Page 1 of 6

Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 01

January 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 113

Housing Finance in Tamilnadu

Dr.Ganesan1 & R.Amuthavalli2

1Associate Professor and Research Guide, Dept. of Commerce, Arignar Anna Govt. Arts

College, Villupuram.

2Research Scholar, Guest Lecturer, PG Extension Center, Thiruvalluvar University illupuram.

Abstract

The demand for housing finance is

increasing day by day. The factors like

population growth, economic growth,

urbanization, insufficient Capital, change

in the pattern of occupational distribution,

increased educational level, changes in

Government policy etc., affect the need or

demand for housing finance. Liberal tax

incentives by the Government, low and

competitive interest rate for housing

finance has made this sector as red hot

sector. The aim of this study is to find out

the significant relationship between the

performance of housing finance and the

type of bank. To test the objectives certain

hypotheses are formulated. Correlation is

used to test the hypotheses. Result found

that there is a positive and significant

relationship between type of bank and

performance of housing finance.

Key words: Housing, Housing finance,

Housing Finance Companies (HFC)

National Housing Bank.

INTRODUCTION

Housing finance all over the world

are undergoing tremendous changes and

have acquired great significance in the

present day context of liberalization,

globalization, and modernization of f the

society. Today, for India to achieve

balanced economic growth, it is essential

to boost construction activity in the

housing sectors. Nearly 31% of India’s

current population lives in urban areas and

contributes 63% of India GDP (Census

2011). With increasing urbanization, urban

areas are expected to house 40% of India’s

population and contribution 75% of India’s

GDB by 2030. In the year 2000, home

finance was just 1.5 per cent of the total

bank advances and in the 2012 it has risen

to around 10-12 percent. At present, GDP

growth seen at 8.1-8.5 percent in 2015-16

Double digit growth trajectory with 8-10%

GDP in coming years.

Housing Scenario in India

We are looking at the Housing

Scenario at a stag when the National

Economy is on the road to revival, after

reeling under depressive conditions for

over the last three years. The growth rate

of the economy might go up to levels up to

6%, if the revival is kept up. Share markets

are not entirely looking up, though they

are stabilizing at levels which can be

termed as reasonable. Industrial growth

Page 2 of 6

Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 01

January 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 114

rate which was wallowing at a low of 1.5%

is now at around 5%. In fact, industrial

credit given out by banks which in normal

times would be about 4-5 times of bank

credit given to housing, had in the last few

years reduced to levels below advances to

housing loans. But the happy feature is

that industrial growth is picking up. Even,

the steel sector which was hopelessly

down is now having hopes of revival.

It is only housing, amidst all these that

seems to have kept up fairly stable front.

Yes, the late 90s saw even housing go

through a bad phase. But, then with that

phase crossed, there has been a steady

revival and stabilization of the market at

levels which can be termed as reasonable

from the point of view of both the

customers and those on the supply side.

Housing is a basic need and like any basic

human need will be constantly in demand.

The potential for housing in this country is

huge by NHB estimates. And the

requirements by NHB estimates are around

20 million houses. There are other

estimates which suggest that it is at a much

higher level. Even going by the

conservative estimate taken by the NHB,

the requirements in the area of housing are

massive. This really means that a lot of

investments can be there in the coming

years and there is room for multiple

players.

Going by figures of amounts given

out by the organized financial sector, the

average of money being advanced for

purchase of housing is in the range of 20 to

25 thousand crores every year over the last

five years. In the next five years these may

be in the region of 70-75 thousand crores.

There is also talk of foreign direct

investment coming in. this will add to the

capabilities of the financial sector in

meeting the requirements in the area of

housing. The considered view on FDI is

that it would not in any way present

hardships to the local developer

community. They may on the other hand

enable the local entrepreneurs to organize

the construction industry in a more stable

way. The reason why I venture forth to say

this is that finance has been one of the

areas of uncertainties as far as investments

into the construction industry are

concerned. FDIs might end up

strengthening this area by bringing in

finance and steadying the construction

industry through the joint venture route.

Review of literature

Singh Fulbag et.al. (2006) in

present study, the authors have studied the

housing finance in India. Housing, as one

of the three basic needs of life, always

remains on the top priority of any person,

economy, government and society at large.

In India, majority of the population lives in

slums and shabby shelters in rural areas.

From the last decade, the Government of

India has been continuously trying to

strengthen the housing sector by

introducing various housing loan schemes

for rural and urban population. The first

Page 3 of 6

Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 01

January 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 115

attempt in this regard was the National

Housing Policy (NHP), which was

introduced in 1988. The National Housing

Bank (NHB) was set up in 1988 as an apex

institution for housing finance and a

wholly-owned subsidiary of Reserve Bank

of India (RBI). The main objective of the

bank is to promote and establish the

housing financial institutions in the

country as well as to

provide refinance facilities to housing

finance corporations and scheduled

commercial banks. Moreover, for the

salaried section, the tax rebates on housing

loans have been introduced. The paper is

based on the case study of LIC Housing

Finance Ltd., which analyzes region-wise

disbursements of individual house loans

their portfolio amounts and the defaults for

the last ten years, i.e., from 1995-96 to

2004-05 by working out relevant ratios in

terms of percentage and the compound

annual growth rates.

Peppercorn (2013) presents the

following critical factors for development

of housing finance markets: a) Value for

money, i.e. maximize the impact of public

resources, leveraging government

initiatives with the involvement of the

private sector, with the goal of achieving a

higher multiplier; b) Coordination, i.e.

ensure the coordination between

administrations and public/private sectors,

to maximize the efficiency and

effectiveness of the programs; c)Public

sector role, i.e. from provider to enabler of

housing; and d)Inclusive housing finance,

i.e. include non-salaried borrowers.

According to Peppercorn, poorer

households tend to borrow from informal

sources, at higher rates.

Objective of Study

The main objective of the study is

to find out the relationship between

performance of housing finance and the

type of bank.

Hypothesis of the study

There is a positive and significant

relationship between type of bank and

performance of housing finance.

Methodology

The methodology adopted for the

research included complication and

analysis of both

Secondary and primary data and

consultation with bankers and Builders

Association. The Secondary data was

collected from the banks from their annual

report and from the publication of the

Reserve Bank of India and National

Housing banks.