COMPARATIVE ANALYSIS OF MORTGAGE BASED PRODUCTS AND SERVICES OF HDFC LTD.

AND STATE BANK OF INDIA

Research Report Submitted Towards Partial Fulfillment of Post Graduate Program In Management From U.P.T.U Academic Session (2009-2011)

UNDER THE GUIDANCE OF

Program chairperson: Mr. Bhupendra HDFC Branch Head (Raebareli branch): Mr. Pawan Panth

Submitted By:

Sagar Institute of Technology and Management Barabanki

(2009-2011)

DECLARATION

I hereby declare that the project report entitled "COMPARATIVE ANALYSIS BETWEEN THE MORTGAGE BASED PRODUCTS AND SERVICES OF HDFC LTD. AND STATE BANK OF INDIA AT RAEBARELI"

Submitted by me in partial fulfillment of the requirement for the degree of Master of Business Administration (MBA) to The Sagar Institute of Technology & Management Barabanki, is my

original work and has not been submitted for the award of any other degree.

ACKNOWLEDGEMENT

With deep sense of gratitude I acknowledge the guidance, help and active cooperation rendered by the following people whose guidance has sustained the effort, which laid to the

completion of this project. I am very much indebted to Mr. Bhupendra (program chairperson,SITM,Barabanki) for her valuable guidance, constant encouragement and cooperation at every stage of the project work. I am much more thankful to Mr. Pawan Panth, HDFC Ltd., Branch Head, Raebareli, who has been the constant source of inspiration to complete the project successfully. It gives me great pleasure to express my deep sense of gratitude to Mr. Arun Arora and Mr. Smith Rastogi, HDFC executives, for boosting and providing all possible help related to research report

TABLE OF CONTENTS

1. Abstract.......4

2. Executive summary.5

3. Objective..14

4. Introduction.6

4.1 Overview of the worldwide mortgage market 4.2 Understanding Sub-Prime crisis 4.3 Indian market 4.4 Mortgage companies in India 4.5 Detailed overview of HDFC Ltd. 4.6 An introduction to associate companies and subsidiaries

4.7 Products and services of HDFC ltd. 4.8 Products and services of SBI

5. About Research 15

5.1 Research process.15 5.2 Types of Research16

6. Research Methodology..18

6.1 Questionnaire..19 6.2 Limitations of the study 6.3 Data and Statistical Analysis20 6.4 Comparative Analysis30 6.5 Findings 6.6 Suggestions ....32

7. Result /Conclusion.33

8. Bibliography..34

9. Annexure..35

1. ABSTRACT

Every person wants to live a high standard of life with all possible comforts. But his financial resources limit him. He is unable to fulfill his dreams because of the shortage of funds. The consumer credit facility makes it easy for a person to have his/her own home, car and home appliances etc. In short one of the main changes in economic life is substitution of cash down with hire purchase system. Retail banking in India operates in a highly saturated and competitive market. The main aim of this research article is to study the problems encountered by the borrowers in connection with credit and also to study the consumer satisfaction level regarding different banks. The finding of the research shows that HDFC bank is on number one position, which made a timely disbursement of loan to its borrowers. Hidden charges are the biggest source of dissatisfaction of the borrowers of SBI bank. So it is advisable to SBI bank that it should disclose each and every fact to its borrowers before signing the loan agreement.

2. EXECUTIVE SUMMARY
To target the particular market it is mandatory for an organization to understand the customers expectations and their requirements. The customer today is increasingly aware and highly responsive. The main objective of the project is to do a comparative analysis between the mortgages based products and services of HDFC LTD. and State Bank of India

3. OBJECTIVE
The main objective of the research is:

To perform a comparative analysis between mortgages based products and services of HDFC LTD. and SBI.

To find out the perception of customers/ borrowers with respect to home loans services.

To analyze the growth of mortgage loans in the market in current scenario.

To know the growth of financial product & services of HDFC & SBI.

To know about the service perception compared with HDFC & SBI.

4. INTRODUCTION

Purchasing and moving into a dream house would generally rank among the top three things on the wish list of most people. After all its what been proved by Maslows Law of Hierarchy as well. That entire house hunting every few years, grumpy landlords, killing rents would be a thing of the past. Hey, you even get to use nails to hang your favorite paintings and pictures. Dont you??? Taking a home loan nowadays has become very simpler. The RBI has been regularly slashing interest rates, with the result that housing finance loans that came at an interest rate of 16.5% to 18% four years ago are now available at 11.5% to 13% or lower. Each year the Finance Minister's generosity during the Budget seems to be solely concentrated for the housing sector and construction sector. The Budget 2000's allowed interest payment up to Rs 1 lakh and principal payment of Rs 20,000 to be exempted from income tax. To top it all, the Housing Finance Companies (HFCs) are aggressively wooing customers.

4.1 Overview of Worldwide Mortgage Market

The term mortgage has acted as a boost to the housing market over the world. Mortgage can be defined as a method of having property instead of paying the total value of the property.

Chart 1

It simply means as making a loan while an individual or business owns a real estate. In the mortgage practices, there are mainly two parties involved. One is called mortgagor who borrows and the mortgagee is lender. The mortgage types among the countries over the world can be of different types depending upon the kind of property, lands and other conditions. In United States the mortgages use are of two types such as Fixed Rate Mortgage and Floating rate mortgage. The tenure for the fixed rate mortgage is generally for 15 years and 30 years. On the contrary the Floating rate mortgage constitute 1 year. In Singapore the mortgage types can be categorized in to two types such as Fixed Rate Mortgage and Flexible Rate Mortgage. In Canada the mortgage types can be differentiated in to two types such as Fixed Rate Mortgage and Variable rate mortgage. In Thailand both fixed rate and floating rates are being used.

10

Chart 2

Foreclosure activity: The process of taking possession of a mortgaged property as a result of the mortgagor's failure to keep up mortgage payments. As observed by the above graph this activity has increased at a consistent rate.

Chart 3

11

The above graph shows how the mortgage market behaved in the years. Sub prime, term loan volume, documents limitations increased with the subsequent years. Let us analyze advantages and disadvantages of new generation approach vs. traditional approach: Home Loans at doorsteps: It became very easy for common man to avail a home loan sitting at cozy comforts of his house. So long as the service provider (sales executive, called as Home Loan Counselor) was a well trained professional, it was okay, but as most of the time the Home Loan Counselor was found to be untrained, unprofessional and mis-selling the loan products, which put the customers into lot of inconveniences such as ineligible customers were promised of loan sanction, higher loan amount was promised, lesser interest rate was offered, etc. Home Loans became affordable: The interest rates came down to 7% in 2005 from 13-14% in 2000, allowing higher loan eligibility. When interest rates were going down, most of the Banks and HFCs did not respond but when interest rates started moving northwards there was immediate action of increasing interest rates, making borrowers to suffer a lot. When interest rates reached 12% in 2008, the EMIs of old customers became burden forcing them to default in repayments. Home Loan process got simplified The lead time for getting sanction and disbursal got reduced to two weeks from ten to twelve weeks, when the concerned home loan counselor was found to be a professional and well trained. But most of the time, customer had to face inefficient home loan counsellor, which increased the lead-time of getting loan sanctioned and disbursed. Paper work reduced: To attract more customers many Banks and HFCs started reducing formalities such as seeking no collaterals, like Guarantors, Assignment of Insurance Policies etc. and dispensing with DPN (Demand Promissory Note) and Tripartite Agreement (executed between the Builder, Applicant and

12

the Bank) etc. The dilution lead to recovery hassles. More Home Loan Products: As competition became fierce, more number of products came in to the market, like Balance Transfer, Top Up Loans, Surrogate Products and Reverse Mortgage Loans etc. Although it helped many non-eligible customers to avail home loans, it also made a way for weak portfolio to build up. More Income Tax benefits: Union Government increased the tax benefit on interest paid on home loans to Rs. 150,000 from Rs. 30,000 pa. IT benefits extended to second house also. Since loan was easily available at attractive terms, many youngsters started heavily investing in house properties, which led to speculation and unreal jacking up of prices of properties. Later on, when interest rates went up, the EMIs started becoming an unavoidable burden. Easy loans to NRIs and PIOs: Government of India allowed Non Resident Indians and Persons of Indian Origin to avail home loan without RBIs permission. As a result, lot of NRIs and PIOs started investing in properties in India, by availing home loans in India, which further increased heating up of the real estates prices. Encouragement for Group Housing: Union Government encouraged Builders and Developers to construct large group housing projects by giving lot of concessions, reducing corporate income tax etc. Making available land for construction: Many state governments allotted land at affordable cost for leading Builders and Developers to construct dwelling units. Reducing stamp duty and registration costs: Under the guidance of Union Government, many states reduced stamp duty charges on development and sale of developed land and constructed houses. Benefits under Priority Sector Lending: For the purpose of classification by Banks under priority sector lending, the limit increased to Rs. 20 lacs first and then up to Rs. 30 lacs for individual home loans, which resulted into Banks to lend heavily for real estate, again increasing the real estate prices.

13

Passing of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act 2002, virtually a shot in the arm, helped the Home Loan lenders to foreclose defaulted accounts without moving to Courts.

4.3 Indian mortgage market

Credit is the lifeblood of banking and the major source of revenue. Bank credit is predominantly for productive purposes and hence, contributes substantially for the economic prosperity and wealth. A banking system with sound credit delivery and credit administration mechanism is a Sine Qua Non for the general financial stability of a nation.

Retail Credit is gradually gaining importance in India in view of its tremendous potential for speedy absorption of sizable loan funds by a large section of middle-income group consumers. Lending is always a hazardous occupation for bankers in India. Lending to Industrial Units pose the problem of recovery, should these units become sick? SICA and BIFR offer shelter even to willful defaulters. Banks are not very successful even in taking possession of machinery and current assets from overdue clients, thanks to the labor laws, which argue that such action will result in closure of the units, forcing workers out of jobs. Recovery through legal recourse involves costly delays and loss of value of assets.

India Mortgage industry until recently was an unorganized sector. But today organized mortgage sector is witnessing steady growth. It is estimated to be US $ 18 billion industry. Huge real estate requirements and its subsequent development have fueled its growth.

The predominant market leaders in organized 'India Mortgage' sector are housing finance

14

companies like LIC Housing Finance, HDFC, ICICI Home Finance etc. Although, size of organized sector account only for 25% of the total housing investment in India (Source: LIC Housing finance). But commercial banks both National and Foreign Banks along with Cooperative banks and other non-banking financial companies (NBFCs) are also catching them up at a very fast pace. Mortgage rates in India industry are consistently registering 20-50 % growth from the year 2000 onwards. Low-income groups communities are still ignorant and skeptical of about it. The bottlenecks are 1. Affordability and 2. Accessibility.

'India Mortgage' industry is heating up and there is a mad rush for credit. The 'Mortgage India' market is estimated to grow at a lightening pace in few years to come. Although, investment in housing has grown steadily over the past years as the proportion of outstanding housing loans as percentage of GDP increased from 3.4 per cent in 2001 to 7.25 percent by 2006. Housing finance gives a measure of the socioeconomic status of people. It is regarded as a critical sector in terms of policy initiatives and interventions. Financial allocations in the 5 Year Plans and fiscal measures related to housing has been taken and implemented successfully. To help it grow and fulfill its huge requirements India Mortgage industry needs indirect government participation, as a guardian and facilitator. Private funds and even FDI should be encouraged to see 'India Mortgage' industry grow further. Overall revamping of land laws, rental laws, fast mutation and registration process along with setting up of credit rating organization and mortgage insurance will only help India in realizing its housing dreams. This will accelerate organized growth of 'India Mortgage' market and at the same time will help reach all sections of Indian society.

