GALAXY International Interdisciplinary Research Journal ISSN GIIRJ, Vol.1 (2), DECEMBER (2013)

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1 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) CUSTOMER SATISFACTIO I RELATIO TO THE SERVICES PROVIDED BY HOUSIG FIACE ISTITUTIOS: A COMPARATIVE STUDY OF HOUSIG DEVELOPMET AD FIACE CORPORATIO LTD. AD GIC HOUSIG FIACE LTD. RAVEET KAUR SEIOR RESEARCH FELLOW, DEPARTMET OF COMMERCE, PUJABI UIVERSITY, PATIALA. ABSTRACT The dream of owning a house is one of the important priorities of every individual. The problem of housing in India has been aggravated by the increase in population, low-income level, low-rate of addition to the housing stock and inadequate maintenance. Various institutions such as banks, housing finance companies and cooperatives have been providing housing finance as a financial service for meeting various needs relating to housing as purchase of plot, flat or a house, construction, extension or repairs, renovation of house. Housing Finance is a service industry. So, the main objective of the institutions should be to create, cultivate and retain the customers. If the institutions are able to fulfill this objective the residual results like profitability and productivity would automatically follow. This study has been conducted to analyze customer satisfaction level in regard to the services provided by housing finance institutions. KEY WORDS : Housing Finance, HDFC, GIC HF, Average. ITRODUCTIO House is one of the basic human necessities next to food and clothing. House plays an important role in shaping the destiny of people. It is not only a shelter but also an asset and wealth of human being. Housing comprises not merely household facilities but a number of services, facilities and utilities which link the individual and his family to community and community to the region in which man grows and progress. Housing and related infrastructure is one of the principal sectors that can revitalize and sustain economic growth and development, employment creation and poverty reduction. Besides housing has the maximum propensity to generate income and demand for materials, equipments and services. But housing is a chronic problem both for developing and advanced countries but in varying degrees and dimensions. The rapid growth of population, increasing urbanization, break up of joint families; low income level and low rate of addition to the housing stock and inadequate maintenance have created the shortage of dwelling units not only in urban areas but also in rural areas in India. The Government of India and Reserve Bank of India have been constantly providing an enabling environment for the furtherance and development of the housing finance sector. The matters relating to housing and urban development has been assigned to the State Governments and urban local bodies by the constitution of India. But the Government of India plays an important role and exercises a larger influence to shape the

2 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) policies and programs of the country as a whole. The Ministry of Urban Development and Poverty alleviation is the apex authority of Government of India at national level to formulate policies, sponsor and support program, coordinate the activities of various Central Ministries, State Governments and other nodal authorities and monitor the programs concerning all the issues of urban development and housing in the country. Reserve Bank of India also supports the housing sector through its subsidiary ational Housing Bank. HOUSIG FIACE Housing Finance as a financial service is relatively of recent origin in India. It has witnessed significant growth particularly over last few years both in terms of value and volume. Housing Finance connotes finance (or loans) for meeting various needs relating to housing, namely purchase of a flat or a house, acquisition of a plot or construction of a house, extension of a house, repairs, renovation and up gradation of a house/ flat, taking over housing loans from other banks/hfc s. Housing Finance is long-term finance with repayment spread over -0 years. The reach of the institutional financial market has been extended to serve the housing sector in different regions and segments of the population. The accessibility of housing finance for people in general has evolved, developed and improved over the years. The financing institutions have come up in funding the housing sector of the economy. With a growing number of players and increased competition, the housing sector is becoming increasingly market driven. The existing housing finance system in India has two components viz. formal and informal sector. The formal sector includes Commercial banks, Cooperative banks, Regional Rural banks, Agriculture and rural development banks, Housing finance companies and cooperative housing finance societies. The informal sector consists of household savings, community based savings, loan from friends, relatives and moneylenders, self-help groups, non-government organizations and public and private sector employers providing loans to their employees. Out of these institutions commercial banks, housing finance companies and cooperatives are the key players in the market. The housing finance market however continued to grow during the year 00-0, with banking sector evincing keen interest, which in turn could have been fueled by the lack of preferable alternative avenues for investment. In order to increase the market share, the lending institutions are competing with each other by offering very attractive terms to customers in the form of lower rate of interest, liberal collateral requirements, longer repayment period or a very high loanto- value ratio which at times goes up to or even beyond 00 per cent of value of the house including the cost of land. In recent years, the lending institutions also introduced 00 per cent floating rate products besides the fixed rate ones with opinion available to the borrower for conversion against a nominal payment. Besides, the speedier processing and disbursement, efficiency advisory services, waiver or reductions in associated up-front fees have also become common tactics of market acquisition. Thus acute competition has given rise to continuous innovation in product design as well as processes, with the customers having a wide variety to choose from. The service industry has always been a virtual component of all economies. It has become more so in these days of globalization. Starting with the agricultural and industrial economy, the emphasis has now focused towards the service economy. In India, the service industry has been given the recognition as being crucial to the economy. Housing finance industry is a service industry. The products manufactured by it are services. These institutions cannot sell services which are not customer specific. They would have to act as providers of

