A PROJECT REPORT ON

“A STUDY ON CUSTOMER SATISFACTION TOWARDS HOUSING LOAN

FACILITIES PROVIDED BY PUBLIC SECTORS AND PRIATE SECTOR”.

A project submitted to

University of Mumbai for partial completion of the degree of

Bachelor in Commerce (Banking and Insurance) under the faculty
of Commerce
By
Miss. Sumita Rajan

Under the Guidance of

(Mrs Vijayalakshmi Yadav)

N.E.S RATNAM COLLEGE OF ARTS, SCIENCE & COMMERCE

NES COMPLEX, NES MARG, BHANDUP (W), MUMBAI-400078
ACADEMIC YEAR 2023-24

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 A PROJECT REPORT ON

“A STUDY ON CUSTOMER SATISFACTION TOWARDS HOUSING LOAN

FACILITIES PROVIDED BY PUBLIC SECTORS AND PRIATE SECTOR”.

A project submitted to

University of Mumbai for partial completion of the degree of

Bachelor in Commerce (Banking and Insurance) under the faculty
of Commerce
By
Miss. Sumita Rajan

Under the Guidance of

(Mrs Vijayalakshmi Yadav)

N.E.S RATNAM COLLEGE OF ARTS, SCIENCE & COMMERCE

NES COMPLEX, NES MARG, BHANDUP (W), MUMBAI-400078
ACADEMIC YEAR 2023-24

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 Declaration by learner

I the undersigned Miss. Sumita Rajan here by, declare that the work
embodied in this project work titled “A STUDY ON CUSTOMER
SATISFACTION TOWARDS HOUSING LOAN FACILITIES
PROVIDED BY PUBLIC SECTOR AND PRIVATE SECTOR " , forms
my own contribution to the research work carried out under the
guidance of Mrs. Vijayalakshmi Yadav mam is a result of my own
research work and has not been previously submitted to any other
University for any other Degree/ Diploma to this or any other
University.
Wherever reference has been made to previous works of others, it has
been clearly indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

Name and Signature of the learner

Certified by
Mrs. Vijayalakshmi Yadav

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 Acknowledgmen
t
To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance
to do this project.
I would like to thank my Principal, Dr. ( Mrs.) Vinita Dhulia_for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank our Programme Incharge Mr. Rajiv Mishra_for
his moral support and guidance.
I would also like to express my sincere gratitude towards my project guide
Mrs. Vijayalakshmi Yadav _ whose guidance and care made the project
successful.
I would like to thank my College Library. For having provided various
reference books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers
who supported me throughout my project.

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 A STUDY ON CUSTOMER SATISFACTION
TOWARDS HOUSING LOAN FACILITIES PROVIDED
BY PUBLIC SECTOR AND PRIVATE SECTOR

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 SR. PARTICULARS Pg.
NO No
1
7
Introduction
2
Literature Review 40
3
41
Research Methodology
4
Data Analysis & Findings 42

5
Findings & conclusion 59

6
Biblography & Webilography 64

7 Annexure 65

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INTRODUCTION-
India’s banking sector is constantly growing; there has been a noticeable change in
transactions through ATMs, and also internet and mobile banking. Following the passing of
the Banking Laws (Amendment) Bill by the Indian Parliament in 2012, the landscape of the
banking industry began to change. The bill allows the Reserve Bank of India (RBI) to make
final guidelines on issuing new licenses, which could lead to increase the banks in the
country. Some banks have already received licenses from the government, and the RBI's
new norms will provide incentives to banks to spot bad loans and take requisite action to
keep rogue borrowers in check. Over the next decade, the banking sector is projected to
create up to two million new jobs, driven by the efforts of the RBI and the Government of
India to integrate financial services into rural areas. Also, the traditional way of operations
will slowly give way to modern technology. Home is the most important human need, next
onlyto food, clothing and shelter.

Home is an important facet of economic development; it is a basic need of a human being.

It is a place where everyone can relax after returning home from day’s tiring work. It is a
place where everyone can give time to his/her family and spend beautiful moments with
family members. It is a fundamental demand for living and one of the keys to peace and
happiness. Every creature yearns for a home. The first and the best training ground for
humanbeings’ development of their varied facilities is home. It constitutes a very
significant part of the social and physical environment where the individuals grow and
mature as good citizens. It also plays an important role in creating employment,
maintaining health, social stability and preserving decent human life.

Definition of Home:-

“Home is the social unit formed by a family living together.”

– Merrian
Webster Dictionary

“Home is the place where your parents live and where you grow up”

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by customers while availing home loan. For this purpose we have taken four commercial
banks in Nagpur city namely SBI, BOI, HDFC Bank and ICICI Bank. It includes two
public sector banks and two private sector banks. In the research methodology a sample
size of 200 respondents has been taken through random sampling. For the study we have
collected both primary data as well as secondary data. Finally the whole research was
carried out in a systematic way to reach at exact result. The whole research and findings
were based on the objectives.

A home loan is a long term commitment which is critical. The demand for home loans has
increased manifold in the last decade. The reason for this growth is not hard to see,
changing mindset with globalization and integration with the developed economies, where
mortgages rule the roost, income tax sops in the Union Budgets and substantial rise in the
income- generating capacity of Indian youth. So, the present scenario of home loans shows
good amount of growth and is heading for a bright future. There are number of banks and
housing finance companies offering cheap home loans at a low interest rate. The home loan
schemes offered by both public and private sector banks are very competitive. Mostly
people prefers public sector banks for home loans, especially because they believe that it is
more secure bank and interest rate is lower. On the other hand the private sector banks are
coming daily in our country and the preference of younger population is changing because
of services & facilities provided by them. And the most important thing is that the customer
should know about each and every term related with Home Loans before applying for a
Loan. There are different types of home loans tailored to meet customer needs like Home
Purchase Loans, Home Improvement Loans, Home Construction Loans, Home Extension
Loans, Home Conversion Loans, Land Purchase Loans; Bridge Loans &Mortgage Loans
offered by public and private sector banks.

History of banks: -

In India, the banking system is as old as early Vedic period. The bookof Manu contains
reference regarding deposits advances, pledge policy ofloan, and rate of interest. From the
beginning of 20th century banking has beenso developed that in fact, has come to be called
“LIFE BLOOD” of trade andIn India, banking has developed from the primitive stage to
the modernsystem of banking in a fashion that has no parallel in the world history.With the
dawn of independence, changes of vast magnitude have takenplace in India. After
independence India launched a process of plannedeconomic activity in order to overcome
the multitude of
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problems it faced as an underdeveloped nation. The increasing tempo of economic activity
tremendous increase in the volume and complexity of banking activity. Therefore, the role
of banks has had to expand at a fast pace.2As engines of development and vehicle of silent
Socio-economic revolution in the country, Indian banks have assumed new responsibilities
in the fields of geographical expansion, functional diversification and personal portfolio.
Indian banking transformed itself from ‘Class banking to Mass banking’ The banking
system, the most dominant segment of financial sector, accounts for over 80% of the funds
flowing through the financial sector.4A banking sector performs three Primary functions in
an economy: The operation of the payment system, the mobilization of savings and the
allocation of savings to investment projects. By allocating capital to the highest value use
while limiting the risk and cost involved, the banking sector can exert a positive influence
on the overall economy, and thus of broad macroeconomic the origin of the Indian banking
industry may be traced to the establishment of bank of Bengal in Calcutta (now Kolkata) in
1786. The growth of banking industry in India may be studied in terms of two broad
phases. Pre-independence (1786-1947) and post-independence (1947 till date). The Post-
independence phase may be further divided into three subphases such as pre-nationalization
period (1947-1969) Post nationalization period (1969 to 1991) and post-liberalization
period (1991 till date).

Pre-Independence Era: -
At the end of late 18th Century, there were hardly any bank in India in the modern sense of
the term’ banks. Some banks were opened at that time which functions as entities to finance
industry, including speculative trade. With the large exposure to speculative ventures, most
of the banks opened in India during that period could not survive and failed. The depositors
lost money and lost interest in keeping deposits with the bank. Subsequently, banking in
India remain the exclusive domain of Europeans for the next several decades until the
beginning of 20th Century. At the beginning of 20th Century, the Indian Economy was
passing through a relative period of stability. Around five decades have elapsed since the
India’s first war of Indian independence and the social, industrial and other infrastructure
have developed. At that time there were very small banks operated by Indians and most of
them were owned and operated by particular community. The banking in India was
controlled and dominated by the presidency banks, namely, The bank of Bombay, The bank
of Bengal and the bank of Madras-which later on merged to form the imperial bank of
India.

