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A STUDY ON HOUSING LOAN BORROWERS OF PUBLIC AND PRIVATE SECTOR BANKS IN THOOTHUKUDI AREA. Researchjournali s Journal of Commerce

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Vol. 1 No. December 01 1 A STUDY ON HOUSING LOAN BORROWERS OF PUBLIC AND PRIVATE SECTOR BANKS IN THOOTHUKUDI AREA Mrs.S.Rajalakshmi Assistant Professor of commerce, Govindammal Aditanar college for women,
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Vol. 1 No. December 01 1 A STUDY ON HOUSING LOAN BORROWERS OF PUBLIC AND PRIVATE SECTOR BANKS IN THOOTHUKUDI AREA Mrs.S.Rajalakshmi Assistant Professor of commerce, Govindammal Aditanar college for women, Tiruchendur, Thoothukodi Tamilnadu Mrs.C.Pappeswari Assistant Professor of commerce, Govindammal Aditanar college for women, Tiruchendur, Thoothukodi Tamilnadu Mr.A.venkatesh Assistant Professor of commerce, Ambai Arts college,tirunelveli District, Tamilnadu Vol. 1 No. December 01 Abstract Housing is a primary human need next in importance only to food and clothing. A first priority for a youngster who beings life is therefore to plan for a house. This takes precedence over other household expenditure and creature needs. Housing, however, is a major expenditure and cannot be funded out of a family s normal monthly income or savings. The prospective homeowner must look for a loan substantial in size and so structured that he can repay it over a longer period of time, in many cases almost one s entire working life. Loan is offered to a borrower to purchase or build a new house on the basis of his/her eligibility and the bank s lending rules. One of the important basic human needs is shelter. House is the ultimate dream of every middle class family. Government gave encouragement for house finance subsidiaries by offering number of tax concessions to individuals with the overall encouragement given to this sector, a number of players entered in housing finance. One of the most important benefits of taking a home loan is the interest rate that is allowed on the home loan. Fixed and variable interest rate options are also available for home loans. Many financiers also offer home improvement loans at the same interest rate as they offer the home loans. Keywords: Housing loan, Types of housing loan, Attitude of housing loan borrowers. 1. Introduction Every human being aspires to have 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 is 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. Though shelter was enshrined as a fundamental right in the constitution, housing did not get the attention it reserved. This was perhaps due to the fact that at that time nobody expected the problem of housing to assume the present gigantic proportions. Proper housing, even at a lower scale, has never kept pace with the minimum requirements of the people. The housing backlog has been compounded by the high rate of population growth. Inadequate housing facilities have led to the rapid growth of slums and unauthorized settlements, poor quality of services, housing land prices and increasing costs of construction. In rural areas the situation is even more alarming. The Government and some public sector undertakings have been trying Vol. 1 No. December 01 to tackle the problem but their efforts do not much even the fringe of the problem. The central and state governments cannot solve this problem.so the Life Insurance Corporation of India and housing societies entered the field of housing loans for their customers. Today these are 0 housing finance companies registered with the registrar of companies, of these 9 have been approved by National Housing Bank for financial assistance. The housing finance industry has been borrowing at the rate of nearly % for the last two years.over the last years Commercial banks and Private sector banks have been playing an important role in housing finance. All Commercial banks and Private sector banks are now emerging as lenders in the segment, taking a slew initiatives in the form of opening dedicated outfits/cells to cater to the ever-increasing demand for housing loans, offering competitive interest rates with fixed/ variable options, Waiver of processing fee, Free additional attractive packages and flexibilities in housing loan Schemes. Generally the traditional trend of the term Housing Loans or Housing Finance means finance for buying or modifying a property. Hence Housing Finance may be defined as the financial resources for an individual or a group of persons used facially for the purpose of housing. A study of the housing loan schemes offered by public sector banks and private sector banks would pave the way taking certain policy decisions for improving these housing loan schemes.. Public Sectors Banks Banks which are owned by government are known as public sector banks. At present in India, there are largest public sector banks. Under this study only deals with three kinds