PROJECT REPORT

ON
“A STUDY ON GROWTH OF HOME LOAN MARKET IN
INDIA”

Submitted in partial fulfilment of requirement of

Bachelor of Business Administration (B.B.A)

Guru Gobind Singh Indraprastha University

B.B.A, 4th semester
BATCH 2023-2026

Submitted to: Submitted by:

Sujal
Ms. Tanya chatwal
Mahalwal
Assistant Professor 09514201723
JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL, VASANT KUNJ

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 CERTIFICATE OF COMPLETION

This is to certify that Ms. Sujal Mahalwal(09514201723) BBA (M) 4th semester from
Jagannath International Management School, VASANT KUNJ, has competed her
project on the topic “A STUDY ON GROWTH OF HOME LOAN MARKET IN INDIA”
under my guidance towards the partial fulfilment of Bachelor of Business
Administration (BBA).

This Report is the result of her own work and to the best of my knowledge no part of
it has earlier comprised in any other report, monograph, dissertation or book. This
project was carried out under my overall supervision.

Signature of guide

Ms. Soumya

ASSISTANT PROFESSOR

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 Acknowledgement

The completion of any project is not complete without thanking the people
behind the project is no exception. Racing against the time and fast
approaching deadlines, the fact that we are able to successfully complete
the project just in time would not have been possible without the help and
support of many people. Their constant guidance and encouragement
coupled with my commitment were the cornerstones for the successful
completion of the project. I have great pleasure in expressing my sincere
gratitude and hearty thanks to my beloved Faculty, Ms. Soumyafor
consenting to be my guide. She had been a great source of encouragement
and inspired me throughout my project. I am greatly thankful to her for
everything she has done for me. I would like to express my deepest
gratitude to my Friends, Management, Department Staffs, and my Parents
for their support and above all to God for showering his blessing upon me.

Sujal Mahalwal

09514201723

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 Table of contents

Title Page

Title Page 1

Certificate Of Completion 2

Acknowledgement 3

Table Of Contents 4

Table of figures 5

List of tables 7

Introduction 9

Objectives Of Study 30

Literature Review 32

Research Methodology 39

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Analysis And Interpretation 44

Limitations 60

Conclusion And Recommendation 62

References 65

Appendices 69

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 Table of Figures

S.no. Title Page no.

1 Organization and functional 11

structure
2 Scheme of Housing Loans 14

3 Graph 1Timeline of home loan 43

applicants.
4 Graph 2 types of home loan 44
available

5 Graph 3 awareness about current 45

interest rates for home loans

6 Graph 4 level of satisfaction of 46

home loan applicants

7 Graph 5 knowledge of different 47

repayment options

8 Graph 6 Hurdles during 48

sanctioning process

9 Graph 7 Ratings for documentation 49

process

10 Graph 8 opinion for loan officer 50

11 Graph 9 experience with HDFC or 51

LIC

12 Graph 10 Preference of customers 52

13 Graph 11 Reasons for preference 53

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 List of Tables

S.no. Title Page no.

1 Table 1Timeline of home loan 43

applicants.
2 Table 2 types of home loan 44
available

3 Table 3 awareness about current 45

interest rates for home loans

4 Table 4 level of satisfaction of 46

home loan applicants

5 Table 5 knowledge of different 47

repayment options

6 Table 6 Hurdles during sanctioning 48

process

7 Table 7 Ratings for documentation 49

process

8 Table 8 opinion for loan officer 50

9 Table 9 experience with HDFC or 51

LIC

10 Table 10 Preference of customers 52

11 Table 11 Reasons for preference 53

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 INTRODUCTION

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Finance is the life blood of almost all the activities, involved in operating an economy.
The housing finance institutions, as a whole, may be said that precursor of the new
era of finance. The existing housing finance institutions though have done pioneering
job in the nation building but in recent years it has been felt that they have not been
able to shoulder that social responsibility, to a desirable extent. Indeed, this was the
very crux Of establishing the housing finance institutions in the country so as to
improve the standard of life the major chunk of the rank and file. Man is a social creature,
which brings some amenities like food, clothing, and shelter
mandatory for his existence. Generally after food and clothing, shelter is an important
benchmark for the existence of the human being. The rate of inflation has played its
part in changing the mindset of people, now not a palatial accommodation but a small
House is perhaps the dream of millions of people. The standard of living can be judged by
the adequacy of housing but millions of people are still vagrant in our country as well as in
the world, so there is a very wild housing problem in our nation and world also. It is well
known that the housing problem in India is alarming problem in both
rural and the urban areas. To overcome this problem some financial institution are
coming forward to provide money to public. In present, housing finance companies
provides loans to individual person, association of person, firm, company, corporations,
union or state government and municipal or any local or public authority for purchase of
house or land, construction, maintenance, reconstruction, improvement and development
of house property, building, flat, office, shop, factory
and warehouse etc. There are some housing finance companies such as Housing and
Urban Development Corporation Limited (HUDCO), Housing Development Corporation
Limited (HDFC), Life Insurance Corporation of India (LIC) Housing Finance Limited, Bank
of Borada
Housing Finance Limited, Deewan Housing Finance Corporation Limited, and State
Bank of India (SBI) Housing Finance, Canara Bank -
CanFin Home Limited, Industrial Development Bank of India Home Finance Limited
(IDBI), Punjab National Bank Housing Finance Limited [PNB] etc.

HOUSING FINANCE IN BRIEF

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Housing being one of the three essential needs of life dependably stays in the top
needs of any individual, society and economy. As a person, an individual needs his
own space and security, which can be given by the responsibility for house. The house
is the essential unit of the general public. Home gives a stage to the family and the
family is the most significant social foundation, which leaves its engraving on a person
for entire life. Along these lines lodging merits critical consideration with regards to
creating arrangements and systems for human improvement. Yet at the same time
most of human people lives in ghettos, shanties and brief ratty sanctuaries in rustic
regions. The deficiency of lodging is a major hindrance in the solid advancement of
an individual and thus the general public, and the country. The issue of room,
protection, security and sanitation prompts social, financial and ecological
degeneration. The ceaseless conflict for space and house-possession prompts
individual and social disorder, which is impeding for the general public and the
economy. A creating country like India needs to concentrate more on lodging part to
take into account the lodging needs of thriving populace and to quicken the monetary
development. The Government of India had as of late made the advancement of the
housing sector.

HOUSING FINANCE IN INDIA

In the initial 25 years of post-freedom, India has focused on rural improvement simply
after the mechanical upset and the persistent moving of provincial populace to the
urban regions, the requirement for advancement of lodging area has been
accentuated. It is dependably a fantasy to claim a house anyway a lion's share of the
populace does not have the required money related help to possess a house. Peering
toward this as a chance, numerous organizations have decided on stretching out
lodging credits not exclusively to support their main concerns yet
Additionally to decrease the overall interest and supply hole. The certified interest
emerging out of the individual requirement for lodging, together with the present blast
in the lodging segment it is good to go to give a stage to the lodging money
organizations to cut out a bit of fortune. What stayed as a position of safety segment
in India is all of a sudden seeing movement that is promising a splendid future. Out of
India‟s new lodging units, 20 percent are financed through the lodging financing
organizations. With the hole between the required number of houses and the real,

10
government recognized lodging division as a center and it is just with the convenient
in mediation of the legislature that lodging fund has turned into a noteworthy industry
in India. With the foundation of National Housing Bank, the administration has given
the genuinely necessary lift to this division. At present out of 380 odd HFIs in India, 42
lodging fund organizations are enrolled with the National Housing Bank out of them
20 are legitimate for acknowledgment of open stores and remains are most certainly
not. This number is going to increment sooner rather than later with the modern
development. During the time some portion of the most recent decade, this division
has seen a development of more than 30 percent and guarantees to develop a similar
rate in the following couple of years. Perceiving the developing need of lodging
account in India, the administration has stressed on lodging and lodging money in the
ninth multiyear intend to realize that there is a shortage of in excess of 20 mission
house units. This is the first occasion when that India has underlined on the lodging
segment.