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The objectives of banks in the colonial era were mainly helping the colonial rulers in
raising the resources for their empire building activities and facilitating training activities of
the numerically small mercantile. India has a long history of both public and private
banking. Modern banking in India began in the 18th century, with the founding of the
English Agency House in Calcutta and Bombay. In the first half of the 19th Century.
Three presidency banks were founded. After the 1860 introduction of limited liability,
private banks began to appear and foreign banks entered into the markets. The beginning
ofthe 20th Century saw the introduction of Joint stock banks. In 1935, the presidency banks
were merged together to form the Imperial Bank of India, which was subsequently
renamedthe State Bank of India. Also, that year, India’s Central Bank, The Reserve Bank of
India beganoperation6.When India emerged as an independent nation, it inherited a war-
torn economy be devilled by shortage of food grains, unemployment and the pangs of
partition. The banking system, with shareholder orientation, was not well-organized. The
banks till then were discharging the functions of a traditional financial intermediary. To
reorient them as instruments of economic change
was indeed a stupendous task considering the narrow objective adopted by the banks at the
time of Indian independence7

Post-Independence era: -
With the dawn of Independence changes of vast magnitude have taken place in India. At
the time of Independence in 1947, the banking system in India was fairly well developed
with over 600 commercial banks operating in the country. However soon after
independence, the view that the banks from the colonial heritage were biased in favour of
working capital loans for trade and large firms and against extending credit to small scale
enterprises, agriculture and commoners, gained prominence. To ensure better coverage of
banking needs of larger parts of economy and the rural constituencies, the Government of
India nationalized the Imperial bank which was established in1921 and transformed it into
the State Bank of India with effect from 1955.8Despite the progress in 1950s and 1960s, it
was felt that the creation of Sbi not far reaching enough since the banking needs of small-
scale industries and the agricultural structure was still not covered sufficiently. This was
partially due to the existing close ties commercial and industry houses maintained with the
established commercial banks, which give them an advantage in obtaining credit.9
Additionally, there was a perception that banks should play a more prominent rule in
India’s development strategy by mobilizing resources for sectors that were seen as crucial
for economic expansion.. As a

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 result, the policy of social control over banks was announced. Its aim was to cause changes
in the management and distribution of credit by commercial banks.

Functions of bank: - Banks act as intermediaries between those who have surplus
money and those who need it. To receive deposits and to advance loans are thus the two
main functions of all commercial banks. In short, they borrow to lend. They borrow in the
form of deposits and lend in various forms of advances. Besides, there are other incidental
functions which have developed according to the needs of society. Some of the most
essential functions are

Functions of banks

Exchange of goods Diversification and

Mobilising savings Giving loans Creating deposits Remitting funds
and services management risk

Mobilising savings:
Financial system mobilizes saving from many diverse individuals and invest in project
which enables economic growth.
Facilitating the exchange of goods and service: -
A financial system facilitates transaction in the economy, by providing the mechanism to
make and receive payment.
Facilitating trading diversification and management of risks:
Financial system helps to manage risk with individual firm by investing in a diversified
portfolio of innovative projects.

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Giving Loans:
But receiving of deposits is not the whole story about a bank’s functions. If that were so,
how could a bank pay interest? Hence, after collecting money by way of deposits, a bank
invests it or lends it out. Money is lent to businessmen and traders usually for short periods
only. This is so because the bank must keep itself ready to meet the demands of the

depositors, who have deposited money for short periods.

By Creating a Deposit: -
Cash credit is another way of lending by the banks. When a person wants a loan from a
bank, he has to satisfy the. manager about his ability to repay, the soundness of the venture
and his honesty of purpose. In addition, the bank may require a tangible security, or it may
be satisfied with the borrower’s personal security. Usually, such security is accepted as can
be easily disposed of in the market, e.g., government securities or shares of approved
concerns. Then details about time and rate of interest are settled and the loan is advanced.
Aborrower rarely wants to draw the whole amount of his loan in cash. Usually, he opens a
current account with that amount the bank, if he already has not got an account with this
bank. Now it is exactly as if that sum had been deposited by him. This is how a deposit is
‘created’ by a bank. That is why it is said “every loan creates a deposit.” A cheque book is
given to the borrower with the right to draw cheques up to the full amount of the loan, but
interest is charged on the whole sum even though only a part is withdrawn. After the
period,for which the money has been borrowed, is over, the borrower returns the amount
with interest to the bank. Banks make most of their profits thus by giving loans.
Remitting Funds:
Banks remit funds-for their customers through bank draft to any place where they have
branches or agencies. This is the cheapest way of sending money. It is also quite safe.

Funds can also be remitted to foreign countries.

Providing Locker Facilities:

Implies that commercial banks provide locker facilities to its customers for safe keeping of
jeweler, shares, debentures, and other valuable items. This minimizes the risk of loss due to

theft at homes.

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Discounting of Bill:
Discounting of bill is a process of settling the bill of exchange by the bank at a value less
than the face value before maturity date. According to Sec. 126 of Negotiable Instruments,
“a bill of exchange is an unconditional order in writing addressed by one person to another,
signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at fixed or determinable future time a sum certain in money to order or to
bearer.”

The facility of discounting of bill is used by the organizations to meet their

immediate need of cash for settling down current liabilities.

Types of banks: -
There are two types of banks 1. Private sector banks .2. Public sector banks

Types of banks

Public banks Private banks

Nationalized banks are also known as public sector banks. A nationalized bank is formed
by taking a bank and its assets into the public ownership. The national government of the
country holds the ownership of nationalized banks. In nationalized banks the government
controls the bank. This could refer to taking control of the public shares, change in
management and new corporate strategy. Government carries out nationalization in order to
meet certain goals like:-
1. To bring the regional equality.
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2. To expand the spectrum of banking facilities in a uniform manner.
3. To provide banking facility in less developed regions.
4. Nationalization sought to find the monopoly control of big industrialists on the system.
5. It aimed at giving more credit to sectors that required to be prioritized.
6. To raise the confidence of public in banking system
7. It aims at generating enough funds that can be utilized in various development schemes
for the country. Types of nationalised banks are as follows

Names of

Syndicate Corporation
Dena bank UCO bank bank India bank Canara bank

Private sector banks are owned by the private lenders. The private banks are also managed
and controlled by private promoters and these promoters are free to operate according to the
market forces. The interest rates of private banks are costly as compared to public sector
banks. Banking has been originated in the form of private banking an individual or in
partnership. The second type includes incorporated banks that are specialized in wealth
management especially for high net-worth individuals and are supposed to be the first
banks that were formed to manage the finances of the wealthy families. Generally, the
private banks are looked as a large organization with global operations. These banks are not
incorporated. In U.K. and Switzerland, these banks have been existing since a long time. A
private bank can also refer to a private sector bank or a bank that is not owned by the
government.

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 Names of
private banks

Bandhan
AXIS bank HDFC bank IDFC bank Yes bank Induslnd bank bank

Services offered by banks:-

Both the Private and Public banks offers different types of services to the customers they
are as follows.

SERVICES OFFERED
BY BANKS

Bank draft Bankers cheque

RTGS NEFT

Bank overdraft Cash credit

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1. Bank Draft:

Bank draft is a facility allowed to customers for sending money to other places. Generally,
banks allow this facility to the account holders only. When a customer wants to send money
to other places then he will have to fill a specific proforma for this purpose. The name of
the person/party to whom the amount is to be sent, the amount for which the draft is
required, the place for which the draft is required, bank charges are mentioned in the
proforma. The bank will issue a draft to the customer after debiting his account with the
said amount.

The customer will send the draft to the person/party to whom the money is to be paid. The
recipient of the draft will deposit the draft with his bank and the bank will credit the amount
to his account. The bank also sends an intimation to the branch where the draft is payable.
It is time-consuming process of transferring money and bank charges are also high on the
drafts.

2. Banker's Cheque:

Banker's cheque means pay order issued by bank itself withdrawing the amount from
payer's account. It will be safe for payee because it cannot bounce. It is also a method of
sending money by a bank. It is similar to that of draft. The banker issues a cheque in the
name of the party to whom the customer wants to make payment. The bank charges
commission for this service as is done for issuing a draft. A banker's cheque is generally
used for making local payments. The banker's cheque is paid at par.

3. RTGS (Real Time Gross Settlement):

It is a system to transfer funds from one bank to another bank on a 'real time' and 'gross
basis'. The settlement in 'real time' means payment transaction is not subjected to any
waitingperiod. The transaction is settled as soon as processed. 'Gross settlement' means the
transaction is settled on one to one basis, without bunching or netting with any other
transaction.

Once processed, the payment is final and irrevocable. This system of electronic transfer
takes place with the help of Central Bank of the country. The electronic payment system is
maintained or controlled by the Central Bank of the Country.

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In India, Reserve Bank of India (RBI, Central Bank of the Country) maintains this payment
network. RTGS is the fastest possible money transfer system. Core Banking enabled banks
and branches are assigned an Indian Financial System Code (IFSC) for RTGS and NEFT
purposes.

This is an eleven digit alphanumeric code and unique to each branch of bank. The first four
alphabets indicate the identity of the bank and remaining seven numerals indicate a single
branch. This code is provided on the cheque books which are required for transaction
along- with recipient's account number. Customers can access RTGS facility between 9
a.m. to 4.30
p.m. on week days and 9.30 a.m. to 1.30 p.m. on Saturday. This timing may also vary from
bank to bank, depending upon the timings of the branches.

4. NEFT (National Electronic Funds Transfer):

NEFT refers to an online system for transferring funds from one financial institution to
another within India. The system was launched in November 2005 and was to inherit every
bank that was assigned to the SEFT clearing system. There is no minimum or maximum
limit for fund transfer in NEFT system. The persons or parties which have bank accounts,
generally use this facility.

