Professional Documents
Culture Documents
SUBMITTED TO:
PROF. S.K.KAPOOR
SUBMITTED BY:
Vinav Jain (BM 011244)
ACKNOWLEDGEMENT
At the outset, I acknowledge the generous help that I have received from all for the completion of my summer internship project work without whom support this project had not been possible. First of all I would like to show my sincere gratitude to PNB, Navyug market, Gzb, for giving me this wonderful opportunity to carry out my summer internship at their Zonal Office. I am grateful to my project guide, Mr. T.C.DHIMAN for providing me continuous guidance and support throughout the internship tenure. I am also thankful to PROF. S.K. KAPOOR, my mentor and our professor at IMS, for providing their continuous help and support throughout my summer internship project. Finally, I am thankful to the whole team at PNB, for their cooperation and guidance which was of immense help in completing my project work.
Pension fund industry in India grew at a CAGR of 39% from 2007-08 to 2011-12. In terms of ownership, debit cards are more in number than credit cards but in terms of transactions, use of credit cards is more prevalent than debit cards. The ATM outlets in India increased at a rate of 30% from March 2011 to March 2012. Outstanding Education loan segment is expected to grow at 36.41% till March 2014 from March 2012 onwards to cross Rs. 27000 Crore Mark. Two-wheeler finance industry is projected to forge ahead at a CAGR of 14.21% till 2011-12 from 2008-09. Indian Mutual Fund industry witnessed a decline of 13% from March 2011 to March 2012, and a higher 215.61% growth was recorded in closed ended schemes. Increasing number of millionaires in India is increasing the scope of Wealth Management Services. Bankable households in India are estimated to move up at a CAGR of 28.10% during 2007-2011. India's retail-banking assets are expected to grow at the rate of 20% a year over the next four years. Housing loan account for major chunk of retail loan.
4
Home Equity Loans: A form of finance to the customer by way of mortgage of existing property to the financier for taking a loan for some other purpose. The current market value of the property is the basis for providing home equity loans.
Home Extension Loans: The purpose of this loan is the extension of existing houses tike the addition of rooms, toilet facilities etc. Such loans fall under the category of home loans.
Home Improvement Loans: These loans are provided mainly for repairs and maintenance of existing houses- These could include internal and external repairing, waterproofing and roofing, complete interior renovation, tiling and flooring etc.
Home Purchase Loans: Finance provided for the purchase of ready-made houses.
Land Purchase Loans: These loans are being provided for the purchase of land for the purpose of construction of residential houses.Private housing finance sector is also doing very well in catering the need for housing finance. Dewan Housing Finance Corporation Ltd. is one of the best options in private housing finance sector. Having 22 branches all over the country and
6
dealing in the market for more then 15 years, the group is well established in the market. Rural housing finance is one of the best schemes in India offered by Dewan Housing. With most competitive interest rates in private sector housing finance market, and personalized finance is made available to informal sectors besides formal sector like service class. HUDCO is a powerful government organization. Financing state government for infrastructural development is the main aim. But ever since it has entered individual housing finance sector, the entire scenario has changed. The main war of interest rates has actually begun when HUDCO has started giving housing finance for 11.5 % and after deductions the interest rates comes to 8.81%. After NHB, many housing finance companies looked at HUDCO for refinancing their proposals. Hometrust Ltd., a company by Gujarat Ambuja Group, Global Housing finance Ltd., a syndicate of reputed builders, Weizmann Homes Ltd., a company from Weizmann Finance Ltd., Maharishi Housing Finance Corporation Ltd., a company from Maharishi Group, are also catering to housing finance sector. SBI Home finance Ltd., a subsidiary of SBI, PNB Housing Finance Ltd., a subsidiary of PNB is also doing very good business. SBI Home Finance Ltd. is doing little bit slow for the time being but PNB Housing Finance Ltd. has recently opened its new branch near Shoppers Stop, Andheri. BOB Housing Finance Ltd., a subsidiary of Bank of Baroda also having very attractive housing finance schemes. Can Fin Homes, very aggressive subsidiary of Canara Bank in Southern India, is also doing very good job in Western parts of the country. Nationalized banks are coming in a very big way into housing finance market. SBI, an oldest financial institution and bankers for majority of Indians have entered with interest rates of 12.24 %. PNB has crossed Rs. 50 crore alone in Mumbai region for housing finance in very short period of time. LIC housing finance Ltd., is one of the largest and oldest housing finance institute, is offering one of the best services in the industry. Having its branches all over India, it offers variety of loans like housing finance for new purchases, re-constructions, renovations, NRI housing finance etc. GIC Housing Finance Ltd., a company from the house of General Insurance Company is also having very strong clientele in recent years. A silent company, but very vibrant in its performance, is also gearing for new land marks in the industry. Last but not the least, HDFC, one of the best housing finance company in the country is all set to take on the challenges of housing finance sector. With reduced interest rates, the company is
having its name as synonymous as, housing finance. Gruh Finance, a subsidiary of HDFC is also giving very good business in Gujarat. Table2. 1
Bank name
Interes t Type
upto 5 lakh
5-20 lakh
20-30 lakh
30-50 lakh
50-75 lakh
>75 lakh
Action
83 Sample Results based on default inputs. Allahabad Bank Axis Bank Axis Bank Bank Baroda Bank of India Star Loan Floating Bank of Floating 9.25 9.25 9.25 9.75 9.75 9.75 Home Floating 9.25 9.25 9.25 10.25 11 11 of Floating 9 9 9 9.75 9.75 9.75 Fixed Floating Fixed 12.25 8.75 14 12.25 8.75 14 12.25 8.75 14 12.25 9.25 14 12.75 NA NA 12.75 NA NA
Maharashtra Bank of
Maharashtra - Festive offer Floating Bank Rajasthan of Fixed 9 9 9 9 9 9 8 8 8 8.25 8.25 8.25
Bank Rajasthan
of Floating Fixed Floating Floating Fixed 7.5 11.5 9.25 8.75 14.25 9.0 7.5 11.5 9.25 8.75 14.25 - 9.0 14.0 8.75 16 11 7.5 11.5 9.25 8.75 14.25 - 9.0 14.0 8.75 16 11 8 11.75 10 9 14.25 - 9.0 14.0 9 16 11 8 11.75 10 9.25 14.25 - 9.0 14.0 9.5 16 11 8 11.75 10 9.25 14.25 - 9.0 14.0 9.5 16 11 -
HSBC Bank ICICI Bank ICICI Bank IDBI Bank IDBI Special Scheme IDBI Finance IDBI Finance Indian Bank Indian Overseas Bank J & K Bank Kotak Bank LIC Floaty Fix-oHome Home Bank
14.0 8.75 16 11
Floating
8.25
8.25
8.25
8.25
8.25
8.25
Floating
8.25
8.25
8.25
8.25
8.25
8.25
Fixed Floating
13.75 9.75
13.75 9.75
NA 10
NA 10.5
NA 10.5
NA 10.5
NA 12.25 8.5
NA NA NA
Floating
8.9
8.9
8.9
9
8.9
8.9
8.9
LIC Housing Finance Moneyline Credit Ltd Oriental Bank Commerce Oriental Bank Commerce PNB Housing Finance Ltd PNB Housing Finance Ltd Punjab Sind Bank Punjab National Bank Punjab National Bank Punjab National Bank- Festive offer (Fixed) Punjab National Bank- Festive offer Floating 8.5 8.5 8.5 8.5 NA NA Fixed 8.5 8.5 8.5 8.5 8.5 8.5 Floating 9.25 9.25 9.75 9.75 9.75 9.75 Fixed 10.5 10.5 10.75 10.75 10.75 10.75 & Floating 8.25 8.25 8.5 10 10 10 Fixed 13 13 13 13 13 13 Floating 9.5 9.5 10 10 10 10 of Fixed 10.25 10.25 10.5 NA NA NA of Floating 9.25 9.25 9.5 10.25 10.25 10.25 Floating 15 15 15 15 15 15 Floating 9.75 9.75 9.75 9.75 9.75 9.75
10
(Floating)
Reliance Home Finance SBBJ Advantage Home Loan SBBJ Advantage Home Loan SBBJ Easy Fixed 8 8 8 8 NA NA Floating NA NA NA NA 8 8 Fixed NA NA NA NA 8 8 Floating 8.25 8.25 8.25 8.25 8.25 8.25
Home Loan SBI SBI Advantage Home Loan SBI Advantage Home Loan SBI Easy
Floating Floating
8 9.75
8 9.75
8 9.75
8 10.25
NA 10.25
NA 10.5
Fixed
NA
NA
NA
NA
Floating
NA
NA
NA
NA
Fixed
NA
NA
Floating
NA
NA
Fixed
12.75
12.75
12.75
13.5
13.5
13.5
11
Few Housing Finance Companies & Banks of India Housing Development Finance Corporation Limited (HDFC)
Housing Development Finance Corporation Ltd (HDFC) is one of the leaders in the Indian housing finance market with almost 37% market share. Serves more than 26 lakh customers across the nation, HDFC also offers customized solutions that fit to the need of the customer. In the FY 2008, it registered a net profit of Rs. 2,282.54 crore. It also registered a net profit of Rs. 663.94 crore in the quarter ended September 30, 2011.
