HNSCMS

EXECUTIVE SUMMARY
Housing, being one of the basic needs of making in terms of safety, security, self-esteem, social status, cultural identity, satisfaction and achievement, is one of the major determinants of economic well being. The social structure of the Indian families is going through a sea change as the joint family is fast giving way to the nuclear family concept. The pressure to have ones own home is high among these families. It is believed that the satellite towns that are being developed in many parts of the country will drive the demand for housing needs. The phenomena being witnessed in the stock market are leading people to believe that the time tested avenues of investment like real estate with significant appreciation over the years are a safer bet and a safer hedge against inflation. The government of India had recently made the development of the housing sector a priority both from the demand and the supply side by fiscal concessions to the providers of the house and to the borrowers. The players in the housing finance field include housing finance companies H!"s#, cooperative housing finance societies, which are under the purview of $ational Housing %ank $H%#, while nationali&ed banks and the other cooperative banks, which are under the purview of 'eserve %ank of India '%I#. Housing finance is available to individuals for various purposes like( construction of a house, construction or purchase of a flat, e)tension or renovation of an e)isting house or flat, purchase for the site construction of a house etc. H!"s and banks also e)tend finance to corporate for funding their staff housing schemes* onward lending to the employees, ac+uisition of staff +uarters etc. and to builders*developers*,evelopment -uthorities*.tate Housing %oards etc. for their various housing projects.

HNSCMS

- host of factors have contributed to the buoyancy in the housing sector apart from the ta) sops, such as increasing number of dual income familiar, high salaried employees with high purchasing and borrowing powers, bottoming pout of property prices, decreasing interest rates tie-ups of builders with H!"s, +uicker and transparent system of working of H!"s, easy availability of home finance etc. !urther, with the stock markets showing the signs of depression, may feel is an opportune time for investing in properties. The e)isting players in the housing finance market became more aggressive as anew players entered the scene. "ompetition got stiffer with the interest rate and softer terms being used as tools to mobili&e business. There are a few factors, which are of major concern to the H!"s. The major issue in the development of the housing finance sector in the country is the availability of long-term resources. /ther issues of concern include( mortgage securiti&ation, ever-thinning spreads, falling interest rates and risk of prepayment of long-term loans. Housing finance sector is considered as priority sector due to its linkages with other sectors. The sector can further grow provided due diligence and prudences shown in disbursements. -s the competition is high and li+uidity in the system is abundant, all the players need to act with precision.

HNSCMS

HNSCMS

HOUSING IN INDIA
Housing being one of the basic needs of making in terms of safety, security, self-esteem, social status, cultural identity, satisfaction and achievement, is one of the major determinants of economic well-being. The housing problem, though universal, is much more acute in developing countries like India. Housing in India may be defined as any structure with four walls and a roof, but the seventh five year plan states that 0in fulfilling the basic needs of the population, housing ranks ne)t only to food and clothing in importance.

The social structure of the Indian families is going through a sea change as the joint family is fast giving way to the nuclear family concept. The pressure to have ones own home is high among these families. It is believed that the satellite towns that are being developed in many parts of the country will drive the demand for housing needs. The phenomena being witnessed in the stock market are leading people to believe that the time tested avenues of investment like real estate with significant appreciation over the years are a safer bet and a safer hedge against inflation. The government of India recently made the development of the housing sector a priority both form the demand and the supply side by fiscal concession to the providers of the house and the borrowers. - certain minimum standard of housing is essential for healthy and civili&ed e)istence. The 1221 population census of India provides that less than 3.4 percent of rural households are totally houseless. -s per the available figures in 1251 the housing shortage in India was 2.6 millions and as per estimates of national building organi&ation, it may increase to 71.6 million units by 8331. There is a gap between demand and supply of housing in India. The 9nited $ations estimates that the least developed countries will have to construct at least ten houses per 1333 population to solve the shelter

HNSCMS

problem by the end of century. %ut in India we construct hardly two houses per 1333 population per year.

HOW HFCs HAS DEVELOPED?

-mong the most important reasons for sound base on which a H!" rest is the uni+ue nature of end product for which a H!" performs the task of financial intermediation. Housing may be characteri&ed, as a basic necessity for which there is a perennial demand. - critical factor in determining the demand for a housing loan is the ability of a borrower to comfortably repay the installments on the borrowed amount. -t the moment, the ability of a typical borrower to afford a housing loan is higher than it was in the last 8 decades. The cost of the house, when e)pressed as a multiple of a borrowers annual income: has come down from about 18 times the annual income in the early 1263s to just four times now. -s a conse+uence of the general rise in income out stripping the rise in the cost of the housing, the potential market si&e for H!"s have grown enormously, while simultaneously reducing the risk attached a housing loan. It is not just rising annual incomes but have raised the levels of affordability, the series ta) benefits handed out in the budgets over the last three years have gone a long way in making a housing loan affordable. In this backdrop, most H!"s and housing finance divisions of financial intermediaries are upbeat about the growth in the market for housing loans. The players in the Housing !inance field include H!"s, "o-operative Housing !inance society which are the purview of $ational Housing %ank, while nationali&ed bank and other co-op banks, which are under the purview of '%I. Housing !inance is available to the individual for various purposes like(

HNSCMS

construction of house, construction or purchase of a flat, e)tension or renovation of e)isting house or a flat, purchase for the site construction of the house, etc. H!"s and banks e)tend finance to corporate for funding their staff housing schemes* onward lending to employees, ac+uisition of the staff +uarters, etc. and to builders*developers*development authorities*state housing boards etc. for their various housing projects. The e)isting players in the housing finance became more aggressive as a new players entered scene. "ompetition got stiffer with the interest rate and softer terms being used as tools to mobili&e the business. There are few factors, which are major concerned to H!"s. The major issue in the development of housing finance sector in the country is the availability of long-term resources. /ther issues of the concern include( mortgage securiti&ation, ever-thinning spreads, falling interest rates and risk of pre-payment of long terms loans. Housing finance sector is considered as priority sector due to its linkages with other sectors. The sector can further grow provided due diligence and prudences is shown in disbursement. -s the completion is high and li+uidity in the system is abundant all the players need to act with precision.

