ACKNOWLEDGEMENT

My most sincere thanks and everlasting gratitude to prof R.VENKATARAMAN, M.tech, FIE, Principal of SRM engineering college for having given me this opportunity to do the course in this college.

My special thanks to the Dean, Dr.THAMPI LATIFF, SRM institute of Management studies, SRM Engineering college.

I profited immensely by the thought provoking questions, frnak discussions and critical appraisal of my work by my respected guide Shri.T.RAMACHANDRAN, M.Com, M.Phil, MBA, senior faculty, SRM institute of Management Studies, during the course of my project work. I wish to express my whole hearted thanks and heart felt gratitude for his able guidance.

I am very much indebted to “THE CHENGALPATTU CO-OPERATIVE URBAN BANK LIMITED” for permitting me to do this project. I am thankful to Shri.R.RAJENDRAN, MA, HDC, secretary and Shri.Pandiyan MA, Manager of Algesa Nagar Branch and all the staff for their kind co-operation in completing the project.

My special thanks to Shri.GOWRI SHANKAR, Internal Auditor of Valliammai Society for his valuable guidance in completing the project.

My special thanks to all faculty members in the SRM Institute of Management Studies for their constant support and encouragement throughout my career.

Last but not least, my sincere thanks to all my family members and friends for their kind co-operation in completing this project.

CONTENTS

ACKNOWLEDGEMENT

LIST OF TABLES

LIST OF CHARTS

ABBREVIATIONS

CHAPTER PAGE NO.

1. AN INTRODUCTION TO HOUSINGFINANCE INDUSTRY - 1

2. INDUSTRY PROFILE - 7

3. BANK PROFILE - 31

4. OBJECTIVES OF THE STUDY - 36

5. METHODOLOGY - 37

6. LIMITATIONS - 40

7. ANALYSIS & INTERPRETATION - 41

8. FINDING AND SUGGESTIONS - 70

9. CONCLUSION - 74

APPENDIX

BIBLIOGRAPHY

LIST OF TABLES

Table No. Name of the table Page No.

1. Census gouses and residential dwelling - 19

2. Distribution of houses by type of

Dwelling – 1989 - 19

3. Tread in urbanization - 19

4. Quality of housing stock - 20

5. Housing shortage - 20

6. Public and private sector investment

In housing - 20

7. Progress of housing society - 30

8. Chengalpattu co-operative urban

bank growth - 34

9. Loans sanctioned occupationwise 1996-97 - 54

10. Loans sanctioned occupationwise 1997-98 - 55

11. Loans sanctioned occupationwise 1998-99 - 56

12. Customer view – interest rate - 57

13. Services/Performance of the bank - 58

14. Loans sanctioned – as per income group - 59

15. Customer view – ranking of priority - 60

16. Customer view – about terms - 61

17. Basis of selecting the bank - 62

18. Customer view – procedural aspect - 63

19. Loans sanctioned – as per quantum of amount - 64

20. Loans sanctioned – purpose wise - 65

21. Outstanding dues – as per installments - 66

22. Customer view – sources of identification - 67

23. Likert sale on services/Performance of the bank - 68

24. Likert scale on interest rate of the bank - 69

LIST OF CHARTS

Chart No. Name of the chart Page No.

1. Chengalpattu Co-operative urban bank growth - 34 (c)

2. Performance of Chengalpattu Co-operative urban bank - 52 (c)

3. Loans sanctioned occupation wise 1996 – 97 - 54 (c)

4. Loans sanctioned occupation wise 1997 – 98 - 55 (c)

5. Loans sanctioned occupation wise 1998 – 99 - 56 (c)

6. Customer view – interest rate - 57 (c)

7. Services/Performances of the bank - 58 (c)

8. Loans sanctioned as per income group - 59 (c)

9. Customer view – ranking of priority - 60 (c)

10. Customer view – about terms - 61 (c)

11. Basis of selecting the bank - 62 (c)

12. Customer view – procedural aspect - 63 (c)

13. Loans sanctioned – as per quantum of amount - 64 (c)

14. Loans sanctioned – purpose wise - 65 (c)

15. Outstanding dues - 66 (c)

16. Customer view – sources of identification - 67 (c)

ABBREVIATIONS

1. HFC - Housing Finance Companies

2. HUDCO - The Housing and Urban Development Corporation Ltd.

3. HDFC – Housing Development Finance Corporation

4. NHB – National Housing Bank

5. LIC – Life insurance Corporation

6. GIC – General insurance Corporation

7. GRHC – The Gujarat Rural Housing Corporation

8. NHA – National Housing Act

9. CMHC – The General Mortgage and Housing Corporation

10. KHB – Korean Housing Bank

11. POSB – Post Office Saving Bank

12. JAC – Joint Advisory Committee

13. FHA – Federal Housing Administration

14. VA – Veteran’s Administration

15. FNMA – Federal National Mortgage Association

16. SLA – Savings and Loans Association

17. RBI – Reserve Bank of India

18. SEBI – Security and Exchange Board of India

19. UTI – Unit Trust of India

20. EWS – Economically weaker sections

21. LIG – Lower Income group

22. MIG – Middle Income Group

23. HIG – High Income Group

24. EMI – Equated Monthly Installment

25. NBO – National Building Organization

26. CBRI – Central Building Research Institute

27. NBCC – National Building Construction Corporation

28. CPWD – Central Public works department

29. TCPO – Town and Country Planning Organisation

30. BIS – Bureau of Indian Standard

31. BMTPC – Building Materials and Technology Promotion council

32. GSS – Global Strategy for Shelter

33. HSB – Housing Installment Saving Deposit

34. WHIDS – Welfare Housing Installment Deposit Scheme

35. NSSO – National Sample Survey Organisation

36. SOB – State Co-operative bank

37. DCB – District central co-operative bank

38. PCB – Primary Co-operative Bank

39. ILO – International Labour Organization

40. ARC – Arbitration

41. DR – Deputy Registrar

42. EP – Execution Petition

43. OD – Over Due

44. NARDCO – National Real Estate Development Council

INTRODUCTION

CHAPTER – 1

INTRODUCTION

Housing is a basic necessity of life, ranked behind only to food and clothing in importance. There is a strong urge in every individual , whether rich or poor, to own a house. House is not a place of dwelling alone, it also satisfies an individual’s social and psychological needs. House by itself is not a productive asset but investement in housing helps in increasing productivity, provision of shelter is thus closely linked with a country’s overall socio – economic development.

According to 1971 census, more than half of the households live in houses made of mud and gross. Nearly 25-30 percent of the urban population live is slums. In 1971, 19.9% of our people 108.8 million live in urban areas. The percentage went up to 21.1 with 128.9 million in 1976, 22.2% with 151.4 million in 1981 and rule of urbanization is estimated to go upto 29.0% with 291 million in 2001.

Number of specialized branches as on 30-06-95 public sector banks totally 681 and private sector banks totally 54 in that no housing finance branch in private sector banks and out of 681 public sector banks only 2 are so tremendous, so huge and they are also getting more and more difficult. We have the problem of rural housing versus urban housing. In urban housing, the problem is that of availability of land and the price of which the land is available. In rural housing land is not the problem average cost of a house in rural areas is also low. A house gives a sense of security to those who own one when one has a house he gets better shelter and security for members of his family.

After 50 years of independence, we are short of 22.9 million housing units (1991 census) 50% of urban population lives in slums, without access to hygienic facilities. More than 90% of this shortage involves the environmentally vulnerable sections of the society. This sector is thus the engine for economic growth and a catalyst for economic recovery. Housing is also imperative for dignified living and needs to be given the status of an essential commodity.

Percentage of housing investment to total investment in economy as per English five year plan budgetary allocation Rs.70, 000 crore. Expenditure as housing (public sector contribution) as percentage of total expenditure up to seventh five year plan 7.80%.

HOUSING FINANCE COMPANIES

Housing finance institutions have two streams-housing finance companies (HFC) and co-operative housing societies. The co-operative housing fiancé system, which is more than 80 years old, is the best example of “self help” in housing. It has two-tier structure – Apex federations at state level and co-operative housing societies at primary level numbering about 70,000 which functions under the Registrar of co-operative societies in various states like co-operative banks and institutions. Housing companies (HFC’s) are comparatively of recent origin.

There are a large number of HFCs but the most prominent among them with sizable equity base and operations are only two viz., The HOUSING URBAN DEVELOPMENT Corporation Ltd. (HUDCO) and the Housing Development Finance Corporative Ltd. (HDFC). During the last 4 years particularly after the establishment of NHB, several HFCs setup sponsored by public sector banks, LIC and GIC have come up.

The Gujarat Rural Housing Corporation, setup by HDFC itself, Can Fin Homes Ltd., sponsored by Canara bank and SBI Homes Finance Ltd., sponsored by State Bank of India, Indian Bank Housing Finance sponsored by Indian Bank.

The housing scenario in India has revealed that more than six lakh people live without a roof on top. The total housing stock in the country is around 142.96 million units and the total demand for housing is more than 170 million units. This shortage is given at a 30 million housing units. This housing shortage requires a whopping Rs.1, 50,000 crore if the gap is to be bridged. The funding of this amount cannot come from the government alone. It needs the co-operation of various agencies and financial institutions

Hasmukh Thakoredas Parekh setup Housing Development Finance Corporation Limited in October 1977 and setup Gujarat Rural Housing Finance Corporation Ltd., in 1986. In 1951 itself H.T Parekh writing about a housing society for the Bombay state and he follows this interest through several initiatives till they end up in HDFC.

It was in recognition of the mutually supportive roles of shelter and development that in mid eighties following declaration of 1987 as the “International year of shelter for homeless” concerted efforts were made in our country to formulate a comprehensive National Housing Policy, encompassing all the elements relevant to shelter development.

People’s housing problem is now receiving serious attention from both the government and the public. It has many facets relevant to different sections of the community. Almost 40% of the people living in urban or rural areas have income below the poverty line. Even among them there are pavement-dwellers, hutment-dwellers, those living in somewhat secured jhopadpatties, old dilapidated houses, old rented premises like chawls, where a majority of tower and middle classes live preciously, housing common toilet facilities.