of public sector banks. That is a) SBI b) CB c) IOB.1 State Bank Of India (SBI) The state bank of India was established on 18 th July 19, under the state bank of India act to take over the business of the imperial bank of India. SBI is owned by the government of India and is the largest bank in the India sub continent. SBI is the second largest bank in the world. SBI has been awarded The Most Preferred Home Loan Provider by AWAAZ Consumer Awards. SBI home loans give concession on interest rates on GREEN HOMES under its environment protection program. SBI offers SBI-optima additional home loans and SBI-Home line special personal loans for existing home loan borrowers who have a repayment record of years, etc. Vol. 1 No. December 01 State bank of India housing finance offers loan for construction and renovation of houses at the lowest interest rates which range from10.0% & goes up to 10.0 %p.a. Highlights Interest Rate 10.0% Loan Amount Tenure Time to Process Loan Minimum `,00,000 Maximum `0,00,000 Minimum years Maximum 0 years 7 days Interest Rates Interest Interest Tenure Type Rate 1-0 years Floating 10.0% Offer Regular (up to `Lakhs-10.0% Above` Lakhs-10.0% ). Canara Bank (CB) The canara bank is a government of India undertaking, and carries on all banking business. The bank was brought into existence by an ordinance passed on the 19 th July 199 by the Central Government. In terms of the ordinance the undertaking of the Canara bank was rested to and transferred to the new bank. This ordinance was replaced by the banking companies (Acquisition and Transfer of Undertaking) Act, 199. This act was declared null & void by the Supreme Court on the 10 th of February 1970 and subsequently the ordinance was promulgated. Then the banking companies act, 1970 was passed and it was made effective retrospectively from 19 th July 199. For construction, purchase, repairs, additions, renovations of residential house, flat include the Purchase of land and construction there on. For taking over of the housing loan liability with other recognized housing finance companies, housing boards, co-operative banks, co-operative societies and commercial banks at our prevailing low rate on interest. Canara bank of housing finance offers loan for construction and renovation of houses at the lowest interest rates which range from 10.% & goes up to 10.0% p.a. Vol. 1 No. December 01 Highlights Interest Rate 10.0% Loan Amount Minimum ` 1,00,000 Maximum ` 10,00,000 Tenure Minimum years Maximum years Time to Process Loan 7 days Interest Rates Tenure Interest Type Interest Rate Offer 1- years Floating 10.0% Regular (up to`0 Lakhs % Above `7 Lakhs %). Indian Overseas Bank (IOB) The IOB bank ltd was established in 197. It was founded as an institution to provide quality banking services using state of the art technology. IOB Banking Corporation Ltd, the first bank in the country to go in for Internet banking. The Bank Proposes to bring credit cards to the large, under -served population in rural and semi-urban areas. Introduces first home loan securitization scheme of `8 core. IOB bank of housing finance offers loan for construction and renovation of houses at the lowest interest rates which range from 10.0 % & 10.0% p.a. Highlights Interest Rate 10.0% Loan Amount Minimum ` 1,00,000 Maximum ` 1,00,000 Tenure Time to Process Loan Minimum 1 years Maximum years 7 days Vol. 1 No. December 01 Interest Rates Interest Interest Tenure Type Rate 1- years Floating 10.0% Offer Regular (up to `1,00,000 Lakhs % Above ` 1,00,000 Lakhs %). Private Sector Banks Private sector banks are owned by private individuals or corporations. That is, the commercials which are not owned by the government of India are known as private sector banks. These banks are under the control of Reserve Bank of India. Under this study only deals with three kinds of private sector banks. That is a) HDFC b) FDB c) TMB.1 Housing Development Finance Corporation (HDFC) HDFC a household name that Indians proudly reckon with Housing Development Finance Corporation Limited (HDFC Ltd) was established in 1977 with the primary objective of meeting a social need was encouraging home ownership by providing long-tem finance to households. Over the last three and a half decades, HDFC has turned the concept of finance for the growing middle class in India into a world class enterprise with excellent reputation for professionalism, and impeccable service. HDFC of housing finance offers loan for construction and renovation of houses at the lowest interest rates which range from 10.0% - 10.% p.a. Highlights Interest Rate 10.% Loan Amount Minimum `,00,000 Maximum ` 1,00,000 Tenure Minimum years Maximum years Time to Process Loan 7 days Vol. 1 No. December 01 7 Tenure 1- years Interest Rates Interest Interest Type Rate Offer Regular Floating 10.0% (up to `,00,000 Lakhs % Above` 1,00,000 Lakhs- 10.