HNSCMS

GROWTH TRENDS OF HFCs

Growth in is!"rs#$#nt% The following figure bellow is a self-evident graph that from 8331-8338 there was a robust growth in the disbursement. It is around ;5< growths in that year. The housing finance industry is e)pected to grow at a 43 percent annually.

,&&&& +&&&& *&&&& )&&&& (&&&& '&&&& & '---.(&&& (&&&.(&&' (&&'.(&&( (&&(.(&&)

HNSCMS

FACTORS THAT DROVE GROWTH

The robust growth e)perienced by the industry in the last few years has been triggered by a number of factors, some of which are listed below and e)plained further(-

Ta) rebates on housing loans announced in the recent budgets.

=owering of real estate prices to affordable levels. >reater amount of professionalism being e)hibited by developers and builders who are today ac+uiring clearer titles and are doing more timely completion of projects.

Investment options have been dried up with lower interest rates and due to the ta)es applicable.

Housing finance received a boost

HNSCMS

INDUSTRY ANALYSIS OF HFCs

CUSTOMERS /ARGAINING POWER% 9ntil recently i.e. ? years back this phenomenon was absent entirely, there were some housing finance companies servicing people in its own way with very high interest rates, standardi&ed product with all other inefficiency of no competition market. %ut the entry of host of banks and other private housing finance companies has lead to a very aggressive combat in the market and hence the customers have gained tremendous amount of bargaining power. %ut in most of the case the interest rate factor goes without any spice as everybody matches the lowest one, so again customers dont have any choice. %ut this competition has certainly leaded to improve level of services. @any of the players have come up with various innovative and fle)ible products, suiting the needs and preferences of various different types of people. "ompanies are wooing the customers on the basis of various frills added to their offerings. ,ifferentiation is the only way to attract the customers and make them feel good. -spects like brand and +uality have come up. In all now customer has some value in the market or great value.

HNSCMS

10

SUPPLIERS /ARGAINING POWER !or the industry like housing finance identifying the supplier is very tricky and difficult. The lenders to the H!"s in the form of bonds and other instruments can be termed as one of the suppliers of funds. !or banking H!" it is the retail saving account deposit and all other term deposit is the source of funds. $H% can form a major part of this funding because of their refinance schemes available only to the H!"s. The other factor that can be considered is services obtained by H!"s from industries like construction, information, technology and marketing support in terms of direct marketing channels. =ets take each one in detail and try to assess the ability and power to influence the industry. L#n #r to th# HFCs in t#r$s o0 /on 1 oth#r instr"$#nt ho2 #rs % These investors holds very low amount of power in influencing the players as they subscribe to what these players sharp fall in the interest rates in Home loan segment, that intern s+uee&e the option of issuing high rate bonds, so low attractiveness for investors. The other factor is of increased investors awareness about various investments instrument. S34in5 3n T#r$ D#6osits with /3n7% They really dont have any

bargaining power as such in most of the cases the interests on such deposits are fi)ed and the investor cant do anything about it. HNSCMS 11

NH/ R#0in3n8#% $H% hold some power in influencing the industry through its refinance activity, where $H% is deciding factor about the rate at which it will refinance the e)isting loans, but governments commitment towards servicing the industry to fulfill its social objectives reduces its impact.

THREAT OF SU/STITUTE The market can face stiff competition from the good rental house sector. %ut today it is struck into a lot of legal and structural problems. Aeople are not willing to rent their properties. The other factor which reduces the threat of substitute is the Indian social re+uirement where owing a house is a sense of pride rather then living in a rented house. The other substitute can be in terms of reducing price level of real estate. %ut the continuous growth in the industry depicts very low chances of this phenomenon coming in force. In all if the affordability of housing becomes easier and cheaper to people it will pose a threat to the industry depicts very low chances of this phenomenon coming in force. /verall threat of a substitute is very low in the industry with high level of growth in market fueling the industry towards one of the economic accelerator. THREAT OF NEW ENTRANT The industry does not pose much threat from new entrants: as far as the entry re+uirement is concerned. It is not problem factor for somebody to HNSCMS 12

enter in the market, but the market forces like cut throat competition and very high level of market penetration by the current players has left very low place for any new entrance to come in.

The threat of new players can also be faced from the various players which are living in the dormant phase and are not so active in market for e)ample almost all the banks have there set up for housing loan but are not aggressively selling it. The only big matter of concern is aggressive nature of multinational banks such as "itibank etc which has recently joined the industry and there are still various international banks which are evaluating the option of entering the Indian market and they might pose a very big threat to the industry as they have access to low cost funds and their deep pockets to continue to hold in the market for longer run. .o in all the industry is pretty secured from the new entrant threat and again the market growth will give a lot of time to all players to settle down as demand is high, the players can very well move in the market. COMPETITION IN THE INDUSTRY "ompetition in the housing finance industry has taken a new height. If we go back in 1223 there was almost no competition in the industry and market was dominated by H!"s like H,!", =I"H!= with some A.9 banks in the market with very low amount of direct competition. @ost of the player were largely servicing to their customers with very low e)posure to others.

