Housing Finance Mubashshir
Transcript of Housing Finance Mubashshir
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1
CHAPTER I
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CONCEPTUAL BACK GROUND
A home loan is a long term commitment of 15-20 years, several factors like expertise, quality
of service, in-depth domain knowledge and the companys level of commitment and
transparency right through, the loan procedures, the fine print, quality of services offered and
safe retrieval of the title deed are critical. There are lot many banks and financial institutions
through which one can easily avail of a home loan at reasonable rate of interest. From the last
decade, the Government of India has been continuously trying to strengthen 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), 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. The purpose of this paper is to analyze the customer satisfaction regarding
home loan of HDFC bank and ICICI bank. The research was carried out among 50 bank
customers by using a structured questionnaire. For the purpose of analysis various statistical
tools has been applied like percentage, mean score value, t-test and chi-square test.
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REVIEW OF LITERATURE
PURPOSE
To build the conceptual framework for housing finance practices in India, literature
survey has been conducted:
W.Boyd et al (1994) the result of the study reveal that reputation, interest charged on loans,
interest on saving accounts are viewed as having more importance than other criteria such as
friendliness of employees, modern facilities, and drive-in-service. Machauer, A. and Morgner,
S. (2001) prefers segmentation by expected benefits and attitudes could enhance a banks
ability to address the conflict between individual services and cost saving
standardization. Using cluster analysis, segments were formed based on combinations of
customer ratings for different attitudinal dimensions and benefits of bank services.
Devlin (2002) investigates the relative importance of choice criteria according to consumers
and also analyze difference in the importance of choice criteria with respect to a number of
demographic and relative factors. The study shows that choosing a home loan institution on the
basis of professional advice is the most frequently cited choice criteria, closely followed by
interest rates. Difference in the importance of choice criteria with respect to gender, class,
household income, educational attainment, ethnicity and financial maturity are apparent.
SOURCES
In order to achieve the specific objectives of the study, primary data has been collected
with the help of structured questionnaire containing questions on various aspects of housing
finance. The present study of home loan is based on a sample of 50 customers, 25 customers
has been selected of each HDFC and ICICI bank. The geographical coverage of the sample
profile is confined to branches of HDFC and ICICI bank located in Kurukshetra and Karnal
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districts of Haryana. Data collected from different sources were tabulated and classified so as to
make the study systematic and scientific. Different tables were prepared for the purpose to
concentrate on each and every aspect of the study. After tabulation of the data, an analysis was
made using different statistical tools such as percentage, average, T-test and Chi Square test so
that reliable conclusions might be drawn
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5
CHAPTER II
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INDUSTRIAL PROFILE
The basic needs of mankind have been the food, shelter and clothing. Keeping this in
mind, lots of efforts have been made to provide food through the poverty alleviation
programmes since substantial portion of the Indian population are still in the clutches of object
poverty. The poverty alleviation programmes both credit oriented and non-credit oriented ones
described in earlier Units would have thrown light on the efforts taken in providing food for the
poor which is primary among the basic needs. However, it is an irony of life that a large section
of the population in India and other developing countries do not afford these needs both in their
quantitative as well as qualitative dimensions. In fact, non-affordability of these facilities is a
sine quo non of poverty. This Unit highlights the need for housing and the efforts taken by the
Government in housing.
The responsibility to provide housing finance largely rested with the Government of
India till the mid-eighties. The setting up of the National Housing Bank (NHB), a fully owned
subsidiary of the Reserve
Bank of India (RBI) in 1988, as the apex institution, marked the beginning of the emergence of
housing finance as a fund-based financial service in the country. It has grown in volume and
depth with the entry of a number of specialized financial institutions / companies in the public,
private and joint sectors, although it is at an early stage of development.
The implementation of housing finance policies presupposes efficient institutional
arrangements. Although there were a large number of agencies providing direct finance to
individuals for house construction, there was no well established finance system till the mid-
eighties in as much as it had not been integrated with the main financial system of the country.
The setting-up of the National Housing Bank (NHB), a fully owned subsidiary of the Reserve
Bank of India, as an apex institution was the culmination of the fulfillment of a long overdue
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need of the housing finance industry in India. The system has also been characterised by the
emergence of several specialised financial institutions that have considerably strengthened the
organisation of the housing finance system in the country. At present, there are about 320
housing finance companies, of which 26 are registered with the NHB and which account for 98
per cent of the total housing loan disbursed.
CENTRAL AND STATE GOVERNMENTS
Till the mid-eighties, the responsibility to provide housing finance rested, by and large,
with the government. The Central and state Governments indirectly support the housing
building effort. The Central Government has introduced, from time to time, various social
housing schemes. The role of the Central Government visa-versa these schemes is confined to
laying down broad principles, providing necessary advice and rendering financial assistance in
the form of loans and subsidies to the state governments and union territories. The Central
Government has set up the Housing and Urban Development Corporation (HUDCO) to finance
and undertake housing and urban development programmes, development of land for satellite
towns, besides setting up of a building materials industry.
The Central Government provides equity support to the HUDCO and guarantees the
bonds issued by it Apart from this, both Central and state Governments provide house building
advances to their employees. While the Central Government formulates housing schemes, the
State Governments are the actual implementing agencies.
HOUSING PATTERN IN INDIA
It is a known fact that year after year more people are added to the category of homeless as
the population is on the increasing trend. The weaker sections that constitute this group are
handicapped in getting shelter at affordable cost. Housing, as such, in any country depends or
the following factors:
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- Demand factor - Growth in population, formation of households, development of new
townships, and increase in income.
- Supply factor - Availability of institutional credit, cost of construction, availability of
land and building materials, and fiscal and legal provisions affecting building
construction.
Though both the type of factors play their role equally, it is to be understood that
everyone wants to have a house constructed either through own money or borrowed funds. But
the growing population makes it impossible to construct houses and satisfy this need for all the
people in desired proportions.
The National Sample Survey 44th Round compiled data on the types of dwellings in India.
Some aspects of these data are presented in Table 1.
Table 1. Types of Dwellings in India
Types Percentage Distribution
Rural % Urban %
a. Independent houses 82.6 52.4
b. Flats 2.7 17.2
c. Chawls 3.0 10.8
d. Others 11.7 90.6
Total 100 100
From the above table it could be seen that the rural areas have more independent houses
compared to urban centers. However, there has been some tendency to go in for flats also, trend
of which is more perceptible in urban areas. This pattern is due to the fact that while some space is
available for construction of small dwellings in rural areas, it is a critical constraining factor in
urban areas. This necessitates the urban house aspirants to go in for flats. The NSS further
observed that in rural India, 39.4% houses are kutcha houses, 34% semi-pucca and 27% pucca
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ones while in urban areas the percentages for the above categories of houses being 11, 18 and 71
respectively. This also shows that an urbanite is interested to have a pucca house while a
ruralite is prepared to live in a house in whatsoever may be the type of construction. Again, the
socio-economic conditions of the ruralites do not permit them to go in for a big permanent
dwelling. Yet another observation made by the NSS indicates that in the past three decades,
there has been an increase in the pucca houses in the rural areas on one hand and the kutcha
houses are on a declining trend in urban centers on the other.
Some trends and progress in housing in India over years as reported by the NSS are
presents in Table 2:
Year No of house holds No of occupied addition
during residential houses
Decades - house holds
R U T R U T R U T
1951 53.6 12.3 65.9 54.1 10.3 64.4 - - -
1961 68.9 15.6 84.5 65.1 13.8 78.9 15.0 3.3 18.6
1971 79.6 20.9 100.5 72.7 18.1 90.8 10.7 5.3 16.0
1981 94.1 29.3 123.4 88.7 28.0 116.7 14.5 8.4 22.9
R Rural, U Urban, T - Total
The conclusions that emerge from the table are as follows:
# On an average, about 90% of the total households have occupied residential houses
throughout the past.