The financing of houses involves a lot of money which is several times the income of the individual. The housing finance market in India is the growth stage. There are around 96 companies in India out of which only 37 have registered themselves with the NHB. Out of these 37, only 26 have been approved by the NHB for refinancing. Now that more banks andinsurance companies have also jumped into the hand wagon, the competition is getting hot.

BUDGET SPECIAL IMPACT 2000

The extension of infra structure status for housing project by another 2 years up to March 2003. The extension of sec.54 of the Income tax act 1961 investement in second and subsequent houses granting exemption from capital gains. A hike in the limit on housing loans from Rs.10,000 to Rs.20,000.

Government Housing Agencies

Central level State level

NBO Housing Board

CBRI Municipal Corporation

Hindustan Pertab Ltd. Improvement Trust

NBCC Development authority

CPWD Building centers

TCPOs Regional Research Laboratory

National Council for Cement and Slum ImprovementBuilding Materials development method

BIS Rural Housing Bank

BMTPC

Keeping in view of the importance of the infra structure projects like “building ofhouses / plots”. I have selected the topic “Housing Finance in Chengalpattu by Co-operative Urban bank” to prepare project report as per University of Madras and submit to the authorities as a part of my MBA degree. I have identified “Chengalpattu Co-operative Urban Bank Ltd.”, Chengalpattu to prepare my project report. The detailed procedural aspects of the bank, their terms and condition schemes are clearly mentioned in the report. Further, the detailed analysis of data about the perfprmance of the banks is clearly given in both tabulation form and charts. Finally, I have concluded this report with my own views and suggestions accordingly.

THE CONTENTS OF THE PROJECT ARE HEREBY GIVEN IN BRIEF

1. Industrial profile about the subject of the project report2. Bank profile3. Objectives of study

a. To find out procedure for sanctioning house loanb. To study the clear picture of housing societyc. To analyse the bank operation in the field of housing financed. To find out the attitude of customers views about housing financee. To give suggestions for the better performance of the bank

4. Methodology 5. Limitations6. Analysis and interpretation7. Findings and suggestions8. Conclusion

INDUSTRY PROFILE

CHAPTER – 2

INDUSTRY PROFILE

Housing is the key to improve the living standards of the family. The advanced countries have reached their high living conditions among other reasons, by means of providing affordable housing, quantity wise and quality wise. In a study prepared by the International Union of Building Societies and Savings Association, Chicago. The case housing in the developing countries, Harold Robinson writes “Rural or small town housing may be needed at times to slow down an excessive country to town movement”. Lack of housing in rural areas creates a push to the city equal to that of a city’s pull and therby creates additional housing problems. The United Nations General assembly in December 1988 proclaimed the “Global Strategy Shelter to the year 2000” (GSS)

Statistics indicate that, in developed countries, investment is housing as a percentage of GNP varies between 3.5% and 7%, while in India, though no such statistics are available, the percentage of GSP is estimated to be between 1 to 2. This would be a measure of problems in terms of financial magnitudes. Another way of looking at this problem, as indicated in a report is that, while in India for every 1000 persons 3.5 houses are being built, what we need to build is 8 to 10 houses per 1000 persons. This implies that we need to treble our building programmes to take care of population increase and backlog of housing.

HOUSING FINANCE SYSTEM IN SELECTED FOREIGN COUUNTRIES

1. CANADAThe present National Housing Act (NHA) which was introduced in 1954 was the principal

piece of Federal legislation dealing with housing urban developments.The Central Mortgage and Housing Corporation (CMHC) is the crown agency charged with

carrying out Federal housing legislation. The corporation assists construction activity in two ways, by granting the loans made by private approved lenders for house construction and by granting direct house loans under its various schemes.

MORTGAGE INSUARNCE FUND

Federal assistance for ownership for housing projects built by private entrepreneurs are provided for the most part for the system of mortgage insurance introduced in 1954. Under these arrangements loans are advanced wholly by the government to lend under the Act. Most life insurance companies and trust and loan companies as well as charted banks and Quebec savings are lenders under the act. The guarantee on their investment is provided by CMHC through the operation of a mortgage insurance fund built up from fees paid by NHA borrowers. Each borrower must provide from his own resources toward margin may consist of cash, land or his own labor or a combination of these elements. Insured mortgage loans are normally available to individual home-owner applications, to builders constructing houses for sale or for rent and to some special groups such as co-operative housing associations.

2. KOREA

In Korea, there are eight special banks for the specified purposes. These banks play a significant role in the Korean economy. One of these banks, the Korean Housing Bank (KHB) was setup in 1967 under the KHP act with a total paid up share capital of 5.05 million won.

Under the Korean Housing Bank Act, the KHB is required to give loans and manage funds for the construction of houses, purchase of newly built houses and development of housing sites. The KHB also advances loans to the local government and small and medium scale enterprises for the production of low cost housing materials and quipments.

Housing lotteries are issued by the KHB for the purpose of mobilsing funds to finance housing construction on comparatively easy terms. Fiscal and other concessions are offered to the winner of the lotteries. Advances out of the amount collected by way of lotteries are mainly to the bereaved families of war dead and members of the low income group.

The National Housing Bonds are issued in pursuance of the objectives of National Housing Construction Promotion law. The term and conditions of the bonds are governed by the KHB act.

Among the varied savings mobilization schemes, housing installment savings is a contractual savings deposit scheme, directly linked to the housing loan extension, which is offered solely by the KHB. There are two types of housing installment savings deposits. Under one, the subscriber makes monthly installment payment for a certain period to qualify for a housing loan, whereas under the other monthly installments are made for the repayment of the principle and the interest on the housing loan already advanced. Besides there are two other schemes “Welfare housing Installment Deposit Scheme” (WHIDS) and “salary and wage earners fortune formation savings deposit scheme. Under these schemes, depositors are paid an attractive rate of interest on their deposits and they are eligible for housing loans.

3. SINGAPOREAmong the various agencies engaged in developing / financing of housing in Singapore, the most important are Housing Development Board and Housing and Urband Urban Development Corporation – both statutory bodies. In the private sector, finance compnies plays an important role in financing construction of residential properties. Besides these commercial banks, post office savings banks and insurance companies also make funds available to their customer for housing.

The housing and Development Board constituted under housing and development act has been pioneering work in several housing estates with high – rise buildings of flats which are almost in nature of self contained townships. Te board derives the funds from government, through budgetary grants, market borrowings subsidies and rental income from flats.

The housing and Urban Development Corporation develops housing flats in urban areas and central business districts which are in a very luxury flats for upper middle class and higher income groups. Finance companies play an important role in development and financing of residential and

commercial property in Singapore. The sources of funds for their activities are deposits accepted from the public.

The commercial banks play only a marginal role in providing housing finance. They extend housing loans only to their selected customers, who have other business dealings with them. Housing loans are given purely on commercial terms.

Post Office Savings Banks (POSB) gives 90% mortgage loans to its depositors under its ‘home ownership scheme’. The scheme has proved immensely popular. The POSB does not grant loan for buying commercial properties. The insurance companies also advance loans for housing but the amount involved is small and the loans are restricted to the policy holders of the company.

4. SWEDEN

Sweden is one of the few countries in the world, where housing construction has attracted large scale investment since the sixties. In fact, the growth rate of housing construction has slowed down in the last few years. Primarily due to the fact that the demand for new houses could be satisfied form the existing stocks of houses.

HOUSING POLICY

The main foundations of Sweden’s housing policy may be summarized as follows:

1. Well – organized municipal planning.2. Active municipal land policy.3. Rational housing production.4. State aid in the form of loans and grants for the construction and mordenisation of

dwellings.5. Grants to groups of people with limited economic resources or special housing needs.6. Rent legislations.

The implementation of housing policy is based on the co-operation and the division of work between the state and the municipalities.

PLANNING OF HOUSING CONSTRUCTION

EACH YEAR THE Ricksdag (parliament) approves a housing construction plan for the next 3 years, which indicates proportion of total resources of the society that could be allocated for housing construction. The plan stipulated the total amount of dwellings and complimentary facilities, in terms of square meters, for which state housing loans may be granted and the extent to which housing construction, not subject to state loans may be permitted. A similar plan is also approved with regard to state support for renewal and modernization of existing houses.

Thus, public and private sectors, together strive for the ordinarily promotion of housing activities. In this context, the role of Joint Advisory Committee (JAC) established in 1973, with representatives from the building societies, the Bank of England, The Treasury, The Department of the Environment and the Registry of Friendly Societies needs to be mentioned. The JAC’s objectives are to encourage the growth of owner-occupation to maintain sufficient funds to enable

the housing sector to plan for a high and stable level of activities, to work towards the stabilization of house prices and to maintain an orderly housing market.

5. USA

The major financial institutions such as Commercial Banks, Life Insurance Companies, Savings & Loan Association (SLAs) and Mutual Savings Banks provide funds for construction activities, the federal agencies, such as Federal Housing Administration (FHA), the Veteran’s Administration (VA) and Federal National Mortgage Association (FNMA) have made significant contribution in the development of the mortgage market, the first two viz., FHA and VA respectively, insure and guarantee mortgage bonds whereas the last oone sells mortgage bonds and buys from investors/lenders.

FEDERAL HOUSING ADMINISTRATION (FHA)

FHA was established in 1934. Its main objectives are to provide a sound pattern of mortgage lending, to encourage wider home ownership and to upgrade housing standards in the USA. These purposes are achieved by insuring mortgage loans made by lenders in accordance with the FHA housing and credit standards. Such loans are made after a careful scrutiny of the long term value of the security and the prospective borrower’s ability to pay.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)

With the establishment of the FHA, the need for an agency to distribute the mortgage money on national basis arose. Accordingly, in 1938 the Federal National Mortgage Association was formed. The FNMA is also authorized to borrow funds privately by issuing debentures and short term discount notes with the approval of the US treasury but they are not guaranteed by the US government.

