A PROJECT REPORT ON

HOUSING FINANCE IN INDIA WITH SPECIAL REFERENCE TO HDFC BANK

LIMITED

A PROJECT SUMITTED TO
UNIVERSITY OF MUMBAI

FOR PRATICAL COMPLETION THE DEGREE

BACHELOR IN COMMERCE
(ACCOUNTING AND FINANCE)

UNDER THE FACULTY OF COMMERCE BY

MANISHA P. SHARMA
ROLL NO. 34

UNDER THE GUIDANCE OF

ASST. PROP. DASKHA CHOUDHARY

SHREE L.R. TIWARI DEGREE COLLEGE OF

ARTS,COMMERCE,AND SCIENCE
MIRA ROAD (EAST) ,THANE,-401107

ACADEMIC YEAR
2020-2021
 A PROJECT REPORT ON

HOUSING FINANCE IN INDIA WITH SPECIAL REFERENCE TO HDFC BANK

LIMITED

A PROJECT SUMITTED TO
UNIVERSITY OF MUMBAI

FOR PRATICAL COMPLETION THE DEGREE

BACHELOR IN COMMERCE
(ACCOUNTING AND FINANCE)

UNDER THE FACULTY OF COMMERCE BY

MANISHA P. SHARMA
ROLL NO. 34

UNDER THE GUIDANCE OF

ASST. PROP. DASKHA CHOUDHARY

SHREE L.R. TIWARI DEGREE COLLEGE OF

ARTS,COMMERCE,AND SCIENCE
MIRA ROAD (EAST) ,THANE,-401107

ACADEMIC YEAR
2020-2021
 CERTIFIED

I, Mrs. DAKSHA CHOUDHARY, hereby certify that Miss. MANISHA P. SHARMA of SHREE
L.R.TIWARI DEGREE COLLEGE OF ART’S, COMMERCE AND SCIENCE of TYBAF
(Semester VI) has completed his project ,titled “HOUSING FINANCE IN INDIA WITH
SPECIAL REFERENCE TO HDFC BANK LIMITED” in the academic year 2020 -2021. The
information submitted herein is true an original to the best of my knowledge.

_______________________
Signature of the principal.
( DR.SANJAY MISHRA )

_______________________

Signature of the project guide

(Mrs. Daksha Chaudhary)
 DECLARATION

I, Mr. MANISHA P. SHARMA of SHREE L.R. TIWARI DEGREE COLLEGE OF ART’S,

COMMERCE AND of TYBAF(Semester VI) hereby declare that I have completed my project, titled
“HOUSING FINANCE IN INDIA WITH SPECIAL REFERENCE TO HDFC BANK
LIMITED”in the Academic year 2020-2021.The information submitted herein is true and original to
the best of my knowledge.

_____________________
Signature of student
(MANISHA P. SHARMA)
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so measures and the death is so enormous.
I would like to acknowledge the following as being identity list channels and fresh dimensions in the
completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do this project.
I would like to thank my principal Dr.Sanjay Mishra for providing the necessary faculties required
for completion of this project.
I take this opportunity to thank our coordinator professor. Sunil Vishwakarma for her moral
support and guidance.
I would also like to express my sincere gratitude towards my project guided the Mrs. Daksha
Chaudhary whose guidance and care made the project successful.
I would like to thank my college library, for having provided various reference books and magazines
related to my project.
Lastly, I would like to thank each and every person who directly or indirectly help me in the
computation of the project specially my parents and peers who supported me throughout my project.
Chapter no. Topics Page no.
Certified
Delarction
Acknowledgement
Chapter no. 1 Introduction
Chapter no. 2 Review of literature
Chapter no. 3 Research and methodology
Chapter no.4 Data analysise and
interpertation
Chapter no. 5 Findings and conclusion
Appendiex Bibliography and
Questionnaires
CHAPTER _ 1

INTRODUCTION

Housing A Basic Need

Housing : Essential for Economy.
Housing : A Wealth Creator.
Housing : A Status Symbol
Housing : A Psychological Satisfaction
A Surging Phase of Housing Sector In India.
Housing : In Asia.

Housing Finance In India

Meaning of Housing Finance.
Eligibility Criteria for Housing Finance in India.
General Terms and Conditions of a Housing Loan.
Different Kinds of Charges Applicable to Housing Loan Products.
The Typical Credit Documents That Need to Be Submitted to the HFI.
Types of Housing Finance.
Finance for Housing.
Housing and Urban Development Corporation (HUDCO).
National Housing Bank (NHB).
Cooperative Housing.
The Central and State Housing Boards.
Commercial Banks.
Non Banking Financial Companies.
References.
 Mid pleasures and places though we may roam, But it ever so humble, there is no place like
home Home! Home ! Sweet, Sweet home !

Introduction:
Even after 200 years, when American poet John Howard Payne wrote these lines, the theme of the
poem still attains the same significance. Its importance has further been compounded by rapid
increase in population and economic development. Housing is one of the basic human requirements
among three basic necessities those are Food, clothing and shelter. The constitution of India includes
the right to live and have a livelihood as a fundamental right to housing policy. The Directive
Principles of State Policy make it an obligation on the state to facilitate housing.

Housing: Essential for Economy

The strengthening of local infrastructure through community development and housing initiative is
essential for any economy irrespective of its stage of development. Housing has always been agenda
for the Government of India over the years, because it is a visible output where the development can
be seen and a vital sector of the national economy creating jobs and generating taxes and wages that
positively influence the standard of the living. It is estimated that for every Indian rupees invested in
construction, of houses, 78 paise is added to GDP (Gross Domestic Product) of the country and the
housing or real sector is subservient to the development of over 250 other ancillary industries.
A study instituted by HUDCO to evaluate the impact of investment in housing sector on GDP and
employment found that housing sectors ranks third among the fourteen major sectors in terms of total
linkage effects with other sectors of the national economy. In terms of income multiplier, it ranks
fourth and is ahead of sectors like transport and agriculture. It is estimated that a unit increase in the
final expenditure would generate additional income as high as five times.
The investment in housing like any other industry, have a multiplier effect on income and
employment. It is estimated that overall employment generation in the economy due to additional
investment in the housing or construction is eight times the direct employment. The construction
sector provides employment to 16% of the work force (absolute number is 146 Lakhs in 1997). It is
growing at the rate of 7%. Out of this, housing sector alone accounts for 85.5 lakh workers. However,
nearly 55% of them are in the unskilled category.
The investment in housing sector enhanced the capacity utilization of related industries such as steel,
cement, transportation etc. It increases the employment opportunities for dealers of building
materials, builders and developers, architects, civil engineers, property valuers, contractors,
plumbers, electricians, interior decorators, furnishers etc.
The economic impact of housing is not confined to the sale of house, but it continues to be an
economic force long after the sale is closed through various activities such as furnishing, decorating,
remodeling rooms, repairs, extensions, property alterations etc.
The increased housing activity results in more revenue to the government by the way of stamp duty.
The development of housing sector is a visible output whether it is supported by Public finance,
private finance or foreign investment.

Housing: A Wealth Creator

The homeownership is a primary means by which households achieve financial security. It is life time
achievement for a person to purchase a sweet home for him and his family. Even people get 4 ready
to spare their provident fund and gratuity amounts received after retirement. The wealth of the person
is estimated by including the market value of his owned property, so, owned home is a symbol of
wealth. Thus, Homeownership is not only a sign of wealth but it is one of the defensive shields which
may yield cash at the time of difficulties. And even in normal course of time it may generate cash
inflows by means of rent, if it is being wholly or partly let out. The financial security is a gift of
homeownership. Presently a new concept of “Reverse Mortgage” have been emerged wherein a
homeowner borrows against the equity in his home and receives regular tax free payments from the
lender. The period of such payment is not a specified number of years but the remaining life time of
the owner of the property and his / her spouse. Thus, homeownership can also make financial
arrangements like pension after the retirement of the person.

Housing: A Status Symbol

Homes are not just houses, they are environments which projects the aspirations of individual
families, the clusters of homes forms neighbourhoods and the cluster of neighbourhoods forms towns
and cities. Home ownership is the physical embodiment of the 5 stake in society. With the changing
time, the shelter as a basic unit of society has also been transformed significantly. Today, the properly
designed home, according to “Vaastu Shastra” with attractive interiors is a status symbol in society.
The home ownership is prime means by which households achieve financial security and
communities achieve stability. Even in patriarchal as well as in matriarchal concept of society there
is a significance of homeownership. The self owned home upto some extent discourages the frequent
migration of the households. And the avoidance of change in the elements of society helps in bringing
stability in the communities. The integrated housing development is very important since it satisfied
basic need, strengthens local economic infrastructure and brings stability in communities.

Housing: A Psychological Satisfaction

The home is a place of refuge and comfort, a haven that protects an individual from anxieties of life.
It is a retreat where a man can build and live his dreams and share them with his family. When
someone buys home for him, it is not just finance but it is love and affection which is being transacted.
Of all our investments buying a house is surely the most emotional decision, nothing 6 compares to
the feeling of owning home. Homeownership brings a sense of satisfaction with a glimpse of
dedication towards family. Satisfactory housing and housing satisfaction are the integral part of socio-
economic development, political stability and development of intellectual capital and thus have far
reaching impact on the well being of the generations to come. Home not only provides protection
against rain, thunder showers, scorching sun, cold breeze or other weather variants but it also provides
a psychological satisfaction, social stability, social security, financial security, a sense of
belongingness and an emotional bond with life.

A Surging Phase Of Housing Sector In India

A well planned housing in India is as old as the Harappan Civilization. Most of the Euro-Americans
(Read capitalists) translated the development as massive urbanization and thereby transformed most
of their rural world into barren spaces for human habitation. India took on the task of moderning and
developing itself obsessed with the idea that real world always live in villages.

The First Prime Minister of India, Pandit Jawahar Lal Nehru’s deep commitments to modernity meant
that he toyed with the idea of building a genuinely modern city that could act as a role model for
urban dwellers. The city was Chandigarh. India has an ancient history of refined urban planning
which could have been popularized and been more effective than Chandigarh in terms of providing
a more identifiable set of concepts and practices for its urban citizens. Udaipur in Rajasthan, Fatehpur
Sikri, Hampi, Vijaynagar and of course the ancient Harappan townships come into mind while
discussing the housing development.
In First Five Year Plan (1951-56) the government of India concentrated on the institution building
and on construction of homes for government employees and weaker section of society. Even good
part of the plan outlay was spent on the rehabilitation of the refugees from Pakistan and on building
the new city Chandigarh. An Industrial Housing Scheme was initiated. The Plan aimed at balanced
regional development, protection of small scale industries, prevents concentration of economic power
in a few business families and regulate and if necessary taken over those industrial undertakings
which were consistently flouting government directives.
In Second Five Year Plan (1956-61) the Industrial Housing Scheme was widened to cover all workers.
The three new schemes were introduced; those were Rural Housing Scheme, Slum Clearance
Scheme and Sweepers Housing Scheme. Town and Country Planning legislations were enacted in
many states and necessary organizations were set up for the preparation of Master Plans for important
towns. But these schemes were not quite seen to be in tandem with other vital inputs that create
habitats, good roads, deep connections with rural hinterlands and facilities such as hospitals and
education.
In Third Five Year Plan (1961-66) efforts were made to coordinate all agencies and help orient
programmes to the needs of low income groups. A scheme was introduced in 1959 to give loans to
State government for a period of ten years for acquisition and development of land in order to make
available building sites in sufficient numbers. Master plans for major cities were prepared and the
state capitals, Gandhinagar and Bhubneshwar were development. The dominant idea became to invest
in new townships that often had no connection with earlier build forms and traditional urban habitats.

The Fourth Five Year Plan (1969-74) stressed need to prevent the further growth of population in
large cities and the need for dispersal of population through creation of small towns. In April 9 1970,
the Housing & Urban Development Corporation (HUDCO) was established to find housing and urban
development programmes .The scheme for environment improved was undertaken with a view to
provide a minimum level of services like water supply, sewerage , drainage, street pavements in
eleven cities, with population of eight lakh and above. The scheme was later extended to nine more
cities. This was a good move, but far reasons to do with general inability the actually implement
grandiose plans, remained excellent ideals.

The Fifth Five Year Plan (1974-79) reiterated the policies of the preceding plans to promote small
towns in new urban centres. This was to be supplemented by efforts to augment civic services in
urban areas with particular emphasis on a comprehensive and regional approach to problems in
metropolitan cities. The Urban Land (Ceiling & Regulation) Act was enacted in 1976 to impose a
ceiling limit on vacant land in urban areas. The aim was to prevent concentration of land holdings in
urban areas and to make urban land available for construction of houses for middle and low-income
groups.
The Sixth Five Year Plan (1980-85) focused on integrated provision of services along with shelter,
particularly for poor. The 10 Integrated Development of Small and Medium Towns (IDSMT) was
launched in towns with population of one lakh for roads pavements, minor civic works, bus stands,
markets, shopping complexes etc. Positive inducements were proposed for setting up new industries,
commercial and professional establishment in small, medium and intermediate towns. Many of the
(4000 plus) townships and urban agglomerations that are part of 2001 census are legacy of these
moves.

The Seventh Five Year Plan (1985-90) stressed the need to entrust the major responsibility of
housing construction to the private sector. The National Housing Bank (NHB) was set up in 1988
under the NHB Act 1987, as a principal agency for expanding the base of housing finance. The NBO
was reconstituted, at the central level, the National Building Organization (NBO) is an attached office
under the Ministry of Housing and Urban Poverty Alleviation is the organization which collects,
maintains, and disseminate the authentic data on Housing and related infrastructure statistics. A new
organization Building Material Technology Promotion Council (BMTPC) was set up to promote
commercial production of innovative building materials. For the first time the problems of 11 urban
poor were recognized and Urban Poverty Alleviation Scheme called “Urban Basic Services for the
Poor (USBP)” was launched. During this plan’s period private builders got an enormous boost to
enter the mass housing market and make materials even more expensive for poor. The NBO has
estimated that in 1991 urban housing shortage at 8.23 millions, expects the absolute shortage to
decline progressively to 7.57 million in 1997 and 6.64 million in 2001.

The Eighth Five Year Plan (1992-97) for the first time explicitly recognized the role and importance
of the urban sector for the nation’s economy. While the growth rate of employment in the urban areas
averaging 3.8 percent per annum, it dropped to about 1.6 percent per annum in rural areas. The Plan
identified the emerging key issues viz.: the widening gap between demand and supply of
infrastructural services, which hits the poor, whose access to basic services like drinking water,
sanitation, education and basic health care is shrinking. The unabated growth of the urban population,
aggravating the accumulated backlog of housing shortages and resulting in the proliferation of slums
and squatter settlements and decay of city environments.

The Ninth Five Year Plan (1998-2002) paid special attention on households at the lowest end of
housing market. The focus was on housing for Economically Weaker Section (EWS) and Lower
Income Group (LIG). The priority groups were identified for such support are people below poverty
line, SC/STs, disabled, freed bonded labourers, slum dwellers and women headed households. The
National Housing and Habitat Policy in 1998 aims at ensuring basic need “Shelter for all” and better
quality life to all citizens by harnessing the unused potentials in public, private and household
sectors.16 Highlights of National Housing and Habitat Policy (NHHP) 1998 were:
1. Mission to achieve “housing for all.”
2. Surplus housing stock to be created.
3. Address issues of urban and rural settlements in entirety.
4. Promote private and cooperative sectors for housing construction (urban/rural).
5. Target to construction Two million houses annually – 0.7 million urban and 1.3 million rural.
6. Fiscal concessions for private sector for shelter delivery to poor.
7. Promote R&D and transfer of technology into housing, new technology for rural areas and to
emphasize the use of locally available raw material.
8. Fiscal concessions to promote mass housing and settling up regulatory mechanism.
9. Planned growth for sustainable use and consumption of natural resources.
10. Basic infrastructure/supporting services to be made integral part of housing development.
11. Skill upgradation, training and employment in housing construction.
12. Pre-disaster mitigation techniques to be adopted by construction/retrofitting of dwellings in
disaster-prone regions to prevent loss of life and shelter.
13. Streamline legal or administrative reforms in housing sector, provide for time bound approval of
projects.
14. Formulation of effective foreclosure laws, development of secondary mortgages market.
15. All states to repeal ULCRA.
16. Simplified procedures for sanctioning building plans and towards single window clearance.

The NHHP from 1999 onwards has guided various authorities in initiating the process of housing
development, with an aim to bring about a housing habitat revolution in economy by 2010.In this
Plan, the Special Action Plan (SAP) 1998-99 recognizes housing for all as priority areas. It sets the
target of construction of 20 Lakhs additional houses every year. In this plan a provision of Rs. 8176.36
crores in the State Sector and Rs. 4873 crores in the Central sector has been made for housing. During
1997-98 under EWS Scheme 104960 housing units were constructed but only eight States viz Andhra
Pradesh, Gujarat, Himachal Pradesh, Punjab, Rajasthan, Tamil Nadu, Karnataka, and Uttar Pradesh
were able to achieve the target set for EWS housing. During this period under LIG housing,
achievement was 23179 units and after certain period it has achieved the target upto 71 percent. Only
eight states viz; Gujarat , Kerala , Madhya Pradesh , Maharastra, Orissa, Rajasthan, Tamil Nadu and
West Bengal achieve the targets set for the programme.
During the plan period, Cooperative Sector and Public Housing Agencies were also being encouraged
to share the responsibility. Urban Land Ceiling and Regulation Act (ULCRA) 1976 has been repealed
to facilitate land for housing activity. Task 15 of upgradation and renewal of old and dilapidated
housing stock is being taken.