13
14
Figure 3. 1
15
The following institutes are providing different Home Loan product to the different class of the people in the society and conduct the activity of financing and refinancing in the sector.
Scheduled Commercial Banks Housing Finance Companies Scheduled Cooperative Banks (Scheduled State Co-operative Banks, Scheduled District Cooperative Banks and Scheduled Urban Cooperative Banks) Agriculture and Rural Development Banks State Level Apex Co-operative Housing Finance Societies
16
countries, the flow of housing finance a substantial share of total financial system. In fact, the savings for housing is among the single largest source of funds in their entire financial system.
The co-operative sector has played an important role in providing housing to its members and has made a significant impact across the country. The cooperative sector is expected to play a lead role, particularly in land acquisition, allotment of land and housing sites to encourage group housing and development of amenities in their projects, as envisaged in the National Housing and Habitat Policy. The National Co-operative Housing Federation (NCHF) was established as an apex organization for coordinating, guiding and promoting cooperative housing activities in the country.
17
The primary housing co-operatives functioning at the grass root level are supported by 25 ACHFS all over the country with a membership of over 6.5 million. These ACHFS represent about 92,000 housing co-operatives all over the country out of which, about 31,000 housing cooperatives are affiliated to state level ACHFS for getting financial assistance.
18
19
4. Issues with the Housing Finance sector in India Aggressive approach may lead to defaults
Growing competition coupled with reduction in risk weights on housing loans has led the lending institutions to adopt aggressive practices including very high loan has led the lending institutions to adopt aggressive practices including very high loan to value loans, softening of collateral requirements, competitive pricing etc. with such an aggressive approach being followed may lead to increase in the default rates.
Cost of funds
The prevailing interest rate war has resulted in constant downward revision of interest rates. Further, the spreads are increasingly becoming thin as the lending rates are fast nearing the cost of funds. While during 1993-94, the interest rate on housing loans were in the range of 17-18% the same right now are in the range of 7%-8.5%. This may lead to erosion of profitability in the long run.
Industry Fragmentation
The fragmented nature of the housing finance industry is a major impediment for its further growth. Despite this, the industry has managed to grow mainly due to consistent decline in interest rates, tax incentives given by the government and changing income profile of the Indian middle class population.
Conflicting Interests
While the private housing finance institutions are required to abide by the guidelines of the NHB, the general financial institutions, which include the commercial banks, follow the guidelines set by the RBI. Today, both these sections are competing with each other for the same housing pie but their functioning and lending practices seem to bear no similarity.
ALM
Asset liability mismatch is one of the biggest risks housing finance institutions are confronted with. Funding of long term loans with short term deposits, leads to a mismatch between assets and liabilities that can be overcome by adopting appropriate asset liability management (ALM) techniques.
21
Future Outlook
The onset of year 2010 has brought in some good news for those who are dreaming of a 'home' with home loan rates as well as property rates spiraling downwards. The considerable reduction in rates is already beginning to affect deposit rates and will soon lead to a fresh round of rate cuts for both deposits and loans. In fact home seekers are likely to see single digit interest rates for regular 20 year home loans (not just for those below Rs. 20 lacs) in this quarter from at least the PSU banks. Recently announced stimulus package by the Government entails consumers seeking home loans between Rs. 5 lacs+upto Rs. 20 lacs a fixed interest rate (for 5 years) of 9.25% and nil processing and pre-payment fees and free life insurance to boot. However it cannot solve the issue of lack of risk appetite in the banks. Clearly, the banks want to play safe. On the other hand consumers The significant reduction in interest rates is likely to result in some increase in demand for such properties. Notwithstanding some corrections, property prices in popular areas continue to be unaffordable and we are unlikely to see new demand emerging till the prices reach some kind of equilibrium. So the number of consumers who will take advantage of this package is unlikely to be very high. Only if the property rates drop by between 20-25% in the middle and high-end home segments, one can expect a spurt in the business. In the meanwhile RBI can make the home loan seeker better equipped by issuing the licenses to Credit Bureaus so that the consumer's right to his own credit report can be activated. This will have a significantly positive effect on credit sensitivity in the country and bring home to the consumer the benefits of paying their bills on time as well as the cost of not paying them on time. Also make the necessary operational changes in Section 138 of the Negotiable instruments act to ensure so that people realize the seriousness of issuing cheques and the impact of dishonoring them. Finally, activate the Mortgage guarantee scheme so that the effective down payment can be brought down in a home purchase.This will raise the customer's confidence level and this is the need of the hour! Clearly all things going right we should see a spurt in business in the last quarter of the year which is also traditionally a large demand quarter. Also await a further reduction in property prices before they will act on the property purchase decision.
22
23
Micro Objective
To study the preference and satisfaction level of the customers regarding Housing Finance providers. To study the Home Loan process in PNB Housing Finance.
Scope
We have taken the Housing Finance as the product of Retail Banking sector. This project has helped to know the macro factors affecting the Housing Finance sector in India. When it comes to micro factors, customer satisfaction, preference and behavioral aspects regarding the Housing Finance are the out puts of the live research. The study of the Home Loan Process at PNB Housing Finance has helped us to get practical exposure of operation hierarchy of Home Loan Process.
Secondary data:
Industry portals, company websites, magazines, newspapers, trade journals, other financial data provided by the bank required for the study.
Research Approach:We have used the Survey Research to collect the primary data, as it is best suited for descriptive research.
Research Instrument:We have used the questionnaire as our research instrument. In which close-ended and openended questions have help to understand consumer preference and behavior more clearly.
24
Sampling Plan:Sample Unit Sampling Size Sampling Method : : : One Home Loan Taker consumers Simple Random Sampling
Contact Method:Out of the four method of primary data collection namely mail questionnaire, telephone interview, personal interview and online interview; we will be using personal interview and telephone interview , so that we can ask more questions.
Limitations
As it is the questionnaire survey, there are chances of bias answers. We have taken simple random sampling because population survey is not possible. Sampling plan is limited to Ahmedabad region only. Limited time period to conduct the project Limited information was available from company side.
25
26
Basic qualifications for a home loan (Resident Indian) (I) A resident Indian is eligible for a home loan if he satisfies the following conditions:
He must be earning a regular monthly income. If he is from the salaried class, then he should a minimum of 5 years of service left. Above 21 years of age at the commencement of the loan Below 65 when the loan matures If he is a business person or a professional or a self employed individual, then his age should be less than 58 years at the time of applying for the loan. The property that he wishes to purchase/construct should have a clear and marketable title.
