns. The various services provided under this is as follows:

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 Maxi Cash savings Account Quantum Fixed Deposits Quantum optima Value added Savings Account Money plus Current Account ATM Phone Banking Treasure Chest Locker facility Power Pay Payroll Retail Treasury Instruments

CORPORATE BANKING:

MOBILE COMMERCE
ICICI Bank now brings Bank Account and ICICI Credit Card to customers fingertips. With Mobile Commerce, customers can perform a wide range of query-based transactions from their Oranges (MUMBAI) and AIRTEL (DELHI) Mobile Phone, without even making a call. Access multiple accounts Balance enquiry to the linked accounts Cheque book requests Mini statement Listing of last three transactions Request for account statements (by mail or fax)

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ICICI: Attractive interest rates Door-step service from enquiry stage till final disbursement No guarantor required Can transfer your existing high-interest rate loan Can transfer your existing high-interest rate loan Special 100% funding for select properties

Home loan Customer must be at least 21 years of age when the loan is sanctioned. The loan must terminate before or when you turn 65 years of age or before retirement, whichever is earlier. Customer must be employed or self-employed with a regular source of income.

Loan Amount: A number of factors are taken into account when assessing repayment dependents, capacity. Customers assets income, and age, number of qualifications, liabilities, stability/

continuity of customer employment/ business are some of them. However, there are ways by which you can enhance your eligibility. If customer spouse is earning, put him/her as a co-applicant. The additional income shall be included to enhance loan amount. Incidentally, if there are any co-owners they must necessarily be co-applicants.

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HOME LOANS :

We at ICICI Bank understand the value of owning your own home. Our affordable home loans can make all the difference to their dream of owning home. 0% processing fee for a limited period. Refer to the table for a loan option that suits their need best

FIND THE RIGHT HOME: Introducing Home Search - Our FREE online property search facility. A one stop shop for all their real estate needs.

What you get 0% brokerage on first sale properties Access the entire market under one roof Site visits to properties short listed by you Help in negotiating the best price Help with legal documentation

Documents Passport size photograph. Age verification: PAN card, Voters ID, Passport, License. Bank statement for the last six months. Income Documents e.g. Latest Form 16, Certified IT returns for latest 3 years. Processing Fee cheque. Loan Enclosure letter. These are the documents required for sanctioning a loan. Customer may be asked to submit further legal documents if required by ICICI or its approved lawyers. Do retain photocopies of all documents being submitted by them.

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Disbursement Customer loan will be disbursed after you identify and select the property or home that customer are purchasing and on their submission of the requisite legal documents. While customer may be under the impression that the list of documents asked for is rather extensive. Each and every single document asked for will be verified and checked to ensure their safety.

List of documents for disbursement

Standard documents : Loan Agreements Disbursement Requests Post-dated cheques Personal guarantor's documents, as the case may be adjustable Rate Loans

Home Loan Interest Rates for Resident Indians

In your quest of the perfect home loan, ICICI Bank Home Loans ensures that you get the best deal, in terms of interest rate and other facilities also, in the most convenient way. With our varied offering of house loans and home finance, we give you an opportunity to select the perfect home loan as per your needs. You can choose from:

Adjustable Rate Home Loan Fixed Rate Home Loan

Combination of the above two

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Step Up Repayment Facility (SURF)

SURF is a variant to enhance the eligibility of a young professionally qualified home loan customer with out increasing monthly outflow as EMI. The structuring consider a notional percentage increase in income & offers options of graded increase in EMI over the tenure of the loan contracted. The tenure is divided in three parts

Primary being lowest EMI Secondary Tertiary being highest EMI

Flexible Installment Plan (FLIP)

FLIP is a variant for structuring enhanced eligibility of home loan applicants with varying tenure of income source. This repayment facility is given when income is going to reduce after certain time during the loan tenure due to one of the borrowers retiring before loan maturity. The EMI payable becomes affordable based on individual income source and also matching the family cash flow. This variant is offered typically to family members joining as applicants like husband & wife or father & son with varying tenure of service Period / Age norm.