This facility is open even to those, who do not have bank account. The persons without
bank accounts can deposit cash at the NEFT-enabled branch with instructions to transfer
funds using NEFT. A separate Transaction Code (No. 50) has been allotted in the NEFT
system to facilitate walk-in-customers to deposit cash and transfer funds to the beneficiary.

Comparison between RTGS and NEFT:

(i) The main difference between the two is that RTGS is on gross settlement basis, NEFT is
on net settlement basis.

(ii) RTGS completes transactions in real-time while NEFT completes transactions in cycles.

(iii)The transfer in RTGS is completed on a one to one basis, while NEFT is on a deferred
net basis, where transfers are bundled and deferred for a specific time.

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(iv) RTGS is a high value transfer system, handling funds worth Rs, 1, 00,000 and above,
while NEFT transfers smaller amounts below Rs. 10,000.

5. Bank Overdraft:

An overdraft is an advance given by the bank allowing a customer to overdraw his current
account up to an agreed amount. An overdraft account is operated in the same way as a
current account. In overdraft the interest is charged on the credit actually utilised, i.e. to the
extent amount is overdrawn.Overdraft facility is widely used by the businessmen. They can
use more money than the credit amount in their account, and secondly, interest is paid only
on the amount actually withdrawn from the bank and not to the overdraft limit allowed by
the bank.

6. Cash-credit:

Under cash-credit a bank advances loans to the customer on the basis of his current assets,
receivables or fixed assets by hypothecating them in favour of the banker.

Basically, cash-credit differs from overdraft in two respects(1) security (2) duration

Generally, cash-credit is advanced against current assets and receivables, while overdraft is
allowed against negotiable security. Further, overdraft is, usually, a temporary facility,
while cash credit is relatively a long term facility. The rate of interest charged on overdraft
may be lower because of lesser risk and service cost.

Individual Banking—Banks typically offer a variety of services to assist individuals in

managing their finances, including:

 Checking accounts, Savings accounts, Debit & credit cards, Insurance, Wealth
management.
Business Banking—Most banks offer financialservicesforbusinessowners who need to
differentiate professional and personal finances. Different types of business banking
services include:
 Business loans, Checking accounts, Savings accounts, Debit and credit cards
Merchant services (credit card processing, reconciliation and reporting, check collection),
Cash management (payroll services, deposit services, etc.)

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Digital Banking—The ability to manage your finances online from your computer, tablet,
or smartphone is becoming more and more important to consumers. Banks will typically
offer digital banking services that include:
 Online, mobile, and tablet banking, Mobile check deposit, Text alerts, E Statements,
Online bill pay.

History of loan
The term loan is a type of debt. Like all debt instruments, a loan entails the redistribution of
financial assets over time, between the lender and the borrower. In a loan the borrower
initially receives an amount of money called the principal amount. The amount of money is
paid back in regular instalments or partial repayment on an annual basis each instalment
being of the same amount.
There is no certainty about how the loans started, but one can easily assume that ever since
the concept of ownership came into existence people have been practicing lending and
borrowing. Various forms of lending are found to be existing in ancient Greek and Roman
times and even the bible mentioned monetary loan. However the modern history of loan
started much later. In the history of loans the “Indentured loan” was one of the earliest
forms of lending which was practiced in the middle ages till the 19 th century by the land
owners and rich people who allowed poor people in need of money to borrow in exchange
of indentured servitude. The borrower had to work for several years to clear their debt.
They had no rights and were considered by many rich people as “Slave labour”. However
money lenders played an important part in the history of loans and both the English word
“Bank “ and “Bankrupt” have origin in the Italian money lenders.

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Types of loan:-

Both the private and public sector banks offer different types of loan some of them are as
follow:-

Personal
loan

Education Home
loan
Types loan

of loan
Bussines
Car loan
loan

1. Personal loan: -This loan can be availed to meet the expenses related to marriages,
travel, honeymoon, holiday, and medical expenditure or for any other personal use .It is
also available to pensioners, defense pensioners. As the name suggests, loans received as
personal could be utilized by the recipient for any requirement. For example – marriage,
home improvement, travel or any miscellaneous expenses. The interest rate is highest for
this category of loan.
2. Home loan: - IT is usually taken for a very long duration. It is a life time dream of every
individual to have his/her own house. It is a primary human need next in importance only to
food and clothing however, is a major expenditure and cannot be funded out of a family’s
normal monthly income or saving. A home loan is based on mortgage and is like any other
loan which is offered to a borrower against a security. In case of home loan security is the
home loan is offered to a borrower to purchase or to build a new house on the basis of
his/her eligibility and the bank’s lending rules. Normally, 80% of property value is granted
as the loan amount. in exceptional cases, it can reach to 85-90% also. According to
National

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Association of Home Builders, the housing industry as a whole contributes about 17% to
18% of the nation’s GDP. Home loan is the funds buyers have to borrow usually from a
bank or other financial institution to purchase property. Generally secured by a registered
mortgage to the bank over the property being purchased.
3. Car loan: - For those individuals who prefer to travel more conservatively or to get to
their destination faster, a two wheeler is as much faster. With newer models coming out
each year the options available to the customers are both attractive as well as convenient.
All resident Indians, salaried people, professionals, and self- employed businessmen and
framers can apply for this loan. These days’ automobile companies have ventured into
finance by setting up separate subsidiary companies solely for this purpose. They are able
to offer the best interest rates often with zero interest rate schemes. They usually undercut
any bank’s finance terms since they are able to eat into their profit margin on the
underlying vehicle.
4. Education loan: - Education is the most important investment one can make in
life.Higher studies and specialization in certain fields call for additional financial support
from time to time. Just like personal loans, the rate of interest is really high for this
category. However the big advantage here is that most banks will give you a grace period
before your EMI’s or repayment terms start. The grace period takes into account the
duration for which your education lasts i.e. repayment starts once you complete your
education and get into job market.
5. Business loan: - Again, the interest rate is really high for this category mostly because of
the risk involved. Business loan facility enables individuals, proprietorships such as
partnership firms and co-operative societies to avail of working capital or undertake
development of shops or by way of loan / overdraft. The loan is provided against the
security of tangible collateral securities in the form of mortgage land and building.

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Types of home loan:-

Types of home
loan

Home Home extention Home purchase

improvement loan Stamp duty loan NRI home loan
loan loan

1. Home loan for improvement: - These loans are given for implementing repair work
and renovation in a home that has already been purchased by the customer. It may be
requested for external works like structural repairs, waterproofing or internal works like
tiling and flooring, plumbing, electrical work and painting etc
2. Home extension loan: - Home extension loans are given for expanding or extending an
existing home. For example addition of an extra room. For this kind of loan, customer
needs to have requisite approvals from the relevant municipal corporations.
3. Home purchase loan:- These are the basic home loans for the purchase of a new house.
These loans are given for purchase of a new or already built flat / bungalow / row-house.
4. Stamp duty: -These loans are sanctioned to pay the stamp duty amount that needs to be
paid on the purchase of property.
5. NRI home loan: -This is a special home scheme for the non-resident Indians (NRI) who
wishes to build or buys a home or land property in India. They are offered attractive
housing finance plans with suitable reimbursement option by many banks in the country.
6. Land purchase loan: - Land purchase loans are available for purchase of land for both
home construction or investment purposes. Therefore, customers can grant this loan even if
customer is not planning to construct any building on it in the near future. However,
customer has to complete construction within tenure of three years on the same land.

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7. Home construction loan: - These loans are available for the construction of a new
home. These documents required by the banks or banks granting customer a home
construction loan is slightly different from the home purchase loans.

Advantages of home loan

The various benefits of home loans arising to the customers are:-

(1) Attractive interest rate:-

The various banks over attractive interest rates to boost and help their customers. Many
banks provide loans on fixed or fluctuating rate to facilitate customers as per their needs.

(2) Help in owing a home:-

The home availed by a person with the help of bank because,they provide technical and
financial assistance to customer for owing their dream house.

(3) Capital Appreciation:-

For each one of us who has seen property prices boom over the last five years, the
prospect of mouth-watering capital appreciation is the biggest argument for buying a home.
Construction costs alone, which account for more than 70 per cent of the flat's cost, have
risen at 15 per cent annually in the past decade. Rents too seem to keep up with inflation;
making a home one of the few investments can shield you from inflation for the long term.

(4) Tax benefit on home loan:-

Your home loan principal and interest repayment fetch you attractive tax breaks. And
remember, renting actually is more expensive than just the rent you pay. Your cost is higher
since you are not earning any interest on the deposit amount paid to the landlord (which is
quite high in premium locations) throughout the lease term.

(5) Loan period:-

There are many banks which provide maximum loan tenure of 15-20 years based on the
loan amount and creditability of the customers .This relives the customers to repay loan
amount till a long period.