The FNMA purchases only marketable mortgages from private institution lenders. There are generally two types of purchase contracts. Under the ‘immediate purchase contract’ the seller offers mortgages for immediate purchases, the FNMA purchase them after scrutiny, such contract is known as ‘Over the Counter Transaction’. The ‘Stand-by Commitment’ contract provides for the future purchase of mortgage by FNMA.

VETERAN’S ADMINISTRATION (VA)

In 1940, the congress passed a legislation, which permitted the Veterans Administration (VA), under title III of the Act ,G1 Home loan and the loan guarantee programmes to guarantee mortgage loans. The guarantee is payable by cash. The Veteran is required to repay the loan in full. In case of default, the outstanding is deducted from any future benefits that he may receive from the Veteran’s Administration.

SAVINGS AND LOAN ASSOCIATIONS

In the USA, bulk of the mortgage bonds are subscribed by Savings and Loans Association (SLA) followed by Commercial banks, Life Insurance Companies and mutual savings banks. SLA’s are chiefly concerned with the welfare of the savers and their concern is prompted by the need to secure funds to support home financing and home ownership.

HOUSING FINANCE SYSTEM IN INDIA

The responsibility to provide housing finance largely rested with the government of India till the mid-eighties. The setting up of the Ntional housing Bank (NHB), a fully owned subsidiary of the Reserve Bank of India (RBI) in 1988 as per the apex institution marked the beginning of the emergency 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 an early stage of development.

NATIONAL HOUSING BANK

The NHB was established in July 1988, under the National Housing Bank Act 1987 as an apex bank, on the lines of IDBI and as a wholly – owned subsidiary of the RBI. It is the principle agency to promote housing finance institutions at the regional and local levels and to provide financial and other support to such institutions connected with housing and human settlements.

OBJECTIVES AND BUSINESS

1. To promote, establish, support or aid in the promotion establishment and support of housing finance institutions.

2. To make loans and advances or render any other form of financial assistance whatsoever to housing finance institute scheduled bank

3. To subscribe to purchase stocks, shares, bonds debentures and securities of every other description

4. To guarantee the financial obligation of housing finance institutions and under write the issue of stocks and share bonds, debentures and securities of every other description of housing.

POWER TO COLLECT CREDIT INFORMATION

The housing finance institutions can be directed by the NHB to submit specified credit information.

1. The amount of laws and advances and other credits facilities2. The nature of security taken for such loans3. The guarantees furnished4. Any other having a bearing on the credit worthiness of the borrower.

NHB GUIDELINES

NHB has spread operating guidelines for the HFCs in India. They must confirm to these guidelines to be eligible for financial / refinance support from the NHB. There are 21 HFCs in the country which are registered with the NHB as the apex institution housing bank with statutory obligation to regulate and supervise the housing finance industry.

SHARE CAPITAL NORMS

The minimum capital of the HFCs registered share with the NHB must be 3 crores. The contribution of the promoters to their share capital should be in conformity with the guidelines issued by the Securities and Exchange Board of India (SEBI) from time to time. According to these, such contribution must be 25% and 20% of the post issue capital up to Rs.100 crore respectively as long as HFCs owe any money to the NHB. In addition, HFCs must offer at least 20% of equity capital to the public as a condition present to listing of shares on stock exchanges. According to NHB stipulations, HFC should list shares on at least one stock exchange. The NHB in its direction and on the merits of each is willing to participate in the share capitl of HFCs to the extenc of 20% of their paid-up capital.

LOANS LENDING NORMS

The main objective underlying the promotion of NHB supported HFC is to extend access of industrial finance to provide a solution to the serious shortage of dwelling units.

TARGET GROUP

The bulk of lending by the HFCs has to be directed to individuals / groups of individuals. In other words, the target group of institutional housing finance is individual households.

FIANACIAL ASSISTANCE FORM NHB TO HFCs

NHB has so far approved 17 HFCs (excluding HUDCO) as eligible to draw refinance from it. As at the end of June 1992 the HFCs which have been approved for the purpose of reference.

1. AB Homes Finance Ltd.2. Akshaya Avas Niraman Villa Ltd.3. Canfin Homes Ltd.4. Cent Bank Home Ltd.5. Cent Bank Home Ltd.6. Dewan housing Development Finance Ltd.7. Fair Growth Gome Finance Ltd.8. Gujarat Rural Housing Finance Corporation Ltd.9. HDFC Ltd.10. Ind Bank Housing Ltd.11. India Housing Finance and Development Ltd.12. LIC Housing Finance Ltd.13. Parshwanath House Finance Corporation Ltd.

14. PNB House Fin Ltd.15. Saya Housing Finance Company Ltd.16. SBI Home Finance Ltd.17. Vysya Bank Housing Finance Ltd.

LOANS AND ADVANCESS GIVEN BY NHB FOR THE YEARS 1991-92 & 1992-93

PARTICULARS 1991-92 1992-93HFC 951.75 1283.57Co-operative Housing Society 57.35 68.20Commercial Banks 64.39 91.98State Co-operative Banks 13.73 32.29Urban Co-operative Banks 2.10 2.40State Co-operative Agricultural Rural Development

71.88 92.63

Others 0.44 0.56TOTAL 11661.64 1571.63

The National Sample Survey Organisation (NSSO) has been collecting certain data on housing since the mid fifties though not as a regular feature. The latest surve worth mentioning is the comprehensive survey on “Housing conditions carried out by NSSO in both rural and urban areas during its 44th round ( July 1988 to June 1989)

HOUSES AND RESIDENTIAL DWELLINGS

The house list as per 1981 census shows that there were 151 million censuses of houses of which more than three fourth were in rural areas. These census houses includes residential dwelling mixed (resident cum commercial dwellings and commercial houses)

TABLE 1

CENSUS HOUSES AND RESIDENTIAL DWELLING (in million)

Year / Area 1

Census Houses 2

Residential Total 3

Dwelling Mixed 4

3/2 %

5

4/3 %

6

1971Rural 96.1 71.9 2.1 74.8 2.9Urban 24.2 18.2 0.7 75.2 3.8TOTAL 120.3 90.1 2.8 74.9 3.11981Rural 115.3 84.6 3.2 73.4 3.8Urban 35.8 27.0 1.2 75.4 4.4TOTAL 151.1 111.6 4.4 73.9 3.9

Source: census of India. The figures are exclusive of Assam

TABLE-2

DISTRIBUTION OF HOUSEHOLDS BY TYPE OF DWELLING – 1989 (percentage)

TYPE OF DWELLING

ALL INDIA RURAL

ALL INDIA URBAN

CITIES POOLED

No. Dwelling 0.0 0.1 --Independent Houses 82.6 52.4 21.1Flat 2.7 17.1 31.0Chawl 3.0 10.8 28.1Others 11.7 19.6 19.8TOTAL 100 100 100

Source: National sample survey organization 44th round survey.

TABLE-3 TREND IN URBANISATION (in million)

YEAR TOTAL POPULATION

URBAN POPULATION

SLUM POPULATION

URBAN POPULATION TO TOTAL POPULATION

SLUM POPULATION TO URBAN POPULATION

1981 685.2 159.7 27.9 23.3 17.51991* 837.3 241.5 51.2@ 28.8 21.32001* 986.1 326.0 NA 33.1 --

Projections @relates to 1990

Source: census of India 1981 – occasional paper no.4 of 1998

Report of the Expert committee and population projection

TABLE – 4 QUALITY OF HOUSING STOCK

Dwelling Type

1961 1971 1987Rural Urban Total Rural Urba

nTotal Rural Urban Total

Total Housing Stock (in million)

65.2 14.1 79.3 74.5 18.5 93.0 88.7 28.0 116.7

Of which % pucca house

13 46 19 19 64 28 21 65 32

Semi pucca 37 35 36 37 23 34 38 24 34Katcha House (including serviceability)

38 19 35 32 13 28 29 11 25

Unserviceable houses

12 0 10 12 0 10 12 0 10

Source: National Buildings Organization Housing Needs, August 1988

TABLE – 5 HOUSING SHORTAGE (in million)

Items Rural Urban Total1981 1991 2001 1981 1991 2001 1981 1991 2001

No. of households 94.1 113.5 137.0 29.3 45.0 69.0 123.4 158.5 206.0Households adjusted for registration

94.1 113.5 137.0 30.7 47.1 72.2 124.8 160.6 209.2

Housing stock 88.7 106.2 127.8 28.0 42.6 64.8 116.7 148.8 192.6Of which acceptable 77.8 92.9 111.5 23.7 36.7 56.7 101.5 129.6 168.2Housing Gap (2-4) 16.3 20.6 25.5 7.0 10.4 15.5 23.3 31.0 41.0

Source: Housing Needs, Aug 1988, National buildings Organisation.

TABLE – 6 PUBLIC AND PRIVATE SECTOR INVESTEMENT IN HOUSING (Rs. Crore)

Plan Period

Total Investement in the economy Investment in housing % of housing investment to total investment

Public Private Total Public

Private Total

1st 1560 1800 3360 250 900 1150 34.2 2nd 3650 3100 6750 300 1000 1300 19.2 3rd 6100 3400 10400 425 1125 1550 14.9 4th 13655 6890 22635 652 2175 2800 12.4 5th 31400 16161 47561 796 3460 4436 9.3 6th 90000 66000 156000 1491 18000 19491 12.5 7th 168148 180000 349148 2458 29000 31458 9.0

Source: Prominent Facts of Housing in India, NBO & UN Regional Housing centre for ESCAP Nirman Bhavan, New Delhi – 1990.

HOUSING AND URBAN DEVELOPMENT CORPORATION (HUDCO)

HUDCO was established on 35thApril 1970, as a fully owned Government of India Enterpirse with the following objectives:

1. To provide long term finance for construction of houses for residential purpose or undertake housing and urban development programmes in the country.

