Empirical Study of Consumer Preference w.r.t. Home Loan using Data Analytics

Abstract

Purpose: The rising population and rapid pace of urbanization owing to the rural–urban migration offers huge untapped potential especially in the affordable housing segment. According to Census 2011, 377.1 million Indians comprising 31.14 percent of the country’s population lives in urban areas, which is projected to grow more than 600 million by 2031.According to National Association of Home Builders, the housing industry as a whole contributes about 17% to 18% of the India’s GDP. As engines of development and vehicle of silent socio-economic revolution in the country, Indian banks have assumed new responsibilities in the fields of geographical expansion, functional diversification and personal portfolio.

The paper calls for adopting a multi-dimensional endeavour starting from preparation of questionnaire, data collection and subsequent analytics using analytical tools for information policy decisions. The study was carried out with the aim to study the comparative analysis of consumer preference between public sector and private sector banks/ housing finance companies for taking home loan. The paper also examined the satisfaction level of the customers who have availed Housing Loan for the construction of house/flat/renovation.

Design/Methodology/Approach: The primary data has been obtained by conducting a sample survey. Cronbach’s Alpha reliability test was undertaken to evaluate the reliability of the questionnaire for the survey study. The analysis was performed using SPSS. The Cronbach’s Alpha value thus obtained was 0.94(high value). Hence, the surveydata has been relied upon for exhaustive data analytics.

The surveydata was also viewed and categorised on vital parameters such as: age, gender and occupation of respondents.

- Age-wise: The data divided into four age groups: between the age of 18-30 years, between the age of 31-45 years (maximum response received), between 46-60 years and last age group of 61 years and above (minimum/ only 1 response received)

- Gender wise distribution of the sample data: males (88% of the population),Females (12% of the population)

- Distribution of the occupation of respondents, majority (83.7%) worked in the Government/ Public Sector, 9.8% worked in the Private Sector and 5.4% were Professional/ Self Employed.

The secondary data collected from Annual Reports of National Housing Bank, Banks/ HFCs Annual Financial Reports, Internet regarding financial performance of the lending banks in disbursing the housing loans during the observation time period in respect of Public and Private Sector Banks and Housing Finance Companies.

Descriptive statistics, Trend Analysis of home loan preference by various categories of consumers (Government Sector Employees, Private Sector, Professional/Business-people) towards Public Sector/Private Sector Banks/ HFCs for availing home loan, comparative analysis of home loan taken from Public Sector Banks/Private Sector Banks/Housing Finance Companies and reasons for opting Public/Private Sector Bank/ Housing Finance Company for availing home loan has been studied and analysed using modern analytical tools and techniques.

Findings: This result clearly shows first preference/liking of Public Sector Banks By the Government/Public Sector employees for availing home loan. About 81.8% of the persons employed under the Government/Public Sector preferred the Public Sector Banks for taking Housing Loan. Moreover, 66.7% of the persons employed under the Private Sector have also chosen Public Sector Banks.

Around 35.9% of the surveyed population considers ‘Low Rate of Interest’ as the criteria of choosing a particular Bank/ HFC for taking housing loan, whereas around 22.8% population availed housing loan from the Bank/ HFC with which they already had acquaintance and some professional relationship. Further, inference can also be drawn that the consumers prefer Public Sector Banks for taking loans considering credibility of providing lower rate of interest, transparency, low penalty and hidden charges.

The results also reveals that the Public Sector Banks are at par with the Private Sector Banks but the Housing Finance Companies are rather better in providing Housing Loan products and related services.

Finally, it clearly depicts that the Housing loan market is very competitive and mature in India.

Paper Type: View Point