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Dis-advantages of home loan:-

(1) Delay in processing: -

Many times, there are huge delay in processing of providing home loan because various
formulations to be fulfilled in these processes. Due to these delay customers fell mentally
and financially weak.
(2) Problem of disbursement:
There are many problems in home loan disbursement amount. There are some delays in
disbursement of loan amount to the customers due to legal formalities. This causes
problems to the customers.
(3) High cost:-
The public sector bank charges high processing fees for home loan sanctioning. They are
force to pay serious charges at various stage to fulfil their requirements. Some customers
are not able to pay such charges so such people cannot avail the benefits of home loan.
(4)Fluctuating interest rates:-
Some banks give home loan at floating rates which fluctuates at different interval due to
some reasons. This changes may some time lead to increase in interest rate which will
increase the cost of home loans to the customers.

Security required for home loan:-

1. A simple registered mortgage which is taken as a security against the loan.
2. In case of jointly owned properties it should be ensured that all the co-owners and co-
applicant execute their documents.
3. In case of flat of a group housing society triparilite agreement shall be entered into.

Charges of home loan:-

Obtaining a home loan involves different types of fees charged on it like processing fees,
administration fees etc.
1. Processing fees: - it is a fees payable at a time of submitting loan application to the bank
which is normally non-refundable.
2. Repayment penalties: - when the borrower re-pays the loan before the loan tenure bank
charges a penalty which is normally 1%.

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3. Delay payment charges: - when there is delay in payment of the EMI bank charges takes
payment fees to the borrower.
4. Cheque bounce charges: - when there is a lack of fund in your account than the bank
charges about 250 to 500 rupees penalty.

EMI (Equated Monthly Installments)

When customer takes a loan, he has not only to pay back the amount of money he has
borrowed, but also the cost of borrowing, which is the interest rate on the loan. The cost of
the loan will vary depending upon the number of years. Customer’s are borrowing for,
usually, a longer-term loan which will be more expensive, than a shorter loan, because
simply put, the lending institution has taken a risk, over a longer period of time. An EMI's
amount is dependent on the principal amount borrowed and the interest that is levied. The
number of EMIs on the other hand, will be dependent on the tenure of the loan. The longer
the loan period, the more number of EMIs customer needs to pay. The EMI usually
remainsconstant throughout the period of the loan. However, what of this is used to pay off
interestand what part to pay off the principal varies. In the beginning of the loan repayment
period,the interest component of an EMI is higher and the principal amount is lower. Later
on, as the years go by, the principal amount becomes higher and the interest becomes
lower.

Calculation of EMI
An EMI can be calculated on a daily reducing, monthly reducing, quarterly reducing, and
half yearly or yearly reducing basis. The EMI will be lowest, if it is calculated on a daily
reducing basis.
Daily Reducing Basis: Even better than a monthly reducing calculation is a daily reducing
method, which some banks apply.
Monthly Reducing Balance: Now, let us take a real life example of an EMI calculated on
a monthly basis. Keeping the loan amount at ` 1 Lakh the period as 15 years and the rate of
interest as 12%, the bank will change the principal outstanding every month. After the
customers pay their EMI for the month, the new reduced amount will be calculated only for
the next month. Similarly, in a quarterly, half yearly or annual reducing balance the interest
is levied according to principal outstanding at the end of these periods. Progressively, the
EMI works out to be more, with the highest being in an annual reducing basis.
Computation of EMI is calculated with the help of the following formula:

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EMI = L×r×(1 + r)n/((1 + r)n - 1)
Where, L - Loan Amount
r - Rate of Interest in Decimals
n - Period of loan (in years).

Types of interest rates:-

There are two basic kinds of interest rates. Interest rate also called adjustable rate loan or
floating rate.

TYPES OF
INTEREST
RATES

Fixed Fluctuating
interest interest rate
rate

Fixed Rate: - The rate of interest is fixed either for the entire tenure of the loan or for a
certain part of the tenure of the loan. In case of a pure fixed rate loan, the EMI remains
fixed for the entire duration irrespective of whether the bank increases or reduces its
interest rates and irrespective of RBI mandated changes in interest rates. If interest rates
move up over the years, a fixed rate EMI becomes very attractive as you pay far lower than
the market rate. The interest rate cannot be changed during the loan tenure period. This is
known as a fixed home loan rate. The interest rate remains constant during the whole loan
repayment period.

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Fixed interest rates for mortgage are normally higher than a floating home loan rate and
here the borrower should repay the loan amount in equal EMIs.

The main advantage of having a fixed interest rate is in spite of any changes occurring or a
sudden rise of interest rates for mortgage in the market, the borrower can pay the same
EMIs until the loan is paid off. These types of interest rates benefit people who wish to
repay the equal EMI payments and plan their financial future accordingly in order to
achieve financial security. When planning your finances for your new home, don’t forget
house insurance. You can also take out refinancing loans with fixed rates.

Besides the advantages there are also disadvantages of choosing a fixed interest rate. The
borrower will generally have to pay 1.5% to 2% more interest than they would on a floating
home loan. Due to the market fluctuations, if there are any decreases in the bank house
loans interest rates then the borrowers who preferred fixed interest rates would not get any
chance of decreasing their EMIs.

Fluctuating Rate: - As the name suggests, the floating rate of interest varies with market
conditions. EMI of a floating rate loan changes with RBI mandated changes in interest rates
(and with changes in bank’s internal interest rate) from time to time. If market rates
increase, your repayment increases. When rates fall, your dues also fall. This type of
interestrate can change or fluctuate during the loan tenure period and it is known as a
floating homeloan rate. It is also known as an adjustable interest rate or variable interest
rate.

A floating home loan rate will depend on the market and economical conditions of the
country. If there is a sudden change in the market and the interest rates increase, it affects
the borrowers who chose to pay floating interest rates. The floating interest rates and the
EMIs will be lowered in case there the interest rates in the market are decreased. This
productoffers a lower interest rate than fixed interest rate loans. You can also apply for a
refinancinghome loan with a floating rate plan.

When a borrower chooses to take floating home loan rates, they will see a sudden change in
the market, i.e. if there is a hike in the interest rates, the borrower has two options:

• To increase the EMI payment and keep the tenure constant

• To increase the tenure period and keep the EMIs constant.

For instance, if the borrower chooses the first option, then they should spend more on EMIs
following the market conditions where the bank house loans tenure will be constant. If the

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borrower chooses the second option, then there will be no change in EMIs but the bank
house

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loan tenure will increase and it will result in a longer loan repayment period. In both cases,
the borrower will pay more from their pockets. We recommend that you use our loans
calculator to calculate the monthly instalments. With adjustable rate mortgages, borrowers
who might have planned to clear their loan amount could deal with difficulties due to the
rise of interest rates for mortgage. Some banks also call these adjustable rate home loans.
Here the interest rate is linked to a benchmark rate. Some banks use their prime lending
ratesas the benchmark rate while some banks have specific benchmark rates that they use
for home loan purposes. Typically, the interest rate applicable to customer loan tends to be
a certain percentage below this benchmark rate. (This is the current trend. Nothing stops the
bank from having a low benchmark rate and quoting the applicable interest rate as a certain
percentage above the benchmark rate. In fact this is the trend worldwide.) The benchmark
rate of a bank called Retail Prime Lending Rate (RPLR) by the bank) or BPLR (Base
PrimeLending Rate) is 10.25% per annum. The bank may currently quote the interest rate
for a twenty-year home loan at 2% below its RPLR. Therefore, the rate applicable for
customer loan currently becomes 8.25% per annum (which is 2% less than 10.25%). The
applicable interest rate for customer loan will henceforth be governed by the movement in
the RPLR. If RPLR goes up, the applicable interest rate on customer loan will go up and
similarly, the applicable interest rate will go down if the RPLR goes down.

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 Steps involved in taking home loan:-

1. Application Form

Filling up the application form is the first step towards the home loan. The look of
application form may differ from bank to bank, but nearly 80 per cent of the information
they need is similar. Most of this pertains to customer’s personal and professional
information, details of customer financial assets and liabilities and the details of the
property (if finalized) including the estimated cost and the means of financing the same.
While submitting the application form, each bank would ask for documents to establish
customer income. This will need to be backed up by proofs such as copies of last three
years’ income tax returns (along with copies of computation of income / annual accounts, if
any), Form 16 / Form 16A, last three months’ salary slips and copies of the last six months’
statements of all customer active bank accounts in which customer salary / business income
details are reflected. Along with the application form and the credit documents, banks will
charge processing fee. This fee varies from bank to bank, but is usually around 1 to 2 per
cent of the total loan amount. Most banks have flexible fee structures, and it is advisable
that customer negotiate hard to find out the bank’s minimum fees though it is unlikely that
a bank will agree to provide a loan without any upfront fee at all. Some banks have zero
upfront- fee loans but that advantage may be negated as their other charges such as ‘legal
charges’ and stamp duty’ are normally higher. The bank statements are scrutinized for:
 Level of Activity
In case of self-employed persons, this gives information about the extent of their
business activities.
 Average Bank Balance
A customer relation is to be established with the bank after scrutinizing average bank
balance maintained in a savings bank account speaks volumes about the spending and
saving habits of any individual.
 Cheque Returns
A small charge debited by customer bank in the statement indicates that a cheque issued by
customer was returned by customer bank. Many such returns can have a negative impact on
customer loan sanction.