While, lending to corporate, suffers from these pitfalls, Indian banks are not known to view extension of consumer credit in the retail segment with favor either. For quite a long period, Reserve

15

Bank did not encourage any massive expansion of consumer credit, as it is concerned with its unproductive nature. Consequently, it imposed severe restrictions on banks. The lending philosophy of RBI has undergone a change in the post-reform phase and there are not many constraints on consumer credit extension now, but banks have also changed their mindset too, but not to the desired extent.

State Bank of India, with over 20 percent market share in banking business is ideally situated in expanding retail credit through its 9000 branches.

SBI also sanction education loans on the model suggested by Reserve Bank. Education Loans cover the purpose like tuition and other fees, maintenance costs, books and equipment, cost of passages, caution fund, building fund, refundable deposits etc. State Bank extends clean personal loans where disbursement is in cash for purposes like marriage of daughter, family functions and travel expenses through 3000 of its branches.

16

Second largest employment generator

Over 269 industries

Sector growing at 30 percent p.a.

Estimated needs for meeting housing needs up to 2012 : US $ 90 bn

Every INR 1 invested in housing adds INR 0.78 to GDP Chart 4

State Bank Of India (SBI) sanctions consumer loans for purposes like marriage, higher education, business travel and medical emergencies, car loan and loan to professionals. Recently, this bank has announced a new loan scheme called Loan against mortgage of immovable property, for providing

17

finance for personal and business needs. The finance ranges from Rs. 1 lakh to Rs. 100 lakh.

Housing finance is gaining prominence among bankers in India for reasons like availability of security, low supervisory cost and low default risk. With tax breaks and general appreciation of values of the real estate over long periods, working class customers are finding home loan affordable and attractive. Home loans could absorb substantial lendable resources. Even rural sector has a potential if suitable schemes are designed. Housing finance has been steadily growing in India, thanks to the surge in demand, besides the liberal terms of lending offered by banks and the recent tax sops.

While HDFC, LIC Housing Finance and GIC Housing Finance are the big players; new entrants like ICICI Bank are offering stiff competition with very attractive terms. Some of the public sector banks have also entered the fray. Ultimately the individual borrower now finds that he is being chased by a number of willing banks to offer a home loan of substantial amount on affordable terms, for medium to long periods.

Many other banks have different versions of consumer finance schemes. The general features of these schemes are more or less the same, with minor variations in the rate of interest or repayment period or insistence on a third party guarantee. However, banks do not display uniform zeal in actively marketing these schemes, with a focus on building volumes. Some of the schemes are not rationally structured either. Take, for example the case of a mortgage loan against equitable mortgage of title deeds to residential house/land of an individual. Such loans are sanctioned to retail and wholesale traders as well, more like working capital finance, but without the rigors in lending working capital advance. These advances are security based and generally sanctioned on the basis of present sales level and projected sales level.

4.4 Mortgage companies in India

18

Housing finance companies: Housing Finance services are provided by the two sectors in India. 1. Public sector companies 2. Private sector companies I. Public Sector Bank of Baroda Housing Finance Can Fin Homes LIC Housing Finance PNB Housing Finance SBI Home Finance

II. Private Institutions HDFC ICICI LIC HUDCO GE Money Home Loan Sundaram Finance Group

Major Home loan providers in India AXIS BANK Allahabad Bank Andhra Bank Bank Of Rajasthan Bank of Baroda

19

 Canara Bank Centurion Bank of Punjab City Bank Corporation Bank Federal Bank Housing Development Finance Corporation Limited HSBC HUDCO ICICI Home Finance IDBI Bank Indian Bank Indian Overseas Bank Kotak Mahindra LIC housing finance Oriental Bank of Commerce PNB PUNJAB AND SIND BANK Standard Chartered Bank State Bank of India Housing Finance State Bank of Mysore UCO bank United Bank of India

Interest Rates for Home Loans are undoubtedly the most important parameter to factor into your calculations. And in most cases is the decisive factor for an investor to narrow down on a certain Housing

20

Finance Company's home loan offer. The interest on housing loans in India is usually calculated either on monthly reducing or yearly reducing balance basis.
Loan Period Finance Institution (in years) Fixed (INR) EMI / Lakh Floating (INR) EMI / Lakh

Up to 5

9.00

2076

8.00

2028

6 to 10 Bank of Baroda 11 to 15

9.25

1230

8.25

1227

9.50

1044

8.25

970

16 to 20

9.50

932

8.50

868

Up to 5

9.50

2100

8.75

2064

6 to 10 State Bank Of India 11 to 15

9.75

1300

9.25

1280

9.25

1029

16 to 20

9.75

949

Up to 5

11

2175

9.50

2101

6 to 10 HDFC 11 to 15

11

1375

9.50

1294

11

1137

9.50

1045

16 to 20

11

1033

9.50

933

21

Up to 5

10.75

2162

9.50

2101

6 to 10 ICICI Bank 11 to 15

10.75

1364

9.50

1294

10.75

721

9.50

1045

16 to 20

10.75

1016

9.50

933

Up to 5

10.50

2149

9.50

2100

6 to 10 LIC Housing Finance 11 to 15

11

1373

9.50

1294

11

1137

9.50

1044

16 to 20

11

1032

9.50

932

Up to 5

9.00

2076

10.50

2150

6 to 10 PNB Housing Finance 11 to 15

9.00

1267

10.50

1350

9.25

1030

10.50

1106

16 to 20

9.50

933

10.50

999

Table 2 The Housing Finance Companies and the Banks have variable interest rates depending upon the tenure and types of home loans. Though interest rates for housing finance are not very volatile, one may well be advised to look out for indication of any rate increases or decreases prior to finalizing the timing and amount of loan.

22

4.5 Detailed Overview of HDFC Limited

Helping Indians experience the joy of home ownership. The road to success is a tough and challenging journey in the dark where only obstacles light the path. However, success on a terrain like this is not without a solution. As we found out nearly three decades ago, in 1977, the solution for success is customer satisfaction. All you need is the courage to innovate, the skill to understand your clientele and the desire to give them your best. Today, nearly three million satisfied customers whose dream we helped realize, stand testimony to our success. Our objective, from the beginning, has been to enhance residential housing stock and promote home ownership. Now, our offerings range from hassle-free home loans and deposit products, to property related services and a training facility. HDFC also offer specialized financial services to our customer base through partnerships with some of the best financial institutions worldwide. SECTOR OF HOUSING FINANCE Against the milieu of rapid urbanization and a changing socio-economic scenario, the demand for housing has grown explosively. The importance of the housing sector in the economy can be illustrated by a few key statistics. According to the National Building Organization (NBO), the total demand for

23

housing is estimated at 2 million units per year and the total housing shortfall is estimated to be 19.4 million units, of which 12.76 million units is from rural areas and 6.64 million units from urban areas. The housing industry is the second largest employment generator in the country. It is estimated that the budgeted 2 million units would lead to the creation of an additional 10 million man-years of direct employment and another 15 million man-years of indirect employment. Having identified housing as a priority area in the Ninth Five Year Plan (1997-2002), the National Housing Policy has envisaged an investment target of Rs. 1,500 billion for this sector. In order to achieve this investment target, the Government needs to make low cost funds easily available and enforce legal and regulatory reforms. Background HDFC was incorporated in 1977 with the primary objective of meeting a social need - that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million. Business objectives The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. Organizational goals HDFC's main goals are to: a) Develop close relationships with individual households, b) Maintain its position as the premier housing finance institution in the country,

24

c) Transform ideas into viable and creative solutions, d) Provide consistently high returns to shareholders, and e) To grow through diversification by leveraging off the existing client base. Organization and management HDFC is a professionally managed organization with a board of directors consisting of eminent persons who represent various fields including finance, taxation, construction and urban policy & development. The board primarily focuses on strategy formulation, policy and control, designed to deliver increasing value to shareholders. Board of Directors Details of the Board of Directors in terms of their directorships/memberships in committees of other public companies (excluding HDFC) are as under:
No. of Committees Sr. Name of Director No. Occupation Directorship Member on No. of Chairpers

Mr. Deepak S. Parekh

Executive Chairman

12

Mr. Keshub Mahindra

Industrialist

Mr. Shirish B. Patel

Consulting engineer

Mr. B. S. Mehta

Practicing CA

14

Mr. D. M. Sukthankar

Professional accountant

25

Mr. D. N. Ghosh

Professional director

Dr. S. A. Dave

Professional director

11

Dr. Ram S. Tarneja

Management professional

13

Mr. N. M. Munjee

Professional director

13

10

Dr. Bimal Jalan

Member of rajya sabha

11

Dr. J. J. Irani

Professional director

10

12

Mr. D. M. Satwalekar

Corporate executive

13

Ms. Renu Sud Karnad

Company executive

13

Vice Chairman & 14 Mr. K. M. Mistry Managing Director 12 8 3

Table 3

FINANCIALS

HDFC BALANCE SHEETS

Balance Sheet of HDFC Bank Mar '11

------------------- in Rs. Cr. ------------------Mar '10 Mar '09 Mar '08

12 mths

12 mths

12 mths

12 mths

26

Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 465.23 465.23 0.00 0.00 24,914.04 0.00 25,379.27 208,586.41 14,394.06 222,980.47 28,992.86 277,352.60 Mar '11 457.74 457.74 0.00 0.00 21,064.75 0.00 21,522.49 167,404.44 12,915.69 180,320.13 20,615.94 222,458.56 Mar '10 425.38 425.38 400.92 0.00 14,226.43 0.00 15,052.73 142,811.58 2,685.84 145,497.42 22,720.62 183,270.77 Mar '09 354.43 354.43 0.00 0.00 11,142.80 0.00 11,497.23 100,768.60 4,478.86 105,247.46 16,431.91 133,176.60 Mar '08

6,1

6,4

68,2

2,8

71,1

13,6

91,2

12 mths

12 mths

12 mths

12 mths

Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block 25,100.82 4,568.02 159,982.67 70,929.37 5,244.21 3,073.56 2,170.65 15,483.28 14,459.11 125,830.59 58,607.62 4,707.97 2,585.16 2,122.81 13,527.21 3,979.41 98,883.05 58,817.55 3,956.63 2,249.90 1,706.73 12,553.18 2,225.16 63,426.90 49,393.54 2,386.99 1,211.86 1,175.13

5,1

3,9

46,9

30,5

1,9

27

Capital Work In Progress Other Assets Total Assets

0.00 14,601.08 277,352.61

0.00 5,955.15 222,458.56

0.00 6,356.83 183,270.78

0.00 4,402.69 133,176.60

3,6

91,2

Contingent Liabilities Bills for collection Book Value (Rs)

559,681.87 28,869.10 545.53

466,236.24 20,940.13 470.19

396,594.31 17,939.62 344.44

582,835.94 17,092.85 324.38

202,1

7,2

LENDING OPERATIONS Approvals and Disbursements

loan approvals 50000

45000 40000 35000 30000
rupees

loan disbursements

49116
48000 46000
rupees

39650 32875

16%
rupees

21%
rupees

44000 42000 40000 38000 2008 year 2009

25000 20000 15000 10000 5000 0 2008 year 2009

42520

Chart 12

Loan approvals during the year were Rs. 49,166 crores as compared to Rs. 42,520 crores in the previous year, representing a growth of 16%. Loan disbursements during the year were Rs. 39,650 crores as against Rs. 32,875 crores in the previous year, representing a growth of 21%. Cumulative loan approvals and disbursements as of March 31, 2009 were Rs. 2,37,450 crores and Rs. 1,91,806 crores respectively.