HNSCMS

13

%ut now the case is opposite with lots of private players and foreign banks in the market. Home loan now comes with lots of other things form advisory about the property to be bought to various other plans for the connivance of the customers.

!oreign banks with their low cost funds have given market a whole new dimension, where in players are providing loans to customers at sub A=' levels. -nd the interest rates are at their minimum level and there is e)pectation of its going up. .o in all competition is at its peak in the market and every player is fighting for its pie in the market. The players which are reluctant to change in the market are facing a situation where are dieing day by day, hence differentiation and innovation holds the key in the market.

HNSCMS

14

HNSCMS

15

INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA

The Industrial "redit and Investment "orporation of India =imited now known as I"I"I =td. was founded by the Borld %ank, The >overnment of India and representatives of private industry on Canuary 5, 1255. The objective was to encourage and assist Industrial development and Investment

HNSCMS

16

in India. /ver the years, I"I"I has evolved into a diversified financial institution. I"I"IDs principal business activities include Aroject !inance Infrastructure !inance "orporate !inance .ecuriti&ation =easing ,eterred "redit "onsultancy services

I"I"I %ank is IndiaDs second-largest bank with total assets of about 's.118, 387 crore and a network of about 753 branches and offices and about 1;53 -T@s. I"I"I %ank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its speciali&ed subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital, asset management and information technology. I"I"I %ankDs e+uity shares are listed in India on stock e)changes at "hennai, ,elhi, Eolkata and Fadodara, the .tock G)change, @umbai and the $ational .tock G)change of India =imited and its -merican ,epositary 'eceipts -,'s# are listed on the $ew Hork .tock G)change $H.G#.

I"I"I %ank was originally promoted in 1227 by I"I"I =imited, an Indian financial institution, and was its wholly-owned subsidiary. I"I"IDs shareholding in I"I"I %ank was reduced to 7?< through a public offering of shares in India in fiscal 1226, an e+uity offering in the form of -,'s listed on the $H.G in

HNSCMS

17

fiscal 8333, I"I"I %ankDs ac+uisition of %ank of @adura =imited in an all-stock amalgamation in fiscal 8331, and secondary market sales by I"I"I to institutional investors in fiscal 8331 and fiscal 8338. I"I"I was formed in 1255 at the initiative of the Borld %ank, the >overnment of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1223s, I"I"I transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like I"I"I %ank. In 1222, I"I"I become the first Indian company and the first bank or financial institution from non-Capan -sia to be listed on the $H.G.

-fter consideration of various corporate structuring alternatives in the conte)t of the emerging competitive scenario in the Indian banking industry,

HNSCMS

18

and the move towards universal banking, the managements of I"I"I and I"I"I %ank formed the view that the merger of I"I"I with I"I"I %ank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the I"I"I groupDs universal banking strategy. The merger would enhance value for I"I"I shareholders through the merged entityDs access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for I"I"I %ank shareholders through a large capital base and scale of operations, seamless access to I"I"IDs strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of I"I"I and its subsidiaries. In /ctober 8331, the %oards of ,irectors of I"I"I and I"I"I %ank approved the merger of I"I"I and two of its wholly-owned retail finance subsidiaries, I"I"I Aersonal !inancial .ervices =imited and I"I"I "apital .ervices =imited, with I"I"I %ank. The merger was approved by shareholders of I"I"I and I"I"I %ank in Canuary 8338, by the High "ourt of >ujarat at -hmedabad in @arch 8338, and by the High "ourt of Cudicature at @umbai and the 'eserve %ank of India in -pril 8338. "onse+uent to the merger, the I"I"I groupDs financing and banking operations, both wholesale and retail, have been integrated in a single entity.

HNSCMS

19

MISSION 1 VISION
Mission
/ur dealings with our customers, public, shareholders, employees shall reflect honesty and openness. "ollectively we shall establish a standard in banking through outstanding performance, courteous service high ethical benchmark.

Vision
To be the preferred brand for housing and property loans, to individuals, builders and corporate.

ICICI GROUP Th# ICICI Gro"6 8o$63ni#s%

HNSCMS

20

1. 8.

ICICI /3n7 2t % - commercial bank that provides both retail I wholesale products. ICICI S#8"riti#s 1 Fin3n8# Co9 Lt 9 :ICICI S#8"riti#s;% are investment bank that offers a wide range of fee based services with the support of I"I"I %rokerage .ervices =td. I"I"I %rokerage#

4.

ICICI Cr# it 8or6or3tion Lt 9 :ICICI Cr# it;% a non banking finance co that provides a retail distribution channel for the groups retail products, supported by I"I"I capital services =td. I"I"I "apital#

7. 5. ?. ;. 6. 2. 13.

