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8/11/2019 ResearchPaper-sunilji

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A Comparative Study on Factors Influencing Housing Loan

Borrowers of Public and Private Sector Banks

Every human being aspires of his own house to live in. After food and clothing,

housing is the third most important human requirement. On an average a person

spends almost two-thirds of his life in a house which his sanctuary in his old age.

Adequate housing is therefore a fundamental need of human beings and an essential

pre-requisite for physical, intellectual and mental development.

Blessed are those who live in their own house and fortunate are those who have the

money to buy one. But all are not privileged to buy a house of their own. For many

such less privileged, buying a house has become possible in modern times through

housing loans.

hough shelter was enshrined as Fundamental !ight in the constitution, housing did

not get the attention, it deserved. his was perhaps due to the fact that at that time

nobody e"pected the problem of housing to assume the present gigantic proportions.

#roper housing, even at a lower scale, has never $ept pace with the minimum

requirements of the people. he housing bac$log has been compounded by the high

rate of population growth. %nadequate housing facilities have &ed to the rapid growth

of slums and unauthori'ed settlements, poor quality of services, spiraling land prices

and increasing costs of construction. %n rural areas the situation is even more

alarming. he (overnment and some public sector underta$ings have been trying to

tac$le the problem but their efforts do not touch even the fringe of the problem. he

)entral and *tate (overnments cannot solve this problem.

*o the +ife %nsurance )orporation of %ndia and ousing *ocieties entered the field of

housing loans for their customers. oday there are / housing finance companies

registered with the registrar of )ompanies, of these 01 have been approved by the

2ational ousing Ban$ for financial assistance. he housing finance industry has

been growing at the rate of nearly 3 for the last two years.

Over the last years commercial ban$ s and private sector ban$s have been playingan important role in housing Finance. All commercial ban$s and private sector ban$s


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are now emerging as lenders in the segment, ta$ing a view of initiatives in the form

of opening dedicated outfits 4 cells to cater to the ever-increasing demand for

.housing loans, offering competitive interest rates with fi"ed4variable options, waiverof processing fee, free additional attractive pac$ages and fle"ibilities in housing loon

schemes.

(enerally the traditional trend of the form 5ousing +oans6 or. 5ousing Finance6

means finance for buying or modifying a property. he various housing loan plans

offered by commercial ban$s and private sector ban$s could be classified as under.

7. ouse #urchase +oan

0. ome E"tension +oan

. ouse %mprovement +oan

8. +and #urchase +oan

. +oan to 2!%s

ence, 5ousing Finance6 may be defined as the financial resources for an

individual or a group of persons used especially for the purpose of housing.

A study of the housing loan schemes offered by public sector ban$s and private

sector ban$s would pave the way for ta$ing certain policy decisions for improving

these housing loan schemes.

SA!"!# $F H! P%$BL!"

%n recent times, ban$s vie with one another in organi'ing loan melas with prior

arrangement with the ultimate aim of reaching new heights in the area of disbursal of

loans. %n the falling interest rate scenario it is quite understandable that every ban$ in

its pursuit of capturing the mar$et is e"ploring all avenues to offer a competitive rate

lo bring more and more customers in its fold. he home loan segment has received

much impetus and is balanced for stupendous growth. he recent budget offers

welcome initiatives toward infrastructure development.


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%n the liberali'ed economy both private and public sector ban$s are entering retail

ban$ing in the mar$et. %n developed countries such as the 9.*. and the 9.:. the

credit parameters of a borrower are readily available and hence, a scoring model isused to decide the credit worthiness of the borrower. %n %ndia, since data is not so

readily available on the credit behavior of a borrower, loan underwriting standards

have evolved $eeping in mind the current environment.

%n the midst of the information e"plosion, borrowers sometimes find it difficult to

decide on the right lender.

%tis a common phenomenon that people want to live in their own houses. #eople try

to fund their finance through borrowing from their provident fund or their employer

or friends and relatives or selling other personal assets.

he present study is an attempt to evaluate the housing finance provided by public

sector and private sector ban$s.

%!&I!' $F LI!%A(%!

:.+. *rinivasan ;0///< in his thesis entitled 5A #ro=ect on ousing Finance-ow *B%

can establish leadership6, has concluded that simplification of the documentation

process, careful and friendly approach systems and procedures, good customer

service and non insistence in collateral securities are the most important variables in

the mar$eting of housing loan schemes by ban$s7.

>eepall *ingh ;0//7< in his study entitled 5)onsumer Behaviour and Ban$ing !etail

#roducts an Analysis stresses that the borrower?s attitude is an important factor for

the improvement of housing loan schemes0.

!.!. :rishna and @.*. :rishna oorthy ;7111< stress in their article entitled 5rend

and #olicy %ssues of ousing Finance in %ndia6, that simplified procedures and

speedy sanction of housing loans will give a boost to the construction of houses.