%). Federal Bank (FDB) In the year 191, Travancore federal bank was inaugurated at Sedum Purim, near Thiruvalla, Kerala. The 1 founders included. In 197, the bank s name was shortened from Travancore federal bank to federal bank. In 1970, the bank became a scheduled Commercial bank. Recently, it opened a representative office in Dubai. Federal bank offers housing loan scheme assists borrowers for construction of house, acquisition of land & construction of house, repairs, renovation, remodeling, extension of house, purchase of flat, purchase of house plot for subsequent construction of house etc. The home borrowed loans interest rate of 10.% % provided the Federal bank. Highlights Interest Rate 10.7% Loan Amount Minimum ` 1,00,000 Maximum ` 1,00,000 Tenure Minimum 1 years Maximum 0 years Time to Process Loan 7 days Interest Rates Interest Interest Tenure Type Rate 1-0 years Floating 10.7% Offer Regular (up to `1,00,000 Lakhs - 10.% Above ` 1,00,000 Lakhs %). Tamilnadu Mercantile Bank (TMB) Tamilnadu Mercantile Bank Ltd (TMB) was established on 11 th May 191. The thought of establishing a bank for the Nadar business community was first proposed at the annual meeting of the Nadar Mahajana Vol. 1 No. December 01 8 Sangam held at Thoothukudi in 190. Originally known as the Nadar Bank Ltd., it changed its name to Tamilnadu Mercantile Bank Ltd., provides commercial banking products and housing loan in India. The borrowed home loans interest rate of 10.%-11.10% provided the Tamilnadu Mercantile Bank. Highlights Interest Rate 11.10% Loan Amount Minimum `,00,000 Maximum ` 1,00,000 Tenure Time to Process Loan Minimum 1 years Maximum years 7 days Interest Rates Tenure Interest Interest Type Rate Offer Regular 1- years Floating 11.10% (up to `,00,000 Lakes - 10.% Above ` 1,00,000 Lakes %). Statement Of The Problem In recent times, banks vie with one another in organizing loan melas with prior arrangement with the ultimate of reaching new heights in the area of disbursal of loans. In the falling interest rate scenario it is quite understandable that every bank in its pursuit of capturing the market is exploring all avenues to offer a competitive rate to bring more and more customers in its fold. The home loan segment has received much impetus and is balances stupendous growth. The recent budget offers welcome initiatives toward infrastructure development. In the liberalized economy both private and public sector banks are entering retail banking in the market. In developed countries such as the U.S. and the U.K the credit parameters of a borrower are readily available and hence, a scoring model is used to decide the credit worthiness of the borrowers. In India, since data is not some readily available on the credit behavior a borrower, loan underwriting standard have evolved keeping in mind the current environment. Vol. 1 No. December 01 9 In the midst of the information explosion, borrowers sometimes find it difficult to decide on the right lender. It is a common phenomenon that people want to live in their own houses. People try to fund their finance the rough borrowing from their provident fund or their employer or friends and relatives or selling other personal assets. Thoothukudi area has many colleges and many schools. A number of teachers work in these institutions. These are a number of sub urban areas like SPIC, saguburam, veerapandiyanpattanam, tiruchendur which are now developing. Thoothukudi is rich in resources like cultivable soil. Naturally it is trading center for several agricultural products. Other business interests also thrive. Even people from other areas come into the area for trading and other professional interests. The people in this flourishing area find housing facilities inadequate in the specific areas they desire and with their requirements and choice. Those who have a reasonably steady income and other backing want to construct houses if easy loans are available from reliable institutions. Social security and status have also largely contributed to higher demand for housing units of Thoothukudi area people. The present study is an attempt to evaluate the housing finance provided by public sector and private sector banks in Thoothukudi area.. Review Of Previous Studies K.L. Srinivasan (000) 1 in his thesis entitled A project on Housing Finance How SBI can establish leadership 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 variable in the marketing of housing loan schemes by banks. DePaul Singh (001) in his study entitled consumer Behavior and Bank Retail products an Analysis Stresses that the borrower s attitude is an important factor for the improvement of housing loan schemes. R.R.Krishna and V.S.Krishna Mouthy (1999) stress in their article entitled Trend and policy Issues of Housing finance in India, that simplified procedures and speedy sanction of housing loans will give a boost to the constructing houses. 