# within this overall pattern the percentage of occupied residential houses is more in rural
areas as compared to urban centers.
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# The number of households added during decades had shown fluctuations in rural areas
but there was a steady increase in urban centers.
The addition to the number of households was more during the decade of 1971-81.
While indicating the relative growth of housing stock in the inter-censor period, the NSS
report analysed whether the growth in the housing stock is commensurate with the growth in
the population. The Table 3 seeks to provide an answer to the above issue.
Inter census period Annual growth of the dwelling per 1000 increase in the
population
Rural Urban Total
1951-61 3.4 5.2 3.3
1961-71 1.9 4.5 2.4
1971-81 3.4 7.9 4.0
The growth of the dwellings per 1000 increase in population was slow during the
period 1961-71. It needs to be noted that during this period, the total population growth was
more than yester years. The percentage increase in population during this decade was 24.8%
which was, in fact, the highest during the period under reference.
The rate of addition of dwellings in relation to the population in rural areas was lower
as compared with the urban centers.
The decade of 1971 -81, witnessed a large increase in the annual growth of dwellings per
- 1000 population and like the earlier patterns, the increase was more in urban centers. It is
interesting to mention here that during this period, the increase in urban population was as
high as 50% which was almost three times of 18% experienced in rural area
All these facts lead to the conclusion that the growth rate in housing did not keep pace
with the rate of growth in population in the entire country. The extent of shortfall was more
pronounced in rural areas.
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The ultimate result has been the housing shortage in both rural and urban areas. In
1971, the Banking Commission, headed by Shri. Bhabatosh Datta submitted its report on the Non-
Banking Financial Intermediaries. This report, besides other aspects of banking systems, dealt at
length with the present and prospective housing finance and the need for a specialised
institution for housing. The Commission made the following observations:
a. The house construction, as indicated earlier, depends on the demand and supply factors
with the demand side including the population, income etc. and the supply side covering
institutions, policy etc.
The following are the three indicators for housing shortage:
The first indicator was provided by the proportion of pucca dwellings to the total
housing stock. According to an estimate, this proportion in India was only 23% as compared
to 96-99% in some of the Western countries like USA, Canada and Japan. An idea of the over-
crowding in dwellings could be obtained from the fact that about 77% of the total dwellings
are of 1-2 room size, whereas in developed countries only about 5% of the houses are in this
category (Palvia, 1969).
The second indicator for the housing shortage was the comparison between the
number of dwellings and the number of households. At the end of 1967, the report
indicated that there were an estimated 6.2 million urban pucca housing units for an estimated
18 million urban households. Thus there was only one pucca house for every three households
in urban areas. In rural areas, for an estimated 81.6 million households, the number of pucca
housing units was only 12 million. The estimated rate of living constructions in India was
around two dwellings per 1000 population per annum as against 10 per 1000 population as
recommended by the United Nations in developing countries during the development decade
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of 1961-71.
The third indicator, according to this report, was the investment in housing as
proportion of the total investment in the public and private sectors. The percentage of total
investments allocated to the housing sector had declined from 34% in the First Plan to 12% in
Fourth Plan.
The Table 4 giving the housing scenario will further indicate the housing shortage in
the past and the prospective housing shortage by 2001.
Housing shortage in India
Rural Urban Total
1981 1991 2001 1981 1991 2001 1981 1991 2001
a. No. of house
holds
94.1 113.5 137 29.3 45 69 123.4 158.4 206
b. Households
adjusted for
congestion
94.1 113.5 137 30.7 47.17 72.2 124.8 160.6 209
c. Housing stock 88.7 106.2 128 28 42.6 64.8 116.7 148.8 193
d. Of which
acceptable
77.8 92.9 112 23.7 36.7 56.7 101.5 129.6 168
e. Housing gap 16.3 20.6 25.5 7 10.4 15.5 23.3 31 41
The above table leads to the following inferences:
A sizable number of people are without any house and every year more and more
people continue to be added to the category of homeless.
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The housing gap goes on increasing over years. This was indicated earlier by the fact
that the annual growth rate in number of dwellings for every 1000 increase in population was very
less leading to housing shortage.
The housing gap was prominent in rural areas as compared to urban centers. This might,
be due to the reason that in rural areas still people are inclined to go in for independent: houses
whereas there is a trend towards flats in urban centers. Besides the needs and likings of the rural
people regarding separate houses, it should also be remembered that the flat system of houses
which needs a multi-storied structure requires a special infrastructure which is just not
available in rural areas at present.
The houses of acceptable conditions were almost 86% of the housing stock in both the
rural and urban areas.
Each of the households had on average 5-6 members both in rural as well as urban
areas.
The report also indicated that more number of persons lives in a room and lack of privacy
connotes the need to augment housing supply.
An analysis was made in various studies on the cause for the housing shortage in
developing countries like India. The conclusion arrived at by studies has been that developing
countries are giving low priority to housing and this is again due to factors like large capital
resources required, high capital-output ratio and top priority given to sectors like the agriculture,
industries, power, communication etc. as compared to housing. All these go to show that there is a
need to give priority to housing since it is the basic need for the mankind.
The growing rate of population needs more investment in the housing sector. The
importance of finance as a factor in house construction may also be examined from the point of
view of individual who wants to own a house. Houses can not usually be built out of the current
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income of the individual. It is estimated that in India, 4.9 years' income of an unskilled labour is
require to get 30 sq.m. House. It is also indicated that in an economy like ours, about 75% of
house-buying involves loan finance and over 5C% of all new and old houses are encumbered with
debt. The rate of interest charged also plays a role in housing finance. All these go to indicate
the need for housing finance and assistance for a common Indian. How far our planning has taken
care of the housing sector over years is given in the succeeding paragraphs
HOUSING AND FIVE YEAR PLANS
Even though housing sector got a relatively low priority in the allocation of public outlay in the
five year plans, the sector is not altogether neglected. In fact, over the years, housing has been
recognised as an important element in the poverty alleviation programmes. This section
highlights the treatment given to the housing in different Five Year Plans.
The First Five Year Plan (1950-56) aimed at enhancing the housing stock of minimum
standards over next few years. It suggested reducing the cost of construction of houses
especially with regard to material and labour by encouraging economical, architectural and
structural designs. The First Plan gave due consideration to the role of private sector to help
solving the problem of housing shortage. Two schemes viz., Subsidised Industrial Housing
Scheme (1952) and Low Income Group Housing Scheme (1954) were introduced during this
period.
The Second Five Year Plan (1956-61) continued its emphasis on the Subsidised
Industrial Housing and Low Income Group Housing Schemes. Seven specific schemes were
introduced during this period.
They are as follows:
Plantation Labour Housing Scheme (1956)
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Slum Clearance and Improvement Scheme (1956)
Village Housing Project Scheme (1957)
Middle Income Group Housing Scheme (1959)
Land Development and Assistance Scheme (1959)
Rental Housing Scheme for State Government Employees (1959)
Jhuggee and Jhopri Removal Scheme (1960)
It should be noted that all the above mentioned schemes aimed at improving the quality
of housing for lower income category of population.
The Third Five Year Plan (1961-66) aimed at land acquisition and development as also
an effective control on urban land. The Annual Plans (1966-69) brought in the concept of
"economically weaker sections". The annual plans integrated this concept with the Subsidised
Industrial Housing Scheme which was in operation since the First plan. Up to 1970, the bulk of
funds were provided by the Government of India and Life Insurance Corporation of India as
loans and subsidies. The schemes of housing have social objectives because they were meant for
people belonging to the SC/STs or to the specified classes of employees and income groups. The
extent of finance made available was usually 80% of the cost of construction as maximum and
this varied from scheme to scheme. In case of Land Acquisition and Development Scheme, 100%
financial assistance as loan was given to Local Bodies / Urban Estate Department.