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In 1985, the RBI made numerous proposals for advancement in the lodging money
framework dependent on the report of Chakraborthy Committee. In 1987, HFC's
revised the Insurance Act of India to permit the Life Insurance Corporation (LIC) and

12
the General Insurance Corporation (GIC) to enter the lodging money business. 47 In
1988, the National Housing Bank was set up as an auxiliary of the RBI to go about as
a peak administrative and limited time organization. In 1989, the RBI enabled
Commercial banks to issue huge advances for lodging without forcing unbending
limitations on financing cost or advance amount roof. National Housing Bank (NHB)
was set up in July 1988 with the value support from the RBI and is expected to go
about as the pinnacle foundation for organizing and building up the lodging money
plans. Afterward, the UTI set up in 1989, a Housing Construction Investment support
for direct interest in development tasks and land advancement. The section of LIC
and GIC and numerous banks like SBI and Canara Bank through their backups has
been begun to be another milestone in the advancement of lodging Impact. The
setting up of National Housing Bank as a completely possessed backup of the RBI,
and as a summit foundation was the zenith of the satisfaction of a long late need of
the lodging money industry in India. The framework has additionally been portrayed
by the rise of a few specific money related foundations, which have extensively
reinforced the association of the lodging fund framework in the nation. In 1990's the
pace set in the previous decades was conveyed forward. Numerous HFCs were set
up under the headings of the NHB. The procedure of progression secured the retail
lodging account segment significantly.

TYPES OF HOUSING FINANCE

Various kinds of home loans are available in India. They are described below:

Home purchase loan

These are the basic home loans for the purchase of a new home. These loans are given
for purchase of a new or already built flat \bungalow\ row-house.

Home improvement loan

These loans are given for implementing repair works and renovations in home that has
alredy 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, painting etc.

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Home construction loan
These loans are available for the construction of a new home. The documents required
by the banks or bank for granting customer a home construction loans are slightly
different from the home purchase loans. Depending upon the fact that when customer
bought the land, the lending party would or would not include the land cost
as a component, to value the total cost of the property.

Home extension loan

Home extension loans are given for expanding or extending an existing home. For
example addition of an extra room, etc. For this kind of loan, customer needs to
have
requisite approvals from the relevant municipal corporation.

Land purchase loans

Land purchase loans are available for purchase of land for both home construction
or investment purposes. Therefore, customer can be granted 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.

Bridge loan
Bridge loans are designed for people who wish to sell the existing home and
purchase another. The bridge loan helps finance the new home, until a buyer is found
for the old home.

Balance transfer
Balance transfer loans help customer to pay off an existing home loan and avail the
option of a loan with a lower rate of interest. Customer can transfer the balance of the
existing home loan to either the same banks or any another banks.
Stamp duty amount
These loans are sanctioned to pay the stamp duty amount that needs to be paid on the
purchase of property.

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NRI home loan
This is a special home loan scheme for the non-resident Indians (NRI) who wish to
build or buy a home or land property India, they are offered attractive housing
finance plans with suitable reimbursement options by many banks in the country.

IMPORTANCE OF HOUSING LOAN

1. The need for home loans arises not because property prices are heading
upwards all the time but because home loans make great sense from a long –term
savings perspective. Not only are home loans a handy tool for the common man to
own a roof over his head but they also help save money in the long run.

2. With skyrocketing real estate prices, people are increasingly opting for housing
loans to acquire their dream home. Interest rates are coming down all the time and

15
the banks and the housing finance companies are literally falling over each other to
lure the prospective home-seekers.

3. Notwithstanding the tax breaks and generous lending rates, a lot of people still
cannot arrange resources for the down-payment, which comes out to be at least 15
per cent of the property value. Taking cognizance of the situation, banks are coming
up with home loan products called “zero down payment loan” where in 100 per cent
funding is provided for select properties. These lucrative offers are other major
reasons for why people are opting for loans.

4. Even if one can afford to buy a home with one’s own money, home loans should
be availed because they act as good savings instrument. According to industry
estimates, the long term average return in investing in a home is about 20% p.a while
the average cost of borrowing funds in the market today is about 7% p.a (considering
all tax breaks).
5. For salaried employees, housing loans are the best way to avail of tax benefits.
Many people simply go for the home loans in order to avail these benefits. Interest
payments up to 2.0 lash on housing loans are deductible from the taxable income
and there is a further deduction of taxable income maximum up to 1.5 lakh against
repayment of principal portion per annum. In case a person stays in a rented house,
the cost of the loan will be nearly zero percent since he will be saving a decent
amount on rent.
ADVANTAGES OF HOME LOANS
The various benefits of home loans arising to the customers are:
1. Help in owning a home.
2. Tax benefits of home loans Attractive interest rates.
3. Long term loan.
4. Repayment schedule on the basis of Earning.
5. Capacity of the borrower.

DISADVANTAGES OF HOME LOANS

The main disadvantages of home loans are high lightened as below:

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1.High processing fee.
2.Delay in processing.
3.Fluctuating interest rate.
4. Problems in disbursement
The above mentioned disadvantages or limitations can be removed by providing good,
prompt and efficient services to the customers.

Home Loan Procedure

With the increasing competition in the market for offering Home Loans, the otherwise
tedious process of availing loans has gone a tremendous change in the recent years.
However, there is still some process involved in the procurement of Home loan. It is
advisable for borrower to first look at the different stages required for obtaining a Home
Loan. Here is step by step procedure of procuring home loan.

Step 1: Application form

The first step involved in applying for home loan is the procurement of application form
from the HFC of applicant’s choice. The Performa of application every HFC
(Housing Finance Companies) is different from the other but about 80% information
required to be furnished is the same. Along with the application form necessary
documents like address proof, age proof, proof of income, bank balance etc. are also
to be attached with the application form before it is submitted to the HFC. Along with
all these documents HFCs also ask for processing fee of the home loan that varies
0.25% to 0.50% of the total loan amount.

Step 2: Personal Discussion After successfully filling the application form and
submitting it to the authority the next step is face to face with bank or HFC where you
have applied for the home loan. The bank first evaluates the papers submitted and
summons the applicant for the
personal discussion regarding the home loan applied for.

Step 3: Bank's Field Investigation

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The next step is the field investigation done by the HFC or banks. They send
representatives to the existing residence of the applicants or their offices for the
validation of the documents submitted. This is the essential part for the banks to
establish the trust with the applicants.

Step 4: Credit appraisal by the bank and loan sanction This is the make or break
stage of the process. The bank or HFC will establishes
repayment capacity based on applicant’s income, age, qualifications, experience,
employer, nature of business etc. to access credential. The bank can refuse loan
application if any discrepancy is found at this stage. But if everything goes according
to the conditions negotiated by the parties then the bank or HFC sanction the loan
that may be unconditional or with some conditions levied.

Step 5: Offer Letter After the sanction of the Home Loan, the applicant gets offer letter
from the bank or HFC with the following details. Loan amount, Rate of Interest, fixed or
variable ROI, Tenure of the loan, Mode of repayment General terms and conditions of
the loan, Special conditions etc. If the terms and conditions are agreed the applicant has
to sign
the duplicate copy of the offer letter and that is to be submitted to the Bank or HEC.
Step 6: Submission of legal documents & legal check
The bank or the HFC now asks for the legal documents of the property involved for
applying home loan. All the legal documents of the property involved have to be
submitted. The bank does all the legal checks on the property. The documents remain
with the bank until the repayment of the Home loan.

Step 7: Technical / Valuation check The Banks or HFC then go about the technical
valuation of the property. The experts of the bank visit the site to be purchased and
value it as per the existing rules and regulations. The valuation of the property is the
most important aspect that the bank considers before financing any property.

Step 8: Registration of property documents

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 After the legal and technical valuation of the property the draft documents has to be
cleared by the lawyer and stamping and registration of the documents is needed.

Step 9: Signing of agreements and submitting post-dated cheques

Now it is time of signing the final agreement of the home loan. After the signing of the
agreement a bunch of postdated cheques are to be submitted as agreed on the agreement.
Step 10: Disbursement It is time for the final Disbursement of the Home Loan. After
the bank or HFC ensures financing the property is invoagreed upon. The mode of
payment varies from full to part payment. In the case of under construction property
the move is part payment and in the case of ready possession properties disbarment
is full and final.

About HDFC:
HDFC Bank was incorporated in August 1994. As of September 30, 2019, the Bank had a
nationwide distribution network 5,314 branches and 13,514 ATM's in 2,768 cities/towns.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in
the private sector, as part of RBI's liberalisation of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995.

Promoter
HDFC is India's premier housing finance company and enjoys an impeccable track record in
India as well as in international markets. Since its inception in 1977, the Corporation has
maintained a consistent and healthy growth in its operations to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over a million dwelling units.

HDFC has developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related credit facilities.