Part Fixed, Part Floating

A product that offers the dual benefit of fixed rate loans as well as floating rate loans. With this product, a customer can book part of his loan under a fixed rate plan and the other part under a floating rate plan. Thus, he can minimize the impact of any adverse changes in the interest rate regimes

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and at the same time, avail of any benefits that may come by way of favorable changes. Smart Fix Home Loans 3 years fixed and floating rate thereafter. A product that offers the safety of fixed rates plus the advantages of floating rates. The Smart Fix enables the customer to lock at fixed rate of interest today with the contract to move to a floating rate on a subsequent date. For the first 3 years you get a fixed interest rate. From the fourth year, your loan gets switched to the prevailing floating interest rate. Thus, a customer gets an opportunity to observe the interest rate movement over a period of time and expects to benefit in the bargain

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Listed below are the steps involved in availing of a home loan :

Step 1 Step 2

A person applies for a home loan. The executive meets the applicant and briefs him the entire loan process, requirements and the various options available. The applicant chooses a Housing Finance Company (HFC) and hands over the income documents to the executive. The income documents are handed over to the HFC for eligibility and approval. The HFC verifies the documents and checks the repaying

Step 3

Step 4

Step 5

capacity, saving habits, tenure of service, etc. of the applicant and approves the loan amount. After approval, an offer letter is given to the applicant by the

Step 6

HFC, along with a list of original property title documents that have to be handed over to the HFC.

Step 7

The applicant gives the original property title documents to the HFC. The HFC scrutinizes the legal and technical aspects of the original title documents. If the HFC is satisfied as to the legal & technical aspects of

Step 8

Step 9

the documents then the applicant is called to sign the loan agreement. The loan disbursement schedule is decided by the HFC

Step 10

according to the stage of construction (if property under construction)or a one time payment is made if property is ready for possession

Step 11

The applicant gets possession of the property depending upon the level of completion of the property.

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Step 12 The applicant starts paying the EMIs.

WHAT ALL CAN ONE TAKE A LOAN FOR : There are different types of home loans tailored to meet ones needs. Heres some of them:

Home Purchase Loans : This is the basic home loan for the purchase of a new home.

Home

Improvement

Loans :

These

loans

are

given

for

implementing repair works and renovations in a home that has already been purchased by the client.

Home

Construction

Loan :

This

loan

is

available

for

the

construction of a new home.

Home Extension Loan : This is given for expanding or extending an existing home. For e.g.: addition of an extra room etc.

Home Conversion Loan: This is available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through home conversion loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need of pre-payment of the previous loan.

Land Purchase Loans : This loan is available for purchase of land for both construction or investment purposes. 26

Bridge Loans : Bridge loans are designed for people who wish to sell the existing home and purchase another one. The bridge loans help finance the new home, until a buyer is found for the home.

Tenure Generally, the maximum tenure of home loans is 15 years, with a few lenders offering tenure of 20 years or more (ICICI has recently launched a 30 year loan). The longer the tenure, more one pays in total interest, but ones monthly payments will be less.

Interest Rate

Without doubt the most important parameter to factor into ones calculations. The interest rates may vary from institution to institution and generally range from about 7.0% to around 8.0%. Repayment is in the form of EMI's (equated monthly installments). The longer the tenure, the more one pays in interest, but ones monthly payment will be less.

Refinance

This is a concept that is yet to catch on in the home loan market but is bound to be a major service in the months to come. Under this facility, one can take a new loan from another

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bank/HFC to pay back an old loan before its natural tenure. It gives one the opportunity of prepaying ones high cost debt and gets a lower cost one. In today's falling interest rate scenario one should use this vehicle to lower ones debt payments as much as possible. The lender facilitates the shift by paying the outstanding and transferring the asset to their portfolio.

a) Interest Tax This is the tax payable on the interest paid on a home loan and not the principal. This tax is some times included in the interest rate of the loan, or may be charged separately as interest tax.

b) Processing Charge It's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount received by you can be less than the processing fee.

c) Prepayment Penalties When a loan is paid back before the end of the agreed duration a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre paid.

d) Commitment Fees

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Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.

e) Others It is quite possible that some lenders may levy a

documentation or consultant charge.

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HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an in principle approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBIs liberalization of the Indian Banking Industry. It was incorporated in August 1994 in the name of HDFC Bank Limited , with its registered office in Mumbai. HDFC began operations as a Scheduled Commercial Bank in January 1995.

About the Promoter

HDFC, the promoter, is Indias premier housing finance company and enjoys an impeccable track record in India as well as in international markets.

