A

SYNOPSIS

ON

THE ROLE OF HDFC BANK PROVIDING HOUSING

FINANCE TO MIDDLE AND HIGH INCOME GROUPS

AT

HDFC BANK LTD

A synopsis submitted to Osmania University

In partial fulfillment for the Award of the Degree of

MASTER OF BUSIUNESS ADMINISTRATION

Submitted by

PUPPALA CHAITANYA BHARGAVI

HT NO: 2121-20-672-175

UNDER THE GUIDANCE OF

------------------------------------------

ARISTOTLE PG COLLEGE

(Affliated To Osmania University,Hyderabad)

Recognized By UGC under section 2(f) of UGC Act 1956

Beside Moinabad Police Station,

Chilkur, Moinabad ,Ranga Reddy District, Telangana.

 2020-2022

INTRODUCTION
India has more than 1.1 billion people. One of the most important parts of the minimum
needs of life is the shelter (house) and in a country with lots of rituals and traditions it seems
as a dream for every person. In a developing country like India, the house is always a dream
of most of the people living in all type of areas (Villages, slums, urban, rural etc). For these
people dreaming for houses, housing loan is a compatible and affordable way of attaining
their own houses. Due to the rapid urbanization and the migration of people from rural to
urban, a crucial demand borne out for housing needs in urban areas. Before start of opening
our economy as an initiative of the government the New Economic Policy 1991, banks were
not entertaining long term finance for housing purpose. After financial reforms and the policy
of liberalization, RBI has approved the policy of housing finance up to Rs. 15 lakhs as
priority sector lending (NEP 1991). Initiative of the facilitation to provide housing through
loan, the housing loan became an important issue in the country like India where crores of
people are struggling for shelter especially in urban area. From that time public sector banks
are playing an important role in catering to the credit needs of housing finance, following the
business of non-banking financial institutions like HDFC and few private banks. In the
current economic scenario all the successive Indian governments have regarded housing as a
primary need of the people. The need to provide affordable housing has been the reason
behind State interventions in the sector. Housing policies, however, tended to be framed by
the government from a social rather than economic perspective. Despite explicit recognition
of the need for housing, dedicated programmes have only benefited from low public
spending. Housing and subsidies have largely synonymous with each other, hence a tendency
to view housing finance from the angle of the government’s cash budget, rather than as a
developmental activity with tremendous spin-offs to the economy.

Taking an extensive overview about the human needs, every individual household unit
desires a home and it is the single largest asset most households invest in. Hence, the cost and
availability of housing finance are critical components determining how well housing
markets function across the globe. With a fast moving economy and growing demand due to
higher incomes, the housing finance market in India has grown and changed significantly
during the past decade. The Housing finance sector in India has no doubt, experienced
unprecedented change in its structure from its formulation stage. The structure of the Indian
housing finance market rapidly changed with the arrival of commercial banks in the late
nineties. These banks with their aggressive marketing and pricing strategies have now
overtaken the housing finance companies with a 65.5% share in the total loan disbursements.
With the liberalization of the housing finance sector and developments like the introduction
of mortgage backed securities in the markets, we are increasingly moving towards the market
structures which exist in the more mature markets. On the other hand, rapid urbanization and
increasing growth for housing demand is causing housing shortage in India. The total housing
shortage in India for the year 2007-2008 is estimated as 78.7 million units. This shortage is
even more pronounced in the urban centers of the country. Government estimates show that
there is a shortage of around 26.53 million units for the years 2007-2012, 90% of which is in
the lower income and affordable housing segment. The Housing finance sector in India has
no doubt, experienced unprecedented change in its structure from its formulation stage.
Indian Housing finance has far moved from the stages of being a solely government provided
service during the 1970’s to a very competitive sector with more than 45 housing finance
entities providing housing loans worth Rs 781,000 million to home buyers across India.

