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CUSTOMER PREFERENCE OF HOUSING

LOANS IN PRIVATE AND PUBLIC SECTOR
BANKS WITH SPECIAL REFERENCE TO
COIMBATORE CITY
Mr.U.ANUB, ,Dr.P.VIMAL KUMAR,
1
Student, 2Assistant Professor,
1
Department of Commerce,
1
Dr.N.G.P.Arts and Science College (Autonomous), Coimbatore

Abstract:
A strong banking sector is important for flourishing the economy of housing loan through leading
banks have become a source of support to pursue housing facility & materialize the dream of future. Though
streaming both the public & private sector bank are offering housing loan as per the same guidelines of RBI
there may be sum difference in some of the factors such as insurance coverage, concession for pre-closure
cash back offer etc. in this context it is important to study the insight level of customer preference with respect
to housing loan & to identify the problems faced by customers. The study helps in knowing how far the
banking services used by the customers. In the view of the objectives set for the research, the study examines
the efforts made by the government in the form of policies are helpful to home loan borrowers. The study
mainly concerned with the customers satisfaction and problems faced by them in private and public banks
with regards to providing housing finance to individual borrowers and to examine the operational factors
which influence them in the selection of housing financial institutions.

KEYWORDS: Housing loans, Types of Home loans, Customer Preference, Home loan schemes.

I. INTRODUCTION
A Housing loan is taken out from a bank or financial company in order to purchase/construct a new
house or reconstruct an existing mortgage. There are several different ways in which an individual can get a
home loan mortgage. Over the past few years, many new banks and housing finance companies have opened
up and are providing attractive and low lending rates. In 1998 the governments setup the national housing
with the objective of providing housing finance to all section of society. Housing finance refers to finance for
meeting the various needs related to housing such as purchase of land, construction of house, extension of a

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house etc. The home loan schemes offered by both public & private sector bank are very competitive. The
most important thing the respondents should know about each & every term related.

NATIONAL HOUSING BANK ACT 1987 [23rd Dec 1987]

"An act to establish a bank to be known as the housing bank to operate as a principal agency to promote
housing finance institution both at local and regional level and to provide financial and other support to such
institution and connected there with or incidental hereto."
Sec 2(d) of NHB act 1987 defines a housing financial institution as under: Housing finance institution includes
every institution, whether incorporated or not which primarily transacts or has as one of its principle objects.
The transacting of the business or providing finance for housing whether directly or indirectly. The National
Housing bank has setup under the NHB of 1987, which was passed on 9 July 1988 it is owned by RBI of India
and to encourage housing finance institutions and provide them with financial support. Besides, the national
housing bank also makes advances and gives loan to scheduled bank and formulates schemes that leads to the
proper use of resources for housing process.

OBJECTIVES OF THE STUDY

The objectives of the study are as follows:
• To study the demographic profile of the respondents.

• To identify the factors preferred to choose the bank for housing loan.

• To identify the problems faced by the customers with obtaining the housing loan.

RESEARCH METHODOLOGY
Research methodology is the specific procedure or techniques used to identify, select process and analyze
information about a topic. The research methodology shows the period, sample design and tools used for the
study

SAMPLING SIZE AND TECHNIQUES

A sample size of 100 respondents has been taken for the study by applying convenience sampling
techniques. The convenient sampling method is used in our study. When population elements are selected
for inclusion in the sample based on the case of access, it can be called as convenient sampling.