Since its inception in 1997, HDFC has maintained a consistent growth in its operations and profitability and over the past 5 years has achieved annual growth rate of 25 30 %.

Its outstanding loan portfolio covers over a million dwelling units.

HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base in relation to its housing related credit facilities and its investment portfolio.

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They had started with a strategic alliance with the NatWest group in UK with 20% equity, which was divested later on. The bank also signed a memorandum of understanding for strategic business collaboration with the Chase Manhattan Bank in February 2 nd 1999. Competitors:

Bank faces strong competition in all of their principal lines of business. Their primary competitors are large public sector banks, other private sector banks, foreign banks and, in some product areas, non-banking financial institutions.

Wholesale Banking : Principal competitors in wholesale banking are public and new private sector banks as well as foreign banks. The large public sector banks have traditionally been the market leaders in commercial lending. Foreign banks have focused primarily on serving the needs of multinational companies and Indian corporations with cross-border financing requirements including trade, transactional and foreign exchange services, while the large public sector banks have extensive branch networks and large local currency funding capabilities.

Retail Banking: In retail banking, their principal competitors are the large public sector banks, which have much larger deposit bases and branch networks, other new private sector banks and foreign banks in the case of retail loan products. Treasury : In treasury advisory services for corporate clients, they compete principally with foreign banks in foreign exchange and derivatives trading, as well as the State Bank of India and other public sector banks in the foreign exchange and money markets business.

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Loans: HDFC Bank brings you a wide range of loans to cater your financial needs. The bank offers the following loans Personal Loans Consumer Loans Auto Loans Loans against shares Loans against RBI Bonds Loans against Insurance policy

HOME LOAN SCHEMES PURPOSE HDFC Ltd. offers loans for the following purposes: Land Purchase Home Construction/Purchase Home Extension Home Improvement loans Short-term Bridge Loans Non-Residential Premises Loans For Professionals 2-in-1 Home Loan scheme A home-loan scheme thats twice as good! Confused whether to opt for an Adjustable Rate or Fixed Rate Loan?

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HDFC brings you the best of both options with 2-in-1 Home Loan. 2-in-1 Home Loan provides customers with a choice of breaking up the loan requirement into Adjustable and Fixed Rate loans.

LOAN AMOUNT Loans can be availed up to a maximum of 85% of the cost of the property (including the cost of the land). HDFC lends up to a maximum of Rs. 1,00,00,000 on a Home Loan to an individual.

LOAN TENURE You can repay the loan over a maximum period of 20 years. RATE OF INTEREST Interest is calculated on annual rests. Principal repayments are credited at the end of HDFC's financial year. The effective rate of interest varies depending on the term of the loan. For a loan with a term of 15 years, the effective interest rate would be higher by 0.37% per annum than the indicated rate of interest.

SECURITY Typically the 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.

Interim security may be additionally required, if the property is under construction. Collateral or interim security could be assignment to HDFC of life insurance policies, the surrender value of which is at least equal to the loan amount, guarantees from sound and solvent guarantors, pledge of shares and such other investments that are acceptable to HDFC.

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. DOCUMENTATION Following documents should be produced for approval of loan:

a) Common for all applicants : 1. Allotment letter of the co-operative society / association of apartment owners. 2. Copy of approved drawings of proposed construction /

purchase. 3. Agreement for sale/sale deed/detailed cost estimate from architect/engineer constructed. 4. If you have been in your present employment / business or profession for less than a year, mention details of occupation for previous 5 years, giving position held, reasons for change and period of the same. 5. Applicable Processing Fees. 6. Any other information regarding your repayment capacity that is necessary and will assist HDFC in appraising the case. for the property to be purchased /

b) Additionally

If borrower is employed: 1. Latest salary slip/salary certificate showing all deductions. 2. If your job is transferable, permanent address where

correspondence relating to the application can be mailed. 3. A letter from your employer agreeing to deduct the monthly installment towards repayment of the loan from your salary. This will expedite the processing of your loan application. 34

If borrower is Self-Employed: 1. Balance Sheets and Profit & Loss Accounts of the

business/profession along with copies of Individual Income Tax Returns for the last three years certified by a Chartered Accountant. 2. A note giving information on the nature form of organization, clients, suppliers, etc. business/profession,