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

Business Focus
HDFC Bank’s mission is to be a World Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of
banking services for target retail and wholesale customer segments, and to achieve healthy
growth in profitability, consistent with the bank’s risk appetite.

The bank is committed to maintain the highest level of ethical standards, professional
integrity, corporate governance and regulatory compliance. HDFC Bank’s business
philosophy is based on five core values: Operational Excellence, Customer Focus, Product
Leadership, People and Sustainability.

Distribution Network
HDFC Bank is headquartered in Mumbai. As of September 30, 2019, the Bank's distribution
network was at 5,314 branches across 2,768 cities. All branches are linked online on a
realtime basis. Customers across India are also serviced through multiple delivery channels
such as Phone Banking, Net Banking, Mobile Banking, and SMS based banking. The Bank's
expansion plans take into account the need to have a presence in all major industrial and
commercial centers, where its corporate customers are located, as well as the need to build
a strong retail customer base for both deposits and loan products. Being a clearing /
settlement bank to various leading stock exchanges, the Bank has branches in centres
where the NSE / BSE have a strong and active member base. The Bank also has a network
of 13,514 ATMs across India. HDFC Bank's ATM network can be accessed by all domestic
and international Visa / MasterCard, Visa Electron / Maestro, Plus / Cirrus and American
Express Credit / Charge cardholders.

Management
HDFC Bank's Board of Directors comprises eminent individuals with a wealth of experience
in public policy, administration, industry and commercial banking. Senior executives
representing HDFC Ltd. are also on the Board.

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Various businesses and functions in the Bank are headed by senior executives with work
experience in India and abroad. They report to the Managing Director. The Bank is focussed
on recruiting and retaining the best talent in the industry as it believes that its people are a
competitive strength.

Technology
HDFC Bank operates in a highly automated environment in terms of information technology
and communication systems. All the bank’s branches have online connectivity, which
enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch
access is also provided to retail customers through the branch network and Automated Teller
Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. In terms of core
banking software, the Corporate Banking business is supported by Flexcube, while the
Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems are open,
scaleable and web-enabled.

The Bank has prioritised its engagement in technology and the internet as one of its key
goals and has already made significant progress in web-enabling its core businesses. In
each of its businesses, the Bank has succeeded in leveraging its market position, expertise
and technology to create a competitive advantage and build market share.

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LIC Housing Finance:

LIC Housing Finance Limited (LIC HFL) is one of the largest Housing Finance Mortgage
loan companies in India having its Registered and Corporate office at Mumbai. LIC HFL is
a subsidiary company of LIC.

The main objective of the company is to provide long-term financing to individuals for the
purchase or construction of houses or flats for residential purposes; the company also
finances for the purpose of repair and renovation of existing flats and houses. The NBFC
also provides financing on existing property for business and personal needs and gives
loans to professionals for purchase or construction of Clinics, Nursing Homes, Diagnostic
Centres, and Office Space and also for purchase of equipments. The Company is very well
known for providing long term financing to individuals engaged in the business of
construction of houses or flats for residential purpose. LIC of India also holds promoter and
controller status in IDBI Bank Ltd from January 2019.

History
The company was incorporated on June 19, 1989, under the Companies Act, 1956. It is
promoted by Life Insurance Corporation of India and went public in the year 1994. The
maiden global depository receipt (GDR) issue was launched in 2004. The Authorized Capital
of the Company is Rs.1500 Million (Rs.150 crore) and its paid-up Capital is Rs.1009.9 Million
(Rs.100.99 crore). The Company is registered with National Housing Bank and listed on the
National Stock Exchange (NSE) & Bombay Stock Exchange Limited (BSE) and its shares
are traded only in Demat format. The GDR's are listed on the Luxembourg Stock
Exchange.

Operations
In FY-2019, It has 9 regional offices, 24 Back-offices, and 282 marketing Offices across
India. It also has 2 foreign offices in Kuwait and Dubai to cater to the Non-Resident Indians in
the Persian Gulf countries covering the residents of Bahrain, Dubai, Kuwait, Qatar, and
Saudi Arabia. It has more than 450 centres across India. The company also has more than
12000 marketing intermediaries or agents to guide through the loan processes. It also has
an online home loan approvals facility through its website.

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Employees
The company had 1345 employees as on 31 March 2013, out of which 444 were women
(31%) and 4 were employees with disabilities.
In its Annual report for FY 2012-13, the company reported that loan assets per employee as
at 31 March 2013 were Rs. 53.63 crore and net profit per employee was Rs. 70.51 lakh.
In the same financial year, it incurred INR 98.15 crore on employee benefit expenses.

As of 2019, the company has a total of 2103 employees, with a net profit per employee
amounting to approximately Rs. 94.62 lakh.

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Current scenario of home loans in India:-
In order to understand the recent trends we need to know or understand various
factors. These factors play vital role in Indian home loan market.

These include interest rate on which banks provide home loan, tax rebate on home
loan and its impact. Apart from this to understand the recent trend we need to compare
the trends of home loan of different years. Here we have compared the interest and
other market trends of year 2010 with 2009-10. This kind of comparison gives the
result which helps us to understand the trends of market of any industry. Apart from
the impact of present and past economic ups and down also affect the trends. Today
the US slowdown is the major issue which has affected almost all the industry. So we
have also discussed this issue in terms to define trend of home loan market in India.
In 2017, housing supply and pricing will be the key drivers, while demand for
singlefamily housing will remain strong—mirroring 2016. Positive job gains and
attractive interest rates continue to bring buyers to the market. Consumer confidence
will improve as employment growth remains positive, interest rates stay attractive, and
consumers continue to improve their balance sheets. On the other hand, supply is
struggling to keep up with demand as builders struggle to come back to the market.
Moreover, the foreclosure inventory has evaporated and the excess of available
existing homes is gone. Coupling these realities with low interest rates is resulting in
pricing growth that outpaces inflation. In particular submarkets, with very strong
demand characteristics and constrained supply, it is likely that unsustainable pricing
exists. In summary, the 2017 housing market will be strong, but buyers should beware
of potential pricing “bubbles” resulting from an imbalance between supply and
demand.
GOI has taken the following Initiatives to support the housing Sector in the recent
years: The Central Government has taken a few steps towards making ‘Housing for all’
a
reality by 2022. The Pradhan Mantri Awas Yojana (PMAY) was launched in June 2015.
The Government envisages building affordable pucca houses with water facility,
sanitation and electricity supply round-the-clock. The scheme originally was meant to
cover people in the EWS (annual income not exceeding Rs.3 lakh) and LIG (annual
income not exceeding Rs. 6 lakh) sections, but has recently expanded its scope to

24
cater to the housing needs of the mid-income group, besides the economically weaker
sections (EWS) and low-income group (LIG). PMAY scheme comprises of four key
aspects. One, it aims to transform slum areas by building homes for slum dwellers in
collaboration with private developers. Two, it plans to give a credit-linked subsidy to
weaker and mid income sections on loans taken for new construction or renovation of
existing homes. Three, the Government will chip in with financial assistance for
affordable housing projects done in partnership with States/ Union Territories for the
EWS. Four, it will extend direct financial assistance of Rs.1.5 lakh to EWS.

GST impact on Housing Sector

The real estate sector is estimated to account for about five per cent of India’s gross
domestic product (GDP) and is considered the second-largest employer in the country,
according to an E&Y report from 2015.
However, the sector faces issues in terms of macroeconomic conditions and fiscal
policy decisions. One such challenge is the management of the multiple indirect tax
levies, such as VAT, service tax, excise, and stamp duty and registration fees. Since
the GST is to subsume multiple indirect taxes, it will simplify tax compliance and
minimise the scope for double taxation. So, there is clear reason for home buyers to
cheer, even if they have to pay slightly more in case the standard GST rate is high.

RBI Directive for Home Loans

The Reserve Bank of India (RBI) has in the latest directive asked the Indian banks to
be more "fair and transparent" while signing their agreements with the Consumers.
This has come following complaints from various consumer sections regarding home
loans. It has emphasized on the fact that while giving a home loan, the banks should
not charge usurious interest rate to the borrower in such a fashion which often results
in pro-bank and against consumer interest.