STATISTICAL TOOLS USED

The following statistical tools have been used for analysis and interpretation of the data:
1) Percentage analysis
2) Analysis of variance
3) Chi-square test
4) Ranking

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REVIEW OF LITERATURE
Umamageswari (2016)1 shows that identify the factors preferred of choice of bank for housing loan and
identify the problems faced by the customers with obtaining the Housing loan. This study concluded that
major factor which is motivated the customer for availing a housing loan was easy procedure to get loan and
amount sanctioned which plays a vital role in public sector bank whereas in case of private sector bank it had
easy procedure to get loan and rate of interest plays vital role in it. But the major problems faced by respondent
in public sector bank was long processing period, where as in case of private sector bank it was higher
insurance coverage. The researcher suggested that it would be beneficial for the interest of the borrowers if
RBI would take proper measure to avail housing loan easily.
Shani, Sopna (2011)2 in this study they are analyzing customer satisfaction level in home loan. The study is
based on various problems in housing loan scheme provided by bank. They are using primary data, customers
are the king. Their satisfaction is important.
Rashed A Karim (2013)3 in this analysis they are evaluating financial performance of private banks based
on ratio analysis. They have used five private banks to asses credit risk, operational efficiency etc.. It helps us
to know management have exerted potential and strong impact on banking performance of private banks.
Pushpa Sangunan, Kanuar Bhan (2012)4 in this study they are analyzing private and public bank and
analysis customer satisfaction level, various schemes and problems faced by them. Public sector banks must
concentrate more on loan processing, preference to customers and various loan schemes must be provided.
Private sector bank is most preferable.
Prabha Garg (2014)5 analyzed comparative study on public and private sector banks. In this analyses public
is offering low interest rate and new scheme for women but tenure period is short. But private bank has high
interest rate, better customer service. They have used both 9
primary and secondary data. But old trend people mostly choose public sector and private sector. Now trend
people prefer private bank.
Chandan babu, P.Rajini (2016)6 study shows that Kumar (2006) he studied the bank nationalization in India
marked a paradigm shift in the focus of banking to mass banking. Internationally also efforts are being to
study causes of financial inclusion of low income group treating it both a business opportunity as well as a
corporate social responsibility .This study concluded that all the banks must have ATM facilities .It will be
better to have networking ATM system i.e. if it is not possible to install ATMs in all parts of the city there
should be tied up and other banks. Presently, some banks are doing the same. There should be the suitable
requirements of more officers in the public sector banks so that the branches which are really understaffed
and over burned become systematically sufficient. There should be appropriate requirement of more officers
in the public sector banks so that the branches, which are really understaffed and over burdened, become
systematically sufficient.
Anita (2014)7 study shows that, "it is not only customary but also absolutely necessary for a researcher to
review the existing literature".By doing so, she may put greater emphasis on those aspects of research problem
which have not been duly covered by earlier researchers. Moreover, it facilitates the comparison between the
earlier findings and findings of the present study.

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Narayana and Brahmanandam (1990)8 in their study, "A study of customer services in commercial banks
"have studied customer services in bank by analyzing physical facilities, reputation of bank, complaints and
suggestion system, staff behavior besides their diverse services like account operations, cheque operations,
draft and money transfer operations etc.. This study concludes that if the facilities in the branch infrastructure,
décor, sitting facility, signage, etc. are adequate, it not only leads to customer satisfaction but Overall
improvement in working of the branch as well whether it is availability of latest products strategic intent,
timely delivery services. If all the signage are in place it will direct the customer to right desk without wasting
their time which further helps the service officer in attending the customers in time and cater to their needs.
Anju otwani (2017)11 this study concludes as undertake the comparative analysis of public & private banks
(Allahabad bank and HDFC bank) in housing loan sector. To study consumer preference for the above two
mentioned banks. To analyze the satisfaction level of public and private bank (Allahabad & HDFC banks
home loan customers. To identify the popular schemes of the above two mentioned banks to evaluate the
impact of tax considerations on housing finance with respect to Allahabad & HDFC bank. On the basis of
data analysis and preparation, this study concludes that people prefer HDFC Bank more to Allahabad Bank.
Youngsters prefer private banks because of the services and facilities offered by them.