The Tenth Five Year Plan (2002-07) highlighted that there is shortage of 22.4 million dwelling units
in urban and rural areas. But unofficially estimates put this number closer to 40 million units. There
is need to construct approx 80 to 90 million housing units over the next 10 to 15 years. Foreign Direct
Investment (FDI) upto 100 percent under the automatic route is now permitted for development of
townships housing, build-up infrastructure and construction development projects. The minimum
area requirement has been reduced to 10 hectares for serviced housing plots and 5000 square meters
built-up areas for construction development projects.
In the Tenth Five Year Plan the outlay on housing was:
For 2002-03 - Rs. 3735 Crores.
For 2003-04 - Rs. 8629.24 Crores
For 2004-05 - Rs. 12153.27 Crores
For 2005-06 - Rs. 13203.74 Crores
Source: Economic Survey 2005-06, GOI Economic Division, Ministry of Finance.

The Physical and Financial progress of “Two Million Housing Programme (2 MHP) which was
launched during 1998-99 with a particular motive to stress on the needs of the Economically Weaker
Sections and Low Income Group categories, during the Tenth Five Year Plan in urban areas is as under:

Organisation Target for Dwelling Progress Reporting SACTIONS

Units (DUs) in Urban Period DUs in Amount
Areas 2000-2007 Urban (Rs. in
Areas crores
HUDCO 20,00,000 20002-2007 (up to 1330271 5307.34
31.5.2006)
HFIs & Public Total 1000000 2002-2006 (up to 2010174 8478604
Sector Bank 31.3.2006)
 Housing 1010015 50610.46
Finance
Institutions
Public 1000159 34175.58
Sector
Banks
Cooperative Sector 500000 2002-2005 (up to 280413 4608.18
(Urban) 31.3.2005)
Total 3500000 3620858 94791.56

Source: Report of the XIth FYP (2007-12) Working Group on Urban Housing with focus on slums.
GOI.

Physical targets in terms of dwelling units have been achieved and even exceeds by one lakh dwelling
units. In the course of monitoring the progress and achievements, following issues have been noticed:

1. HUDCO and Cooperative Sector have been contributed less than their targets.
2. HFIs and Public Sector Banks have contributed substantially to achieve the physical target.
3. In the first two years of the plan period HUDCO has surpassed the targets but the sanctions has
declined in the subsequent years. The reason for this decline is however attributed to the difficulties
faced by State Housing Agencies in getting the required Government guarantee for raising funds for
Economically Weaker Section (EWS) and Low Income Group (LIG) housing and also due to shortfall
in recoveries from the beneficiaries (EWS/LIG). The other Centrally sponsored schemes are also
responsible for this decline.
The draft of the National Urban Housing and Habitat Policy (2006) is currently under finalization.
The main policy directions and strategies included in this draft policy are incorporated in the working
group report in relevant sections. To promulgate the draft National Urban Housing and Habitat Policy
2006, a Task Force has been constituted under the Chairmanship of Secretary, Urban Employment
and Poverty Alleviation on 27.1.2005 representing members from Planning Commission, Ministry of
Finance and other Ministries/Departments/State Governments and Financial and other Institutions
dealing with housing sectors. The terms of reference of the Task Force are:-
(i) To Review the existing National Urban Housing and Habitat Policy, suggest changes and
draft a new policy.
(ii) To review the existing schemes, policies, guidelines, laws, bye-laws, and rules and
regulations at the Central/State levels in the housing and habitat Sector and suggest
revision of these in the light of the proposed revised Housing Policy.
(iii) To recommend the broad parameter on the lines of which the model laws, bye-laws, rules
and regulations of the Central/State level may be drafted to boost the housing activities
and to remove legal impediments in achieving goals of the proposed policy.

In December 2005, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM)
has been launched by Government of India for an initial period of seven years with a
Central outlay of Rs. 5000 Crores. Under this mission there are 63 cities including 35
cities with more than a million population which are designated to be eligible for
investment. The Mission comprises two sub-mission namely Submission for
Infrastructure & Governance and Submission for Basic Services to the Urban poor.

The main thrust of the Sub-mission for Basic Services to the Urban Poor (BSUP) will be
on integrated development of slums through projects for providing shelter, basic services
and other related civic amenities with view utilities to the urban poor. To compliment this
activity in smaller non-mission towns the centrally supported scheme of Integrated
Housing and slum Development Programme (IHSDP) has been launched. These schemes
of BSUP and ISHDP will replace the earlier launched schemes of Valmiki Ambedkar Awar
Yojana (VAMBAY) and National Slum Development Programme. The schemes also
envisage implementation of reform measures besides extending funding support for basic
services and shelter development that benefit the poor in urban slums.

The Government of India launched VAMBAY scheme as a centrally supported scheme in

the period of Tenth Five Year Plan as a centrally supported scheme with inbuilt subsidy
for undertaking construction of dwelling units and sanitation units specially focused for
slum dwellers that are economically below the poverty line and belong to socially
disadvantaged group. The progress of scheme is reported as from the year 2001 to 2006,
the total amount allocated is Rs. 109393.01 lakhs, GOI subsidy released Rs. 96378.138
lakhs, Number of Dwelling Units sanctioned for construction or 20 upgradation 442369,
and Number of Toilet seats sanctioned for construction were 65286.

LOAN DISBURSEMENT DURING Xth Plan Period

Institutions Total Housing Loan Disbursements (Rs. in Crores)

2002-03 2003-04 2004-05 2005-06 2006-07
Commercial 23553 32816 50398 60000 67000
Banks
HFCs 17832 20862 26000 29500 32500
Co-operative 642 623 421 500 500
Institution
Total 42027 45301 76819 90000 100000
Source: Report of XI FYP (2007-12) Working Group on Urban Housing with Focus on
Slums. GOI.

From the various indicative reports like Flow of credit for rural housing under various
ongoing schemes like Golden Jubilee Rural Housing Finance Scheme. It is observed that
approx. 15% of the above mentioned institutional credit is flowing towards rural housing.
Therefore, it is estimated that about Rs. 3.0 Lakh Crores of 21 institutional credit would
be flowing towards urban housing during the 10th Plan period i.e. 2002-07.

In terms of the scheme structure, VAMBAY scheme proved to be more successful than
Two Million Housing Programme (2MHP), since it had a grant component of 50% thus
making housing affordable to the poor. The advantages are also in terms of targeting the
urban poor and EWS, as the major urban housing shortage is in EWS and LIG categories
with launching of JNNURM. The VAMBAY scheme has been discontinued. However its
elements have been incorporated in JNNURM.

During the plan period joint sector projects attempted in a few cities as well as slum
redevelopment projects taken up in Mumbai. Other projects like Gujarat Ambuja Housing
Project jointly undertaken with West Bengal Housing Board at Kolkata, SRA Projects
taken up in the Mumbai & Pune, Integrated Townships taken up by Karnataka Housing
Board as joint venture projects in collaboration with private companies in the vicinity of
Bangalore and other major towns in the State of Karnataka. These projects are focused to
providing housing to Economically Weaker Section (EWS), Lower Income Group (LIG),
Middle Income Group (MIG) and High Income Group (HIG). Institutions such as
National Real Estate Development council (NAREDCO) and Confederation of Real
Estate Developers Association of India (CREDAI) has played a significant role in
regulating the activities of Private Developers.

The Eleventh Five Year Plan (2007-2012) The Technical group set up by GOI to assess
the extent of housing shortage, it has assessed the housing shortage at beginning of 11th
Plan period at 24.71 million units. As per the Technical Group 99% of this shortage
accounts for EWS/LTG. The total requirements of the dwelling units during the entire
period of 11th plan (2007-2012) will be 26.53 million.27 The housing shortage as on 2007
according to different categories is as follows:

Category Housing shortage in Million as on 2007

EWS 21.78
LIG 2.89
MIG 0.04(Including MIG & HIG)
HIG _____
24.71
Source : www.planningcommission.nic.in

The housing requirement during the Eleventh Plan Period has been worked out by
utilizing the rate of growths on various parameters as has been applied for arriving at the
housing shortage as on 2007 assuming that the rates will not change drastically during the
five year period of the plan. There fore, the estimates of the households, housing stock
etc. as on 2012 will be:-

Sr As on 2012
no.
1 Housing Shortage as on 2007 (Mn) 24.71
2 Households (Mn) 75.01

3 Pucca House (Mn) 53.49

4 Semi-Pucca Houses (Mn) 10.05
5 Katcha Houses (Mn) 2.56

6 Addition to Households (Mn) 8.71

7 Addition to Housing Stock (Mn) 7.27
8 Upgradation to Katcha Houses (Mn) 0.38
9 Additional Requirement (Mn) 1.82
10 Total requirement (Mn) (6-7+8) 26.53
Source: www.planningcommission.nic.in

The above table explicit the total housing requirement in the period of Eleventh Plan will
be 26.53 million. In this table, the household means a group of persons normally living
together and taking food from a common kitchen. The members of household might or
might not be related by blood to one another. The pucca house is a structure whose walls
and roof were made of pucca material such as cement, concrete, oven burnt bricks, hollow
cement/ash bricks, stone, stone bricks, metals, asbestos cement, plywood etc. The Katcha
house is the structure whole wall and roof, both are made of non pucca material. The
Katcha house with thatched walls and thatched roof is unserviceable Katcha house and in
its absence it is serviceable Katcha house.

Semi-pucca house is a structure which could not be classified as a pucca or Katcha

structure as per definition is semi-pucca. Such structure has either the wall or the roof but
not both made of pucca material. The estimated housing shortage has been divided
amongst the states on the basis of the proportion of the number of households in the urban
areas of State to the total number of household as per Census of India, 2001. The
distribution of the housing shortage amongst the States as on 2007 it as follows:
State/UTs Housing Shortage (Millions)
1.Andhra pradesh 1.95
2,Arunachal pradesh 0.02
3.Assam 0.31
4.Bihar 0.59
5.Chhatisghar 0.36
6.Goa 0.07
7.Gujarat 1.66
8.Haryana 0.52
9.Himachal pradesh 0.06
10.Jammu and kashmir 0.18
11.Jharkhand 0.47
12.karnataka 1.63
13.Kerla 0.76
14.Madhya pradesh 1.29
15.Maharashtra 3.72
16.Minipure 0.05
17.Meghalya 0.04
18.Mizoram 0.04
19.Nagaland 0.03
20.Orissa 0.50
21.Punjab 0.69
22.Rajashtan 1.03
23.Sikkim 0.01
24.Tamil nadu 2.82
25.Tripura 0.06
26.Uttra khandan 0.18
27.Uttar pradesh 2.38
28.West Bengal 2.04
29.Andaman &Nicobar Island 0.01
30.Chandighar 0.08
31.Dadra & Nagar haveli 0.01
32.Daman & Dev 0.01
33. Delhi 1.13
34.Laskhdeep 0.00
35.Pandicherry 0.06
36.All India 24.71

The table shows that the more shortage of housing units are in the states like Maharashtra,
Tamil Nadu, Uttar Pradesh , Andhra Pradesh , Gujarat and Karnataka as in all these states
 the housing shortage is of more than 1.50million housing units. Investment required to
cover Housing Shortage at the beginning of Eleventh Five year Plan period is estimated
to be Rs. 361318.1 Crores

Scenario Investment Requirement ( Rs. In

Crores)
Housing Shortage at the beginning of XI 1477195.00
Plan Period
New Additions to the housing stock during 214123.10
the XI Plan Period including the additional
housing shortage during the plan period
Total House Requirement for the XI Plan 361318.10
Period

Source: www.planningcommission.nic.in

The above estimation of housing shortage has been done by the Technical Group set up
by the Ministry of Housing & Urban Poverty Alleviation, Govt. of India. The total
investmentrequirement would be in the order of Rs. 361318.10 Crores consisting of Rs.
147195.00 crores required for mitigation housing shortage at the beginning of XI Plan
and Rs. 2141123.10 crores for new additions during the XI Plan period. As per the
estimates the urban housing shortage at the beginning of XI Plan Period
71 million units. In addition to this, it is expected that 7.27 million units will be
constructed during the plan period. The total funds required to meet total construction of
the dwelling units during XI Plan Period will be around Rs. 3.61 Lakhs crores.
According to current economic and monetary scenario it is expected that the housing
finance disbursals by banks, Housing Finance Companies (HFCs) and cooperative sector
institutions would grow at a rate of about 15% per annum during XI Plan period. The
following table shows the expected gross flow of funds which come to approximately Rs.
2.90 Lakhs crores, which is 80% of the total investment requirements for urban housing
for the XI plan period.

EXPECTED FLOW OF FUNDS IN XII PLAN PERIOD

S. No Institutions Expected of Funds in XIPlan Period Total Housing
Loan Disbursement (Rs. in Crores
2007-08 2008-09 2009-10 2010-11 2011-12
1 Commercial Banks 77000 88000 102000 117000 135000
2 HFCs 37500 43500 49500 57500 66500
3 Cooperative Institutions 500 500 500 500 500
4 Gross Flow of Funds for Total Housing 115000 132000 152000 175000 201000
5 Gross Flow of Funds for Urban 86250 99000 114000 131250 150750
Housing
6 Net Fund Flow for Urban Housing 43125 49500 57000 65625 75375
(50% of Gross Urban Housing)
Net Fund Flow for Urban Housing For 290625
the XI Plan Period

The housing Sector requires huge investment to tackle the housing sector shortage
in the country over the next five year period upto 2012. Resources need to be mobilized
through the domestic as well as the international markets. The Government of India has
permitted 100% FDI for development of township including housing, built up
infrastructure and construction/development projects, subject to minimum capitalization,
minimum land/built up area etc.

In the XI Plan period the securitization, External Commercial Borrowings (ECBs),

Foreign Direct Investment (FDI), and creation of Housing investment Trust (HIT) or Real
Estate Investment Trust (REIT) and Real Estate Mutual Fund or Real Estate Investment
Trust (RFIT) (REMF) will be given special consideration.
The Housing Sector has witnessed dramatic changes ever the last few years coupled with
the much needed recovery from the necessary trends and gaining a never-before
buoyancy.

There are various factors which have contributed to the buoyancy in the housing sector.
During past few years the Union Budgets have taken several measures to extend fiscal
incentives and simplify procedures that have gone a long way in giving an impetus to the
housing sector. The Union Budget 2007 has been pronounced, heralding positive trends
for the housing industry. In Budget proposals, Union Finance Minister Mr. P
Chidambaram unveiled a mortgage guarantee mechanism to facilitate easier home loan
deals and proposed the introduction of the “ Reverse Mortgage ” scheme from senior
citizens through the National Housing Bank (NHB). Moreover , the government is also
proposing a number of positive policies to regulate the real estate industry and ensure a
fair deal for home buyers . These includes selling apartments on the basis of carpet area
as against the existing norm of built-up or super built-up area and making certain that
builders do not backtrack on promises made on the amenities nor the quality of the
construction.

Accounting for 16% of the global population, India runs the risk of achieving the dubious
distinction of the most populous country in the world by 2050. One of the advantage
though that India will continue to enjoy for some years is that what is termed as
“Demographic Dividend” namely a young population and the declining dependency ratio.

Housing: In Asia
The housing markets in Asia are under more pressure than anywhere else in the world.
The land price to income ratio, for Asia is amongst the world’s highest. If reflects the lack
of affordable urban housing in the region. It also underscores increases in pollution and
congestion and dramatic decrease in aggregate productive work time.

In Asian countries there is limited availability of infrastructure services such as water,

power sewage treatment etc. Those who do not have access to housing finance are forced
to live in slums and squatter settlements. Mumbai is a good example of this case in India.
Alternatively, those who do not have access to affordable housing live far outside the
metropolitan where they work and commute long distances every day.

In Korea government encouragement of extensive housing construction and deregulation

of housing finance has made housing available and affordable to almost everyone.
In war-ravaged Afghanistan, where 60% of Kabul’s capital has been destroyed or
damaged in over a quarter century of conflict and post conflict instability, about 65% of
urban dwellers lack adequate housing or even access to safe water.
Pakistan still suffers from incredible housing shortage of about seven million units,
approximately 600000 units would have to be build every year for 20 years.
In Mongolia needed reforms have been made, but existing housing finance options are
totally inadequate. It housing markets are constrained by lack of knowledge of mortgage
lending, compounded with underdeveloped banking system and vague land ownership
laws. It is an irony that during the era of liberalization Privatization and Globalization,
there are currently more than a billion people world wide that live in adequate housing,
the majority in urban slums and squatter settlements.

Due to rapid population growth and disproportionate urbanization the problem is more
prevalent in the Asia and the Pacific region. This region accounts over half of all
inadequate housing units, this explicit that the Asia and the pacific region is in throes of
what could be called without exaggeration, a housing crisis.

In India, despite the growth of housing markets, the current housing shortage is of 22.4
million dwelling units; the time has come to solve the problem and change the situation.
The rapid increase in demand for housing has been widening the scope of development in
housing sector not only in India but in general in entire world and in Asia and Pacific in
particular. As housing Sector has linkage to many sectors in the economy, thus it is a key
to economic growth. A stimulus to the demand for housing will have direct or indirect
stimulatory impact on all other allied industries. The development of housing sector does
not mean to provide a well designed bungalows to high income groups but its real sense
is to provide houses to those who are still living in slums .This sector has a potential to
bring the stage of prosperity for the economy if fully explored.

