DETERMINANTS OF INFRASTRUCTURE (HOME) LOAN IN INDIAN PUBLIC SECTOR BANKS

Transcription

1 International Journal of Civil Engineering and Technology (IJCIET) Volume 9, Issue 5, May 2018, pp , Article ID: IJCIET_09_05_111 Available online at ISSN Print: and ISSN Online: IAEME Publication Scopus Indexed DETERMINANTS OF INFRASTRUCTURE (HOME) LOAN IN INDIAN PUBLIC SECTOR BANKS ABSTRACT Dr. B.C.M. Patnaik Associate Professor, School of Management, KIIT University, Bhubaneswar, Odisha, India Dr. Ipseeta Satpathy Professor, School of Management, KIIT University, Bhubaneswar, Odisha, India Nihar Ranjan Samal GM, IDBI & Research Scholar, School of Management, KIIT University, Bhubaneswar, Odisha, India The empirical research on housing market in India is scarce due to the paucity of relevant data. The main objectives of this research are many fold. First, we try to find the nature of residential housing demand at present in India and estimate the major factors that drive the residential housing demand. Second, we correlate existing profile of housing loan borrowers of selected banks and housing finance companies to understand the relationship between borrower characteristics and loan parameters etc. Third, we try to investigate how demographic and situational factors such as employment status, family type, income level, locations affect the perception of beneficiaries so also of bankers towards the home loan portfolios. In order to accomplish the above objectives, we use primary data from bankers and customers collected from various sources to examine the determinants of performance of home loan in India. In doing so, we used various descriptive statistics tools, correlation analysis, regression analysis, factor analysis and one way analysis of variance to realize the research objectives and arrive at a meaningful conclusion. Here the authors presume that infrastructure is basic home for common man. Keywords: Home loan, Customer perception, Banker perception and Public sector banks. Cite this Article: Dr. B.C.M. Patnaik, Dr. Ipseeta Satpathy and Nihar Ranjan Samal, Determinants of Infrastructure (Home) Loan in Indian Public Sector Banks, International Journal of Civil Engineering and Technology, 9(5), 2018, pp editor@iaeme.com

2 Determinants of Infrastructure (Home) Loan in Indian Public Sector Banks 1. INTRODUCTION 1.1. An Overview Shelter or Home being one of the most basic human needs, it is an integral part of every human being, who since childhood, dreams to have a living space of his/her own. This being a productive and once in a lifetime investment requires financial assistance in the form of loan. That is how the home loan comes into scheme of things. Buying or constructing a home is a dream for everyone. Housing issue is a crucial issue to a person in the society. Home gives a physical frame work in which the social, cultural and economic well-being of an individual is realized. Housing is a burning issue to all nations including India. Around one-fourth of the total population does not have enough homes. Easy accesses to institutional finance at affordable rates are an essential pre-requisite for accelerating the tempo of housing activity. Housing is not just a question of buying or constructing a house, but also a lot more including maintaining a social, cultural, and economic balancing system which permit human beings not just to survive, but hopefully to prosper. To attract consumers, banks provide home loans at cheaper rate. Currently banks offer cheapest rate of loan for homes, as a gesture of customer friendly attitude (Aarti Varma,2015) ; on the demand side, the first and the most important factor for the growth has been faster rise in income as compared to property prices, thus making housing more affordable. (Shalini Kumar, Sudha,2014);customers also care other aspects such as friendliness of employees, product varieties, online facilities hassle free paper work and follow up etc.( Boyd,1994);the study indicated that proximity, quick loan facility and better service were the three major variables influencing the rural customers before selecting bank ( Nair,1994); bank s image as competitive strategy for increasing customer traffic flow. Preference for bank amongst students as provider of financial services, greater confidence in large medium sized banks.( Spencer,1991) ; hassle free processes for sanctioning home loans will boost the housing sector. (Krishna, R.R and V.V.Ganesh Murthy,1998) ;changes in the legal frame-work, the Government s active involvement (Leelamma Kuruvilla,1999);Counselling the prospective borrowers ( Pillai Kalathil,S.R.,1996); service quality, courtesy and speed of service are certain other important dimensions affecting the growth of housing finance industry. (Vidhyavadhi. K.,2002), Introduction of new schemes matching the economic profile of the borrowers. Suggested improvement in schemes is highly essential for the growth of housing finance in India.(Karthik,1998);cost effective eco-friendly housing. (Helen, A.P,2006), introducing more flexible and innovative home loan products. (Hasanbanu, S and Jeya Shree,2006);finance sector has been growing at a quick progress as there has been an increasing demand for housing due to, tax sops and increasing disposable income.(rao,r.v.s,2003),house finance in developing countries is primarily carried out by informal mechanisms e.g. Family savings, formal housing financing is typically government funded, inflexible, (Den,1994); two important macroeconomic factors, viz. employment and unemployment rate of the country and short term or long term interest rate of the central bank. These are the factors mainly influence the credit risks that the banks are dealing with. (Aver,2008) ; Low income level is another area of concern which often discourages bank and other financial institutions not to provide high value housing finance to the poorest sections of the society (Siddiqui etal,2016); an avenue of investment where people invest their excess earnings with an expectation of good returns.( Nagar,2016) There should be adequate link with the price of the house and the purchasing power of the people living in that part of the country (Ismail etal,2015).these factors are divided into two editor@iaeme.com