A brief introduction of business/profession Balance sheet, profit & loss account and statement of income with Income Tax returns for the last 3 years certified by the Chartered Accountant A photocopy of advance tax payments (if applicable) A photocopy of registration certificate of establishment under shops and establishments Act/factories Act A photocopy of registration certificate for deduction of profession tax (if Applicable) Bank statements of current and saving accounts for the last six months A photocopy of certificate of practice (if applicable) A photocopy of any bank loan (if applicable) A photocopy of the first and last pages of the Ration card or a copy of PAN/telephone/electricity bills A photocopy of investments (FD certificates, shares, any other fixed assets) (c) If flat is purchased from builder Original copy of your agreement with the builder 7/12 extract of your agreement with the builder Copy of N.A. permission for the land from the collector Search and title report (with the details of the documents) for the last 30 years Development agreement between the owner of land and the builder Copy of the order under the urban land ceiling Act Copy of building plans sanctioned by the competent authority Commencement certificate granted by the corporation / Nagar Palika Building completion certificate (if available) The latest receipts of taxes paid Partnership deed or memorandum of association of the builder firm (d) If the property is being purchased in a co-operative society Original share certificate of the society Allotment letter from the society in your name Copy of the lease deed, if executed Certificate of the registration of the society Copy of the bye-laws of the society
28
No objection certificate from the society 7/12 extract or property register card in the societys name Copy of N.A permission for the land from the collector Search and title report (with the details of documents) for the last 30 years Copy of order under the urban land ceiling Act Copy of the building plans sanctioned by the competent authority Commencement certificate granted by the corporation / Nagar Palika The latest receipts of tax paid Original Agreement to assign/ Deed of assignment (e) If constructing on own land Original sale deed of land and extract of index 2 7/12 extract or property register card in your name Copy of N.A permission for land from the collector Search and title report (with the details of documents) for the last 30 years Copt of order under urban land ceiling Act Copy of the building plans sanctioned by the competent authority Building permission granted by corporation / Nagar Palika The latest receipts of taxes paid Estimate of cost of construction certified by the architect
Non-residents (a) Income Documents Employment contract (if the contract is in any language other than English, the same has to be translated into English and arrested by the employer/Indian Embassy) Certified copy of the latest salary slips of the past 6 months Identity card issued from the current employer Continuous discharge certificate, if applicable Latest work permit Visa stamped on passport NRE bank account passbook sheets Overseas bank account statements for the past 6 months
29
Bio-data covering educational qualifications, age job experience, nature of profession/ business with necessary proof Power of attorney in favour of local representative in India, if required Guarantor forms along with net worth proof / income proof. Number of guarantors as per the norms of the company. The guarantors should be related to the applicant(s) (b) Property documents: purchase of a flat from the builder/promoter Title deeds of the builder/land owner for a period of at least 13 years Development agreement between the builder and land owner if applicable Power of attorney executed in favour of the builder, if applicable Non-encumbrance certificate for the past 13 years The khata certificate (basic document indicating ownership of property as entered in the register of the government authorities) Up-to-date tax paid receipts of the property A sanctioned plan and Licence An agreement for sale and a construction agreement with the borrower
(c) In case of purchase of house from second owner Title deeds of land owner for a period of at least 13 years Non-encumbrance certificate for the past 13 years Khata certificate Up to date tax paid receipts of the property Sanctioned plan and license Agreement for sale in favour of the applicant(s) Valuation report from the qualified valuers (d) Incase of repairs/ renovation/ extension of house/ flat Title deeds of land owner for a period of at least 13 years Non-encumbrance certificate for the past 13 years Khata certificate Up to date of tax paid receipts of the property Sanctioned plan and license for the extension
30
Agreement for sale in favour of the applicant(s) Estimates of costs from the qualified engineer (e) Personal Documents 1 passport size photograph 1 copy of your passport/ PAN card/ Driving License/ school leaving certificate/ birth certificate/ LIC policy/ bankers sign verification 1 copy of last months telephone bill / ration card (first and last page) / title deed property / rental agreement / driving license
31
32
Step
1:
Application
form
Step
2:
Personal
Discussion
Step
3:
Bank's
Field
Investigation
Step
Step
5:
Offer
Letter
Step
6:
Submission
of
legal
documents
&
legal
check
Step
7:
Technical
Valuation
check
Step
8:
Valuation
Step
9:
Registration
of
property
documents
Step
Step
11:
Disbursement
33
Documents to submit:
While submitting the application form, every bank asks for several documents. And most banks these days provide doorstep service, so that applicant doesn't have to spend time visiting their office to submit the documents. However, some banks still insist on the customer visiting their offices at least once.
Proof of income:
This will need to be backed up by proof such as copies of last three years Income Tax returns (along with copies of Computation of Income/Annual accounts, if any), Form 16/Form 16A, last three months salary slips, copies of the last 6 months statements of all applicants active bank accounts in which applicants salary/business income details are reflected, etc. Other documents that applicant need to provide with application form include age proof, address proof and identification proof. Applicant may also be asked to give applicants employment details.
Age proof:
Copy of school leaving certificate/Driving license/Passport/ration card/PAN card/Election Commission's card/etc.
Address proof:
Similar documents need to be provided to prove that applicant is actually staying at his/her current address.
Identification proof:
Same as above, but with photograph. Sometimes, the same document if it contains a photograph, the current residential address and the correct age can be the proof for all 3 things.
Employment details:
If applicants company is not well-known, then a short summary about the nature of the company, its business lines, its main customers, its competitors, number of offices, number of
34
employees, turnover, profit, etc may be needed. Usually, the company profile that is available on the standard website of the company is enough.
Financial check:
All the income-related documents submitted by applicant serve a specific purpose. The lending institution uses them to study financial status. The bank statements are scrutinized for:
Level of activity in the case of self-employed persons, this gives a very good clue about the
extent of business activities.
Average bank balance a cursory glance at the average bank balances maintained in a
savings bank account speaks volumes about the spending/saving habits of any individual.
Cheque returns a small charge debited by bank in the statement indicates that a cheque
issued by applicant was returned by applicants bank. Many such cheque returns can have a negative impact on applicants loan sanction.
Cheque bounces if cheques deposited by applicant are returned by the issuer's bank, they will
be visible in applicants bank statement and again, banks have specific norms as to how many such returns are acceptable in a period of one year.
Processing Fee:
Along with the application form and the credit documents, banks ask for a processing fee. This fee varies from bank to bank, but is usually around 0.25% to 0.50% of the total loan amount. The agent dealing with applicant earns a commission from the bank, which to some extent is also affected by the amount of fees paid. Most banks have flexible fee structures, and it is advisable that applicant negotiate hard to find out the bank's minimum possible fees though it is unlikely that a bank will agree to provide a loan without any upfront fee at all. Some banks have zero upfront fee loans, but that advantage may be negated as their other charges such as legal charges and 'stamp duty is normally higher.
35
This fee is collected to maintain applicants loan account, and includes work like sending Income Tax certificates every year, maintaining post-dated cheques, etc.
2. Personal discussion
After applicant has formally and successfully completed the application process, all applicants have to do is wait till the home finance institution evaluates applicants papers. The wait normally lasts only a day or two or sometimes even less. However, some banks insist on meeting applicant after receiving the application form, and before the loan sanction. This is to gather more details about applicant that may not be mentioned in the application form and to reassure them of applicants repayment capacity.
3. Field Investigation
Thousands of people apply for loans everyday. And however eager a bank is to complete its targets, every loan is a risk. So, it is only natural that it confirms or validates the details applicant provides. The bank checks all applicants information including applicants existing residential address, applicants place of employment, employer credentials (if applicant work for a small organization), residence and work telephone numbers. Representatives are sent to applicants workplace or residence to verify the details. Even the references applicant has provided in the application form are checked out. While this may sound irritating and an invasion of his/her privacy, banks are forced to undertake validation in the absence of any credit bureau. Once applicants credentials are validated, it helps establish trust between applicant and the bank.
36
unconditional letter, or may have certain terms and conditions mentioned, which applicant have to fulfill before the loan disbursal.
5. Offer letter
Once the loan is sanctioned, the banks sends applicant an offer letter mentioning the following details: Loan amount Rate of Interest Whether fixed or variable rate of interest linked to a reference rate Tenure of the loan Mode of repayment If the loan is under some special scheme, then the details of the scheme General terms and conditions of the loan Special conditions, if any
Acceptance copy
If applicant agree with what is mentioned in the offer letter from the bank, applicant will have to sign a duplicate letter of the same for the bank's records. Earlier, banks used to charge administrative fees along with the offer letter. However, with rising competition, administrative fees have virtually disappeared from the home loan market.
Legal check
Every bank conducts a legal check on applicants documents to validate their authenticity. Even the draft sale documents that applicant will be entering into with seller will be scrutinised. The documents are sent to a lawyer in their panel (either in-house or outsourced) for a thorough scrutiny. The lawyer's report either gives a go-ahead if documents are clear, or it may ask for a further set of documents. In the latter case, applicant is expected to hand over the additional documents to the bank for a clear title.