2. To finance or undertake the setting up of new satellite towns.3. To finance or undertake the setting up of the building materials industries.4. To administer the money received from government of India and other such grants for the

purpose of financing or undertaking housing and urban development programmes.5. To subscribe to the debentures and bonds to be issued by the State Housing Board,

Improvement Trusts, Development Authorities etc. specially for the purpose of financing housing and urban development programmes.

RESOURCE BASEHUDCO establishes with an equity base of Rs. 2 crore. Over the years, the equity

base has been expanded by the government. The present paid up of capital HUDCO is Rs.298 crore as against the authorized capital of Rs.385 crore. It has further been able to mobilize resources from institutional agencies like LIC, GIC, UTI banks and international assistance as well as through public deposits.

The cumulative resource of equity Rs.298 crore reserves Rs.367 crore, borrowings Rs.4400 crore. Up to the end of March 95, it has been sanctioned over 11,041 projects worth Rs. 16,577 crore for which HUDCO’s loan committee was Rs.10,116 crore, of which Rs.7432 crore has already been released. The project on completion will help provide over 57 lakh residential units over 4 lakh developed plots 29.3 lakh sanitation with and 319 urban infrastructure projects.

Eighth Plan period, the sanctions are expected to be out of the order of Rs.8230 crore and disbursements would be above Rs.5551 crores. HUDCO vision – 2002 – sanction for Rs.14746 crore and release Rs.12534 crores. HUDCO has extended loan assistance to the co-operatives to the extent of Rs.2162 crores for taking up about a million housing units in our country. HUDCO has contributed an amount Rs. 166 crores for supporting about 6.82 lakh housing units.

HUDCO’s assistance now reaches out to 6.80 lakhs families through the Tamil Nadu co operative Housing Federation, which has availed the highest loan of Rs.1164 crores from HUDCO, vis-à-vis all other housing agencies this represents more than 25% of HUDCO’s loadn sanction of Rs,4271 crores to Tamil Nadu HUDCO slashes interest rates on housing loans to 0.25% - 1.25%. Elaborating on the HUDCO’s yearly performance, the corporation ahs achieved all time high sanctions of Rs.8899.89 crores, making a jump of 33.5% during 1999-2000 over last year’s performance of Rs.6666.67 crores.

As per te provisional results for 1999-2000, the corporation registered a quantum jump of 43.13% in profit before tax and 20.27% in profit after tax. The figures are Rs.115.18 crores and Rs. 83.84 crores respectively against Rs.80.47 crores and Rs.69.71 crores for 1989-99. During 1999-2000 HUDCO mobilized the resources worth Rs.3836.43 crores, up 18% from Rs. 3240 crores in the previous year. This was done through a basket of options covering both domestic and external funding sources. In its maiden effort to raise funds from the US markets, the corporation raised $10 million in the form of bonds under the USAID housing guarantee programme. The funds have been swapped with EXIM bank for a period of 30 year for Rupee funds totally Rs.43.60 crores HUDCO has initiated action for raising the second tranche of $20 million from the US capital market under this scheme.

SBI FINANCE SCHEMESSBIHF provides housing finance to individuals, corporate holders and promoters and

developers. The salient features of the schemes for the three categories are listed as follows.

SCHEME FOR INDIVIDUALSThe loans are granted for construction of houses, purchase of house/flats and repairs,

renovation extension, additional/alteration of existing houses/flats. The quantum of loan is the lowest of 1. Rs. 10 lakh2. 70% - 85% of the cost including the cost of the building3. A sum based on the repayment capital of the borrower as assessed by the SBIHIF. The

repayment period is 5-20 years. In any case, the loan must be repaid retirement of the individual – borrower or 65 years of age whichever is earlier. The mode of repayment is normally Equated Monthly Insurance (EMI) comprising principal and interest.

SCHEME FOR PROMOTERS AND DEVELOPERSThe purpose of housing loans given to this category of borrowers is an additional

sources of finance to supplement their resources, for construction of residential housing projects. The period of loan is based on the cash flow of the project. It however, does not exceed 24 months.

SCHEME FOR CORPORATESThe size of housing loan in all the scheme is the lower of Rs.5,00,000 or 80-85

percent of the project cost including the cost of land.i. The SBIHF has designed 3 alternative schemes for lending for houing to corporate

bodies / for construction / purchase of staff quarters of their own employees (scheme A)

ii. For on – lending to their employee is accordance with their own housing scheme (scheme B)

iii. Loans to their employees nominated by them (scheme C)

LIC HOUSING FINANCEIt has access to low cost funds obtained from its parent – Life Insurance Corporation

of India and has in the 7 year since its incorporation not raised funds through public deposits. As of March 95, out of the total funds of Rs. 1640 crores borrowings from LIC amounter to as much as 90%, with the balance from National Housing Bank (NHB)aand deposits under the NHB home loan account scheme. The company accessed the capital markets with the premium IPO (issue price Rs.60) in September 1994, the performance for 1994-95 has fallen slightly short of projections. For 1995-96 the company had projected a total income if Rs.356 crores and an earnings per share of Rs. 6.81. For the six months ended September 1995, the total income was Rs.150 crores and annualized per share earnings Rs.5.94. The company has a widespread branch network of about 60 offices, the largest in the industry.

IND BANK HOUSING LIMITEDIt was incorporated in 1991. It was a joint venture of Indian Bank and HUDCO. Its

objectives are to carry on the business of providing finance to eract, construct or purchase or upgrade any house, building, flat or any part there of India for residential purpose. Repayment

of housing loans is by way of Equated Monthly Installments (EMIs) comprising of principal and interest. Ind Bank performance highlighted from the year 91-92 to 97-98.

PERFORMANCE OF THE BANK

Year Housing Loans (in crores) 91-92 18.6892-93 42.1293-94 63.4094-95 92.1495-96 136.4296-97 147.3497-98 149.26

CO-OPERATIVE BANKSThe co-operative banking sector consists of state co-operative Banks (SCBS), District Central Co-operative Banks (DCBs) and Primary Co-operative Banks (PUCBs). The first set of comprehensive guidelines for these co-operative banks were issued in 1984 by the RBI co-operative banks finance individuals, co-operative group societies, housing boards etc, who undertake housing projects for EWS, LIGS and MIGS.

Institutions Items 1992-93 1993-94Primary co-operative Banks

Numbers 1.399 1.400Owned funds 2.224 2.723Deposits 13.531 16.796Borrowings 565 496Loans Outstanding 10.132 12.172

CO-OPERATIVE BANKING

REGISTRATION / LICENSING OF NEW PRIMARY (URBAN) CO-OPERATIVE BANKSThe policy towards alowing new Primary Co-operative Banks (PCBs) continued to be

liberal depending upon the necessity and the prospects of achieving viability within a specified time frame. During the period July 1998 – june 1999, 218 fresh proposals including 25 conversion proposals for setting up of new primary Co-operative banks were received by bank. Of these 107 proposals were cleared for registrations, 3 proposals were closed, no response from the proposed banks and 77 were rejected. During the year licenses were issued to 126 new Urban Co-operative bank for the commencement of banking business, licenses issued during the period June 98 – march 99 were 21.

NO. OF OFFICES OF PRIMARY URBAN CO-OP. BANKS

The total of PCBs including salary earner type of banks increased to 1936 as on 31/03/1999 from 1811 as at the end of 31/03/1988. The number of offices increased to 5934 as on 31/01/1998 from 5417 as on 31/03/1998.

CO-OPERATIVE HOUSING SOCIETYTamil Nadu Co-operative Housing Federation has completed 40 years of its useful service to

the public. Their 40th annual general body meeting of federation is being held on 30th March 2000. According to ILO Co-operative is defined as an association of persons usually of limited means, who have voluntarily joined together to achieve a common economic and through the formation of a democratically controlled business organization, making equitable contributions to the capital required and accepting a fair share of risks and benefits of the undertaking.

The total amount distributed by NHB to the Co-operative sector up to the end of 1992 has been Rs.146.77 crores. The share of the 4 different categories of co-operative sector and institutions has been as under:

Category Amount (Rs. In crores) Share in %State co-op. banks 14.00 9.5Urban co-op. banks 2.31 1.6Apex co-op Housing Finance society

58.79 40.1

Agricultural & rural development Banks

71.67 48.8

TOTAL 146.77 100

LOANS DISTRIBUTED TO PRIMARIESA sum of Rs.2763.40 crores have been disbursed upto 15/03/2000 for construction of

10,28,976 houses under urban and rural housing scheme a detailed below. The Tamil Nadu Co-operative Housing Federation is the only federtation in the country disbursing a highest amount in the co-operative sector.

S.No

Scheme No. of Houses Loan distributed (in crores)

1 Urban Housing 2,70,127 2,015.812 Rural Housing 7,58,849 747.59

TOTAL 10,28,976 2,763.40

NATIONAL AWARDThe Tamil Nadu Co-operative Housing federation is the only co-operative Housing

Federation in the country to win sixth time: ‘HUDCO NATIONAL AWARD’ for all round excellent performance for the year 1992-93, 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99. In view of the excellence performance, the Tamil Nadu Co-operative Hosing Federation has been adjusted as the “BEST MANAGED APEX COOPERATIVE HOUSING FEDERATION” in the country by the National Co-operative Housing federation and given the “NATIONAL AWARD” for 1994-95. Besides, four more special awards have been bagged by the federation in the “ALL INDIA LOW COST HOUSING COMPETETION”

COST HOUSING COMPETETIONProgramme for 1999-2000

It was proposed to provide financial assistance to an extent of Rs.687 crores as detailed below:

S.No Scheme No. of Units Loans to be Distributed (Rs. In crores)

1 Urban Housing 42,000 430.00 2 Rural Housing 62,678 256.82

TOTAL 1,04,678 686.82

CO-OPERATIVE HOUSING SOCIETY LTD. – CHENGALPATTU Objects of the housing society are:

To issue land to members for constructions of new house 1st, 2nd floors and additions. On mortgage of the house properties To acquire land and make into house plots

Area of operation of the society is Chengalpattu Municipal limit and upto the area of all village panchayat limits and up to the area of the village panchayats lying within the radius of 10km from the municipal limit. Maximum loan issued to a member is Rs.7 lakhs in the municipal limit and Rs.6 lakhs in the other places. Loans issued to members on the basis of their income, area of the building to be constructed as given below:

LOANS ISSUED ON THE BASIS OF INCOME AND AREA

S.No Group Monthly Income Maximum Loan amount Area of the building

1 EWS Below 2100 25,000/- 35 sq.m377 sq.ft

2 LIG 2101 – 4500 1,00,000/- 55 sq.m592 sq.ft

3 MIG 4501 – 10,000 2,00,000/- 95 sq.m1022 sq.ft

4 HIG – A Above 10,000 6,00,000/-(in village panchayat and municipal area)

190.5 sq.m2000 sq.ft

5 HIG – B Above 10,000 7,00,000/-(corporation and Municipal)

190.5 sq.m2000 sq.ft

Source: Housing Society Annual Reports.