!a=esh :umai *ood ;0//< in his article entitled 5ousing +oan #ortfolio of A*)Bs

- (rowth >rivers Associated !is$ and itigation *trategies6, has concluded that


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ban$s should review the housing loan portfolio at periodical intervals for capturing

new mar$ets and to avoid ris$ in the housing loan schemes8.

$B)!CI&!S $F H! S(*+

he main ob=ectives of this study are

7. o study the socio-economic profile of those who ta$e housing loans.

0. o study the various factors which influence the people who ta$e housing

loans for availing of such loans from public sector and private sector ban$s

and

. o offer suggestions for the improvement of housing loan schemes in public

and private sector ban$s.

SC$P! $F H! S(*+

he study has been underta$en mainly to highlight the features of housing loan

offered by public and private sector ban$s. All $inds of such borrowers li$e

Businessmen, #rofessionals, (overnment Employees, #rivate Employees and *elf-Employed #eople have been included in this study. %t has been underta$en from the

standpoint of borrowers, and ban$ers are e"cluded from the study. Only individual

borrowers have been ta$en and others are e"cluded from the study

SA"PL! *!SI,#

he study is based on the sampling method. he areas of *outh >elhi are included in

the study. A sample of 7// borrowers representing various types such asBusinessmen, (overnment Employees, Employees of #rivate Enterprises,

#rofessional #eople and *elf-employed #eople are selected by applying a convenient

sampling method.


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ABL! -. Sample Housing Loan borrowers selected for t/e study

Sl0 #o Category

of

individual

borrowers

Public Sector Banks Private Sector Banks

#o0 of

%espondents

Percentage

1

#o0 of

%espondents

Percentage

1

7. Business 77 00 8 C

0. #rofessional D 78 70

. Agriculture 7/ 0/ 7/ 0/

8. *elf

employment

D 78 7 0

. (overnment

employment

7/ 8 C

#rivate

employment

7/ 0/ 7/ 0/

otal 23 -33 23 -33


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,!$,%APHICAL A%!A $F H! S(*+

he study covers the areas of >elhi.

"!H$*$L$,+ A#* $$L F$% *AA C$LL!CI$#

Both public sector and private sector ban$s were selected for this study. he data

from the borrowers relating to the housing loan schemes of the ban$s were collected

with the help of an interview schedule. he interview schedule was translated into the

vernacular language. he borrowers who understand English were given the

questionnaire in English *tatistical tools li$e percentage and (A!!E?* !an$ing

ethod were used for this analysis.

FI!L* '$%4 A#* C$LL!CI$# $F *AA

he present study is an empirical research based on the survey method. %t involves

the collection of primary data from the borrowers from public and private sector

ban$s. *ome of the secondary data were collected from articles in the %BA Bulletin,

the !B% Bulletin and pamphlets produced by some ban$s.

*(A P%$C!SSI#,

After the completion of the interview schedules a thorough chec$-up of the data was

made. he missing data was collected immediately. he data was processed with the

help of some statistical tools li$e percentage analysis and (arretts !an$ing ethod.

"!AS(%!"!# $F &A%IABL!S

he researcher has identified ten factors to measure the attitude of borrowers towards

the housing loan schemes. hese variables are measured by the researcher with the

help of (arrett?s !an$ing ethod. he following are the ten factors identified by the

researcher.

7. !ate of %nterest

0. !epayment ethod


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. Free %ncentives

...

8. #rocessing )harges

. )ustomer *ervice

. Guic$ >isposal of +oan Applications

D. *ervice )harges

C. Friendly behaviour of the *taff

1. +esser Formalities

7/. 2earer to borrowers residence

F%A"!'$%4 $F A#AL+SIS

First, the relationship with the socio-economic factor and the loans provided by

ban$s are analy'ed with the help of percentage analysis.

*econd, the various factors which influence the borrowers to approach the ban$s are

analy'ed with the help of (arrett?s !an$ing able.

FAC$%S I#FL(!#CI#, H$(SI#, L$A# B$%%$'!%S

According to the modern ban$ mar$eting concept the customer is the $ing. For any

product to stand in the mar$et it should satisfy the customer. he demand for a

particular product changes from time to time. At present customers ;ousing loan

borrowers< e"pect more from the ban$s. he basic mechanism in the ban$ing

industry is providing borrower satisfaction. %t seems to be the mass customi'ation of

the services not only in terms of product deliverables but also in terms of distribution

channels.

here are a number of factors which influence the borrowers of housing finance in

selecting the ban$. he borrower?s attitude analysis is an important technique in

studying the housing loan schemes of the ban$s.


