Finance Case Study - The Indian Housing Finance Industry At Crossroads|Finance|Case Study|Case Studies

The Indian Housing Finance Industry At Crossroads

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Case Details:

Case Code : FINC019
Case Length : 15 Pages
Period : 1970 - 1992
Pub. Date : 2002
Teaching Note :Not Available
Organization : Indian Government
Industry : Financial Services
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Wooing the Customers

Till the late-1990s, the marketing efforts of Indian HFCs were rather limited because the industry was largely a seller's market. Even the market leader, HDFC, had not undertaken any major marketing initiatives.

The entry of commercial banks and other private sector companies, however, changed the dynamics of the industry, and for the first time, all the players emphasized on marketing. Many of the HFCs targeted the middle class, which had begun availing of housing loans largely due to the declining interest rates.

Analysts pointed out that housing loan companies needed a strong brand image to build a strong relationship with these customers. It was felt that if interest rates increased in the future, this brand image would help companies gain/retain their marketshares. Direct marketing emerged as a very effective tool for attracting customers in this industry...

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Future Prospects

Many analysts felt that the reduction in tax exemptions would negatively influence the housing sector's growth since the tax exemptions provided to the salaried class had acted as one of the main drivers for its growth.

Removing these exemptions would, according to analysts, lead to a decline in demand, especially in the Rs 1-2 million loans segment (reportedly, this segment contributed around 80% of the market). Some industry observers were of the opinion that the removal of exemptions could result in the lowering of real estate prices by companies to attract new customers. However, others felt that the acceptance of the Kelkar Committee's recommendations would not result in a drop in the cost of real estate because prices had reportedly touched all-time low. Ashok Narang, Proprietor, L. Lachmandas and Company remarked, "There is already an oversupply situation in most of the big cities in India. So, the prices are more or less close to the bottom"...


Exhibit I: Kelkar Committee's Recommendations (Housing Finance)
Exhibit II: Housing Finance - The Basics
Exhibit III: Fiscal Concessions Announced by The Government of India

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