The Fourth Five Year Plan (1969-74) emphasised the low cost housing schemes in view
of
(a) High cost of construction of the dwelling units
(b) Insufficient contribution by the private and Cooperative sectors to meet the growing needs
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of houses for the poorer sections, and
(c) Deteriorating condition of older slums.
It was in April 1970, that the Housing and Urban Development Corporation (HUDCO)
was started. Various State Governments started Housing Boards funded through State
budgetary allocation and the Slum Clearance Schemes were initiated. The Housing Boards of
the States started issuing debentures on State Government Guarantee to which institutions like
the nationalised banks contributed. The Housing Boards are essentially construction agencies and
not funding agencies. This function is to create and manage the housing stocks. It was during
1977, that the Housing Development Finance Corporation (HDFC) was started for housing
finance. It was an important addition to this sector.
The Fifth Plan (1975-80) aimed at providing house sites to four million landless labour
and intensifying research on low cost housing mainly through manufacture of low cost building
materials. It decided to enhance the financial assistance to the State Housing Board* and Local
Bodies. A scheme for improving the existing housing was also introduced during the Fifth Plan.
In 1974, the Minimum Needs Programme and in 1975, the Twenty Point Economic Programme
were launched which emphasised providing housing for the poor and housing construct through
wage employment.
The Sixth Plan (1980-85) attempted to use the public sector resources in such a way that
they yield optimum results and provide maximum possible houses to absolutely shelter less
people.
The Seventh Plan (1985-90) estimated the housing shortage at 24.7 million units. It
called for establishment of proper and diversified institutional credit for housing and
construction to cater to the needs of housing development. It also stressed the need to strengthen
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the HUDCO and creation of new Cooperative Building Societies. The plan period added a feather
in the cap of housing by the establishment of National Housing Bank in 1988. This gave a new
direction to the decentralised housing finance system by promoting housing finance institutions
and facilitating proper cooperation amongst various agencies relating to housing.
The data in Table 5 indicate the relative share of housing in the investment in the economy
during the Plan periods.
Plans Total Investment in the
plan (Rs. Crores )
Investment in
Housing
(Rs. Crores)
Percentage of
Housing to total
Investment
First 3340 1150 34.2
Second 6750 1300 19.2
Third 10,400 1550 14.9
Fourth 22,635 2800 12.4
Fifth 47,561 4436 9.3
Sixth 1,56,000 19,491 12.5
Seventh 3,49,148 31,438 9.0
The conclusion that could be drawn from the above table is:
- The First Plan gave top priority to housing next to food since majority of the population was
poor.
- There have been fluctuations in percentage of housing investments to the total investment in
economy during different periods.
- There has been a decline in the investment in housing during VII Plan which was
disproportionate to the total investment in economy.
The Eighth Plan (1992-97) covered the strategy of creating an enabling environment
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for housing activity by eliminating various constraints and providing direct assistance to the
disadvantaged groups consisting of the rural and urban poor, self employed, physically
handicapped, widows and single women. It was during the 8 th Plan, that the Shelter Up
gradation Scheme under the Prime Minister's Integrated Poverty Eradication Programme was
initiated with a loan component of Rs. 10000/- to be arranged from the HUDCO/any other
financial institution including Commercial Banks, subject to the condition that the borrower holds
the title to the land. This has a subsidy component too. The 8 th Plan outlay on housing has been
Rs.20000 - 25000 cores. During 1995-96, the HUDCO sanctioned Rs.1967 cores as loans and
actually released Rs. 1229.5 cores. About 90% was spent on dwellings for the weaker sections and
low income groups.
The Ninth Plan Approach paper indicates that housing will be given priority as one of
the seven principles of development. The analysis of the above facts on housing and
investments during the plan periods indicates the need for more funds for housing. Therefore,
the role of institutional finance for housing has assumed vital importance and many agencies
are drawn into the fold of housing finance.
NATIONAL HOUSING POLICY
According to an estimate made by the Sub group of Urban Ministry on the "Magnitude of
Housing Problem", about 64.4 million new houses will be needed by 2001. The total funding to
create so many units is estimated to be around Rs 2, 35,000 crores based on the price index of
1985. This being a herculean task, it needs the cooperation of Centre and the States and the
private sector to increase the availability of houses at affordable rates. For this purpose, a
comprehensive policy on housing was felt essential. Hence the Comprehensive National
Housing Policy prepared by the Ministry of Urban Development was placed before the
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Parliament in 1988 and was discussed subsequently in 1990 at the Home Ministers Conference.
The objectives of the National Housing Policy (NHP) are as follows:
To assist all people and in particular the homeless and inadequately housed and
vulnerable sections, to secure for themselves affordable shelter through access to developed
land, building materials, finance and technology;
To create an enabling environment for housing activity by eliminating constraints and by
developing an efficient system for delivery of housing inputs;
To expand infrastructural facilities in rural and urban areas in order to improve the
environment of human settlement, increase the access of poorer households to basic services
and to increase the supply of developed land for housing;
To undertake, within the overall context of policies for poverty alleviation and
employment, steps for improving the housing situation of the poorest sections and
vulnerable groups by direct initiative and financial support of the state;
To help mobilise resources and facilitate expansion of investment in housing in
order to meet the needs of housing construction and up-gradation and augmentation of
infrastructure, and
To promote a more equal distribution of land and houses in urban and rural areas
and to curb speculation in land and housing in consonance with the macro-economic
policies for efficient and equitable growth.
To achieve these objectives, the Government should take initiatives for directing
the activities of public agencies towards increasing the supply of serviced land for various
groups and essential purposes directing towards poorer sections. The weakness of the NHP
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has been that it did not set any time bound targets owing to resources constraints.
In order to achieve the NHP, the following steps were taken.
Setting up of an apex institution - National Housing Bank (NHB) as a subsidiary
of Reserve Bank of India under the NHB Act, 1987.
Floating of specialised housing finance subsidiaries by the Scheduled
Commercial. Banks.
Large flow of credit through the Housing and Urban Development Corporation
(HUDCO).
Emergence of LIC as an important contributor of housing Finance.
Financing for housing through Government Schemes.
Involving the private sector in housing finance
For the past decade, the Government of India attempted to strengthen the housing sector
by introducing various loan schemes for the rural and urban population. The first attempt in this
regard was the National Housing Policy (NHP), which was introduced in 1988. However, the
growing realization of the insufficiency of public funds to meet the demands for financial
schemes in the housing sector is evident in the aims of the 2007 policy. Innovative financial
instruments that will spur the flow of funds from the private sector is one of the focal points of
this policy. Until now, most financial companies were reluctant to lend to low-income groups
because the small amounts do not justify the costs. Profit is the overarching goal, and these
institutions try to efficient in the mobilisation, disbursement and recovery of funds. Finance
companies are able to mobilize funds from shareholders and investors by offering competitive
rates of interests. These funds will be disbursed to those who are deemed eligible, after
assessment of application forms and personal interviews. There are difficulties in assessing
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credit risks and a lack of clarity on recoveries, land title and possession. These problems have
led to a scenario where the popular perception was that the requirements of low-income
housing were incompatible with formal housing finance.
Whereas today, in low-cost housing, the government is the sole financier, the Ministry of
Urban Development is exploring a new financial architecture that will make loans for low-cost
houses affordable for both the lenders and borrowers. Despite the frenetic pace of growth in
housing finance over the past 5 years in India, mortgage penetration as a percentage of GDP
continues to remain low, at 4 percent. This means that there are considerable growth
opportunities in housing finance. This is further corroborated by the fact that despite the
impressive rate of growth in the housing finance sector in the recent period, financing through
the organised sector continues to account for only 25 percent of the total housing investment in
India.