ELIGIBILITY

The repayment capacity as determined by HDFC will help in deciding how much one can borrow (the cost of the property or Rs. 1 crore, whichever is lower). Repayment capacity takes into consideration factors such as income, age, qualifications, number of dependants, spouse's income, assets, liabilities, stability and continuity of occupation and savings history. And, of course, HDFC's main concern is to make sure customer can comfortably repay the amount they borrow

TAX-BENEFIT

Resident Indians are eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961. Interest repayment of Rs. 1,00,000 p.a. (for a loan on or after April 1, 2000) can get borrower a tax saving up to approximately Rs. 33,000 p.a. Moreover, customer can get added tax benefits under Sec 88 on repayment of principal amount up to Rs. 20,000 p.a. which can further reduce borrowers tax liability by Rs. 2,000 p.a.

35

About the product HDFC's Home Loans offers you various unique benefits and are easy to arrange and repayable in easy monthly installments. The terms of the loan can be structured according to customer unique requirements. Home Loans can be applied for by either individually or jointly. Proposed owners of the property, in respect of which the loan is being sought, will have to be co-applicants. However, the co-applicants need not be co-owners. Loans can be availed upto a maximum of 85% of the cost of the property (including the cost of the land). HDFC lends upto a maximum of Rs. 1,00,00,000 on a Home Loan to an individual. You can repay the loan over a maximum period of 20 years . They determine the loan amount after evaluating the repayment capacity of the individual. HDFC's main concern is to help individuals comfortably repay the borrowed amount. Get in touch with your nearest HDFC office today. We will be pleased to discuss and help you realise your plans for a house

USP

Superior Processing Capacity : HDFC has over the years invested substantially into computer systems and training. This has enabled HDFC to respond to customer needs and build up capabilities to approve loans on the spot or disburse them fast.

Branch Network : HDFC has offices spread all over the country. This extensive network helps HDFC in providing service to large and well spread out clients. Experienced and Trained Staff: HDFC is the pioneer of housing

36

finance in India and has been a leader in the business for the last 25 years. HDFC has vast experience and a very committed and skilled staff to handle housing loan applications and solving customer problems.

Free Counseling : HDFC believes that it is in the business of providing solutions to an individuals need for owning a house, and not just in the business of providing finance. Legal and Technical Guidance : HDFC has qualified Legal and Technical staff who liase with the developers to collect and scrutinize the property documents and permissions. We have Master Files of most projects being developed by reputed developers. It has always been HDFC's endeavor to protect the interest of the borrower, as we believe that buying a house is one of the most important decisions in his life.

Extension customers.

Products :

Over

the

last

25

years,

HDFC

has

developed various products in response to the needs of our

Flexible (Customized) Repayment Schemes : Keeping in mind the fact that each individual has a unique problem requiring unique solutions, HDFC has developed various repayment options like Step Up Repayment Facility, Flexible Loan Installment and Balloon Payment Scheme.

Pari Passu/ Second Mortgage Arrangements : HDFC has a tieup with a large number of Public Sector Organizations and banks which enables us to offer loans to your employees with the flexibility of their spouse also availing a loan from his/her own employer.

37

Safe Document Storage Facilities : HDFC has state of art storage facilities, which are theft and fire proof, at various locations where loan and property documents are stored. In this way valuable documents are stored safely over the period of the loan and are released almost immediately after a customer repays his loan.

Post disbursement services:

a) The exemption in respect of interest on borrowed capital is Rs 1,50,000 under section 24 (b) of the Income Tax Act. Further interest on housing loans can now be taken into account by an employer while computing the tax to be deducted from an employee's salary. Electronic Mail : HDFC through its e-mail service can promptly respond to queries. In addition, HDFC can promptly send it is application form cum brochure and other details on its loan products by e-mail to interested individuals. Home Conversion Loans : HDFC offers the option of a Home Conversion Loan to its existing customers who are interested in moving to a new house. Applications can be made before selecting property:

Individuals may make an application for a loan even if the property has not been selected or the construction has not commenced. HDFC can provide assistance in locating an appropriate house to such customers. Home Improvement Loans : As an exclusive offer to it's existing customers HDFC offers Home Improvement Loans upto 100% of the improvement cost as compared to Home Improvement Loans of upto 70% of the improvement cost offered to the general public.