•Households should get credit counseling before signing any loan agreement. In
such case, banks should give credit counseling to customer before giving a loan.
Any non-governmental organization can also give independent credit counseling to
small borrowers.
• Consumers often complain of not receiving benefits of falling interest rates as
banks tie their floating rate loans with its PLR and even when rates fall, the banks

25
kept the PLR unchanged. But when interest rates are hiked, the banks increase the
benchmark rate, thus making customers pay a higher rate and consequently
increase the number of EMIs too. The RBI has asked the banks to mend rules for
the same. However, RBI in its latest development has brought a concept of MCLR
(Marginal Cost of Fund Based Lending Rate), which refers to a minimum interest
rate a Bank can charge the borrower below which Bank cannot lend and this is a
resultant of the RBI’s Policy Rates, thereby brought a scope to pass on The benefit
of the RBI’s Interest Rate Change on the borrowers.
•Individual borrowers should ask for the exact tenure and EMI while taking a
fixed rate loan. The RBI has also resolved to look into all consumer complaints if it
is bought to the regulator's notice.
•The IRDA (insurance regulator) has powers to take action against banks if a
customer feels cheated while buying an insurance product along with the Home
Loan. On its regulatory role, the RBI is trying to maintain a balance between the
extent of freedom granted to the banks and the objectives of governance.

Challenges for home loan industry

The housing finance sector has emerged as one of the outstanding successes over
the last decade. In the earlier scenario, there were select few dominant players in the
housing finance industry, whereas in the current scenario, there is an increase in the
number of players in the housing finance industry over last three years. This has
increased a hefty competition in the housing finance industry.

Declining interest Rates

The interesting trend that has emerges in the housing finance market over the last
few years is the decreasing importance of interest rates (Anil K Khandelwal 2002).
This acts as a competitive tool. The interest rate charged by a small HFC was at
least two-and-a-half to three percentage point higher than the rate charged by HDFC.
The banks would of course charge the lowest rate. The nationalized commercial
banks, still offer the lowest rates on some occasion. There is not much difference in
the interest rates amongst the various players in the housing loan segment.

26
Service and Product Innovation
The service and product innovation are the only way to differentiate one company’s product
from another. This is due to the absence of a significant difference in interest rates. The
difference of a half-a-percentage point in interest on housing loans can be easily offset by
quick and reliable service. The product innovation as used to capture the market in this
industry. The competition has made the housing finance institutions look for the needs not
met in a seemingly straight forward product. Now the HFCs are offering insurance
packages that come attached to a housing loan product. The severe competition will bring
few more innovations in the future. The product innovation is unlikely to remain unique for
long because companies quickly mimic a successful introduction. The only benefit from
product innovation is to build an image and the advantage of being the first to capture the
market.

27
OBJECTIVES

28
 OBJECTIVES OF THE STUDY

1) To study customer awareness about home loan facilities in India.

2) To understand the preferences of the customers towards the loan services offered by
various banks.

3) To study the customers` satisfaction levels towards housing finance banks in India.

4) To understand the preferences of the customers towards home loans offered by HDFC
and LIC Housing Finance Ltd.

29
 LITERATURE REVIEW
Real estate and dwellings has a share of5.9 per cent in India’s GDP and a growth of
7.2 percent in 2011-12. The growth of real estate services in has been consistently
impressive at over 25 per cent since 2005-6 with26.3 per cent growth in 2011-12.
Housing is a basic necessity for human life and second largest generator of
employment, next only to agriculture. Housing activities have both forward and
backward linkages in nearly 300 sub-sectors such as manufacturing (steel, cement,
and builders’ hardware), transport, electricity, gas and water Supply, trade, financial
services, and construction which contribute to capital formation, income opportunities,
and generation of employment. In 2012-13 property prices have moderated. As per
the National Housing Bank (NHB) RESIDEX index for the quarter July-September
2012 compared to April-June 2012 (covering 20 cities, with 2007 as base year), there
is a general decline in prices of residential properties in some smaller towns, while
there is increase in some other cities which is marginal. In view of increased
urbanization, the housing requirements in urban areas have been witnessing increase
over the years. The Eleventh Five Year Plan (2007-12) estimated housing requirement
of 24.7 million units in urban areas of which 99 percent was in the economically
weaker sections/lower income groups (EWS/LIG) segment. As per the estimation of
the Task Force on Housing Requirements in Urban Areas during the Twelfth Five Year
Plan Period (2012-17), the housing requirement in urban areas is 18.7 million units of
which 18.5million are for the EWS/LIG segment. As per a McKinsey Report, the
demand for affordable housing will be 38 million by 2030. To support the growth of the
housing and real estate sector, many institutions have been setup especially for
financing. While these institutions largely cater to the formal sector, access to finance
by the informal market segment largely remains untapped. As this untapped market
segment is significant and growing, the Government of India has announced various
measures like the Interest Subsidy Scheme for Housing for the Urban Poor and setting
up of the Credit Risk Guarantee Fund Trust for Low Income Housing. With support
from lending institutions, housing credit has grown substantially over the years,
resulting in increased market penetration. The housing loan portfolio of scheduled
commercial banks and housing finance companies– the major institutional players
– stood at ` 6.10lakh crore as in end-March 2012. However, due to limited housing
finance solutions, the gap between housing demand and supply is widening. Besides
the mortgage market in India is also underdeveloped. Though mortgages as

30
a percentage of GDP have improved from 3.4 per cent in 2001 to 9 per cent in 201112,
the share is relatively lower than in many other countries – such as China (12 per
cent), Thailand (17 per cent), Malaysia (29 per cent), Hong Kong (40 per cent), and
the USA (65 per cent). While advanced countries like the US were rattled by the
subprime crisis, Indian banks have demonstrated a great amount of maturity in their
lending for the housing sector. The government has also taken many policy measures
for this sector. In Union Budget 2012-13, a number of incentives were given for
promoting affordable housing like allowing external commercial borrowings (ECB) for
low cost affordable housing projects, increase in investment linked deduction of capital
expenditure incurred in the affordable housing projects, exemption from service tax
payments for construction services related to residential dwellings, and low cost mass
housing up to an area of 60 sq. m under the Scheme of Affordable Housing in
Partnership. A Credit Risk Guarantee Fund Trust has been established since 1May
2012, which will be managed by the NHB, and provide default guarantee for housing
loans up to ` 5lakhRs. Sanctioned and disbursed by the lending institutions without
any collateral security or third party guarantees and for new borrowers in the EWS/LIG
category in urban areas. The NHB has also floated a joint-venture mortgage guarantee
company– the India Mortgage Guarantee Corporation Pvt. Ltd—which will offer
mortgage guarantees against borrower defaults on housing loans from mortgage
lenders which will help
expand access to housing in India. Renting of residential units has been included in
negative list of services, which are exempt from service tax. In order to develop
strategic policy intervention to promote rental housing as a viable alternative for
addressing the housing shortage, the Government of India has also set up a task force
for rental housing. The Rajiv Awas Yojana (RAY) also provides support to states for
creation of affordable housing stock and assigning property rights to slum dwellers.
India’s housing and real estate sector faces many challenges. While India is among
the top countries in terms of housing and workspace needs, it ranks 182nd in
construction permission processes according to the World Bank’s Doing Business
2013report. There are 34 procedures and the average time taken is 196 days, which
increases the sale value by 40 per cent. Rapid increase in land prices, absence of a
long-term funding and lending market at fixed rates, limited developer finance, the
Urban Land Ceiling Regulations Act (ULCRA) continuing in some states, existing lower
floor area ratio in cities, high stamp duties and difficulties in land

31
Acquisition are some other issues which need to be addressed. ‘Affordable Housing
for All’ is another challenge as the demand for housing by the EWS/LIG segment has
increased.
According to Bandyopadhyay Arindam and Saha Asish (2011), in their article studied
they focused that the importance of borrower-specific characteristics as well as local
situation factors in determining the demand prospect as well as the risk of credit loss on
residential housing loan repayment behaviour in India. They used 13,487 housing loan
accounts (sanctioned from 1993-2007) data from Banks and Housing Finance Cos
(HFCs) in India. This paper made an attempt to find out the crucial factors that
drive demand for housing and its correlation with borrower characteristics by using a
panel regression method and logistic regression.

According to Anand Kumar T.S and others (2008), in their paper they examined the
practical guidance to MFIs adopting the housing programme in addition to the existing
line of micro-finance services and inputs about any market.