28

Non-Performing Loans Gross non-performing loans as at March 31, 2009 amounted to Rs. 701.55 crores. This is equivalent to 0.81% of the loan portfolio (previous year 0.84%) comprising loans as well as debentures issued by corporate and corporate deposits placed for financing their real estate projects. Based on a six months overdue basis, the non-performing loans as at March 31, 2009 stood at 0.56% of the loan portfolio as against 0.68% in the previous year. In terms of the prudential norms as stipulated by the National Housing Bank, the Corporation is required to carry a provision of Rs. 319.40 crores in respect of non-performing assets and general provision on outstanding standard non-housing loans. The balance in the provision for contingencies account as at March 31, 2009 stood at Rs. 621.53 crores, which is equivalent to 0.72% of the portfolio. RESOURCES As at March 31, 2009, outstanding deposits stood at Rs. 19,375 crores as against Rs. 11,296 crores on the corresponding date last year, registering a growth of 72%. During the year, deposits accounted for 55% of the incremental borrowing of the Corporation. CRISIL and ICRA have for the fourteenth consecutive year reaffirmed AAA rating for HDFCs deposits. During the year, loans drawn from commercial banks and financial institutions amounted to Rs. 19,704 crores. HDFC raised Rs. 8,567 crores through private placement of non-convertible debentures (NCDs) during the year under review. The NCDs were AAA rated by both CRISIL and ICRA.

CAPITAL ADEQUACY RATIO

29

 HDFCs capital adequacy ratio stood at 15.1% of the risk weighted assets, as against the minimum requirement of 12%. Tier 1 capital adequacy was 13.2% against a minimum requirement of 6%.

COST INCOME RATIO For the year ended March 31, 2009, the cost to income ratio stood at 8.8% as compared to 9.2% in the previous year. Business carried out by the company and its subsidiaries: HDFC is a public limited company primarily engaged in the business providing housing finance by creating an institutional facility for meeting the needs of the people for long term finance for the construction/purchase of residential houses anywhere in India. The corporation has seven wholly owned and six other subsidiaries: HDFC Developers Limited carries on the business of real estate development HDFC Investors Limited carries on business on investments in stock, shares, debentures, and other securities HDFC Holdings Limited carries on business on investments in stock, shares, debentures, and other securities HDFC Trustee company limited acts as a trustee for HDFC Mutual Funds HDFC Reality Limited is engaged in the business of real estate broking and other services. HDFC Venture Trustee Company acts as a trustee for HDFC Property Fund HDFC Property Ventures Limited is engaed in advisory services HDFC Sales Private Limited acts as the distributor of home loans and other products HDFC Venture Capital Limited carries on the business of managing of assets of HDFC Property Fund

30

HDFC Standard Life Insurance Company Limited is engaged in the business of life insurance HDFC ERGO General Insurance company Limited is engaged in the business of general insurance

HDFC Asset Management Company Limited carries on the business of management of assets of HDFC Mutual Fund

GRUH Finance Limited is engaged in the business of providing housing finance. REVIEW OF KEY SUBSIDIARY COMPANIES

HDFC Standard Life Insurance Company Limited (HDFC-SLIC) Gross premium income of HDFC-SL for the year ended March 31, 2009 stood at Rs. 5,565 crores as compared to Rs. 4,859 crores in the previous year.

HDFC Asset Management Company Limited (HDFC-AMC) As at March 31, 2009, HDFC-AMC managed 37 debt and equity oriented schemes of HDFC Mutual Fund. During the year, the average asset under management was Rs. 65,258 crores (which is inclusive of average assets under discretionary portfolio management/advisory services). For the year ended March 31, 2009, HDFC-AMC reported a profit after tax of Rs. 129.11 crores as against Rs. 117.74 crores in the previous year.

HDFC ERGO General Insurance Company Limited (HDFC-ERGO) The year under review marked the first year of operations of the company with the new joint venture partner, ERGO International AG. HDFC-ERGO offers a complete range of insurance products like

31

motor, health, travel, home and personal accident in retail segment and customized products like property, marine and liability insurance in the corporate segment. The growth in the non-life insurance sector during the year has slowed down to 9%. However, HDFCERGO recorded a growth of 56% during the year, with a Gross Written Premium of Rs. 374 crores as against Rs. 240 crores in the previous year.

DISTRIBUTION NETWORK HDFCs distribution network spans 267 outlets, which include 56 offices of HDFCs distribution company, HDFC Sales Private Limited (HSPL). In addition, HDFC covers over 2,400 locations through its outreach programmes. Distribution channels form an integral part of the distribution network with home loans being distributed through HSPL, HDFC Bank Limited and a few third party direct selling associates. To cater to non-resident Indians, HDFC has an office in London and Dubai and service associates in Kuwait, Oman, Qatar, Sharjah, Abu Dhabi, Al Khobar, Jeddah and Riyadh in Saudi Arabia. During the year, HDFCs global presence was further strengthened by commencement of operations in Singapore.

4.6 Associate companies and subsidiaries of HDFC ltd.

32

HDFC BANK

INRODUCTION The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. Directors: 1. Mr. Jagdish Capoor 2. Mr. Aditya Puri 3. Mr. Keki M. Mistry 4. Mrs. Renu Karnad 5. Mr. Arvind Pande 6. Mr. Ashim Samanta 7. Mr. C M Vasudev 8. Mr. Gautam Divan 9. Dr. Pandit Palande 10. Mr. Paresh Sukthankar

33

11. Mr. Harish Engineer

Corporate governance rating: The bank was amongst the first four companies, which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL). The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating for the second consecutive year, which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest.

Types of deposit accounts: While various deposit products offered by the bank are assigned different names, the deposit products can be categorized broadly into the following types. Definition of major deposit schemes are as under: "Demand Deposits " means a deposit received by the bank, which is withdrawable on demand; "Savings Deposits" means a form of Demand Deposit, which is subject to restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the bank during any specified period; "Term Deposit" means a deposit received by the bank for a fixed period withdrawable only after the expiry of the fixed period and includes deposits such as Recurring / Double Benefit Deposits / Short Deposits / Fixed Deposits / Monthly Income Certificate / Quarterly Income Certificate etc.

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''Notice Deposit'' means Term Deposit for a specific period but withdrawable on giving at least one complete banking day's notice; "Current Account" means a form of Demand Deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and will also include other deposit accounts which are neither Savings Deposit nor Term Deposit Key Subsidiary companies: HDFC Securities Limited (HSL) and HDB Financial Services Limited (HDBFSL).

HDFC STANDARD LIFE INSURANCE COMPANY LIMITED

INTRODUCTION

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HDFC Standard Life Insurance Company Limited. is one of India's leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Limited), India's leading housing finance institution and a Group Company of the Standard Life Plc, UK. As on February 28, 2009 HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) 2006, Ltd. holds 26.00% of equity in the joint venture, while the rest is held by Others. Financial Expertise As a joint venture of leading financial services groups, HDFC Standard Life has the financial expertise required to manage your long-term investments safely and efficiently. Track Record So Far HDFC Standard Life Insurance's focus in the current fiscal would be more on consolidation of its business rather than expansion, "Last year, we did expansion across our business, but during this fiscal we will focus on consolidation and greater penetration," HDFC Standard Life Insurance Executive VicePresident and Head (Marketing) Sanjay Tripathy said. The company in 2008-09 generated a total premium income of Rs 5,564.69 crore against Rs 4,858.56 crore in FY 08, registering a year-on-year growth of 15 per cent. Its renewal premium also saw a growth of 34 per cent at Rs 2,913.58 crore for the fiscal as compared to Rs 2,173.19 crore in the previous year. The company's Effective Premium Income (EPI) in respect of retail business increased by 5%, growing from Rs 2,425 crore in 2007-08 to 2,552 crore in 2008-09. HDFC Standard Life tracks its new business premium on the basis of EPI which is calculated by giving only a 10 per cent value to a single premium policy. The company will enhance its thrust on children and its pension plan business in the year as the segments will be major drivers for growth.

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HDFC Standard Life launched 11 new products in the last fiscal and would launch a slew of products that would be a mix of traditional policies and ULIPs. The company, which is a new entrant in the health insurance business with two products, would be launching two more by the end of this fiscal, company official said. The firm, which has banc assurance as its alternate distribution channel, would look for other channels, Tripathy said. "Currently, we sell policies through banc assurance channel. This year, we will be selling it through telemarketing and online," he said. The company would be strengthening its direct sales force channel and tie-ups with brokers. HDFC Standard Life, which increased its financial consultant strength by 43 per cent during the last fiscal, would not increase it with the same pace. "We increased the strength of our financial consultants by 43 per cent, from 1.45 lakh in FY 08 to 2.7 lakh in FY 09 but this year we will look at making our agents more productive and that will help us gain more business from them," he said. The company has 149 in-house training centres for its agents. BOARD MEMBERS Mr. Deepak S. Parekh Sir Alexander M. Crombie Mr. Keki M. Mistry Ms. Marcia D. Campbell Ms. Renu S. Karnad Mr. Norman K. Skeoch Mr. Gautam R. Divan Mr. Ranjan Pant Mr. Ravi Narain Mr. Ravi Narain

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 Mr. Paresh Parasnis PARENTAGE HDFC Limited HDFC Limited, Indias premier housing finance institution has assisted more than 3.3 million families own a home, since its inception in 1977 across 2400 cities and towns through its network of over 250 offices. It has international offices in Dubai, London and Singapore with service associates in Saudi Arabia, Qatar, Kuwait and Oman to assist NRIs and PIOs to own a home back in India. As of December 2008, the total asset size has crossed more than Rs. 95,000 crores including the mortgage loan assets of more than Rs. 82,800 crores. The corporation has a deposit base of Rs. 17,551 crores, earning the trust of more than 9,00,000 depositors. Customer Service and satisfaction has been the mainstay of the organization. HDFC has set benchmarks for the Indian housing finance industry. Recognition for the service to the sector has come from several national and international entities including the World Bank that has lauded HDFC as a model housing finance company for the developing countries. HDFC has undertaken a lot of consultancies abroad assisting different countries including Egypt, Maldives, and Bangladesh in the setting up of housing finance companies.

Standard Life Group (Standard Life plc and its subsidiaries) The Standard Life Group has been looking after the financial needs of customers for over 180 years. It currently has a customer base of around 7 million people who rely on the company for their insurance, pension, investment, banking and health-care needs. Its investment manager currently administers 125 billion in assets. It is a leading pensions provider in the UK, and is rated by Standard & Poor's as 'strong' with a rating of A+ and as 'good' with a rating of A1 by Moody's. Standard Life was awarded the 'Best Pension Provider' in 2004, 2005 and 2006 at the Money Marketing Awards, and it was voted a 5 star life and pensions provider at the Financial Adviser Service Awards for the last 10 years

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running. The '5 Star' accolade has also been awarded to Standard Life Investments for the last 10 years, and to Standard Life Bank since its inception in 1998. Standard Life Bank was awarded the 'Best Flexible Mortgage Lender' at the Mortgage Magazine Awards in 2006. UNIT LINKED INSURANCE PLANS: In Unit Linked Plans, the investments made are subject to risks associated with the capital markets. This investment risk in investment portfolio is borne by the policy holder. Thus, we should make our investment choice after considering your risk appetite and needs. Another factor that a customer needs to consider is his future need for funds. HDFC Standard Life offers us a variety of unit-linked insurance products to suit our goals be it for our retirement planning, for our health, for our childs education and marriage or for investment purposes. Structure of ULIP: In a Unit Linked Plan, the premiums payed are invested in the funds chosen by us after deducting allocation charges and charges including those for managing funds, policy administration and for providing insurance cover are deducted from the funds by cancelling certain units. The value of each unit of a fund is determined by dividing the total value of the funds investments by the total number of units. Advantages of ULIP: Market linked returns: Unit linked plans give us an opportunity to earn market-linked returns as part of the premiums are invested in market linked funds which invest in different market instruments including debt instruments and equity in varying proportions. Life protection, Investment and Savings: Unit linked plans offer the twin benefits of life insurance and savings at market-linked returns. Thus, we have the opportunity to invest our money to earn higher returns, while taking care of our protection needs. Investing in unit linked plans helps to inculcate a regular habit of saving and investing, which is important for building wealth over the long term.