Meaning of Housing Finance

The home is basic unit of society, but the capital required per dwelling is so large that few
individuals can raise it from their own savings. So there is a great need and scope for the
purpose of construction of house. The terms “Housing Finance” or “Home Loan” means
finance for buying or modifying a property. The different housing loan products could be
classified as:-
(a) Home Loans
(b) Home Extension Loans
(c) Home Improvement Loans
(d) Land Loans
(e) NRI Loans
(f) Home Equity Loans
(g) Short Term bridging Loans
(h) Converting high interest housing loan to low interest housing loan.

Eligibility criteria of housing finance in India.

The individual, who is planning to buy a house in India, can apply for home loan, whether
he is “Resident” or Non-resident individual. The individual can apply for loan even before
the selection of the property which is to be purchased. Once an individual decides the
maximum amount that he can put into the property, all Housing Finance Institution (HFIs)
can help to plan his budget by calculating his “Affordability” which is based on his
individual or clubbed income.
The loan applicant has an option of having co-applicant to his loan to enhance his loan
eligibility. All HFIs lay down conditions on who can be co-applicants. All co-owners to
the property need to be co-applicants to the loan necessarily. But any minor cannot be
coapplicant as he is not eligible to enter into contract as per law. HFIs do not permit friends
or relatives who are not blood relatives to take property jointly. Income of co-applicants
as decided by HFIs can be clubbed together to get higher loan eligibility.

The following table shows some acceptable relationship of co-applicants for clubbing
of income :-
(a) Husband – Wife (Yes)
(b) Parent – Son (if only son) (Yes)
(c) Parent – Daughter (if only daughter) (Yes)
(d) Brother – Brother (if currently staying (Yes) together and
intend staying together in new property)
(e) Brother – Sister (No)
(f) Sister – Sister (No)

(g) Parent – Minor Child (No)

General Terms and Conditions of a Housing Loan

The following are the general terms and conditions applicable to the basic housing loan
product only. These are likely to change with respect to different types of housing loans.

1. The loan to value ratio cannot exceed a particular percentage. This differs from product
to product and from one HFI to another. The ratio is known as ‘LTV’.
2. The maximum tenure of the loan is normally fixed by HFIs. However, HFIs do provide
for different tenor with different terms and conditions.
3. The installment that applicant pay is normally restricted to about 40 percent of his
monthly gross income. This is known as Installment to Income Ratio (IIR).
4. The total monthly outflow towards all the loans that applicant has availed of including
current loan is normally restricted to 50 percent of applicants monthly gross income. This
is known as the Fixed Obligation to Income Ratio (FOIR).
5. An applicant will eligible for a loan amount, which is lowest as per his eligibility. This
is calculated as per the LTV norms, the IIR norms and the FOIR norms.
6. Most HFIs consider applicant’s profile before they judge his capacity. The applicants
are judged on the basis of age, qualification, number of dependents, employment details,
employer credentials, work experience, previous track record of repayment of any loans
that he has availed of, occupation, the industry to which applicant’s business relates to. If
applicant is self-employed, then his turnover in the last 3-4 years, etc.
7. Some HFIs insist on guarantees from other individuals for due repayment of applicant’s
loan. In such cases applicants have to arrange for the personal guarantee before the
disbursement of loan takes place.
8. Most HFIs have a team of civil engineers to visit the site to get a technical report on the
quality of construction and compliance with the local laws before they disburse the loan.
9. Most HFIs have a panel of lawyers who go through applicant’s property documents to
ensure that the documents are clear and are not mis-represented.
10. The disbursement of loan takes place as per progress of construction of property unless
it is ready property in which case the disbursement of loan will take place by one single
cheque. PEMI are simple interest on loan amount disburse to an applicant in case of a part
disbursement is payable by an applicant on the disbursement.
 11. The disbursement in most cases, favours the builder or the seller or the society or the
development authority as the case may be. The disbursement does come in applicant’s
favours only in special circumstances.
12. An applicant can repay the loan either through deduction against salary, post dated
cheques, standing instruction or by cash or demand draft (DD).
13. The principal is amortized either an annual reducing or monthly reducing basis as case
may be.

Different kinds of charges applicable to Housing Loan Products.

The different kinds of charges applicable to home loans are listed below, but all of these
charges may or may not levy by all HFIs.
These charges are broadly CHARGES classified into two
categories.

PRE-DISBURSEMENT CHARGES POST – DISBURSEMENT CHARGES

1. Processing Fees 1. Cheque Bounce Charges
2. Administrative Fees 2. Delayed Payment Charges
3. Rate of Interest 3. Additional Charges
4. Legal Charges 4. Incidental Charges
5. Technical Charges 5. Prepayment Charges
6. Stamp Duty and Registration Charges 6. PDC Swapping Charges
7. Personal Guarantee from Charges

Processing Charges:
This is a charge that is levied by most HFIs to cover the cost that they incur on the processing of loan
application. This has to be paid at the time of submission of the application form. Most HFIs refund
this fee if loan application is rejected. It is normally charged as a percentage of loan amount
sanctioned or it may be charged as a flat fees based on loan amount. In case of excess fees
corresponding to loan, it can be adjusted with subsequent charges which are to be paid by applicant.

Administrative fees:
This charge is based on percentage on the loan amount sanctioned. It is collected by the HFI for the
maintenance of customer’s records, issuing interest certificates, legal charges, technical charges etc.
through the tenure of loan. It is to be paid after acceptance of offer letter given by HFI.

Rate of Interest: It is charges on the principal on either annual reducing method or monthly
reducing method. There are two types of rate of interest, “Fixed rate of interest”, and “Floating rate
of interest”. Applicant can opt for any of these types.

Legal Charges: Some HFIs levy legal charges that they incur on getting property document vetted
by their panel of lawyer.

Technical Charges: This charge is levied by some HFIs to meet their expenses on the technical site
visits to the property.
Stamp Duty and Registration Charges:
HFIs that go in for a registered mortgage pass these charges on to an applicant. These are rather
heavy in certain states depending on the laws laid down by the State where the property is to be
purchased.

Personal Guarantee form Charges:

These charges are levied by HFIs who demand for guarantee. Since the personal guarantee
provided by an applicant is to be stamped, so these charges are to be paid by applicant.

Cheque Bounce Charges:

In case the cheque through which an applicant is making payment to HFI gets dishonored, then some
minimum charges are levied by bank. And these charges are to be recovered by an applicant.

Delayed Payment Charges:

In case of delay of installment beyond due date. HFIs charge these charges to an applicant.

Additional Charges:
These are levied as a percentage on the delayed payment charges by most HFIs. These charges are
levied if an applicant fails to pay the dues within the stipulated time after delay has taken place

Incidental Charges:
This is payable in case the HFI sends a representative from their organization to collect their
outstanding dues. It is normally charged at a flat rate per visit. These charges are levied by most HFIs.

Prepayment Charges:
It is penalty charged by HFIs from when the applicant makes either a part prepayment or a full
prepayment of loan. This charge is levied on the amount prepaid by an applicant and not on the
equated monthly installments (EMIs) that he pays. This charge is levied on the amount prepaid and
not on the entire outstanding principal. These charges are gradually being discontinued by the HFIs.

PDC Swapping Charges:

In case, an applicant wishes to swap the PDC’s given by him to HFI for EMI repayments, some HFIs
charge a flat fee for the same. Here PDC refers to “Post Dated Cheques”.

The Typical Credit Documents that Need to be submitted to the HFI

The given list is the exhaustive list of credit documents that need to be submitted for a general home
loan product. The document vary from one HFI to another. But the general requirements are:-

1. Income Document: it may be

(a) Salary slips for last three months.
(b) Appointment letter
(c) Salary Certificate
(d) Relationship Agreement, if appointed as consultant.
(e) Form 16 issued by an employer on applicant’s name.
(f) Last three years Profit and Loss Account Statement duly attested by a Chartered Accountant, if
self employed.
(g) Last three years Balance Sheets duly attested by a Chartered Accountant, if self employed.
(h) Last three years Income Tax Returns duly filed and certified by the Income Tax Authorities.
2. Proof of Employment: it may be
(a) Identity Card issued by employer.
(b) Visiting Card

3. Employer’s Details (in case of Private Limited Companies) Profile of employer on

employer’s letter head it is to be signed by a Senior Person in the organization comprising:
(a) Name of Promoters / Directors
(b) Background of Promoters / Directors
(c) Nature of business activity.
(d) Number of Employees
(e) List of branches / factories
(f) List of Supplier
(g) List of Clients / customers
(h) Turnover of employer

4. Annual reports of the employers for the last two to three years. Proof of Age (any one of the
following)
(a) Passport
(b) Voter’s ID Card
(c) PAN Card (d) Ration Card
(e) Employer’s Identity Card
(f) School Leaving Certificate
(g) Birth Certificate

5. Proof of Residence (any of the following)

(a) Passport
(b) Ration Card
(c) PAN Card
(d) Rent Agreement
(e) Bank Pass Book
(f) Allotment letter from company, if an applicant is residing in company quarters.

6. Proof of Name Change (if applicable)

(a) A copy of the official Gazette.
(b) A copy of the newspaper advertisement publicizing the name change.
(c) Marriage Certificate

7. Proof of Investment (if required)

(a) Bank Statement for the last six months of all operating and salary account.
(b) Bank statements for the last six months of all current accounts, if self employed.
(c) Any other photocopies of investment held, if required by HFI. The name and the list of documents
vary from state to state and it also depends on the type of property being financed. The broad outline
of the documents which are generally required by most HFIs is given below:

1. Acceptance copy of the offer letter issued by HFI.

2. Title document of the property that includes:-
(a) Sale agreement duly registered.
(b) Allotment letter
(c) Registration Receipts
(d) Land Documents indicating ownership, if applicable
(e) Possession letter
(f) Lease Agreement, if applicable (Property bought from development authority)
(g) Mortgage deed, if HFI opts for a registered mortgage.

3. No Objection Certificate from developer, society or development authority as applicable.

4. Personal Guarantee, if applicable.

5. In case of alternate or additional security, documents for the same depending upon the
security details

6. Post Dated Cheques for EMIs. These documents are indicative in nature and do not cover
the entire list..Type of Housing Finance Home Loans: A home loan is a loan taken from a
Housing Finance Institution (HFI) to buy or to modify a property. The term property includes:
(a) Property – under construction
(b) Property – ready for occupation

Type of Housing Finance Home Loans:

A home loan is a loan taken from a Housing Finance Institution (HFI) to buy or to modify a property.
The term property includes:-
(a) Property – under construction
(b) Property – ready for occupation
(c) Resale Property
(d) Self Construction or own construction.

Home Extension Loan:

A home extension loan is a finance taken from HFI to extend the built up area of an existing property.
This could be by way of any of the following:-
(a) Additional Floor Space Index (FSI) granted by the approving authority to construct an additional
room.
(b) Enclosing the balcony with sliding windows or grills.
(c) Construction of an additional floor in the existing house.

Land Loan:
A land loan is a loan taken from HFI to purchase the plot of land from either a developmental authority
or a society or a developer.

Home Equity Loan:

Home equity loan is especially designed to meet financial needs of a person who already owns a
house. The loan amount is given against the existing property and as a customer the person can utilize
these funds to meet any of his requirements.

Difference Between a Normal Home Loan and Home Equity Loan is as follows:-

1. A normal home loan is a loan given for the purchase of new property. While home equity loan is
given against existing property of a customers.

2. In a normal home loan, the end use of the loan amount is monitored to ensure that loan is actually
used to pay the seller of the property. While in case of the home equity loan the customers can
utilize the loan amount to meet any of his requirements.
3. In a normal home, since it is finance for the purchase of property, the agreement value of the
property is taken as benchmark. While in home equity loan, the finance is against an existing
property and hence the property needs to be valued by a Government Approved Valuer or by HFI
approved valuer.

NRI Home Loan:

The NRI home loan’s available to Non-Resident Indians from various HFIs for any of the following
activities:-
(a) For purchase of house of a house either under construction or on resale.
(b) For self-construction of a property on a plot of land.
(c) To finance the purchase of a plot of land allotted by a society/development authority.
(d) To renovate or improve on Indian holding a valid Indian passport.

Who is NRI?
(a) As defined by Reserve Bank of India, according to RBI, an Indian citizen who holds a valid
Indian Passport and who stays abroad for employment or carrying on business or vocation
outsides India or stays abroad under circumstances indicating an intention for an uncertain
duration of stay in abroad is NRI.
(b) As defined by Income Tax Authorities, according to Income Tax Act 1961, NRI is one who
employed abroad 57 for a period of not less than 182 days in the financial year immediately
preceding the year in which he is assessed.

Balance Transfer Loan:

A balance transfer loan enables the financing of an outstanding home loan. This loan may
have been availed from a HFI at a time when the interest rates are high. To convert this loan
to a lower rate of interest or at the rates prevailing currently a balance transfer loan is the best
option. This can be done with the same HFI or one could switch to a new HFI. This switch
becomes attractive when there is a substantial decrease in the current interest rate vis-avis the
rate of which the loan was availed.
Most housing loans are disbursed at a rate of interest that is fixed over the tenure of a loan. A
converting high interest housing loans to low interest housing loan enables a customer to get
benefit from the decrease in rates and reduce the monthly installment on the loan. The two
option are available at the time of transfer of loan.

(A) Reduction in EMI (Equated Monthly Installment) An applicant may get the option of
reducing the EMI with the term being constant. Constant means the balance term left as per
the 58 terms and conditions of the previous sanction by HFI. The EMI reduces as a result of
the reduction in interest rate on loan.

(B) Reduction in Term An applicant may keep his EMI constant and reduce the term of loan.
This possibility arises in case when an applicant is comfortable with current EMI and wishes
to clear the loan much earlier. For the cases mentioned above, the loan amount for which an
applicant is eligible is calculated as:-

Eligible Amount = Principal outstanding as on the month in which one apply for loan (as
mentioned in the letter issued by HFI from where the loan has been taken) + Prepayment
Charges.
Finance for Housing The responsibility to provide housing finance largely rested with the
government of India till the mid eighties. Even until ten years ago, the housing finance
industry had only one or two active lenders for home loans it was only, when the Govt.
realized their importance that it offered sops to customers and banks. The realized their
importance that it offered sops to customers and banks. The need for institutionalization of
housing finance has been realized.

To cope up with increasing demand it became necessary that the institutional finance should
be made accessible to different sections of society at reasonable interest rates. The significant
emphasis had been made in institutional set up for housing finance in form of specialized
housing finance institutions.

Finance for house is provided in the form of mortgage loans, that is, it is provided against the
security of immovable property of land and buildings. The suppliers of house mortgage loans
in India are the following institutions such as. The Housing and Urban Development
Corporation (HUDCO), the apex cooperative housing finance societies and Housing Boards
of different states, Central and State Governments, Life Insurance Corporation (LIC), General
Insurance Corporation (GIC), and a few private housing finance companies and nidhis. The
government provides direct loans mainly to their employees. The shelter sector of Indian
financial system remained utterly underdeveloped till the end of 1980s. But with the
establishment of apex institutions like HUDCO, in 1970, HDFC in 1977, and the NHB in
1988, it has been getting impetus. As at national level, HUDCO, HDFC, NHB, All Indian
Financial Institutions, Cooperative Institutions, State Housing Finance Societies, Insurance
Companies, The Central & State Government housing Boards, Provident fund organizations,
Commercial Banks and their subsidiaries etc. are the major funding organization for housing
projects. The brief description about the premier sources of housing finance is given as
follows:

Housing And Urban Development Coopration (HUDCO) HUDCO was set up on 25th
April 1970 as a National Techno—financing institution in the field of housing and Urban
Development by the Government of India. It was established with a equity base of Rs. 2
crores, today its Authorized capital is Rs. 2500 crores and its paid-up capital is of Rs. 2001.90
crores. And the net worth is of Rs. 3588.55 crores (Provisional). It has been able to mobilize
resources from institutional agencies like LIC, GIC, Banks, and international agencies like
KIW, OECF, ODA, USAID as well as through public deposits. The principal mandate of the
HUDCO is to ameliorate the housing conditions of low income groups (LIG) and
economically weaker Section (EWS). HUCDO’s housing portfolio covers a wide range of
target groups spread all over the country both in urban and rural areas. HUDCO lays emphasis
on the affordable housing and project lending wherein before lending, housing projects are
examined for financial viability with a motive to ensure full cost recovery .HUDCO has been
trying to reach to the ultimate beneficiaries through State Parastatals, Development Authories,
Local Bodies, Cooperative, Private Sector Agencies, Special designated agencies and others.
HUDCO has its offices in State Capitals and in many cities also. HUDCO’s lending operations
are subject to market conditions, and it also provides subsidy in its few housing and shelter
programmes where State or Central Govt. provides additional support to it in this regard.

HUDCO undertakes housing and urban development programmes, the setting up of new
satellite towns, and the setting up of the building materials industries. It also subscribe the
debentures and bonds to be issued by State Housing Boards, Improvement Trusts and
Development Authorities. HUDCO has been playing an important role in meeting the housing
needs in emergency situations of natural calamities such as earthquake, cyclone, floods,
seaerosion, Tsunami etc.

During the Tenth Five Year Plan (2002-07) the HUDCO has assigned the target of 4 Lakh
dwelling units in urban areas and 6 Lakh dwelling units in rural areas annually, this target was
under Two Million Housing Programme (2 MHP). It has achieved the target of 20 Lakhs
dwelling units, in urban areas the number of dwelling units is 1330271 and in rural areas the
number is 669729 dwelling units. This number of dwelling units is below the target i.e. 50
Lakhs dwelling units in plan period.