Site visit: The site visits to applicants property are conducted to verify the following: In case of under construction property: Stage of construction is the same as that
mentioned in the payment notice given to applicant by the builder. Quality of construction Satisfactory progress of work. Layout of flats and area of property is within permissions granted by the governing authority. The builder has the requisite certificates to start construction at the site. Valuation of the property in relation to other deals in the surrounding areas.
There is no existing lien or mortgage on the property. Valuation of the property in relation to other deals in the surrounding areas. These inspections are carried out to protect consumer interests in terms of construction quality, adherence to local laws, approved building plans, etc. A technical inspection also lets the bank understand the progress of construction so as to release the staggered disbursements.
This practice has led to severe consumer issues in an increasing number of cases, as the valuation is normally done only after the consumer takes a sanction (by paying a fee) and after identifying and committing to buy the property. The valuation issue rarely arises when a property is purchased through a reputed builder directly or if the property is pre approved. In both the cases, the banks would have already completed the valuation and therefore, applicant can safely assume that there is no difference between the documented cost of the property and the bank's valuation amount.
39
11. Disbursement
After the bank has ensured that the property is legally and technically clear, all the original documents pertaining to transfer of ownership of property in applicants favor have been submitted and all the necessary loan agreements have been executed. Applicant will now actually receive the cheque in his/her hand. Before the big moment arrives, applicant need to submit documents to prove that applicant has paid his/her personal contribution towards the property, since banks normally finance only up to 85-90 % of the total cost of the house. In case applicant is expecting money from other sources to fund his/her own contribution, need to provide sufficient evidence for the same. It is only after submitting this proof that the bank will release part-disbursement of the loan.
40
The cheque will be in the name of the reseller (for resale flats), builder, society or the development authority. It is only in exceptional circumstances, that is, if applicant provides documents to support that he/she has made an excess payment from his/her own account then, the cheque will be handed over to applicant directly by the bank.
Disbursement in stages
Usually, loans are disbursed on the basis of the stage of construction of the property. So, in case of resale or ready possession properties, the disbursement is full and final. However, in case of under-construction properties, the payment is made in parts, also known as part-disbursement. Each option would have different disbursement processes.
1. Part disbursement: When a loan is partly disbursed, the bank does not start EMIs
immediately, since it is calculated on the total loan amount at a particular rate of interest and for a given tenure. Moreover, it normally does not start breaking up the installments into its principal and interest components until the entire loan amount is disbursed. To overcome this difficulty, banks charge simple interest on the partly disbursed loan amount. For instance, if applicant have a sanctioned loan of Rs10 lakh, but the property is under construction and the bank has disbursed only Rs4 lakh, applicant will be charged a simple interest only on the disbursed amount. This process continues until the final disbursement takes place. The simple interest paid is called Pre-EMI interest or PEMI. At this stage, banks may take only around three to six post-dated cheques on account of PEMI.
2. Full and final disbursement: If it is a ready-possession property, the bank disburses the
entire loan amount in favor of either the reseller or the builder.
Payment receipt:
Once the bank hands over the pay order to applicant, applicant in turn are expected to hand it over to the reseller or the builder. Applicant should get a receipt from them for the payment and hand it back to the bank, as it will become part of applicants mortgage documentation. Share certificates: In case applicants property is part of a society, applicant will need to get the flat transferred to applicants name by asking the society to issue the share certificate in applicants name and recording the transfer of ownership in their books. This normally happens at the first AGM/EGM after the sale transaction. This transferred share certificate also happens to be a part of the mortgage documentation and has, therefore, to be handed over to the bank after the transfer takes place.
Repayment:
The loan is generally repaid by equated monthly installments, using post-dated cheques. Banks usually ask for 12, 24 or 36 PDCs, after which applicant need to repeat the process until applicant have repaid the loan. Some banks may also insist on a cheque for an amount equivalent to the loan outstanding at the end of PDC period to ensure timely replenishment of PDCs for the next 12, 24 or 36 months as the case may be. In case applicants installments are to be deducted against applicants salary, applicant needs a letter from applicants employer accepting this arrangement and directly remitting the amount to the bank every month. This is possible only if applicants organisation has an arrangement with the bank for all employees. Some banks allow applicant to give standing instructions to the bank where applicant have applicants savings/current account to deduct money each month crediting applicants home loan account. Another possible mode of payment is by cash or demand draft (not all banks offer this). Applicant can deposit the EMI every month at the bank's office. ]
42
Prepayment
Applicant can prepay a loan either in part or in full at any given point of time. Applicant can also prepay it even when it is only partly disbursed. However, most banks have an upper limit on the number of times a person can prepay his loan in a year as well as on the minimum amount applicant can prepay each time. Until recently, banks charged a penalty for part or full prepayment. But increased competition has forced most banks to allow partial prepayment at nil charge. Most banks levy a prepayment charge if applicant make full repayment and ask for release of applicants property documents.
Sometimes (and we must stress only sometimes) the bank may misplace applicants original property documents leading to avoidable stress. In fact, the bank may claim that these documents were never given to them at all. Hence the importance of insisting on a proper receipt of title documents while handing them over to the bank. Remember that receipt will come in very useful when the loan is fully paid off. Also, it is extremely useful when applicant want to shift applicants loan to a new lender.
44
45
Home Improvement Loan is offered to facilitate improvement of a self-owned dwelling unit to existing or new customer. HIL considers a range of facilities internal or external to the structure without increase in the living pace. Thus, a customer can add or improve facilities to his dwelling unit with a loan at Home Equity Loan rate of interest. Home Improvement Loan can be availed by Resident Indian whether salaried or Self-Employed. Office Premises Loans
Office Premises Loan can be used for purchase, construction, extension & also for improvement (at the time of acquisition of office premises. It creates an opportunity to extend loans to selfemployed individuals to house their profession or business giving a permanent address for generating steady flow of income. The product can also include the estimate of renovation at the time of purchase of the property. This loan is especially meant for self-employed professionals like Doctors, Architects etc. Home Loans can be availed by Resident Indian who is Self-Employed and also by Non- Resident Indian who are Salaried. EMI under Construction
46
EMI under Construction is offered for structuring a home loan to enable individuals to commence his EMI in a partly disbursed under construction project. Commencement of EMI ensures re-payment towards principal amount leading to savings in interest and faster repayment of the loan. The EMI paid is as per the sanctioned loan amount and remains constant during the tenure of the loan. The tenure of the loan keeps moving up with additional amount being disbursed. EMI under Construction can be availed by Resident Indian whether Salaried or Self-Employed and also by Non- Resident Indian.
Balance Transfer
Balance Transfer is a facility offering the customer a choice to transfer the outstanding balance of the loan availed for better terms & conditions. Balance Transfer helps to move from higher rate of interest to lower rate of interest or increase in loan component as Top up. BT is possible only from loans taken from HFCs approved by NHB for refinance, Banks or employer Loans taken from Central or State Government. Balance Transfer can be availed by Resident Indian whether salaried or Self-Employed
MoneySaver
Money Saver account is a home loan account with transaction facility. The account holder can deposit & withdraw to the extent of balance maintained. On the commencement of EMI the interest will be calculated on the outstanding debit balance. Thus, the home loan account holder maintaining large balance in the Money Saver account can save on the interest paid by faster repayment. This means one can pay less & repay loan faster. This product can be offered only in case of first and final disbursement Part disbursement cases cannot be offered this product. MoneySaver would be available at Floating Rates only & Fixed EMI per lac per month would be applicable. IT certificate in the case of MoneySaver is not issued. Money Saver can be availed by Resident Indian whether salaried or Self-Employed
Top Up Loan
Top Up Loan can be availed time and again for various personal requirement based on value of the property. It offers the customer additional funds against the security of the same property. To avail Top Up loan, the vintage of at least six months is required for the loan availed. The basic
47
eligibility emerges with good repayment track record. The end use letter is essential to be collected. The End use of Top Up Loans can be Furnishing of home Consumer durable Childs education Daughters marriage Family holiday Vehicle Any other personal requirement of the borrower provided it is not speculative or illegal in nature. This product is applicable to fully disbursed cases with no post- disbursement document pending. This product is priced more than base home loan rates but lower than any personal loan rates. Top Up Loan can be availed by Resident Indian whether Salaried or Self-Employed.