3 Dr. B.C.M. Patnaik, Dr. Ipseeta Satpathy and Nihar Ranjan Samal categories, viz. loan elements and customer service elements. Factors like, repayment period, monthly repayment, loan to value ratio are comes under the first category while other factors like bank s reputation, employees service quality and marketing methods are coming under second category. A single borrower always gives weightage to these factors before making any kind of decision related to home loan purchase. Chein etal (2016) If the consumers are confident about the future because of the past incident, there will be issue of fluctuation in home price index. This is very complicated but may provide a better idea about future market conditions. (Garratt,2000).While taking loans most of the buyers look into various issues, among them timely repayment is important. Moreover, issues like fixed and flexible interest rate also play an important role in choosing the home loan.( Kaur etal,2017).the movements of the people from rural to urban areas are creating significant demand for housing sector in the urban area itself. (Oyier etal,2008);some of the issues like timely repayment, flexible interest, feature of pre payment of loan, discount, socio economic profile wise specific benefits are some of the factors which becomes an important issue in choosing a home loan.(gupta etal,2015). Increasing income of Indian middle class, growth in business opportunities, competitive interest rate and many more factors are contributing significantly for the growth of housing sector.. But only interest rate is not the primary factor, there is a deep link with the service quality factor as provided by the banking sector. Today, in a customer driven economy, unless and until the customers are not satisfied they are not going to make purchase and this is true for government as well as private sector organizations. (Sathyabama,2016) ;Factors like bank ownership, bank size, legal creditor protection etc. are some of the important component which determines the bank loan portfolios. These are the factors which help to earn trust and confidence among its target customers (Hass etal,2009) It is true that demand for housing finance will increase with the increase in employment opportunities. Job opportunities not only attract the people, it will also increase the space of urbanization. As more and more people will come to a specific place for better opportunities, this will automatically lead to improved housing demand. This indirect link of housing finance may create overall positive impact on the monetary policy. The increased flow of money supply in the form of credit flow surely brings excess supply of finance in the economy. As a result of which the entire economy may move towards positive direction. Calza etal, Report (2009);But it is the main criteria, some other factors like, documentation, ease of processing and most importantly service quality as offered by the banks often determines the choice of home loans from a specific bank.( Badrivishal,2016);Government of India already in the process various schemes to develop housing sector and which will boost the economy. But this should not be the initiative of government only. The main stakeholders, like various financial institutions are also in the active process to get into the picture to bring justification in the entire process.. (Piyush etal,2016);some of the factors like initial processing fees, lack of knowledge of staff, low service quality, poor communication etc. are some of the important factors that the buyers are considering important while opting for any amount of home loans.( Riar etal,2016);factors like increased value of the property, increase in EMI to income ratio etc. are some of the factors which may lead to default in home loan (Bandyopadhyay etal,2009) editor@iaeme.com