38

Fee A processing fee of 0.5% of the loan amount applied for i.e. Rs. 5 per Rs. 1000 of the loan applied for is payable when the application form is submitted to HDFC. This fee is in respect of costs incidental to the application. For example: Loan applied for Rs.20,000 Rs. 1,00,000 Fees Rs.100 Rs. 500

On approval of the loan, a loan offer is made to you. On acceptance of the offer, you will have to pay an administrative fee of 0.5% of the loan approved. You can also pay the processing and administrative fees upfront i.e. 1% of the loan at the time of submission of the loan application itself.

Rate of Interest

Adjustable rate of Interest : The interest rate on your ARHL is linked to HDFC's Retail Prime Lending Rate (RPLR). The rate of interest is revised every three months from the date of first disbursement, if there is a change in RPLR. However, the EMI on the ARHL will not change. For instance, if the interest rate increases, the interest component in EMI will increase; the principal component would reduce, resulting in an extension of the term of the loan and vice-versa when the interest rate decreases. customer will be provided with an annual statement indicating the details of the interest and principal payments made during the year.

39

Annual Rest Option Term of Loan (No. of Years) 1 20 Monthly Rest Option Term of Loan (No. of Years) Upto-5 6-10 11 20 Rate Per Annum (%p.a) 12.25 11.50 11.00 Rate Per Annum (%p.a) 10.00

Rate of interest under ARHL is linked to HDFC's RPLR (Retail Prime Lending Rate) which currently is 8.00% per annum. Customer repays the loan in EMIs comprising principal and interest. Pending final disbursement, you pay interest on the portion of the loan disbursed. This interest is called Fixed rate of interest: The current applicable fixed rate of interest in respect of the total loan approved is are as follows:

How to Apply: Customer can either download (in a pdf format) the

application form or, get the application form by email or normal mail. Alternately, customer can collect the application forms from any of your nearest HDFC Offices. Customer need to submit it along with supporting documents and the processing fees at any HDFC office that is convenient to the customer. Customer can make payments by cheque marked "Payee's account only" drawn on a bank in a city where HDFC has an office, by demand draft (payable at par to HDFC) or by cash.

Customer can make an application at any time after they

40

have decided to acquire a house, even if the house has not been selected or the construction has not commenced. HDFC will consider your application, make enquiries as it deems necessary and convey its decision to you. On approval of the loan, a loan offer is made to you. On acceptance of the offer, you will have to pay an administrative fee for the loan approved. customer can take disbursement of the loan after the property has been technically appraised, all legal documentation has been completed and you have invested your own contribution in full (Own contribution is the total cost of the property less HDFC's loan). The loan will be disbursed in full or in suitable installments (normally not exceeding three in numbers) taking into Account the requirement of funds and progress of construction, as assessed by HDFC and not necessarily according to a builder's agreement.

supporting Documents to be attached : For approval of loan

a) Common for all applicants : 1. Allotment letter of the co-operative society / association of apartment owners. 2. Copy of approved drawings of proposed construction /

purchase. 3. Agreement for sale/sale deed/detailed cost estimate from architect/engineer constructed. 4. If you have been in your present employment / business or profession for less than a year, mention details of occupation for previous 5 years, giving position held, reasons for change for the property to be purchased /

41

and period of the same. 5. Applicable Processing Fees. 6. Any other information regarding your repayment capacity that is necessary and will assist HDFC in appraising the case.

b) Additionally, If You Are Employed: If You Are Self-Employed:

42

IDBI
IDBI, the tenth largest development bank in the world has promoted world class institutions in India. A few of such institutions built by IDBI are The National Stock Exchange (NSE), The National Securities Depository Services Ltd.(NSDL), Stock Holding Corporation of India (SHCIL) etc. IDBI is a strategic investor in a plethora of institutions which have revolutionized the Indian Financial Markets.

DBI promoted idbi bank to mark the formal foray of the IDBI Group into commercial Banking. This initiative has blossomed into a major success story. idbi bank , which began with an equity capital base of Rs.1000 million (Rs.800 million contributed by IDBI and Rs.200 million by SIDBI), commenced its first branch at Indore in November 1995. Thereafter in less than seven years the bank has attained a front ranking position in the Indian Banking Industry.

idbi bank successfully completed its public issue in February 99 which led to its paid-up capital expanding to Rs.1400 million. The promoters holding consequent to this public issue stood reduced to 71% with IDBI holding 57% and SIDBI 14% of the paid up capital of IDBI Bank. This is in line with the requirement of RBI which stipulates that eventually the promoters holding should be brought down to 40%.