During Eleventh year Plan period (2007-2012), HUDCO proposes to extend a larger quantum
of assistance for supporting the housing and urban development requirements in urban and
rural areas. The proposals envisage a total sanction of Rs. 74,596 crores during the plan period
for both housing and urban development programmes. The amount of Rs. 14919 crores have
been tentatively identified for its housing operations and the amount of Rs. 27820 crores
proposed to be disbursed during XI Plan period. The amount of Rs. 5574 Crores is anticipated
for its housing programme.

National Housing Bank (NHB) The NHB was established in 1988 under the NHB Act 1987,
to operate as a principal agency to promote housing finance institutions (HFIs), at both local
and regional levels and to provide financial and other support to them. The setting up of NHB,
a fully owned subsidiary of the Reserve Bank of India marked the beginning of the emergency
of housing finance as a fund based service in country.

It was established with authorized and paid up 63 capital of Rs. 350 crore. The National
Housing Bank had issued Housing Finance Companies (NHB) Directions, 1989, to every
Housing Finance Company in exercise of the powers conferred on it under the National
Housing Bank Act 1987 (53 of 1957). It had also issued guidelines to housing finance
companies on prudential norms on income recognition, accounting standards, asset
classification, provisioning for bad and doubtful assets, capital adequacy and concentration
of credit/investment.

The National Housing Bank act 1987 has been further amended by National Housing Bank
(Amendment) Act 2000 (15 of 2000) further to enable the NHB to safeguard the interest of
depositors and promote healthy and universal growth of Housing Finance Companies in
India.The functions of the NHB includes the promotion and development of housing finance
institutions on sound and healthy lines, regulation and supervision of housing finance
companies in the matter of acceptance of deposits and providing refinance facilities to retail
lending institutions in order to speed up housing construction activity and augmenting
housing stock in the country.
NHB also provides direct lending facility to public agencies such as State level Housing
Boards and Area Development Authorities for large scale housing projects, slum
redevelopment projects and other special projects such as housing for earthquake and cyclone
victims.
The given table explicit the size-wise disbursement of housing loans by HFC based on annual
returns submitted by 20 major HFCs to NHB excluding HUDCO.

Size of Housing Loans Year of Disbursement

Disbursed by HFCs
 2002-03 2003-04 2004-05
Less than Rs 50000 15.72 (0.2%) 15.72 (0.2%) 34.81 (0.2%
Rs. 50001 – Rs. 100000 147.80 (1.7% 507.82 (4.8%) 1208.59 (7.11%)
Rs. 100001 – Rs. 300000 2675.61 (30.5%) 2409.62 3335.09 (19.6%)
(22.7%)
Rs. 300001 – Rs. 500000 2164.61 (24.7%) 2358.98 4064.69 (23.89%)
(22.2%)
Rs. 500001 – Rs. 2023.90 (23.0%) 2652.84 2565.76 (15.08%)
10,00000 (25.0%)
Above Rs. 1000000 1749.89 (19.9%) 2663.94 5804.08 (34.12%)
(25.1%)
Total 8777.40 (100%) 10609.50 17013.02 (100%)
(100%)

The above table shows that only 0.2% of housing loans extended by HFCs are of the value
less than Rs. 50000, about 7% of the housing loans are of value between Rs. 50000- Rs.
100000, and more than 73% of housing loans extended by HFCs are of the value exceeding
Rs. 3 Lakhs and about 93% of value if exceeding Rs. 1 Lakh. It can be observed that there is
need to evolve a system for financing housing projects on scale for LIG whose affordability
for housing falls in the range below Rs. 3 Lakhs, as the 90% of the shortage of housing is in
account of LIG/EWS.

Cooperative Housing
With the progress of Five Year Plans the Cooperative Housing Movement is receiving support
as a strong institutional set up has been evalued for it in India. There are few states where the
Cooperative Acts and Rules were enacted; in other states, these Acts and rules were extended
to increase the horizon of cooperative movement.

These Cooperative Acts & Rules facilitates the registration of primary cooperative housing
societies and its also helped in the formation of the state level apex cooperative housing
federations. These provisions have helped the primary cooperative societies in securing
finance for construction of houses. The number of primary housing cooperatives was 92000
in 2004-05 with a membership of 66 lakhs. The number of State level apex Cooperative
Housing Federation has increased to 25, according to ‘Report of the Task Force on
Cooperative Housing (Third Draft) 2005’. The total funds mobilized by various apex
federations upto 31 March 2005, stood at Rs. 8767.67 crores. Out of this amount 3.7% is
collected by the means of deposits and debentures issued by State level Apex Cooperatives,
while rest (96.3%) is mobilized as loans from different agencies, such as Life Insurance
Corporation of India (38.4%), National Housing Bank (9.6%), Commercial and Cooperative
Banks (23.4%), HUDCO (18%), State Government (2.8%), other sources (4.1%). During the
first three years of Xth Five Year i.e. 2002-03, 2003-04 and 2004-05, the Apex Cooperative
Housing Federation could raise an amount of Rs. 1774.43 crore from the aforesaid sources.
In 2002-03, these federations have disbursed Rs. 641.48 Crore and financial 32481 housing
units. In 2003-04, Rs. 623.08 Crores and in 2004-05 Rs. 421.15 Crores was disbursed. And
in 2003-04 the Apex Cooperative Housing Federations. These housing units mostly cater to
the needs of middle and high income groups in cities and lower income groups in rural areas
with few exceptions. The limitation faced by Cooperative Housing Movement 67 is in the
allotment of serviced land in few of the cities where Cooperative Housing Movement is not
active. They are not able to bid for land at market price due to their financial dependence on
public agencies and state government.

The National Cooperative Housing Federation has initiated a concept of organizing multi-
purpose Cooperative for urban poor and slum dwellers to improve their living standard. Its
proposal has been put for the consideration of State Governments and Union Territory
Administrations. The Cooperative Banking Sector which includes State Cooperative Banks,
District Cooperative Banks & Primary Urban Cooperative Banks have been providing finance
to individuals, cooperative group housing societies, housing boards and other agencies which
undertakes the housing projects for the EWS, LIGs and MIGs, in the way this sector have
been contributed to the housing and urban development.

According to the Report prepared by the Technical Group under the Ministry of Housing and
Urban Poverty Alleviation, the cooperative sector is expected to construct 5 lakh houses for
LIG and EWS. The given table explicit the expected contribution by the Cooperative sector
in the development of the housing industry in 68 the India during the Eleventh Plan Period i.e
2007-2012. The total house construction by the housing cooperatives would require the
investment of about Rs 10000 crores in the Eleventh Five Year Plan Period if it is assumed
that the cost of constructing one house is Rs.1 lakh.

Loan Requirements and Construction Targets for Housing Cooperatives During XII
FYP
Year Loan Requirements Contribution by Number of Houses
from Govt. Housing to be constructed
Agencies (Rs. in Cooperatives (Rs. or financed
cores) in crores)
2007-08 850 850 85000
2008-09 925 952 95200
2009-10 1000 1000 10000
2010-11 1075 1075 107500
2011-12 1150 1150 11500
Total 5000 5000 50000

The Central and State Housing Boards

ating to foreign exchange operations. The banks like HSBC Bank, Barclay Bank, Deutsche Bank etc are
also moving towards the housing finance sector in India. The Housing Boards are playing a vital role
in the development of the housing sector. Housing Boards are responsible 69 for the
implementation of integrated Housing Schemes for the construction of houses. Their aim is
to enable the Lower Income, Middle Income and Higher Income Groups in the society to
acquire houses on rent and on ownership basis. The boards also undertakes the construction
and rent out shops, commercial complexes etc. to enhance the financial resources of the board.
The objective behind the formation of housing boards in state is to provide housing to the
deprived citizens in the State at affordable prices. For example the Tamil Nadu Housing Board
aims to cater the housing needs of people of different groups such as E.W.S., L.I.G., M.I.G.,
& H.I.G. and even to cater different segments of society such as SCs, STs, Dhobies, Freedom
Fighters, Ex-service personnel, Handicapped persons, Language Crosaders States
Government Servants, Central Govt. Servants, Press people, social workers, widows and
destitute. In past 37 years it has taken up various social housing projects on large scale ant it
has provided around 350027 dwelling units so far in the State. Similarly the Chandigarh
Housing Board right from its beginning in 1976 has focused upon the construction and
allotment of houses for the less affluent sections of society on hire purchase basis. Till March
2007 the Chandigarh Housing Board has constructed a total of 44151 houses of various
categories. It has 70 been estimated that about 2.5% of the population of Chandigarh is living
in CHB houses. It has been providing well designed houses with good quality of construction
at prices much lower than the market and thus obtaining the excellent response from the
public. In this manner the State Housing Boards have been performing their duty to remove
regional imbalances through housing and urban development. The State wise housing
developments may lead to the central housing sector’s development.

Commercial Banks
Commercial Banks are the oldest biggest and fastest growing financial intermediaries in India,
having a major contribution in the development of the economy. The Public Sector Banks,
Private Sector Banks and Foreign banks all are required to meet targets in respect of sectoral
deployment of the credit, regional distribution of branches and regional credit deposit ratios.
The Public Sector Banks include the fourteen Banks includes the fourteen banks nationalized
on 19th July 1969, and 6 Banks nationalized on 15th April 1980. It includes Allahabad Bank,
Andhra Bank, Bank of Baroda, Central Bank of India, State of Bank of India and its
subsidiaries, Punjab National Bank, Canara Bank etc. The majority of these Banks offer 71
Housing loans products directly or indirectly through their subsidiaries. As their function
includes the social welfare, social justice and promotion of regional balance and development,
these banks provide housing loans not only to individuals but to the Private Developers for
the construction of residential as well as nonresidential buildings. Due to the Government’s
stake in these banks most of the people do rely upon these banks for housing loans, as the
tenor of these loans are comparatively longer than consumer, personal or education loans. The
Private Sector Banks are functioning on par with the Public Sector Banks in various respects.
Since, they have been included in the Second Schedule of Reserve Bank of India Act 1934,
they are enjoying the privilege like other scheduled banks. The Private Sector Banks like
HDFC Bank, ICICI, Bank, IDBI Bank Axis Bank Ltd., The Jammu & Kashmir Bank Ltd.,
ABN AMRO Bank etc. are also offering the housing loan products with a wide range of the
fascinating features. The housing loan is the product where the risk is comparatively less
because the property or house of the borrower itself acts a collateral, therefore most of the
private Banks are stepping in into the field of housing finance either by lending directly to the
individual borrower or by financing the construction projects of townships, Apartments,
Hotels or Malls. The Foreign Banks are the Branches of Banks incorporated in foreign
countries. They perform almost the same range of services as being performed by local banks.
These banks are active players in export and import trade and transactions relating to foreign
exchange operations. The banks like HSBC Bank, Barclay Bank, Deutsche Bank etc are also moving
towards the housing finance sector in India.

Non Banking Financial Companies (NBFCs)

A ‘Non-Banking Financial Company (NBFC) is a company registered under Companies Act 1956 and is
engaged in the business of loans and advances, question of shares/securities issued by Government or local
authority or other securities of like marketable nature, leasing, hire purchase, insurance business, chit
business but does not include any institution whose principal business is that of agriculture activity,
industrial activity, sale/ purchase/ construction of immovable property. In terms of Section 45-1A of the
RBI Act 1934, it is mandatory that every NBFC certain category of NBFCs are regulated by other
regulators, like Housing Finance Companies regulated by National Housing Bank.24 Housing Finance
Company means a company incorporated under Companies Act 1956 (1 of 1956) which primarily transacts
or has as one of its principal objects, the transacting of the business of providing finance for housing,
whether directly or indirectly.25 In this way there is not dearth of sources of housing finance in India as
there are many suppliers of Housing Finance including Commercial and cooperative Banks, Non Banking
Finance Companies, and other private lending agencies .Despite many sources of housing finance the
housing sector is still undersized, there is still need to infuse a huge amount to gain the momentum in the
pace of development in the housing sector.

REFERENCES

1. “Housing Sector and Housing Finance: An overview” ,

Accommodation Times Bureau ,
www.accomodationtimes.com
2. Karnad, Renu , “Soaring Skywards” , Frontline , Feb- March
2005, Vol-22.
3. “Impact of Investment in the Housing Sector on GDP and
Employment in the Indian Economy”, HUDCO sponsored
study, IIM Ahmedabad, July 2000.
4. “Report of the XII Five Year Plan Working Groups on Urban
Housing with Focus on Slums 2007”, Ministry of Housing
and Urban Poverty Alleviation , Government of India,
www.planningcommission.nic.in
5. “On the House: Elders can now own and earn” Times of
India, March 1, 2007 & www.indiahousing.com
6. Srivastava ,Rahul , “Panning the Past : History of India’s
Urban Plans”, www.infochangeindia.com
7. ibid.
8. ibid.
9. ibid.
10. ibid.
11. ibid.
12. ibid.
13. ibid.
14. ibid.
15. ibid.
16. “Housing & Slums: Government interventions, Review of
Annual Plan 1998-99 and Provision for 1999-2000. May
2007, www.planningcommission.com.
17. National Housing and Habitat Policy 1998 .
www.planningcommission.nic.in
18. opcit “Report on the Urban Housing with Focus on Slums
2007”, Ministry of Housing and Urban Poverty Alleviation ,
Government of India.
19. opcit , “Housing & Slums: Government interventions,
Review of Annual Plan 1998-99 and Provision for 1999-2000.
May 2007 .
20. opcit , “Report on the Urban Housing with Focus on Slums
2007”, Ministry of Housing and Urban Poverty Alleviation ,
Government of India.
21. ibid.
22. ibid.
23. ibid.
24. ibid.
25. ibid.
26. ibid.
27. ibid.
28. ibid.
29. ibid.
30. ibid.
31. www.nic.in and www.indiahousing.com
32. Economic Survey 2005-06, GOI Economic Division, Ministry
of Finance.
33. Gaur, V.P and Narang, D.B, “Income Tax Law & Practice,
Assessment Year 2006-07” , 34th edition , Kalyani Publishers,
New Delhi,2006.
34. Bestani, Robert and Klein,Johana “ Housing Finance in Asia”,
Asian Development Bank , Philippines.
35. ibid.
36. ibid.
37. ibid.
38. ibid.
39. http://www.apnaloan.com.
40. ibid
41. ibid
42. ibid
43. ibid
44. ibid
45. ibid
46. ibid
47. ibid
48. ibid
49. ibid
50. opcit, “Income Tax Law & Practice” 2006-07.
51. opcit , www.apnaloan.com
52. Harsh Vardhan Roongta , Krishna Subramanium, “The
Complete Home Loan Guide” Penguin Publishers, New Delhi,
2005.
53. www.hudco.org
54. opcit, Report on Urban Housing with focus on Slum XII
FYP , GOI.
55. ibid
56. ibid
57. ibid
58. ibid
59. ibid
60. www.rbi.org
61 S. Natrajan , R Parmeshwaran, “Indian Banking” , S Chand &
 Company Ltd.,2007 .
62. opcit, www.rbi.org
63. www.nhb.org

Source : www.planningcommission.nic.in

CHAPTER No.2
REVIEW OF LITERATURE

Rao K.N. (2006) in “Housing Finance - A Global Perspective” states that there has been
remarkable growth of Housing Loans in India since last more than a half decade. He has also stated
tgat the factors which have been contributing to this growth are reduced rate of interest, easy EMIs ,
less formalities and also some tax benefits on interest payments as well as repayment of principal
amount of loan. As other authors, Mr. Rao also in the similar view that LICHFL and HDFC both are
the key market players in Home Loans who have initiated to lends Loans for a longer period of 20 or
more years, and also they usually sanction loans upto 85% of
the total amount of security.

Chaubey M. (2009) in “Housing Finance in India – Problems and Prospectus” states that
according to his study, it was revealed that the customers of home loans selected to take loan due to
low interest rate firstly, easy installment schemes secondly, simple procedure thirdly and so on. About
92% of the Home Loan customers opted for floating rate of interest whereas about 60% of the total
home loan customers opted for more than 15 years and about 70% accepted that the approval and
disbursement of loan is generally delayed as per its time schedule. It was also suggested that the
details of the loan accounts of the customers must be available online for more transparency in dealing
and EMIs should be available not only monthly but also quarterly and half yearly.

Vetrivel T (2010) in “A study on Customer’s Preference and Satisfaction of fied with

Four Basic Banking Services in Coimbatore and Erode” has studied and revealed that 50%
customers on an average get satisfied with the service of banks for home loan customers. It was also
observed and suggested by him that the insurance services are rarely used by the customers of which
attractive schemes and policies must be offered to get the customers attached to this. It was also
observed suggested that the Net Banking [E – Banking] facility was also not utilized by
the customers at its optimum for which the banks must put attempts to aware customers about its use
and make them fully satisfied.

Kumar N. & Dr. Gangal V. K. (2011) in “Customer Satisfaction in new generation

banks in case study of HDFC Bank” say that, for every bank to retain in this competitive
world,customer‟s satisfaction with speedy and quality service, is the most essential factor to take
case of but, they also say that the products and services offered by Indian Banks are not much
diversified which creates the need for adopting the customer retention strategies to enhance customer
satisfaction and retain them with banks.