RATE OF INTEREST OF HOUSING SOCIETY

Loan Amount Rate of Interest Borrowing Lending

25,000 10.5 11.51,00,000 14.5 15.51,00,001 – 3,00,000 15.5 16.53,00,000 – 5,00,000 16 175,00,000 – 7,00,000 17 18

Source: Housing Society Annual Reports

TABLE – 7 PROGRESS OF HOUSING SOCIETY

Year No. of members

Share capital (lakhs)

Loan borrowed (lakhs)

Loan distributed (lakhs)

Loan Outstanding

No. of houses constructed

1993 – 94 776 22.39 48.59 45.49 225/13 9831994 – 95 773 23.55 42.28 45.19 240/15 10351995 – 96 757 25.45 44.53 47.44 259/22 11401996 – 97 683 30.68 103.82 102.23 329/77 12101997 – 98 744 36.43 116.85 120.53 412/76 13121998 – 99 794 45.32 169.94 174.42 533/80 143731/12/99 857 53.39 136.36 163 659/03 1531

Source: Housing Society Annual reports.

BANK PROFILE

CHAPTER 3

THE CHENGALPATTU CO-OPERATIVE URBAN BANK LIMITED PROFILE

The Bank was registered on 6.05.1910 and it started to function from 26.06.1910. it covered the entire area of Chengalpattu Municipality, Hanumanthaputheri and Pulipakkam villages.OBJECTIVESThe main objectives of the bank are:a. Getting deposits from the members as well as non-members and distributing the

same as loans for productivity purposes among its members.b. Collecting cheques and demand drafts from the members, customers, issuing

cheques and demand drafts to the members and customers.c. Encouraging self-sufficiency, thrift and co-operative spirit among its members.

STRUCTURE OF THE SHARE CAPITAL

The banks is having ‘A’ class and ‘B’ class members and in the case of ‘A’ class category each share value is Rs.25 while for ‘B’ category its value is Rs.10 on 31.01.2000this banks was in possession of Rs.44.11 lakhs as share capital. This indicates the share capital of Rs.42.39 lakhs from 10602 ‘A’ class members Rs. 1.72 lakhs from 21932 ‘B’ class members.

DEPOSITS

The bank received Fixed Deposits, Recurring Deposits, savings Deposits and current Deposits. In the case of Fixed Deposits maximum, the rate of interest is 12.5% and for savings deposits it is 5.5% and for recurring deposits it is from 11% to 12.5%.

SCHEDULE OF DEPOSITS AS ON 28.01.2000

Item Amount ( Rs. In lakhs)Fixed Deposits 1184.70Savings Deposits 200.40Current Deposits 17.32TOTAL 1402.42

LOANS

It offers loans on jewels subject to a maximum of Rs.1,00,000 at the interest rate of 18%. Similarly, housing loan is granted maximum of Rs.5,00,000 at the rate of 19%. This bank also issuing loans for small scale industries, cottage industries and for businessmen on security. It also offers loans for the monthly income group on personal surety upto Rs.10,000 at the interest of rate of 19%. Further, it gives loans on the deposits invested, subjected to a maximum of 75% of the deposit amount.

SCHEDULE OF LOANS SANCTIONED 31.01.2000 (Rs. In lakhs)

Jewel loans 253.10Mortgage loans (including Housing Loans) 266.47Others 14.85

For the depressed classes, salaried people and for business and industrial community loans are given on guarantee basis.

MICRO CREDIT LOANS

Under the loan scheme so far 170 loan are issued to the women during business. The members loan amount is Rs.1000 repayable in 100 days.

The recovery position is very good. We have only 1% of overdue. The president, board od directors and staff are very much interested in collecting the micro credit loan without any overdue amount.

TOTAL INVESTEMENT OF THE BANK AS ON 28.02.2000 WAS AS FOLLOWS:

S.No ITEM Amount (Rs. in lakhs)1. Current account 56.902. Savings account 2.273. Fixed account 43.174. Indra Vikas

Certificate0.50

5. Kissan Vikas Certificate

0.60

6. Reserve fund 3.427. Share capital of co-

op. societies0.63

8. Cash certificate 628.709. Other investments 4.14

TOTAL 740.33

This bank has opened one branch at Alagesa Nagar and another branch at Natham. Both branches are working well on profits and saving the people.

THE CHENGALPATTU CO-OPERATIVE URBAN BANK LIMITED

TABLE – 8 BANK’S GROWTH IN THE LAST 7 YEARS

Year Members Share amount(Rs. In lakhs)

Deposits (Rs. In lakhs)

Loans (Rs. In lakhs)

Profit (Rs. In lakhs)

A B1993 7283 22110 12.11 216.49 193.62 9.001994 7735 22028 14.84 259.66 238.38 11.191995 7487 21997 16.58 323.67 272.69 5.011996 8080 21957 19.49 433.17 324.57 8.271997 8829 21947 24.71 615.72 467.93 10.291998 9470 21936 31.30 889.88 637.03 13.271999 10086 21932 39.34 1209.67 820.97 2.62

Source: compiled from the record of the Urban Co-operative Bank.

THE CHENGALPATTU CO-OPERATIVE URBAN BANK GROWTH

1993 1994 1995 1996 1997 1998 19990

200

400

600

800

1000

1200

1400

DepositsLoans

Year

ORGANISATION CHART

Board of Directors

Managing Director

Secretary

Assistant Secretary

Manager 1 Manager 2 Appraiser

Assistant Assistant Typist Assistant Assistant Typist

METHODOLOGY

CHAPTER – 5

METHODOLOGY

DATA COLLECTION METHOD

DATA SOURCE

Primary and secondary data were used for the purpose of study.

Primary Data: Survey of customers in Chengalpattu area.

Secondary Data: Bank records, journals, newspapers and Governemnt of India Census reports.

RESEARCH APPROACH

Survey method was used to collect primary data from the customers of the bank.

RESEARCH INSTRUMENTS

a questionnaire method was applied to extract the required information. Since research inferences were of great importance to building and other activities a plot was done on 10 people to design the correct questionnaire contains open ended questions and multiple choice questions. Likert scales were also included so as to measure the attitude and opinion in certain cases.

The pilot survey showed that 3 out of 10 respondents has availed the facility of housing finance.

p = probability of occurrence = 0.3

q = 1 – p = 1 – 0.3 = 0.7

standard deviation σ = √p (1−p )N

= √0.3 (1−0.3 )

10

= √ 0.021

= 0.145

Organization has permitted an error level of 0.02 at 95% confidence level z = 1.96

Z = error / (standard deviation of sample/√n)

√n = Z x standard deviation of sample / error

√n = 1.96 x 0.145 / 0.02

= 14.21

Z = 0.02 / (0.145 / 0.02 )

= 0.02 / 0.0102

= 1.96

So the survey is conducted for 200 samples.

SAMPLING DESIGN

I have selected convenience sampling as my sampling technique. The addresses of the customer were collected from the bank. From the list of the custiomers, the respondents weer selected according to the conveniences of the researcher.

DATA COLLECTED METHOD

The method of contact used in this study is personal interview based on structures questionnaire.

FIELD WORK

The customers were met personally and the answer of the questions were marked by the researcher. The respondents were met at their residence and also from bank.

METHODS OF DATA ANALYSIS

Data collected was analysed systematically. Tables were prepared on the basis of simple percentage Likert scales made with respect to some aspect and presented along with the respected table. Pie diagrams are used for their easy understanding of the analysis.

LIMITATIONS

CHAPTER – 6

LIMITATIONS OF THE STUDY

1. Survey was done to a limited number of dealers which were selected by sampling , there is a chance for the date being biased.

2. This survey need not be representative one for all co-operative urban banks, since it was limited to Chengalpattu urban bank only.

3. The study has limited scope it suffers from certain limitations.4. The conclusions arrived are based purely on the respondent’s responses. 5. Selected sample sizes of customers due to unavailability of time and resources. The difficulty

in gathering information from the respondent.6. Questionnaire has to be translated in Tamil.

ANALYSIS AND INTERPRETATION

CHAPTER - 7

ANALYSIS AND INTERPRETATION

OBJECTIVE I: TO FIND OUT THE PROCEDURES FOR SANCTIONING OF HOUSING LOAN.

PROCEDURE FOR SANCTIONING LOAN.

ELIGIBILITY: Individuals requiring housing loan from bank should satisfy the basic two conditions.

1. The individual should belong to Chengalpattu town.2. He should be the permanent resident.3. He should be the member of the bank

Housing loans shall be granted to the persons for the following purposes by virtue of provisions contained in the co-operative urban bank regulations.

Renovation/repair to the existing house/flat Construction or purchase of a new flat / house within local limits.

Individuals eligible for housing loans from the bank fall into 4 categories namely,

i. Those belonging to Economically weaker sections (EWS), low, middle and high income groups.

ii. Those holding land and capable of liquidating the loan within the stipulated time.iii. Those purchasing residential flats from State Housing Boards / Co-operative Societies /

Private Builders etc.iv. Those belonging to Scheduled Castes / Scheduled tribes who have been allotted land by the

government.