Loan on Phone
Loan On Phone is a pre-sanctioned loan. Its is based on the existing relationship of the customer with PNB Bank. The biggest advantage is that the customer can get the loan with minimum documentation. Good banking transactions and repayment records becomes a strength for availing loans in future. Loan on Phone can be availed by Resident Indian whether salaried or Self-Employed
Improvement of Property Medical Treatment Home Equity Loans can be availed by Resident Indian who is Self-Employed and also by NonResident Indian who are Salaried.
Property Overdraft
The overdraft facility from PNB Bank Home Loans allows you to borrow money against your self-occupied property. The overdraft facility comes with a multi-city cheque book and phone banking facility. The customer is charged interest only for the amount that he withdraws from the account. Whenever he deposits funds into the account, they go towards reducing the outstanding balance in the account.
It offers the following benefits:Generating capital against property (R) or ( C) for business or personal use Convenience of Pre - Sanctioned limit and draw as you need Pay interest on the amount drawn and for days utilized Convenience of depositing & withdrawing like any Current Account Benefit of Cheque Book & Phone banking Fast Processing and door-step service Multi-city cheque book and phone banking facility Property Overdraft can be availed by Resident Indian who is Self-Employed
Fiance's income can also be considered for sanctioning the loan on combined income. The disbursement of the loan, however, will be done only after the proof of marriage is submission.
Providing additional security like bonds, fixed deposits and LIC policies may also help to enhance eligibility. While there is no need for a guarantor, it could be that having one might enhance credibility. If so, loan officer would provide clients with the necessary details. The final amount to be sanctioned will depend on your repayment capacity. However, what you ultimately are entitled to will have to conform within the limits fixed for each loan.
Also, when the company looks at the total cost, registration charges, transfer charges and stamp duty costs are included.
50
FLIP would have two different EMIs during the tenure of the loan Normally the first EMI would be based on the combined income The second EMI would be smaller & based on the lower income with longer tenure of the applicant FLIP can be availed by Resident Indian whether salaried or Self-Employed and also by NonResident Indian who is Salaried.
52
family will have the support of the insurance cover to pay for the outstanding Home loan, without being burdened by the loan EMI's. ICICI Housing Finance presents Home Safe Plus& Home Assure/Health Assure two exclusive and innovative insurance plans to insure your Home Loan.
Home Assure/Health Assure Insurance cover for Home Assure/Health Assure provided by PNB Life Insurance Company.
53
Age/Term 12 18-30 31-35 36-40 41-45 46-50 51-55 56-60 1.488 1.89 2.694 4.146 6.646 10.49
23 3.184
24 3.383
25 3.592
26 3.812
54
27 4.042
28 4.284
29 4.536
30 4.798
4.213 6.433
4.513 6.917
4.839 7.426
5.174 7.959
5.524 8.518
5.888 9.105
6.269 9.718
6.666 10.359
7.081 11.032 NA NA
File of all necessary documents of client is getting sourced by the Back-Office people and Client ID is given to the file of client.
If any document is remaining to be submitted then, query is conveyed to the client. Client is asked to submit the remaining documents so that the file can be moved ahead.
documents given by the client and if there is any query, it is communicated to the Back Office people.
Property for which Loan is taken is properly identified by the Professional Evaluation Team of the PNB Housing Finance. There are two types of property evaluation conducted by the Professional Evaluation Team mentioned below.. 1) Technical Evaluation- Eg: Layout plan, Building premises etc.
55
2) Resale (Legal) Evaluation- Eg: Legality of documents of previous owner, property etc.
legality of
Afterwards credibility of client is verified by Credit Processing Agency (CPA). On the bases of credibility of client amount of loan is decided and sanction letter is prepared which is signed by the authorized officer. This sanction letter should be having the signature of the managers at the different hierarchy based on the amount of the loan. Up to Rs. 10 LakhBranch Credit Manager
Rs. 10 Lakh to Rs. 40 Lakh- Area Credit Manager Rs. 40 Lakh to Rs. 60 Lakh- Regional Business Head More than Rs. 60 LakhZonal Business Head
56
The next step is moving of file to the Operation Department where the Disbursement Process is conducted. Client has to pay the amount, which is the difference between the property value and the amount of Loan sanction by the PNB to the builder of the property. Thus now property becomes ready for the disbursement from the PNB side.
Client has to submit all necessary disbursement documents. The 230 A Clearance of the seller and / or 37I clearance from the appropriate income tax authorities (if applicable) is also needed. Followings are the disbursement documents
Property documents (as per P&D for respective states and as asked by empanelled lawyers for individual cases) Facility Agreement Disbursal Request Form Cheque Submission Form for Pre EMI and EMI cheques ECS or Auto Debit for PNB Bank account holders or Post Dated Cheques for EMI / Pre EMI Personal Guarantors Documents (PG Form, Photograph, Identity Proof, Address Proof, Signature Verification and Income documents, if applicable)
On satisfactory completion of the above, on registration of the conveyance deed and on the investment of your own contribution, the loan amount (as warranted by the stage of construction) will be disbursed by PNB Bank.
57
58
Family 1
59
Service Tax and Education Cess Rs. 912.06/(already included in EMI) As may be specified by PNB Housing Finance from Security time to time as its sole discretion 0% on Amount Prepaid** 2% on Amount Prepaid and on all Amounts tendered Fees on Full and Final by the borrower towards Prepayment of the Loan during the last one year from the date of Final Prepayment Insurance Type Amount of Insurance Home Assure/Health Assure Rs. 71,000/-
Prepayment
Margin Amount which is being deducted from PLR for Loan up to Rs. 20 Lakh as per
norms of PNB Housing Finance. Eg: If current PLR of PNB Housing Finance is 16.00% then Adjustable Interest Rate would be (16.00% - 5.75%) = 10.25%.
**
In the case of Part Prepayment Client does not require to pay any Prepayment Charges
when he/she makes the payment of all EMIs up to the last 12 EMIs. Minimum 12 EMIs must remain to avoid the Prepayment Charges.
60
61
Figure
9.1
1
First Purchase in
32%
62
From the above graph we can see that maximum number of people prefer the Home Loan for First Purchase in ready construction and under construction property. Out of which the preference for the First Purchase in ready construction is comparatively higher, that is 42%. This data shows that individuals are more attracted towards the purchase of house after they properly see and feel the house. 32% people have chosen the Home Loan for Under Construction Property, majority of them have approached Home Loan provider through builders tie-up. We can see that only 2% out of the sample of 200 have chosen Land Loans. These individuals are having income more than Rs. 5 Lakh. One of the major reasons for this is they get no tax benefit on principal and interest of this loan. 2. Type of Home Loan Providers There are many Housing Finance Companies and Banks which provide home Loan products. The purpose of asking this question is to know the preferred source, of home loan provider, by the people. Table 9. 2 Housing Finance Companies Banks Figure 9. 1 41 84
63
We can see that popularity of Banks in Home Loan sector is more than the Housing Finance Companies. Banks capture 67% of our sample and 33% of people go for Housing Finance companies. The reason for this is, Banks are providing many products and people are already taking other services from Banks so Banks are easily acceptable by the people.
Any other
Figure 9. 2
64
From the graph we can see that out of 41 people who have taken home loan from the HFC, 47 % have chosen LIC Housing Finance which is highest amongst the group. One reason for this can be the lower interest rate of LIC and brand name of LIC. Gruh Finance is also having the second largest portion of 34 %. In any other category 3 people have specified PNB Housing Finance Ltd and Bank of Baroda Housing Finance as home loan provider.
