A STUDY ON CONSUMER PERCEPTION TOWARDS HOME LOAN AMONG

PUBLIC SECTOR AND PRIVATE SECTOR BANKS

Pratiksha Mishra1 and Dr.Smita Kavatekar2

Abstract

Buying a home is also a preferred investment avenue by many investors. This encourages real
estate business and thereby boosts economic development. But in today’s scenario buying the
home is a challenging chore, because it is a major expenditure. Housing finance means to take
home on a loan basis in which we pay monthly installments with favorable interest rates.

The main purpose of this study to know consumer perception towards home loan among private
and public sector banks. It’s a primary research paper and data is collected through a structured
questionnaire and discussions with the consumers. The outcome of the study shows that the level
of consumer awareness towards home loan is good with the benefits and service offered by
banks more consumers are willing to go home as an investment.

Keywords: Home Loan, Consumer Perception

1
Student, M.com(FA), Dept of Commerce – PG Studies, JAIN (Deemed-to-be-University),
Bengaluru Email Id: mishrapratiksha16@gmail.com, Contact: 7775921816
2
Assistant Professor, Dept of Commerce – PG Studies, JAIN (Deemed-to-be-University),
Bengaluru Email Id: smita.kavatekar@gmail.com, Contact: 9980414741

Introduction

Over the last few decades, the role of loan sector has undergone a significant shift. Home loan is
one of the important aspects of the source of loan for people to buy homes. People prefer it as an
investment avenue either as short term or long-term investment. The consumer expectations are
very high so it should be kept in mind and offer the best possible service. The home loan amount
fixed according to the value of the property. The borrower needs to have an excellent credit
history to obtain a home loan. The private sector offers a high-interest rate compared to public
sector banks, still, many borrowers prefer private banks over public banks because of the service
and commitment.

Review of Literature
  Gupta and Sinha (2015) examine factors influencing the purchase of home loan are a
low rate of interest, easy accessibility, the status/ reputation of the institution and scheme
offered by the company and that these influence the selection of the housing finance
institution. Chithra and Muthurani (2015) conducted a study on customer perception
towards home loan in H.D.F.C in Chennai with the 85 sample size. The study shows that
H.D.F.C. bank home loans have a product portfolio for satisfying different consumer
needs. Murugan and Jansirani (2017) carried out a study in Chennai to understand
customer perception towards home loan by selecting the 500 customers on a random
basis. Their study made an attempt to evaluate in depth the performance and operational
problems faced by the banking sector Sangwan and Bhan (2012) the study focused on
the satisfaction level of customers and problems faced by them in while obtaining home
loans. For this purpose, they have taken four commercial Banks in Chandigarh
city.Bandyopadhay (2011) has demonstrated the importance of borrower specific
characteristics as well as local situation factors in determining the demand prospects as
well as the risk of credit, loss on residential housing loan repayment behavior in India.

Figure 1: Theoretical Framework of Factors Influencing Home Loan

Promotional Strategies

Consumer Consumer needs

Interest rates and Customization
Perception as per needs
towards Home
Loan

Physical
facilities, IT Employee Behaviour
(Attitude, Concern for
and Quality needs and job clarity)
of services
Theoretical framework suggests that consumer perception towards home loan is influenced by
major factors as shown in the figure. Employees’ behavior towards consumer, Physical facilities,
Understanding customer needs and Promotional strategies of bank influences consumer
perception towards home loan.

Research Methodology:
The study was conducted with the help of primary data and secondary data. The data was
collected through a structured questionnaire. The people who have taken home loan from private
sectors banks and public sector banks were considered for the study. The study is conducted on
the basis of the response of 124 respondents. SPSS 15 was used and Descriptive statistics, Mean
score and Chi-square tests were used for analysis and interpretation. The study is conducted in
Bangalore city only.

This research is carried out primarily to examine factors affecting public and private sector banks
on the consumer satisfaction for the home loan disbursed to their consumer and relationship
amongst consumer satisfaction towards the bankers and availing of the loan.

Objectives:
1. To study the perception of consumers towards home loans.
2. To understand consumers’ preference towards home loan among public and private
sector banks.
3. To know consumers’ satisfaction level wrt interest rates among public and private
sector banks.
4. To find out whether identified important features of consumer perception and
demographic profile of the respondents are dependent on each other or not.