As analyzed by the affordable housing finance (IFMR) capital about Indian housing finance
sector with growing population and urbanization. According to IFMR, “Traditionally, banks
have been the largest player in the housing finance market, and they continue to hold close to
70% of the total home loan portfolio in India. The other players in the market include: HFCs,
land development banks and housing societies. The National Housing Bank (NHB) was set
up in order toaccelerate housing finance activity in India and promote HFCs. Although their
market share has been steadily growing, 37% as of 2014, the majority of housing loans
disbursed remain in a higher loan bracket of over INR 10 lakhs, according to NHB. Home
loans below INR 10 lakhs, categorized as the low income housing market, provided huge
opportunity for the existing as well as new HFCs. HFCs with a strategic focus on financing
low and middle income segments in the informal sector have come to be known as
‘affordable housing finance companies’ (AHFCs). The Affordable housing finance market
can be segmented based on the target market it is catering to and the home loan size. The
aggregate AUM of all AHFCs is estimated to be INR 20,000-21,000 crore. Within this
segment, large HFCs dominate the market, catering to borrowers in the formal sector who are
able to produce documented proofs of income. Excluding DHFL, GRUH and Mahindra Rural
Housing, who collectively account for more than 90% of the market share, all other AHFCs
manage less than INR 500 crore of assets, individually. Semiformal and informal sectors
remain largely under-served; this is especially true when the loan requirement falls below
INR 7 lakhs. AHFCs rely on their ability to assess the clients’ income, develop templates to
understand the margins and cash flows of local businesses, and have a strong in-house
process of credit and security verification. The number of AHFCs in this market and their
assets under management is very small in proportion to the demand – presently, they
collectively manage less than INR 4000 crore.
 CHAPTER-II
REVIEW OF LITERATURE
Before giving details regarding the research methodology used in the study, it is appropriate to present
a brief overview of the research articles, case studies, and books written on this particular topic. The
area of study may be within the country or outside the country.
Review of literature helps a researcher to get acquainted with his/her selected research problem and
also may provide some guidelines in selecting a proper research methodology. It is also helpful in
finding out the research gaps in the existing literature. This will help the researcher in fine-tuning
his/her research problem and methodology. Another advantage of reviewing in the existing literature
is that in cases where the research problems are similar, the conclusions and findings may be easily
compared. This will help the researcher in determining whether his/her findings are possible or not.

Housing loan is one of the services provided by mostly commercial institutions. In the current trend,
banking institution is losing their market shares (Mylonakis, 2007). Due to technology advancement,
information about every product and services in banking industry are transparency. Potential
customers are able to compare the interest rates, packages and services offered by each and every
bank. Likewise, internet banking had widely spread across the whole nation due to the convenient of
places, time and cost saving (Arnold and Ewijik, 2011). Unfortunately, in the sense of technology
wise and globalisation, banking institutions face more competitors compared to previously (Girardone
et al., 2010). In such a situation, how commercial institutions will be able to be outstanding among all
the institution lenders?

Factors affecting borrowers’ choice of housing loan package is the dependent variable in this research
paper. The author would like to know about which factor contributes the highest in affecting
borrowers’ choice. As from the past findings, there are more than 10 factors which will affect
borrowers’ decision making (Ojo and Ighalo, 2008; Mylonakis, 2007; Tiwari and Moriizumi, 2003).

In this chapter, the author categorise independent variables into 2 major categories which are loan
elements and bank’s services. Further on, loan elements consists of interest rate, repayment period,
monthly payment, loan to value ratio and penalty; while bank’s services includes reputation,
employee and promotion method. Each of the independent variables is discussed one by one based on
the past findings. Moreover, only 1 moderating variables will be discussed after the independent
variables. There is income, which indirectly affects borrowers’ choice in choosing a mortgage loan.
Government Efforts
Government plays an important role in leading its citizen across the transformation of becoming a
developed country. In financial sector, Central Bank of Malaysia, which also known as Bank Negara
Malaysia (BNM), was established in year 1959 under the Central Bank of Malaysia Act 1958 (CBA
1958). The CBA 1958 was later replaced by the Central Bank of Malaysia Act 2009 (BNM, 2010).
BNM is 100% owned by Government of Malaysia with the increasingly paid-up capital around RM
100 million. Based on Figure 2.1, the central bank is the one and only statutory body that set the
deposit interest rate, base lending rate (BLR), overnight policy rate (OPR) and the reserve
requirement ratio (Shaari, 2008). Any changes of these interest rates will affect the amount of money
available for loan lending. Thus, government controls ‘everything’.
Before giving details regarding the research methodology used in the study, it is appropriate to present
a brief overview of the research articles, case studies, and books written on this particular topic. The
area of study may be within the country or outside the country.
Review of literature helps a researcher to get acquainted with his/her selected research problem and
also may provide some guidelines in selecting a proper research methodology. It is also helpful in
finding out the research gaps in the existing literature. This will help the researcher in fine-tuning
his/her research problem and methodology. Another advantage of reviewing in the existing literature
is that in cases where the research problems are similar, the conclusions and findings may be easily
compared. This will help the researcher in determining whether his/her findings are possible or not.

Housing loan is one of the services provided by mostly commercial institutions. In the current trend,
banking institution is losing their market shares (Mylonakis, 2007). Due to technology advancement,
information about every product and services in banking industry are transparency. Potential
customers are able to compare the interest rates, packages and services offered by each and every
bank. Likewise, internet banking had widely spread across the whole nation due to the convenient of
places, time and cost saving (Arnold and Ewijik, 2011). Unfortunately, in the sense of technology
wise and globalisation, banking institutions face more competitors compared to previously (Girardone
et al., 2010). In such a situation, how commercial institutions will be able to be outstanding among all
the institution lenders?