4. Banks
This question helps to know the preference of the people towards the Bank as home loan provider. Table 9. 4 S.B.I. I.C.I.C.I H.D.F.C. Any other Figure 9.3 31 19 26 8
Banks
S.B.I. 36%
65
From the graph we can see that out of 84 people who have taken home loan from the Banks, 36% have chosen SBI. which is highest amongst the group Out of 31 individuals who have chosen SBI, most of respondents are Government employees and business man. From this we can say that popularity of SBI. is more in Private sector employees and Businessman. 31% people have who have gone for HDFC includes 10 Private employees out of which 4 are the employees of the same organization. Out of 19 individuals of PNB 9 individuals are Professionals. Any other category includes banks like ADC, Axis, Dena Bank , Bank of Baroda and Punjab National Bank and ABN AMRO
5. Amount of loan
Although the loan amount depends on the income proofs, property price and persons ability to repay the loan amount, this question helps to analyze the number of people falling in to different ranges of loan amount. Table 9. 5 Less than 5 Lakh 5 Lakh to 10 Lakh 10 Lakh to 15 Lakh 15 Lakh to 25 Lakh More than 25 Lakh Figure 9. 4 15 50 49 6 5
66
5%
4%
12%
39%
40%
From the graph we can see that majority of people prefers to take a loan of second and third range which is 5 Lakh to 10 Lakh and 10 Lakh to 15 Lakh respectively. These individuals are having the income range of 2.5 Lakh to 5 Lakh and few falls in the income range of more than 5 Lakh. Through this analysis we can say that middle class people are more likely to go for home loans. Two individuals out of three who have taken the loan of more than 25 Lakh is for the Land Loan. 7 Females out of 11 females have taken the Home Loan for the amount which is less than 5 Lakh. So that we can see that Females are more likely to take Home Loan of less amount.
14 36 48 27
From the above graph we can see that 38% of people prefer the time duration of 10 years to 15 years to pay home loan. One of the main reasons for longer duration to repay the loan is lower EMIs. As number of years increase the amount of EMIs decreases and this is more convenient to the middle class people. All the individuals of the category 1 year to 5 years have taken the loan of the amount less than 5 Lakh. The entire individuals who have taken the loan of more than 15 Lakh and few from the range of 10 Lakh to 15 Lakh falls in the time duration of more than 15 years.
Figure 9.6
68
From the above graph, we can conclude that 64% of people go for floating rate of interest. Floating rate gives flexibility and protection to the home loan takers as it varies according to the market condition and economy of the country. The data shows that number of people are less who are going for fixed rate of interest. Mostly people believe that if they take the loan at high fixed interest rate and future interest rates will decrease then they will have to bear unnecessary interest burden.
69
13% or more
25
Figure 9.7
0%
7% 5% to 7% 7% to 9% 9% to 11%
55%
38%
The above mentioned data indicates that out of 45 people of this category, 55% pay fixed rate of interest which is more than 13%. Currently Interest rates for Home Loan is low in all Banks and HFCs. Because of non flexibility of fixed rates they are paying high interest rate and this is the major reason for the dissatisfaction of all 16 individuals who are discussed in QUE.10 (III)
Disbursement 5% to 7% 7% to 9% 0 0
70
5 31 44 -
24 4 0 10
Figure 9.8
0% 6%
55%
39%
Figure 9. 9
71
0% 5%
13%
0%
30%
Recession in the Indian economy and different steps taken by the RBI for the recovery of the same is having the positive impact on the floating rates of interest in Home Loan. We can see that 5 people were falling in the range of 9% to 11% of interest rate at the time of disbursement, but currently there are 24 individuals falling in this range of floating interest rate. At the same time we can not ignore that number of individuals falling in the interest rate range of more than 13% is the highest at the time of disbursement with 55% which is now 0%. There are 10 individuals who dont know their current floating rate of interest. This situation can be because of lack of attention paid towards the timely notice letter sent by the Home Loan Company. In SBI highest people have selected floating rate of interest, while in HDFC 19 individuals have selected floating interest rate
72
10. Rating for the banks procedure from 1 to 5. (Where 5 stands for the best) This question helps to understand the satisfaction level of Home Loan takers on the following shown indicators. Table 9.10 Ease of Documentation 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied 6 17 55 38 9
Figure 9. 10
Ease of Documentation
60 50 3-Average, 55
numbers
From the findings we can see that 55 individuals out of people have given average rating and 38 individuals have given satisfactory rating. Most of the people who have given the rating of 4 and 5, which indicate satisfaction and high satisfaction, have taken the Home Loan from private
73
sector. Out of 17 individual who were dissatisfied include 6 Home Loan taker of SBI Housing Finance, 4 Home Loan takers of Gruh Finance and rest 4 were of LIC Housing Finance.
Table 9. 11 Time Duration for Loan Sanctioning 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied 0 14 50 47 14
Figure -9. 11
Numbers
14 0
14
3Av er ag e
2D isa
4Sa tis
at is
iss
1H ig hl y
scale
From the findings we can see that 50 individuals out of people have given average rating and 47 individuals have given satisfactory rating. People who were highly satisfied are mostly the client
74
5H ig hl y
at isf ie d
tid sf ie
fie
fie d
of SBI Housing Finance and HDFC. From this information we can say that private sector is taking less time for sanctioning of Home Loan
Table 9. 12 Interest Rate Charges 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied 8 28 53 30 6
Figure 9. 12
Numbers
30
4-Satisfied
5-Highly Satisfied
53 individuals out of have given average rating to Interest rate charges. All those individuals who are highly dissatisfied and majority of those who are dissatisfied are fixed interest rate
75
payers. Dissatisfaction towards fixed rate of interest is because of liberal rates offered to the individuals who have opted for floating rate of interest for Home Loan.
Table 9. 13 Processing Fees 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied 1 25 67 28 4
Figure 9. 13
Processing Fees
80 70 60 50 40 30 20 10 0 1-Highly Dissatisfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied 1 4 25 28 67
76
Processing Fees are almost similar in most of the Home Loan providers. 67 individuals have given average rating to Processing Fees. One of the reasons for this can be, when it comes to the charges or fees, people are not satisfied as they are less willing to pay such charges.
Table 9. 14 Charges for late payment 1-Highly Dissatsfied 2-Disatidsfied 3-Average 4-Satisfied 5-Highly Satisfied 9 16 43 45 12
Figure 9. 14
Numbers
16 12
2-Disatidsfied
3-Average Scale
4-Satisfied
5-Highly Satisfied
77
43 people have responded for this question. Here one assumption can be made that 32 individuals, who are dissatisfied,would have had bad experiences with there Home Loan providers.
Figure 9. 15
Yes , 13
Yes No
No, 112
13 people are willing for the prepayment of the Home Loan in which 9 individuals are fixed interest rate payers. This is the open ended question and people have given the reasons like
78
Fixed rate of interest is high on their Home Loan and they are more likely to go for prepayment charges rather than paying high fix rate of interest. Availability of sufficient fund.
Figure 9. 16
Yes, 14
Yes No
No, 111
79
As it is not compulsory and it highly depends on the preference of the Home Loan taker to either take the insurance or not, majority of people from the sample of have not taken insurance with their Home Loan. One of the reasons for this can be increased burden of premium as person is already paying EMI and individuals are not much ready to bear extra payments.
Figure 9. 17
Yes , 17
Yes No
No, 108
17 people are willing to transfer there loan. All these people are the clients of private Home Loan providers namely Gruh Finance, HDFC, PNB. For this, people have given reasons like high
80
interest rate charged by them. Out of 17 individuals 8 have committed that they want to shift to S.B.I. because of its 8% interest rate scheme.
Table 9. 18 Personal Analyses Builders tie-up Friends suggestion From Advertisement If any other 12 20 60 15 18
Figure 9. 18
14% 12%
10% 16%
Personal Analyses Builders tie-up Friends suggestion From Advertisement If any other
48%
81
From the data we can see that word of mouth is the best source people think, to get the information as 48 % people have taken suggestion from their friends and relatives for Home Loan. Any other category includes reasons like Either that person or his/her spouse/family members working in that organization Satisfied with the banking services, so have chosen the same for Home Loan. Few were the clients of different other loans of that organization in the past and their satisfaction level has led them towards the home loan of the same organization.
82
Figure 9. 19
Female 9%
Male Female
Male 91%
From the above graph we can see that 91 % of the respondents are Male and only 9 % respondents are Female. This data includes the names of people who have taken the Loan on their own names. Major decisions regarding huge amount of financial products are generally taken by the Male.
83
Figure 9. 20
Under Graduates 6%
Graduates 55%
From the Home Loan takers 55 % Individuals are Graduates, 39 % Individuals are Post Graduates and 6% are under Graduates. So from this data we can conclude that maximum number of people going for Home Loan are Graduates.