ICICI In4#stors S#r4i8#s Lt 9 :ICICI S#r4i8#s;< offering +uality investor servicing. ICICI 4#nt"r# 0"n s $5t Lt 9 :ICICI V#nt"r#;% a Fenture "apital "ompany ICICI Int#rn3tion32 Lt % -n off shore investment mgt co. ICICI =INFRA Lt 9 :I.7in;< a co. that offers infrastructure financing and development assistance in Eerala. ICICI Ho$# Fin3n8# 8o9 Lt 9 :ICICI.HFC;% that provides facilities of home loans I other facilities i.e. balance transfer. ICICI P#rson32 Fin3n8i32 s#r4i8#s Lt % That provides services for personal purposes. Oth#r 8o$63ni#s o0 Gro"6 are ( I"I"I "apital .ervice =td. I"I"I e-payment =td. I"I"I >lobal /pportunities !unds =td. I"I"I Enowledge Aark I"I"I =ombard >eneral Insurance "o. =td. I"I"I Arudential =ife Insurance "/. =td. I"I"I Trusteeship .ervice =td. I"I"I Beb-Trade =td.

A0t#r $#r5#r with ICICI /3n7> $3n? o0 th# 3!o4# 8o$63ni#s 3r# now on# #ntit? o0 ICICI !3n7. LEGAL 1 REGULATORY ENVIRONMENT

HNSCMS

21

'G>9=-T/'H G$FI'/$@G$T

HNSCMS

22

'9

M3r7#t A88#ss

'9'9 R#5"23tions 5o4#rnin5 ho"sin5 s#8tor The entry of foreign players in the housing finance as well as the larger financial services sector is governed by specific norms that have been evolving towards progressive liberali&ation during the last decade. In the conte)t of the housing finance sector, the federal government allows 133 percent foreign direct investment with some capital ade+uacy re+uirements( If the foreign direct investment !,I# is less than 51 percent, J 3.5 million must be brought in up front If !,I is between 51 percent and ;5 percent, J 5.3 million is re+uired up front If !,I e)ceeds ;5 percent, J 53 million is needed, out of which J ;.5 million must be brought up front and the balance invested within two years. !oreign ,irect Investment !,I# in the $%!" sector is put on automatic route subject to compliance with guidelines of the 'eserve %ank of India. The '%I would issue appropriate guidelines in this regard. !or foreign banks, the federal government permits mergers and ac+uisition. 72 percent limit e)ists on foreign e+uity in Indian banks. !oreign banks are given automatic approval to open branches in India. .ince Culy 1224, the 75odd foreign banks about 163 branches# have been re+uired to make 48 percent of their loans to priority sectors. Bithin the overall threshold of 48 percent, two sub-limits for loans to the small-scale sector minimum of 13 percent# and e)porting ventures minimum of 18 percent# have been fi)ed. -s

HNSCMS

23

of @arch 8333, the total priority sector lending by these banks is 47.5 percent out of the net bank credit provided by these banks.

-ccording to "itibank, with reference to the housing finance

and

construction# sector, mortgage and other property related the Indian "ontract -ct governs by the Transfer of Aroperty -ct and issues. The following are important elements that drive this business in India. =and records( =and records are maintained at the office of the subregistrar of assurances. Kuality of record keeping and accessibility of the land records vary. .ome provide history of mortgages or encumbrances while others do not. This difference is driven by the Indian constitution that divides roles between the federal and the state government. =and record is a state subject. 'egistration and .tamp costs( -ll property transactions including creation of certain type of mortgages# must be stamped, and registered with the sub registrar of assurances. .tamping and registration costs tend to be high 6 to 17 percent of transaction value#. High transaction costs have led to issues pertaining to under-reporting of transaction values that in turn leaders to corruption at the offices of the subregistrar. !oreclosure normally results in a court-induced sale# process is divided into various steps.

L#n #r %anks*$otified !inancial Institutions

For#82os"r# 6ro8#ss Through ,ebt 'ecovery Tribunal for loans in e)cess of 9. J 83,333. @ortgage suit in civil court. If the value e)ceeds 9. J 533,333, then the high court is the authority Through a mortgage suit in a civil court. If the value e)ceeds 9. J

/ther lenders

HNSCMS

24

533,333, high court is the authority

The Indian legal system is slow. .teps to reform the legal process have started. These include setting up of the ,ebt 'ecovery Tribunals - to manage debt owed to the banking system. In addition, specialist tribunals have also been established for trail of mortgage loans given by the $H% to housing finance companies. The most eagerly awaited changes pertain to securiti&ation. There are no laws governing securiti&ation transactions in India. @ajor restructuring of regulations needs to be done on this front. The government of India constituted a working group on asset securiti&ation in Culy 8333. This group submitted a comprehensive draft securiti&ation bill to the federal government. The bill has not been tabled in the parliament. - number of factors, mainly legal and regulatory, need to be addressed to ensure healthy development of the Indian securiti&ation market. )9'9( Distri!"tion@/"sin#ss 6r38ti8#% .o far, the preferred channel for reaching the end-users is through the offices of the housing finance companies or the commercial banksD branches. .ome institutions do deploy representatives and agents. The role of outside agencies is bound to increase once the market matures. In more developed markets the originator and the distributor of mortgages are separate entities. This has yet to become the accepted norm of mortgage business in India, at least in the housing finance sector.