Factors affecting borrowers’ choice of housing loan package is the dependent variable in this research
paper. The author would like to know about which factor contributes the highest in affecting
borrowers’ choice. As from the past findings, there are more than 10 factors which will affect
borrowers’ decision making (Ojo and Ighalo, 2008; Mylonakis, 2007; Tiwari and Moriizumi, 2003).

In this chapter, the author categorise independent variables into 2 major categories which are loan
elements and bank’s services. Further on, loan elements consists of interest rate, repayment period,
monthly payment, loan to value ratio and penalty; while bank’s services includes reputation,
employee and promotion method. Each of the independent variables is discussed one by one based on
the past findings. Moreover, only 1 moderating variables will be discussed after the independent
variables. There is income, which indirectly affects borrowers’ choice in choosing a mortgage loan.
Government Efforts
Government plays an important role in leading its citizen across the transformation of becoming a
developed country. In financial sector, Central Bank of Malaysia, which also known as Bank Negara
Malaysia (BNM), was established in year 1959 under the Central Bank of Malaysia Act 1958 (CBA
1958). The CBA 1958 was later replaced by the Central Bank of Malaysia Act 2009 (BNM, 2010).
BNM is 100% owned by Government of Malaysia with the increasingly paid-up capital around RM
100 million. Based on Figure 2.1, the central bank is the one and only statutory body that set the
deposit interest rate, base lending rate (BLR), overnight policy rate (OPR) and the reserve
requirement ratio (Shaari, 2008). Any changes of these interest rates will affect the amount of money
available for loan lending. Thus, government controls ‘everything’.
 CHAPTER-III

RESEARCH METHODOLOGY

NEED OF THE STUDY

Housing is one of the basic requirements of an individual. An individual has to ensure

housing requirement depending upon their purchasing capability. Rapid increase in
population of India, rapid industrialization, shifting from rural to urban area, break up of joint
family etc. are some of the reasons behind lack of affordable housing in India. Fulfilling the
basic requirement of shelter is one of the challenging tasks of government of the respective
country Government of India has formulated national housing policy to handle the problem
of scarcity of affordable housing in India. The primary objective of national housing policy in
India is to encourage investment in housing sector so that a sustainable growth in housing
sector can be achieved. National housing policy has an estimated requirement of additional
ten lakh units per annum so as to fulfill gap between demand and supply of housing in India.
Housing finance has to play a kind of facilitation role to bridge the gap of demand and supply
of housing in India. An individual who has a dream to have a house but he might not have
large corpus of funds to acquire that assets. Housing finance is an instrument that might help
them a lot to acquire that house which is not in his reach. A sound institutional infrastructure
should exist to support housing finance to household to have sustainable growth in housing
sector.
OBJECTIVES OF THE STUDY

 Present study is guided by the following objectives:

 To examine the performance of housing finance provided by HDFC BANK LTD
 To evaluate the financial performance of HDFC BANK LTD.
 To make a comparative analysis of financial performance by HDFC BANK LTD.&
LICHF Ltd
 The study can be more effective by studying customers view point towards housing
finance organization.
 Extending time period for study can be more helpful in analyzing efficiency of the
selected organization.

 SCOPE OF THE STUDY

Present study focuses on existing structure and development of housing finance system in
India. Scope of the present study is on understanding the existing structure of housing sector
and analysis of financial performance of HDFC BANK LTD. and LICHFL. HDFC BANK
LTD. is one of the leading private sector enterprises in housing finance sector. LICHFL is
also one of the important enterprises in India catering the needs of housing finance of Indian
housing finance. This is one of the prime reasons to include these two HFCs for the purpose
of the study.

Ten financial years (2016-2017to 2020-2021) have been covered for the purpose of the study.
Analysis of financial performance and its comparison is only possible when it is being done
for comparable period. Financial performance of the two enterprises should be compared
with substantial period; hence period 2016-2017to 2020-2021 have been selected for the
purpose of the study.
 RESEARCH METHODOLOGY
The data collection methods include both primary data and secondary data.

Primary Data:

Primary datais that data that has not been previously published, i.e. the data is derived
from a new or original study and collected at the source, e.g. in marketing, it is information
that is obtained directly from first-hand sources by means of surveys, observation or
experimentation. This is also called first-hand data.

SOURCES:

 No primary data was collected while doing this project.

Secondary Data:

The secondary data, on the other hand, is basically primary data collected by someone else.
Researchers reuse and repurpose information as secondary data because it is easier and less
expensive to collect. However, it is seldom as useful and accurate as primary data. It can be
collected directly either from published or unpublished sources. It is collected for purposes
other than the completion of a research project and it is used to gain initial insight into the
research problem. It is the data that have been already collected by and readily available from
other sources.