According to Bandyopadhyay Arindam and Saha Asish (2011), in their article studied
they focused that the importance of borrower-specific characteristics as well as local
situation factors in determining the demand prospect as well as the risk of credit loss
on residential housing loan repayment behaviour in India. They used 13,487 housing
loan accounts (sanctioned from 1993-2007) data from Banks and Housing Finance
Cos (HFCs) in India. This paper made an attempt to find out the crucial factors that
drive demand for housing and its correlation with borrower characteristics by using a
panel regression method and logistic regression.

According to Anand Kumar T.S and others (2008), in their paper they examined the
practical guidance to MFIs adopting the housing programme in addition to the existing
line of micro-finance services and inputs about any market According to
Bandyopadhyay Arindam and Saha Asish (2011), in their article studied they focused
that the importance of borrower-specific characteristics as well as local situation
factors in determining the demand prospect as well as the risk of credit loss on
residential housing loan repayment behaviour in India. They used 13,487 housing loan
accounts (sanctioned from 1993-2007) data from Banks and Housing Finance
Cos

32
(HFCs) in India. This paper made an attempt to find out the crucial factors that drive
demand for housing and its correlation with borrower characteristics by using a panel
regression method and logistic regression.
The first attempt in this regard was the National Housing Policy (NHP), which was
introduced in 1988. The National Housing Bank (NHB) was set up in 1988 as an
apex institution for housing finance and a wholly owned subsidiary of Reserve Bank
of India (RBI). The main objective of the bank is to promote and establish the housing
financial institutions in the country as well as to provide refinance facilities to housing
finance corporations and scheduled commercial banks. Moreover, for the salaried
section, the tax rebates on housing loans have been introduced. International
Journal of Trend in Scientific Research and Development (IJTSRD) Housing being
one of the three fundamental needs of life dependably stays in the top needs of any
individual, society and economy. As a person, an individual needs his own space
and protection, which can be given by the responsibility for house.
The house is the fundamental unit of the general public. Home gives a stage to the
family and the family is the most significant social establishment, which leaves its
engraving on a person for entire life. In this way lodging merits critical consideration
with regards to creating approaches and systems for human advancement. Yet at
the same time most of human people lives in ghettos, shanties and transitory pitiful
havens in provincial zones. The lack of lodging is a major obstacle in the sound
improvement of an individual and therefore the general public, and the country. The
issue of room, protection, security and sanitation prompts social, financial and
natural degeneration. The unending hardship for space and house-possession
prompts individual and social complication, which is impeding for the general public
and the economy. A creating country like India needs to concentrate more on
lodging area to take into account the lodging needs of expanding populace and to
quicken the monetary development. The lodging part has been all inclusive utilized
as a motor to drive the financial development as it produces work and request in the
market. Most recent multi decade has seen the specialists giving huge spotlight on
the lodging division in India.

Keywords: housing finance, market and impediment

Housing is a significant part and a proportion of financial status of the general population. It
is viewed as a basic part regarding approach activities and meditations.

33
An enormous part of our populace is as yet missing legitimate lodging office.
The lodging issue in India is an annoying issue both in the country and urban regions.
One of the primary reasons of the issue of lodging deficiency is its size of populace. It
is said that one among the each six people on the planet is an Indian. India stands
second among the worlds to a great extent populated nation

According to Bandyopadhyay Arindam and Saha Asish (2011), in their article studied
they focused that the importance of borrower-specific characteristics as well as local
situation factors in determining the demand prospect as well as the risk of credit loss
on residential housing loan repayment behaviour in India. They used 13,487 housing
loan accounts (sanctioned from 1993-2007) data from Banks and Housing Finance
Cos (HFCs) in India. This paper made an attempt to find out the crucial factors that
drive demand for housing and its correlation with borrower characteristics by using a
panel regression method and logistic regression.

According to Anand Kumar T.S and others (2008), in their paper they examined the
practice According to Bandyopadhyay Arindam and Saha Asish (2011), in their article
studied they focused that the importance of borrower-specific characteristics as well
as local situation factors in determining the demand prospect as well as the risk of
credit loss on residential housing loan repayment behaviour in India. They used
13,487 housing loan accounts (sanctioned from 1993-2007) data from Banks and
Housing Finance Cos (HFCs) in India. This paper made an attempt to find out the
crucial factors that drive demand for housing and its correlation with borrower
characteristics by using a panel regression method and logistic regression. According
to Anand Kumar T.S and others (2008), in their paper they examined the practical
guidance to MFIs adopting the housing programme in addition to the existing line of
micro-finance services and inputs about

any market study, profiling the customers, product design, pricing of the product,
affordability of the clients, income assessment, loan assessment, operational
procedures, risk coping mechanisms and technical backup guidance. They found that
MFIs should also ensure that housing micro-finance suits their strategy from
institutional and financial perspectives. Singh, et.al, (2006) in his article described the
housing sector by introducing various housing loan schemes for rural and urban
population. The first attempt in this regard was the National Housing Policy (NHP),

34
which was introduced in 1988. The National Housing Bank (NHB) was set up in 1988
as an apex institution for housing finance and a whollyowned subsidiary of Reserve
Bank of India (RBI). The main objective of the bank is to promote and establish the
housing financial institutions in the country as well as to provide refinance facilities to
housing finance corporations and scheduled commercial banks. Moreover, for the
salaried section, the tax rebates on housing loans have been introduced. The paper is
based on the case study of LIC Housing Finance Ltd., which analyses regionwide
disbursements of individual house loans, their portfolio amounts and the defaults for
the last ten years, i.e., from 1995-96 to 2004-05 by working out relevant ratios in terms
of percentages and the compound annual growth rates. The authors have said that
there is a need for designing the special schemes for financing of LIC Housing Finance
Limited to meet its prime goal. According to Joydip Dasgupta (2015), in his paper he
focused on Interest Rate Risk Management of HDFC which started off in 1977 as a
new mortgage bank and operated S&Lsin the first few years and raised retail deposits.
This did not create much problem for the entity in the administered interest rate regime.
The study offered a new paradigm shift in the financing pattern of HDFC for
development of housing industry. The shift of financial strategy is suited to countershift
risk profiles in the housing finance business in India and thus HDFC managed to create
a niche in the industry. The author strongly felt that there is a need for extending liberal
rate of interest to housing industry.

35
 Research Methodology
Research Methodology

The process used to collect information and data for the purpose of making business
Decisions. The methodology may include publication research, interviews, surveys and
Other research techniques, and could include both present and historical information. For
this study data is collected through primary as well as secondary source.

Research methods

The research is primarily both exploratory as well as descriptive in nature. The sources
of information are both primary & secondary. A well-structured questionnaire was
prepared and personal interviews were conducted to collect the customer’s perception
and buying behavior, through this questionnaire. The goal of the research process is
to produce new knowledge or deepen understanding of a topic or issue. This process
takes three main forms (although, as previously discussed, the boundaries between
them may be obscure):

- which tests theories and proposes solutions to a problem or

question.
- which tests the feasibility of a solution using empirica evidence.

There are two major types of research design: qualitative research and quantitative
research. Researchers choose qualitative or quantitative methods according to the
nature of the research topic they want to investigate and the research questions they
aim to answer:

Quantitative research

Systematic empirical investigation of quantitative properties and phenomena and their

relationships. Asking a narrow question and collecting numerical data to analyze
utilizing statistical methods. The quantitative research designs are experimental,
correlation, and survey (or descriptive). Statistics derived from quantitative research
can be used to establish the existence of associative or causal relationships between

36
variables. Quantitative research is linked with the philosophical and theoretical stance
of positivism
Qualitative research

Understanding of human behavior and the reasons that govern such behavior Asking a
broad question and collecting data in the form of words, images, video etc that is
analyzed searching for themes. This type of research aims to investigate a question
without attempting to quantifiably measure variables or look to potential relationships
between variables. It is viewed as more restrictive in testing hypotheses because it can
be expensive and time consuming, and typically limited to a single set of research
subjects Qualitative research is often used as a method of exploratory research as a
basis for later quantitative research hypotheses. Qualitative research is linked with the
philosophical and theoretical stance of social constructionism.

What is a Questionnaire?
A questionnaire is a research instrument that consists of a set of questions or other
types of prompts that aims to collect information from a respondent. A research
questionnaire is typically a mix of close-ended questions and open-ended questions.
Open-ended, long-form questions offer the respondent the ability to elaborate on their
thoughts. Research questionnaires were developed in 1838 by the Statistical Society
of London.

The data collected from a data collection questionnaire can be both qualitative as
well as quantitative in nature. A questionnaire may or may not be delivered in the
form of a survey, but a survey always consists of a questionnaire.