HNSCMS

25

REGULATORY ENVIRONMENT
N3tion32 ho"sin5 /3n7 :NH/;
'; Vision% 0$H% ensures a sound and healthy housing finance system in India through effective regulation and supervision of housing finance institutions. -s a financial institution, $H% is known for its commitment, innovation and +uality of service offering a broad spectrum of financial products to address the needs of the housing sector with motivated employees working in a congenial and participative work environment. Bhen people think of financial services related to housing, they think of $H%.L

(; Th# O!A#8ti4#s o0 NH/ % The $ational Housing %ank $H%# was established on 2 th Culy 1266 under an -ct of the Aarliament vi&. the $ational Housing %ank -ct, 126; to function as a principal agency to promote Housing !inance Institutions and to provide financial and other support to such institutions. The -ct, inter alia, empowers $H% to( Issue directions to housing finance institutions to ensure their growth on sound lines @ake loans and advances and render any other form of financial assistance to scheduled banks and housing finance institutions or to any authority established by or under any "entral, .tate or Arovincial -ct and engaged in slum improvement and

HNSCMS

26

 !ormulate schemes for the purpose of mobili&ation of resources and e)tension of credit for housing.

In terms of the $ational Housing %ank -ct, 126;, $ational Housing %ank is e)pected, in the public interest, to regulate the housing finance institution being conducted in a manner detrimental to the interest of the depositors or in a manner prejudicial to the interest of the housing finance institutions. !or this, $ational Housing %ank has been empowered to determine the policy and give directions to the housing finance institutions and their auditors. %esides the regulatory provisions of the $ational Housing %ank -ct, 126;, $ational Housing %ank has issued the Housing !inance "ompanies $H%# ,irections, 8331 as also >uidelines for -sset =iability @anagement .ystem in Housing !inance "ompanies. These are periodically updated through issue of circulars and notifications. -s part of the supervisory process, an entry-level regulation is ought to be achieved through a system of registration of housing finance companies. $ational Housing %ank supervises the sector through a system of on-site and off-site surveillance. ); R#5"23tions% R#5istr3tion o0 Ho"sin5 Fin3n8# Co$63ni#s "@S#8tion (-A o0 th# N3tion32 Ho"sin5 /3n7 A8t> '-BC Till the end of Cune 8337, the %ank had received 1?5 application from H!"s for granting of "ertificate of 'egistration "/'#. /f this, 7? H!"s have been granted "/' and applications received from 13? H!"s were rejected. In

HNSCMS

27

another ? cases, show cause notices have been issued as to why their applications should not be rejected. In ; cases, the "/' granted earlier were cancelled as these H!"s either went out of the housing finance business or due to non compliance with the conditions subject to which the "/' were issued.

A$#n $#nts to Ho"sin5 Fin3n8# Co$63ni#s :NH/; Dir#8tions> (&&' Having considered it necessary in public interest and for the purpose of regulating the housing finance system, the %ank issued the following ,irections to the housing finance companies, during the year. To maintain uniformity in the interest rate payable on repartiable deposits accepted from the non-resident Indians by the various players in the financial system, the %ank advised H!"s in .eptember 8334 that the interest rate payable by them on such deposits should be the same as is payable by the scheduled commercial banks on these deposits from time to time. "onsidering the fact that financing of real estate forms an integral part of the business of a H!", the ceiling on investments by a H!" in real estate e)cept for its own use was raised from 13< of a H!"s owned fund to 83< of a H!"s capital fund as on @arch 41 of the previous year subject to the stipulation that the additional limit would be permissible only for investments in residential units. In order to align the investment classification and inter-class transfer norms of H!"s with those applicable to the non-banking financial companies $%!"s#, the %ank amended the Housing !inance "ompanies $H%# ,irections 8331 regarding the prudential norms relating to classification and valuation of investments. This amendment

HNSCMS

28

interalia specifies that the investments in securities shall be classified into current and long term at the time of making each investment and that there shall be no inter-class transfer from current to long term or vice versa on ad-hoc basis and if warranted, the inter class transfer can be effected only at the beginning of each half year.

,uring the year, the %ank also advised H!"s that they should not sanction loans to state >overnment 9ndertakings*.pecial Aurpose Fehicles .AFs# for any project solely on the basis of guarantees e)tended by the state >overnments and instead sanction loans only after a through appraisal of the project regarding identification of risks, risk mitigation measures, financial viability of the project and the creditworthiness of the borrower etc. .imilarly, in respect of the housing*infrastructure projects, H!"s have been advised to undertake due diligence on the viability of the viability of the projects. *; Ho"sin5 Fin3n8# Co$63ni#s Pro$otion ED"it? P3rti8i63tion !? NH/ -t the beginning of the year, the %ank had e+uity participation in five H!"s. However, continuing the last years trend of merger of bank sponsored H!"s with their parent organi&ations, $H% divested its entire holding in Fibank Housing !inance =imited, conse+uent to its plans of merger with Fijaya %ank. There was no fresh e+uity participation by the bank during the year. S#ttin5 "6 o0 EFr3" 8#22F In order to identify the causative factors behind frauds of housing loans in H!"s, $H% has set up a M!raud "ell to collected on a regular basis. The information collected is analy&ed and inferences regarding the causative

HNSCMS

29

factors are shared among all H!"s and also with '%I as a part of preventive measure. +; Fin3n8i32 S#r4i8#s

ProA#8t Fin3n8# $ational Housing %ank offers project loans to public agencies for different types of projects, as under( Township cum Housing ,evelopment "onstruction of housing on individual plots of group housing =and ac+uisition for the purpose of housing and housing development =and development for housing including provision of facilities like roads, water supply, storm water drains, sewerage system, etc. ,evelopment of land into buildable plots