43

The Bank The birth of idbi bank took place after RBI issued guidelines for entry of new private sector banks in January 93. Subsequently, IDBI as promoters sought permission to establish a commercial bank and retained KPMG a management consultant of international repute to prepare the groundwork for establishing a commercial Bank. The Reserve Bank of India conveyed it's in principle approval to establish idbi bank on February 11th, 1994. Thereafter the Bank was incorporated at Gwalior under Companies Act on 15th of September 1994 (Registration No. 1008624 of 1994) with its Registered Office at Indore. The Certificate for Commencement of Business was received on 2nd of December 1994.

Management Team - The Core Strength of The Bank

Since August 2000 idbi bank has witnessed a transformation in the top management structure with top talent from foreign banks and private banks coming together to create a world-class management team. Mr Gunit Chadha joined idbi bank as its Managing Director & CEO after spending 16 years with Citicorp in New York and India, on 22nd August 2000. He laid out the bank's immediate performance priorities, driven amongst customer them focused being building up a organization. Existing

talented people within the bank were re-aligned to a functionally driven Product & Sales organizational structure. Also, to align employee interests with shareholder interests founder Stock Options (ESOPs) in October 2000 covering 75 % of the existing employees of idbi bank were distributed.

44

Key recruits into the top management team were: In January 2001, Janak Desai joined in as Country Treasurer after an outstanding innings at Standard Chartered Bank and ABN Amro. In February 2001. Ajay Bimbhet joined as Head-Retail Banking to lead retail banking at idbi bank . Ajay comes after a strong and brilliant 25 year career at ANZ Grindlays. In December 2000, Neeraj Bhushan Bhai joined idbi bank as the Chief Technology Officer. Neeraj has been a major success story in the assignments handled by him earlier as Chief Information Officer of Sharekhan.com and Chief Technology Officer of ICICI Infotech in their technology initiatives. In April 2001, Subramanian Kumar joined idbi bank as Head - Operations after earning accolades during his stint at Standard chartered Bank, Dubai and previously at HDFC Bank. In May 2001, Ulhas Deshpande joined as Head - HRD. He has more than 18 years of rich human resource experience, of which over 10 years has been in heading the HR function in premier organizations- Hindustan Ciba Geigy, Merind, Parke Davis and most recently as Head-HR at Tata-AIG. In August 2001, Susheel Kak joined as Head - Corporate Banking after a 25 years of varied banking experience in SBI and Deutsche Bank in Singapore and India. Idbi bank is growing at a very fast pace. Recently, the no. of employees have crossed 1000 mark from 777 employees as on 1st April 2001 and it is expected to cross 1200 by the end of this financial year. The Bank also has a state-of-the-art training centre at Belapur and every employee receives on an average at least 40 hours of training in a year.

45

Technology and Tech Initiatives

Keeping in line with its policy of leveraging technology to drive its business, idbi bank deployed Finacle, the e-age banking solution from Infosys to consolidate its position, meet challenges and quickly seize new business opportunities. Entire Finacle rollout was remarkable considering the fact that it was implemented across all branches in a record time-frame of 5 months. Finacle will provide the critical technology platform to propel the bank's new thrust and direction.

The bank has also implemented Kondor+ - a treasury Front Office software from Reuters and ITMS- treasury back office software from Synergy Login. Achievement of these significant milestones is consistent with idbi bank 's continued focus to create customer and shareholder value through deployment of superior technology.

Investments in technology is part of the plan to put in place building blocks for creating the right organizational infrastructure which will help idbi bank in consistently delivering superior products, convenient access channels and efficient service to our retail and corporate customers. Of the total investments of over Rs. 75 crors, large investment has been made in back-end technology to strengthen processes, systems and control. This, in the long run, propelled by a top quality management team will clearly set idbi bank apart from its competitors.

46

Strategic Retail Initiatives idbi bank in the previous calendar year initiated its formal foray into retail banking. idbi bank 's depository services product ESec is a major success story and the bank today is in the top three league in India in this segment. A spate of retail products were introduced such as home finance, loans against shares, educational loans, car loans, Sweep in account, SMS/WAP mobile banking etc. on very competitive terms.