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  Cheque Bounces
Cheque deposited by customer are returned by the issuer’s bank they will be visible in
customer bank statement and banks have specific norms as to how many such returns are
acceptable in a period of one year.
 Regular Periodic Payments
The existence of periodic payments to other finance companies/banks indicates an existing
liability and customer will need to provide full details to the lender.
 Customer Age
Proof of customer age, such as, license / passport / ration card / PAN card / Election
Identity Card will need to be submitted.
 Identification Proof
Same as above but with customer photograph. Sometimes the same document, if it contains
a photograph, the current residential address and the correct age can be the proof for all
three things.
 Customer Employment Details
If Customer Company is not well known, then a short summary about the nature of the
company, its business lines, its main customers, its competitors, number of offices, number
of employees, its turnover and profits may be needed. Usually the company profile that is
available on the standard website of the company is enough.
 Customer Investments
This helps the bank to estimate customer ability to pay for the down payment as well as
customer savings habit.
2. Personal Discussion
Some banks insist on meeting customer after receiving the application form, and before the
loan sanction, together more details about customer that may not be mentioned in the
application form.
If the bank calls customer for personal discussion (this is normally to reassure
them of customer repayment capacity) make sure customer carry all the original documents
pertaining to the information provided on the application form. Banks process loans only
after they are convinced favorably about customer.
3. Bank’s Field Investigation
Every bank validates customer information, including customer existing residential
address, customer’s place of employment, CIBIL report, employer credentials (if
customer’s work

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for a small organization) and residence and office telephone numbers. This is normally
done by sending representatives to customer workplace or residence. These representatives
are usually employees of small firms to which the bank has outsourced this activity. The
ability of these personnel is uneven and the interaction with them may not always be
smooth. Banks also do a quick check on the references customers have provided in the
application form.
4. Credit Appraisal and Loan Sanction
The bank establishes customer repayment capacity based on customer’s income, age,
qualification, experience, employer and nature of business (if self-employed). Based on
these parameters, customer maximum loan eligibility is worked out and the final loan
amount communicated to customer, then issues a sanction letter. This letter may either an
unconditional letter, or may have certain terms and conditions mentioned. Customer has to
fulfill these conditions before the loan is disbursed.
5. Offer Letter
Once the loan is sanctioned, an offer letter is sent mentioning details like loan amount, rate
of interest, whether fixed or variable rate of interest is linked to a reference rate, tenure of
the loan, mode of repayment, if the loan is under some special scheme, the details would be
mentioned, general terms and conditions of the loan and special conditions, if any.

 Acceptance Copy of the Offer Letter

If customer accepts the offer letter the bank will ask customer to sign a duplicate letter for
the same bank’s records.
6. Submission of Legal Documents
Once customer selects property, the bank requires customer to hand over the entire set of’
original documents pertaining to customer property so that it can keep them as security for
the loan amount given to customer. These documents would remain in the bank’s custody
until the loan is fully repaid.
 Legal Check
Every bank conducts a legal check on customer documents (including draft sale documents
that customer will be entering into with customer seller) to validate their authenticity.
These documents normally include:
 The title documents of customer seller which prove the seller’s title including the
chain of title documents if he is not the first owner.
 NOCs from the legal owners such as Cooperative Housing Societies, statutory
development authorities, or the leaser of the land in the case of leasehold land.

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NOCs are not required where the property is situated on freehold land and the entire land is
being transferred along with the structure. The banks send these documents to a lawyer on
their panel (either In-house or outsourced) for a thorough scrutiny. Some banks will charge
a special fee to cover these cost while some banks will ask customer to pay these directly to
the concerned lawyer though for most banks the upfront fee covers these fees as well. The
lawyer’s report either gives a go-ahead if the documents are clear, or it may ask for a
further set of documents. In the latter case, customer are expected to handover the
additional documents to the bank for a clear title.
Since property documentation in India is non-standard and non-transparent, it helps if
customer buy property from a reputed builder since the builder would know the process
inside out, and keep all the documents ready. In fact, the maximum customer service issue
arises at this stage because of a lack of standardization. Also, as per the laws of several
states, there are heavy transfer charges on sale of property and / or very heavy stamp duties.
This has given rise to sale of property by showing lower consideration than agreed for, with
the balance being paid either on an amenities agreement or in cash. Moreover, the concept
of sale by executing ‘Irrevocable Power of Attorney’ has gained ground especially in the
National Capital Region. All this could restrict the choice of customer lenders and may
therefore increase the cost of the loan which customer might want to keep in mind while
finalizing these kinds of properties.
7. Valuation of Property
Valuation has become a key parameter in determining the loan amount that can be
sanctioned by the bank. The valuation process is quite subjective and dependent on the
quality and ability of the person sent by the bank for valuation. In many cases, the valuer
determines the value of the property at an amount that is lower than the documented cost of
the property and this would result in the loan amount being decreased since the bank funds
a certainpercentage of the cost or valuation of the property whichever is lower. Now a day,
valuationof property is determined according to “Jantri Value”. Valuer could not exceed the
value ofproperty if valuer had proper evidence for higher value.
8. Registration of Property Documents
After the legal and technical / valuation check, the draft documents as cleared by the lawyer
need to be finalized and signed and the stamping and registration of the documents need to
be done. Also if any No Objection Certificates (NOCs) are pending these need be obtained
in the format approved by the bank’s lawyer.

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9. Disbursement
The best part is when customer actually received the cheque. This happens once the bank
has ensured that the property is legally and technically clear and after customer has handed
over all the original documents pertaining to the transfer of ownership of property in
customer favour, having executed the necessary loan agreements with the bank. But at this
stage, customer should also provide documents to prove that customer have paid customer
personal contribution towards the property, since banks normally fund only up to 85-90
percent of the total cost of the house. In case customer are expecting money from other
sourcesto fund customer own contribution, customer need to provide sufficient evidence for
the same. It is only after submitting this proof that the bank will release part disbursement
of theloan.
The cheque will be in the name of the reseller (for resale flats), builder, society or the
development authority. It is only in exceptional circumstances, that is, if customer provides
documents to support that customer have made an excess payment from customer own
account that the cheque will be handed over to customer directly by the bank.
Usually, loans are disbursed on the basis of the stage of construction of the property. This
would mean that the disbursement could either be full and final (in the case of resale or
ready possession properties) or part disbursement (in the case of under construction
properties). Each option would have different disbursement processes. Customer should
keep photocopies of all documents / agreements / letters submitted to the bank to avoid any
misunderstandings later. Apart from home loan process, the following flow charts shows
home acquisition process and booking process which are important for a home loan buyer.

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Determination of Loan amounts: -
Loan eligibility is based on two separate calculations:
1. The amount of Loan repayment that a customer can afford to make every month.
2. A specified percentage of the cost of the property.
The amount of the loan sanctioned will be the lower of the two figures arrived at after
making these two calculations.
It is possible that while the customer’s income (and hence, customer’s ability to repay)
could make customer eligible for a higher loan, the bank will almost always cap the
sanctioned loan amount at 80 to 90 per cent of the property cost.

Repayment
ability

Determination
of income
Determination
of loan
amount Clubing of
income

Cost of
property

[i] Repayment Ability - The Most Important Determination

Customer’s ability to repay is based on income and expenditure pattern. For instants, if a
customer’s monthly income is ` 10,000 and his monthly expenses is ` 8,000the customer
can certainly pay ` 2,000 towards any potential home loan he can take. This amount can
now be used as the installment amount and the customer’s eligibility can be reverse –
calculated. The larger customer’s repayment capability, the higher will be customer’s loan
eligibility.
[ii] Determination of Income

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Banks need to be sure about income stability of customer. Which is why, they may not
consider the following categories of income while calculating loan eligibility: Performance
bonus, medical reimbursements or leave travel allowance, as these are not certain, any case
annual perks are not available every month to help in monthly repayments. Some banks,
however, are willing to consider these amounts
either partially or fully as ‘income’. Overtime may be of temporary nature. Again, if the
overtime is shown as being received consistently for a long period of time, some banks may
consider at least a part of this as ‘income’. Interest income since the underlying investments
on which these incomes are earned may be liquidated to pay for customer contribution
required towards the cost of the house. But if a customer can convince some bank that the
interest income will remain even after customer have bought the house, the bank may be
persuaded to include the interest income while calculating loan eligibility. Conveyance or
entertainment / other allowances paid in cash through vouchers, unless customer regularly
deposits the cash reimbursement in his/her salary account. Banks will hesitate to consider it
for a loan since they have no document to verify whether such an allowance is indeed paid.
Earnings from non-verifiable sources such as tuition / tailoring are not considered as
‘income’ by the banks unless business of this kind is carried on in a verifiable manner.
Agricultural income, since this is non-taxable and non-stable as well, most banks
do not give this any weight age or give significantly lower weight age. Rental income is
being consistently received and shown in the income tax (IT) returns and copies of the
rental agreements are available, banks may consider part or whole of this as ‘income’. If a
customer is a salaried employee, some banks apply the normative percentage on the gross
salary, while some apply it on customer’s net salary. Having said that, most banks go by
gross salary as the net salary varies from month to month (deduction of festival advances,
medical reimbursements given, or grant of leave travel allowance that month). These banks
allow a smaller percentage of customer income as available for payment of loan
installment; while those applying it on net salary allow a higher percentage of the salary. In
case of customer is self-employed, the difference in eligibility norms can be glaring. Some
banks strictlyconsider only returned income, that too an average of last two or three years
of income, to smoothen out any sharp increases in reported incomes. Some banks will add
full/half of the depreciation to calculate the base income. Recognizing this, quite a few
banks have evolvedeligibility norms that work around these issues. Let us call these banks
‘self- employed- friendly banks’. Some of the things they might have for calculating
eligibility norms that areself-employed friendly are:

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  Considering customer’s ‘actual income’ as multiple of customer’s ‘disclosed
income’.
 Estimating customer’s ‘actual income as a percentage of ‘gross receipts’ and
ignoring customer’s ‘disclosed income’.
 Clubbing the income of entities controlled by customer such as private limited
companies or partnership firms in which customer have substantial stakes or are a
partner by making such entities joint borrowers to the loan.
Some banks do not consider that part of income which forms customer’s yearly investment
which is allowed as deduction under section 80C. This amount is not considered as income.
However some banks have considered this as income if investment is liened by bank
authority. Most foreign banks are ‘self-employed friendly’ on the above lines. Most banks
do empower local level officials with discretionary powers to enhance loan eligibilities
based on their subjective assessment of customer’s true income.