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he importance given to a factor by a person may not be the same as in the case of

another. *ome of them are satisfied with one aspect but dissatisfied with the other

aspects of the scheme. hus, it is a difficult tas$ to identify single factor whichinfluences the borrowers. %t was found mat factors such as the rate of interest, the

quic$ disposal of loan application, lesser formalities in advancing housing loans, the

processing charges, the repayment method, free incentives, customer services, nearer

to resident e and friendly behaviour of employees influence the borrowers in

choosing the ban$s.

FAC$% 'IS! A#AL+SIS $F P(BLIC S!C$% BA#4S

ABL! 5. Factors influencing t/e Borrowers in Public Sector Banks

S0

#o0

%ank

Factors

#o0 of %espondents otal

I II III I& & &I &II &III I6 6

7 +ow rate of

%nterest

7/ H H H H H H H /

0 Guic$

disposal of

loan

application

7 0 7/ H H /

+esser

formalities

H 1 0 H 8 7/ 7/ /

8 Free

%ncentives

H H H 0 8 7/ 7 7/ /

+ow service

charges

7/ 8 D D 8 H /

Friendly

behaviour of

field staff

8 C 8 8 D 8 D /

D (ood

customer

service

H C C 8 8 8 8 8 8 7/ /

C +ow waiver

of processing

0 7 7/ H H H H H H H /


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fee

1 )onvenient

!epaymentmethod

7C 7 70 H H H H H H /

7/ 2earer to

!esidence

H H H H D 8 7/ 0/ /

FAC$% 'IS! A#AL+SIS $F P%I&A! S!C$% BA#4S

ABL! 7. Factors influencing t/e Borrowers in Private Sector Banks

S0

#o0

%ank

Factors

#o0 of %espondents otal

I II III I& & &I &II &III I6 6

7 +ow rate of

%nterest

0 C C 1 H H H H H H /

0 Guic$

disposal of

loanapplication

00 7/ C C 0 H H H H H /

+esser

formalities

H H H D D 7 /

8 Free

%ncentives

H H H H 8 8 C C 0/ /

+ow service

charges

7 C D 8 H H H /

Friendly

behaviour of

field staff

H H H 70 7/ C 8 /

D (ood

customer

service

H 0 7 7 0 7/ C 1 77 /

C +ow waiver

of processing

fee

H H H H H 7/ 7/ 7 7 H /


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1 )onvenient

!epayment

method

0/ 7 0 8 0 H l 0 H /

7/ 2earer to

!esidence

0 7 0 8 D 7C /

%t was felt that the ran$ing of the influencing factors would be reasonable. ence,

(arrett?s !an$ing technique was used. !an$s have been calculated with the formula

given by him and also with (arrett?s !an$ing able

(arrett?s Formula

#ercent #osition Ij

ij

N

R ./7//

!i=I !an$ given for the ithvariable by =threspondents

2=I 2umber of variable ran$ed by the =threspondent

By using this formula the result obtained was compared with, (arrett?s !an$ing

able and the scores were given.

he total scores of each item were added and ran$s were given according to the total

value.

,A%%! %A#4I#, F$( P(BLIC S!C$% BA#4S

ABL! 8. ,arrett9s %anking able for Public Sector Banks

Sl0

#o0

Factors Public Sector Banks

otal Scores "ea n Score %ank

7. +ow rate of %nterest. 1// DC.// %

0. Guic$ disposal of loan

application

018D C.18 %@

. +esser formalities 71C1 1.DC @%%%

8. Free %ncentives 7D .7 %J


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. +ow service charges 0DC7 .0 @

. Friendly behaviour of field staff 077 /.00 @%

D. (ood customer service 08 8.10 @%%

C. +ow waiver of processing fee D D./7 %%

1. )onvenient !epayment method 11 D7.1C %%%

7/. 2earer to !esidence 7C7 7.0 J

able 8 shows that in the case of the public sector ban$s the low rate of interest was

ran$ed first, low waiver of processing charges was ran$ed second, convenient

repayment method ran$ed as third, quic$ disposal of loan applications ran$ed as

fourth, low service charges ran$ed as fifth, friendly behaviour as si"th, good

customer service ran$ed as seventh, +esser formalities ran$ed as eighth and free

incentives, nearer lo residence were ran$ed ninth and tenth respectively.

ence it is clear the rate of interest offered by the public sector ban$s is an important

factor .influencing the borrowers in approac/ing the ban$s

,A%%! %A#4I#, F$% P%I&A! S!C$% BA#4S

ABL! :. ,arrett9s %anking able for Private Sector Banks

Sl0

#o0

Factors Public Sector Banks

otal Scores "ean Score %ank

7. +ow rate of interest 0 D./8 %

0. Guic$ disposal of loan

application

1 D7.10 %%

. +esser formalities 717 C.0 @%

8. Free %ncentives 71C 7./ J

. +ow service charges 07 ./0 %@

. Friendly behaviour of field

staff

0717 8.C0 @

D. (ood customer service 7C1 D.1 %J


12/20

C. +ow waiver of processing

fee

717 C. @%%%

1. )onvenient !epayment

method

8C 1. %%%

7/. 2earer to !esidence 71/ C. @%%

able shows that in the case of private sector ban$s the low rate of interest ran$ed

as first, quic$ disposal of loan application ran$ed as second, convenient repayment

method ran$ed as third, low service charges ran$ed as fourth, friendly behaviour of

staff ran$ed fifth., +esser formalities ran$ed si"th, nearer to residence ran$ed as

seventh, +ow waiver of processing fees ran$ed eighth, and good customer services

and free incentives ran$ed as ninth and tenth respectively.