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Flexibility: Unit Linked Plans offer us a wide range of flexible options such asA. The option to switch between investment funds to match our changing needs. B. The facility to partially withdraw from our fund, subject to charges and conditions. C. Single premium additions to enable the policy holder to invest additional sums of money (over and above the regular premium) as and when desired, subject to conditions.

PRODUCTS UNDER HDFC STANDARD LIFE HDFC LTD. has 100% stake of HDFC Standard Life Insurance Company (SLIC). It has following cross sell plans/products under it: 1. Savings and investment plans 2. HDFC Home Loan Protection plans (HLPP) 3. Childrens plans 4. Retirement plans 5. Health plans

1. HDFC Home Loan Protection Plans (HLPP): This plan aims to protect our family from our loan liabilities in case of our unfortunate demise within the policy term. It ensures that our family does not lose the dream house that we have purchased for them, in case you are not around to repay the outstanding monthly installments on your housing loan. This provides us with the comfort of knowing that in our absence, a sum of money will be available towards repaying our housing loan, making sure that our family will be secure in your family home.

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Features 1. 2. Minimum premium: minimum premium under this plan is Rs. 2000/Multiple payment options: we can pay a single premium in advance or include this premium in our housing loan amount and repay as a part of home loan repayment EMIs. 3. Entry age: minimum age of entry is 18 years and maximum age is 50 years. Maximum age at expiry is 60 years. 4. Benefit: policy comes with decreasing sum assured, payable in case of policy holders unfortunate demise within the policy term. 5. Sum assured: maximum sum assured available under this plan is RS. 30,00,000/-

Advantages

A decreasing Sum Assured payable if we die during the term of the contract. This sum assured is intended to help pay-off your outstanding home loan

Policy can be availed by paying a single premium in advance The premium amount can be included in the housing loan and repaid as part of the loan repayment installments Decreasing Sum Assured makes sure that we do not pay for protection we dont need

2. Health Plans Health plans give us the financial security to meet health related contingencies. Due to changing lifestyles, health issues have acquired completely new dimension overtime, becoming more complex in nature. It becomes imperative then to have a health plan in place, which will ensure that no matter how

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critical your illness is, it does not impact our financial independence. In the race to excel in our professional lives and provide the best for our loved ones, we sometimes neglect the most important asset that we have our health. With increasing levels of stress, negligible physical activity and a deteriorating environment due to rapid urbanization, our vulnerability to diseases has increased at an alarming rate.

Incidence of disease per lakh 800

800 700 600 500 400 300 200 100 0

650

640

596.36

460 310 290

405.2

8.07

9.99
Diabetes Mental Health Cardiovascular Diseases COPD and Asthma

Cancer

Chart 13
current 2015 Estimates

(Source: National Commission on Macroeconomics and Health Report 2005)

As can be seen in the above chart, lifestyle diseases are set to spread at disturbing rates. The result Increased expenditure. In many cases, people need to borrow money or sell assets to cover their medical expenses. All it takes is a suitable plan to help us overcome the financial woes related to our health by paying marginal amounts as premiums. For example, if a person is 30 years old, then a mere sum of approximately Rs 3500 annually (exclusive of taxes) can provide hin a health insurance plan of Rs 5 lakh over a period of 20 years, and a worry-free future for him and his family. 3. Retirement Plans Retirement Plans provide us with financial security so that when our professional income starts to ebb, we can still live with pride without compromising on our living standards. By providing us a tool to a

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cumulate and invest our savings, these plans give us a lump sum on retirement, which is then used to get regular income through an annuity plan. Given the high cost of living and rising inflation, employer pensions alone are not sufficient. Pension planning has therefore become critical today. Indias average life expectancy is slated to increase to over 75 years by 2050 from the present level of close to 65 years. Life spans have been increasing due to better health and sanitation conditions in the country. However, the average number of years of employment has not been rising commensurately. The result is an increase in the number of post-retirement years. Accordingly, it has become necessary to ensure regular income for life after retirement, so that a person could live with pride and enjoy his twilight years. However, skyrocketing costs can throw even a well-laid plan off balance. With costs rising every day, we can just imagine how high they will be when we are ready to hang up our boots. So, what should we do to counter this? Its time to plan our retirement and that too sooner than later.

Chart 14

The above illustration shows how with each passing year your annual savings requirement would increase. For instance, if a person is 30 years old and plan to retire at 60, then, with a current annual

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expenditure of Rs. 3,00,000/- , he would need a corpus in excess of Rs. 2,00,00,000/- to maintain his living standards, assuming he live till 85 years and the inflation rate is 4%. To build this retirement corpus, he need to invest Rs 3,60,000/- per annum in a retirement plan that offers 8% returns per annum. In case he delay planning his retirement by 5 years then the investment amount would increase to Rs 6,90,000/- per annum.

Types of Retirement Plans

Type Regular premium

Conventional plans HDFC personal pension plan

Unit linked insurance plans HDFC Unit Linked Pension II HDFC unit linked pension

Single premium/ investment maximiser II

4. Savings and Investment Plans: We have always given our family the very best. And there is no reason why they shouldnt get the very best in the future too. As a judicious family man, our priority is to secure the well being of those who depend on us. Not just for today, but also in the long term. More importantly, we have to ensure that our familys future expenses are taken care, even if something unfortunate were to happen to us. A big factor that we need to consider while building our wealth is inflation. It has a dual impact on our hard-earned savings. Inflation not only erodes our current purchasing power but also magnifies our monetary requirements for the future. Sample this: An 35 Year individual needs to invest Rs. 36,000/- per year with 8% returns to build a corpus of Rs. 10,00,000/- by the age of 50 Years. However, Rs.

44

10,00,000/- after 15 years would be worth roughly around half of what it is today once adjusted for inflation at the rate of 4%. Therefore, an individual will need to save nearer to Rs 50,000/- annually to reach your targeted savings at the age of 50 Years, if you consider inflation.

Rs.
100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 35 36 37 38 39 40

Saving

41

42 Age

43

44

45

46

47

48

49

Chart 15

HDFCs Savings & Investment Plans provide us the assurance of lump sum funds for our and our familys future expenses. While providing an excellent savings tool for our short term and long term financial goals, these plans also assure our family a certain sum by way of an insurance cover. With HDFC Standard Lifes range of Saving & Investment Plans, we can therefore ensure that our family always remains financially independent, even if we are not around.

5. Childrens Plans Childrens Plans helps us save so that we could fulfill your childs dreams and aspirations. These plans go a long way in securing our childs future by financing the key milestones in their lives even if we are no longer around to oversee them. As a parent, we wish to provide our child with the very best that life offers, the best possible education, marriage and life style.

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Most of these goals have a price tag attached and unless we plan our finances carefully, we may not be able to provide the required economic support to our child when we need it the most. For example, with the high and rising costs of education, if we are not financially prepared, your child may miss an opportunity of a lifetime. Today, a 2-year MBA course at a premiere management institute would cost us nearly Rs. 3,00,000/- At a assumed 6% rate of inflation per annum, 20 years later, you would need almost Rs. 9,07,680/- to finance our child's MBA degree. To cope up with the future expenses on our childs education, Childrens Plans help us save steadily over the long term so that we can secure our childs future needs, be it higher education, marriage or anything else. A small sum invested by us regularly can help us build a decent corpus over a period of time and go a long way in providing our child a secured financial future.

Types of childrens plans:

Conventional Plans

Unit Linked Insurance Plans 1. HDFC Unit Linked Young Star II HDFC Unit Linked Young Star plus II HDFC Unit Linked Young Star Champion

HDFC Childrens Plan

2. 3.

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HDFC ERGO
HDFC ERGO General Insurance Company Limited is a 74:26 joint venture between HDFC Limited, Indias premier Housing Finance Institution & ERGO International AG, the primary insurance entity of Munich Re Group. HDFC ERGO focuses on providing the Right Insurance Solution for all. It offer its customers complete range of general insurance products ranging from Motor, Health, Travel, Home and Personal Accident in the retail space and customized products like Property, Marine and Liability Insurance in the corporate space.

It is their constant endeavor to improvise and cater to every need of the modern day customer with superior customer support service. This helps them give their customers a seamless and hassle-free experience.

HDFC ERGO has been expanding its presence across the country and is today present across 46 cities with 52 branch offices with an employee base of over 650 professionals. The company has a right balance of distribution channel comprising of Dealerships, Brokers, Retail and Corporate Agents, Banc assurance and Direct Sales Team.

Today, with assets worth more than Rs. 80,000 crores, a customer base of 32 lakhs and AAA rating for 13 consecutive years, the group has expanded into Banking, Insurance(life and General), Asset Management and Property Venture Funds. ERGO is primarily insurance entity of Munich Re Group, one of the worlds largest risk careers and the leader in health and legal protection insurance in Europe. Its investment total to cover 100

47

billion. Little wonder, 3.3 crore clients in 25 countries place their trust in the services, competence and security ERGO provides. With the coming of these two financial giants, India looks forward to see the business of General Insurance being redefined. At HDFC ERGO, aim is set to benchmark in their path in innovative products and delivering customer service. As part of their vision, it is their endeavor to be the most admired company by being responsive to the needs and putting their customers back in the path of progress when life surprises them with an unfortunate event.

HOME SURAKHSHA PLUS: It is a quadruple benefit plan, which protects us and our home against major incidences. The benefits include: 1. Package policy 2. Hassle free claims policy 3. No medicals/health check up required 4. Tax benefit under section 80D(on critical illness cover only)

KEY FEATURES: HOME SURAKHSHA PLUS protects our home in the event of any unfortunate and unforeseen event. It mitigates against any financial loss arising out of:

Critical illness

Personal accident

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Loss of job

Home insurance

KEY BENEFITS: Critical illness: Entire sum insured payable on the first diagnosis of any of the below mentioned 9 critical illness and procedures: A. Cancer B. Kidney Failure C. Multiple Sclerosis D. Major Organ Transplant E. Heart Valve Replacement F. Coronary Artery Bypass Graph G. Stroke H. Paralysis I. Myocardial Infarction- Heart Attack Personal Accident: Pays up to the entire sum insured, if bodily injury results in death or permanent disability due to an accident. A. Accidental death B. Permanent total disability (PTD)

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C. Dependant child education benefit: pays the sum insured towards dependant childrens education in the event of death of the insured due to accident resulting in death within 12 months of the Date of Loss. Loss of Job: Up to 3 EMIs payable in the event of termination from employment of of the insured by the employer. Home Insurance: Pays up to the sum insured in the event of loss or damage to the structure of the house due to fire and allied perils like natural calamities, earthquake, terrorism, burglary, housebreaking and theft.

HDFC ASSET MANAGEMENT COMPANY LIMITED

Objective: Carries on the business of management of assets of HDFC Mutual Fund HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000. The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400020. In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crore. The present equity shareholding pattern of the AMC is as follows:

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Particulars

% Of the paid up equity capital

Housing Development Finance Corporation Limited

60

Standard Life Investments Limited

40

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a review of its overall strategy, had decided to divest its Asset Management business in India. The AMC had entered into an agreement with ZIC to acquire the said business, subject to necessary regulatory approvals. On obtaining the regulatory approvals, the following Schemes of Zurich India Mutual Fund have migrated to HDFC Mutual Fund on June 19, 2003. These Schemes have been renamed as follows:
Former Name New Name

Zurich India Equity Fund

HDFC Equity Fund

Zurich India Prudence Fund

HDFC Prudence Fund

Zurich India Capital Builder Fund

HDFC Capital Builder Fund

Zurich India TaxSaver Fund

HDFC TaxSaver

Zurich India Top 200 Fund

HDFC Top 200 Fund

Zurich India High Interest Fund

HDFC High Interest Fund

Zurich India Liquidity Fund

HDFC Cash Management Fund

Zurich India Sovereign Gilt Fund

HDFC Sovereign Gilt Fund*

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The AMC is managing 24 open-ended schemes of the Mutual Fund viz. 1. 2. 3. 4. 5. 6. 7. 8. 9. HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund (HLF), HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund,

10. HDFC Floating Rate Income Fund (HFRIF), 11. HDFC Equity Fund (HEF), 12. HDFC Top 200 Fund (HT200), 13. HDFC Capital Builder Fund (HCBF), 14. HDFC TaxSaver (HTS), 15. HDFC Prudence Fund (HPF), 16. HDFC High Interest Fund (HHIF), 17. HDFC Cash Management Fund (HCMF), 18. HDFC MF Monthly Income Plan (HMIP), 19. HDFC Core & Satellite Fund (HCSF), 20. HDFC Multiple Yield Fund (HMYF), 21. HDFC Premier Multi-Cap Fund (HPMCF), 22. HDFC Multiple Yield Fund, 23. HDFC Quarterly Interval Fund (HQIF) and 24. HDFC Arbitrage Fund (HAF).