The lending criteria set out by formal financiers are more appropriate to the life style of the
middle-level income group. To obtain a housing loan, a combination of conventional (assets
that can be mortgaged) and non-conventional collateral such as peer pressure is required. Lack
of mortgage insurance is also a reason why the private formal sector bypasses the low-income
segment
DEVELOPMENT OF HOUSING FINANCE IN INDIA
The early development of housing finance in India is a result of the housing policies
implemented by the government. In the first Five Year Plan (1951-56), housing was introduced
into the policy framework at the national level. Affordability was emphasized, and government
support through subsidies and loans were deemed necessary. This plan in fact became the
benchmark for subsequent Five Year Plans for the next two decades.
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The second plan (1956-61) strengthened the schemes of the first plan by expanding
coverage, and gave rise to State Housing Boards that still remain in existence. Despite these
efforts, by the fourth plan (1969-74), the government was faced with the dual problem of a
rapidly growing population and a slow growing housing stock. For the first time, the
government decided to encourage private and co-operative housing schemes by providing
financial assistance. However, the majority of activity still remained within the public sector.
The government also recognized the need to provide housing finance to low-income groups and
thus set up the Housing and Urban Development Corporation (HUDCO) in 1970. HUDCOs
mandate was to provide such groups with loans below peak interest rates and with longer
repayment periods.
It was during the fifth plan (1974-79) that as a completely private sector initiative, in
1977, the first retail housing finance company, Housing Development Finance Corporation
(HDFC) was set up, seeking to provide financial assistance to individuals, groups, co-operative
societies and companies for staff housing.
During the Sixth Plan period, other housing finance companies also entered the market.
Towards the mid and late 1980s a few housing finance companies were set up either as private
limited companies (e.g. Dewan Housing Finance Limited) or as a joint venture with partnership
from the state government (e.g. Gujarat Rural Housing Finance Corporation) or bank sponsored
housing finance companies (e.g. Can Fin Homes, SBI Home Finance, PNB Housing Finance).
Even state owned insurance companies like the Life Insurance Corporation and the General
Insurance Corporation of India set up housing finance arms. The seventh plan period saw the
UN Global Shelter Strategy, of which India subscribed to, being passed in the UN General
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Assembly in 1988. This gave the impetus to the drafting of a National Housing Policy for the
first time. Another major reform that took place at the time was the founding of the National
Housing Bank (NHB) in 1988. The NHB was founded to promote and regulate housing finance
companies and to mobilize additional resources for housing.
The National Housing Bank (NHB) was established in July 1988 under an act of
Parliament viz. the National Housing Bank Act, 1987. The act empowers the National Housing
Bank to first, issue directions to housing finance institutions to ensure their growth on sound
lines. Secondly, make loans and advances or render financial assistance to scheduled banks and
housing finance institutions or to any such authority established by or under any central, state
or provincial act and engaged in slum improvement. It may also formulate schemes for the
purpose of mobilisation of resources and extension of credit for housing.
Public housing finance corporations have schemes that encourage beneficiaries to
invest their own money in their dwellings, but do not offer opportunities for beneficiaries to
deposit savings. The beneficiaries are granted larger housing loans, than what may be available
from informal sources. To make housing loans affordable for the urban poor, direct subsidies
are given for construction cost (e.g. the VAMBAY scheme) and/or indirect subsidies on
interest rates are provided. The latter could be in the form of the interest differential subsidy
amounts being remitted directly in the HFC loan accounts of the borrowers, so as to bring down
their loan liability. These loans are characterised by conventional mortgage lending, have a
longer-term tenor and repayments are in equal monthly installments (EMIs).
The eighth plan recommended that reforms be made on both, the financial and legal
aspects to allow the mortgage market to develop further. It laid special emphasis on
government incentives to enhance the flow of credit to the housing sector through housing
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finance institutions. Both the ninth (1997-2002) and tenth (2003-2007) plan recommended
further reforms to enable the government to play its role as a facilitator and encourage the
development of the mortgage market. Emphasis was particularly laid on market friendly
reforms for improving both taxes and infrastructure to help increase investments into housing.
The ninth and tenth five-year plans are also characterised by the aggressive entry of
commercial banks into housing finance.
HOUSING FINANCE: INSTITUTIONS, SCHEMES & SUPPORT
COMMERCIAL BANKS
The trend of commercial banks lending to individuals for housing emerged in the wake
of the report of the working group on the Role of Banking System in Providing Finance for
Housing Schemes. (R C Shah Working Group, the RBI, 1978). They have been lending to the
housing sector based on annual credit allocations made by the RBI. In terms of the RBI
guidelines, scheduled commercial banks are required to allocate 1.5 per cent of their
incremental deposits for disbursing as housing finance every year. Of this allocation, 20 per
cent has to be by way of direct housing loans of which again at least half, that is, 10 per cent of
the allocation has to be in rural and semi-urban areas. Another 30 per cent could be for indirect
lending by way of term loans to housing finance institutions (HFIs), housing finance companies
(HFCs) and public housing agencies for the acquisition and development of land and to private
builders for construction. The balance 50 per cent is for subscription to the HUDCO, and the
NHB bonds.
HOUSING FINANCE THROUGH COMMERCIAL BANKS
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The Reserve Bank of India has brought the Commercial Banks too under the fold of
housing finance which did not exist prior to 1979. The basic question that needs to be debated is
as to why the commercial banks are interested in extending loans for the housing facilities
particularly to the poorer sections of the society. In general it is believed that the residential
house is a non-productive asset. It does not generate any income by itself so as to make the loan
self liquidating. The question is to be understood in the larger developmental context. The
investment decision and the activity pattern of any family are influenced to a large extent by the
location and type of residential accommodation. The banker's relationship with the prospective
borrowers for a productive activity is of long term nature and the banker has to communicate
with the borrower before the loan disbursement and more so during the post loan period. The
settled borrower, therefore, is a lesser risk for the banker. The reasonable housing facility is one
of the facilitating factors for the borrower to take up and maintain a productive enterprise. The
housing finance for the poor people, therefore, is capable of creating a better production
environment. All these factors have induced the policy makers in India to include the housing
loan for the poor in the priority sector lending.
The RBI in its priority sector lending guidelines clearly stated that 1.5% of the Bank's
incremental deposit as at the end of the previous financial year should be earmarked for
housing and ensures that the bank finance for housing flows to the needy segments of the
society. The finance will be in terms of both direct and indirect mode. Thirty per cent of the total
allocation for housing should be by way of direct finance and of which half should be extended
as direct housing loans in rural and semi urban areas. Further 30% will be utilized by way of
term loans to housing finance companies, housing boards and other public housing agencies.
The balance 40% of the allocation for housing should be provided in the form of subscription to
guaranteed bonds and debentures of the National Housing Bank and HUDCO only.
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The "housing finance'' by the banks is granted for the following types of construction:
Residential houses to be constructed by public housing agencies like the HUDCO,
Housing Boards, local bodies, individuals, Cooperative Societies or employers, priority being
given for economically weaker sections, low and middle income groups.
Educational, health, social, cultural other institutions/centers which are part of housing
project and which are necessary for the development of settlements or townships.
Shopping Complexes, markets and such other centers catering to the day-to-day needs of
the residents of housing colonies and forming part of a housing project.
Construction meant for improving the condition of the slum areas for which credit is
extended directly to the slum dwellers on the guarantee of the Government or indirectly to them
through the State Government.
To bodies constituted for undertaking repairs and for individuals either singly or
collectively, in buildings owned or occupied backed by security or guarantee.