3 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) services in buyers market rather than sellers market. So, customer satisfaction is the key for the success of the institutions. This satisfaction is the direct function of the composition of service- mix and the quality of services. The main purpose of the business should be to attract and retain the customers. So, the main objective of the institutions should be to create, cultivate and retain the customers. If the institutions are able to fulfill this objective the residual results like profitability and productivity would automatically follow. RESEARCH METHODOLOGY This study has been conducted to analyze customer satisfaction level in regard to the services provided by housing finance institutions. The universe of the study consists of main institutions providing home loans. For this, HDFC from private sector and GIC HF from public sector have been selected for the purpose of present study. For the analysis of questionnaire three variables have been selected viz. institution, occupation and income. The sample includes 00 respondents which have been selected on the basis of convenience sampling techniques covering 0 respondents from each institution and businessmen, agriculturist, 0 government employees and private employees were selected as a sample size for the purpose of study. The comparative analysis of the opinion of customers of both the institutions relating to various aspects of housing finance such as cost borne in availing the loan, rate of interest charged on loan, amount of loan provided, difficulties faced in availing the loan was also made. For analysis of data, percentages, averages, average weighted score, chi- square test of independence have been used. Average Weighted Score It is used to study the customers opinion expressed in terms of ranks of preferences and views as per their level of significance. The following formula has been used for this purpose: W = fw wfw where, W = Average Weighted Score w = Weight given to an aspect fw = number of respondents who attached weight to the aspect Chi square Test To study the differences with regard to the various aspects highlighted by the customers in the questionnaire, chi- square test has been selected. It has been worked out as follows: (O - E) χ = E where, χ = Chi- square value, O = observed frequencies and E = expected frequencies.

4 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) DATA AALYSIS AD ITREPRETATIO The responses of customers who have taken housing loan from Housing Development and Finance Corporation Ltd. and GIC Housing Finance Ltd. on the basis of various parameters as purpose of availing the loan, cost borne in availing the loan, rate of interest charged on loan amount etc. are as follows. Table Purpose of Loan Category Occupation Income Wise Land Purchase Home Loan HDFC (.00) (.00) GIC HF (.00) (.00) Businessmen (O-) - 9 (.0) Agriculturists (O-) - (.0) Govt.Employees (O-) (.00) (.00) Private employees (O-) (.) (.) Rs.0,000-Rs. Lakh - 9 (I-) (.) Rs. Lakh-Rs.. Lakh - (I-) (.0) Rs.. Lakh- Rs. Lakh (I-) (0.00) (0.00) Rs. Lakh and above (I-) (.) (.) Home Improvement Loan (0.00) (.00) (.) (.0) 0 (00.00) 0 (.0) (9.) 0 (.) (.00) Home Extension Loan (.00) (.00) (.0) (.0) (0.00) (.) (.9) 9 (.) (.00) - - Total Table shows that institution- highest proportion of customers per cent of HDFC and per cent of GICHF has taken home loans for purchase of house, flats etc. followed by 0 per cent and per cent customers of HDFC and GICHF who have taken home improvement loans. Only per cent of customers of both the institutions have taken loan for purchase of land. Occupation- per cent of government employees,. per cent of private employees,. per cent of businessmen and. per cent of agriculturists have taken loan for the purchase or construction of home, followed by. per cent of private employees,. per cent of agriculturists,. per cent of businessmen and 0 per cent of government employees have taken loan for home improvement. Few customers per cent of government employees and. per cent of businessmen have taken loan for the purchase of land. Income - major proportion of customers. per cent in income group of Rs. lakh and above,.0 per cent in income group Rs. lakh- Rs.. lakh, - per cent of customers in income group Rs. 0,000- Rs. lakh and 0.00 per cent in income group Rs.. lakh- Rs. lakh have taken loan for purchase of house, flats, followed by.00 per cent in income group of Rs.. lakh- Rs. lakh, 9. per cent in income group Rs. 0,000-Rs. lakh and. per cent in income group Rs. lakh Rs.. lakh have taken the home