Deb B. C. et al (2011) in “Importance of Housing Finance Companies in

Development of Financial Markets of Bangladesh” state that the economic development of a
country can be boosted by the existence of Money Market. The Housing Finance Companies are not
direct participants of Money Market, but they can take active participation in Money Market by
issuing various Money Market Instruments like collecting short term loans for securitization of
mortgage loan. In this paper, the study of the authors shows that a well-built and pulsating Capital
Market cannot be sustained in a long run without competent Money Market. But, it can be seen that
this paper has adopted the word Financial Market, whereas it has emphasized more on Money Market
and also it less emphases on Housing Finance.

Rani S (2011) in “Growth and Development of Housing Finance in India: Post

Liberalisation period” states that National Housing Policy gave a thrust to the concept of Housing
Finance by establishing the National Housing Bank on 9 th July, 1988 under the National Housing
Bank Act, 1987 which became the regulatory body for the Housing Finance in India and also
forproviding funds and other assistance to the Housing Finance Institutions. With the help of
theirstudy they concluded that HDFC has been the on the top of the list of housing finance with
37%market share followed by SBI thru HUDCO with 16% market share and LICHFL with 13%
market share.

Chaudhary R. and Junjhua Y. (2011) in “Customer Perception and satisfaction

towards Home Loans” where they have studied the customer satisfaction level and their
perceptiontowards Baghat Urban Co – op. Bank limited and with the study, they have revealed that
people are more satisfied with this bank in aforesaid area in the paper due to the faith of customers
for the bank, cheaper rates of interest and convenient repayable EMIs. They have also suggested
thatto get success in the market of housing loan, the bank has to come up with offer of different
services to different groups of customers.

Vadde S. (2011) in “Performance of Non-Banking Financial Companies in India –

An Evaluation” states that in India, the Non-Banking Financial Companies play a dominant role in
supporting the Capital Market with the help of providing short and medium term loans. Such Non-
Banking Financial Companies also help in purchasing long term properties through lease or hire
purchase. He has, in this paper, studied in all 1215 banks out which the data of HDFC and 3 other
Banks were excluded which was giving significance difference in comparison and with this by
studying 1211 financial companies in all, they have concluded that the share of investments in total
uses of funds increased during the year 2008-09 on account of investments in Mutual Funds and
Shares & Debentures of other companies.

Raghuwanshi D. (2012) in his paper “Retail Banking in India – Challenges and

Opportunities” says that Retail Banking focuses on customer. Retail Banking is nothing but a mass-
market banking where local branches of giant commerce banks are used by individual customers.
Such Retail Banking has got tremendous acceleration in its growth and development in the recent
years with many dimensions. The author has also suggested that to grab and retain the customers,
continuous innovation is required in Retail Banking.

Ratti M. (2012) in “Indian Financial System & Indian Banking Sector: A

Description Research Study” gives the clear picture of History, Concepts, Functions and types of
Bank in one section and in second section, different phases of Financial System of India and itcurrent
institutional structure. She has emphasized on the entire Financial System of India where she has
shown components of Indian Financial System such as Financial Institutions, Financial Markets and
Financial Assets. Later in this paper she has discussed about three phases faced by Indian Financial
System Since 1951 till date of this publication. She has also concluded that the Banking System in
India has got thrust in sense of geographically wide and functionally
iverse in the Post Nationalization era i.e. from 1969 to 1991.

Sangwan P. and Bhan K. (2012) in “A Comparative Analysis on Home Loans of

Public & Private Sector Banks in India” state that the dream of a man which represents the labors,
giving up luxuries in present for the purpose of generating funds altogether for fulfillment of the
dream is owning a Home. For this he has to opt for Home Loans. With this study, the authors have
compared Public & Private Sector Banks and concluded that the people are attracted to lesser interest
rates, formalities and paper work of Private Sector Banks leading to less popularity of Public Sector
Banks wherein suggested that the Public Sector Banks must adopt more attractive schemes for Home
Loan Customers.

Govinda Rao H. and Dr. Apparao N. in their research paper entitled “An Assessment
of the Indian Housing Finance System: Crucial Perspective” state that the shortage of housing is
the universal incident today. At the view of the authors, this must be followed by many reforms
making Housing Finance more affordable which is lacking in developing countries like India. They
have concluded that the employment generation in the economy through Housing and Construction
is 8 time more than the direct employment which may be contradictory.

Mahajan A. (2013) in “A comparative study of disbursement of Housing Loan of

Public, Private and Co-operative Bank in Sangli – Miraj - Kupwad Corporation Area” states
that it gives the psychological utility for owning house. He has observed that the rate of interest
charged by cooperative banks are higher than that of private and public sector bank as well as the
NPA proportion is higher is cooperative banks it can be concluded from his paper that the Sangli
USB bank has lesser formatives as compared to SBI and HDFC banks.

Singh H. and Kamlesh (2013) in “Employee Productivity of Private Sector Banks in

India” studied and observed that the productivity of Private Sector Banks since 2002 to 2012has
been increasing with respect to different factors and indicators of performance and as compared to
Public Sector Banks are better at all factors and indicators. At the comparison of old Private Sector
Banks with New Private sector banks, from 2001 – 02 to 2005 – 06.

Manjunath S. J. and Aluregowda (2013) in “Impact of service quality on customer

satisfaction at AXIS bank” state that the quality of service, through customer satisfaction, results
in customer loyalty. The banks should assess the percentage of customer service dependence to
develop the powerful service quality. By studying almost seventeen to fifty seven variables, they
have concluded that the quality of service has an impact on the customer satisfaction in direct
proportion.

Ravichandran K. and Pandian V. A. (2013) in “An Economic Analysisi of

Visvesvarya Urban Cooperative Bank” states in this paper that the Cooperative Banks got boost
due to especially passing of the Cooperative Societies Act, 1904, but the Urban Cooperative Banks
got the real thrust only after the applicability of Banking Laws to the Cooperative Societies in 1966.
They have concluded about the Visvesvarya Urban Cooperative Bank that the financial performance
of this bank has been on the rising trend since 2004 except 2009-10. And the bank had received the
“Best Urban Cooperative Bank in Karnataka” for consistent 4 years from 2004 to 2007.

Srinivas K. and Saroja L. (2013) in “Comparative Financial Performance of HDFC

Bank and ICICI Bank” state that with the Nationalization of 1970‟s and 1980‟s as well as with the
liberalization of banking resulted in emergence and expansion of many private sector and
international banks. With the help of comparison of HDFC and ICICI Bank on the basis of CAMELS
Model consisting of Capital Adequacy, Assets Quality, Management, Earning Quality, Lquidity and
Sensibility, they have concluded that there is no significant difference between both the banks. But
the performance of HDFC bank was slightly better than ICICI Bank on this context.

Keerthi B.S. (2013) in “A study on Emerging Green Finance in India: Its Challenges
and Opportunities” states that the efficiency in energy sector can lead to conservation of natural
resources. She has noted that biggest hurdle for the rise of “green city” is that there are no funds
available for eco – friendly infrastructure. She has concluded that if India needs reduce dependency
on imports in traditional power sector, the steps have been taken by the government to increase the
efficiency in energy by using renewable source more. This is supported by such kind of loans thatare
energy efficient lended by SIDBI (Small Industrial Development Bank of India) and SBI (State
Bankof India) which is added with training on sustainability steps for MSMEs.

Selvakumar M. et al (2013) in “Analysis of Non – Performing Assets of Tamil Nadu

based Private Sector Commercial Banks in India” have studied and observed that this is an era of
transition of banking customers from Public Sector to Private Sector Banks due to the biggest issue
for Public Sector. Banks called the NPAs (Non – performing Assets) which is increasing according
to RBI due to dual problems i.e. insufficient credit appraisal process and unfavorable economic
condition in the home as well as international markets. Whereas Private Sector banks have kept the
quality of managing such issues due to which they have shown decreasing percentage of NPAs.

Shah M. et al (2013) in “A study of Customer Satisfaction towards service provided

by Employees off Public Banks using SERVQUAL Model with reference to Durg – Bhilai
Region” stated that the needs of the customers have been too diversified and now they need
everything serviced quickly and at their doorstep. It is only the quality of the service which the banks
provide to the customers which can lead to customer satisfaction and ultimately organizational
satisfaction.

Ravindra P. S. et al (2013a) in “Operational and Financial Performance Evaluation

of Housing Finance Companies in India – A case study of LIC Housing Finance Limited
and HDFC” have studied and observed different aspects of comparison between LICHFC and HDFC
through which they have concluded that there is no doubt that , now-a-days, these two agencies of
housing finance are most popular due to its marketing network at its personnel‟s, but in recent times,
LICHFL has better performed and overtaken HDFC in both financial aspect through being one of the
most potent and efficient distribution forces in India and operational aspect through its low operating
expenses to Assets Under Management (Op – Exp/ AUM) Ratio during the study period.

Ravindra P. S. et al (2013b) in their article “Service Quality of Housing Finance

Companies in India – A case study of LIC Housing Finance Ltd and HDFC” have stated that
success of the Housing Finance companies depends truly an two factors viz customized products an
disservice quality they also say that LICHFL & HDFC both are very popular and both have very high
customer satisfaction and trust due to their more emphasis on marketing personnel network resulting
in better and better service quality further leading to more and more customer satisfaction with
highest customer base.

Bhuvaneswari R. et al (2013) in “A study on Financial Planning and Forecasting

with special reference to HDFC Banks at Thanjavur” stated that s\considering the main function
of the banks as accepting deposits and lending loans to the public, these has been an increasing trend
in the ratio of loans lended to the net current assets and deposits of the banks. It was also suggested
by the authors to increase the productivity. Other steps also to be taken by bank to raise more share
capital, promote the products and schemes of the banks largely through its core marketing‟s.

Raval P. D. and Maisuriya M. H. (2013) in “Awareness about NHB as a Regulator”

state that it is a sign of Financial Stability to own a house which represents the social positioning of
a person. As this is felt by the people, the need of housing finance has rised now-a-days. For this, the
Government has also taken many steps to fulfill this basic need of the people. Hence, the availability
of housing finance has tremendously increased, but the people are unaware about the fact of the
regulatory body of all Housing Finance Companies in India which is National Housing Bank [NHB].
NHB was initiated not only to regulate the Housing Finance Companies but also to provide funds to
them. This is really ignored by people today where the authors have tried to put the light as a stepping
stone for awareness of NHB.

Soyeliya U. L. (2013) in “A study on Cooperative Banks in India” states that the banking activities
promote flow of productive use and investments which in turn encourages the growth of the economy.
According to the author, the cooperative movement was initiated by the government in 1904 after
which the government decided to develop the cooperatives as the institutional agency to handle the
problems of rural indebtedness. At the conclusion, she has stated that the modern banking facilities
like internet banking, ATM etc should be initiated by the cooperative banks and should act as the
friend, philosopher and guide to the poor population of the country.

Kashyap P. et al (2013) in “Priority Sector Lending by Assam Gramin Vikash Bank:

A Study” state that the thought of Regional Rural Banks (RRBs) was originated by the Government
of India in the year 1975 so as to boost up the rural economy. With the help of the study of Assam
Gramin Vikash Bank, they came to the conclusion that the bank has shown the satisfactory results in
the progress of the bank in lending in the area of Priority Sector. In their study, the authors
haveconsidered four sectors in priority sector viz Agriculture and allied activities, Small Scale
Industries, Service & others and Housing Sector out of which, except Service and others, all the other
sectors showed the increasing trend. And they stated that the impact of this bank on the socio-
economic growth of Assam is subjected to be studied.

Baligatti Y. G. (2013) in “Impact of Home Loan on Tax Liability of Salaried

Employees” states that as Benjamin Franklin says that the only things which are certain in our lives
are the death and the taxes. It is clear with the today‟s tax structure of India that, we can not be fully
exempted from the tax but its burden can be reduced to the maximum extent with the help of proper
tax planning. For this today, Home Loan has become the powerful weapon for reduction and saving
of tax for especially the salaried people. With the study of current tax structure, the author has
concluded that tax can be saved more in case of Let Out House Property [LOP] as compared to Self
Occupied House Property [SOP] as there are no ceiling of interest rates in case of LOP.

Rajalkshmi S. et al (2013) in their research paper entitled “A study on Housing Loan

Borrowers of Public and Private Sector Banks in Thoothukudi area” state that today‟s
youngsters have the very first priority in their life is to acquire a house. For the same. One must go
for the Housing Loan which is entitled to follow certain formalities for the evaluation of the eligibility
of the borrower.the authors have considered the interest rate as one of the most essential advantage
of taking a home loan. They have concluded that the Home Loan market has witnessed the growth
rate of 40% in past four years. They have also concluded that as compared to rise in Property
Prices,the incomes of the people have been rising fasted which has resulted in more affordability of
Home Loans.

Srinivasa Rao K. and Ramakrishna P. (2014) in “Emerging Trends in Banking

Services, its impact and implication – A micro study” state that the developments in the stream of
Information Technology has led to growth of different banking services. These services are day by
day becoming more customer friendly at the global stage. Hence, the policies of the banks for their
services should be framed so an to be in this competitive era which will
also lead to development of business.

Kumaraswamy M. and Nayan J. (2014) in “Marketing of Housing Finance - A

comparative study of Public and Private Sector Banks” state that since the first five year plans
only the housing has been the priority on national discussion but it was limited to construction of
house for government employees and different social housing schemes like SRA they have suggested
that the rate of interest must be keep at 3@above inflation rate and the banks must concentrate on
marketing segment to satisfy and retain the existing and the marketing must not be misconcepted as
only selling or advertisement but the another fact is that if one follows the 3percent above the inflation
rate which is continuously increasing day by day.

Srinivas K.T. (2014a) in “A study on Financial Performance of National Housing

Banks (NHB) in India”, states that the primary objective of National Housing Banks is to workas
an apex institution to promote the housing finance through financial and other aid to the financial
institutions. He also states that there is sound and commendable financial performance of the National
Housing Banks.

Srinivas K.T. (2014b) in “A study on Loan management with special reference to the
Belgaum Industrial Co – operative Bank Limited, Belgaum” states that his study was an attempt
to analyze the lending policy giving deal idea about increase and decrease in loan disbursements and
recovery of Belgaum co –operative Banks limited, Belgaum since 2007 – 08 till 2011 – 12. In this
study he has also suggested that the said bank should concentrate on providing finance for
othersectors than deposit cash credit, Business Cash Credit, Medium Term Loan and creating
awareness of its difference loans schemes other than these.

Das S. and Dutta A. (2014) in “A study on NPA of Public Sector Banks in India” have analyzed
the data about the NPAs [Non Performing Assets] of Public Sector Banks of past 6 years from 2008
to 2013 from the website of RBI. Giving many definitions of NPA like „a property of the bank i.e
loan lent by the bank, when stops generating any income to the bank including principle, is considered
as Non-Performing Asset‟, they have tried to give reasons for NPAs like market failure, intentional
defaults, poor follow up etc. With the help of the data collected, they have concluded that there is no
significance difference between SBI and other Public Sector Banks in consideration with NPAs.

Yadav S. (2014) in “NPAs: Rising Trends and Preventive Measures in Indian

Banking Sectors” states that since last 10 years, NPA has been a disturbing factor to the
BankingSector in their sustainability and insurability. The quality of loans and advances given by the
banks has the impact on the operational efficiency in terms of earning capacity, liquidity and solvency
of the bank. The author has concluded, with the help of different meaning, types and factors of NPA,
that the problem of NPA can be solved by proper appraisal of credit and a mechanism of risk
management. For this, the author has suggested that the Banking System is required to be equipped
with proper prudential norms.
Bexley J. B. and Nenninger S. A. (2014) in “Consumer Perceptions and Preferences
of Financial Institutions” have studied about the perceptions of the customers about their Financial
Institutions and the changes in their level of services of their Financial Institutions after the effects of
Financial Crisis. In this paper, the authors have put the light on the decision process of selecting the
Financial Institution on the event of Financial Crisis. With the help of the study, the authors have
concluded that the pricing policy is the secondary factor for selection of Financial Institution by the
customers. The primary factor becomes the location and quality provided to the customers.

Ghosh S. (2014) in “A study on Housing Finance Policies and Appraisal Process of

Home Loan in India” states that one of the biggest ambitions in a person‟s life is to own ahouse.For
the fulfillment of this dream home, one has to go for the Home Loan for which he has to pass
throughthe Credit Appraisal Process of the Bank. On the other hand, the Banks/ HFCs come up with
numerous financial and non-financial tools and techniques to assess the creditworthiness of the
applicant. In this paper the author has primarily emphasized on the guidelines followed by the Banks/
HFCs in India while going through the Credit Appraisal Process. He has concluded that the one of
the major contributor to the Economic Development of India housing sector.

REFERENCE
 REASEARCH AND METHODOLOGY
CHAPTER No.3

INTRODUCTION
Introduction
Recent Trend of Home Loans In India
Rationale of Study:
Structure of Banks
Profiles Of Selected Bank
RESEARCH METHODOLOGY
Statement of The Problem
Importance, Scope and Area of The Study
Objectives of Study
Research Design
Source of Data
Chapters Schemes
Introduction:
A person should be meet three basic needs to be able to survive. These three needs are food, clothing
&shelter. Today, we see that most families give the importance to providing good education to their
kids & also give importance of owning a house is on top of their priority list. Having your own home
can actually increase your standard of living& it will be added to your assets. Another the advantage
of owning your own home is that you can be able to avoid those landlords who constantly raise their
rental fees. One of the top reasons of smart people who like to purchase a property is because of the
tax benefits. There is tax rebate to house loan installments. Buying a home is very possible even for
those who are on a tight budget. This is due to the fact that banks and other financial organizations
have provide loans to these peoples and also lowered their interest rates and restructured their
mortgage plans.