HNSCMS

30

HNSCMS

31

R#s#3r8h Pro8#ss
D#0inin5 th# R#s#3r8h Pro!2#$ It is one of the most important part of the project, as the whole research is based on this problem formulation. It is also known as opportunity identification, as in unknown problem there may be opportunities for companies. Two steps are involved in formulating the research problem, vi&., understanding the problem thoroughly, and rephrasing the same into meaningful terms from an analytical point of view. I"I"I H!" has a large database of the customer . I have conducted a survey of 133. and check the satisfaction level of e)isting customer. Lit#r3t"r# s"r4#? S#8on 3r? 2it#r3t"r# s"r4#? %. I have checked some records of the customer in I"I"I H!". The secondary data was colleted from the past survey which was earlier conducted. D#4#2o6$#nt o0 wor7in5 H?6oth#sis %. Borking hypothesis is tentative assumption made in order to draw out and test it logical or empirical conse+uences. -s such the

HNSCMS

32

manner in which research hypotheses are developed is particularly important since they provide the focal point for research. I also test some of the important +uestions using chi-s+uare 8# test of +uantitative methods by various hypotheses for chi-s+uare 8 # are as under Ho (- There is no relation between rate and satisfaction level Ho (- There is no possibility for further loan due to the satisfaction. Ho (- There is no positive relation between recommendation and satisfaction.

R#s#3r8h #si5n %
I follow ,escriptive research design

S3$62in5 #si5n %
The sampling design is +uota and judgmental. I have also follow restricted sampling under selection techni+ue. .ampling unit (- The unit selected where the customer who has taken loan from I"I"I H!". .ampling si&e (- The .ampling si&e was 133 customer.

D3t3 8o22#8tion% .
There are various methods are available for collection of data. I follow personal interview and telephonic method of data collection because it is best suitable method of data collection according to research I take records of customers from bank. H?6oth#sis G t#stin5 Hypothesis

Int#r6r#t3tion
HNSCMS .atisfaction level Is high. They are also satisfy with the rate of I"I"I H!". They can also provide reference to others. 33

They can take loan again from bank in future.

R#s#3r8h Instr"$#nt %
'esearch Instrument used here is structured +uestionnaire and most of the +uestion here are of multiple-choice +uestion but open ended +uestion are also included.

Li$it3tion%
The following are the limitation which are faced during the research. .elected sample si&e is 133 customer so study could be relatively justify on that ground. 'espondent %ias. The project is done for I"I"I H!" 'ajkot %ranch only so scope of research is limited to 'ajkot %ranch.

Chi.sD"3r# !#tw##n s3tis038tion 2#4#2 3n r3t# o0 int#r#st o0 ICICI ho$# 2o3n9

H o ( There is no relation between rate I satisfaction level H ( There is a relation between rate I satisfaction level

O!s#r4# Fr#D"#n8? S3tis038tion R3t# Hes $o Total Hes ?3 16 ;6 $o 18 13 88 Total ;8 86 133

HNSCMS

34

EH6#8t# Fr#D"#n8? S3tis038tion R3t# Hes $o Total Hes 5? 88 ;6 $o 1? ? 88 Total ;8 86 133

Chi.sD"3r# t3!2# /bserved !re+uency /i ?3 18 16 13 G)pected !re+uency Gi 5? 1? 88 ? -7 7 7 7 1? 1? 1? 1? /i NGi# /i-Gi#8 /i - Gi#8 *Gi 3.865; 1.3333 3.;8;4 8.?;33 7.?;2;

8 value O 5< level of significant at d.f.

H / P rejected H P accepted

P c N1# r N1# P 8-1# 8-1# P1 is 4.671

Con82"sion (

HNSCMS

35

H accepted it means there is a positive relation between rate and satisfaction level. It means satisfaction of customer will effecting the change in rate of interest.

Co.r#23tion !#tw##n r3t# 1 s3tis038tion 2#4#2

8o.r#23tion t3!2# Q ;8 86 133 H ;6 88 133 Q8 5167 ;67 52?6 H8 ?367 767 ?5?6 Qy 5?1? ?1? ?848

'

100(6232) (100)(100) 100(5968) (100) 2 100(6568) (800) 2 623200 10000 596800 10000 656800 10000 613200 596800 656800 613200 616070

HNSCMS

36

P 3.225

Con82"sion % There is high level of co-relation between rate of interest I satisfaction level of customer.

8hi.sD"3r# !#tw##n 0"rth#r 2o3n 3n s3tis038tion 2#4#2 o0 th# 8"sto$#r9

H o ( There is no possibility for further loan due to the satisfaction. H ( There is possibility of further loan and satisfaction O!s#r4# 0r#D"#n8? S3tis038tion F"rth#r 2o3n Hes $o Total EH6#8t# 0r#D9 S3tis038tion F"rth#r 2o3n Hes $o Total Hes ?6 13 ;6 $o 12 4 88 Total 6; 14 133 Hes ;5 4 ;6 $o 18 13 88 Total 6; 14 133

HNSCMS

37

Chi.sD"3r# t3!2# /bserved !re+uency /i ;5 18 4 13 ?6 12 13 4 G)pected Frequency Ei ; -; -; ; 72 72 72 72 3.;83? 8.5;62 7.2333 1?.4444 87.5486 /i N Gi# /i -Gi#8 /i -Gi#8 *Gi

table value O 5< level of significant at d.f. P c N 1# r N 1# P 8 N 1# 8 N 1# P1 is 4.671

Ho ( 'ejected Hi ( accepted Con82"sion % H accepted so, there is possibility of further loan due to the satisfaction level of the customer. It means customer are satisfied and can take further loan in future.