The quantum of the loan is determined on the basis of two different parameters:

i. On the basis of income of the borrower. The eligibility of the quantum of the loan is arrived at in a manner that the installment doesn’t exceed 30% of the net take home income of the borrower.

ii. On the basis of estimated cost of construction on repair

The second parameter is based on the estimated cost of construction less necessary margin requirement. If the quantum of the loan is the lower amount arrived on the basis (i) or (ii), the loan amount is further subjected to a ceiling of 5 lakhs.

The rate of interest is charged to the amount of loan. Presently bank charge exclusive of income tax

Upto Rs.1,00,000 18%1,00,000 to 2,00,000 18.5%2,00,000 to 5,00,000 19%

SECURITY

The normal housing loan as mortgage of property from the proceeds of the loan.

MARGIN REQUIREMENT

In general, bank do not finance the full cost of the house and the owners / borrowers have to bring in the margin from their own resources as part of the cost however the bank will fix the loan money at the discussion of the Board on case to case basis.

REPAYMENT

The loan is repayable in Equated monthly installments (EMI) in a maximum period of 6 years. The term of the loan, the interest rate and the amount of monthly mortgage payments fixed for the entire terms of loan. The monthly installment consists of the principal repayment and the interest on outstanding principal and is

given by: Amount of the fund borrowed

Present value of anannuity of Rs.1 permonth

In case of default additional interest of 2% more than the normal rate of interest shall be charged on the defaulted installment every month.

SCRUTINITY OF APPLICATIONS

The person/individual requires loan from the bank shall submit an application form duly filled along with the necessary enclosures (mentioned in annexure) by paying Rs.400 towards : Application Rs.50 legal & survey etc Rs.350.

ENCLOSURES WITH THE LOAN APPLICATION

Bond Rent recipt Encumbrance certificate Land tax recipt Pay certificate Other sources of income Construction or alteration estimate

After receiving the application, the bank will verify and check the details and forward it to their legal opinions. The legal advisor shall forward and to the end of the bank about the genuine of the application. Then the application shall be put-up to the notice board for discussion and approval. After getting the approval from the board, the bank manager will sanction the loan amount to the customer.

After sanctioning the loan and before the disbursement of the first installment the customer is asked to mortgage the property in favour of the bank as a security against the loans sanctioned. After satisfying the necessary formalities the bank will first disburse 50% of the loans sanctioned. The balance amount will be released once the loan was utilized properly.

The bank will deduct 2.5% towards margin from the loan amount sanctioned and will be kept as a deposit. The interest will be paid on this deposits 14% per annum.

TREATMENT OF DEFAULT CASES

The customer who fails to pay their installment due for continuously more than 6 month or installment which is due more than 6 months, the customer will be treated as a defaulter. Then the bank will send a notice by registered post acknowledgement, reminding repayment of the installment to the customer and will close the customer’s account. For closing accounts the bank will calculate interest as on date and other postal and printing chargers added with principal amount and that the total amount will be treated as principal amount. For this principal, interest rate will be the normal interest + 2% penalty interest. This interest will remain same up to the clearance of the overdue principal. If he cleared the overdue principal amount then the normal interest rate only

applicable. If the customer fails to pay, bank will file a suit for arbitration by sending a notice to the customer.

After due verification of the suite field by the bank the Deputy Registrar will register the case against the customer and send summons to the defaulter for 3 times.

After ARC if the customer pays the interest regularly and cleared all his overdue means the DR will decree the customer. After the decree the interest rate will be the normal rate will be +2% penalty rates and this rate will never change even if he paid his overdue principal.

The next step decree is property attachment. This means that the customer cannot do anything in the property without the banker’s knowledge. Then the customer not paying the overdue for the long time and the customer is not responding means, the next step is Execution Petition (EP).

DR will send sale officer to the customer and they announce the auction of the property and this auction will be informed through advertisement in the newspapers and the bank notice board. Then an on date interest will be calculated and added with overdue principal then from the action sale they will take the money due and the balance returned to the customer.

If the auction sale amount is less than the overdue amount of the customer then recover the whole money for the bank and balance should be collected from the customer.

TERMS AND CRITERIA FOR THE AUDIT CLASSIFICATION OF THE CO-OPERATIVE BANKS IN AUDIT

Audit classifications are to be arrived at on basis of the aggregate marks secured indicated below

1. DEPOSIT MOBILIZATION

Increase in total deposits over the previous year

INCREASE MARKS20% and more 10Between 15% - 20% 8Between 10% - 15% 5Between 5% - 10% 1** increase nil

2. PERFORMANCE UNDER PRIORITY SECTOR

Percentage of priority sector advances to total advances at the end of the year

MARKS60% and more 10Between 50% - 60% 7

Between 40% - 50% 5Less than 40% nil

Percentage of weaker sections advance to total priority sector advances at the end of the year.

MARKS25% and more 5Between 15% - 25% 3Less than 15% nil

3. RECOVERY PERFORMANCE

Percentage of overdue to loans and advances outstanding at the end of the co-operative year.

MARKSBetween 5% - 10% 12Between 10% - 15% 10Between 15% - 20% 8Between 20% - 25% 5Between 25% - 30% 3Above 30% nil

4. RESERVE/PROVISIONS TO COVER EROSION IN THE VALUE OF ASSETS

MARKS100% 550% 3Less than 50% nil

5. MAINTENANCE OF CASH RESERVATION ASSETS

MARKSCash reserve 5Liquid assets 3

6. MANAGEMENT OF FUNDS1. Maintenance of cash reserve/liquid assets below the optimum level throughout the year.2. Surplus over the optimum level either under cash reserve or liquid assets or both sporadically

observed for a short period not exceeding 10 occasions in a year.

3. If surplus noticed in cash reserve and/or liquid assets over and above the optimum level for a long stretches of period and for more than 10 occasions.

7. LOANS AND ADVANCES

The bank should have certain loan rules properly or its local policy should have been incorporated in its by laws duly approved by the Registrar of Co-operative societies.

8. WORKING RESULT1. The bank has strained norms of viability in respect of

a. Paid up share capital.b. Deposits.c. Loans and advances.d. The banker has earned profits.

2. The bank has made appropriate allocations to various resrves/provisions3. The bank has declared a reasonable dividend 4. The bank cost of management was not more than 2% of its working capital or 30%.

9. OPERATION EFFICIENCY1. Compliance with RBI directions.2. No default in the repayment from higher finance agencies.3. No default in the submission of various returns prescribed under the regulation act 1949

and the state co-operative housing societies act throughout the year.4. Submission of satisfactory compliance on or before due date to the inspection report of

RBI and to last audit report

10. EFFICIENY OF MANAGEMENT1. The modeling of the board/committee/general body held regularly.2. Regularity in interviewing the bank;s working.3. Proper maintenance of books of accounts.4. Proper systems of internal checks and branch control introduced and observed.5. Proper systems for recruitment of qualified staff and their training procedures.

AUDIT CLASSIFICATION

Depending upon the aggregate marks secured by the banks audit classification made on this basis of following

Marks Secured Audit Classification60% and above A45% and above but below 60% B

30% and above but below 45% CBelow 30% D

OBJECTIVE 3

TO ANALYSE THE BANK OPERATION IN THE FIELD OF HOUSING FINANCE

Apart from district and central co-operative banks which provide mainly bridge finance to

primary housing co-operative societies, urban co-operative banks also play useful role in the provision of

housing finance unlike commercial banks. Urban co-operative banks can give loans only to their customers.

The Chengalpattu co-operative urban bank for the last 7 years were analyzed and the details given

below.

Years Housing loans

(Rs. In lakhs)

1992 – 93 17.67

1993 – 94 36.61

1994 – 95 15.52

1995 – 96 31.80

1996 – 97 62.40

1997 – 98 203.65

1998 – 1999 211.24

TOTAL 578.89

Source: compiled from the records of urban co-operative bank

From the table observed that the bank has sanctioned housing loans 17.67 lakhs during 92 - 93. For

the year 93 – 94, it sanctioned about 36.61 lakhs. It shows the tremendous performance of the bank in

sanctioning housing loans. However, there was a competition in the bank in the market. Keeping in view

the competition in the market and the potentiality the bank has received this policy in order to attract the

people and consequent, when there was a sudden jump in the year 1995 – 96 of about 16% more than the

previous year and so on. Due to liberalization in economic policies such as importance and encouragement

of infrastructure projects like housing and other income tax benefits attracts the public more and more.

There was a tremendous response from the public. As a result the bank could achieve substantial jump in

sanctioning the housing loans to the extent of 203.65 during 1997 – 98 and Rs.211.24 crores during 1998 –

99.

1992 - 93 1993 - 94 1994 - 95 1995 - 96 1996 - 97 1997 - 98 1998 -990

50

100

150

200

250

Performance of Chengalpattu Co-operative urban bank

Housing loans

52(C)

OBJECTIVE – 4

TO FIND OUT THE ATTITUDE OF CUSTOMERS VIEWS ABOUT HOUSING FINANCE

TABLE – 9

LOANS SANCTIONED – OCCUPATION WISE – 1996-97

Details of occupation Loan sanctioned (Rs. In lakhs) Percentage

Business 16.95 27

Government employee 13.53 22

Non-governmental employee 5.87 9

Agriculture 7.99 13

Profession 18.06 29

TOTAL 62.4 100

INFERENCE

The table clearly shows that during the year 96 – 97 loan sanctioned to profession customers about

29% followed by business people about 27% and 22% to government employee and so on.

27%

22%9%13%

29%BusinessGovernment employeeNon Governement EmployeeAgricultureProfession

54(C)

TABLE – 10

LOANS SANCTIONED – OCCUPATION WISE – 1997-98

Details of occupation Loan sanctioned (Rs. In lakhs) Percentage

Business 35.79 19

Government employee 37.41 20

Non-governmental employee 46.83 26

Agriculture 25.44 14

Profession 20.19 11

Staff 19.00 10

TOTAL 184.66 100

INFERENCE

The table clearly shows that during the year 97 – 98, 26% loan sanctioned to non government

employee customers about 20% to government employee and 19% loans available by business people

followed by agriculture 14% and profession 11% and staff 10%.