There is no ceiling on housing finance for housing construction. Banks may consider
additional finance as per their terms and conditions too. Housing finance is extended to persons
affected by natural calamities for house repairs / constructions also. For regular housing
finance, the repayment period is fixed at not exceeding 15 years (including a moratorium, at the
option of the beneficiary, till the completion of construction or 18 months from the
disbursement of the loan, whichever is earlier) with graduated installments.
Some of Government sponsored schemes like the Differential Rate of Interest have the
component for housing for the weaker sections. In the DRI scheme, housing finance can be
given to an individuals belonging to SC/ST up to Rs.5000/- which is besides the normal
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assistance. In schemes like the PIUPEP, Shelter Up-gradation Scheme with a loan component of
Rs. 10000/- is arranged through HUDCO/any other financial institution and a subsidy of
Rs.2500/- per unit was given. Under the Nehru Rozgar Yojana, the Government provides a
subsidy of Rs.1000/- per household for up-gradation of housing of urban poor along with a loan
from the HUDCO. In the Jawahar Rozgar Yojana, a non-credit linked programme, less than one
of its components viz., Indira Awaas Yojana, emphasis has been laid on housing finance.
During 1996-97, a sum of Rs.1194 crores was allotted under the Indira Awaas Yojana. The
Indira Awaas Yojana provides houses for the poverty sticken people and those belonging to
SC/ST and freed bonded labour in rural areas. During 1995-96, about 8.64 lakh houses were
constructed and till October, 1996, 2.82 lakh houses were constructed and 3, 56 lakh houses
were under progress against which Rs.424.78 crores was spent.
The banks extend loans to the housing finance institutions as indirect advance. These are
term loans given taking into consideration the institution's debt-equity ratio, track record,
recovery performance and other relevant factors. The term loans are given to HUDCO, HDFC
and Housing Finance Companies promoted/sponsored by the commercial banks. Banks extend
loans to the State Housing Boards and other public agencies for housing also. In view of the
need to increase the availability of land and housing sites for increasing the housing stock, the
banks are extending finance to the public agencies for acquits ion and development of land,
provided, that it is a part of the complete project for infrastructural development.
A major development in the area of housing in recent years has been the entry of the
commercial banks by establishing subsidiaries either on their own or in collaboration with other
financial institutions including HUDCO and HDFC which have done pioneering work in the
fied of housing finance. The public sector banks like the State Bank of India, Canara Bank,
Punjab National Bank, Indian Bank, Bank of Baroda and Central Bank of India from the public
sector and Vysya Bank limited from the private side have started separate subsidiaries for
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housing finance. The amount of public deposits which the housing companies can raise under
the Housing Companies (NHB) Directions, 1989, is equal to 10 times of their Net Owned
Funds. With the emergence of housing subsidiaries together with the apex institution- National
Housing Bank, the housing finance scenario has taken a new turn.
HOUSING FINANCE THROUGH OTHER INSTITUTIONS
Some specific Organizations are extending housing finance as described below:
LIFE INSURANCE CORPORATION OF INDIA
The LIC of India is the oldest organizations connected with housing finance. It gives
long term credit for housing. It makes available every year certain amount to Central
Government for financing certain specified housing schemes of various State Governments.
The Government of India makes allocation to different states out of the said amount. The LIC
also advances to the Apex Cooperative Housing Finance Societies on guarantee from the State
Governments and those societies in turn make advance to the Primary Cooperative Housing
Finance Societies for house construction, in addition, the LIC has "Own Your House" scheme
for its policy holders against mortgage of immovable property. It also finances for approved
parties for construction of housing/commercial/office complexes, to public limited companies
for the purchase of houses for their employees. The LIC spent Rs.1570 crores during Seventh
Plan towards housing.
HOUSING AND URBAN DEVELOPMENT CORPORATION (HUDCO)
Established as a Government of India undertaking in 1970, the chief objective of
HUDCO is to finance housing and urban development particularly for the poorer sections of
the society. It provides finance for the schemes formed by the State Housing Boards, State
Finance Societies in the urban and rural areas and Improvement Trusts. HUDCO's loan
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schemes are on soft terms, the repayment period extending up to 22 years and interest rate
ranging from 4% to 15% per annum.
INTRODUCTION
Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries
and above all gathering funds little by little to afford ones dream. Home is one of the things
that everyone one wants to own. Home is a shelter to person where he rests and feel
comfortable. Many banks providing home loans whether commercial banks or financial
institutions to the people who want to have a home. HDFC-(Housing Development And
Finance Corporation) Home Loan, India have been serving the people for around three decades
and providing various housing loan according to their varied needs at attractive & reasonable
interest rates. Owing to their wide network of financing, HDFC Housing Loans provides
services at your doorstep and helps you find a home as per your requirements.
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Many banks are providing home loans at cheapest rate to attract consumers towards
them. The more customer friendly attitude of these banks, currently offer to consumers
cheapest loan over homes. In view of acute housing shortage in the country, and keeping in
mind the social
economic role of commercial banks in the present times, the RBI advised banks to
encourage the flow of credit for housing finance. With the RBI reducing bank rate, the home
loan market rates nose-diving by 50 basis points. The HDFC Bank and Standard chartered bank
has become the first player in this sector to announce a housing loan for a 20 years period. No
doubt it will enhance the end cost people to plan their house over longer duration now; it has
been made easy for a person to buy that dream house which he dreamt of long ago. HDFC also
provides with Home Improvement Loan for internal and external
repairs and other structural improvements like painting, waterproofing, plumbing and
electric works, tiling and flooring, grills and aluminium windows. HDFC finances up to
85% of the cost of renovation (100% for existing customers).
Current status is that HDFC reduced home loan rates by 50 basis points for all its
existing floating rate customers.
HOUSING REFINANCE
The National Housing Bank extends refinance to the Commercial Banks on the housing
finance extended by them. The rate of interest charged by the NHB to the banks on the
refinance is linked to the purpose of loan and the geographic regions. For instance, the
refinance rate o interest for acquisition or construction of new units in rural areas ranges from 10
to 15% and 11. to 15 per cent in urban areas. The corresponding rate for the loans for the up-
gradation in run areas is 10% while it is 11 to 13.5 per cent in urban areas. However, except in
up-gradation i rural areas where there is a ceiling for charging interest from bank to borrower,
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for others, the banks are free to fix the rates of interest. The refinance provided by the NHB up to
March, 1995 was of the order of Rs.2254.04 crores.
Considering the Golden Jubilee of Indian Independence, a Golden Jubilee Rural He
Refinance Scheme has been introduced by the NHB. The objective of the scheme is to provide
refinance to the institutions that finance for housing in rural areas which would facilitate the
ruralites for access to housing credit to build modest new house or to improve or add to the old
dwelling. This scheme is applicable to Scheduled Commercial Banks, State Cooperative Bank,
Regional Rural Banks, State Cooperative Agriculture and Rural Development Banks,
Cooperative Housing Finance Societies and Housing Finance Companies. The NHB will be
extending 100% refinance under the scheme. The aggregate amount of assistance from the
NHB will in no case exceed the aggregate amount of outstanding housing loans from the
primary lending institutions to the borrowers (excluding overdues).
SCOPE
Refinance would be provided only in respect of direct lending to individuals/groups of
individuals (formal or informal, including cooperative housing societies). Overdue
loans/bought over loans from any other HFCs banks, loans given for acquisition of old housing
units/second sale would, however, not be eligible for refinance under the scheme.
Eligibility Criteria
(i) Only such HFCs that conform to the 'Guidelines for Extending Refinance Support to
Housing Finance Companies', as amended from time to time, and which have been approved
by the NHB (discussed earlier) for the purposes of refinance support are eligible to avail
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refinance from the NHB,
(ii) Overdue housing loans of the HFCs, including those covered under the NHB refinance,
should not exceed 10 per cent of the total housing demand (including overdues) for the
preceding twelve months. The level of overdues should be assessed, taking into account only
the amounts overdue for over three months,
(iii) The percentage of net non-performing assets should not exceed risk weighted assets by
more that 5 per cent.