84
Figure 9. 21
Professional 21%
From the above graph we can see that 31 % of people are private employees and 37 % of people are businessman/woman. So from this data we can conclude that maximum number of people going for Home Loan are private employees and businessman/woman.
85
Table 9. 22 Less than 1.5 Lakh 1.5 Lakh to 2.5 Lakh 2.5 Lakh to 3.5 Lakh 3.5 Lakh to 5 Lakh More than 5 Lakh 2 22 59 27 15
Figure 9. 22
12% 22%
2%
18%
Less than 1.5 Lakh 1.5 Lakh to 2.5 Lakh 2.5 Lakh to 3.5 Lakh 3.5 Lakh to 5 Lakh More than 5 Lakh
46%
From the above graph we can see that people going for home loan, out of that 46 % are from the income range of 2.5 Lakh to 3.5 Lakh. This people come unders the middleclass income level of
86
the society. People having income less than 1.5 Lakh and more than 5 Lakh covers the smallest part of this chart.
87
88
Ho: There is significant relation between income of a respondent and amount of Home loan H1: There is no significant relation between income of a respondent and amount of Home loan PNB
Table 10.1 Loan Amt 5 to 10 Up to Lakh Income( Lakh) Up to 1.5 1.5 to 2.5 2.5 to 3.5 in 5 Lakh 0 0 1 0 3.5 to 5 More than 5 Total 0 1 0 12 0 5 1 1 0 0 1 19 0 2 8 2 0 2 2 1 0 0 0 0 0 0 0 0 0 4 11 3 10 to 15 Lakh 15 to 25 Lakh More than 25 Total
89
Expected Frequencies\ Table 10.2 0 0.21 0.57 0.15 0.052 0 2.52 6.94 1.9 0.63 0 1.052 2.9 0.78 0.26 0 0.21 0.57 0.15 0.052 0 0 0 0 0
(fofe)2/fe 0.000 0.000 0.000 0.000 0.000 0.210 0.107 0.854 0.210 0.000
fe)2 0.000 0.000 0.000 0.000 0.000 0.044 0.270 0.899 0.044 0.000
1 8 2 0 0 0 2 1 0 0 0 0 0 1 0
0.57 6.94 2.9 0.57 0 0.15 1.9 0.78 0.15 0 0.052 0.63 0.26 0.052 0
0.43 1.06 -0.9 -0.57 0 -0.15 0.1 0.22 -0.15 0 -0.052 -0.63 -0.26 0.948 0
0.185 1.124 0.810 0.325 0.000 0.023 0.010 0.048 0.023 0.000 0.003 0.397 0.068 0.899 0.000
0.324 0.162 0.279 0.570 0.000 0.150 0.005 0.062 0.150 0.000 0.052 0.630 0.260 17.283 0.000 21.309
= 2 (O-E)2 E
= 21.309
The value of 903.12 = 2 Degree of freedom (D.F.) = (r-1) x (c-1) = 16 2tab = (at 5 % confidence level)= 26.296
91
Hence Ho is accepted Interpretation: As figure shows the sample Chi Square the value of 21.309 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan
HDFC
Table 10.4 Loan Amt 5 to 10 Up to Lakh Income( Lakh) Up to 1.5 1.5 to 2.5 2.5 to 3.5 in 5 Lakh 0 1 6 0 2 1 0 3 7 0 0 0 0 0 0 0 6 14 10 to 15 Lakh 15 to 25 Lakh More than 25 Total
92
0 4
1 15
0 0
0 0
1 26
Expected Frequency Table 10.5 0 1.61 3.76 1.34 0.26 0 0.92 2.15 0.76 0.15 0 3.46 8.07 2.88 0.57 0 0 0 0 0 Table 10.7 (fofe)2/fe 0.000 0.000 0.000 0.000 0.000 0.231 1.268 0.061 0 0 0 0 0
Arranging Observed & Expected Frequencies As Follows: (fofo 0 0 0 0 0 1 2 3 Fe 0 0 0 0 0 1.61 0.92 3.46 fo-fe 0 0 0 0 0 -0.61 1.08 -0.46
93
0 0 6 1 7 0 0 0 1 4 0 0 0 0 1 0 0
0.000 0.000 5.018 1.323 1.145 0.000 0.000 1.796 0.058 1.254 0.000 0.000 0.068 0.023 0.185 0.000 0.000
0.000 0.000 1.334 0.615 0.142 0.000 0.000 1.340 0.076 0.436 0.000 0.000 0.260 0.150 0.324 0.000 0.000 6.237
= 2 (O-E)2
= 6.237
2tab = (at 5 % confidence level)= 26.296 The value of 2 Here 2cal < 2tab. = 6.237 2tab. =26.293
Hence Ho is accepted As figure shows the sample Chi Square the value of 6.237 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan
SBI
Table 10.8 Loan Amt 5 to 10 Up to Lakh Income( Lakh) Up to 1.5 1.5 to 2.5 2.5 to 3.5 in 5 Lakh 1 1 2 0 3.5 to 5 More than 5 Total 0 4 0 12 0 11 2 2 1 2 3 31 0 4 4 4 0 3 5 3 0 0 0 0 0 0 0 1 1 8 11 8 10 to 15 Lakh 15 to 25 Lakh More than 25 Total
95
0 0 0 1 4 3 0 0 2 4 5 0 0 0 4 3
0.35 0.064 0.064 1.03 3.09 2.83 0.51 0.51 1.41 4.25 3.9 0.7 0.7 1.03 3.09 2.83
96
0 1 0 0 0 2 1
= 2 (O-E)2 E
= 24.636
The value of 636.42 = 2 Degree of freedom (D.F.) = (r-1) x (c-1) = 16 2tab = (at 5 % confidence level)= 26.296 The value of 2
2
= 24.636
tab. =26.293
Hence Ho is accepted As figure shows the sample Chi Square the value of 24.636 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan
97
Other Banks
Table 10.10
Loan Amt
5 to 10 Up to Lakh
10 to 15 Lakh
15 to 25 Lakh
More than 25
Total
in
5 Lakh 0 0 1 0 3 2 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 4 3
98
0 0 0 0 0 0 0 0 0 0 1 3 0 0 0 0 2 1 0 0
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.250 0.250 1.000 0.000 0.000 0.137 0.017 0.063 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.500 0.100 1.000 0.000 0.000 0.370 0.009 0.083 0.000 0.000
99
0 0 1 0 0
0. 0.62 0.25 0 0
= 2 (O-E)2 E
= 5.057
The value of 750.5 = 2 2tab = (at 5 % confidence level)= 26.296 Here 2cal < 2tab.
Degree of freedom (D.F.) = (r-1) x (c-1) = 16 The value of 2 = 5.057 2tab. =26.293
Hence Ho is accepted As figure shows the sample Chi Square the value of 5.057 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan Housing Finance Companies
100
Gruh Finance
Table 10.12
Loan Amt
5 to 10 Up to Lakh
10 to 15 Lakh
15 to 25 Lakh
More than 25
Total
in
5 Lakh 0 0 1 0 0 0 4 0 0 1 3 2 0 0 0 0 0 0 0 0 0 1 9 1
101
102
2 0 0 0 0 2 0 1
=2 (O-E)2 E
= 6.503
Hence Ho is accepted As figure shows the sample Chi Square the value of 6.503 is within the acceptance region. Thus we accept the null hypothesis .There is significant relation between income of a respondent and amount of Home loan.
103
DHFL
Table 10.14 Loan Amt 5 to 10 Up to Lakh Income( Lakh) Up to 1.5 1.5 to 2.5 2.5 to 3.5 in 5 Lakh 1 1 0 0 3.5 to 5 More than 5 Total 0 2 0 3 0 0 0 0 0 0 0 5 0 1 2 0 0 0 0 0 0 0 0 0 0 0 0 0 1 2 2 0 10 to 15 Lakh 15 to 25 Lakh More than 25 Total
104
105
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.917
=2 (O-E)2 E
= 2.917 Degree of freedom (D.F.) = (r-1) x (c-1) = 16 2tab = (at 5 % 2tab. =26.293
The value of 719.2 = 2 confidence level)= 26.293 The value of 2 Here 2cal < 2tab. = 2.917
Ho is accepted As figure shows the sample Chi Square the value of 2.917 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan
106
107
108
0 0 0 0 1 3 1 0
= 2 (O-E)2 E
= 10.953
The value of 359.01 = 2 Degree of freedom (D.F.) = (r-1) x (c-1) = 16 2tab = (at 5 % confidence level)= 26.296 Here 2cal < 2tab.