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The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund. Mutual fund products 1. Equity/ Growth Fund 2. Childrens Gift Fund 3. Fixed Maturity Plan 4. Liquid Funds 5. Debt/ Income Fund BOARD OF DIRCTOR CHAIRMAN: DEEPAK S. PAREKH DIRECTORS: Mr. Norman Keith Skeoch Mr. Mark Connolly Mr. Hoshang Billimoria Mr. P. M. Thampi Dr. Deepak B. Phatak Mr. Humayun Dhanrajgir Ms. Renu Sud Karnad Mr. Rajeshwar R. Bajaaj Mr. Keki M. Mistry Mr. Vijay Merchant MANAGING DIRECTOR: Mr. Milind Barve

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CURRENT MUTUAL FUNDS MARKET In March 2009, mutual funds were net sellers in equities to the tune of Rs 270.60 crore and net buyers in debt of Rs 702.20 crore, as per the Securities and Exchange Board of India (SEBI) data. However, select stocks such as HDFC Bank, State Bank of India, ITC, Larsen & Toubro and United Spirits saw sustained buying. The fund houses were mainly bullish on heavyweight stocks such as HDFC Bank and bought 4.34 million shares worth Rs 402.29 crore, followed by the State Bank of India (Rs 175.59 crore), ITC (Rs 169.71 crore), Larsen & Toubro (Rs 166.52 crore), United Spirits (Rs 163.36 crore). Fund managers said that banking stocks, which had taken a beating, were much sought after now. HDFC and SBI figured at the top in the sector. Mutual funds were net sellers in some stocks such as HDFC, Around 2.7 million shares of HDFC have been sold at Rs 361.15 crore, 1.94 million shares. Market experts believe that HDFC could post bad quarterly results and ICICI bank, investors are scared of bank liabilities.

HDFC SALES

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HDFC SALES acts as the distributor of home loans and other products

Objective: HDFC Sales is a wholly owned subsidiary of HDFC Ltd. The company has been floated as a distribution arm of HDFC with an objective of offering doorstep service to prospective clients of HDFC group.

HDFC Sales offers financial management solutions to individuals encompassing among other products Home Loans, Life Insurance, Mutual Funds, Fixed Deposits and property Solutions.

Home Loans: HDFC Sales is present in over 100 locations across the country with 55 offices and over 1750 employees.

Financial Management: HDFC Sales offers financial management solutions in 9 cities and is continuously expanding its reach. HDFC Sales employs sales persons across all spectrums of financial management enabling them to meet a range of financial needs.

HDFC Realty: HDFC Sales manages the HDFC Realty business, which offers property solutions buying, selling, leasing to Individuals and Corporate. HDFC Realty is present in all the major cities in India as well as in Dubai.

The company mirrors the philosophy and values of its parent, HDFC.

"HDFC's finest investment is in its Human Resources. It draws its personnel from many disciplines. They are the building blocks on which the company's performance & productivity is based". H T Parekh, Founder - Chairman, HDFC

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HDFC Sales values integrity, commitment, teamwork and excellence in customer service. Today the company have a highly motivated team of sales persons and that we have the lowest employee turnover rate in the Industry.

Even though the housing loan market was suffering from inadequate demand, India's leading mortgage lender, HDFC managed to post a more than expected growth of 20% during the last quarter of the previous fiscal. The net profits for the lender rose to Rs 733 crore against a net profit of Rs 609.5 crore, a year ago. HDFC's total income during the period under review increased by 36% to Rs 3,152 crore from Rs 2,318 crore a year earlier. Between January and March 2009, some house builders assured that they would pass on the future rate benefits to the customers, which helped HDFC to sell more loans at the back of increased sale of apartments. However for the entire fiscal, HDFC's net profit declined by 6% to Rs 2,282.5 crore from Rs 2,436 crore, a year ago. Last year HDFC's profits were increased by exceptional gains from stake sales in HDFC's BPO arm Intelnet, its life insurance arm HDFC Standard Life and its non-life subsidiary HDFC Ergo General Insurance. If these gains are excluded, HDFC's net profit for the year increased by 23%. Meanwhile Parekh said that the housing loan market, hit hard by a combination of factors including high interest rates, low loan availability and falling prices, saw some signs of improvement at the beginning of the new fiscal. The company was incorporated in 2004. It is a group company of HDFC ltd. The energetic and efficient sales team members consist of 10 20 employees working day and night for the company so that the customers doesnt feel dissatisfied with the services.

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CEO of HDFC SALES is Mr. Gautam Bhagat. Other directors include Ron Charles and Deepak Vasandani.

4.7 Products Offered by HDFC Ltd.

HOME LOANS DEPOSITS (FIXED DEPOSITS)

HOME LOANS Your HDFC HOME LOAN advantage Home Loan Counseling Sharing of over 30 years of home loan experience.

HDFC have been a part of a 30-year journey with our 26 Lakh customers. Their home loan counselors offer you the time-tested advice. Be it legal documentation, project or builder approvals, and technical advice, we look forward to sharing with you and this service is absolutely free. Their project approval facility provides our customers the comfort of purchasing properties from builders who have complied with all basic documentation. Doorstep office HDFC offers doorstep service. Customer could call HDFC Home Line for their Sales Executive to assist you or get in touch with the HDFC Office near you.

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They help you find our dream home We can buy, sell and lease residential or commercial properties through HDFC Realty. Wide Product Range HDFC provide loans to meet all our requirements for us to make that house a home. Home Loans, Home Improvement Loans, Home Extension Loans, and Loans to professionals for office or clinic, Home Equity Loans (Loan Against Property), Loan Against Rent receivables, Short Term Bridging Loan. Loans are available at: 1. Adjustable Rates and Fixed Rate. 2. 2-in-1 Home Loans

Multiple Repayment Option Step Up Repayment Facility Helps young executives take a much bigger loan today based on an increase in their future income, this helps executives buy a bigger home today. Flexible Loan installments Plan Often customers, parents and their children, wish to purchase properties together. The parent is nearing retirement and their children have just started working. This option helps such customers combine the incomes and take a long-term home loan where in the installment reduces upon retirement of the earning parent. Tranche Based EMI

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Customers purchasing an under construction property need to pay interest (on the loan amount drawn based on level of construction) till the property is ready. To help customer save this interest, HDFC have introduced a special facility of tranche Based EMI. Customers can fix the installments they wish to pay till the property is ready. The minimum amount payable is the interest on the loan amount drawn. Anything over and above the interest paid by the customer goes towards Principal repayment. The customer benefits by starting EMI and hence repays the loan faster Accelerated Repayment Scheme Accelerated Repayment Scheme offers you a great opportunity to repay the loan faster by increasing the EMI. Whenever you get an increment, increase in your disposable income or have lump sum funds for loan prepayment, you can benefit by: 1. Increase in EMI means faster loan repayment 2. Saving of interest because of faster loan repayment 3. You can invest lump sum funds rather than use it for loan prepayment. The return from the investments also gives you the comfort of paying the increased EMI. Wide network of financing With over 200 offices, 90 outreach programs - HDFC is able to provide home loans in over 2400 locations in India. We can apply at our local HDFC office for properties in locations where they finance.

Balloon Payment

Balloon Payment is an augmentation tool offered by the financial institutions, which helps in increasing the loan eligibility of the customer without increasing the EMI by assigning securities like National Savings Certificate (NSC), LIC policies etc. The

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present value of the maturity amount of assigned securities is combined with the loan amount to arrive at the enhanced loan eligibility. Under this facility, the EMI is calculated on the net loan amount (i.e. total loan less the present value of the maturity value of the securities).

Home Loan Tenure

Home loan tenures fixed by RBI are available up to a term of 15 years. Some financial institutions have home loan tenures in the range extending up to 20, 25 and 30 years if the applicant fulfils certain criteria. However, you cannot opt for a term that extends beyond your attaining retirement age or 60 years of age (whichever is earlier).

Home loan Tenure:

Type of property Residential Plot of land Against existing plot of land

Salaried 15 10 15

Self Employed 10 10 10

Current Rates of Interests of HDFC Home Loans

Status of earning Salaried / professional Rates of interest 9.25

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Self-employed

9.50

Loan Repayment 1. ECS facility 2. Post dated cheques 3. Loan repayment at any HDFC offices

HOME LOANS PRODUCTS HOME LOANS FOR INDIVIDUALS: HDFC offers us Loans for Homes for buying and constructing home, refinance a home loan availed from other institutions or even to extend or improve our existing home. HDFC also finance purchase of land, from approved agencies to help us constructing a home of our choice. We could also acquire a self-contained flat in an existing or even a proposed cooperative society, in an apartment owners association or even an independent single-family or a multi-family bungalow or a row house. We can avail of a maximum of up to 85% of the cost of property, including the cost of land. Fees and charges: a one time fee of 1% is payable on the loan amount applied for. HDFC offers us the option to switch between two schemes for EMI payments: 1. 2. FIXED RATE HOME LOANS (FRHL) ADJUSTABLE RATE HOME LOANS (ARHL) HOME IMPROVEMENT LOAN:

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HDFCs home improvement facility helps us undertake internal and external repairs. Any improvement that will increase the life of our home, contribute toward a healthy living, at the same time, add the value of our home could be financed under this scheme. Improvements are like: external repairs, waterproofing and roofing, internal and external painting, plumbing and electrical works, tiling and flooring, grills and aluminium works.

HOME EXTENSION LOAN: Once there is a home for us to live in is made, there is always room for extension

especially with growing families. HDFC Home Extension Loan is designed to meet this requirement. Such an extension could be additional room on the same floor, an extra room on the terrace, or even enclosing an opening balcony. TOP UP LOANS: HDFCs top up loan is a wonderful opportunity to cash in on the value or worth of your property by providing funds without selling it. All existing customers who have a good repayment record and have repaying the loan for at least one year are eligible for this facility. Non-resident Indians cannot avail of the top up plan. HOME EQUITY LOAN This loan facility is for those individuals who are not the existing customers of HDFC. This loan is only for personal usage.

OTHER INNOVATIVE LOANS:

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NON-RESIDENTIAL PREMISES LOANS: These are loans exclusively for professional

for constructions, purchase and extension or renovation of their office or clinic. Under this type of loan a maximum amount of up to 85% of the cost of construction, purchase or extension, whichever is lower is provided for a maximum period of 15 years.

SHORT TERM BRIDGING LOAN: With this loan we can have convenience of moving

out of our present house and buy a bigger and better house even before selling the present house.

HOME CONVERSION LOAN: We can avail HCL to acquire another dwelling unit. The

existing loan can be transferred to the new dwelling unit with an increase in loan amount based on current eligibility.

LAND PURCHASE LOANS: It is a convenient facility to purchase land.

Tax benefits

There are certain tax benefits for the resident Indians based on the principal and interest component of a loan under the Income Tax Act, 1961. It may help one get tax benefit up to Rs. 50,490 p.a. (approx). If interest repayment of Rs. 1,50,000 p.a. is paid. In addition to this, one also is eligible for getting tax benefits under section 80C on repayment of Rs. 1, 00,000 p.a. that further reduces the tax liability by Rs.33.660 p.a.