Period of Refinance
Refinance from NHB to HFCs would be repayable during a period not exceed 15 years,
based on the weighted average period of housing loans (WAPOL) in respect of which
refinance is claimed.
Security for Refinance
Refinance from the NHB would be secured by charge on the book debts of the HFC.
Additional security such as charge on immovable properties/movable properties, guarantee of
promoters, additional margins and so on may be stipulated at the NHB's discretion. If at any
time the NHB is of the opinion that the security provided by the HFC has become inadequate to
cover the outstanding refinance, it may advise the HFC to provide and furnish to the
satisfaction of the NHB, such additional security as may be acceptable to the NHB to cover
such deficiency. The NHB may get the loan accounts and associated documents verified, either
by its own officers or a firm of chartered accounts appointed by it for the purpose, with respect
to the loans included in a particular refinance application. It may, at its discretion, recover the
cost of such verification from the concerned HFC.
PROCEDURE
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Application for Annual Refinance Limit
The refinance operations of the NHB are centralised at New Delhi. Refinance, in a
particular year, is released on the basis of the refinance limit sanctioned to the HFC for the year
(July to June). Any HFC approved for the purpose of refinance should submit to the NHB its
annual projections for sanction of refinance limit, in the prescribed annual credit review format,
together
Other Terms and Conditions
Separate Books Separate and proper books of accounts, registers and so on should be
maintained branch-wise by the HFC with respect to housing loans for which refinance has
been extended by the NHB and these should be kept up-to-date. The list of loan accounts
along with necessary details, in terms of the NHB's refinance, should be readily available with
the respective branches.
Life Span of Dwelling Units
Since the repayment period should not exceed the life span of the house/unit financed
out of the housing loan, it should be ensured that the construction is pucca/semi-pucca, with a
life span of not less than 30 years.
Post-disbursal Discipline
There should be proper post-disbursement supervision and follow-up of housing loans
to ensure proper end use of funds as also timely and regular repayment of the loans. It should
conduct its business with due diligence and efficiency and have due regard to these principles
in the conduct of its business.
Maintenance of Recovery
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Performance Continuance of refinance facility under the scheme would be subject to
maintenance of satisfactory a recovery performance by the HFC, from the beneficiaries.
Recall of Refinance
The NHB reserves the right to recall the refinance in the event of diversion of the
relative funds for purposes other than housing or for suppression of any material information
by the borrowing bank.
NHB's Right to Modify the Scheme
The NHB may modify the clauses of the Refinance Scheme in respect of all HFCs, or
in respect of any one HFC, depending on its performance. Such modifications are being
brought out in the form of circulars/letters, from time to time, and have become part of the
scheme.
NHB's Right to Call for Information
The NHB may call for any information or returns from the HFC availing of refinance,
in respect of housing loans and refinance sanctioned under this scheme. It would also have the
right to collect such information directly from the HFC's constituents, its lenders, auditors,
credit rating agencies and so on.
Insisting on Deposits from Borrowers
The HFCs availing of refinance from the NHB should not insist that borrowers place
part of the housing loans disbursed to them in deposit accounts or retain the entire proceeds
disbursed as deposits or insist on deposits as a precondition for sanctioning housing loans.
Borrowings from Institutions other than the NHB
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In case the HFC borrows funds from banks/financial institutions other than the NHB, it
should inform the NHB about the same, giving particulars about the security offered for such
borrowings and obtain a 'no objection' from the NHB. They are required to follow the
necessary procedures and furnish details of their borrowings.
Compliance with HFCs (NHB) Directions, Guidelines on Prudential Norms
The HFC (NHB) Directions, 2001, as amended from time to time, prudential norms for
income recognition, accounting standards, provisioning for bad and doubtful debts, capital
adequacy and concentration of credit/
investments, 2001 and guidelines for refinance support to HFCs, as amended from time to time,
should be deemed to be a part of this refinance scheme.
NATIONAL HOUSING BANK (NHB)
The National Housing Bank (NHB) was established on 9th July 1988 under an Act
of the Parliament viz. the National Housing Bank Act, 1987 to function as a principal
agency to promote Housing Finance Institutions and to provide financial and other support
to such institutions. The Act, inter alia, empowers NHB to:
Issue directions to housing finance institutions to ensure their growth on sound lines
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Make loans and advances and render any other form of financial assistance to
scheduled banks and housing finance institutions or to any authority established by or
under any Central, State or Provincial Act and engaged in slum improvement and
Formulate schemes for the purpose of mobilisation of resources and extension of credit
for housing
Management
The general superintendence, direction and management of the affairs and business of
the.NHB are vested in its Board of Directors, which exercises all powers and executes all acts
and things on its behalf. Subject to the provisions of the NHB Act, the Board, while
discharging its functions, has to act on business principles, with due regard to public interest. In
general, (a) the Chairman, if he is a whole-time Director or if he is holding offices both as a
Chairman and a Managing Director (CMD) or (b) the MD, if the Chairman is not whole-time
director or is absent, can also exercise these powers of the Board. The MD has to follow, in the
discharge of his powers and functions, all directions given by the Chairman. In the discharge
of its functions, the NHB is to be guided by the directions given in writing by the Government
in consultation with the RBI, or by the RBI in matters of policy involving public interest.
The Board of Directors of the NHB consists of
(i) a Chairman and a Managing Director (CMD),
(ii) two Directors from amongst experts in the field of housing, architecture, engineering,
sociology, finance, law, management and corporate planning, or in any other field, special
knowledge of which is considered useful to the NHB,
(iii) two Directors who are persons with experience in the working of institutions involved
in providing finance for housing or engaged in housing development or have experience in the
working of financial institutions/banks,
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(iv) two Directors elected by shareholders other than the RBI/Government/other institutions
owned/controlled by Government,
(v) two Directors from out of the RBI Directors,
(vi) three Directors from amongst Central Government officials and
(vii) Two Directors from amongst State Governments' officials. The CMD an other
Directors, excepting the RBI's Directors and those elected by the shareholders, are appointed
by the Government in consultation with the RBI. The RBI nominates its Directors on the NHB.
BUSINESS ACTIVITIES
NHB, as the Apex level financial institution for the housing sector in the country,
performs the following roles:
(a) Promotion and Development:
NHB operates as a multifunctional Development Finance Institution (DFI) for the
housing sector. The Bank's policies are directed towards promotion and development of
housing finance institutions. NHB has framed guidelines for HFCs with a view to promoting
their development on sound and healthy lines. The guidelines are reviewed and modified from
time to time in the light of developments in the financial and housing sectors. All HFCs
registered with the National Housing Bank u/s 29A of the National Housing Bank Act, 1987
and inter alia having minimum net owned funds of Rs.10.0 crores are eligible for refinance
support. It has also contributed to the equity capital of five HFCs. NHB has a dedicated
Training Division which organises regular training programmes in areas relating to housing and
housing finance for development of management capabilities of officials working in the sector.
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NHB's promotional endeavors are also directed towards capacity building for the housing
finance system besides enlarging the credit absorption capacity.
(b) Regulation and Supervision:
NHB exercises regulatory and supervisory authority over the HFCs in the matter of
acceptance of deposits by them pursuant to the powers vested in it under the Act. As per the
amendments to certain provisions of the Act, which came into effect from June 12, 2000, NHB
is vested with powers to grant Certificate of Registration to companies for
commencing/carrying on the business of a housing finance institution. Besides, NHB regulates
the deposit acceptance activities in accordance with the Housing Finance Companies (NHB)
Directions, 2001, amended from time to time, in the matter of ceiling on borrowings (including
public deposits, rate of interest, period, liquid assets, etc). NHB has also issued Directions on
prudential norms in regard to capital adequacy, asset classification, concentration of credit,
income recognition, provisioning for bad and doubtful debts etc. NHB supervises the working
of HFCs through on-site inspection and off-site surveillance.