Retail Bank has acquired software for its Retail Assets products. Also, on its way is Internet Banking with Bancaway, from Infosys. idbi bank has recently launched its upgraded, state-ofthe-art telebanking product across 17 centres with latest software from BK Systems. Mobile banking

(WAP/SMS)

from

Hexaware,

which

is

mobile

service

provider independent, launched during FY01. We have also migrated to an Open Architecture "Oasis" ATM Switch capable of providing features like Bill Presentation Payment and personalized messaging.

The bank has recently announced its strategic alliance with TATA AIG General Insurance Company for selling General Insurance Products through select branches & ATMs of idbi bank .

The bank announced a landmark strategic alliance to make available widely, both organizations products through each others distribution channels. Now you can buy coveted savings Products like the National Savings Certificates and Kisan Vikas Patra on Internet.

47

The New products which are going to be announced shortly are Credit Cards, Debit Cards etc. Idbi bank is continuously looking for ways to leverage its technical strengths and bring to the retail customer convenience products at reasonable cost.

Corporate Banking and Credit

Idbi bank has launched its Cash Management Services in the 2nd quarter of FY02 with powerful software from Cash Teck. The bank has also invested in Credit Rating System software from CRISIL to strengthen its corporate risk assessment mechanism. This goes live from the first quarter of 2001-2002. Moreover, the bank is in the process of investing in more back-end systems for Fixed Assets, Payables, FTP and ALM.

Employee Contribution idbi bank has more than 1000 talented and highly motivated employees as on date. The average age of the employee at idbi bank is 31 yrs. 85% of the employees are MBAs/CAs/ Professionally Qualified Bankers. The bank has rolled out broad based grant of stock options covering 75% of the employees to align their interests with those of its shareholders.

Buying a home of one's own is every individuals first stop in life. . Which is precisely why, we at idbi bank , have pulled out all the stops to sew together a home loan product that has flexibility as its very foundation. Bank have created a product that is 48

competitively benchmarked, that is amply affordable and one that is customer-sensitive. Only because when it comes to buying a house, the first thing customer need to do is to feel at home with their bank.

Advantage Interest Rate on Monthly Reducing Balance Home Loan services at Door Step Simple Documentations Personalized Service Legal and Technical Assistance

49

Housing Loan Rates :

Floating rate loans have been institutionalized as the standard offering, making it simple for new customers to benefit from favorable interest rate changes in the future too.

MUMBAI: Public sector lender IDBI Bank on Tuesday announced a cut in its fixed deposit rates for home loans. Simultaneously, it has upped interest rates on term deposits of various tenures by 0.25-0.50 per cent. Fixed home loan rates for three-years have been reduced by 1-1.5 per cent to 10.75 per cent from 12.5-13.5 per cent per annum earlier, a press release issued here stated. For five-years, the rate has been reduced from the earlier 13.75-14.25 per cent per annum by 1-1.5 per cent to 10.75 per cent per annum. The interest rate on floating home loans remains pegged at 9.75 per cent.

The bank has increased interest rates on its term deposits for tenures beginning from nine months up to one year to a tenure of up to 10 years. Now for a maturity of nine months up to one year and for an amount up to Rs 15-lakh, the rate has been increased from 7.25 per cent to 7.75 per cent while for deposits above Rs 15 lakh to Rs 1 crore, the rate has been upped from 7.50 per cent to 8 per cent. Pre-payment Fees Pre-payment Fee of 2% on principal outstanding if the prepayments are through institutional / HFC s Cheque / pay order.In case of customer premature closing his home loan account with his own funds no prepayment will be levied

50

NORMAL HOME LOAN Lets suppose that the customer have a home loan of Amount RS. 10 lakhs Repaid in 16 years (192 months) at an interest rate of 11.25% p.a. (monthly rests)

Some Interesting facts about you home loan You owe the bank
25 Total Payments In Rupees Lakhs Principal Paid 20 15
4.13

Interest Paid
4.98

10

10 5 0
1.5 5.25 9.37 10.09 11.6

60

120

134

192

Months

Imaging how much the value of their home will have to appreciate to just be worth the value you finally paid for it!