Questionnaire Examples

The best way to understand how questionnaires work is to see the types of questionnaires
available. Some examples of a questionnaire are:

1. Customer Satisfaction Questionnaire: This type of research can be

used in any situation where there’s an interaction between a customer and
an organization. For example, you might send a customer satisfaction survey

37
 after someone eats at your restaurant. You can use the study to determine if
your staff is offering excellent customer service and a positive overall
experience.

2. Product Use Satisfaction Questionnaire: You can use this

Template to better understand your product’s usage trends and similar
products. This also allows you to collect customer preferences about the
types of products they enjoy or want to see on the market.

3. Company Communications Evaluation Questionnaire: Unlike

the other examples, a company communications evaluation looks at internal
and external communications. It can be used to check if the policies of the
organization are being enforced across the board, both with employees and
clients.

The most significant limitation of a data collection questionnaire is that respondents

need to read all of the questions and respond to them. For example, you send an
invitation through email asking respondents to complete the questions on social
media. If a target respondent doesn’t have the right social media profiles, they can’t
answer your questions.

Sources of Data
The study is based on primary as well as secondary data.
a) Collecting Primary Data Primary data are collected through the responses of
the customers through questionnaires which were specially prepared for this
study. The questionnaire contained questions regarding the general and socio-
economic characteristics of the respondents such as age, religion, educational
qualification, etc. and also about their reason for taking home loan, term, rate of
interest, procedure etc. A sample size of 100 was used because it is not possible
to cover the whole India consisting of all the customers.
b) Collecting Secondary Data There was extensive use of secondary information
in the form of books, articles published in magazines, journals, newspaper,
reports of HDFC and LIC Housing Finance Ltd., websites, circulars, pamphlets
of the banks, clippings etc.

38
RESEARCH PROCESS IN THIS PROJECT/STUDY:

•RESEARCH TYPE: Descriptive and analytical

•DATA COLLECTION:Primary and secondary
•DATA POPULATION:Individual
•SAMPLE SIZE: 100
•REASEARCH AREA: India
•RESEARCH TOOLS: MS excel, Graphical analysis.
•TOOLS OF ANALYSIS: Percentage and Ratios

39
Analysis and Interpretation

40
Question 1. When did you take home loan??

2000-2010 15
2010-2020 45
2020-present 40
Table 1 timeline of home loan applicants

timeline for home loan applications

2020-present

2010-2020

2001-2010

0 5 10 15 20 25 30 35 40 45

no. of respondants 50

Graph 1 Timeline of home loan applicants.

INTERPRETATION:

15 respondents applied for home loan from 2000 to 2010. Since then there has been a
significant growth in the home loan market. 45 respondents applied for home
loan from 2010 to 2020. Continuing so, 40 respondents applied for home loan in just two and
a half years. This shows the increase in the awareness among people regarding home
loans.

41
 Question 2. What are the different kinds of home loans you are aware of?

PURCHASE OF LAND 23
HOME PURCHASE 21
CONSRUCTION OF HOUSE. 15
HOME IMPROVEMENT 24
HOUSE EXTENTION 17

Table 2 types of home loan available

HOUSE EXTENTION 17

HOME IMPROVEMENT 24

CONSRUCTION OF HOUSE 15 15

HOME PURCHASE 21

PURCHASE OF LAND 23

0 5 10 15 20 25 30

Graph 2 types of home loan available

INTERPRETATION:

There are different kinds of home loans available in the market but very few people are
aware about all of them. 21 people say that they are aware about home loan approval for
purchase of land. 21 people are aware about availability of home loans for home purchase.
There is still lack of awareness regarding different options for which a home loan can be
sanctioned.

42
Question 3. What according to you is the current interest rate for home loans?

0-5 45
6-10. 22
11-15 6
23 15 0

Table 3 awareness about current interest rates for home loans

50

45
40
35

30

25

20

15

10

0 to 5 6 to 10 10 to 15 above 15

no. of respondants

Graph 3 awareness about current interest rates for home loans

INTERPRETATION

Most of the respondents are aware about the home loan interest rates of different banks
available in the market , this shows that people are more aware of the home loan interest rates

43
 as low interest rates always gives a huge amount of benefit and more amount of savings .
Choosing a lender that offers you a competitive rate of interest helps in saving interest cost.
While taking a home loan for the first time or getting it refinanced from another lender at a
lower rate, even a difference of 1% can result in a saving of a few lakh rupees.

Question 4. Rate the level of satisfaction from the home loan services availed
by you. (5= highly satisfied, 1= highly dissatisfied)

GRADE 5 42
GRADE 4 32
GRADE 3 16
GRADE 2 3
GRADE 1 7

Table 4 level of satisfaction of home loan applicants

45

40

35

30

25
42
20
32
15

10
16

5 7
3
0
GRADE 5 GRADE 4 GRADE 3 GRADE 2 GRADE 1

Graph 4 level of satisfaction of home loan applicants

INTERPRETATION

Above 50% of the respondents gave above 4 star ratings to the home loan services availed by

them. This shows the efforts of different home loan financing companies to cater their

customers. But still there are customers who aren’t very much satisfied with the services availed

44
 by them. Reason could be of various kinds. This shows there’s still a room for improvement by

housing finance companies.

Question 5. How would you rate your knowledge regarding different kind of
repayment options available to you? (5= highly satisfied, 1= highly dissatisfied)
GRADE 5 23
GRADE 4 46
GRADE 3 16
GRADE 2 12
GRADE 1 3

Table 5 knowledge of different repayment options

50
45

40

35

30

25
46
20

15
23
10
16
5 12

3
0
GRADE 5 GRADE 4 GRADE 3 GRADE 2 GRADE 1

Graph 5 knowledge of different repayment options

INTERPRETATION

Nearly 60% percent of the respondents are aware of the repayments options which are available and
rest arenot.

45
Loan repayment generally occurs through equated monthly instalments (EMIs). These instalments are
the amount of money that is repaid to the lender every month. It is made up of

two components – the principal amount and the interest on the principal amount, paid to the bank or
lender on a fixed date each month until the total amount due is paid up over the loan tenure.

Question 6. What difficulties were faced by you during sanctioning process?

DOCUMENTATION HURDLES 49
LACK OF AWARENESS ABOUT 21
CHARGES
DIFFERENCES IN PROPERTY 16
VALUATION
OTHERS 14

Table 6 Hurdles during sanctioning process

OTHERS 14

DIFFERENCES IN PROPERTY VALUATION 16

LACK OF AWARENESS ABOUT CHARGES 21

DOCUMENTATION HURDLES 49

0 10 20 30 40 50 60

Graph 6 Hurdles during sanctioning process

46
 INTERPRETATION
All of the 100 respondents have faced problems in getting their loan sanctioned. Different kinds of

problems were faced like documentation hurdles, lack of awareness about charges,
differenced in property valuation etc. All this shows that housing finance companies are still not able to
provide a smooth loan process to their customers. This also shows that people lack knowledge
about different aspects of getting loan sanctioned smoothly.

Question 7. How would you like to rate the documentation process?

EXCELLENT 27
GOOD 53
FAIR 10
AVERAGE 2
BELOW AVERAGE 8

Table 7 Ratings for documentation process

60

50

40

30
53

20

27
10

10 8
2
0
EXCELLENT GOOD AVERAGE BELOW AVERAGE
FAIR

Graph 7 Ratings for documentation process

47
 INTERPRETATION

Nearly 80% people found the documentation process good enough. The others rated

the documentation process as fair, average and below average. There could be
numerous reasons behind the dissatisfaction. The documentation involved in a home

loan process can be tedious for many applicants. Home loan is a versatile process that requires
a careful review of a huge bunch of documents. The process itself can often be
cumbersome, unless you have a clear understanding of why a certain document is
important. Paperwork is essential, irrespective of your credit score and income level.

Question 8. “The loan officer was cooperative enough.” How much do you agree
with this statement?
STRONGLY AGREE 42
AGREE 26
NEUTRAL 14
DISAGREE 8
STRONGLY DISAGREE 10

Table 8 opinion for loan officer

STRONGLY DISAGREE 10

DISAGREE
8

NEUTRAL 14

AGREE 26

STRONGLY AGREE 42

0 5 10 15 20 25 30 35 40 45

Graph 8 opinion for loan officer

48
 INTERPRETATION

A Loan Officer's responsibilities include reviewing, authorizing and recommending loans for
approval. They meet with applicants to determine their creditworthiness before
deciding whether or not they will offer them a personal or commercial loan. More than half of
the respondents feel like the loan officer was cooperative enough which is a very good
sign of satisfaction.
Question 9. Do you have any prior experience with HDFC or LIC Housing Finance Ltd.?
I HAVE 39
I DON’T 61

Table 9 experience with HDFC or LIC

39%

61%

I HAVE I DON'T HAVE

Graph 9 experience with HDFC or LIC

INTERPRETATION

Around 60% people have prior experience with HDFC or LIC Housing finance Ltd. This
shows their supremacy in the market of housing finance sector.