ence it is clear that the rate of interest to be levied by the private sector ban$s is an

important factor influencing the borrowers in approaching the ban$s.

S$(%C!S $F I#F$%"AI$# AB$( H$(SI#, L$A# SCH!"!

he housing loan scheme awareness among the respondents was evaluated through

various sources which persuade them in their borrowing.

ABL! :. Sources of Information on Housing Loan Sc/eme

Sl0

#o0

Sources of

Information

Public Sector Banks Private Sector Banks

#o0 of

%espondents

Percentage

1

#o0 of

%espondents

Percentage

1

7. 2ewspaper 70 D 78

0. .@. 70 08 7/ 0/

. Banners 7 0 / /

8. !adio 7/ 8 C

. *taff embers 0 8

. Friends 0 8 07 80


13/20


14/20

A'A%!#!SS $F %A! $F I#!%!S

A7L!


15/20

. @ery #oor H H H H

otal 23 -33 23 -33

able 1 shows that out of / respondents in the private sector ban$s 7 ;/3eepall *ingh, )onsumer Behaviour % Ban$ing !etail #roducts an Analysis.

Ban&ing 'inance (a) *++,

. !.!. :rishna and @.*. :rishna oorthy, rend and #olicy %ssues of ousing

Finance in %ndia. Southern Econo$ist! April , % ,-! ,...

8. !a=esh :umar *ood M ousing +oan #ortfolio of A*)B- (rowth >rivers

Associated !is$s and mitigation strategies -IBA Bulletin! /une*++0


19/20

BIBLI$,%APH+

B$$4S

7. Agarwal, .2.71C/. APortrait of Nationalised Ban&s! 1elhi2 Inter India

Publication

0. Bandyapaduyay, !. 71C8. E$erging #hallenges of Indian Ban&ing and

Polic)

. Facts, Figures and Analyses 718D - 711D. %ndia at /, E3press publications

4(adurai5 Ltd

8. enry. E. (arrett and !. Nood North Statistics Ps)cholog) and Education!

@a$ilas Faffer and *imons #rivate +td., Bombay 71C 7. p. 01.

. 2abhi?s &111.How to Borrow fro$ Ban&ing and 'inancial Institutions! ;7/th

ed.< 2ew >elhi a 2abhi #ublications.

. *anthosh :umar Adhi$ari, "he lending Ban&er! )alcuttaL &.2. (hash andsons.

D. hanulingam, 2. 71C Research (ethodolog)! Rainbow Publications!

)oimbatore.

C. @ershney, #.2.711D.Ban&ing Law and Practices ;8thed.< 2ew >elhi *ultan

)hand % *ons.

%!P$%S A#* P%$)!CS

7. *inivasan :.+. 0///.A Project on Housing 'inance! How SRI can Establish

leadership *B% - *) perambur )hennai.

0. #ulunlsamy .:. 0///.AProject on #hallenges Ahead! *B% - *) perambur

)hennai.

. #radeep :umar *harma #H Bhabha Scholarship Project Report *++0 %BABulletin, &une 0//.


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A%ICL!S

7. >eepal *ingh, @en$atanarnyanan. #onsu$er Beha6iour % Ban&ing Retail

Products and Anal)sis! Ban$ing Finance, ay 0//7.

0. (uthura$an P Housing 'inance in India! %BA Bulletin, *ep. 7111.

. !a=esh :umar *ood, Housing Loan portfolio of AS#Bs - 7rowth 1ri6ers

Associated Ris&s and (itigation strategies8 %BA Bulletin &une 0//.

8. :rishnan !.!., and. @.*. (aneshmurthy, "rends and Polic) issues of Housing

'inance in India *outhern Economist. April l % 7. 7111.

. *rinivasa @allabhan. #ost9satisfaction Anal)sis in Housing Acti6it)2 A #ase

Stud)! *outhern Economist August. 7, 0//.

#ewspapers

Business +ine

he Nee$-Ho$e Loans $ar&eting it wor& for )ou arch 0C, 0//8.

he Nee$-A: that )ou want to &now about Housing 'inance ay 0, 0//.

2ittin #alany, Housing 'inance Huge :ntapped Potential! he indu - Sur6e) of

Indian Industr) *++;

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