[iii] Clubbing of Incomes of Relatives

Eligibility is also calculated by clubbing the customer’s income with that of his relatives.
All banks allow clubbing of the spouse’s income to work out the loan eligibility. In such
cases, they insist on making the spouse a joint borrower (or co borrower).The basic premise
behind using pooled incomes for calculating eligibility is that both parties will actually
combine their income and pay off all expenses (including the home loan instalment ).
However, banks are selective in extending this concept of pooling of incomes to other
relations. Some banks allow parents, children and brothers to be joint borrowers.

[iv]Cost of the Property

The bank naturally wants customer to put in a contribution towards the cost of the house so
that customer has a stake in its continued maintenance. This also ensures that if the value of
the house goes down in future, the bank’s outstanding loan amount is lower than the market
value of the property. The amount the customer is expected to put in is called ‘margin
money’ or ‘down payment’. Generally bank gives loan amount of 85% to90% of the
agreement value of the property. Even if a customer’s income is enough to justify a higher
loan, the bank will give a maximum loan based on its margin requirements.

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  Age of the Building
The down payment can also vary depending on the age of the property. If the property is
older, the down payment requirement may be higher. Most banks have a cap on the
maximum age of the building at the end of the loan tenure. This would normally be fifty
years. So if a customer is buying a property on resale and the current age of the building is
thirty-eight years, the probability of getting a tenure higher than twelve years is very low
despite the fact that the customer may otherwise be eligible for a twenty-year loan. This
reduction of tenure would reduce the loan eligibility.
 Unaccounted Component
In some real estate transactions a portion of the cost is not accounted for in any of the
documents related to the purchase. Thankfully, this practice is on the decline especially
where the property is bought from reputed builders. No bank takes this unaccounted
amount in calculating the cost of the property while determining the loan amount
eligibility.
 Resale Value
The resale value of a property is taken into consideration before the bank lends money to
buy a property. It ensures that in the unlikely event of a default, should the bank need to
dispose the property to recover its dues, the bank is well covered to the extent of the home
loan provided. This is more of a problem in case of resale properties and lesser one in case
of properties purchased from reputed builders.
 Independent Valuation of the Property
Every bank has practiced that bank will not give a loan (or give the loan at a higher rate)
when the property is being bought from a relative. Also, the bank insists on an independent
valuation of the property and the maximum loan amounts are based on this valuation rather
than on the agreement value.

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Tax Benefits
In the present study, I wanted to reveal that the Government of India has announced
following tax benefit in direct tax and indirect tax.
Income Tax / Direct Tax
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
` 46,350 p.a. (approx). If interest repayment of ` 1,50,000 p.a. is paid. In addition to this,
also is one eligible for getting tax benefits under section 80C on repayment of ` 1,00,000
p.a. that further reduces the tax liability by ` 30,900 p.a. These deductions are available to
assesses, 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 ` 1,50,000 if the following
conditions are fulfilled:
 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 principal 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 ` 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 ` 1,00,000 under Section 80C from assessment year 2006-
07.

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 LITERATURE REVIEW
Review of literature

helps a researcher to get acquainted with his/her selected research problem and also may
provide some guidelines in selecting a proper research methodology. It is also helpful in
finding out the research gaps in the existing literature. This will help the researcher in fine-
tuning his/her research problem and methodology. Another advantage of reviewing in the
existing literature is that in cases where the research problems are similar, the conclusions
and findings may be easily compared. This will help the researcher in determining whether
his/her findings are possible or not. The literature under review may be of two types: (i)
Concerning the conceptual and theoretical framework. (ii) The empirical literature dealing
with the studies made in the past which are similar to the one that the researcher intended to
undertake. The basic outcomes of such review will be the knowledge as to what data are
available for analytical purposes, which will help the researcher to specify his/her own
research problem in a more meaningful way. Thus, review of literature is helpful in
formulating the research problem and also helps the researcher in deciding about the most
appropriate methodology to be used. While comparing the results of the earlier studies with
his/her own results, care must be taken to verify whether the objectives and methodology
are similar. While reviewing the earlier studies a researcher has to state the objectives of the
study, describe the concepts and definitions used, the methodology employed and the
important findings and conclusions of the study.

3.1 Review of other researcher:-

1. Birla Institute of Scientific Research (1981)1 in its study makes a

comparative assessment of the performance of public sector banks and major private
sector banks since nationalisation. They find that the performance of public sector banks
is not satisfactory in rural development activities when compared to the private sector
banks.
2. R Jayakumar (1993)3 in his study of “Performance of private sector banks in
Kerala” makes a comparative examination of performance of public sector banks and
private sector banks in Kerala. He finds that in Kerala private sector banks perform better
than their public sector counterparts
3. Govindarajalu (1996) 5 in his article “by banks and policy makers for the
development of banking sector. Satisfaction and dissatisfaction with bank services” views
that the Indian banks have lost the quality of customer service.

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Sarkar and Das (1997)6 make a comparison of the performance of the three bank sectors
- public, private and foreign - for the year 1995-1996. These banks are compared in terms
of profitability, productivity and financial management. They find that the public sector
banks are very poor in performance on the basis of these variables than the other two
sectors.
4. D Mishra (1997)7 makes a study on the performance of commercial banks in
India choosing relevant parameters like quality of service, risk management, profitability
etc. His conclusion is that the banks should try to increase quality, balance risk
management, and optimise profitability in order to survive and succeed. He identifies four
challenges for the bank namely competition, credit, customer and control.

5. N. S. Varghese (2000)9 is of the opinion that new generation private sector

banks with their latest technology are able to implement e-banking and are highly
preferred by investors in the stock market. He also points out that prominent new
generation private sector banks like HDFC and ICICI have entered into internet banking
through which greater convenience is offered with lower transaction cost.
6. Anantha Swamy (2001)13 makes an appraisal of the performance of
different bank groups in India in the backdrop of competition, deregulation and changes
in the field of banking. He classifies banks into public sector, old private sector, new
private sector and foreign banks. His focus has been on profitability, NPA, contingent
liabilities, spread etc. for the lastfive years and arrives at the conclusion that the new
private sector banks are performing better than the banks in other sectors.
7. Pushpangadharan’s (2002)17 study on “The quality of customer service in
public sector banks” also shows that public sector banks lag behind private sector banks
in customer service. The parameters he used in the study are facilities and amenities,
speed in completing transactions and providing deposit related and credit related services.
The customers of public sector banks are not much satisfied with branch managers’ and
employees’ attitudes. The public sector banks are very poor in respect of customer
feedback system and redress of grievances.
8. Qamar (2003) 23 has done a comparative study on the “Profitability and
resource use efficiency in scheduled commercial banks in India”. He finds that efficiency
of new private banks and foreign banks is better though marginally than the old private
sector banks and public sector banks.

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 Research and Methodology
DEFINITION OF RESEARCH:
According to Philip Kotler, Marketing research is the systematic design, collection,
analysis & reporting of data & finding relevant to a specific marketing situation facing the
company

 RESEARCH PROBLEM STATEMENT:

There are many facilities which are provided by the banks for their customers here in this
study researcher wants to know on customer satisfaction towards online banking facilities
provided by public sector banks and private sector banks

 OBJECTIVES OF STUDY

The following objectives represent the whole of our research work.

 To analyse the home loan schemes of private sector and Public sector banks.
 To study the preference of consumers towards home loan.
 To study the problems faced by the consumers in obtaining home loan.
 To study the customer satisfaction towards home loan facilities provided by public
sector banks and private sector banks

 REASEARCH DESIGN
A Descriptive research design was used for this study. Descriptive study is a fact-
finding investigation with adequate interpretation. It is the simplest type of
research. It is more specific than an explanatory study as it has focus on particular
aspects of the problem studied it is designed to get descriptive information and
provide information for formulating more sophisticated studies. Data are collected
by using appropriate method through questionnaire.

 SAMPLING PLAN
 POPULATION: Population is set from which samples are drawn, population
here is taken form bank customers.

