COMPARITIVE STUDY OF VARIOUS HOUSE LOANS SCHEMES WITH

REFERENCE TO HDFC BANK, ICICI BANK

AND UTI BANK.

SYNOPSIS

SUBMITTED BY:
VISHAL
ENROLLMENT NUMBER: XXXX
SYUDY CENTER: XXXXX
UNDER THE SUPERVISION OF:
XXXXXX
XXXXXXXX
SUBMITTED TO:
SCHOOL OF MANAGEMENT STUDIES
INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI
NEW DELHI
FOR THE PARTIAL REQUIREMENT OF THE DEGREE OF MBA

Introduction: Housing Finance

The housing finance industry, encompassing banks and housing finance
companies (HFCs), has exhibited a 36 per cent growth between April and
December 2002 despite the high prepayment levels experienced by some HFC's.
Aggressive marketing efforts of banks and HFC's have further precipitated this
trend.
"Banks have an inherent advantage in retail finance, especially in housing loans,
because of the lower cost of funds, existing retail relationships in liability products
and large branch network."
It is expected that banks will further increase their market share in the housing
finance sector in the medium term. It is also expected that the housing finance
sector will maintain its high growth rates in future given that the key growth
drivers

the government's thrust on the housing sector in terms of fiscal

incentives for individual housing loans coupled with the demand-supply gap in
housing - would remain strong.

Product description
Loan amounts extend upto 60%-85% of the value of property sought to be
financed.

Amount of loans provided vary from Rs.100,000 to Rs.2.7 million.

Repayment periods vary from 5 to 20 years and HFCs have many types of
payment structures and schemes. Some Housing Finance Companies (HFCs)
provide loans for home improvement and home addition as well.

i. exe

Loans are largely provided to individuals, with some part of most HFCs portfolio
consists of loans to corporate bodies that in turn either build housing for
customers or employees or pass the loan on to the employee as housing loan.
The break-up of business of Housing Development Finance Company (HDFC)
and LIC Housing Finance Company Limited (LHFL) for 1994 was:
HDFC

LHFC

Individuals

75%

91%

Corporate Bodies

23%

4%

Others

2%

5%

Loans to others consist of loans extended to Builders/Developers and Cooperative Societies. Although the margins on these loans are higher, the risk
associated with these loans is also higher , consequently these form a small part
of the portfolio for any HFC.
Sources of housing finance
In addition to Housing Finance Companies, other sources of Housing Finance
include Scheduled Commercial Banks, Provident Funds, Co-operatives and
Housing and Urban Development Corporation (HUDCO).
Loans extended by Scheduled Commercial Banks for the purpose of housing
qualify for priority sector lending. Most commercial banks also have subsidiary
HFCs. RBI has stipulated that 1.5% of the incremental deposits received should
be deployed toward lending to the housing sector. Of this amount 30% must be
used for direct lending, of which half must go to rural or semi-urban areas, 30%

for indirect lending and the remaining 40% should be used to buy NHB or
Housing and Urban Development Corporations bonds and debentures.
Savings held in Provident and Pension Funds (PFs) represent 17% of the
financial assets of the household sector, second only to banks. Almost all the
investment capital of these funds has to be placed in either a special deposit
scheme of the Central Government (70%) or in State Government securities
(15%). In addition to providing pension benefits, PFs also extend housing loans
to members. Advances for housing represents about 12%-16% of collections. In
addition the Planning Commission report suggests that 5% of new PF
accumulations should be set aside for loans to HFCs and investment in heir
securities.
Co-operatives fall in to three categories co-operative banks, state mortgage
banks and apex national and state level housing finance companies.

Co-

operative banks have a small but wide network, State mortgage organisations
are involved primarily in rural housing schemes, Apex housing societies obtain
87% of their resources from other institutions i.e. banks, LIC, HUDCO etc. There
are 25 State apex co-operative housing federations, these on an average lend
Rs 3 billion per year financing construction of about 100,000 homes.
Housing and Urban Development Corporation was set up in 1970 to provide
housing for the poor. It provides financing to state housing boards, co-operative
societies, development authorities etc. Over 90% of the houses financed by
HUDCO are low income.
Government, LIC, NHB, UTI etc.

HUDCO receives support from the Central

The major players in the banking sector that offer housing loans to individuals are
ICICI Bank, HDFC Bank, SBI Bank, UTI bank, Canara Bank and some other
nationalised banks.

OBJECTIVE OF THE PROJECT

1. To compare the housing loans schemes of ICICI Bank, HDFC Bank and UTI
bank in Delhi.
2. To conduct a consumer survey to find the consumer about housing loans.

RESEARCH METHODOLOGY