(c) Financing:
NHB raises resources for the housing sector towards increasing new housing stock and
provides refinance to a large set of retail lending institutions. These include scheduled
commercial banks, scheduled state cooperative banks, scheduled urban cooperative banks,
specialised housing finance institutions, apex co-operative housing finance societies and
agriculture and rural development banks. Refinance is provided by NHB under various
schemes, which are formulated taking into account, several aspects of the National Housing
Policy, the constraints facing the sector etc. NHB has also a window for direct lending to
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Public Agencies such as, State Level Housing Boards and Area Development Authorities for
large scale integrated housing projects and slum redevelopment projects.
NHB is also operating a special window for extending financial assistance to the people
affected by natural calamities viz. earthquake, cyclone etc.
(d) Resources of NHB
NHB raises resources from diversified sources, both domestic and external by issuing
Bonds/ debentures, borrowing from RBI and financial institutions/organisations etc. Under the
Act, NHB is authorised to issue and sell Bonds with or without the guarantee of the Central
Government for the purpose of carrying on its functions.
(e) Rural Housing:
NHB launched the "Swarna Jayanti Rural Housing Finance Scheme" to mark the golden
jubilee of India's Independence. The Scheme seeks to provide improved access to housing
loans to borrowers for construction/acquisition/ up-gradation of a house in rural areas of the
country.
(f) Recent Initiatives
Securitisation of mortgage loans of the retail lending institutions facilitates for
channelising household savings into the housing sector is seen as a potentially viable market
oriented alternative. Support to Mortgage backed securitisation is a major policy initiative of
the Government as manifested in its National Housing and Habitat Policy announced in 1998.
This policy emphasises NHB's lead role in mortgage-backed securitisation and development of
a secondary mortgage market in the country. As the apex body in housing finance sector in
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India, NHB has been playing a lead role in the sector in matters relating to policy environment
as also operational mechanism for the development of a secondary mortgage market in India.
In order to resolve the twin problems of affordability and accessibility affecting the
growth of the housing finance business and the prospect of home ownership, NHB has been
entrusted with the responsibility of launching a Mortgage Credit Guarantee Scheme for
protecting the lenders against default.
HFCs Promotion and Development
The principal mandate of the Bank is to promote housing finance institutions to
improve/strengthen the credit delivery network for housing finance in the country. The Bank
has played a facilitator role in this regard instead of itself opening such dedicated housing
finance institutions. For this purpose, NHB has issued the Model Memorandum and Articles of
Association. NHB has also issued guidelines for participating in the equity of housing finance
companies. All housing finance companies registered with NHB u/s 29A of the National
Housing Bank Act, 1987 and scheduled commercial/co-operative banks are eligible for
refinance support subject to terms and conditions as laid down under the respective refinance
schemes.
As a part of its promotional role NHB has also formulated a scheme for guaranteeing the bonds
to be issued by the housing finance companies.
Considering the need for trained personnel for the sector NHB has designed and conducted
various training programmes.
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41
CHAPTER III
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RESEARCH METHODOLOGY
GENERAL METHODOLOGY
Research Methodology used here is purely exploratory. It is used when one is seeking insight
into the general nature of the problem, possible decision alternatives and relevant variables that
need to be considered.
The research methodology is highly flexible, unstructured & informal in nature undertaken to
gain background information. The procedure followed in the study consists of following steps:
1) The research includes figurative and diagrammatic interpretation for easy comparison.
2) Understanding of Housing finance in global and domestic scenario.
3) Analysis of Government policy towards Housing finance.
4) Financial Performance Analysis that includes:
a) Determination of growth equilibrium of Housing finance to find internal liquidity to
fund its current position.
b) Multiple discriminates analysis to evaluate the likely position of bankruptcy of Housing
finance.
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SAMPLING PLAN
There has been no sampling plan as such as the study involves understanding the various
processes and analyzing them. The study involved the detailed analysis of the secondary data
collected from various source and therefore no. sample size is 135 and plan has been
considered.
SOURCES OF DATA
Data has been collected from primary as well as from secondary sources.
PRIMARY DATA SOURCES:
Primary data sources include information gathered through interview and discussions with the
head and employees of various departments.
SECONDARY DATA SOURCES:
Below mentioned are secondary data sources used in present study-
Internet
Magazines
Books
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ANALYSIS OF DATA
For the analysis of data, Excel sheet is used. Simple tables are prepared for the purpose of
comparison and help of graph is also taken for making the interpretation easier.
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45
CHAPTER IV
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DATA ANALYSIS AND ITS INTERPRETATION
DATA PROCESSING AND ANALYSIS PLAN
Data processing is an intermediary stage of work between data collection and data
analysis. The raw data, after collection, has been processed and analyzed in accordance with
the outline laid down for the purpose of the study. Tabulation is the process of summarizing
raw data and displaying them on compact statistical table for further analysis. Data is further
classified and categorized for analysis.
ANALYSIS OF DATA: MEANING
The analysis of data is the most skilled task in the research process. It calls for the
researchers own judgment and skill. Analysis means a critical examination of the assembled
and grouped data for studying the characteristics of the object under study and for determining
the patterns of relationships among the variables relating to it.
PURPOSE OF STATISTICAL ANALYSIS
Statistical analysis of data serves several major purposes.
It summarizes large mass of data into understandable and meaningful form. This is the
role of descriptive statistics. The reduction of data facilitates further analysis.
Statistics makes exact descriptions possible. For example, when we say that the
educational level of people in X district is very high, the description is not specific;
but when statistical measures like the percentages of literate among males and females,
and the like are available, the description becomes exact.
Statistical analysis aids the drawing of reliable inferences from observational data. Data
are collected and analyzed in order to predict or make inferences about situations that
have not been measured in full.
Statistical analysis also helps making estimations or generalizations from the results of
sample surveys.
The analysis and interpretation of the data collected has been arranged in the following format
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for better understanding and scrutiny.
Title of the table
Graphic representation
Concept
Analysis
Inference of the table
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1. Which income group do you belong? (Per annum)
S.No. Topic Percentage (%)
1 Below 2 lakhs 502 2-4 lakhs 25
3 4-6 lakhs 20
4 6 lakhs and above 5
50%
25%
20%
5%
Below 2 lakhs
2-4 lakhs
4-6 lakhs
6 lakhs and above
Analysis:
It can concluded from the result that 50% of the respondent income is below 2 lakhs
followed by 25% of the respondent whose annual income is 2-4 lakhs
Interpretation:
From the table and graph above it can be seen that
50% respondents annual household income is below than 2 lakhs .
25% respondents annual household income is between 2 to 4 lakhs.
20% respondents annual household income is between 4 to lakhs.
5% respondents annual household income is more than 8 lakhs.
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2. Have you ever taken Home loan before?
S.No. Topic Percentage (%)
1 Yes 45
2 No 55
45%
55%
Yes
No
Analysis:
It can concluded from the result that 55% of the respondent did not have taken loan
Interpretation:-
From the table and graph above it can be seen that
55% respondents have never taken home loan
45% respondents have taken home loan
3. If yes, from which Bank/company?
S.No. Topic Percentage (%)
1 ICICI 25
2 HDFC 553 UTI 10
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4 Centurion bank of Punjab 5
5 Others 5
Analysis:
It can concluded from the result that 55% of the respondent have taken loan from HDFC
bank& 25% of the respondent have taken loan from ICICI bank.
Interpretation:-
From the table and graph above it can be seen that
55% respondents have taken home loan from HDFC bank,25% from ICICI bank,10% from
UTI,5% from Centurion bank of Punjab & 5% from others
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4. Are you satisfied with the services provided?