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  SAMPLE SIZE: A sample is the subset of the population it comprises only
some elements of the population, the sample of 232 is taken for study
 SAMPLING METHOD: The sampling method that will be used for the purpose of
study would be non-probability convenient sampling.
 SAMPLING AREA: Navsari city

➢ TYPE OF DATA

▪ Primary Data: - They are those data which are generated for the first time by the
researcher for his own purpose. Such data do not already exist.

▪ Secondary data: - Data gathered and recorded by someone else prior to and for a
purpose other than the current project.

SOURCES OF DATA:

Data will be collected from primary source as well as secondary source. Questionnaire will
be used for primary data collection and online articles, past research papers articles,
journals etc. are used for secondary data collection

SCOPE OF THE STUDY: -

 The study covers primary data from the customers who are using housing loan
facilities provided by public sectors banks and private sector banks.
 Research is related with housing loan facilities only that is it only consider customer
using home loan facilities.
 This research is related with customer using housing loan facilities in Navsari city
only.

LIMITATIONS OF STUDY: -

 This research study was limited only to Public sector banks and private sector banks
 This research study was taken in a limited area only (i.e. Navsari city) and findings
may vary if the area of study is changed.
 As data is collected from questionnaire, some of the replies of the respondents may be
biased.
 The respondents were very much keen to disclose personal information.
 Time span of the study is limited.

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 DATA ANALYSIS

Q1 Response as per Gender of Customers

Gender Frequency percentage
Male 188 81
Female 44 19
Total 232 100

INTERPRETATION: -
From the above data and chart, it can be known that 81% of the respondents are male while
19% of the respondents are female

Q2 Respondents as per the age groups

Age
Basis Frequency Percentage
Less than 25 60 25.9
26-45 88 37.9
46-65 65 28
65& Above 19 8.2
Total 232 100

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INTERPRETATION:
From the above data and chart, it can be known that, 25.9% respondents are below the age
of 25years, 37.9% respondents are of the age of 26 to 45 years, 28% respondents are of the
age of 46 to 65 years, and 8.2% respondents are of the age of above 65 years and above

Q3 Qualification

Education Frequency Percentage

Under Graduate 42 18.1
Graduate 90 38.8
Post-Graduate 82 35.5
Others 18 7.8
Total 232 100

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INTERPRETATION:
From the above chart it is clear that 18.1% of total respondents are undergraduate, 38.8%
respondents are graduate, 35.3% of respondents are post graduate and 7.8% of total
respondents have chosen option others.

Q4 Occupation
Occupation Frequency percentage
Student 22 9.5
Self Employed 88 37.9
Service 49 21.1
Business 54 23.3
Retired 11 4.7
Home Maker 08 3.4
Total 232 100

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INTERPRETATION: -
From the above data and diagram, it can be known that, out of the respondents 9.5% are
students, 37.9% people are Self-employed, 21.1% people are in service,23.3% people are
doing Business, 4% of respondents are retired and 9.5% of respondents are home maker

Q5 Monthly Income

Income Frequency Percentage

Less Than 20000 60 25.9
20001-40000 91 39.2
40001-60000 63 27.2
60000 & above 18 7.8
Total 232 100

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INTERPRETATION: -
From the above data and diagram, it can be known that 25.9% respondents had their
income below 20000, 39.2% respondents had their income between 20001-40000, 27.2%
respondents had their income between 40001-60000, and 7.8% respondents had their
income above 60000.

Q6 Which sector bank do you have account?

Bank Frequency Percentage
Public sector banks 112 48.3
Private sector banks 101 43.5
Others 19 8.2
Total 232 100

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INTERPRETATION: -

From the above data and diagram, it can be known that 48.3% customer are preferring
public sector bank while the remaining43.5% customer were preferring private sector bank
and 8.2% customer are preferring the others option.

Q7 Reasons for taking home loan?

Reasons Frequency Percentage

For New Construction 35 15.1
For Renovation 55 23.7
For house Extension & Expansion 98 42.2
For purchase of house 33 14.2
Others 11 4.7
Total 232 100

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INTERPRETATION:

From the above data and chart it can be known that 15.1% of total respondents took home
loan for new construction purpose, while 23.7% of total respondents took home loan for
renovation purpose. 42.2% of total respondents took home loan for house expansion &
extension purpose 14.2% of respondents took loan for purchase of new house while
reaming respondents took others as option for reason for taking home loan.

Q8 What is approximate time period required to pass a home loan?

Time Frequency Percentage

10-15 days 61 26.3
16-30 days 106 45.7
31-45 days 45 19.4
45 & above 20 8.6
Total 232 100

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INTERPRETATION

From the above data and chart, it can be known that 26.3% respondents of total respondents
selected 10-15 days option as approximate time period required to pass home loan 45.7%
respondents selected option of 16-30 days’ time period to pass home loan, 19.4%
respondents selected 31-45 days’ time period required to pass a home loan while only 8.6
%of total respondents of the total population took the option of more than 45 days.

Q9 What is interest rate charged on your home loan?

Rates Frequency Percentage

Less than 7% 46 19.8
7.1-9% 96 41.4
9.1-11 65 28
More than 11 25 10.8
Total 232 100

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INTERPRETATION

From the above table and chart, it can be known that 19.8% of total respondents selected
the option less than 7% as interest rate charged on their home loan, while majority of
respondents that is 41.4% respondents selected 7.1-9% as interest rate charged on their
home loan 28% of total respondents selected 9.1-11% rate as interest rate charged on their
home loan while only 10.8% of respondents selected the option that is more than 11% as
interest rate charged on their home loan.

Q10 what mode of instalments generally you prefer?

Period Frequency Percentage

Monthly 88 37.9
Quarterly 117 50.4
Yearly 27 11.6
Total 232 100

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INTERPRETATION

From the above table and chart 37.9% of total respondents prefer monthly as mode of
instalments , while 50.4% respondents prefer quarterly as mode of instalments, while only
11.6% of total respondents prefer yearly as mode of instalments.

Q11 processing fees charged by your bank on you loan?

Amount Frequency Percentage

5000-10000 31 13.4
10001-15000 95 40.9
15001-20000 81 34.9
20000 & above 25 10.8
Total 232 100

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INTERPRETATION

From the total respondents 13.4 % of total respondents selected 5000-10000 option as
processing fees charged by bank on loan, 40.95 of total respondents selected the option of
10001-15000 as processing fee charged on their loan, 34.9% of respondents selected the
option of 15001-20000 as processing fee charged on their home loan and only 10.8%
respondents selected the option of 2000% above as processing fee charged on their home
loan.

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Q12 satisfaction Level among Bank Customers Regarding the housing loan facilities.
Category Extremely Satisfied Neutral Dissatisfied Extremely Total
satisfied dissatisfied
Private 53 136 34 05 05 232
sector
banks
Public 40 106 31 29 26 232
sector
banks

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INTERPRETATION

 For public sector banks

From the above table and graph, it can be known that 40 bank customers of public sector
bank were extremely satisfied 106 respondents were just satisfied with housing loan
facilities while 31 respondents were neutral in their decision 29 respondents were
dissatisfied with the housing loan facilities and 26 of total respondents were extremely
dissatisfied with housing loan facilities provided by public sector banks.

 For private sector banks

From the above table and graph, it can be known that53 bank customers of private sector
bank were extremely satisfied 136 respondents were just satisfied with housing loan
facilities while34 respondents were neutral in their decision 05 respondents were
dissatisfied with the housing loan facilities and 05 of total respondents were extremely
dissatisfied with housing loan facilities provided by private sector banks.

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 Findings
Results of this study provide banking decision makers an insight into the perception about
Housing loan among Indian customers and that is the most important practical contribution
of this study. Housing loan is gaining popularity in India and finding of this study allow
banks to fine tune their housing loan product. Based on the findings of this study the
following suggestions could be arrived:

 The study shows 81% of respondents are male. While 19%of respondents are
female.
 The study shows that 25.9% of respondents are of age group of less than 25 while
37.9% respondents are of age group between 26-45. 28% respondents are of age
group of 46-65. And 8.2% of respondents are of age group of 65& above.
 The study shows that 18.1% of respondents are under graduate,38.8% of respondents
are graduate, 35.3% of respondents are post graduate, while only 7.8 % of respondents
selected others as option.
 The study shows that 9.5% of respondents are students, while 37.9% of respondents are
self-employed, 21.1% of respondents are in service, 23.3% of respondents have
business, 4.7% respondents are retired and 3.4% of respondents are home maker.
 The study shows that 25.9% respondents have their monthly income less than 20000
while 39.2% respondents have their income between 20001-40000 27.2%
respondents have their monthly income between 40001-60000 while 7.8%
respondents have their monthly income above 60000.
 The study shows that 48.3% of respondents have their account in public sector bank
while 43.5% of respondents have their account in private sector bank, and only 8.2
% of respondents prefer to have account in other banks
 The study shows that 15.1% of total respondents took home loan for new construction,
23.7 % respondents took home loan for renovation purpose, 42.2% respondents took
loan for house extension & expansion, 14.2% respondents took home loan for purchase
of other house, while only 4.7% respondents choose option others as reason for taking
home loan.
 The study shows that about 45.7% of respondents loan get processed in 16-30 days,
26.3% of respondents get their loan processed in less than 15 days, 19.4% respondents
loan gets processed in more than 30 days.