These deductions are available to assess, who have taken a loan to either buy or build a house, under Section 24(b). However, interest on borrowed capital is deductible up to Rs 150,000 if the following conditions are fulfilled:

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Capital is borrowed for acquiring or constructing a property on or after April 1, 1999. The acquisition and construction should be completed within 3 years from the end of the

financial year in which capital was borrowed. The person, extending the loan, certifies that such interest is payable in respect of the amount

advanced for acquisition or construction of the house A loan for refinance of the principle amount outstanding under an earlier loan taken for such

acquisition or construction.

If the conditions stated above are not fulfilled, then the interest on borrowed capital is deductible up to Rs 30,000 though the following conditions have to be satisfied.

Capital is borrowed before April 1, 1999 for purchase, construction, reconstruction repairs or

renewal of a house property. Capital should be borrowed on or after April 1, 1999 for reconstruction, repairs or renewals

of a house property. If the capital is borrowed on or after April 1, 1999, but construction is not completed within 3

years from the end of the year, in which capital is borrowed.

In addition to the above, principal repayment of the loan/capital borrowed is eligible

for a deduction of up to Rs 100,000 under Section 80C from assessment year 2006-07. Terms and conditions for availing Tax benefits on Home Loans

1.

Tax deductions can be claimed on housing loan interest payments, subject to an upper limit of

Rs 150,000 for a financial year. 2. An additional loan for extension/improvement to the same house and the individual's

deductions on the existing loan are less than Rs 150,000; he can claim further benefits from the additional loan taken, subject to the upper limit of Rs 150,000 for a financial year.

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3.

Tax benefits under Section 24 and deduction under section 80C of the Income Tax Act can be

claimed only when the payment is made. If an individual fails to make EMI payments, he cannot claim tax benefits for the same. 4. 5. According to the Income Tax Act, the loan applicant can only claim tax rebates. The interest on home loans taken for repairs, renewals or reconstruction, also qualifies for

the deduction of Rs 150,000. 6. A husband and wife, both of whom are taxpayers with independent income sources, get tax

deduction benefits, with respect to the same housing loan, to the extent of the amount of loan taken in their own respective name.

Documentation

Documentation refers to the specific documents to be submitted by Resident Indians as they apply for home loan. These documents are very much necessary for the financial institutions to avoid any dispute and uncertainty. The documents to be provided by the resident Indians include income proof, property documents and personal identification documents, etc., which of course varies, based on the borrowers financial status and the type of loan you want to avail. And of course every resident Indian should follow some eligibility criteria before apply Home Loans in India.

However, there are some standard documents made mandatory for a loan applicant to produce such as the loan applicant's profile, earning life of the applicant and present financial status proof etc.

List of Documents needed for availing home loan

For salaried individuals:

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1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Salary slip 3 months Form 16 Income tax return Updated Salary Bank statements last 1 year Investment details (NSC/FD/KVP/RD) Pan card Address proof Photos 4 Sale deed Khasra/ Khatauni Agreement to sell ADA map submission receipt ADA Sanction map ADA Permission letter Actual map Actual estimate Seller bank account Seller ID proof Seller photo 2 Processing fees (@ 0.5% of loan amount + 12.30% service tax) Legal fees (= Rs. 1500-2500)

For self employed individuals or businessmen

1. 2. 3.

Application form with photograph Identity and Residence Proof Proof of business existence.

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4. 5. 6. 7. 8. 9.

Education Qualifications Certificate Last 3 years Income Tax returns (self and business) Business profile Bank statements (last 6 months) Last 3 years Profit /Loss a/c and Balance Sheet Computation of income

Proof of Individual's Identity (any one of the following)

Passport Photo PAN Card Defense Identity Card Voter's Identity Card Driving License Photo Ration Card Government Identity Card

Proof of Residence (any one of the following)

Passport Ration Card Telephone (Land/Mobile) Bill Electricity Bill Driving License Voter's Identity Card Life Insurance Policy

Only Passport can be used as both Proof of Individual's Identity and Proof of Residence. 67

Proof of Age (any one of the following)

Passport Valid Driving License Voter's Identity Card Birth Certificate School leaving certificate LIC Policy or Premium Receipt clearly indicating the applicant's age Letter from the employer stating the age of the employee Photo Ration Card

What is an EMI?

EMI (Equated Monthly Installment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of a portion of the interest as well as the principal.

How is an EMI calculated?

EMI Formula: l x r [(1+r) n /(1+r) n-1] x 1/12

l = loan amount r = rate of interest n = term of the loan

NON-PERFORMNG ASSETS

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Those borrowers, who are the defaulters, since they are not repaying their EMIs consistently and regularly against the borrowed amount constitutes non-performing assets or simply NPA. NPA is calculated as: Total principal outstanding of loans with EMI outstanding greater than 2 months

X 100

NPA =

Total principal outstanding of all loans

It has been seen that NPA is least for HDFC of 0.81%, which stood at 0.84% last year between all major HFCs. DEPOSITS SCHEMES HDFC comes with a brilliant Premium Deposits schemes as under:

Annual income plan Periods (months) Rate of interest (% p.a.) Individuals 30 45 8.75 8.6 Senior citizens 9 8.85 Maximum deposit without TDS (Rs) Individuals 57000 58000 Senior Citizens 55000 56000

Maximum deposit amount: Rs 20000

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Monthly income plan Periods (months) Rate of interest (% p.a.) Individuals 15 30 45 8.20 8.45 8.30 Senior citizens 8.45 8.70 8.55 Maximum deposit without TDS (Rs) Individuals 60000 59000 60000 Senior Citizens 59000 57000 58000

Maximum deposit amount: Rs 40000

Non cumulative quarterly options Periods (months) Rate of interest (% p.a.) Individuals 15 30 45 8.25 8.50 8.35 Senior citizens 8.50 8.75 8.60 Maximum deposit without TDS (Rs) Individuals 60000 58000 59000 Senior Citizens 58000 57000 58000

Maximum deposit amount: Rs 20000

Non cumulative half yearly option

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Periods (months)

Rate of interest (% p.a.) Individuals Senior citizens 8.55 8.80 8.60

Maximum deposit without TDS (Rs) Individuals 60000 58000 59000 Senior Citizens 58000 57000 57000

15 30 45

8.30 8.55 8.40

Maximum deposit amount: Rs 20000

Cumulative option Periods (months) Rate of interest (% p.a.) Individuals 15 30 45 8.50 8.75 8.60 Senior citizens 8.75 9 8.85 Maximum deposit without TDS (Rs) Individuals 57000 50000 46000 Senior Citizens 55000 58000 44000

Maximum deposit amount: Rs 20000

At these rates a depositor can earn maximum interests. The interest is credited to the depositors account with ECS facility. Variable Rate Deposits HDFC has instituted well-defined service standards for both depositors and deposit agents. HDFC has been able to mobilize deposits from over 10 lac depositors. Outstanding

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deposits grew from Rs. 1,458 crores in March 1994 to 11,278 crores in March 2008. Much of this success can be attributed to its strong brand image, superior services, security and above all, the significant contribution made by HDFC's deposit agents. HDFC has over 50,000 deposit agents and distributes all its retail savings (deposit) products primarily through this channel. Benefits of an HDFC Individual Deposit:

Highest Safety: 'FAAA' and 'MAAA' rating affirmed for the fourteenth

consecutive year by CRISIL and ICRA respectively.

Tax Benefits: TDS: No tax deduction at source on interest from deposits up

to Rs. 5,000/- per branch in a Financial Year.

Attractive Returns: HDFC deposits are Available throughout the year and

offer Attractive, Assured returns to investors. Interest rates offered are higher than that offered by most of the commercial banks.

Quick Loan Facility: Loan against deposit is available after 3 months from

the date of deposit up to 75% of the deposit amount subject to the other terms and conditions framed by HDFC. Interest on such loans will be 2% above the deposit rate.

Nomination Facility: Individual depositors, singly or jointly, can nominate

under this facility. In case the deposit is placed in the name of a minor only a person lawfully entitled to act on behalf of the minor can make the nomination. Power of attorney holder or any person acting in representative capacity as holder of an office or otherwise cannot nominate. The nominee shall have the right to receive the amount due in respect of deposit on death of all the depositors and payment by HDFC to the nominee shall constitute full discharge to HDFC of its liability in respect of the deposit.

Demand Draft Facility: Outstation depositors can send demand drafts after

deducting demand draft charges. This facility is not available to investors under Easyway

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Savings. This facility is applicable for places where HDFC does not have an office.

High Service Standards: Depositors are offered across the counter services

for new deposits, renewals, repayments and loan against deposit facility. Further, all enquiries through email, post, telephone and in person are attended to immediately.

Electronic Clearing Service: This facility is provided to depositors in

selected centers whereby the interest will be credited directly to the depositors' bank account. The depositor would receive a credit entry "ECS HDFC" in his passbook/bank statement. Intimation of interest credited would be sent on an annual basis. Your bank will not levy any charge for this facility as per present RBI guidelines.

4.8 Housing Finance based Products offered by STATE BANK OF INDIA

SBI Home Loans "THE MOST PREFERRED HOME LOAN PROVIDER" voted in AWAAZ Consumer Awards along with the MOST PREFERRED BANK AWARD in a survey conducted by TV 18 in 21 cities across India. SBI HOME LOANS now offers Interest Rates concessions on GREEN HOMES in accordance with SBI's commitment to Environment protection. SBI Home Loans stands on the solid foundation of trust and transparency built in the tradition of State Bank of India.

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Best Practices followed in SBI mentioned below would tell why it makes sense to do business with State Bank of India. Unique features: * Provision for on the spot "In principle" approval. * Loan sanctioned within 6 days of submission of required documents. * Option to avail Home Loan as a Term Loan or as an Overdraft facility to save on interest and maximise gains. * Option to club income of your spouse and children to compute eligible loan amount. * Provision to club depreciation, expected rent accruals from property proposed to compute eligible loan amount. * Provision to finance cost of furnishing and consumer durables as part of project cost. * Repayment permitted up to 70 years of age. * Free personal accident insurance cover up to Rs.40 Lac. * Optional Group Insurance from SBI Life at concessional premium. * Interest calculated on daily reducing balance basis, and starts from the date of disbursement. Plus schemes which offer attractive packages with concessional interest rates to Govt. Employees, Teachers, Employees in Public Sector Oil Companies. * Special scheme to grant loans to finance Earnest Money Deposits to be paid to Urban Development Authority/ Housing Board, etc. in respect of allotment of sites/

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house/ flat * Option to avail loan at the place of employment or at the place of construction
Package of exclusive benefits:
Complimentary international ATM-Debit card Complimentary SBI Classic/ International Credit Card. Option for internet-banking Concessional package under Credit Khazana for prospective Auto Loan, Student Loan,

Personal Loan borrowers whose accounts are conducted satisfactorily

50% concession in charges in respect of all personal remittances/ collection of outstation

cheques.

Personal loan at attractive rates under SBI Home Plus scheme tailored exclusively for SBI Home Loan customers.

Purpose 1. Purchase/ Construction of House/ Flat 2. Purchase of a plot of land for construction of House 3. Extension/ repair/ renovation/ alteration of an existing House/ Flat 4. Purchase of Furnishings and Consumer Durables as a part of the project cost. 5. Takeover of an existing loan from other Banks/ Housing Finance Companies.

Eligibility Minimum age 18 years as on the date of sanction

Maximum age limit for a Home Loan borrower is fixed at 70 years, i.e. the age by which the loan should be fully repaid.

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 Availability of sufficient, regular and continuous source of income for servicing the loan repayment.