19%

20%

26%

14%

11% 10%BusinessGovernment employeeNon Governement EmployeeAgricultureProfessionStaff

55(C)

TABLE – 11

LOANS SANCTIONED – OCCUPATION WISE – 1998-99

Details of occupation Loan sanctioned (Rs. In lakhs) Percentage

Business 100.40 47.53

Government employee 63.45 30.03

Non-governmental employee 7.10 7.14

Agriculture 15.09 10.51

Profession 22.20 10.51

Staff 3.00 1.43

TOTAL 211.24 100

INFERENCE

About 47.53% of total loans sanctioned during the year 1998 – 99 to business sector followed by

government employees 30.03%, Proffesionals 10.51%, agricultural sector 7.14% and 3.36% to non-

governmental employee as indicated in the table.

48%

30%

3%

7% 11%1%

BusinessGovernment employeeNon Governement EmployeeAgricultureProfessionStaff

56(C)

TABLE – 12

CUSTOMER VIEW – ABOUT INTEREST RATE

Views No. of persons Percentage

Very important 53 26

Important 44 22

Ok 25 13

Not important 38 19

Not very important 40 20

Total 200 100

INFERENCE

It is observed from the table that about 26% of customers view about interest rate is very

important followed by important from 33% of customers and 20% of customers’ opinion is not very

important and 19% of customers views are not important followed by 12% of customers view is no

commands.

26%

22%13%

19%

20%

Very importantImportantOkNot importantNot very important

57(C)

TABLE – 13

SERVICES / PERFORMANCE OF THE BANK

Views No. Of persons PercentageHighly satisfied 40 20Satisfied 25 13Neither satisfied not dissatisfied

60 29

Dissatisfied 38 19Highly dissatisfied 37 19Total 200 100

INFERENCE

It is observed from the table that about 20% of customer option about the performance of the bank is satisfied and 29% customers with no comments and 19% of customers are dissatisfied and 19% of customers highly dissatisfied and only 13% of the customers are satisfied with the performance of the bank.

20%

13%

29%

19%

19%

Highly satisfiedSatisfiedNeither satisfied nor dissatisfiedDissatisfiedHighly dissatisfied

58(C)

TABLE – 14

LOANS SANCTIONED – AS PER INCOME GROUP

Income group No. of persons Percentage

Upto 50,000 56 28

50,001 – 1,00,000 69 34

1,00,001 – 2,00,000 58 29

2,00,001 – 3,00,000 17 9

Total 200 100

INFERENCE

it is observed from the table that the bank had sanctioned the loans to the income group in

between 50,001 – 1,00,000 of about 34% followed by the income group 1,00,001 – 2,00,000 about 29%

and followed by the minimum group of 50,000 about 28% and so on.

28%

34%

29%

9%

Upto 50,00050,001 - 1,00,0001,00,001 - 2,00,0002,00,001 - 3,00,000

59(C)

TABLE – 15

CUSTOMER VIEW – RANKING OF PRIORITY

Terms No. of persons Percentage Rank

Interest rate 50 25 3

Pay back period 78 39 1

Procedure 62 31 2

Reputation of the bank 10 5 4

Total 200 100

INFERENCE

It is observed from the table that about 39% of customers ranking views as indicated rank 1, for

the pay back period followed by procedural aspect and interest rate of reputation of the bank as shown

in the table.

25%

39%

31%

5%

Interest ratePay back periodProcedureReputation of the bank

60(C)

TABLE 16

CUSTOMERS’ VIEWS - ABOUT TERMS

Terms No. of persons Percentage

High interest rate and low pay

back period

117 58

Low interest rate and high pay

back period

83 42

Total 200 100

INFERENCE

It is observed that about 58% customers choose the first option which is high rate and low pay back

period and about 41% of customers chose Low interest rate and high pay back period.

58%

42%

High interest rate and low pay back period

Low interest rate aand high pay back period

61(C)

TABLE – 17

BASIS OF SELECTING THE BANK

Selection No. of persons Percentage

Interest rate 0 0

Pay back period 114 57

Procedure 86 43

Total 200 100

INFERENCE

It is observed from the table that 57% customers selected the bank because the pay back period

and about 43% of customers selected this bank because of bank’s simple procedural aspects.

57%

43% Interest ratePay back periodProcedure

62(C)

TABLE – 18

CUSTOMER VIEW – ABOUT PROCEDUTAL ASPECTS

Procedure No. of persons Percentage

Highly complicated 15 8

Complicated 60 30

Simple 125 62

Total 200 100

INFERENCE

It is observed from the table that about 62% of customers’ views about the procedural aspects of

the bank was simple compared to 30% of the customers’ view is complicated and 8% of the customers’

view is highly complicated. This may be due to various reasons whoch may not be relevant procedural

policies.

8%

30%

62%

Highly complicatedComplicatedSample

63(C)

TABLE – 19

LOANS SANCTIONED AS PER QUANUM OF AMOUNT

Quantum of loan No. of persons availed Percentage

Up to 50,000 32 16

50,001 – 1,00,000 62 30

1,00,001 – 2,00,000 60 30

2,00,001 – 3,00,000 23 12

3,00,001 – 4,00,000 6 3

4,00,001 – 5,00,000 17 9

Total 200 100

INFERENCE

It is observed that the table that 60% loans were sanctioned to 50,001 - 2,00,000 followed by 16%

loans up to Rs.5,00,000 as indicated in the table.

16%

30%

30%

12%3% 9%

Upto 50,00050,001 - 1,00,0001,00,001 - 2,00,0002,00,001 - 3,00,0003,00,001 - 4,00,0004,00,001 - 5,00,000

64(C)

TABLE – 20

LOAN SANCTIONED – PURPOSE WISE

Purpose No. of persons Percentage

Construction of houses 93 47

Repair / renovation 107 53

Total 200 100

INFERENCE

It is observed from the table that 53% of persons availed loans for the purpose of repairs and

alterations of houses and 47% of persons availed for constructing the houses.

47%

53%

Construction of housesrepair/RenovationPurchase of plots/houses

65(C)

TABLE – 21

OUTSTANDING DUES - AS PER INSTALLMENTS

Outstanding installments No. of persons Percentage

1 – 5 33 44

6 – 10 29 39

11 and above 13 17

Total 75 100

INFERENCE

It is observed from the table that out of 200 persons, 75 have outstanding dues. The table shows that 44% of

OD installments between 1 – 5 and 39% between 6 – 10.

44%

39%

17%

1 to 56 to 1011 and above

66(C)

TABLE – 22

CUSTOMER VIEW – SOURCES OF IDENTIFICATION

Sources of identification No. of persons Percentage

Through friends 93 46

Through advertisements 30 15

Through officers 77 39

Total 200 100

INFERENCE

It is observed from the table that 46% of customers identified the bank through friends and 39% of

customers through other sources.

46%

15%

39%through friendsthrough advertisementsThrough others

67(C)

TABLE – 23

LIKERT SCALE TO SERVICES / PERFORMANCE OF THE BANK

Views No. of persons Rank Likert scale

Highly satisfied 40 2 80

Satisfied 25 1 25

Neither satisfied not dissatisfied

60 0 0

Dissatisfied 38 -1 -38

Highly dissatisfied 37 -2 -74

Total 200 -7

INFERENCE

Likert scale shows negative balance that is out of respondent most of the people view is they are not

satisfied with the performance of the bank. No comments by 60 persons about the performance of the bank.

So the bank should take steps to identify the customers at their maximum level.

TABLE – 24

LIKERT SCALE ON INTEREST RATE OF THE BANK

Views No. of persons Rank Likert scale

Very important 53 2 106

Important 44 1 44

Ok 25 0 0

Not important 38 -1 -38

Not very important 40 -2 -80

Total 200 32

INFERENCE

The likert scale shows positive result so most of customers view is interest rate is very

important so the bank has to take necessary steps with regard to the interest rate up to their level.

FINDINGS AND SUGGESTIONS

CHAPTER 8

FINDINGS AND SUGGESTIONS

1. For professionals, agriculture loan sanctioning is very poor. During the first year, business people

sanctioned more than others and non-governmental employee are very low. In the second year non –

government employee loan sanctioning are more compared to the others. In the third year business

people sanctioned more. During these three yearsloans to professionals and agricultural sectors are

too low. This may be due to lack of awareness of the people about the bank or less concentration of

the bank towards this segment or competition from other banks/financial institutions.

The bank may take steps to attract the above segments by giving huge advertisements liberalizing

the proceeds at par with the competitors.

2. The bank’s maximum limit at loan is Rs.5,00,000 but very least people availed the maximum limit.

Most of the people availed loans up to Rs.2,00,000 only. This may be due to locational aspect i.e.,

Chengalpattu is an area of less locational advantage.

The bank may take steps to encourage that they may utilize the maximum kimit by liberising the

procedures to avail the maximum limit.

3. Customers availed loans from the bank mostly for repair and renovation of existing houses

compared to the new construction of houses. There are no loans sanctioned for purchase of the plot

ot flat.

Bank giving housing loans as mortgage loan. For new purchase of flat or plot customers initially

need of money, so they go for other financial institutions and co-operative housing societies. So, the

bank may give loan for the purchase of plot/flat.

4. Bank over due is higher. This will affect the bank more. So, to reduce OD, the bank may take steps

to give some special concessions to the regular customer without any OD. Then, to take serious

steps to the OD customers to collect the amount.

5. Bank advertisements are very low compared to the other financial institutions. It may be suggested

that the bank may go for small advertisement within the city limits to make awareness of the general

public about their housing finance schemes. So that it can increase the housing finance business

substantially.

6. Most of the customers feel that the bank’s procedural aspects are apparently simple but the

formalities are difficult to understand and are complicated. The bank may take steps to satisfy their

customers by liberalizing the procedures.