4 Determinants of Infrastructure (Home) Loan in Indian Public Sector Banks 2. OBJECTIVES OF THE STUDY To analyse the factors influencing choice of home loan portfolio of the public sector banks. To understand Banker s perception in home loan segment of the public sector banks. To assess the relationship of socio-economic profile of the target population with the home loan portfolio of the public sector banks. 3. HYPOTHESES IN A NUTSHELL Factor Hypothesis Remarks H1a: Age group wise there is no significant association with the fact that timely Alternative hypothesis H1b: Age group wise there is a significant association with the fact that timely Customer s Age wise Perception towards Home Loan Portfolio of Public Sector Banks Customer s Gender wise Perception towards Home Loan Portfolio of Public Sector Banks H2a: Age wise there is no significant association with the fact that processing H2b: Age wise there is a significant association with the fact that processing H3a: Age wise there is no significant association with the fact that no cross selling is acceptable with the home loan product. H3b: Age wise there is a significant association with the fact that no cross selling is acceptable with the home loan product. H4a: Age wise there is no significant association with the fact that there should be adequate loan to value ratio. H4b: Age wise there is a significant association with the fact that there should be adequate loan to value ratio. H5a: Age wise there is no significant association with the fact that target H5b: Age wise there is a significant association with the fact that target H6a: Age wise there is no significant association with the fact that product variety should be there in the home loan portfolio. H6b: Age there is a significant association with the fact that product variety should be there in the home loan portfolio. H7a: Age wise there is no significant association with the fact that system to H7b: Age wise there is a significant association with the fact that system to access credit should be convenient. Hypothesis 1 H1a: Gender wise there is no significant association with the fact that timely H1b: Gender wise there is a significant association with the fact that timely Hypothesis 2 H2a: Gender wise there is no significant association with the fact that processing H2b: Gender wise there is a significant association with the fact that processing Hypothesis 3 H3a: Gender wise there is no significant association with the fact that no cross H3b: Gender wise there is a significant association with the fact that no cross Hypothesis 4 H4a: Gender wise there is no significant association with the fact that there should be adequate loan to value ratio. H4b: Gender wise there is a significant association with the fact that there should be adequate loan to value ratio. Alternative hypothesis Alternative hypothesis Alternative hypothesis Alternative hypothesis Null Hypothesis Null Hypothesis Null Hypothesis Null Hypothesis editor@iaeme.com

5 Dr. B.C.M. Patnaik, Dr. Ipseeta Satpathy and Nihar Ranjan Samal Customer s Income wise Perception towards Home Loan Portfolio of Public Sector Banks Customer s Level of Education wise Perception towards Home Loan Portfolio of Public Sector Banks Hypothesis 5 H5a: Gender wise there is no significant association with the fact that target H5b: Gender wise there is a significant association with the fact that target Hypothesis 6 H6a: Gender wise there is no significant association with the fact that product H6b: Gender wise there is a significant association with the fact that product Hypothesis 7 H7a: Gender wise there is no significant association with the fact that system to H7b: Gender wise there is a significant association with the fact that system to Hypothesis 1 H1a: Income wise there is no significant association with the fact that timely H1b: Income wise there is a significant association with the fact that timely Hypothesis 2 H2a: Income wise there is no significant association with the fact that processing H2b: Income wise there is a significant association with the fact that processing Hypothesis 3 H3a: Income wise there is no significant association with the fact that no cross H3b: Income wise there is a significant association with the fact that no cross Hypothesis 4 H4a: Income wise there is no significant association with the fact that there should be adequate loan to value ratio. H4b: Income wise there is a significant association with the fact that there should be adequate loan to value ratio. Hypothesis 5 H5a: Income wise there is no significant association with the fact that target H5b: Income wise there is a significant association with the fact that target Hypothesis 6 H6a: Income wise there is no significant association with the fact that product H6b: Income wise there is a significant association with the fact that product Hypothesis 7 H7a: Income wise there is no significant association with the fact that system to H7b: Income wise there is a significant association with the fact that system to H1a: Education wise there is no significant association with the fact that timely H1b: Education wise there is a significant association with the fact that timely Hypothesis 2 H2a: Education wise there is no significant association with the fact that processing H2b: Education wise there is a significant association with the fact that processing Hypothesis 3 Null Hypothesis Null Hypothesis Null Hypothesis Null hypothesis Null Hypothesis Null Hypothesis Null Hypothesis Null Hypothesis Null Hypothesis Null Hypothesis editor@iaeme.com