SOURCES:

 The data was collected from personal observation of records.

 The pamphlets provided by the bank.
 The brochures and annual records provided by the bank.
 Various books relating to loans, advances and other related topics.
 Official website of the company
 Internet
 LIMITATIONS OF THE STUDY

Following are the main limitations of the present study:

 Study is purely based on secondary data and no perception from customer side had
been studied, due to which this study is basically an analysis of supply side of housing
finance.
 Assumed time period for the study is only of 10 financial years. Variations in findings
can be expected if time period of the study varies.
 Main focus of the study is only on one institution i.e. HDFC BANK LTD and
comparison also have been made with only one organization i.e. LICHF Ltd.
 The study is also affected by the limitations of the analytical tools that have been
selected to support the study.
 CHAPTER-IV

COMPANY PROFILE
HDFC (Housing Development Financial Corporation) Bank Limited is an Indian banking

and financial services company headquartered in Mumbai, Maharashtra. It has 84,325

employees and has a presence in Bahrain, Hong Kong and Dubai. HDFC Bank is India’s

largest private sector lender by assets. It is the largest bank in India by market capitalization

as of February 2017. It was ranked 69th in 2017 Brand Top 100 Most Valuable Global

Brands.

In 1994 HDFC Bank was incorporated, with its registered office in Mumbai, India. Its first

corporate office and a full service branch at Sandoz House, Worli were inaugurated by the

then Union Finance Minister, Manmohan Singh.

As of June 30, 2017, the bank's distribution network was at 4,715 branches and 12,260 ATMs

across 2,657 cities and towns. The bank also installed 4.30 Lacs POS terminals and issued

235.7 Lacs debit cards and 85.4 Lacs credit card in FY 2017.

Products and services

HDFC Bank provides a number of products and services including wholesale banking, retail

banking, treasury, auto loans, two wheeler loans, personal loans, loans against property

and credit cards.

The latest entry in the league is 'Project AI', under which HDFC Bank, over the next few

weeks, would deploy robots at select bank branches. These robots will offer options such as

cash withdrawal or deposit, forex, fixed deposits and demat services displaying on a screen to

customers.
Acquisitions

HDFC Bank merged with Times Bank in February 2000. This was the first merger of two

private banks in the New Generation private sector banks category.[15] In 2008, Centurion

Bank was acquired by HDFC Bank. HDFC Bank Board approved the acquisition of CBoP for

95.1 billion INR in one of the largest mergers in the financial sector in India.

Listings and shareholding

The equity shares of HDFC Bank are listed on the Bombay Stock Exchange and the National

Stock Exchange of India. Its American Depository Shares are listed on NYSE and the global

depository receipt are listed on the Luxembourg Stock Exchange where two GDRs represent

one equity share of HDFC Bank.

Shareholders (as of 31 December 2015) Shareholding[17]

Promoter group (HDFC) 21.57%

Foreign institutional investors (FII) 32.4%

Individual shareholders 8.5%

Bodies corporate 7.5%

Insurance companies 5.38%

Mutual funds/UTI 8.65%

 NRI/OCB/others 0.29%

Financial institutions/banks 2.75%

ADS/GDRs 18.78%

3.2.2 VISION AND MISSION OF THE COMPANY

Vision Statement

"To become the market leader in Housing Development Finance in Sri Lanka"

Mission

We define our mission in the broader context of our shareholders, customers, staff, the

national economy, regulators and the natural environment.

 To our shareholders, our mission is to optimize returns.

 To our customers, our mission is to provide a caring service by anticipating their

requirements and innovatively satisfying them beyond their expectations.

 To our staff, our mission is to identify their multi-faceted talents, develop, motivate,

recognize and reward them towards fulfilment of the institutional and national housing

vision.

 To the national economy and the industry regulator, we are the key driver and thought

leader, shaping and financing the national housing policy.

 To our natural environment, we enforce sustainable practices across all our activities.
 CHAPTERIZATION

CHAPTER-1

INTRODUCTION

CHAPTER-2

REVIEW OF LITERATURE

CHAPTER-3

RESEARCH METHODOLOGY

 NEED OF THE STUDY

 OBJECTIVES OF THE STUDY
 SCOPE OF THE STUDY
 DATA COLLECTION
 LIMITATIONS
CHAPTER-4

INDUSTRY/COMPANY PROFILE

CHAPTER-5

DATA ANALYSIS

CHAPTER-6

FINDINGS

CHAPTER-7

SUGGESTION & CONCLUSION

BIBLIOGRAPHY

ANNEXURES