7. 12% of customers comment about interest rate of bank as no comments. This is because the interest

rate of the bank is higher than the other financial institutions, banks and co-operative societies.

The bank may take steps to reduce the interest rate by seeking grants concessional loans from

National level Housing Development Banks.

8. From the table about 20% customers view about the performance of the bank is highly satisfactory.

13% are satisfied and 19% of customers are dissatisfied and 18% are highly dissatisfied. This may

be the views of the overdue customers. The bank should try to satisfy the customers at the maximum

level.

9. While selecting the bank, 57% of people selected because of payback period and no person selected

the bank for interest rate because, compared to the other banks and other housing finance institutions

interest rate are high. So the bank should analyse about this and try to take the necessary steps.

10. From the table about 59% customers’ opinion is high interest and low pay back period. The middle

income group people only availing the loans. So they cannot spend more amount to pay installments.

So they like more years to complete the loan. 41% customers opinion is low interest rate and high

payback period. Some people view is to repay the loan as early as possible. So they like low interest

rate and high payback period.

11. From table, while ranking the priority of bank payback period takes first rank and simple procedures

takes second place and interest rate takes only third place. So the bank should take steps to analyse

and to reduce the interest rates.

12. From the table, about 35% of customers belong to the income group between Rs.50,001 – 1,00,000

and 29% belong to the income group between Rs.1,00,001 – 2,00,000. This risk indicates that low,

middle and high income group customers availed this loan. The bank may take steps to increase the

sanctioning of loans to the lower income group people.

CONCLUSION

CHAPTER – 9

CONCLUSION

Last few years have witnessed radical measures aimed at broadening the financial system in our

country the fact remains that a significant proportion of financial transaction even now takes place outside

the format financial system. This is much more so in housing finance. The problem traced by the industry

and the first tale to which NHB addressed itself after coming into existence was to have a close look at the

existing financial frame work for meeting housing needs. It found that the existing housing finance system

had broadly two segments viz. “formal” and “informal”, the formal segments comprising the central/state

government, financial institutions like the Life Insurance Corporation of India (LIC), General Insurance

Corporation of India (GICI), Unit Trust of India (UTI), Provisional Funds, Commercial banks and housing

finance institutions including Housing Co-operative accounted for less than 20% of the investment in

housing. The rest 80% of the funds came from the informal segment which includes households themselves

and public/private sector employers providing housing loans to their staff. But now with lot of housing

companies entering the market this scenario is totally challenging and more people are preferring the formal

sector for their housing loan and this now has lead to shortage of resources for the housing finance

companies this is due to the depending of the housing finance companies on the low-cost funds which is

becoming hard to mobilize and another problem faced by them mismatch of asset and liability, to up all short

coming NHB has sent a team of officials to study the system of securitization provides the mechanism for

mobilizing funds from the asset side of the balance sheet. This system has got a big potential and the

responsibility of providing funds for the social security at a reasonable cost.

Entry of foreign banks in the market has created a sift competition in the market for the existing

players like HDFC, LIC,GIC and Canfin Homes even though the interest rate charges by the foreign banks

are high they compensate it by providing innovative value added service which make the customer feel very

important and satisfied and the service generally provided by the LIC and GIC are poor when compared to

the services provided by the HDFC and foreign banks and the entry of other schedule banks like SBI. Indian

Bank, Vysya Bank and other financial institutions entering the market will make the life hard for existing

housing finance companies if they are not going to improve their services to their clients. Even though

HDFC has a market share of 60% and LIC having another 20% now they have started to lose their share due

to entry of other finance companies in the market.

The housing finance industry has got a big potential and the responsibility of providing funds for the

social security at a reasonable cost. The industry is presently facing the problem of souring of funds. Most of

them depend on NHB for low cost finance, the NHB has its own limitations on generating such large

amount.

Thus the key aspect of the growth of the industry is to try for new methods of funding, like

following the example set by USA, where securitization has revolutionized the housing finance industry, the

open body NHB should take immediate steps for developing the securitization concept and develop a market

for securing debt instruments.

Financing of urban housing, being so much difficult, deserves special consideration. A proper

institutional structure for financing housing development is the key to its success. The difficult aspects of the

housing problem whether it is in regard to land or to the rate of interest, whether it is pertaining to finance or

building materials all these are difficult problems in themselves. The country has to progress, people will

have to have housing and the means of mobilizing savings for housing and making the task of the people

who want to build a house easier should engage lot of own attention, in the years to come.

The government must give higher priority to funds following into housing through special

incentives. To provide housing for all with adequate infrastructure facilities by 2010 to enable everybody to

lead a dignified life, is the vision of ASSOCHEM. Policy recommendations are about legislature framework,

outmoded laws are holding up development of the housing sector. These should be repealed or amended to

give a boost to housing and construction industry. Some of these laws are given below:

FORECLOSURE LAWS

The present foreclosure laws are oriented towards the borrower. These place the lender at a service

disadvantage, thus hampering the mortgage market as well as its securitization.

STAMP DUTY

Although a state subject stamp duties are exorbitantly high and need to be drastically brought down and

rationalized. In some states, the rate of stamp duty is high as 15% stamp duty should be brought down to the

uniform rate of around 1 – 3% in all states of the country.

PROPERTY TAX

There is a need to reduce excessive property tax burden on house owners by widening the existing

narrow tax base in order to encourage house construction.

SELF REGULATION

Seven years of intense efforts to professionalise the housing construction industry have led to the

formation of National Real Estate Development Council (NAREDCO) an apex body of government policy

and private sectors for ethical conduct and to self-regulate the nascent industry.

To increase demand for housing, easy availability of loans at low interest rates is essential to enable

buyers purchase homes at the beginning of careers. Such long-term loans should be based on primary

mortgages back by govt. insurance and guarantee programmes.

Government should encourage the private sector to develop and construct housing projects as also

townships with the government acting as the facilitator.

While commercial housing can be left in the hands of the private sector, the housing needs of the

poor will have to be met by the government.

Infrastructural development is not possible without construction sector being accorded due

importance. Construction sector should, therefore be accorded industry status in order to give a till up to

housing construction; excessive sales tax on construction equipment should be reduced.

High interest rates and builder’s demand for cash payment is keeping housing costs high. Unless

prices fall further and interest rates go down, the boom may never come. Housing finance systems enjoys

certain tax concessions, treatment of HFCS.

They are not allowed to create a special reserve equal to an amount not exceeding 40% of the total

income such a reserve is admissible as a deduction in computing taxable income of HFCs under the head

profit & gains of business/profession under sec 36(1)(VIII) of the Income Tax Act.

TREATMENT OF DEPOSITS, LOANS & DIVIDENDS

Deposits with HFCs are exempted from wealth tax under sec 5(1)(XXVII) of the wealth tax act

within the overall specified ceiling of Rs.15 lakh. Interest on deposits with them qualifies for deduction

under 80L if the Income Tax Act. Interest on housing loan is deductable expense under income from house

property under section 24 of the 80L Act. Dividends received on shares of HFCs quality for a deduction up

to Rs.13,000 under section 80L of the Income Tax Act together with other eligible deductions to develop the

house finance industry the government has taken many steps. People view is that the field of housing is the

government responsibility. But this is not so. People and government are two sides of the same coin and the

public should not try to run away from its responsibility by putting the entire burden on the government.

APPENDIX

A SURVEY OF CUSTOMER VIEWS ABOUT HOUSING LOAN TERM FROM “THE

CHENGALPATTU CO-OPERATIVE URBAN BANK LIMITED”

QUESTIONNAIRE

1. Name & address of the customer

2. Age

a. Below 45 years

b. 45 – 50

c. 51 – 55

d. 56 – 58

3. Occupation

a. Govt. employee

b. Non – govt. employee

c. Business

d. Agriculture

e. Staff

4. Annual income (in Rs.)

a. Up to 50,000

b. 50,000 – 1,00,000

c. 1,00,001 – 2,00,000

d. 2,00,001 and above

5. Purchase of loan availed

a. Purchase of flat/plot (new or old)

b. Construction of new house

c. Repair of house/flat

6. Amount of loan availed

a. Up to 50,000

b. 50,001 – 1,00,000

c. 1,00,001 – 2,00,000

d. 2,00,001 – 3,00,000

e. 3,00,001 – 4,00,000

f. 4,00,001 – 5,00,000

7. How did you know the bank

a. Through friends

b. Through advertisements

c. Through other sources

8. How do you feel about the procedure for obtaining loan

a. Highly complicated

b. Complicated

c. Simple

9. Within how many months do you have to pay back the loan

10. How much importance do you give for interest rates

a. Very important

b. Important

c. OK

d. Not important

e. Not very important

11. How did you approach the co-operative bank

a. Directly

b. Other sources

12. Are you satisfied with the services of the bank

a. Highly satisfied

b. satisfied

c. neither satisfied nor dissatisfied

d. dissatisfied

e. highly dissatisfied

13. on what basis have you selected the bank

a. interest rate

b. payback period

c. procedure

BIBLIOGRAPHY

BIBLIOGRAPHY

Books

1. S.GIRIAPPA – “Housing Finance & Development in India”, Mohit

Publications, New Delhi, 1998

2. P.DAYAL, “Housing development in India”, Priteeksha Publication,

Jaipur, 1991.

3. GARG Y.K, “An Approach towards spatial planning standards for

neighborhoods, shelter, a HUDCO Publications , October 1995

4. M.Y.Khan “Financial service”

5. PAREKH H.T, “Writings of H.T.Parekh”

REPORTS

1. “Finance for Housing schemes” report of the working group rate of the

banking system by RBI.

2. “BECON” 17th Bank Economist conference 94

3. “ASSOCHAM” India competing for the future policy recommendations July 99

4. Report on Trend and Progress of Banking in India 1994 – 95 by RBI

5. Annual reports of RBI

6. Annual reports of NHB

7. Report on trend and progress of Housing Finance by NHB in June 1992.

JOURNALS

1. The Hindu

2. The Economic Times

3. The Financial Express

4. India Today

5. Business India