6 Determinants of Infrastructure (Home) Loan in Indian Public Sector Banks Perception of the Bankers H3a: Education wise there is no significant association with the fact that no cross H3bEducation wise there is a significant association with the fact that no cross Hypothesis 4 H4a: Education wise there is no significant association with the fact that there should be adequate loan to value ratio. H4b: Education wise there is a significant association with the fact that there should be adequate loan to value ratio. Hypothesis 5 H5a: Education wise there is no significant association with the fact that target H5b: Education wise there is a significant association with the fact that target Hypothesis 6 H6a: Education wise there is no significant association with the fact that product H6b: Education wise there is a significant association with the fact that product Hypothesis 7 H7a: Education wise there is no significant association with the fact that system to H7b: Education wise there is a significant association with the fact that system to H1c: Banker s group wise there is no significant association with the fact that lack of promotional scheme is a problem for public sector bank s home loan segment. H1d: Banker s group wise there is a significant association with the fact that lack of promotional scheme is a problem for public sector bank s home loan segment. H2c: Banker s group wise there is no significant association with the fact that hidden charges should be avoided to make the home loan more attractive. H2d: Banker s group wise there is a significant association with the fact that hidden charges should be avoided to make the home loan more attractive. H3c: Banker s group wise there is no significant association with the fact that there should be adequate loan to value ratio. H3d: Banker s group wise there is a significant association with the fact that there should be adequate loan to value ratio. Hypothesis 4 H4c: Banker s group wise there is no significant association with the fact that home loan is not accessible to all the group of consumers. H4d: Banker s group wise there is a significant association with the fact that home loan is not accessible to all the group of consumers. Hypothesis 5 H5c: Banker s group wise there is no significant association with the fact that service quality is important determinant for home loan segment. H5d: Banker s group wise there is a significant association with the fact that service quality is important determinant for home loan segment. Hypothesis 6 H6c: Banker s group wise there is no significant association with the fact that product H6d: Banker s group wise there is a significant association with the fact that product Hypothesis 7 H7c: Banker s group wise there is no significant association with the fact that system to H7d: Banker s group wise there is a significant association with the fact that system to Null Hypothesis Null Hypothesis editor@iaeme.com

7 Dr. B.C.M. Patnaik, Dr. Ipseeta Satpathy and Nihar Ranjan Samal 4. CONCLUSIONS Market of housing constitutes almost 80 percent of the real estate market in India in terms of volumes and has been growing at 34 percent per annum. The growth in disposable income, demographic changes such as a growing number of working women, the growing number of nuclear families, higher income levels within the urban population, the access and availability of bank finance are driving the housing demand in India. The housing sector is therefore becoming one of the most important sectors of the Indian economy and has tremendous potential to become more and more important in the coming years. However, housing finance companies, more accurately the public sector banks need to more carefully evaluate the underlying risk of default. The empirical research on housing market in India is scarce due to the paucity of relevant data. The main objectives of this research are many fold. First, we try to find the nature of residential housing demand at present in India and estimate the major factors that drive the residential housing demand. Second, we correlate existing profile of housing loan borrowers of selected banks and housing finance companies to understand the relationship between borrower characteristics and loan parameters etc. Third, we try to investigate how demographic and situational factors such as employment status, family type, income level, locations affect the perception of beneficiaries so also of bankers towards the home loan portfolios. In order to accomplish the above objectives, we use primary data from bankers and customers collected from various sources to examine the determinants of performance of home loan in India. In doing so, we used various descriptive statistics tools, correlation analysis, regression analysis, factor analysis and one way analysis of variance to realize the research objectives and arrive at a meaningful conclusion. The primary contribution of the research delineated in this thesis is to demonstrate the importance of borrower specific characteristics as well as perception of bankers in determining the effectiveness of home loan portfolio developed by public sector banks in India. From this study we can conclude the followings :- First of all, we can conclude that till today i.e., in the post liberalized era, where multiple number of private and foreign players are available to cater the home loan need of customers in India, public sector banks were most preferred by a home loan seeker. Secondly, it was also concluded that behavior of a banker is highly prioritized over the other dimensions like repayment period, loan amount and the rate of interest etc. while selecting a bank for availing the home loan facility. Thirdly, tax benefit is the most important reason for availing a home loan from a public sector bank and repayment in easy installments is the least important reason for availing a home loan from public sector banks. Moreover, this study documents that the relationship between overall customer satisfaction and all the factors namely employee behaviour, process and Scheme of home loan has a significant relationship with the satisfaction of consumer as the table sig. value of 0.05 is greater than the calculated sig value. Likewise, avail maximum funding as per the eligibility has a significant relationship with the satisfaction of consumer. Similarly, selected demographic characteristics like age, gender, income, educational qualification and occupation has a significant influence over the loan amount, repayment period and rate of interest editor@iaeme.com