5 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) improvement loan.. per cent of customers in income group Rs. lakh and above and 0 per cent in income group Rs.. lakh- Rs. lakh have availed loan for purchase of land. Table AVERAGE AMOUT OF LOA TAKE AD COST BOR I AVAILIG LOAS Occupation Income-Wise Average amount of loan taken Mean (Rs. Lakhs) HDFC.0. GIC HF.90.0 Businessmen (O-)..9 Agriculturists (O-).9.9 Govt.Employees (O-).. Private employees (O-). 9. Rs.0,000-Rs. Lakh.. (I-) Rs. Lakh-Rs.. Lakh (I-).. Rs.. Lakh- Rs. Lakh (I-) Rs. Lakh and above (I-) Cost born in availing loans Mean (Rs.) The customers take loans from the housing finance institutions based on their need, purpose, income and their repaying capacity. Table indicates that on an average maximum loan amount Rs..0 lakh was advanced by HDFC followed by GIC HF (.90 lakh). Occupation it is evident that on an average highest amount of loan Rs.. lakh was taken by businessmen followed by Rs.. lakh that was taken by government employees. Private employees have taken loan on an average amounting to. lakh. On the other hand, agriculturists took the least amount of loan on an average accounting to Rs..9 lakh. Income- on an average the highest amount of loan Rs..0 lakh was taken by customers in income group of Rs. lakh and above followed by Rs. lakh that was taken by customers in income group Rs.. lakh Rs. lakh. Customers in income group Rs. lakh Rs.. lakh have taken on an average loan amount of Rs.. lakh. On the other hand, customers in income group Rs. 0,000- Rs. lakh have taken on an average least amount of loan (Rs.. lakh). The customers have to pay processing and administrative fees to the institution for getting the loan amount. Such charges affect the cost of loan by the customers. The results in Table indicate that HDFC has charged comparatively higher cost (Rs..) on an average from the customers for availing the loan than GIC HF for which the average cost was Rs..0. Occupation businessmen have paid highest amount on an average (Rs..9) followed by government employees (Rs..), private employees (Rs. 9.) and agriculturists (Rs..9) for availing the loan. Income customers in income group Rs. lakh and above have paid higher amount on an average (Rs. 00) followed by customers in income group Rs.. lakh- Rs. lakh (Rs. 0.) Rs. lakh- Rs.. lakh (Rs..) and Rs. 0,000-Rs. lakh (Rs..) for availing the loan. 9

6 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) Table Opinion Regarding Cost Borne in Availing the Loan Category Occupation Income Very HDFC (.00) GIC HF 9 (.00) Businessmen (O- ) (9.0) Agriculturists 9 (O-) (.9) Govt.Employees (O-) (.00) Private employees (O-) (.) Rs.0,000- Rs. Lakh (I-) (.9) Rs. Lakh- 0 Rs.. Lak(I-) (.0) Rs.. Lakh- Rs. Lakh (I-) (.00) Rs. Lakh and above (I-) (.) (.00) (.00) (.) (.0) 0 (0.00) (.00) 9 (.) 9 (.) (.00) (.) either or Low Low Very Low Total (.00) (.00) (.00) (.0) (.00) (.) (.) (.).00) (.) () Average Weighted Score For judging the opinion of the customers regarding the cost borne in availing the loan five point scale has been used. Table shows that per cent of customers of GIC HF and per cent of customers of HDFC opined that they had borne high cost in availing the loan. per cent customers of GIC HF and per cent of HDFC had borne very high cost in availing the loan. Only per cent of customers of HDFC opined that they were charged low cost in availing the loan. The average weighted score also testified that the customers of both the institutions were of the opinion that they have been charged high cost of loan. Occupation opinion of customers regarding cost borne in availing loan reveals that per cent of private employees, followed by. per cent of businessmen, 0 per cent of government employees have paid high cost in availing the loans..9 per cent of agriculturists have paid very high cost in availing the loan. The average weighted score depicts that very high cost was borne by agriculturists and customers in other categories have paid high cost in availing the loan. Income- opinion of customers regarding cost borne in availing loan reveals that highest proportion of customers in income group Rs. lakh and above (. per cent), followed by per cent in income group Rs.. lakh Rs. lakh,. per cent in remaining income groups have paid high cost in availing the loans. The average weighted score depicts that high cost was borne by customers in all the categories. 0