TYPES OF LOAN PROCESS IN HOUSING LOAN

1. Home loan application
The application forms from any bank office or download it from online. Duly fill the form and attach copies
of the loan related documents such as ID proof, address proof of educational details and employment, bank
statement etc. if you apply online, you can get instant provisional approval within 24 hours. Send the form
and the non refundable processing fee to the bank for loan approval process. The processing fee differs from
one bank to another from 0.25 % to 0.50 % which is usually non refundable in case if the loan is denied. This
is used for the loan processing procedure and maintenance of your loan.
2. Discussion with the bank
After submission of application form, the applicant will be called by the bank for a face to face discussion to
evaluate the papers and decide on the loan amount etc. This discussion meet happen in 2 or 3 days after the
submission of application form. At this. Point, the applicant can also bring the original documents of all the
proofs submitted earlier.
3. Bank Investigation
A field investigation will be conducted to check all the information stated in the application form and qualified
bank employee or a verification agent will investigate and Verify all the details. The representatives will visit
the office and residence of the applicant to verify the details. In process, the references mentioned by the
applicant will also be checked and cross verified.
After this, the bank will verify the applicant repayment capacity and if it is not satisfactory, the loan will be
rejected. It will check the ability of the borrower to repay the loan amount with interest on time along with
the previous loan transactions track record. If the bank finds that the applicant can repay, then the loan will
be sanctioned.

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4. Offer Letter for the loan sanction

Once the loan is sanctioned, the bank will send an offer letter to the applicant with details regarding the home
loan such as loan amount sanctioned, interest rate for the loan, type of interest selected: fixed or floating
interest rates, loan tenure, mode of loan repayment, special scheme or offer if applicable and the general terms
and conditions of the home loan approved. If you are satisfied with all the norms, then you can provide an
acceptance letter with your signature to the bank to acknowledge the sanction.
5. Submission of legal documents
These days, the bank requires all the legal documents related to the property for availing the loan. The bank
will perform legal check and these documents will be detained by the bank till the applicant repays the loan
amount.
6. Technical Valuation of property.
Along with the legal check, the bank will also perform a technical valuation of the property. For under
construction projects, the bank will check the quality and progress of the construction work along with the
locality valuation to evaluate the value of the property. The bank has qualified valuators to assess the property
value under established parameters. This is performed to ensure a clear title and if the property is viable and
meets the valuation standards. 22

7. Registration and Signing

After all the financial and technical valuations, the home loan registration process begins. The legal loan
documents will be prepared on stamp papers by the bank lawyer. The loan agreement must be signed and
submitted back to the bank along with post dated cheques.
8. Loan Disbursal
After registration, the bank will disburse the loan amount based on the agreed terms of disbursal either as a
full payment or partial payment mode in stages. Usually for ready possession of the property, the amount will
be disbursed in full.
The above mentioned home loan process is applicable in most banks though there might be changes according
to individual bank policies. This long home loan process is now simplified with the instant home loan process
available online. You can try ay one based on your convenience and requirement.

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DATA ANALYSIS AND INTERPRETATION

SIMPLE PERECENTAGE ANALYSIS
GENDER

The following table 4.1.1 presents the classification of the respondents based on gender

TABLE
GENDER OF THE Frequency Percent
RESPONDENTS
Gender
Male 62 62.0
Female 38 38.0
Total 100 100.0
INTERPRETATION
The above table shows that 62.0 per cent of the respondents are male and 38.0 per cent of the respondents
are female. Hence, majority (62.0 per cent) of the respondents have taken home loan are male.

ANALYSIS OF VARIANCE
PERSONAL PROFILE VS FACTORS PREFERRED TO CHOOSE THE BANK
Personal groups Mean S.D No T- F- Sig.
profile factor value value
Gender Male 2.2629 .42358 62 -0.036 Ns
Female 2.2658 .36781 38
Age 21-30 years 2.3542 .35137 24 0.982 Ns
31-40 years 2.2714 .37583 49
41-50 years 2.2000 .50621 17
Above 50 years 2.1200 .44171 10
Marital status Married 2.2373 .40083 83 -1.504 Ns
Unmarried 2.3941 .38966 17