8 Determinants of Infrastructure (Home) Loan in Indian Public Sector Banks Finally, Opinion of sample bankers towards the hindrances existing for extending home loan revealed that the most prominent hindrances existing in the way of disbursement of home loan are complex documentation, longer Turn Around Time (TAT) and Conventional Service Mode. The results of analysis of variance with respect to location revealed that, the variables considered while accepting the Home Loan proposal, factors responsible for post disbursement customer satisfaction, hindrances existing with respect to Home Loan and services provided by the bank with respect to home loan are not significant at p<0.05 value. Furthermore, with respect to experience of the sample banker revealed that, the variables considered while accepting the Home Loan proposal, factors responsible for post disbursement customer satisfaction, hindrances existing with respect to Home Loan and services provided by the bank with respect to home loan are not significant at p<0.05 value. Our findings cannot be generalized to the entire banking industry of India. However, caution should be taken in interpreting the results. It must be noted that the home loan portfolio of public sector banks does not directly depend on perception and opinion of customers and bankers alone but moderated by the bank's strategies, RBI policies and others. Conclusively, this study shows that opinion of customer and perception of banker have strong and statistical impact on the home loan portfolio of public sector banks in India, though not uniform across REFERENCES [1] AartiVarma (2016), A Study On Customers View And Perception Towards Home Loan, Episteme: an online interdisciplinary, multidisciplinary & multi-cultural journal, Vol 3(4), 2015 PP: 1-14 [ in Text Citation Varma, 2016] [2] Shiv Kumar Garg, Gajendra Kumar(2015), Housing Finance in India: A Comparative Study of Public and Private Sector Banks, Journal of Commerce & Trade, Vol 9(2), 2014 PP: [In Text Citation Garg, Kumar, [3] Vidhayavathi. K "Role of urban housing financial institution in Karnataka - A study of selected housing finance corporation in Bangalore city", Finance India, Delhi, March [4] M.S. Siddiqui and R.Y. Mahore (2016); Rural Housing Finance: Impediments and Way Forward; International Research Journal of Social Sciences, Vol. 5(12), 47-51, December (2016) [5] Rachana Nagar (2016); Housing Finance in India: Challenges and Issues, Professional Panorama: An International Journal of Management & Technology [6] Ismail, A. A. Bujang, W. R. Anthony Jiram, H. Abu Zarin, and M. N. Jaafar (2015); Factor Affecting the Housing Financing of Bumiputera in Iskandar Malaysia; Journal of Economics, Business and Management, Vol. 3, No. 11, November [7] Teo Siew Chein, Gan Chee Yee & Chong Yin Ni (2016); Factors Affecting Borrowers Choice of Housing loan Packages; The Social Sciences 11 (13); [8] Dean Garratt, Economist, Council of Mortgage Lenders (2000); Consumer Confidence and UK House Price Inflation, Housing Finance Series 46 [9] Raju Kaur, Kajal Chaudhary, Amit Kumar, Supreet Kaur Jaggi (2017); A Comparative Study Of Home Loans Of State Bank Of India (S.B.I.) And Housing Development Finance Corporation N(H.D.F.C.) Banks: An Emperical Study Of Bathinda, Punjab; IJARIIE-ISSN (O) , Vol-3 Issue [10] Tony Oyier, Richard Ketley, Ben Davis (2008); Overview of the housing finance sector in Rwanda, FinMark Trust Report editor@iaeme.com

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