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 The study shows that 41.4% respondents get interest rate charged between 7.1-9%,
while 28% respondents get interest rate charged between 9.1-11% and 19.8%
respondents states that their interties rate is charged less than 7%.
 The study shows that 50.4% respondents prefer quarterly as their mode of
installments, 37.9% respondents prefer monthly mode of instalments and only
11.6% of total respondents prefer yearly as mode of instalments.
 The study shows that 40.9% respondents pay processing fee between 10001-15000,
while 34.9% respondents pay processing fee between 15001-20000, and 13.4 %
respondents pay between 5000-10000 and only 10.8% respondents pay processing fee
more than 20000.
 The study shows that 100 respondents strongly agreed for the procedure as factor
preferred while availing housing loan facilities while 97 respondents just agreed to it 21
respondents were neutral about their decision 10 respondents disagree to it and only 04
respondents strongly dis agreed the above factor out of total respondents.
 The study shows that 46 respondents strongly agreed for the rate of interest as factor
preferred while availing housing loan facilities while 143 respondents of the total agreed
to it 26 respondents were neutral about their decision 12 respondents disagree to it and
only 05respondents strongly dis agreed the above factor out of total respondents.
 The study shows that 30 respondents strongly agreed for the repayment period as factor
preferred while availing housing loan facilities while 137 respondents of the total agreed
to it 38 respondents were neutral about their decision 23 respondents disagree to it and
only 04 respondents strongly dis agreed the above factor out of total respondents
 The study shows that 22 respondents strongly agreed for the flexibility in interest
payment as factor preferred while availing housing loan facilities while 151 respondents
of the total agreed to it 34 respondents were neutral about their decision 16 respondents
disagree to it and only 09 respondents strongly dis agreed the above factor out of total
respondents
 The study shows that 23 respondents strongly agreed for the Document &processing fee
as factor preferred while availing housing loan facilities while 134 respondents of the
total agreed to it 47respondents were neutral about their decision 19 respondents
disagree to it and only 09 respondents strongly dis agreed the above factor out of total
respondents

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 The study shows that 17 respondents strongly agreed for the amount sanctioned as
factor preferred while availing housing loan facilities while 135 respondents of the
total agreed to it 47respondents were neutral about their decision 25 respondents
disagree to it and only 08 respondents strongly dis agreed the above factor out of total
respondents
 The study shows that 15 respondents strongly agreed for the Emi option as factor
preferred while availing housing loan facilities while 139 respondents of the total
agreed to it 49 respondents were neutral about their decision 21 respondents disagree
to it and only 08 respondents strongly dis agreed the above factor out of total
respondents
 The study shows that 25 respondents strongly agreed for the Penalty procedure as
factor preferred while availing housing loan facilities while 133 respondents of the
total agreed to it 43 respondents were neutral about their decision 20 respondents
disagree to it and only 11 respondents strongly dis agreed the above factor out of total
respondents
 The study shows that 78 respondents strongly agreed while 121 respondents agreed for it
while 16 respondents were neutral in their decision 05 respondents disagreed to it while
12 respondents strongly disagreed for rejection at first stage.
 The study shows that 74 respondents strongly agreed while 111 respondents agreed for it
while 25 respondents were neutral in their decision 15 respondents disagreed to it while
07 respondents strongly disagreed the processing fee not refunded factor.
 The study shows that 24 respondents strongly agreed while 142respondents agreed for it
while 42 respondents were neutral in their decision 17 respondents disagreed to it while
07 respondents strongly disagreed the desired loan not sanctioned factor.
 The study shows that 30 respondents strongly agreed while 133 respondents agreed for
it while 43 respondents were neutral in their decision 19 respondents disagreed to it
while 07 respondents strongly disagreed the rate dilemma factor.
 The study shows that 29 respondents strongly agreed while 132 respondents agreed for it
while 44 respondents were neutral in their decision 16 respondents disagreed to it while
11 respondents strongly disagreed the high down payments factor.
 The study shows that 26 respondents strongly agreed while 140 respondents agreed for it
while 40 respondents were neutral in their decision 15 respondents disagreed to it while
11 respondents strongly disagreed the title deed factor.

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 The study shows that 40 bank customers of public sector bank were extremely satisfied
106 respondents were just satisfied with housing loan facilities while 31 respondents
were neutral in their decision 29 respondents were dissatisfied with the housing loan
facilities and 26 of total respondents were extremely dissatisfied with housing loan
facilities provided by public sector banks.
 The study shows that bank customers of private sector bank were extremely satisfied
136 respondents were just satisfied with housing loan facilities while34 respondents
were neutral in their decision 05 respondents were dissatisfied with the housing loan
facilities and 05 of total respondents were extremely dissatisfied with housing loan
facilities provided by private sector banks.

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 Conclusion

 From the study 81% of respondents were male respondents while 19%of respondents
were female respondents thus it can be concluded that male customer were using
more housing loan facilities.
 From the study 25.9% of respondent were of less than 25 years of age 37.9% of
respondents were in age group of 26-45 28% of respondents were in age group of 46- 65
and only 8.2% of respondents were from age group of 65& above hence it canbe
concluded from the response of above home loan facilities is comparatively used more
in age groups of 26-45.
 From the study 48.3% of respondents were having account in public sector bank 43.5%
of respondents were having account in private sector banks and 8.2% of respondents
were having account in other bank hence from the study it can be
conclude that more respondents were having account in public sector banks.
 From the study 45.7% respondents agreed that their home loan is passed in 16-30 days
while 26.3% respondents agreed for that their loan is passed in 10-15 days19.4
respondents choose the option of 31-45 days.
 From the study it can be concluded that Procedure, ROI, Repayment Period etc do affect
the decision making of the customer while taking Housing Loan facilities from different
sectors
 From the study it can be conclude that majority of respondents agreed on the mentioned
factors affecting Housing Loan decisions while respondents also considered various
problems which are generally faced while availing Housing Loan Facilities.
 From the study of housing loan facilities of private sector banks 53 Respondents of
private sector banks were extremely satisfied 106 respondents were just satisfied 34
respondents were neutral in their respondent 05 respondents were dissatisfied and 05
respondents were extremely dissatisfied

From the study of housing loan facilities of public sector banks 40 respondents
were extremely satisfied 106 respondents were just satisfied 31 respondents were
neutral in their decision 29 respondents were dissatisfied 26 respondents were
extremely dissatisfied with the service provided by public sector banks/

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 WEBLIOGRAPHY

http://ijmrr.com/admin/upload_data/journal_S--8jun15mrr.pdf

http://www.differencebetween.info/difference-between-nationalised-banks-and-private-banks.
http://www.blog.sanasecurities.com/types-of-bank-loans-in-india-interest-rates-and-charges/

http://www.bankandfinance.com/loan/Home-Loan/Home-Loan-Rates.php
https://www.scribd.com/doc/49180381/A-Project-Report-on-Home-Loan

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 ANNEXURE
1. 1GENDER
a) MALE
b) FEMALE

2. AGE
a) LESS THAN25
b) 26-45
c) 46-65
d) 65 & above

3. QUALIFICATION
a) UNDER GRADUATE
b) GRADUATE
c) POST GRADUATE
d) OTHERS

4. OCCUPATION
a) STUDENT
b) SELF EMPLOYED
c) SERVICE
d) BUSINESS
e) RETIRED
f) HOME MAKER

5. MONTHLY INCOME
a) LESS THAN 20000
b) 20001-40000
c) 40001-60000
d) 60000 & ABOVE

6. IN WHICH SECTOR BANKS DO YOU HAVE ACCOUNT?

a) PRIVATE SECTOR BANKS
b) PUBLIC SECTOR BANKS
c) OTHERS

7. WHAT IS YOUR REASON FOR TAKING HOME LOAN?

a) FOR NEW CONSTRUCTION
b) FOR RENOVATION
c) FOR HOUSE EXPANSION & EXTENSION
d) FOR PURCHASE OF HOUSE
e) OTHERS

8. WHAT IS APPROXIMATE TIME PERIOD REQUIRED TO PASS YOUR HOME LOAN?

a) 10-15 DAYS
b) 16-30 DAYS
c) 31-45 DAYS

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9. WHAT INTEREST RATE IS CHARGED ON YOUR HOME LOAN?
a) LESS THAN 7%
b) 7.1-9%
c) 9.1-11%
d) MORE THAN 11%

10. .WHAT MODE OF INSTALLMENTS GENERALLY YOU PREFER?

a) MONTHLY
b) QUARTELY
c) YEARLY

11. WHAT IS PROCESSING FEES CHARGED BY YOUR BANK ON LOAN? a) 5000-10000

b) 10001-15000
c) 15001-20000
d) 20001 & ABOVE

12. ARE YOU SATISFIED IN RELATION TO SERVICE OF HOUSING LOAN FACILITIES

PROVIDED BY YOUR BANK?
a) PRIVATE SECTOR BANKS
b) PUBLIC SECTOR BANK

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