Data Analysis and Interpretation

The survey was conducted and data were collected from 124 respondents. The collected data
were analyzed by using SPSS 15.0 and by applying different statistical tools.

Table No.1 Demographic Profile (N= 124)

VARIABLES FREQUENCY PERCENT

Gender
Male 80 64.5%
Female 44 35.5%
 Age(in years)
30-40 73 58.9%
40-50 29 23.4%
Above 50 22 17.7%
Occupation
Professional 32 25.8%
Self-Employed 29 23.4%
Salaried 63 50.8%
Annual Income
(in Rs.)
Below 2 Lakh 4 3.2%
2-4 Lakh 20 16.1%
4-6 Lakh 58 46.8%
6 Lakh And Above 42 33.9%
Education
High School 7 5.6%
Graduate 64 51.6%
Postgraduate 53 42.7%
Banking Sector
Public Sector 64 51.6%
Private Sector 60 48.4%
Loan Amount
Less Than 1 Lakh 3 2.4
1-5 Lakh 20 16.1
5-10 Lakh 59 47.6
More Than 10 42 33.9
Lakh
Satisfaction
Towards Rate of
Interest
Yes 59 47.6
No 42 33.9
Maybe 23 18.5

 Out of 124 respondents, 64.5% are male and 35.5 % are female.
 Out of 124 respondents of 58.9% were between the ages of 30-40, 23.4% were
between the age of 40-50, and there were only 17.7% of respondents above 50.
 Representation of Salaried, professional, self-employed respondents is 26%, 23%,
and 51% respectively.
  Majority of the respondents, 46.8% respondent belong to 4-6 lakh annual income
followed by 33.9% respondents belong to 6 lakh and above and 3.2% people belong
to below 2 lakh annual income, 16.1% respondent belong to 2-4 lakh annual income.
 In terms of educational qualifications, 5.6% have done high school, 51.6% are
graduate and 42.7% are postgraduate.
 Out of 124 respondents, 51.6% of people take home loan from public sector banks
and 48.4% of people refer to take home loan from private sector banks.
 Out of 124 respondents, 47.6 % were taken loan between 5- 10 lakh and 33.9 % were
taken loan amount of more than 10 lakh.
 Out of 124 respondents, 47.6% were satisfied with the rate of interest and 33.9% were
not satisfied with the rate of interest.

Table no. 2 - Cross tabs between Loan amount and Banking Sector

banking sector
public private
sector sector Total
Loan less than 1 2 3
Amount 1 lakh
1-5 lakh 10 10 20
5-10 lakh 31 28 59
more than 22 20 42
10 lakh
Total 64 60 124

When the loan amount is less than 5 lakhs the consumers preferred to take home loan from both
private and public sector bank in equal proportion. Above 5 lakhs they preferred public sector
over private sector banks only by 2% - 3 %.
Table no. 3 - Cross tabs between Rate of Interest and Banking Sector

banking sector
public private
sector sector Total
rate of Yes 30 29 59
interest No 22 20 42
maybe 12 11 23
Total 64 60 124

The consumer preference for a home loan from private sector banks and public sector banks do
not depend on the rate of interest. Out of 124 respondents, 59 respondents are satisfied with the
rate of interest from the public and private sector banks. 42 respondents are not satisfied with the
rate of interest.

TABLE NO. 4 Indicating the Mean Scores of the Features (N= 124)

Qualitativ
Attitude Attracting Prompt e and
to service Care and and Customiz attention Employe Appointin Qualitativ productiv Branch Employe Understa
of concern retaining e product Relations to e g more e and e head/ Promotio Job e nding
employee for customer and Physical hip customer Flexible Develop service service customer Controllin n of distributo Behaviou Customer
s customer s services facilities banking needs prices IT ment personnel personnel s g office products n r needs
Mean 2.77 2.76 2.76 2.68 2.53 2.56 2.63 2.49 2.82 2.67 2.65 2.61 2.59 2.74 2.73 2.65 2.79 2.85
Std. 1.027 1.007 1.054 1.130 1.093 0.998 1.108 0.984 1.060 1.087 0.971 0.960 0.963 1.051 1.077 1.067 1.022 1.145
Deviation
IV V V VIII XV XIV XI XVI II IX X XII XIII VI VII X III I

Important features related to consumer perception towards home loans have been ranked based
on the mean scores.