S.No. Topic Percentage (%)
1 Highly Satisfied 402 Neutral satisfied 10
3 Highly Dissatisfied 25
4 Dissatisfied 25
40
10
25 25
0
5
10
15
20
25
30
35
40
Highly Satisfied Neutral satisfied HighlyDissatisfied Dissatisfied
Analysis:
It can concluded from the result that 40% of the respondents are highly satisfied for the loan
services
Interpretation:-
From the table and graph above it can be seen that
40% respondents are satisfied with the services of loan
25% respondents are highly dissatisfied & dissatisfied with the services of loan
10% respondents are neutral satisfied with the services of loan
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5. While taking loan, which things attract you the most?
S.No. Topic Percentage (%)
1 Interest rates 55
2 Service provided 15
3 Payback period 10
4 Schemes 15
5 Others 5
55%
15%
10%
15%5%
Interest rates
Service provided
Payback period
Schemes
Others
Analysis:
It can concluded from the result that 55% of the respondents will take loan in interest rate
Interpretation:-
From the table and graph above it can be seen that
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respondents take loan of, 55% to interest rates, 15% to schemes and services
provided, 10% to payback period. So, customer didn't give response
regarding the services of the bank / company except to the amount of loan
and legal formalities
6. How much loan amount you took?
S.No. Topic Percentage (%)
1 Less than 1 lakhs 32
2 1-5 lakhs 48
3 5-10 lakhs 12
4 more than 10 lakhs 8
32%
48%
12%8%
Less than 1 lakhs
1-5 lakhs
5-10 lakhs
more than 10 lakhs
Analysis:
It can concluded from the result that 48% of the respondents take loan for 1-5 lakhs& 32% of
the respondents take loan for less than 1 lakhs
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Interpretation:-
From the table and graph above it can be seen that
48% respondents will take loan for 1-5 lakhs
32% respondents will take loan for less than 1 lakhs
8% respondents will take loan for more than 10 lakhs
12% respondents will take loan for
7. Even if the Interest rate is high for the Home loans, you will go for it?
S.No. Topic Percentage (%)
1 Yes 35
2 No 65
35%
65%
Yes
No
Analysis:
It can concluded from the result that 65% of the respondents will not take loan in high interest
rate
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Interpretation:-
From the table and graph above it can be seen that
65% respondents will not take loan in high interest rate
35% respondents will not take loan in high interest rate
8. If you get a chance to get a loan which bank will you prefer?
S.No. Topic Percentage (%)
1 Standard Chartered Bank 15
2 State Bank of India 25
3 ICICI Bank 10
4 HDFC LTD 45
5 Others 5
Analysis:
It can concluded from the result that 45% of the respondents will take loan from HDFC bank
Interpretation:-From the table and graph above it can be seen that:-
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45% of the people contacted prefer HDFC LTD to any other and therefore it
is ranked no.1 by that percent of respondents. The analysis showed that a
large number of customers prefer HDFC LTD as compared to others. The
data shows that 15% of customers took loan from Standard Chartered
Bank, 10% of customers from ICICI BANK, 25% Customers took loan from
State Bank of India, 5% of customers fall under the category of 'Any other'
which included Canara Bank, Punjab and Sind Bank, etc
9. From where have you got information about home loans scheme?
S.No. Topic Percentage (%)
1 Newspapers 58
2 Magazines 12
3 Hoarding/banners 10
4 Word of mouth 15
5 Others 5
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58
1210
15
5
0
10
20
30
40
50
60
New spapers Magazines Hoarding/banners Word of mouth Others
Analysis:
It can concluded from the result that 58% of the respondents have get information about home
loans scheme through newspaper
Interpretation :-
The data shows that around 15% of customers got information from source
of
'Word of Mouth' which includes information from friends, relatives,
colleagues etc. 58% of
customers got information from newspapers, only 12% of customers from
magazines and 5% of customers got information about home loans
schemes under 'Any other source' and 11% through Banners/
Hoardings/Pamphlets .
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FINDINGS
HDFC LTD having good brand image in the minds of customers.
Majority of the people got loans from HDFC LTD only
Most of the customers are not aware of the products of HDFC home loans
Some of the customers felt that the interest rates are somewhat high
Some of the customer not having good faith on private banks likes Standard
Chartered bank, HSBC bank etc.
Most of the people are directly go to HDFC to apply a home loan
Some of the customer of HDFC already benefited through HDFC home loan
products and services
Customer awareness is medium about HDFC products.
HDFC LTD providing good services to their customers.
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59
CHAPTER V
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CONCLUSION
The past studies have indicated that any point of time there has been housing shortage
in India and it grows at an alarming proportion to the population is increasing year after year,
lots of efforts are being made to provide housing finance to the poor who represent the majority
of those facing housing problems .the NHP was the first efforts in this direction .besides that
,several other organizations like the LIC of India, HUDCO, HDFC are also involved to a
greater extension to housing finance. All those efforts, it is hoped would reduce the housing
shortage in India to a greater extend.
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SUGGESTIONS
Since Housing finance is highly vulnerable to the fluctuation in London Metallic
Exchange so in order to reduce this volatility HDFC should try to enter into forward
contract with suppliers along with other possibilities.
In India, bank is preferred to housing in bank sector..
Cash is utmost requirement for any banks. If the collection period of the company could
be reduced to 10-15 days from its present level, more cash will be available with the
company and will increase cash in hand position.
.
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ANNEXURES
QUESTIONNAIRE
NAME..AGE
GENDER.PROFESSION.
ADDRESS...
CONTACT NO.
1. Which income group do you belong? (Per annum)
(a) Below 2 lakhs [ ] (b) 2-4 lakhs [ ]
(c) 4-6 lakhs [ ] (d) 6 lakhs and above [ ]
2. Have you ever taken Home loan before?
(a) Yes [ ] (b) No [ ]
3. If yes, from which Bank/company?
(a) ICICI [ ] (b) HDFC [ ] (c) UTI [ ]
(d) Centurion bank of Punjab [ ] (e) others [ ]
4. Are you satisfied with the services provided?
(a) Highly Satisfied [ ] (b) Neutral satisfied [ ]
(c) Highly Dissatisfied [ ] (d) Dissatisfied [ ]
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5. While taking loan, which things attract you the most?
(a) Interest rates [ ] (b) Service provided [ ]
(c) Payback period [ ] (d) Schemes [ ]
(e) Others [ ]
6. How much loan amount you took?
(a) Less than 1 lakhs [ ] (b) 1-5 lakhs [ ]
(c) 5-10 lakhs [ ] (d) more than 10 lakhs [ ]
7. Even if the Interest rate is high for the Home loans, you will go for it?
(a) Yes [ ] (b) No [ ]
8. If you get a chance to get a loan which bank will you prefer?
(a) Standard Chartered Bank [ ] (b) State Bank of India [ ]
(c) ICICI Bank [ ] (d) HDFC LTD [ ]
(e) Any other (please specify)...........................................
9. From where have you got information about home loans scheme?
(a)Newspapers [ ] (b) Magazines [ ]
(c) Hoarding/banners [ ] (d) Word of mouth [ ]
(e) any other (please specify)...................................
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BIBLIOGRAPHY
1. Financial services
3rd edition - M. Y. Khan
2. Practical banking advances
UBS publishers ltd
3. Report of the study group on non-banking financial institutions and company.
4. Report on trends and progress of housing in India.
WEBSITE VISITED
1. www.nhb.org.in
2. www.google.com
3. www.business-standard.com
4. www.unece.org
5. www.hinduonnet.com
http://www.google.com/http://www.unece.org/http://www.hinduonnet.com/http://www.google.com/http://www.unece.org/http://www.hinduonnet.com/