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DATA ANALYSIS

The home loans provided by various banks are more or less same at a basic level. The banks generally try to go ahead of other banks in terms of attracting number of customers to their countries. For this they are trying to offer some unique services as per the unique requirements of the unique and important customers. In the next page various datas have been shown which shows that are the home loans provided by various banks and SCB have also tried to compare the services offered by the banks,.

TRENDS IN INTEREST RATES OF HOUSING LOANS

Interest Rates Have Dropped

16 14 12 10 8 6 4 2 0 2004 2005 2006 2007 2008 13.5 13 12.5 11.5 10.75

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And Housing Loan Disbursement Have Soared

50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

45,000

29,359 19,723 11,352 22,425

2003-04 2004-05 2005-06 2006-07 2007-08

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MARKET SHARE OF MAJOR PLAYERS

Source: http://indiaproperties.com

Market Share of Players

8 32 5 10 Standard Chartered Bank Citibank ICICI HDFC IDBI 5 45 OTHERS

PROPERTY

RATES

54

CONCLUSIONS

1-The Indian customer has come a long way from purchasing to fulfilling their needs from buying a house.

2- Customers now grab everything that comes their way but they do their own survey of optimum loans; same is the case with banks, and housing loans. With innumerable choices before him, the customer is indeed the king.

3- It is therefore imperative that if a bank has to succeed in the competitive world

4- it should be technological sarvy, customer centric progressive driven by highest standards of corporate governance and guided by sound ethical values and above all should be cordial and should have personalize customer services.

5-There is scope of exploiting the vast middle income group by releasing loans with special interest rate which would be beneficial to both parties.

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RECOMMENDATIONS

The following suggestions are strongly recommended:

1. To broaden the customer base the vast middle income strata should be fully exploited 2. Simplify the procedure, reduce service charges, and demand only the basic essential proof. 3. Most banks are reluctant to advance loan to the service class e.g. lawyers, police officers etc.. This aspect must be exploited. 4. Adoption of flexible and more lenient penalty should the customer fail to deposit the payment on time. The penalty should be on case to case basis rather then the same for the entire customer base. 5. Restriction to be reduced to bare minimum for loan advances and for repayment. For e.g. offer long-term repayment facilities and have no age restriction to choosing repayment. 6. The maximum age for repayment could be increase to 65-70 years of age. Such facility will help grow fast retail segment of the bank. 7. Offer multiple repayment loans. 8. Service class to be exploited by offering special reduced rates and linking the repayment from the source from where the pay-cheque to the employee is issued. This needs to undergo special contract with government organization to ensure implementation.

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BIBLIOGRAPHY
www.indiaproperties.com www.apnaloan.com Philip Kotler, Marketing Management, 9th edition Akkar ;Marketing Research Icicibank.com Idbibank.com Hdfcbank.com

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QUESTIONNAIRE

NAME: __________________

GENDER:

AGE: ________________

PROFESSION:
SERVICE BUSINESS

HOUSE HOLD ANY OTHER MOBILE NUMBER : __________________ MONTHLY INCOME: 10,000-20,000. 21,000-40,000. 41,000-60,000. 61,000 ABOVE

1-You are living in your own house or rent? OWN HOUSE NOT OWN

2-Will you prefer home loan to buying home ? Yes No

3-Whould you like to prefer loan from housing bank or other? Yes No

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4-Which Bank you prefer for housing loan ? a- HDFC b-ICICI c-IDBI d- OTHERS

5- Are you give importance of TAX benefit while choosing loan scheme?

Yes

No

6- You give more focus when choosing loan scheme onAMOUNT DOCUMENTATION INTEREST RATE TIME

7- How much affect location of bank when you choosing loan scheme? VARY MUCH LITTLE BIT .

8- Are you familiar with procedure of home loan scheme? YES NO

9- Are you familiar with repayment policy of home loan scheme? YES NO

10- Is service charge affect on you when you choosing home loan scheme? YES NO

11Would you prefer your own survey or accept standard comparison of bank scheme? OWN SURVEY STANDERD COMPARISON 59

12- In which scheme you are more familiar of repayment policy in home loan scheme? YES NO

13- Did you think age of repayment should increases or not? YES NO

14- How much you satisfied with the current home loan scheme of your choosing BANK? ____________________________________________________

15- You have any suggestion for amendment of home loan scheme ?

60