HNSCMS

38


Q ;6 88 133

8o.r#23tion !#tw##n 0"rth#r 2o3n s3tis038tion 2#4#2 o0 th# 8"sto$#r

H 6; 14 133 Q8 ?367 767 ?556 H8 ;5?2 1?2 ;;46 Qy ?;6? 86? ;3;8

'P

100(7072) (100)(100) 100(6558) (100) 2 100(7738) (100) 2 707200 10000 655800 10000 773800 10000 697200 645800 763800 697200 702326

P 3.228;

HNSCMS

39

Con82"sion % There is high degree of co-relation between satisfaction I further loan.

Chi.sD"3r# !#tw##n r#8o$$#n 3tion 3n s3tis038tion9

H o ( There is no positive relation between recommendation and satisfaction. H ( There is positive relation between recommendation and satisfaction . O!s#r4# 0r#D"#n8? Hes ?6 13 ;6 S3tis038tion $o 11 11 88 Total ;2 81 133

R#8o$$#n 3tio n Hes $o Total

EH6#8t# 0r#D"#n8? R#8o$$#n 3tion Hes Hes ?1 $o 1; Total ;6 S3tis038tion $o 16 7 88 Total ;2 81 133

HNSCMS

40

/bserved !re+uency /i ?6 11 11 11

G)pected !re+uency Gi ?1 16 7 7 ; -; -; ;

/i NGi#

/i -Gi#8

/ i - G i# 8 * Gi

72 72 72 72

3.6344 8.;888 8.6687 18.8533 16.?5;2

"hi-s+uare value O 5< level of significant with d.f P 1 is 8.671 H i ( 'ejected H ( accepted Con82"sion % H is accepted so, there is positive relation between recommendation and satisfaction level of customer.

HNSCMS

41

Co.r#23tion !#tw##n r#8o$$#n 3tion 3n

H ;2 81 133 Q8 ?367 767 ?556 H8 ?871 771 ??68 QH ?1?8 7?8 ??87

s3tis038tion
Q ;6 88 133

100(6624) (100)(100) 100(6558) (100) 2 100(6682) (100) 2 662400 10000 655800 10000 668200 10000 652400 645800 658200 652400 652475

P 3.2226 Con82"sion % There is high degree of "o-relation between recommendation I satisfaction level. HNSCMS

42

PROCESS OF HOME LOAN There are basically two phases in the home loan process(

HOME LOAN PROCESS

SANCTION PHASE

DISBURSEMENT PHASE

The following diagram displays the whole sanction process I disbursement process(

HNSCMS

43

HNSCMS

44

BASIC DOCUMENTS FROM CUSTOMER Y

DOES THE FI VERIFACTION

DEDUP D/B RELATED ACTION TAKEN Y RELATED ACTION TAKEN

HNSCMS
CREDIT MANAG ER SENDS FI REQUEST TO FI AGENCY

DMA/DSA

TEAM

FI AG EN CY

CHECKS IF CUTOMER APPEARS IN DEDUP DATABASE

45
DOE S IT APP EAR S RCU UNIT CREDIT MANAG ER

TEAM

IF RCU REPO RT PNEG ATIVE N

HNSCMS
SCRUTINNIZES THE COMPLETENESS OF THE DOCUMENTS PREP ARATI ON OF CAM SHEET ANY DEVI ATIO N APPROVAL TAKEN CREDI T MANA GER APPROVED LOAN FILE APPROVES CAM & PREPARE SANCTION LETTER BRANCH OPERATION

46

DIS/URSEMENT PROCESS

HNSCMS

47

HNSCMS
SENDS PROPERTY DOCUMENTS TO LEGAL AGENCY LEG AL AGE NCY CREDIT MANAGE R TEAM TECHNI CAL AGENC Y DOES THE LEGAL VERIFACTION CHECKS IF CUTOMER DOCUMENTS DOES THE TECHNICAL VERIFACTION SCRUTINNIZES THE COMPLETENESS OF THE DOCUMENTS AS PER P& D ARE THERE ANY DEVIATI ON N Y APPROVAL TAKEN

DMA/DSA

SENDS TECHNICAL VERIFICATION REQUEST TO TECHNICAL AGENCY

PROPERTY DOCUMENTS & DRF FROM THE CUSTOMER

48

HNSCMS
CHECK THE EXISTENCE OF PROPERTY & APPROACABILITY N IS THE FIPV REPO RT NEGA TIVE Y APPROVAL TAKEN CREDI T MANA GER DISBURSEMENT MEMO APPROVES DM BRANCH OPERATION

PR EP AR ATI ON OF DM FI (FIP V)

49

HNSCMS

50

GLOSSARY
'9 APF%

-dvance processing facility is the field that helps to customer for speed in the process of loan sanctioned and to the builder by the investment of project. The process of -A! is start by the builder: the builder gives its all project file to the bank and bank verifying this project by their technical and legal. -fter the verifying of project, the bank gives the letter of proof, which is called -A! letter. $ow when any customer who is interested in house of project of builder and also re+uire loan from I"I"I Home !inance, the letter of -A! get by the bank from the builder via customer. (9 /ALANCE TRANSFER% %alance transfer is the product in which the customer can terminate loan to the other bank. The balance transfer is possible if the outstanding balance is according balance is according to bank. The tenure of the loan should be up to or more than si) installments. )9 CAP% - ceiling on the interest rate on a floating-rate note. *9 Co G 3662i83nt -s a customer you have an option of having a co - applicant to your loan. The co - applicant cannot be a minor and most H!"s allow for only brother brother, parent - son and husband - wife combination for a co N applicant.