Shelter is a basic human need, which has become a major challenge in a country, which is fast
urbanizing. Maharashtra is one of the most urbanized states in the country. Whereas nationally 27%
of the population was in the urban areas, &in Maharashtra the figure was 42% (Census 2001).
Housing in urban areas assumes much greater significance, as it relates not only to basic shelter needs
but also provides a facility to the citizens to access services and be part of the development process.

Growth of manufacturing industry & service sector activities are increasing around urban area. So
more people from rural area are attracted towards the urban area for employment. Because of that
there is more pressure on urban area or cities, to provide shelter to this incoming population. So there
is increase the demand for home which leads to increase the rates of land& construction. It is difficult
for layman to purchase home in single cash payment. Though the government provides various
facilities, still there is very difficult task to build a house for middle and lower income class peoples.
So they move towards banks or financial institute which helps them &gives them better services and
maximum loan amount. The tenure of loan is very long & they must manage their loan installment
with their limited budget. Due to increase the number of loan taker, there increases the healthy
competition among the banks. Banks also get strong business from this loan disbursement. So they
provide different schemes to attract the customers.

Recent Trend of Home Loans In India The year 2009 was a good one for home loan borrowers.
Banks(brings low interest rate offer and especially for home loan packages.roperty prices also stable
so; the demand for home loans was steady. With the economy prepared for strong growth and
confidence returning to the capital market, most bankers expect the demand for home loans to grow
in 2010. Bankers expect disbursements to be around 25 per cent higher next year.

The first half of 2009 the housing loan segment was decreased due to reasons of the overall economic
slowdown, high property prices and high interest rates.

As on August 2009, growth in home loans was 5.4 % & August 2008 it was 12.4%. (In absolute
terms, the growth in housing loans was Rs 14,668 crore in August 2009, against Rs 29,872 crore in
August 2008.)

Home loan growth in the second-half of 2008-09 was decreased(down by a combination of factors
such as the economic slowdown, high interest rates, high property prices and a lack of confidence
among buyers, who were not sure of theirjobs and, therefore, their incomes. Year 2009 was a good
for borrowers, because Banks offered tremendous interest rates schemes. Some banks offer home
loans at rates as low as 8 per cent. Some banks offered lock-in the interest rates for periods of up to
five years & dual-rate scheme which is firstly introduced by SBI.

This type of flexible interest rates scheme provided by banks & stable property prices maintains good
demand for home loan.

The trend of affordable housing which began in 2009 will continue in 2010. Developers will continue
to launch innovative schemes and affordable middle-income housing projects.

The top 10 banks' home loan portfolio grew at 13.8 % for 2009-10, even as overall bank lending to
housing grew only 8 per cent. State Bank of India saw a 32 per cent growth in its home loan portfolio
for 2009-10 and became the top mortgage lender among banks.

The top ten banks collect 65% of the total outstanding housing loans of scheduled commercial banks
in 2009-10.

Growth Rates of Home Loans of Top Ten Banks

Top ten banks grow fast

Rs. In crore
2008-09 2009-10 Growth%
State bank of India 54063 71193 32
ICIC Banks 57000 47400 -17
Axis Bamnk 10400 14700 41
 Punjab National Bank 9037 10612 14
Bank of Baroda 8263 10313 25
Canara Bank 7896 10116 28
HDFC Bank 5000 8700 74
Union Bank 6621 8115 22
Bank of India 7269 7788 7
Central Bank of India 4422 5318 20
ToplO loans outstanding 170000 194000 14
Total home loan credit growth 8

ICICI Bank from being the largest mortgage lending bank fell to second place in the last year. The
bank's home loan shranker cent over the year. Other private banks such as HDFC Bank and Axis
Bank observe expansion in their home loan portfolios, which 74 per cent and 41 per cent respectively.

SBI contributed 78 % of the incremental home lending in 2009-10. Because of SBI's attractive loan
policies(brings)a good number of borrowers and consistent ahead in home loans. So its market share
improving from 17 % in March 2008 to 24 % by March 2010.

The Reserve Bank of India's increaseIhe home loan limit for cooperative qanks tojhp30 lakh from Rs
5 lakh & it helps to give a boost to cooperative banking sector in the state. This is expected to be of
great help to the rural middle class people. The RBI has decided that the maximum quantum of
housing loan that can be granted to an individual borrower by a state/central cooperative bank would
now be Rs. 20 lakh. However, in case of a cooperative bank having a net worth of RslOO crore and
above, the limit will be Rs30 lakh. For repairs, additions, alterations etc to existing houses, the
maximum amount of loan per individual borrower stands revised to Rsl lakh, which was Rs 50,000
till now.

Rationale of Study:
Every bank have different bank policies e.g. rate of interest, processing fees, maximum loan limit,
different loan period, lease or mortgage procedure, recovery of loan procedure, etc. People are
unknown about all these points therefore there is need to study that which bank gives loan with
minimum terms & conditions, where customers are availed benefits a huge amount of loan. It requires
to studying the facilities or schemes provided by these different types of banks. So here, I have
decided to undertake a comparative study ofthe loan sanctioning procedure ofthe bank.

The study also covers the difficulties in providing & getting home loan by bank. So I have taken this
study to compare the procedure of sanctioning home loan, variation in interest rate & study the
problems & obstacles to sanctioning the house loan. There are various types of banks in Sangli-
MirajKupwad Corporation Area. The Researcher has selected three banks in three sectors
(1) Public Sector (2) Private Sector (3) Co-operative Sector.

Following three banks selected purposively.

(a)SBI from Public Sector
(b)HDFC from Private Sector
(c)Sangli Urban Co-Op. Ltd. from Co-operative Sector

Structure of Banks:
Today we all are familiar with banks. Bank is become a important part in our life. A man probably
use a bank for many of the transactions, such as paying household bills, drawing cash, and perhaps
having his salary paid directly into his account. So every person is attached with bank. Banks perform
basic two functions acceptance of deposits from customers and lending the money by the way of loan
or overdraft to customers.

STRUCTURE OF INDIAN BANKING SECTOR

RESERVE BANK OF INDIA

Schedule Banks
(1) Commercial Banks
(a) Foreign Banks
(b) Regional Rular Banks
(c) Private Banks
(d) Public Sector

(2) Co-opervatives Banks

(a) Urban Co-Opervatives Banks
(b) Rular Co-opervatives Banks

Public Sector Banks:

These are banks where majority share is held by the Government of India or Reserve Bank ofIndia.
Examples of public sector banks are: State Bank of India, Corporation Bank, Bank of Baroda Dena
Bank are 24 nationalized banks

2) Private Sectors)Banks:
In case of private sector bankf the bank is held by private individuals. These banks are registered as
companies with limited liability. For example: HDFC Bank, ICICI Bank, Axis Bank. etc.

3) Co-operative Sector People who comes together voluntarily to serve their common interest and
often form a cooperativesociety under the Co-operative Societies Act. When co-operative societies
engage itself in bankingbusiness it is called a Cooperative Bank. For example: Sangli Urban Co-op.
Bank,Rajarambapu Co-op. Bank, Vasantdada Shetkari Co-op. Bank. Etc.

Profiles Of Selected Batik

State Bank of India: The SBI Banking group is big one in Indian economy. It haloid history. Bank
of Bengal was established in 1809, Bank of Bombay established in 1840 and the of Madras was
established in 1843. These three provincials banks were came together and Imperial Bank of India
came into existence in (1921 Up to 1955 this bank was played of crcuial role in financial transaction
of Indian economy. In 1st July 1955, State Bank of India came into existence by the merger of
Imperial bank of India along with other state owned and state associated banks. The main intention
of the bank is to provide better services & development ofthe rural areas of the country.

It is the largest bank in India and the largest public sector bank in India by market capitalization. The
bank is entering into many new businesses with planned tie ups - Pension Funds, General Insurance,
Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory
Services, structured products etc. - each one of these initiatives having a huge potential for growth.
Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external
commercial borrowings in the country.

Mobile Banking Services launched on 31.03.2009, have been extended to all branches
during(FY2010) There are more than 2,18,000 registered users on date. Out of 1,049 branches opened
during the financial year 2009-10,354 branches were opened in metro and urban areas with a view to
increase our reach and be more accessible to customers. As at the end of March 2010, the Bank had
12,496 branches and 21,485 Group ATMs. A host of Mobile Banking services, such as funds transfers,
enquiries, cheque book requests, bill payments, Mobile Top-up, recharging of DTH services, Demat
account enquiry are currently being offered under mobile banking.

State Bank has rolled out several unique products like Self Help Group (SHG) Credit Card, SHG
Sahayog Niwas and SHG Gold Card, a new scheme for financing NGOs/ MFIs for on-leading to
SHGs, a Micro Insurance product - Grameen-Shakti has been rolled out which has covered one
million lives by March 2010. Bank has been rated as the Best Public Sector Bank for Rural Reach by
Dun and Bradstreet and has been awarded the Best Microfinance Award for the year 2009 by the
Asian Banker for financial institutions across the Asia Pacific, Gulf and Central Asia regions.

This Bank was No.l in retail lending in FY 2009 and continues to be No.l in FY 2010, driven by
robust growth in Home, Auto and Education loans, Agricultural advances.

Home loans grew by 31.68%( Year of Year ’from a level of Rs.54,063 crores in March 2009 to
Rs.71,193crores in March 2010. Almost 95% of customers (in rural, semi urban and urban areas) are
first time home buyers. SBI Home thousand India's No.l Home Loan brand. It has maintained its
position as India's "Most Preferred Home Loan" brand in CNBC-Awaaz consumer awards
continuously for four years since 2006. SBI Home Loans has been rated as "The Best Home Loan"
in India by the panel of eminent jury in NDTV-Outlook Money awards continuously since 2008.

The bank also has a network of 18,500 branches in India as on 31 March 2010 and about 21,485
ATMs in India and the bank is also looking at opportunities to grow in size in India as well as
internationally. It presently has 82 foreign offices in 32 countries across the globe presence with 142
branches.

It offers advanced facilities like core banking, ATM, Debit Card, Credit Card, Internet Banking, and
Mobile Banking, Share Trading as wide range of banking services to customers.

The Operating Profit of the Bank for 2009-10 stood at Rs. 18,320.91 crores as compared to Rs.
17,915.23 crores in 2008-09 registering a growth of 2.26%. The Bank has posted a Net Profit of Rs.
9,166.05 crores for 2009-10 as compared to Rs. 9,121.23 crores in 2008-09 registering a moderate
growth of 0.49%. While Net Interest Income recorded a growth of 13.41% and Other Income
increased by 17.95%, Operating Expenses increased by 29.84% attributable to higher staff cost and
other expenses.

Among the awards, this Bank was adjudged (announce/declared) Bank of The Year 2009, India by
The Banker Magazine for the second year in succession; Awarded "Best Bank - Large", and "Most
Socially Responsible Bank" from Business World Best Bank Awards 2009; Bagged the BEST BANK
2009 Award by Business India; Adjudged the Most Trusted Brand 2009 - Economic Times, Brand
Equity; Bagged the awards for "Most Preferred Bank", "Most Preferred Credit Card' and "Most
Preferred Home Loan Brand" from CNBC AWAAZ Consumer Awards; Awarded Visionaries of
Financial Inclusion - Year 2009 by Financial Information Network & Operations Ltd. (FINO);
Awarded Technology Bank of the Year in recognition of outstanding achievements in banking
technology - IBA. Banking Technology Awards 2009 and selected as the winner of Golden Peacock
National Training Award for the year 2009 by the Golden Peacock Awards Jury.

The Bank was also awarded the "Best Home Loan Provider" as well as "The Best Bank" - by Outlook
Money Awards, 2008.

SBI Advances for home loan

Years Advances (amount in crores) Increase in %
2004-05 2869.87 -
2005-06 3744.76 30.48
2006-07 4875.86 30.12
2007-08 6032.22 23.79
2008-09 7503.62 24.39
2009-10 8695.02 15.87
Source: Annual Reports of SBI from F.Y.2004-2005 to 2009-2010.

HDFC Bank Ltd:

The Housing Development Finance Corporation Limited" (HDFC) was amongst the first bank which
(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 RBI's liberalization of the Indian Banking Industry in 1994. The bank
was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in
Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January
1995.

The objective is to build the preferred provider of banking services for retail and wholesale customer
segments, and to achieve healthy growth in profitability. The bank is committed to maintain the
highest level of ethical standards, professional integrity, corporate governance and regulatory
compliance. highest level of ethical standards, professional integrity, corporate governance and
regulatory compliance.

HDFC Bank's business philosophy is based on four main principles

1 Operational Excellence
2 Customer Focus
3 Product Leadership
4 People.
HDFC Bank is headquartered in Mumbai. The Bank has a network of 1,725 branches spread in 780
cities across India. All branches are linked on an online real-time basis& offer speedy funds transfer
facilities to its customers. Customers in over 500 locations are also serviced through Phone Banking.
The Bank's expansion plans take into account the need to have a presence in all major industrial and
commercial centers where its corporate customers are located as well as the need to build a strong
retail customer base for both deposits and loan products. The Bank also has 4,393 networked ATMs
across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and
international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express
Credit/Charge cardholders.

The bank's loan approvals during the FY 2010 were Rs. 60,611 (crorsnas compared to(FY 2009 Rs.
49,166(crorsy)representing a growth of 23%. Loan disbursement during the FY 2010 wasRs. 50,413
ponpas against Rs. 39,650 ^rorsln the FY 2009, representing a growth of 27%.

HDFC banks resource mobilization was as under during the year, HDFC availed loans amounting to
USD 175 million under the Short-Term Foreign Currency Borrowings by Housing Finance
Companies. DuringjFY 2010 the Corporation raised loans amounting to Rs.25,037 crores from
commercial banks, of which Rs.9,319 crores were under priority sector category of commercial
banks. The Corporation further raised Rs.2,357 crores from banking sector as FCNR loans.

HDFC is India's premier housing finance company has good track record in India as well as in
international markets. This Corporation has maintained a consistent and healthy growth in its
operations to remain the market leader in mortgages.

With its experience in the financial markets, a strong market reputation, large shareholder base and
unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian
environment.

The Bank has some Key Subsidiary and Associate Companies - HDFC Bank Ltd, HDFC Standard
Life Insurance Company Ltd, HDFC Assets 15 Management Company Ltd, HDFC ERGO General
Insurance Company Ltd, HDFC Property Funds, GRUH Finance Ltd, HDFC Sales Private Ltd,
HDFC honored with awards

1) NDTV Business Leadership Awards 2010 - Best Private Sector Bank.

2) Dun & Bradstreet Banking awards 2010 - Overall Best Bank 3) ACI Excellence Awards 2010 -
Best Private Sector Banks in SME Finance.
4) Asian Banker Excellence Awards 2010 - Best Retail Banks in India
The above table shows growth rate of approval and disbursement of home loans from year 2005 to
2010. This trend indicates that approval and disbursement increasing at diminishing ratef. Approval
increasing rate is from J^64% to 25.52%. And disbursing rate is from 28.11% to 26.28%.

Sangli Urban Co-operative Bank Ltd.

Introduction:
People come together voluntarily to serve their common interest often form a co-operative societies.
The co-operation is a collective effort with the spirit of doing the some work together, in the spirit of
give & take and with a view to achieve some common objectives. Here peoples are voluntarily
associated together with the basic principle of equality. The first "Cooperative Credit Society Act"
was passing in 1904 to relieve the agriculturists from the clutches of money lenders. But this act was
provided only for registration of Agricultural Co-op Credit societies. But the other classes like artisan,
balutedars, weavers etc were also in need of credit so "Co-operative Society Act 1912" was enacted.

The co-operative sector in India has played an important role in economic development of the
country. It has certainly made significant contribution in sector like farming, manufacturing, sugar,
dairies, processing Co-operatives, spinning/ textile, fisheries, distribution of fertilizers, consumer co-
operative, housing, banking, co-operative marketing etc.

When a co-operative society engages itself in banking business it is called a Co-operative Bank. The
society has to obtain a license from the Reserve Bank of India before starting banking business. Any
co-operative bank as a society is to function under the overall supervision of the Registrar,
Cooperative Societies of the State. As regards banking business, the society must follow the
guidelines set and issued by the Reserve Bank of India.

There are various types of co-operative banks like devlopment bank State Co-op Bank, Central Co-
op Bank, District Central Co-op Bank, Employee's Co-op Credit Societies, Urban Co-op Bank etc.

Urban Co-operative banks are one of the important constituents of banking system. Democratic
management, local feel & familiarity, compactness in area of operation & mutual knowledge of
members these special characteristics strengthen the system. In Maharashtra there(1s)iighest number
of urban co-op banks as well as highest amount of advances & lowest percentages of bad debts.
Maharashtra state is highly benefitted out of the services of these banks.

Brief History of Sangli Urban Co-operative Bank Ltd Sangli Urban Co-operative Bank Ltd,
Sangli was established at Sangliinthe year 1935. The main source of sprit behind the establishment
of Sangli Urban Co-op .Bank is Shri. Annasaheb Godbole. He took very much effort in establishment
of this bank. {After them Shri. Bapuroa Bhauroa Pujari is the chairman of the bank & still they are
working as).ln very few days the root of this bank, spread all over in Sangli city. The first general
meeting of Sangli Urban Co-op. bank was held in the year 1937. According to the rule & regulation
of Bombay Co-operative Society Act 1927, Sec7 the banking activity started with various important
aims & objectives.

