With a view to give a push to affordable dwelling units, the National Housing Bank (NHB), a wholly-owned subsidiary of the Reserve Bank of India (RBI), could soon offer concessional refinance to new housing finance companies (HFCs). The move will result in the flow of housing finance to lowincome households.
As a practice, HFCs approach NHB for refinance at concessional rates for home loans, generally two- three years after starting their operations. But in order to encourage the flow of housing finance to low- income households, NHB is exploring if it can offer concessional refinance to HFCs within a year of commencement of operations. NHB's refinance facility to lenders against their existing housing loans helps them rectify their asset- liability mismatches as housing loans are of a longer tenure.
"We are considering the issue. We are taking a view on that," R. V. Verma, the chairman and managing director ( CMD), NHB, told M AIL T ODAY when asked about concessional refinance to HFCs. Concessional refinance, according to officials, will stimulate the lenders as well as developers to do more for low income housing.
According to Verma, since low and lower middle income households are unable to get home loans developers are not creating affordable dwelling units. But he feels the situation could reverse once HFCs are offered early refinance, which would encourage the flow of small- ticket home loans for the low and lower middle income households.
A low-income housing unit is one with a maximum selling price of Rs 15 lakh. And low and lower middle income households are those whose monthly income is between Rs 3,000- Rs 20,000. This class of households have good credit as their priority is to own a house, and so they hardly default on the home loan.
During July- June 2009- 10, 10 new HFCs were granted registration by NHB, taking the total to 52 HFCs. According to NHB officials, 39 microfinance institutions ( MFIs), which have received non- banking finance company ( NBFC) licence from RBI, also plan to foray into the housing finance market.
NHB plans to extend its refinancing support to NBFCs engaged in the housing loan business. Currently, its refinancing activity is restricted to HFCs registered with it.
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