49
Question 10. Which one among HDFC and LIC housing finance would you prefer?

HDFC 54
LIC HOUSING FINANCE 46

Table 10 Preference of customers

46%

54%

HDFC LIC HOUSING FINANCE

Graph 10 Preference of customers

INTERPRETATION

Among all the 100 respondents, 54 people chose HDFC as their preference and the

rest 46 respondents chose LIC. This could be because of better services being
provided by HDFC.

Question 11. Why do you prefer any specific home loan company?

50
 Easy and transparent process; no 47
hidden charges.
Pre-approval of home loan 19
Free and safe document storage 27
Competitive interest rates 3
Any other 4

Table 11 Reasons for preference

Any other 4

Competitive interest rates 3

Free and safe document storage 27

Pre-approval of home loan 19

Easy and transparent process; no hidden charges.

47

0 5 10 15 20 25 30 35 40 45 50

Graph 11 Reasons for preference

INTERPRETATION

Most of the people look for easy and transparent process with no hidden charges. Free
and safe documentation storage is what many people looks for in any housing finance
company. There are other things too which are important from a point of view of a
customer. A customer usually looks for a smooth and hassle free process. Question 12.
What suggestions do you want to give?

Consistency in home loan rates 32

Easiness in documentation process 24

Transparent process 27

Any other 17

51
 consistency in home loan rates easiness in documenation process
transparent process any othe

Graph 12 suggestions by customers

INTERPRETATION

According to the analysis, 32% people wants the consistency in home loan rates. 24%
of them wants to have easiness in documentation process. 27% wants more
transparency in the whole process and the rest have other suggestions.
Smaller HFCs
The image building is likely to be very crucial to all HFCs. The traditional strengths of
HDFC, ICICI and LIC housing finance made the life of smaller HFCs very tough. The
smaller HFCs are likely to be more active in smaller towns. The smaller towns are less
likely to witness head-on competition from bigger players. So in this segment the
smaller HFCs try to capture the market.

HFCs vs. Banks

The banks aid HFCs are competing each other in the housing finance market. The
severe competition between these two housing finance providers had made them to
adopt various strategies to increase their market share. The HFCs are facing lot of
constraints as against the banks. The banks have access to lower cost of funds
compared to HFCs because banks have easy access to low cost retail funds and low

52
minimum capital adequacy ratio. The HFCs are not given refinance by NHB at
competitive rates. The banks despite a late entrant have overtaken the HFCs in the
home loan markets. The share of banks in total home loan disbursements has risen
from 43.6% in the year 2000-01 to 65.5% in 2002-03.
Consumer Services
The current housing finance market is skewed in the favor of the buyers. The home
buyers are rushing to take a housing loan without fully exploring the options available.
The housing finance sector has certainly become more competitive in recent times.
The banks and housing finance companies market their housing finance products
much more aggressively. The customers are seeking more convenience in the entire
process of acquiring a home as well as the finance for it (Rajiv Sabharwal 2002).
Therefore the marketing has assumed significance in the rapid increase in activity of
housing finance sector. The housing finance institutions are resorting to various
marketing strategies to effectively market the specialized
finance products.
The housing finance providers are trying to satisfy the customer. As far as the industry
is concerned the customer appears to gain from the competition in the way of better
products better prices and better services (Gunit Chadha 2002). The real
discriminating point, as far as the customer is concerned, will become his perception
of the quality of service of one company over the other.

Future of home loan industry in India

The housing finance is likely to remain a low risk low margin business that records
fast growth in the foreseeable future. The market is likely to get a little broader
based approach (Mistry K K 2002). The HDFC’s market share may be eaten by
ICICI. The
industry will continue to be dominated by a handful of big players and it is difficult to
see beyond HDFC, LIC Housing Finance and ICICI as dominant players at this point.
The HFCs will continue to operate in a highly competitive market with higher demand
for home finance. The housing shortage and the government initiatives and above all
the customer-centric interest rates will be the drivers of HFCs. The improvement in
products, services, access and reduction in interest rates will retain and create
customers. The buyers are the ultimate beneficiaries at large. There are several
bottlenecks exist in this industry. They have to be taken care of, before any of the
above can bring about an improvement in the prospects of the industry. The overall

53
 demand for housing is ever rising and the same would be reflected on the demand for
funds. Hence the profitability of the industry should commence on the positive track
in the future.
HDFC:
According to the article published on The Economic Times on January 24, 2022, Vibha
Padalkar, MD and CEO, HDFC Life, said “Margins will continue to show a smooth
upward trend. We have done fairly well in this quarter on a standalone basis. We have
gone up from 26.4% to 26.8% and on a nine month basis, there has been an
improvement in margin from 25.6% to 26.5% and consequently a growth in our VNB
by 26%.”

HDFC bank performed very holistically. All of their channels grew significantly and did
well. The Last quarter ended March 31, It assigned loans amounting to Rs 8367 crore
compared to Rs 7503 crore in the corresponding quarter of the previous year. This
means theres a jump of 11.51 percent. In its public disclosure filed on stock exchanges,
HDFC said, gross income from dividend for the quarter ended March 31, 2022 was Rs
128 crore, up 15.31 per cent from Rs 111 crore. Last month an HDFC official said it had
approved retail home loans totalling more than Rs 2 lakh crore in the current fiscal year,
its highest ever. Last year the lender had processed home loans worth Rs 1.55 lakh
crore, registering a year-on-year growth of 30% as demand for homes surged.

:
LIC Housing Finance Ltd.:

According to a report published on Business Standard, Mortgage lender LIC Housing

Finance (LICHFL) on Thursday reported a 6 per cent increase in profit after tax at Rs
767.33 crore for the quarter ended December 2021, aided by higher collections and drop
in provisions. It had reported a profit after tax of Rs 727.04 crore in the same period of the
previous fiscal. "The income levels were more or less maintained. Our collections were
good during the three months of the quarter. Recovery also picked up across all the
regions. "Even the provisions were less in the quarter because of the provisions we had
made earlier," the company's Managing Director and CEO Y Viswanatha Gowd said. The
lender reported better growth in the quarter due to higher disbursements during the festive
season. Gowd also said with easing of the pandemic, growth and asset quality metrics are

54
expected to improve. Provisions during the quarter stood at Rs 355 crore as against Rs
665 crore made in the second quarter of this fiscal.
Net interest income (NII) grew 14 per cent to Rs 1,455 crore, as against Rs 1,281 crore for
the same period in the previous year.

Net interest margin (NIM) improved to 2.42 per cent as against 2.36 per cent. Gowd expects
Q4 NIM to be at around 2.50 per cent.

The stage 3 exposure at default stood at 5.04 per cent, as against 2.68 per cent as on
December 31, 2020.

The individual loan portfolio was Rs 2, 29,321 crore, compared to Rs 2, 04,444 crore earlier,
a growth of 12 per cent.

Project loan portfolio stood at Rs 14,091 crore as against Rs 15,753 crore as on December
31, 2020.

Total outstanding portfolio grew at 11 per cent to Rs 2, 43,412 crore from Rs 2, 20,197 crore.

55
 Limitations of the study

No research is without limitations, but their number can be reduced to achieve accuracy The
survey conducted within the limited period, so shortcomings may be expected.

the respondent’s personal bias is uncontrollable. The finds of the survey is strictly Based
on responses of the respondents.
It is difficult to find the euthenics be true, so they are assumed to be true. it was
difficult to find respondents as they were busy in their schedule, and collection Of data
was very difficult. Therefore, the study had to be carried out based on the Availability
of respondents.
the respondents were not comfortable; they showed non-cooperative approach And
rude behavior while revealing their information. Some respondents responded Half-
heartedly and gave incomplete information.