7 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) Table Opinion about ROI Charged Category Occupation Income Very HDFC (.00) GIC HF (.00) Businessmen (O-) (9.0) Agriculturists 9 (O-) (.9) Government Employees (0.00) (O-) Private employees (O-) Rs.0,000- Rs. Lakh (I-) Rs. Lakh- Rs.. Lakh (I-) Rs.. Lakh- Rs. Lakh (I-) Rs. Lakh and above (I-) (.) (.) 0 (.0) (0.00) (.) 9 (.00) (.00) (.) (.0) (.00) (.00) 9 (.) (.) 0 (.00) (.) either or Low (.00) (.00) (.0) Low Very Low Total (.00) (.) (.00) (.) (.) (.0) (.) (0.00) (0.00) Average Weighted Score Customers of the institutions were asked to indicate their opinion on five point scale to examine their opinion regarding rate of interest charged by the institutions. Table depicts that majority of customers of both HDFC ( per cent) and GIC HF ( per cent) were of the view that institutions has been charging high rate of interest. Only per cent of customers of HDFC were of the view that the institution has been charging low rate of interest. The average weighted score reveals that customers of HDFC and GIC HF were of opinion that the institution had charged high rate of interest. Occupation highest proportion of private employees ( per cent), government employees ( per cent) and businessmen (. per cent) have been paying high rate of interest. On the other hand, agriculturists (.9 per cent) have been paying very high rate of interest. The average weighted score also reveals that agriculturists opined that rate of interest charged was very high while customers in other categories were paying high rate of interest. Occupation- highest proportion of private employees ( per cent), government employees ( per cent) and businessmen (. per cent) have been paying high rate of interest. On the other hand, agriculturists (.9 per cent) have been paying very high rate of interest. The average weighted score also reveals that agriculturists opined that rate of interest charged was very high while customers in other categories were paying high rate of interest. Income- highest proportion of customers (. per cent) in category I- ( lakh and above) have been paying very high rate of interest whereas. per cent in I- (Rs. lakh -. lakh) opined that they were paying high rate of

8 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) interest. Customers in I- (Rs.0, 000-Rs. lakh) i.e.. per cent and I- (Rs.. lakh Rs. Lakh) i.e.0 per cent were also paying high rate of interest. Only 0 per cent of customers in I- category opined that they were paying low rate of interest. The average weighted score reveals that the customers in category I- opined that they have been paying very high rate of interest and customers in remaining categories opined that they have been paying high rate of interest. Table Satisfaction Level of Customers relating to loan provided Category Occupatio n Income ly Satisfie d % HDFC (.00) GIC HF (.00) Businessmen (O-) (9.0) Agriculturists (O-) (.0) Govt.Employe es (O-) (0.00) Private employees (.) (O-) Rs.0,000- Rs. Lakh (I- ) Rs. Lakh- Rs.. Lakh (I-) Rs.. Lakh- Rs. Lakh (I- ) Rs. Lakh and above (I-) (.) (.) (.00) Satisfie d % (.00) (.00) (.09) (.) 9 (.00) (.00) 9 (.) (.) (0.00) - (.) eutra l % 0 (0.00) (.00) (.0) 0 (.0) (0.00) (.) (.9) 9 (.) (.00) (.) Dissatisfie d % (.00) (.00) (9.0) (9.) (.00) (0.) (.) (.0) (0.00) ly Dissatisfie d % (.00) (.00) (9.0) Tota l (.) Average Weighte d Score To know the satisfaction level of customers relating to loan provided by the institution five point scale has been used. Table shows that - larger proportion of customers per cent of GIC HF and per cent of HDFC were indifferent by the services provided by institution while per cent of customers of HDFC and per cent of GIC HF were satisfied by the services of institution. per cent customers of both the institutions were highly dissatisfied with the services. The average weighted score shows that the customers of HDFC were satisfied by the services of institution while that of GIC HF were indifferent by the services provided. Occupation-. per cent customers in O- category (Agriculturists) and. per cent of customers in O- (Private employees) were indifferent about the services provided by the institutions. per cent of customers in O- category (Govt. employees) followed by.09 per cent of customers in businessmen were satisfied by the services provided by the institutions. The average weighted score also shows that customers in BUSIESSME and O- category were satisfied with the services of the institutions,