Loan Amount
40 to 60 times of NMI, depending on repayment capacity as % of NMI as under
Net Annual Income Up to Rs.2 lacs Above Rs.2 lac to Rs. 5 lacs Above Rs. 5 lacs EMI/NMI Ratio 40% 50% 55%

To enhance loan eligibility borrower have option to add: 1. Income of his/her spouse/ his son/ daughter living with you, provided they have a steady income and his/ her salary account is maintained with SBI. 2. Expected rent accruals (less taxes, cess, etc.) if the house/ flat being purchased is proposed to be rented out. 3. Depreciation, subject to some conditions. 4. Regular income from all sources. 0.50% of Loan amount with a cap of Rs.10,000/-(including Service Tax) Pre-closure Penalty No penalty if the loan is preclosed from own savings/windfall gains for which documentary evidence is produced by the customer. In case, the borrower does not produce such proof, penalty @2% on the amount prepaid in excess of normal EMI dues shall be levied if the loan is preclosed within 3

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years from the date of commencement of repayment. Security

Mortgage of the property Other tangible security of adequate value like NSCs, Life Insurance policies etc., if the property cannot be mortgaged

Maximum Repayment Period

For applicants up to 45 years of age: 25 years For applicants over 45 years of age: 15 years

Moratorium Up to 18 months from the date of disbursement of first installment or 2 months after final disbursement in respect of loans for construction of new house/ flat (moratorium period will be included in the maximum repayment period).

Disbursement
In lump sum direct in favour of the builder/ seller in respect of outright purchase

In stages depending upon the actual progress of work in respect of construction of house/ flat etc.

Documents required:
1. Completed application form 2. Passport size photograph

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3. Proof of Identity PAN Card/ Voters ID/ Passport/ Driving

License

4. Proof of Residence Recent Telephone Bill/ Electricity Bill/ Property tax receipt/ Passport/ Voters ID 5. Proof of business address in respect of businessmen/ industrialists 6. Sale Deed, Agreement of Sale, Letter of Allotment, Non encumbrance certificate, Land/ Building Tax paid receipt etc. (as applicable and subject to satisfaction report from our empanelled lawyer) 7. Copy of approved plan and approval from the Local Body

8. Statement of Bank Account/ Pass Book for last 6 months SBI-Flexi Home Loans A customized product designed to enable borrowers to hedge their Home Loan against unfavourable movement in interest rates. The product gives you a one time irrevocable option to choose one of the three customized combinations of fixed and floating interest rates and also to choose the order in which the fixed and floating rate will be availed. Minimum Loan Amount: Rs.5 lacs SBI-Maxgain Home Loans An innovative and customer-friendly product to enable you to earn optimal yield on your savings and minimize interest burden on Home Loans, with no extra cost. The loan is granted as an Overdraft facility with the added flexibility for you to operate your Home Loan Account like your SB or Current Account. The product serves to minimize your interest cost by enabling you to park

78

your surplus funds in SBI-Maxgain (with the benefit to withdraw the surplus funds whenever you require), especially in the wake of low yields from other deposit/ investment avenues. Minimum Loan Amount: Rs.5 lacs SBI-Realty Home Loans A unique product if you are on the look out for a loan to purchase a plot of land for house construction. The loan is available for a maximum amount of Rs.1 crore and with a comfortable repayment period of up to 25 years. You are also eligible to avail another Housing Loan for construction of house on the plot financed above with the benefit of running both the loans concurrently. (House construction should commence within 2 years from the date of availment of SBI-Realty Housing Loan) SBI-Freedom Home Loans A revolutionary product designed for customers who are on the look out for a source of finance for a property they want to invest in without mortgaging the same. All you have to do is pledge any financial security that you have and you will get a Home Loan for your dream home.

A must-take for those who do not want to pay stamp duty for mortgage of their property or go through the hassles of creation of mortgage.

Repayment is highly customized, giving us the option to repay through regular EMIs or through maturity proceeds of the securities pledged.

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SBI-OPTIMA ADDITIONAL HOME LOANS & SBI-HOMELINE

SPECIAL PERSONAL LOANS Innovative and value added products extended to existing Home loan borrowers with a satisfactory repayment record of 3 years and whose loan is Standard Asset, with a view to reinforce the customer loyalty and to maintain long term relationship with the borrowers. In case of take-over of Home Loans from other Banks/HFCs, the borrower should have fulfilled the above conditions with the present Bank/HFC. Purpose SBI-Optima Additional Home Loans To meet expenditure towards major repair, renovation, addition to their house/flat, purchase of furniture, fixtures and consumer durables SBI-Homeline Special Personal Loans General purpose loan to meet expenditure to meet foreseen/ unforeseen contingencies Eligibility SBI-Optima Additional Home Loans: 18 times NMI (for salaried borrowers)/ 1 times NAI (for others) or (i) 25% of the original project cost of house/flat (ii) 85% of the cost of repairs etc. or (iii) gap between 85% of the current market price of flat/house and actual outstanding loan dues , whichever is lower (EMI/NMI ratio of all loans should not exceed 60%) SBI-Homeline Special Personal Loans:

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18 times NMI (for salaried borrowers)/ 1 times NAI (for others) Other Salient Features
Inbuilt provision for availment of the loans on the expiry of each bloc of 5 years, the first

bloc commencing on the expiry of 5 years from the date of sanction of original Home Loan.
Original Home Loan and all SBI-Optima Home Loans/SBI-HomeLine Personal Loans

can run concurrently

Comfortable repayment obligations Tenure of the loans equal to the residual maturity of

the original Home Loans. PRASHASAN PLUS, TEACHER PLUS AND OIL PLUS The above plus schemes offer concessional interest rate of 0.25% below the applicable interest rates on Home Loans to niche client groups like Government Employees, Teachers, employees of public sector oil companies etc. SBI Special Home Loan Scheme For Loans up to Rs.5 Lac 8.5% p.a. fixed rate with reset every 5 years from the date of disbursement of first installment. For Loans above Rs.5 Lac and up to Rs.20 Lacs 9.25% p.a. fixed rate with reset every 5 years from the date of disbursement of first installment.

SBI Happy-Home Loan Offer for new loans sanctioned on or after 2nd February 2009 and at least partially disbursed on or before 30th April 2009 Interest rate 8% p.a. (Frozen) for a period of one year.

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Interest rate will be reset after one year as per contracted rate at the time of sanction of loan as underInterest Rates w.e.f. 01.01.2009 a) Floating Rates linked to SBAR SBAR w.e.f. 01.01.2009 = 12.25 % p.a. Loans (i.e. Sanctioned limits) up to Rs.30 Lac

Loan amount

Loan Tenure ->

Up to 5 Yrs

Above 5 Yrs & up to 15 Yrs

Above 15 Yrs & up to 25 Yrs 1.75% below SBAR

Linkage with SBAR in the loan document

2.25% below SBAR,

2.00 below SBAR

Loans up to Rs.30 lacs for new loans sanctioned on or after 01.01.2009

Special product level discount that may be withdrawn/revised solely at the discretion of the Bank.

0.25%

0.25%

0.25%

Effective Rate

9.75% p.a.

10.00% p.a.

10.25% p.a.

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Loans (i.e. Sanctioned limits) above Rs.30 Lacs and up to Rs.75 Lacs
Loan Tenure -> Linkage with SBAR Above Rs.30 lacs and up to Rs.75 Lacs w.e.f. 01.01.2009 Effective rate 10.25%p.a. 10.50% p.a. 10.75% p.a. 2.00% below SBAR Up to 5 Yrs Above 5 Yrs & up to 15 Yrs 1.75% SBAR below Above 15 Yrs & up to 25 Yrs 1.50% SBAR below

Loans (i.e. Sanctioned limits) above Rs.75 Lacs

Linkage SBAR Above Rs.75 Lacs w.e.f. 01.01.2009 Effective rate 10.25% p.a. 10.50% p.a. 11.00% p.a. with 2.00% SBAR below 1.75% SBAR below 1.25% SBAR below

b) Fixed rates - Re-payment Up to 10 Years (w.e.f. 01.01.2009): Fixed rates (interest rate reset at the end of every two years on the basis of fixed interest rates prevailing at that time)
Up to Rs. 30 Lacs 11.25% p.a.

Above Rs. 30 Lacs

12.25% p.a.

d) Other Home Loans Schemes:

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'SBI Gram Niwas' Rural Home Loans, Home Loans under 'Prashasan Plus', 'Teacher Plus' and 'Oil Plus: 10 bps below applicable card rates for the respective tenures (fixed rate loans only up to 10 years and interest rate reset at the end of every two year on the basis of fixed interest rates prevailing then). Following rebates will be applicable on the above-mentioned rates: (i) Risk Based Discount: up to 0.25% (ii) Loans to customers who maintain their salary accounts with us: 0.10% (iii) Loans for purchase of dwelling units in Green Houses rated by approved agencies: 0.10%

e) SBI Life-style Loan (only for existing Home Loan borrowers) (w.e.f.2nd February 2009) 8% p.a.

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5. ABOUT RESEARCH
5.1 Research

Research is defined as human activity based on intellectual application in the investigation of matter. The primary purpose for applied research is discovering, interpreting, and the development of methods and systems for the advancement of human knowledge on a wide variety of scientific matters of our world and the universe.

5.2 Types of research

1. Exploratory research, which structures and identifies new problems 2. Constructive research, which develops solutions to a problem 3. Empirical research, which tests the feasibility of a solution using empirical evidence Exploratory research is a type of research conducted because a problem has not been clearly defined. Exploratory research helps determine the best research design, data collection method and selection of subjects. Given its fundamental nature, exploratory research often concludes that a perceived problem does not actually exist. Constructive research is perhaps the most common computer science research method. This type of approach demands a form of validation that doesnt need to be quite as empirically based as in other types of research like exploratory research.

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Empirical research is any research that bases its findings on direct or indirect observation as its test of reality. Such research may also be conducted according to hypothetico-deductive procedures. Advantages of questionnaire method: Versatility: Probably the greatest advantage of the questionnaire method is its versatility. Almost every problem of marketing research can be approached from the questionnaire standpoint. Many problems can be studied by questioning. Knowledge options, motivations, and intentions are usually not open to observation. Similarly, it is not mean that the questionnaire method can be used satisfactorily to solve all marketing problems. It can be used however, to get some data relative to most problems. Speed and cost: questioning is usually faster and cheaper than observing. Interviewers have more control over their data gathering activities than do observers. As a result less time is typically wasted in a questionnaire study.

Disadvantages of questionnaire method: 1. Unwillingness of respondent to provide information 2. Inability of respondent to provide information 3. Influence of questioning process Advantages of observation method : 1. If the researcher observes and records event, it is not necessary to rely on the willingness and the ability of respondent to report accurately . 2. The biasing effect of interviewers or their phrasing of questions is either eliminated or reduced

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3. Data collected by observation are, therefore, more objective and generally more accurate. Disadvantage of observation method : 1. Inability to observe such thing as attitude, motivations and plans. 2. There are something that can observed but respondents cannot report that with any accuracy. Tone of voice, nervous habits , and spatial relationship interpersonal encounters are examples of things of which most people are too unaware to report accurately, but which can be observed. 3. Observational data are more expensive to obtain than a survey data.

6. RESEARCH METHODOLOGY
Primary data has been collected for the research study in Allahabad, India. The major reason for choosing Allahabad is its demographic outlook (which includes both educated and uneducated, peoples from different parts of the country) and Allahabad being considered as one of the important cities of India. The research design involves descriptive style. Secondary data has been collected for the study of recent trends in mortgage market. The sample size was 30 and the sampling technique used is convenience sampling. The research instrument used was questionnaire and it comprises both open and close-ended questions. Personal interview has been conducted among the target respondents.