Objectives of Bank
To receive money on current, saving, fixed recurring deposits to receive for safe custody, securities,
ornaments & other valuable. To buy & sale securities to the government of Maharashtra or
government of India or other securities. To finance the entrepreneurs, artist, small traders, to act an
agent for Govt, of Maharashtra, the purpose of distribution of industrial & other loan granted to small,
medium & cottage industries ,retailers. To act as agent the RBI or any other banks, to acquire loan &
household properties in satisfaction of claim & hold properties for the purpose of building etc. for
office & godown purpose. household properties in satisfaction of claim & hold properties for the
purpose of building etc. for office & godown purpose.

Location, expansion &business Of The bank

Sangli Urban Co-op. bank is located in the heart of the city particularly known as 'Khan-Shag's
Sangli. In Sangli there are various banks state Bank of India, Bank of India, Bank of Maharashtra,
Bank of Baroda, Panjab National Bank, Canara Bank, Indian bank, Central bank, HDFC Bank, ICICI
bank, Cosmos Co-op banks, Saraswat Co-op Bk, Ratnakar Bank Ltd. However The Sangli Urban Co-
operative Bank is facing competition of other bank.
Bank covered Sangli, Kolhapur, Solapur, Beed, Parbhani, Jalana, Latur Districts according to bylaws
of the bank to provide services to the members efficiently & effectively. Bank opened 35 branches &
No of employees are 656 up to march 2010. Bank opened 10 branches in SagnliMiraj-Kupwad-
Corporation Area. These are Harbat Road, Goanbhag, (DakshinShivahi Nagar), Mali Colony,
Vishrambag, Timber Area, Madhavnagar,Gandhi ChowkMiraj, Khan bhag, AoudyogikVasahat,
Market Yard. The bank earned profit for every financial year but not by exploiting to the borrowers.
Banks earned sufficient profit only to perform banking functions efficiently.

'No profit no loss' the principle of co-operative. The bank gives more stress in providing better
facilities to the customer.

Loans & Advances Bank

granted loans & advances to middle class people, small traders, self-employed person, farmers,
hawkers, retailers etc. as per the need of the 20 person. Bank granted short term, medium term &
long term loans & advances. The bank introduced various types of loan schemes such as vehicle loan,
business loan, industrial loan, housing loan, home appliances loan, agriculture loan, computer loan,
education loan, utsav loan, cupal loan, gold mortgage loan, loan to salary earners etc.

As per the amendment of Banking Regulation Act 1st march 1966 for co-operative societies, the bank
started to give housing loan. The bank can offer loan maximum for the 15 years & minimum for 3
years. Bank offer loan limit is maximum 2 crore & minimum loan limit is 5,000. Maximum loan offer
limit is decided on the exposure limit of balance sheet. Bank also offersjoint bank loan facility. In the
year 2009-2010 the number of borrowers is 24,972. The banks offer loan during the FY 2010 were
Rs. 29,681 lakhs as compared to FY 2009 Rs. 25,546lakhs, representing a growth of 16%. In the year
2009-2010 no of depositors are 2,82,364 & amount of deposit for the FY 2010 is 42,999 lakhs as
compare to FY 2009 is 37,220, representing a growth of 15%.

Today Bank gives the various services to their customers like - ATM machines, PAN card service,
core-banking services, provide the service of insurance sector by making agreement with New India
Assurance Co. & with LIC.
From above table, we find that from financial year 2006 - 2007 loan amount percent is decreased by
7.42, and then it slightly increased in next year. Then it increase by 8.21% & 16.18% for financial
year 2009 &financial year 2010 resp.

RESEARCH METHODOLOGY
STATEMENT OF THE PROBLEM:
Every bank have different bank policies e.g. rate of interest, processing fees, maximum loan limit,
different loan period, lease or mortgage procedure, recovery of loan procedure etc. People are
unknown about all these points therefore there is need to study that which bank gives loan with
minimum terms & conditions, where customers are availed benefits a huge amount of loan. So here,
researcher has decided to undertake a comparative study of disbursement of housing loan of private,
public & Co-operative banks in Sangli-Miraj-Kupwad Corporation area. The researcher has
undertaken the study of procedure of sanctioning & disbursing of home loan, variation in interest
rate, analysis of proposals appraisal & also covers the difficulties in providing home loan by bank.

IMPORTANCE, SCOPE AND AREA OF THE STUDY

With the help of this study bank can find exact requirement of customer on offering home loan. In
addition, customer understands the rules fk regulations of banks in the different sector. Researcher is
considering the geographical area of Sangli particularly the Sangli-Miraj-Kupwad Corporation.
Researcher has considered the period of 5 years i.e. 2003 -2008.

OBJECTIVES OF STUDY.
1. To study the nature and significance of home loan.
2. To satisfy the procedure of sectioning housing loan
3. To examine the causes of variation of rate of interest.
4. To analysis the proposals appraisals by bank.
5. To study obstacles and problems in the procedure of home loan.

Source Of Data
a. Primary Data The primary data has collected by interview and observation from banks with help
of schedule. The researcher has taken the interview in detail of loan and advance section as well as
recovery section authority directly.

b. Secondary Data The secondary data has collected from respective banks records i.e annual
reports, books, articles in newspapers and web sites etc.

CHAPTERS SCHEMES
I. Introduction And Research Methodology The first chapter entitled introduction and
research methodology. This chapter deals with introduction and recent trends of home
loans, structure of banks, profiles of selected banks. The researcher determines
deliberately objectives, scope hypothesis, etc. research methodology and chapter scheme
briefly.

II. Procedure Of Home Loan Second chapter relates to the procedure of home loan. It covers
introduction, present scenario of three selected banks, advantages and disadvantages of
home loans, three selected banks home loan procedure and various parameters on which
bank avail home loan facility to applicant.

III. Variation Of Rate Of Interest The third chapter includes the causes of variation in interest
rates. It also includes meaning of base rate, repo rate & reserve repo rate, trends in rates
& ratios, existing interest rates of housing loan of three selected banks and methods of
interest rates adopted by selected banks.

IV Sanctioning, Disbursement & Repayment The fourth chapter explains sanctioning

procedure and scrutiny process of applicant file by appropriate authority & final decision
about approval of home loan of three banks. After sanctioning the steps involve in
disbursement of home loan, nature of EMI. At last repayment procedure of loan and NPA
percentages prevail in bank of three selected banks.
IV. Lacks Of Problems Faced By Selected banks in the fifth chapter deals the various
problems faced by selected banks like changing RBI's policies, problem of NPA, Expenses
on advertisement etc.
 REFERNCES

Ref. Business Line - Business Daily from THE HINDU group of publications Sunday, Jun 06,2010

Source: Annual Reports of SBI from F.Y.2004-2005 to 2009-2010.

Source: Annual Reports of Sangli UCB from F.Y.2005-2006 to 2009-2010.

www.iaeme.com

ir.unishivaji.ac.in
 DATA ANALYSIS AND INTERPERTATION
Chapter no. 4

Loan Portfolio
The loan approval process of HDFC is decentralized, with varying approval limits. Approval of
lending proposals beyond certain limits is referred to the Committee of Management (COM). Larger
proposals, as appropriate are referred to the Board of Directors.
 Data compiled with the help of Annual Reports of HDFC Ltd. For different years.

The HDFC’s loan book has increased by 28.49% in 2003-04, 28.73% in 2004-05, 24.93% in 2005-
06 and 25.61% in 2006-07, it has been concluded with the help of Fig. 1.1. The net increase in loan
book has been determined after taking into account the loan repayment which are given in Fig. 1.2.
The loan repayments has been increased in 2003-04 by 19.35%, in 2004-05 by 34.18%, in 2005-06
by 34.19% and in 2006-07 by 27.55%. The increasing rate has shown the declining trends in the year
2006-07. The amount of the loans written off during the years has firstly shown the increase. Such as
it has been increased in 2003-04 by 156.37%, in 2004-05 by 58.89%, in 2005-06 by 164.86% but in
the year 2006-07 it has be declined by 64.69%. The Fig. 1.3 exhibits the above information.

In the year 2006-07, loan book, net of loans securitized has grown by 26% during the year. Inclusive
of loans securitized, the loan book growth was 28%. The outstanding investment in debenture and
corporate deposits for financing housing and real estate projects amounted to Rs. 1476 crores in 2006-
07 as compared to Rs. 1502 crores in 2005- 06, Rs. 1205 crores in 2004-05 and Rs. 886 crores in
2003-04. The total portfolio as at March 31, 2007, excluding loan securitized but inclusive of the
aforesaid investment in debentures 98 and corporate deposits amounted to Rs. 57988 crores, in the
year 2005-06 it was Rs. 46942 crores, it shows the increase of 25%. In the year 2003-04 it stood at
Rs. 28860 crores, in 2004-05 Rs 37216 crores.

Recoveries
With effect from March 31, 2005, an asset is non-performing asset (NPA) if the interest or installment
is over due for 90 days as against the earlier norm where a loan was a NPA if the account was in
arrears for over six months .The principal loans outstanding along with debentures and corporate
deposits for financing real estate projects, where payments were in arrears for over 90 days amounted
to Rs. 533.82 crores as at March 31, 2007, constituting 0.92% of the portfolio. It was Rs. 446.39
crores as at March 31, 2006, constituting 0.96% of the portfolio and it was amounted to Rs. 410.68
crores, as at March 31, 2005, constituting 1.10% of the portfolio. In 2006-07, the NPA in respect of
individual portfolio was 1.15% and in respect of non-individual portfolio was 0.51%. In the year
2005-06 and 2004-05, the NPA in respect of individual portfolio was 1.36% and 1.499% respectively,
similarly regarding 99 non-individual portfolio NPA in the year 2005-06 and 2004-05 was 0.21% and
0.39% respectively. The above information explicit that the percentage of NPA to portfolio has been
showing the decreasing trends in case of individual as well as non-individual portfolio. It is the sign
of healthy financial institution. The total loans written off since inception (net of subsequent
recoveries) aggregated to Rs. 48.24 crores.

Provision for Contingencies

As per prudential norms prescribed by NHB, HDFC is required to carry a provision of Rs. 151.29
crores as at March 31, 2007 in respect of non-performing assets and provision for standard non-
housing assets. HDFC has been transferring additional amounts to the provision for contingencies
account including transfers from Special Reserve Account No. 1. After taking into account including
transfers as well as the net utilization, the balance in provision for contingencies as at March 31, 2007
stood at Rs. 409.66 crores, at March 31, 2006 stood at Rs. 380.46 crores, and at March 31, 2005 stood
at Rs. 376.90 crores. The provision for contingencies has been increased in these years by 8.69%.

Fixed Assets
The Net fixed assets as at March 31, 2007 amounted to Rs. 213.07 crores, at March 31, 2006 it stood
at Rs. 247.31 crores, at March 31, 2005, it amounted to Rs. 294.85 crores, at March 31, 2004 it stood
at Rs. 437 crores and at March 31, 2003 it was Rs. 417.76 crores.
 Data Compiled with the help of Annual Reports of HDFC Ltd. For the Year 2004-05, 2005-06 and
2006-07
With the help of the given table we can conclude that asset profile of HDFC has been showing slight
changes in the given period of three years. As the percentage of portfolio has been declined from 92%
to 90%. The proportions of investment have increased in 2006 then remain same in 2007. There has
been no change in the proportion of fixed assets. But the percentage of net assets has been increased
from 1% to 2%. The fixed assets includes freehold and leasehold land, building for own use or under
operating lease, leasehold improvements, computer hardware, furniture & fittings, vehicles owned or
leased, leased assets. such as plant & machinery, vehicles ,computer software owned or leased ,
goodwill on amalgamation, website development etc. The current assets includes Income Accrued on
Investments, Interest Accrued on Deposits, Sundry Debtors (unsecured), construction work in
progress, cash and cheque on hand with scheduled banks as current accounts & deposit accounts,
cash balance with Reserve Bank of India, cash balance with non-scheduled banks as current accounts,
commercial papers, Treasury bill etc.

Subordinated Debt
During the year 2006-07, the corporation raised Rs. 475 crores through the issue of long-term
unsecured redeemable nonconvertible subordinated debentures. The subordinated debt was for the
period of 10 years and was assigned a ‘AAA’ rating from both CRISIL Limited and ICRA Limited.
As at March 31, 2007, the corporation’s outstanding subordinated debt was Rs. 1375 crores. The debt
is subordinated to present and future senior indebtness of the corporation. Based on the balance, term
to maturity, as at March 31, 2007. Rs. 1295 crores of the book value of sub-ordinated debt is
considered as Tier II under the guidelines issued by the National Housing Bank for the purpose of
capital adequacy computation .As at 31 March 2006, the Corporation’s outstanding subordinated debt
was Rs. 900 crores. In the year 2005, the corporation raised Rs. 500 crores and in the year 2004, the
corporation raised Rs. 400 crores through the issue of long term unsecured redeemable
nonconvertible subordinate debentures.

Borrowings
Borrowing as at March 31, 2007 amounted to Rs. 57193 crores, at March 31, 2006 stood at Rs. 46721
crores, at March 31, 103 2005 it amounted to Rs. 36647 crores, and at March 31, 2004 and at March
31, 2003 it amounted to Rs. 28684 crores and Rs. 23252 crores respectively. The trend exhibits that
in year the borrowings have been increased by Rs. 5432 crores, it is 23% increase, in the year 2004-
05 it has increased by Rs. 7963 crores i.e. 27.76% increment, in the year 2005-06, it has increased by
Rs. 10074 crores i.e. 27.48% increment, in the year 2005-06 it has increased by Rs. 10472 crores i.e.
22.41% increment. These increments in borrowings are based on the increase in borrowings over the
previous year borrowings. The borrowing comprises deposits, foreign currency convertible bonds,
international borrowings, domestic term loans, bonds & debentures etc. The given table shows the
variation in the composition of borrowings from the year 2003-04 to the year 2006- 2007.

Breakdown of Borrowings
2003-04 2004-05 2005-06 2006-07
Deposits 33% 21% 19% 18%
Foreign Currency - - 05% 04%
Convertible
Bonds (FCCB)
International 11% 08% 06% 04%
Borrowings
Domestic Term 33% 39% 37% 39%
Loans
Bonds 23% 32% 33% 35%
Debentures and
Commercial
Papers(CPs)
Total 100 100 100 100
Data Compiled with the help of Annual Reports of HD
FC Ltd . for different years.

The above table shows the change in the composition of borrowings; the deposits as a part of
borrowings are showing a downfall trends in proportion to total borrowings in the given period. The
FCCB got impetus in the year 2005-06, and the international borrowings has shown the decrease in
percentage in the given portfolio. But the proportions of domestic term loans and bonds, debenture
and CPs have been increasing year on year basis.

Despite the competition from small saving schemes and mutual funds, the corporation has managed
to increased its deposits by revising interest rates in line with the increasing interest rates in the
economy. As at March 31, 2004, the deposits outstanding amounted to Rs. 9338 crores and at March
31, 2007, the outstanding deposits stood at Rs. 10384 crores, it is showings the increase of Rs. 1046
crores or of 11.20% over the period of last three years. As at March 31, 2007, the depositor base stood
at approximately 10 lac depositors as CRISIL and ICRA has reaffirmed their ‘AAA’ rating for
HDFC’s deposits for the XII th consecutive year.

In September 2005, the corporation concluded the issue of USD 500 million zero coupon FCCB. The
bonds are convertible at any time into equity shares of the corporation of the face value of Rs. 10
each from August 24, 2006 upto July 29,2010, at the option of the holders, at Rs. 1399 per equity share,
representing a conversion premium of 50% over the initial reference share price.

The premium payable on redemption of the bonds is charged to the Securities Premium Account over
the life of the bonds. The bonds are redeemable on September 27, 2010 with a yield to maturity of
4.62% per annum. Upto March 31, 2007, none of the bonds have been converted into equity shares.
HDFC has in earlier years availed of foreign currency borrowings from ADB under the Housing
Finance Facility Project – ADB-II (USD 100mn), from KFW (DM 23mn and Euro 15.33mn),
syndicated yen loan (JPY 12.05 bn), Floating Rate Notes (USD 100mn) from DEG, a member of the
KFW Group of Company (USD 50mn) and from International Finance Corporation (IFC),
Washington (USD 200 mn) In November 2006, the corporation fully repaid first syndicated yen loan
facility of JPY 12 bn. In January 2007, the corporation successfully refinanced USD 160 mn of the
USD 200 mn loan from IFC.

In case of Domestic Term Loans, during the year 2006-07, HDFC raised loans from commercial
banks aggregating to Rs. 11924 crores. Out of this, loans amounting to Rs. 5666 crores qualify for
priority sector allocation. HDFC raised a further Rs. 2219 crores from the banking sector as FCNR
(B) loans.

As at March 31, 2007, the total loans outstanding from banks, institutions and National Housing Bank
amounted to Rs. 19963 crores as compared to Rs. 9631 crores as at March 31, 2004, it is showing an
increase of Rs. 10332 crores or of 107% within the period of three years.

During the year 2006-07, the corporation issued NonConvertible Debentures amounting to Rs. 8165
crores on private placement basis. The corporation bought back debenture amounting to Rs. 437
crores. In the year 2004-05 the corporation had issued NCD at different point of time aggregating in
to Rs. 5600 crores on a private placement basis, in the year 2005-06 the corporation issued NCDs
amounting to Rs. 5640 crores on private placement basis. And bought back debentures amounting to
Rs. 268 crores in the year 2005-06 and amounting to Rs. 180 crores in the year 2004-05. The
Corporation’s NCD issues have been listed on the Wholesale Debt Market segment of National Stock
Exchange of India Limited (NSE). The corporation’s NCDs have the highest rating of ‘AAA’ by both
CRISIL and ICRA.