HNSCMS

51

+9 COLLATERAL% -n asset such as a car or a home# that can be used to guarantee the repayment of a loan. The borrower risks losing that asset pledged as collateral if the loan amount is not repaid in a timely fashion. ,9 DEMAT% ,G@-T account service, which provide by the bank in which the person can direct deal with the stock market and can know the updates of the market. C9 DIS/UREMENT% ,isbursement is the process in which your loan will be disbursed after you identify and select the property or home that you are purchasing and on your submission of the re+uisite legal documents. B9 DST% ,irect sales team is the team of the direct consult to the customer. ,.Ts are in the job of marketing and selling of different products of the bank. .ometimes ,.Ts also called the e)ecutive. -9 E2i5i!i2it?% This is the loan amount that you are eligible to based on your repayment capacity. Hour eligibility depends on the norms set by the H!"s. Typically, the eligibility computed would be lower of the =oan to value ratio =TF#, Installment to Income 'atio II'# and !i)ed /bligation to Income 'atio !/I'# as per the norms of the H!". '&9 EMI% G+uated @onthly Installment , in which the customer has to repay the loan. -ctually, the amount of G@Is is calculated on the rates and tenure of the loan. The income of the customer is main factor in this calculation.

HNSCMS

52

''9 FOIR% !i) /bligatory Income 'atio is the ratio of the income and loan amount. !/I' is varied with the criteria, which is salaried. .GAs and .G$As. !/I' is the most important in the calculation of loan amount. '(9 FRR% !loating 'eference 'ate is varied with the change in policy of bank. !'' is also known as a adjustable rate that the interest rate is linked to the I"I"I %ank !loating 'eference 'ate !''#.

')9 G"3r3nt##% - promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract. The party that promises to do so is called guarantor. '*9 Lo3n T#n"r# % The time duration for which loan has been provided. '+9 LOAN TRANSFER% =oan transfer is the product in which bank facilitates to the customer to transfer loan from other bank. The outstanding amount of loan is the main factor In transfer and how many G@I has been paid. ',9 MORTGAGE% - pledge of specific property offered as security for a loan. 'C9 NATIONAL HOUSING /AN= ACT> '-BC% I"I"I Home !inance "o. =td. was set up with the objective of providing longterm housing loans to individuals and corporate. The "ompany was registered on @arch 43, 8333 with $ational Housing %ank $H%# under $ational Housing %ank -ct, 126;.

HNSCMS

53

'B9 O/LIGATION% This term indicates the running G@Is of any loan in any bank or institution. The loan amount is depended up on the obligation. '-9 PART PREPAYMENT% The administration and other charges for loan are known as prepayment. The customer is paid when the loan is sanctioned and this payment is only in che+ue. (&9 PDC% The bank takes the Aost ,ated "he+ues in advance from the customer. These che+ues are G@Is of the customer, which is given in advance to the bank. ('9 PEMI% AG@I is payable by che+ue by the end of the month In which the disbursement is made and each subse+uent AG@I at the end of every month till the commencement of G@Is. ((9 PF STATEMENT% Arovident fund statement is the statement In which the salaried the detail of the salaried and ensure that if salaried customer is eligible for the payment or not. A! statement re+uires only in the case of salaried customer is eligible for the payment or not. A! statement re+uires only in the case of salaried customer. ()9 RTR% 'epayment Track 'ecord is the product in which customer is facilitated to apply for loan only based on documents of early or running loan record. If the credit of the customer is good, can get loan. (*9 SEP%

HNSCMS

54

.elf Gmployed Arofessional is the criteria for loan. Arofessionals like doctor, engineer, advocate practice# and chartered accountant. These all are called .GA case in loan process. (+9 SENP% .elf Gmployed $on Arofessional is the criteria for loan. $on- professional is any businessperson like traders, manufacturer, brokers, dealers, merchants. These all are called .G$A case in loan process. (,9 SU/SIDIARY COMPANY% The company owned by other company that controls more that 53< of the voting stock. (C9 TERMINAL VALUE% The value of a property at some point of time in future. This valuation is based on the report of legal and technical. (B9 TOP UP% Top up is the product in which the bank facilitates to the customer for remain loan amount that the person was re+uired. In this product the bank, provide funding on the loan amount, which was not able to provided to customer based on above loan.

HNSCMS

55

HNSCMS

56

IUESTIONNAIRE
J RESEARCH ON SATISFACTION OF EXISTING CUSTOMER OF ICICI HOME LOANK
I am conducting a research to find out the e)isting customer satisfaction from I"I"I H!" =T,. I will be very grateful if you could spend sometime in going through the +uestionnaire and filling it up. I assure you that the responses shall be treated confidentially. In anticipation. THI$EI$> H/9 !/' H/9' "//AG'-TI/$ 1# $ame 8# -dd 4# Ahone no. 7# /ccupation( R S .ervice R S %usiness R S /ther

5# Bhy do you prefer I"I"I Home =oan T R S =ow interest R S $o hidden charges R S %rand name R S ,oor step services R S Gasy procedure R S =iberal in penalty charges

?# -re you satisfied with the rate of I"I"I Home =oan T R S Hes R S $o.

;# Bill you consider I"I"I for further loan T HNSCMS 57

R S Hes

R S $o

6# -re you recommended to your friends and relatives for I"I"I home loanT R S Hes R S $o.

2# Hour recommendation *suggestion * complaints for I"I"I home loan.

HNSCMS

58

HNSCMS

59