Hence Ho is accepted As figure shows the sample Chi Square the value of 10.953 is within the acceptance region. Thus we accept the null hypothesis There is significant relation between income of a respondent and amount of Home loan
109
Correlation Analysis The coefficient of correlation is the second measure that we can use to describe how well one variable is explained by another. When we are dealing with samples, sample coefficient of relation is denoted by r and is the square root of sample coefficient of determination. Here we have used r to study the relation between income of respondents and the home loan amount. SBI
Table 10.18 X 4.25 5 4.25 5 4.25 3 2 3 3 2 4.25 3 3 Y 7.5 12.5 12.5 20 12.5 20 7.5 12.5 12.5 7.5 20 12.5 12.5 x*y 31.875 62.5 53. 100 53. 60 15 37.5 37.5 15 85 37.5 37.5
110
x2 18.063 25.000 18.063 25.000 18.063 9.000 4.000 9.000 9.000 4.000 18.063 9.000 9.000
y2 56.25 156.25 156.25 400 156.25 400 56.25 156.25 156.25 56.25 400 156.25 156.25
5 5 20 20 12.5 7.5 12.5 25 12.5 7.5 12.5 7.5 7.5 12.5 20 5 7.5 7.5 377.5
4.000 4.000 18.063 18.063 9.000 9.000 4.000 18.063 9.000 4.000 4.000 4.000 9.000 18.063 25.000 1.000 4.000 9.000 346.500
25 25 400 400 156.25 56.25 156.25 625 156.25 56.25 156.25 56.25 56.25 156.25 400 25 56.25 56.25 5481.25
y=377.5, xy=1317.5,
x2=346.5,
111
y2= 5481.25 = 3.16 = 12.17 b=xy-n x2 -- n2 1317.5- 31(3.16)(12.17) 346.5- 31( 3.16)^2 b= 3.39 a = - b = 1.42 r2 = a y + b xy - n2 y2 - n 2 = 0.474 r = 0.689 =12.17- 3.4(3.16)
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents. PNB
Table 10.19 x 3 3 3 3 3 3 2 y 7.5 12.5 7.5 5 7.5 7.5 7.5 xy 22.5 37.5 22.5 15 22.5 22.5 15
112
x2 9 9 9 9 9 9 4
12.5 12.5 7.5 20 7.5 7.5 12.5 12.5 7.5 7.5 7.5 7.5 177.5
25 25 7.5 100 22.5 31.875 37.5 53. 31.875 22.5 22.5 22.5 559.375
156.25 156.25 56.25 400 56.25 56.25 156.25 156.25 56.25 56.25 56.25 56.25 1881.25
= 0.112
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.
113
HDFC
Table 10.20 X 3 4.25 4.25 4.25 4.25 2 5 2 2 2 3 2 3 4.25 3 3 3 3 y 5 12.5 7.5 12.5 12.5 5 12.5 7.5 12.5 12.5 5 5 5 12.5 5 5 5 12.5 xy 15 53. 31.875 53. 53. 10 62.5 15 25 25 15 10 15 53. 15 15 15 37.5 x2 9 18.0625 18.0625 18.0625 18.0625 4 25 4 4 4 9 4 9 18.0625 9 9 9 9 y2 25 156.25 56.25 156.25 156.25 25 156.25 56.25 156.25 156.25 25 25 25 156.25 25 25 25 156.25
114
3 3 3 3 3 3 3 2 80.25 r2 = a y + b xy - n2 y2 - n 2 r = 0.27
9 9 9 9 9 9 9 4 265.3
= 0.0729
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.
Other Banks
Table 10.21 x 3 4.25 3 5 y 5 7.5 7.5 12.5 xy 15 31.875 22.5 62.5
115
x2 9 18.0625 9 25
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.
x2 9 9 25 9
25 9 18.0625 9 25
4 9 9 9 9 178.0625
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.
117
118
7.5 157.5
56.25 1368.75
15 581.875
4.000 281.313
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents. DHFL
Table 10.24 x 2 1 3 3 2 11 r2 = a y + b xy - n2 y2 - n 2 y 7.5 5 7.5 7.5 5 32.5 xy 15 5 22.5 22.5 10 75 x2 4 1 9 9 4 27 y2 56.25 25 56.25 56.25 25 218.75
= 0.582 r =0.763
119
Here the sign for r is positive. Thus, the relation between the two variables is direct. This shows that amount of home loan is more dependent on income of respondents.
120
121
11. Findings
Maximum number of people prefers the Home Loan for First Purchase in Ready Construction and Under Construction property, which is 42 % and 32 % respectively. Only 2% out of the sample of 125 has chosen Land Loans. Banks capture 67% of our sample and 33% of people go for Housing Finance companies. 47 % have chosen LIC Housing Finance which is highest amongst the group. Gruh Finance is having the second largest portion of 34 %. 36 % have chosen SBI which is highest amongst the group. HDFC stands at the second position with 31 %. 40 % of people go for the Home Loan ranging from 5 Lakh to 10 Lakh. Most of the people going for the loan, which ranges from less than 5 Lakh to 15 Lakh, are having the income range of 2.5 Lakh to 5 Lakh. 38 % of people prefer the time duration of 10 years to 15 years to pay home loan.
64 % of people go for Floating rate of interest. 36 % of people pay fixed rate of interest which is more than 13%. At the time of Disbursement 55 % of people were paying Floating Interest Rate more than 13% and 39 % of people were paying Floating Interest rate ranging from 11% to 13%. Currently 30 % of people are paying Floating Interest Rate from 9% to 11% and 5 % are paying Floating Interest Rate between 11% to 13%. 55 Individuals have given average rating and 38 Individuals are satisfied with the Ease Of Documentation. 50 Individuals have given average rating and 47 Individuals are satisfied with the Time Duration for Loan Sanctioning. 53 Individuals have given average rating to Interest rate charges and 28 Individuals are dissatisfied. 67 Individuals have given average rating to Processing Fees. 43 Individuals which is of the 125 respondents have given average rating to charges for late payments and 16 are dissatisfied .
122
13 Individual are willing for the prepayment of the Home Loaan. 14 Individuals are having Home Loan with Insurance Cover. 17 people are willing to transfer their loan. 60 people have taken suggestion from their friends and relatives for Home Loan to approach the Home Loan Provider. 91% of the sample are Male and 9 % are Female 55 % of the sample is having Graduation and 39 % is having Post Graduation as their Educational Qualification. 31 % of people are private employees, 37 % of people are Businessman/woman 21 % of people are professional and 11 % are Government employees. 46 % of people are having income between 2.5 Lakh to 3.5 Lakh and 22 % are having income between 3.5 Lakh to 5 Lakh.
123
124
12. Conclusion
The Government of India and the Reserve Bank of India have been constantly providing an enabling environment for the furtherance and development of the housing finance sector and Two Million Housing Programs which are being monitored annually by the Ministry of Urban Affairs and Poverty Alleviation. To give the boost to the economy and to control the money supply in the market RBI has reduced the interest rates for home loans. Majority of population of India consist of middle class people. This Housing survey reflects the same fact that it is dominated by the middle class people when it comes to take the Home loan. Recession in the Indian economy and different steps taken by the RBI for the recovery of the same is having the positive impact on the floating rates of interest in Home Loan. Popularity of Floating rate of interest is more compared to fixed rate of interest due to flexibility according to economic condition Main purpose of Housing Finance Companies is to provide Home Loan but still people are more inclined to go for a Bank when it comes to taking a Home Loan. Reason for dissatisfaction among the Home Loan taker is high fixed interest rate which is paid by these people so they are more willing for prepayment and transfer of Home Loan. Concept of insurance with Home Loan is not much popular in Home Loan takers, rather than believing it as a risk cover people are taking it as an additional burden on their ongoing EMIs. Above mentioned factors affect this sector positively or adversely but one of the major factors which is helping this sector to grow is rapidly increased population and people are accepting this as a need rather than a financial burden.
125