9 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) while customers in O- and O- were indifferent by the services provided. Income- major proportion of customers. per cent in I-,. per cent in I- and.9 per cent in I- were indifferent regarding the satisfaction level. However 0 per cent customers in I- were satisfied by the services provided. On the other hand, per cent of customers in I-,. per cent customers in category I- and. per cent in I- were highly satisfied by the services provided by the institutions. Only. per cent of customers in I- were highly satisfied from the services provided. The average weighted score also shows that customers in I- were satisfied by the services provided by the institution and customers in remaining categories were indifferent regarding the satisfaction level. Table ature of Difficulties Category Occupation Income More Formalities HDFC (.00) GIC HF 0 (0.00) Businessmen (O-) Agriculturists (O-) Government Employees (O-) Private employees (O-) Rs.0,000- Rs. Lakh (I-) Rs. Lakh- Rs.. Lakh (I-) Rs.. Lakh- Rs. Lakh (I-) Rs. Lakh and above (I-) (.) (.0) 9 (.00) 0 (.0) (.0) (.90) (0.00) (.) Uncooperative Staff (.00) (.00) Delay in Processing Loan (.00) 9 (.00) - (.) (9.) (.) (0.00) (.00) (.) (.0) (.0) (0.00) (.0) (.9) (.) (0.00) Delay in Sanctioning/ Disbursement Total - 0. (.00) 0 (.) 0.9 (.) (.0) - - (.) Chi square value At % significance level ( d.f. = ) not significant at per cent level ( d.f. = 9) not significant at per cent level 9. ( d.f. = 9) Significant at per cent level The customers while availing the loan have to face many difficulties. They have to complete number of formalities and may have problem of delay in sanctioning and disbursement of loan. Table reveals that highest proportion of customers per cent of HDFC and per cent of GIC HF faced difficulty of delay in processing of loan. 0 per cent customers of GIC

10 GALAXY International Interdisciplinary Research Journal ISS -9 GIIRJ, Vol. (), DECEMBER (0) HF and per cent of HDFC feel that they have to fulfill more formalities. Whereas per cent customers of HDFC and per cent of GIC HF feel that the attitude of staff was uncooperative. Only per cent of customers of GIC HF have faced problem due to delay in sanctioning and disbursement of loan. The chi-square value at per cent level of significance shows that no significant difference exists among the responses of customers of both the institution with regard to nature of difficulties faced. Occupation- major proportion. per cent of customers in businessman category and.0 per cent in O- category have faced the difficulty of delay in processing/sanctioning of loan. While percent of customers in O- followed by.0 per cent in O- have faced the difficulty of performing more formalities. The chi square value at per cent level of significance shows that there is no significant difference among various occupational categories regarding nature of difficulties faced. Income- highest proportion of customers. per cent in I-,. per cent in category I- and.9 per cent in category I- have faced the difficulty of delay in processing of loan. On the other hand, customers in I- (0 percent) category have faced the difficulty due to uncooperative attitude of staff. Only. percent customers in I- have faced difficulty of delay in sanctioning/disbursement of loan. The chi-square value at per cent level of significance shows that significant difference exists between customers of different income groups regarding difficulties faced in getting the loan. COCLUSIO The dream of owning a house is one of the important priorities of every individual for whom, a house is a major source of financial and physical security. The responses of customers who have taken housing loan from Housing Development and Finance Corporation Ltd. and GIC Housing Finance Ltd. on the basis of various parameters revealed that majority of customers have taken loan for the purchase of house and flats. The highest of loan has been sanctioned by HDFC. Majority of customers of GIC HF were of the view that the institution have been charging very high rate of interest. Customers of HDFC were of the opinion that the institution have been charging high rate of interest. HDFC had charged comparatively higher cost on an average for availing the loan. It is suggested that the institutions should device new schemes keeping in view the needs of people living below poverty line to lend at the affordable rates and to reduce their dependency on money lenders. Processing, administrative and conversion fees charged by the institutions should be minimized and number of formalities to be fulfilled for availing the loan should also be minimized. References. Brar, Jasmindeep Kaur(00), Financing of Housing Sector in Punjab- A Study of al Sources, Ph.D. thesis submitted to Punjabi University, Patiala.. Kothari, C.R. (00), Research Methodology, ew Age International Pvt. Limited, ew Delhi.. Mohan, Devendra (009), House within reah, Business India, July.. air, P.. Sasidharan(00), Commercial Dimensions of Housing Industry-A Case study of Ernakulam District, Ph.D thesis submitted to Mahatma Gandhi University, Kottayam.. Ram, S.T. (009), Housing for the Poor, The Hindu, Monday, April 0, Tiwari, Piyush (999), Development in Housing Finance in India, Housing Finance International, Vol.XII, Sept.999.