Educational Schooling level 2.2310 .40187 29 1.012 Ns

qualification
Ug graduate 2.3152 .45410 46

Pg graduate 2.2524 .26948 21

Professional 1.9750 .26300 4
course
occupation government 2.0125 .38275 16 4.559 **

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CHI-SQUARE TEST
TYPE OF BANK FOR HOUSING LOAN
Health advertisement Groups Type of bank for housing loan Total Table Sig.
Public sector Private value
sector
No % No % No %
PURPOSE OF OPTING Purchase of 5 45.5 6 54.5 11 100 4.520 Ns
HOUSING LOAN home
Construction 37 53.6 32 46.4 69 100
Renovation 1 25.0 3 75.0 4 100
Land purchase 1 16.7 5 83.3 6 100
Home extension 6 60.0 4 40.0 10 100
loan
Duration taken by bank to Below 30 days 10 47.6 11 52.4 21 100 0.253 Ns
sanction the bank loan 30-60 days 29 50.9 28 49.1 57 100
60-90 days 7 53.8 6 46.2 13 100
Above 90 4 44.4 5 55.6 9
days
Type of interest Fixed 30 50.8 29 49.2 59 0.041 Ns
Floating 20 48.8 21 51.2 41
Level of submission High 14 46.7 16 53.3 30 100 1.949 Ns
Medium 32 49.2 33 50.8 65 100
Low 4 80.0 1 20.0 5 100
Repayment mode Direct Payment 23 47.9 25 52.1 48 100 0.174 Ns

Deduction from 23 52.3 21 47.7 44 100

salary account
cheque 4 50.0 4 50.0 8 100

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RANKING

SATISFACTION LEVEL OF THE RESPONDENTS

The following table presents the satisfaction level of service provided by thebankers.

TABLE

SATISFICATION LEVEL OF THE RESPONDENTS

Level of satisfaction of the services Mean Actua

providedby Bankers rank l rank

v21 Accounts management 3.04 2

v22 Do you like the presentation given 3.44 3

by thesales people about loan
process

v23 Duration of loan process 2.81 1

v24 Customer grievances attended on 4.61 6

calls
v25 Customer grievances solved 4.05 5
within thementioned
period
v26 Opinion regarding recommending 3.50 4
services toothers

(Source: computed)

It is observed from the table 4.1.20 that, the respondents have given the highest rank to the service
V23 (mean of 2.81)duration of loan process, followed by V21 (mean of 3.04), Accounts
management, V22 (mean of 3.44) Presentation given by sales people about loan process, V26 (mean
of 3.50), opinion regarding recommending service to others, V25 (mean of 4.05) customer grievance
solved within the mentioned period and the least priority has given to V24 (mean of 4.16) customer
grievance attended on calls. The Friedman rank test has been applied to find out the significant
variations in mean rank that influence the respondents in level of satisfaction of the services
provided by the bankers.Ho-factors do not differ significantly among the respondents.

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SUGGESTIONS

 Private bank can reduce the interest rate in housing loan so respondents prefer the bank
mostly..

 Public sector banks can reduce the requirement of legal documents it will reduce the
burden of respondents.

 Private sectors bank are providing better services for customer so respondents mostly
prefer private sector banks.

 Public and private sector banks can provide better repayment service for respondents it
will be more convenient.

 Public sector must provide better information about legal securities so it will be more
flexible for customers to apply for housing loan.

CONCLUSION

After doing this research, the project concludes that respondents prefer both public and
private sector banks equally. Mostly people prefer government banks for loans especially older
persons are more dependent on government banks. It is true that younger population preferenceis
changing and they prefer more private banks because of service and facilities provided by private
banks. The interest rate is lower in government banks. This study concludes that most preferred
banks are SBI and HDFC. But business people prefer private sector banks. The study also motivates
for future research by examining the satisfaction level of customer during different period of time
to see the difference in their satisfaction level and its impact on business profitability.

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