Securitization of Loans
During the year 2006-07, the HDFC concluded three Mortgage Backed Securities (MBS) issues
which were subscribed to by banks. Through the sale of loans under the MBS issues the corporation
raised a total of Rs. 1567 crores in the year 2006-07, in the year 2005-06 it stood at Rs. 1016 crores,
in the year 2004-05 it amounted to Rs.216.08 crores .The total MBS outstanding as at March 31,
2007 stood at Rs. 2319 crores. HDFC continues to service the loans sold under the MBS issues. The
corporation also, through a sell down offer has sold a part of its non-individual loan portfolio
amounting to Rs. 530 crores in 2006-07. These loans have been trenched and accordingly assigned
to the purchaser. The corporation however continues to hold the security of these loans on a pari passu
basis with the purchaser. The residual income on the individual loans securitized as well as on the
non-individual loans sold during the period is being recognized at the time of actual collections and
not upfront on a net present value basis .

Risk Management
The Financial Risk Management and Hedging Policy as approved by the Audit Committee sets limits for exposure
on 108 currency and interest rates. The risk management strategy has been to protect against foreign exchange risk,
whilst at the same time exploring any opportunities for an upside, so as to keep the maximum all-in cost on the
borrowing in line with or lower than the cost of a borrowing in the domestic market for a similar maturity.
HDFC has to manage various risks associated with the mortgage business. These risks include credit risk, liquidity
risk, foreign exchange risk and interest rate risk. HDFC manages credit risk through stringent credit norms.
Liquidity risk and interest rate risks arising out of maturity mis-match of assets and liabilities are managed through
regular monitoring of the maturity profiles.

The currency risk on the borrowings is actively hedged through the combination of dollar denominated assets, long
term forward contracts, principal only swaps (POS), full currency swap and currency options. As at March 31, 2007,
the Corporation’s net foreign currency exposure on borrowings net of risk management arrangements was USD
100.17 mn. The total net foreign currency exposure inclusive of cross currency swap is USD 743 mn. Of this, USD
348 mn pertains to long term exposure. The long term open position (excluding FCCB) is at 2.65% of total
borrowings of HDFC.

Asset Liability Management

As a part of asset liability management and on account of the increasing response to HDFC’s
Adjustable Rate Home Loan product as well as to reduce the overall cost of borrowings. HDFC has
entered into interest rate swaps wherein it has converted its fixed rate rupee liabilities of a notional
amount of Rs. 7265 crores as at March 31, 2007 for varying maturities into floating rate liabilities
linked to various benchmarks. In the year 2005-06 it amount to Rs. 6565 crores. The Assets and
Liabilities in foreign currency are revalued at the rates of exchange prevailing at the end of the year.
The following table shows the Assets and Liabilities with different maturities for the period of last
four years.

31-03-04 31-03-05 31-03-06 31-03-07

Assets with 9611 16951 15524 17842
maturity upto 1
year
Liabilities with 11448 18007 14785 17597
maturity upto 1
year
Assets with 18978 18993 27961 33666
maturity between
2 to 5 years
Liabilities with 15932 16442 27764 34838
maturity between
2 to 5 years
Assets with 5247 6544 9913 14063
maturity beyond
5 years
Liabilities with 6456 8039 10849 13136
maturity beyond
5 years

Source: Annual Report of HDFC Ltd. 2006-07.

From the above table, by making a comparison between the figures of the year 2003-04 with the
figures of the year 2006-07, we conclude that the asset and liabilities with maturity upto 1 year has
shown increase by 86% and 54% respectively. The assets and liabilities with maturity between 2 to 5
years has shown increase by 77% and 119% respectively. And the assets and liability with maturity
beyond 5 years has shown the increase by 168% and 103% respectively.
HDFC does not generally take an interest rate mismatch. As at March 31, 2007, 73% of the assets
and 71% of the liabilities were on floating rate basis.

Human Resource
The human resource is the most valuable asset of every organization. The number of employees
increased from 806 to 1388 during the period from 1998 to 2007. during the same period the number
of offices has been increase from 41 to 191 excluding the offices of HLSIL. Total assets per employee
as at March 31, 2007 stood at Rs. 45.20 crores as compared to Rs. 38.12 crores in the previous year
111 and net profit per employee as at March 31, 2007 was Rs. 113 lakhs as compared to Rs. 94 lahks
in the previous year.

Spread of Loans
The average yield on loan assets during 2006-07 was 9.67% per annum as compared to 8.66% p.a. in
the year 2005-06, & 8.64% p.a. in the year 2004-05. The average all-inclusive cost of funds was
7.49% p.a. in the year 2006-07, 6.50% in the year 2005-06, and 6.47% in the year 2004-05. The
spread on loans over the cost of borrowing for the year 2006-07 is 21.18% p.a., for the year 2005-06
it is 21.16% and for the year 2004-05 it is 2.17% p.a.
 Data Compiled with the help of the Annual Reports of HDFC Ltd. For different years.

On the basis of Fig.A , the assets per employee has been showing the increasing trends , it has shown
the increase of Rs.2435 lakhs in the period of six years. The Fig. B shows the cost-income ratio for
the period of six years, it has been showing falling trends in ratio, which is a positive sign for the
profitability of the concern. The Fig. C has been indicating the reduction in the administrative
expenses to average total assets ratio from 0.49 to 0.38 over the period of six years , it is again a
positive sign and explicit the low operating leverage of the concern. The Fig. D shows the change in
the composition of the income sources, it reflects the less dependency of the concern on income from
leased properties and income from dividends in 2006-07 as compared to the given previous years.
The Fig. E shows the portfolio regarding the expenditure of the concern for past four years. The
expenditure on the interest and other charges has been increased and on staff, establishment, other
expenses, provision for contingencies has been decreased in 2006-07 as compared to the given past
years.

On the basis of data of last 13 years, the approvals and disbursement has shown consistent growth.
The maximum percentage increase over the previous years in approvals & disbursements are in the
year 1995-96. There is positive correlation in the approvals and disbursements. In the year 1996-97,
the rate of growth has fallen to 22% and 25%, but in the year 1997-98 it has again increased to 29%
and 31%. In the year 1998-99, it’s growth rate has been decreased to 25% and 24%. In the year 1999-
00 the growth rate has shown increase of 30% and 31%, but in 2000-01, the approvals has grown
with a same pace but disbursement has shown decline in growth rate to 29%. Then, in the year 2001-
02 it has shown the equal growth in approvals as well as disbursement. In the year 2002-03, the
approvals have been increased by 30% and disbursement by 31%. But in the year 2003-04, the
approval has shown the same rate of increase i.e. 30% but the disbursement has shown decline in
growth rate, this year the average individual loan size of Rs. 450000. In the year 2004-05 the rate of
growth remains same and the average loan size was Rs. 600000. In the year 2005-06, the growth rate
remains same 30% and 28% and the average loan size was Rs. 840000. In the year 2006-07 the
growth in individual loan business continued to be strong with approvals registering the growth of
30% but the disbursement has shown fall in the growth rate & it registered the growth of 27%. With
increased affordability due to higher disposable incomes, this year, the average size of individual loan
increase to Rs. 1100000. As compared to the year 2003-04, the average size of individual loan has
increased by Rs. 650000, that is about 144% increase in 2006-07. It is due to the high disposable
income, increased standard of living and increasing rate of inflation.

According to the above table the cumulative investment made in housing sector shows the variation
in percentage increase year on year basis. In the year 1995-96, there was 37% increase in the
investment in housing sector. In the year 1999-00, 2000-01, 2001-02, 2003-04, 2005-06, and 2006-
07 it has shown the increase in the growth rate over the previous year. In the year 1996-97, 1997-98,
1998-99,2002-03, it has shown decline in the rate of growth over the previous year. In the year 2006-
07, the growth rate of approvals and investment in housing sector increased by same rate i.e. 30%.

**Includes one time special dividend of 20% to mark the completion of HDFC’s 20th Anniversary.
**Includes one time special millennium (interim) dividend of 100%.
**Includes one time special Silver Jubilee dividend of 100%. @ The corporation allotted bonus
shares in the ratio of 1:1 in December 2002, Dividend in for full year on the enhanced capital post
the issue of bonus shares. # Adjusted for Bonus.
The table showing financial highlights gives the summary of the progress of HDFC Ltd. in the last
13 years with the help of significant financial variable. The shareholder fund has shown the
tremendous increase in the given span of time. The equity shares have been issued in the year 1995-
96, 2000-01, 2001-02, 2003-04, 2004-05, 2005-06, & 2006-07. In the year 2002-03, the bonus share
in the ratio of 1:1 has been issued. The preference shares have been issued in the year 1995-96 and
1996-97. It shows the low degree of financial leverage. As on April 27, 2007, the shareholding pattern
has been observed as given in the table below:-
 Source: Annual Report of HDFC Ltd. 2006-07.

The maximum percentage of shares are held with the FIIs. The Reserve and surplus has been showing
gradual increase as in 1994-95 it was of Rs. 773.61 crores and in 2006-07 it amounted to Rs. 5298.39
crores, it shows the increase of Rs. 4524.78 crores or 585% in the period of 12 years. The term
borrowings has also shown the increase as in 1994-95 it was Rs. 2583.10 crores and in 2006-07 it
amounted to Rs. 46808.61 crores, in the period of 12 years it has increased by Rs. 4425.51 or by 17
times. The outstanding loans have shown the increase of Rs. 53445.48 crores over the period of 12
years. The dividend yield has been in increased from 32% in 1994- 95 to 220% in 2006-07. In the
year 1997-98, the special dividend of 123 20% was paid in addition to mark the completion of
HDFC’s 20th Anniversary. In 1999-00, the special millennium interim dividend of 100% was paid.
Again in 2001-02 the special Silver Jubilee dividend of 100% was given to shareholders.
 REFERENCES:
1. www.hdfc.com
2. ibid
3. ibid
4. Annual Report 2006-07 . HDFC Ltd.
5. opcit , www.hdfc.com
6. Consulted last five year’s Annual Reports of HDFC Ltd.
7. ibid
8. opcit , Annual Report 2006-07 HDFC Ltd.
9. opcit ,Consulted last five year’s Annual Reports of HDFC
Ltd.
10. ibid
11. ibid
12. HDFC’s Annual Reports for the year 2003-04, 2004-05 ,
2005-06 , 2006-07.
13. ibid
14. ibid
15. ibid
16. ibid
17. ibid
18. ibid
139
19. ibid
20. ibid
21. ibid
22. opcit, Annual Report 2006-07, HDFC Ltd.
23. ibid
24. opcit, www.hdfc.com
25. ibid
 Conculsion And Suggetion
Chapter no. 5

Conclusion :
In my study we came to know that many people are interested to take a home loan from HDFC LTD
to construct their homes. For public sector, no. of applications availed with SBI banks are
approximately 50 to 100 per year. That of with HDFC Banks approximately 300 per year & with
Sangli UCB no. of applications availed up to 50. This indicates that customers attract more towards
HDFC bank than SBI & Sangli UCB.

The Co-operative Bank's interest rates are high than rates of Private Sectors & Public Sector Bank's
interest rates. Today's rate of interest of SBI is 9.75%, HDFC is 9.75% and Sangli UCB is 12%. Banks
also applied different policies of interest rate SBI and HDFC offer fixed & floating interest rate
method. But Sangli UCB offer only reducing balance method of interest rate.
SBI offer home loan from 1 lakhs to 75 lakhs. HDFC offer home loan from 1 lakhs to 1 crore. And
Sangli UCB gives loan from 5,000 to 1 crore. It concludes that Sangli UCB meets the needs of low
income group also SBI and Sangli UCB both are not charge any early redemption cost but HDFC
charge 2% early redemption cost on home loan amount.

Towards SBI the customers have to approach 7 to 8 times and HDFC institution 2 to 3 times and in
Sangli UCB 4 to 5 times. It indicates the HDFC rendered their services promptly to their customers.

SBI utilized 20% of their deposits for offering loan. But HDFC is fully engaged in providing housing
loan i.e. they utilized 100% amount for housing loan but in Sangli UCB below 20% amount is utilized
for housing loan. This difference occur because of the number of applications of HDFC are larger
than SBI & Sangli UCB. So they required huge amount of money for housing loan. SBI stand in 2nd
rank in case of no. of applications so they required large amount of money than Sangli UCB.

The loan sanction process of HDFC is take long time compare to SBI and Sangli UCB banks i.e. SBI
require 8 days while Sangli UCB required 15 days. HDFC required 1 month because file is sending
for pune branch forsanctioning.

Sangli UCB make last few years Legal Verification of a property. SBI & HDFC required 30 years
search report to verify the properties title. And Sangli UCB required 13 years search report. It may
be dangerous to Sangli UCB to make mortgage of property.

For SBI & HDFC required 1 guarantor for loan, but in Sangli UCB required 2 guarantors for loan
application. It conclude that co-operative bank protect their loan amount.

Though the amount of disbursement is given in part but interest is charged on the amount is different
as per bank • In the SBI the interest charge &EMI payments commences only after the entire
sanctioned loan amount is drawn. • But in HDFC customer is supposed to pay a simple interest after
the approval of loan & EMI starts after disbursement of 1st stage of loan. • In Sangli UCB interest &
EMI is charged after the whole amount of loan is disbursed.

ln SBI & HDFC Bank offer monthly EMI, but Sangli UCB offer monthly/ Quarterly/ Half-yearly or
Yearly EMI. Borrowers of Sangli UCB are most of the farmers, small artisans, Small scale trader
their income is not monthly so this facility is provided by sangli UCB.
ln the Sangli UCB moratorium period is higher because it gives loan to small businessman, small
farmers and artisans & their income is irregular. But in the SBI moratorium period is given for 18
months from disbursement of loan amount or completion of work whichever is earlier. HDFC does
not offer any moratorium period to borrower they starts EMI immediate after disbursement of first
stage of loan amount. Sangli UCB they offer moratorium period upto 3 to 6 months as per borrower's
demand.

Co-operative bank's NPA proportion is higher than the proportion of Public & Private Sectors because
of low income group is attracting towards co-operative societies. Hence in Sangli UCB NPA
percentage is 3 to 4%; SBI's & HDFC's NPA percentage is 1%. Finally the whole research was carried
out in a systematic way to arrive at exact results. The whole research and findings were based on the
objectives. However, the study had some limitations also such as lack of time, lack of data, non-
response, reluctant attitude which posed problems in carrying out the research. But proper attention
was made to carry out research in proper way and to make accurate conclusion for the banks which
may beneficial for banks to enhance their customer base.

Suggestion:
In India the laws regarding the clear Land Title should be revised and strengthened so that the off
market land should be used legally. It should be made mandatory for all States and Union
Territories to maintain all updated records in computerized form; it will increase the transparency in
case of land ownership. It will help in reducing the increasing prices of land due to removal of
artificial scarcity of land.

The rental laws must be revised to make the renting properties a financially viable option. But for
the LIG, those who has taken home loan, for widows and for disabled the income from House
Property should be exempted from tax.

The Government should not levy house tax on the people belongs to LIG and EWS who have taken
housing loan till the repayment of their housing loan.

The LIG and EWS are still unaware of the housing development schemes like low cost houses
worth Rs 1 Lakh (of NHB), interest subsidy (of government). There is need to start the awareness
campaign among masses to communicate the policies and concessions which are designed
exclusively for them and encourage them to avail the facility given by the government.

It has been observed that the agriculture lands of suburban are being purchased by the builders and
then after conversion of land use that land are being used for the purpose of educational institute or
an industrial set up or Apartments for HIG and MIG , But these type of uses of land are not at all
benefiting the urban poor. It is again proves to be beneficial for the HIG and MIG .The Government
should control the conversion of land use and this type of land should be used to construct the
houses for LIG and EWS.

The RBI and NHB must lay down specific guidelines for all public and private sector banks and
Housing Finance companies to invest a fixed amount every year in the proposed project “Housing
for all ” or in “National Shelter Fund”. Because the financial institutions have some implications
regarding NPA and Capital adequacy ratio etc, these institutions cannot contravene the norms like
KYC, they cannot make compromise with the documentation formalities as it may lead to increase
in their NPAs. They would not compromise with the profitability of their concern by concentrating
only on LIG and EWS.
The RBI should issue the guidelines for all commercial banks and all HFCs to charge a low rate of
interest on home loans from Low income groups and that rate should be uniformly charged by all
these lenders.

As there are still many loop holes in the rules and regulations applicable on the housing sector but
here our motive is to concentrate on the housing for LIG and EWS. By keeping that motive in mind
these suggestions have been given.
 REFERNCES
1. “Study on Section 80 I B (10), The Income Tax Act , its
Impact on Real Estate Development in India” CREDAI,
www.magicbricks.com.

2. ibid

3. opcit “ Income Tax Law and Practice” 2006-07.

4. Recommendations of the Rakesh Mohan Committee’s India
Infrastructure Report, 1995.

5. www.indiahousing.com and www.indiaproperties.com

6. opcit, CREDAI, Report.

7. opcit, Report on Urban Housing with focus on slums,

Ministry of Housing & Urban Poverty Alleviation, GOI,
2007.

8. opcit CREDAI , Report

9. opcit, “Key Rates unchanged; RBI focuses on inflation

control”, The Business Line, January 30, 2008.

10. ibid.

11. Joshi Associates, Property Dealing & Builder, 14, Subhash

Road, Dehradun.
 BIBLIOGRAPHY

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