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88

6.1 Questionnaire

Name . Age . Profession Contact number

1. What is the your status of earning? i. Salaried ii. Self-employed iii. Professional

2. What is your annual income? i. Up to 1 lac

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ii. Between 1 lac to 2 lacs iii. Between 2 lacs to 3 lacs iv. Between 3 lacs to 5 lacs v. Above 5 lacs

3. What is the most important that you need from the housing finance company to do for you? (rank from 1 to 4) i. Services ii. Timely disbursal of loan iii. Transparency iv. Information

4. Are you satisfied with the services of your housing finance company? i. Totally satisfied ii. Satisfied iii. Totally dissatisfied iv. Dissatisfied v. Cant say

5. If not, then please tell us the major cause of your dissatisfaction

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i.

Behavior of the staff

ii. Hidden charges iii. High Rates of interests iv. Untimely disbursal of loan v. False commitments

Any other (which is not described in the above list):

6. Which housing finance company have you applied for availing loan? i. Housing Finance Company Limited (HDFC) ii. State Bank of India iii. Others

7. For how many years have you been the customer of your preferred company? i. Below 1 year ii. 1 year to 5 years iii. More than 5 years

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8. How do you feel that the staffs behaved with you? i. Excellent

ii. Very Good iii. Good iv. Average v. Bad

9. Do you have any suggestions for the housing finance companies? It will of great help for us to provide the service to meet your standard.

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6.2 Limitations of the study

The research suffers from the following limitations:

Chances of respondents' bias are involved in the research. As the research is restricted with major housing finance institutions in Allahabad, Uttar Pradesh, which may not represent the whole sector of India, the results are not applicable to other parts of the State or country. Limited number of respondents has been chosen due to time constraint and this could affect the accuracy of result to certain extent. Size of the sample is 30, which is, of course, small in comparison to population of borrowers world. There can be many interpretations and explanation to the data collected. This is empirical study and the research provides the explanation as understood by the researcher only.

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6.3 Data Analysis and Statistical Analysis

People with age more than 30 years were preferred for the survey that preferred different financial institutions. Their preference in different institutions was due to the differences in the products and services in them. Based on the survey of the sample population, following interpretations were made:

1. Status of Earning:

Status

No. of respondents

Salaried

16

Self employed

Professional

Total

30

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Out of the total number of population surveyed 53% were salaried; 30% were self-employed and 17% were professionals.

2. Annual income of the respondents:

Annual income

No. of respondent

Up to 1 lac

Between 1 lac to 2 lacs

Between 2 lacs to 3 lacs

Between 3 lacs to 5 lacs

10

Above 5 lacs

95

Total

30

annual income

7% 23% Up to 1 lac Between 1 lac to 2 lacs Between 2 lacs to 3 lacs Between 3 lacs to 5 lacs Above 5 lacs

33%

10%

27%

Out of the total population of borrowers 33% earned an annual income between 3 to 5 lacs and 27%, 23%, 10% and 7% of the borrowers earned between 2 to 3 lacs, up to 1 lac, 1 to 2 lacs and above 5 lacs respectively.

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3. Ranks of customers preference with respect of their needs:

Needs of a customer

Respondent of HDFC

Respondent of SBI

Overall needs

Service

Rank I

Rank II

Rank I

Timely disbursal of loan

Rank III

Rank IV

Rank III

Transparency

Rank II

Rank III

Rank II

Information

Rank IV

Rank I

Rank II

After the survey it was found that respondents of HDFC have put service, transparency, timely disbursal of loan and information at ranks 1, 2, 3 and 4 respectively and respondents of SBI have put them ranks 2, 3, 4 and 1 respectively. After calculating the overall needs services have been at the top priority, each of transparency and information second and timely disbursal at third rank.

4. Satisfaction level of the customers with the services of their preferred HFCs:

HDFC Customer satisfaction level No. of respondent % of total No. of

SBI Total No. of % of total Others respondents

respondent

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Totally satisfied

10

33%

10%

13

Satisfied

13%

10%

Totally 0 dissatisfied 0 2 6% 0 2

Dissatisfied Cant say

17%

3%

Total

15

50%

13

43.3%

30

customers satisfaction
10 9 8 7 6 5 4 3 2 1 0

satisfaction level

HDFC SBI Others

Totally dissatisfied

Dissatisfied

Totally satisfied

banking institutions

After the survey conducted it was found that out of the total borrowers of HDFC, 33% said that they were totally satisfied, 13% were satisfied and 3% were not sure about their satisfaction.

Satisfied

Cant say

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Out of the total borrowers of SBI, 10% were totally satisfied, 10% satisfied, 17% and 6% were dissatisfied and totally dissatisfied respectively.

customer satisfaction

10% 17% 43%

7%

Totally satisfied Satisfied Totally dissatisfied Dissatisfied Cant say

23%

From the above pie chart it can be interpreted that 43%, 23%, 17%, 10%, 7% of the total population surveyed were totally satisfied, satisfied, dissatisfied, couldnt say and totally dissatisfied respectively.

5. Major cause of dissatisfaction of borrowers:

HDFC Major cause of dissatisfaction No. of respondent % of population No. of respondent

SBI Total No. of % of population Others respondents

Behavior of staff

6.66%

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Hidden charges

10%

High rates of 1 interests 3.33% 0 0 1 2

Untimely disbursal 0 of loan 0 1 3.33% 1 2

Large 0 Documentation 0 1 3.33% 0 1

False 0 commitments 0 0 0 0 0

Total

3.33%

23.31%

10

causes of dissatisfaction
3
no. of respondents

2.5 2 1.5 1 0.5

High rates of interests Untimely disbursal of loan Behavior of staff Documentation False commitments

HDFC SBI Others

Hidden charges

major causes

When asked about the reasons of dissatisfaction it was found that among the population of borrowers in HDFC, 3.33% of the total population was dissatisfied because of high rates of interests. And among the

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borrowers of SBI, 10% of the total population were dissatisfied because of hidden charges, 6.66% and 3.33% were dissatisfied since the behavior of staff and each of untimely disbursal of loans and discouraging documentations procedures in banks.

cause of dissatisfaction

10%

0%

20% Behavior of staff Hidden charges High rates of interests Untimely disbursal of loan Documentation False commitments 30%

20%

20%

Out of the total population of sample borrowers 30% said hidden charges was their major cause of dissatisfaction while 20% each of untimely disbursal of loans, high rates of interests and behavior of staff and 10% due to documentation procedures and no one due to false commitments.

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6. Companies from which customers have applied for housing loan:

Name of the company

No. of respondents

HDFC

15

SBI

13

Others

Total

30

banks

Other

bank

SBI

13

HDFC

15

10

12

14

16

No. of re spondents

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15 borrowers were banking with HDFC, 13 with SBI and 2 banked with other institutions like Bank of Baroda and PNB.

7. Period of time the customers continuing with the preferred HFCs:

Time period

No. of respondents

Below 1 year

Between 1 to 5 years

14

More than 5 years

Total

30

banking years

More than 5 years

years

Between 1 to 5 years

14

Below 1 year

10

12

14

16

No. of respondents

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Out of the people surveyed 14 were continuing banking since 1 to 5 years, 8 respondents each banked since 1 year and more than 5 years respectively.

8. Behavior of staff towards the customers:

HDFC Behavior of staff

SBI Others Total

No. of respondent

% of total HDFC

No. of respondent

% of total SBI

Excellent

10

66.66%

20%

14

Very good

20%

20%

Good

13.33%

6.66%

Average

30%

Bad

13.33%

Total

15

100%

13

100%

30

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behavior of staff
10 9 8 7 6 5 4 3 2 1 0

no. of respondents

HDFC SBI Others

Excellent

Average

Very good

behavior

When asked about the behavior of staff they deal with in the banks between HDFC, 66.66% feel that it is excellent, 20% said its very good and 13% said that its good. When asked from the customers of SBI, nearly 20% scaled it for excellent and very good, 13% said it was bad, approx 30% said its average 7% scaled it as good.

Good

Bad

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behavior of staff

7% 13%

47% 10%

Excellent Very good Good Average Bad

23%

Out of the total population surveyed 47% said behavior of staff was excellent, 23%, 13%, 10%, 7% scaled it was very good average, good and bad respectively.

6.4 COMPARATIVE ANALYSIS

Comparing mortgage based products of HDFC and SBI

CRITERIA PROCESSING TIME LOAN COVER

HDFC 25 to 26 days 85% 6 days 85%

SBI

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PROCESSING FEES LOAN FOR PENSIONERS TIME TAKEN FOR LEGAL AND TECHNICAL FORMALITIES

1% of loan amount No

0.5% of the loan amount No

45 hrs.

3-4 days

Orientation towards customer BEST FEATURE satisfaction 1. Home Improvement Loan 2. Home Extension Loan 3. Home Equity Loan 4. Top Up Loans 5. Non Residential Premises loans 6. Short term Bridging loan HOME LOAN PRODUCTS 7. Home Conversion loan 8. Land Purchase loan

Free personal accident insurance 1. SBI- Flexi home loans 2. SBI- Maxgain home loans 3. SBI-Reality home loans 4. SBI Freedom home loans 5. SBI-Optima additional home loans 6. SBI-Homeline special personal loans 7. Prashashan Plus, Teacher plus, Oil plus home loans 8. SBI-Happy home loan 9. SBI-Gram Niwas home loans 10. SBI Life-style home

loans RATE SPREAD 13.75% 12.25%

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RPLR 4.50% HOME LOAN RATES FLOATING RATES (P.A.) up to 5 years 9.25% 5 to 15 years 15 to 25 years FIXED RATES (P.A.) DOCUMENTS REQUIRED MAX REPAYMENT 20 years PERIOD NPA 0.81% 11% same in both institutions

SBAR 1.752.25%

up to 30 lacs 9.75% 10% 10.25% 11.25%

above 30 lacs 10.25% 10.50% 10.75% 12.25%

15-25 years

12%

6.5 FINDINGS

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 As HDFC boasts to be the oldest and have major market share of 50% of total home loan market in India, new entrants like SBI home loans, ICICI bank, LIC housing finance, PNB housing finance etc are giving HDFC a sharp competition. Customers prefer HDFC because of its quality service and put it at rank 1 of their needs and range of solutions in availing loans. HDFC also prefer and focuses on those prospective customers who have the least defaults case and with good credit, which makes the company less prone to non-performing assets. While most customers were asking for a better service in SBI, Rates of interests were the major cause of concern in HDFC in spite of tax benefits offered by government.

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6.6. SUGGESTIONS

As the customers of HDFC are asking to lower the current rates of interests, HDFC must come up with different alternative solutions or discounts to retain their customers so that they dont try to surrender their loan terms. Hidden charges are the biggest source of dissatisfaction of the borrowers of SBI bank. So it is advisable to SBI bank that it should disclose each and every fact to its borrowers before signing the loan agreement. Recently it came in the news that SBI is challenging HDFC and attracting the customers by charging them the least rates of interest, HDFC must promote for its best services and work in

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similar direction of discovering new ways of giving services and attractive offers like giving free insurance cover to the borrowers of home loans.

7. CONCLUSION

After the survey conducted on the sample borrowers it was found that the majority customers (46%) were totally satisfied with the services of HDFC and only a fewer percentage of borrowers (20%) were satisfied with the services of SBI. The major cause of dissatisfaction for the customers of SBI was the services, behavior of staffs and hidden charges while these were the strong points for the satisfaction of customers of HDFC.

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 66.6% of the borrowers of HDFC said the staffs have behaved excellently with them and the remaining 33% said they were very good while 46% of the borrowers with SBI said staff behaved very good to excellent and 13% said that staffs did not behaved well with them and 30% said it was average.

8. BIBLIOGRAPHY

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Books referred: 1. 2. Marketing management by Kotler Research methodology by C.R. Kothari.

Websites referred: 1. 2. 3. 4. www.google.com www.wikipedia.com www.yahoo.com www.businesswireindia.com (Referred May 10, 2009 press release by HDFC) 5. 6. www.mydigitalfc.com (Referred May 6, 2009, My Money blog) www.hdfc.com

Magazines referred: 1. India today magazine (December 2000 issue).

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ANNEXURE

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