56
CONCLUSION AND RECOMMENDATION

57
Concluding note

The housing finance industry could be saddled with an increasing number of bad loans
as greater competition forces lenders into stepping up volume to maintain profit,
according to National Housing Bank chairman R.V.Verma. The waiver of prepayment
penalty charges has increased rivalry among banks and housing finance companies,
which the regulator fears will lead to a dilution in underwriting and appraisal standards.
The Reserve Bank of India (RBI) had ordered the waiver of penalties on early
payments of floating-rate loans in October 2011 to ease the burden on borrowers. The
housing finance market is expected to grow 20% and reach a size of Rs.1.25-1.3 trillion
by the end of the current fiscal, with banks having a two-third share and housing
finance companies the rest.
Increasingly, borrowers are looking at more than just interest rates and also
considering service standard. Aggressive practices, such as the waiving of processing
fees by big banks could be harmful for the industry.
Housing finance companies typically lend at one-two percentage points more than
banks, since the latter are among their source of funds. That edge is persuading many
customers shift from housing finance companies to banks. The Indian housing finance
market cannot be looked at independently of the government’s role in the overall
financial sector, which is nowadays characterized by a process of liberalization.
However, the Indian government has tried, and is still trying, to stimulate economic
development by control-ling interest rates and directing credit to priority sectors.
Furthermore, private sector housing finance has been developed since 1977 and the
creation of the National Housing Bank has helped the sector to develop further. In
addition to specific guidelines and directions of HFCs, lending regulations, refinance
facilities and the Home Loan Account scheme were set up with the particular intention
of serving the small man. However, the intentions conflict with reality. The poor still
face problems of accessibility, affordability and suitability of formal housing finance
through HFCs. HFCs tend mainly to serve households with incomes above medium
level, because the lending criteria (long-term credit, large loan size and tight methods
of repayment) most closely fit the life-style of this income group. This clientele is known
to the HFCs and can be served relatively easily, after careful checking of their
repayment capacity, without fearing high default rates. The same lending criteria,

58
apart from a lower interest rate, are used for the poor. The poor are then treated as
extremely risky, instead of the lending criteria being questioned. Government control
of the Indian housing finance market limits its further development. Financial
subsidies, such as on interest rates and tax exemptions, generally benefit the better
off. It would be wise to stop giving subsidies such as tax concessions and subsidies
on interest rates, which are a burden on the financial system and the tax payers.
Further liberalization of the financial market may be suggested to enable the
development of a kaleidoscope of credit instruments for the different segments of the
various income groups. The Indian example of down-marketing housing finance
shows that it cannot be assumed that the private sector will serve the small man, even
if supportive measures are developed. HFCs are reluctant to deal with the small man,
because they are an unknown group. An important lesson from the case described,
which is probably beyond the Indian context, is that a credit mechanism which fits an
incremental way of building should be developed instead of trying to fit the poor into
the existing housing finance jacket. Such credit should be characterized by short- or
medium-term credit, relatively small amounts and flexible repayment methods. In
other words, an enabling strategy for the poor has more potential than encouraging
the private sector to serve the small man. Reform of the housing finance schemes for
middle and low-income households should take place simultaneously. If emphasis is
put on the development of housing finance schemes for the poor and schemes for the
middle-income households are neglected, middle-class groups will probably
appropriate the schemes meant for the poor. Instead of interest subsidies on housing
loans for the poor, one-time grants for households may be a better way to help them.

59
 References

• The Economic times

• The business standard

• Wikipedia

• Anthony B. Sanders, Barriers to homeownership and housing quality: The impact

of the international mortgage market, Journal of Housing Economics, 14(3), 2005,
147-152.

• Naik D.D, Housing Finance Pamphlet 163, Commerce Publication, Bombay,

1981. pp.1, 12, 15 and 18.
• J.P. Sah selected papers. Up. City, 2011.

• Manorama Year Book, with a special feature on 50 years of Indian freedom and
Democracy and development, 32nd year of publication, 1997, pp. 600.

• Krishnamachari S M, Mobilisation of Finance for Rural Housing, Yojana

Publication Division, New Delhi, 26 1980, 16-18.

• Satyanarayana C P, Housing rural poor and their living conditions, Gain

Publishing House, Delhi, 1987, 15.

• India year Book, Director. Publication Division, Ministry of information and

Broadcasting, Government of India publication, New Delhi, 1988-89, 597.

• Andra C. Ghent and Michael T. Owyang, Is housing the business cycle?

Evidence from US cities, Journal of Urban Economics, 67(3), 2010, 336-35.

• Despande, Cheap and healthy house for the middle classes in India - United Book
Corporation, Pune, 1975, 1-10.

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• Rangwala S.C., ―Town P1anning R.C. Patel, Charotar Book Stall, 1998,5161.

• GopinathRao, C.H., Ownership of flats: Sai Ganesh offset printers – Santhome,

Madras 4, 1988, 1- 4.

• Dr.HarichandranC., Housing Development Finance, Yojana Publication Division,

New Delhi,35,1989,11-25.
• Solanki, op. cit. 1989.

• Chacko K.O., Annual General Body meeting of cooperative societies: A tutorial

review, A Seminar on 'Housing Finance, 1989.

• MadhavRao, A.G. Murthy and Annamalai G, Modem Trend in housing in

Developing Countries, (Oxford and IBH Publishing Company, New Delhi, 1985,
341).
• Amin Y. Kamete, EXNORA's zero waste management models revisiting the urban
housing crisis in Zimbabwe: Some forgotten dimensions?, Journal of Habitat
International, 30(4), (2011,981-995.

• Erwin Mlecnik, HenkVisscher and Anke van Hal, Barriers and opportunities for
labels for highly energy-efficient houses, Journal of Energy Policy, 38(8), 2010,
4592-4603.
• OnzaloLizarralde, Stakeholder participation and incremental housing in
subsidized housing projects in Colombia and South Africa, Journal of Habitat
International, 35( 2), 2011, 175-187.

• Richard Harris and Ceinwen Giles, A mixed message: the agents and forms of
international housing policy, 1945–1973 , Journal of Habitat
International, ‖27(2), 2003, 167-191.

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• Nickell P and Dorsey J.M, Management in family living: John wiley and sons
incorporated, New Delhi, 1976, 295.

• R.M. Buckley .Housing policy in developing economies: evaluating the

macroeconomic impacts, Review of Urban and Regional development Studies,
2, 1989, 27-47.

• Munjee M. Gupta, D Mehta and Hutheesing V, Housing and housing finance in

India, Shelter Conference, Journal of Housing Finance International, 1999, 26-
28.

62
 APPENDICES QUESTIONNAIRE

Question 1. Name
_________________________________________________________________

Question 2. Email address

_________________________________________________________________

Question 3. When did you take home loan?

• 2001-2010
• 2010-2020
• 2020-present

Question 4. What are the different kinds of home loans you are aware of?
• Loans for Purchase of Land
• Loans for Home Purchase
• Loans for Construction of a House
• Loans for Home Improvement
• House Expansion or Extension Loans

Question 5. What according to you is the current interest rate for home loans?
• 0-5%
• 6-10%
• 11-15%
• Above 15%

Question 6. Rate the level of satisfaction from the home loan services availed
by you. (5= highly satisfied, 1= highly dissatisfied)
• Grade 5
• Grade 4
• Grade 3
• Grade 2
• Grade 1

Question 7. How would you rate your knowledge regarding different kind of
repayment options available to you?(5= highly satisfied, 1= highly dissatisfied)
• Grade 5
• Grade 4
• Grade 3

63
 • Grade 2
• Grade 1

Question 8. What difficulties were faced by you during sanctioning process?

• Documentation hurdles
• Lack of awareness about charges
• Difference in property valuation
• Others

Question 9. How would you like to rate the documentation process?

• Excellent
• Good
• Fair
• Average
• Below average

Question 10. “The loan officer was cooperative enough.” How much do you
agree with this statement?
• Strongly agree
• Agree
• Neither agree nor disagree
• Disagree
• Strongly disagree

Question 11. Do you have any prior experience with HDFC or LIC Housing
Finance Ltd.?
• I have
• I don’t

Question 12. Which one among HDFC and LIC housing finance would you
prefer?
• HDFC
• LIC housing finance ltd

Question 13. Why do you prefer any specific home loan company?
• Easy and transparent process; no hidden charges.
• Pre-approval of home loan
• Free and safe document storage
• Competitive interest rates
• Any other

64
Question 12.What suggestions do you want to give?
• Consistency in home loan rates
• Easiness in documentation process
• Transparent process
• Any other

65