1. K.L.Srinivasan, A project on Housing Finance How SBI can Establish Leadership. SBI, STC paramour.. Deepak Singh, Consumer Behavior & Banking Retail products an Analysis, Banking finance, may R.R.Krishna and V.S.Krishna Mouthy, Trend and policy Invest of Housing Finance in India. Southern Economist, April 1 & 1,1999, Vol. 1 No. December Rajesh Kumar stood (00) in his article entitled :Housing Loan Portfolio of ASCB s Growth Drives Associated Risk and mitigation strategies, has concluded that banks should review the housing loan portfolio at periodical intervals for capturing new markets and to avoid risk in the housing loan schemes. Maheswari and Govindarajan.k in their article entitled, housing loan borrower in banks : A Micro Study. They concluded that adoption of modern banking technology as a means to improve housing loan borrowers. Uma Shankar Mishra in her article entitled Housing Loan Quality Attributes Affection Borrowers Satisfaction In Banking Sector Of India, explored structural equation model is formulated to indicate the impact of the relationship between borrowers satisfaction and loan attributes. G.Visalatchi 7 in her article entitled A comparative study on the housing loan borrowers of public and private sector banks in Thoothukudi area. Explored that three component service quality model and concluded that the survival and growth of a bank does not depend on the size of funds, rather it depends on its ability to provided qualitative to its borrowers on sustained basics.. Scope Of The Study The study has been undertaken mainly to highlight the features of housing loans offered by public and private sector banks in Thoothukudi area. All kinds of borrowers like Businessmen, Agriculturists, Professionals, government employees, Private employees and self employed people have been included in this study. It has been undertaken from the stand point of borrowers, and banks are excluded from the study. Only individual borrowers have been taken and other are excluded from the study. 7. Objectives Of The Study 1. To study the socio-economic profile of the respondents.. To study the housing loan borrowers for availing of such loan from public and private sector banks.. To study the corporate culture about the home loan.. To analyze public & private home loan market and its growing trends.. Rajesh Kumar stood-housing Loan Portfolio of ASCB- Growth Privets Associated Risks and mitigation Strategies IBA Bulletin, June 00.. Maheswari.V and Govindarajan.K Horsing Loan Borrowers in Banks : A micro study, Sothern economist, vol. XXXI,No. Dec 009,PP Uma Shankar Mishear, Housing Loan attributes affecting Borrowers satisfaction in banking sector of India. European Journal of Economics ISSN 10-7 Issue (010),PP G.Visalatchi, A comparative study on the Housing Loan Borrowers of Public and Private Sector Banks in Thoothukudi Area. Vol. 1 No. December To analyze various methods of operating a home loan.. To gain knowledge about various home loan products. 7. To know various rates available while providing home loan. 8. To offer suggestions for the improvement of housing loan schemes in public and private sector banks. 9. To understand current scenario of the India Housing Finance. 10. Make comparative analysis of SBI, CB, IOB (Public sector bank) and HDFC, TMB, Federal Bank (Private sector banks). Hypothesis To Be Tested In order to study the relationship between the personal profile of the respondents and their level of perception towards the housing loan borrowers of banks, the following hypotheses were framed. 1. The level of perception is independent of the gender of the respondents.. The level of perception is independent of the age of the respondents.. The level of perception is independent of the educational qualification of the respondents.. The level of perception is independent of the occupational status of the respondents.. The level of perception is independent of the monthly family income of the respondents.. The level of perception is independent of the marital status of the respondents. 7. The level of perception is independent of the size of the family of the respondents. 8. The level of perception is independent of the nature of family of the respondents. 9. The level of perception is independent of the place of residence of the respondents. Geographical Coverage The present study has been carried out in Thoothukudi area which covers SPIC, Saguburam, veerapandiyanpattanam, Tiruchendur. Period Of Study The researcher herself carried out the field work for this study. It was conducted during the period from June 01 to July 01. The researcher have used interview schedule for collecting the data. The Study was collected on Sundays and holidays. Care was taken to ensure completeness and accuracy in the interviews. Methodology And Tool This section describes the methodology which includes the collection of data, the construction of interview schedule, f-test, t-test, garret s ranking, field work and data collection, frame work of analysis.
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