Objective: To find out whether features of consumer perception and demographic profile of the
respondents are dependent on each other

Test: Chi-Square
Hypothesis

H1: Features of consumer perception and the demographic profile of the respondents are
dependent on each other.

H0: Features of consumer perception and the demographic profile of the respondents are
independent of each other.

TABLE NO. 5 Test of Independence between important features of consumer perception

towards home loan and Demographic Profile

Gender Age Education Income Occupation

X2 val X2 val X2 val X2 val X2 val
Understanding consumer 0.001* 0.064 0.048* 0.743 0.373
needs
IT 0.004* 0.115 0.079 0.114 0.126
Employee Behavior 0.000* 0.172 0.347 0.367 0.426
Attitude towards service 0.000* 0.000* 0.216 0.444 0.563
Care and concern for 0.018* 0.003* 0.13 0.88 0.816
customer
*Significant at 0.05

 Understanding Consumer needs - The P value (0.001 < 0.05) in case of gender and the
P value (0.048 < 0.05) in case of education. Ho is rejected in these two cases. Hence it is
concluded that the feature of understanding consumer needs is dependent on gender and
education. The feature of understanding consumer needs is not dependent in case of age,
occupation, and income.
 IT- The P value (0.004 < 0.05) in case of gender. Ho is rejected in this case. Hence it is
concluded that the feature of IT is dependent on gender. The feature of IT is not
dependent in case of age, education, income, and occupation.
 Employee Behavior - The P value (0.000< 0.05) in case of gender. Ho is rejected in this
case. Hence it is concluded that the feature of employee behavior is dependent on gender.
The feature of employee behavior is not dependent in case of age, education, income, and
occupation.
 Attitude towards service - The P value (0.000 < 0.05) in case of gender and the P value
(0.000 < 0.05) in case of age. Ho is rejected in these two cases. Hence it is concluded that
 the features of attitude towards service are dependent on gender and age. The feature of
attitude towards service is not dependent in case of education, income, and occupation.
 Care and concern for customer - The P value (0.018 < 0.05) in case of gender and the
P value (0.003< 0.05) in case of age. Ho is rejected in these two cases. Hence it is
concluded that the feature of care and concern for the customer is dependent on gender
and age. Feature of care and concern for customer is not dependent in case of education,
income and occupation.

Findings of the Study

 40- 50 years age group taken more home loan to compare to another age group.
 4 -6 lakh annual income people taken more home loans to compare to other income
groups.
 51% of people taken a loan from the public sector and 49% of people took home loan
from private sector banks.
 The respondents preferred bank which understood consumer needs and attitude of the
employee also matters.
 47.6% of respondents were satisfied with the rate of interest and 33.9% respondents are
not satisfied with the rate of the interest.
 Consumer perception towards understanding consumer needs is dependent on gender and
education. Consumer perception towards Information Technology, Employee Behaviour
and Attitude towards Service is dependent on gender. Consumer perception towards
feature of care and concern for customer is dependent on gender and age.

Suggestions
 Banks should use the easy/simple procedure for the sanctioning of home loans to
consumers.
 The banks need to give more importance to consumer satisfaction; competition is high to
survive in the market they need to focus more on consumer feedbacks.
 The bank should improve its consumer service. The services provided by banks need to
be more computerized.
 The loan passing process should be quicker by public sector bank as a private sector
bank.
 The rate of interest should be competitive and free accident insurance cover for home
loan consumers should be provided.
Conclusion
According to the study, different demographic factors such as age, gender, annual income
and no. of dependents have a significant impact on consumer perception towards home
loan. This study attempts to find out the consumer perception towards home loans among
private and public sector banks in Bangalore and the problems faced by the consumers
while availing home loans. According to the research age group 40- 50 opted for a home
loan, income group between 5 lakh – 6 lakh. While availing the home loan consumer
wants their banks to understand their need and suggest customize products according to
that. Nowadays, people also prefer to take home loan from the private sector.

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