NHB mulls early refinance to housing finance cos

Source : http://bankfinanceindia.blogspot.com/ Low and lower middle income segments to benefit.

---

Normally, housing finance companies can tap NHB for refinance at concessional interest rates in respect of home loans, given by them only after their business stabilises i.e. two to three years after kicking off operations.

---

To encourage flow of housing finance to low-income households, the National Housing Bank is examining the possibility of giving concessional refinance to housing finance companies, set up exclusively to fund the home ownership dream of these households, within a year of commencement of operations.

Normally, HFCs can tap NHB for refinance at concessional interest rates in respect of home loans, given by them only after their business stabilises i.e. two to three years after kicking off operations.

The proposal to offer refinance to HFCs, catering solely to the home loan needs of those in the low and lower middle income segments, early on is expected to have a beneficial ripple effect. For one, HFCs, based on refinance backing, will lend more.

 For another, knowing that home loan is available to those in the low income bracket, builders will be encouraged to construct affordable dwelling units.

Low and lower middle income households are those with a monthly income of Rs 3,000-20,000. A low-income housing unit is one whose maximum selling price does not exceed Rs 15 lakh.

Concessional refinance, according Mr R.V.Verma, Chairman and Manging Director, NHB, will galvanise all key players in the housing ecosystem — lenders as well as builders — to do more for low income housing.

“Since low and lower middle income households are not able to get home loans, builders are not creating affordable dwelling units.

 However, this situation is expected to reverse as housing finance companies focused on giving home loans to these households are coming up. Availability of early refinance to these companies will encourage flow of housing finance,” said Mr Verma.

Low and lower middle income households are a good credit bet for lenders, emphasised the NHB chief. Unlike the well-heeled, most of these households, subject to finance being available, will be able to buy a house only once in a lifetime. So, they will do their utmost to diligently service the home loan.

Credit delivery network

NHB regulates HFCs, extends refinance in respect of the home loans extended by primary lending institutions, and promotes housing finance institutions to improve/strengthen the credit delivery network for housing finance in the country.

The provision of affordable housing is one of the most formidable challenges that the country faces, according to the report of the high-level committee on affordable housing for all. Approximately 42.8 million persons or about 15.2 per cent of India's urban population live in slum settlements.

According to the Census of India, 35 per cent of urban households live in single room dwelling units and 68 per cent of such households have four members or more. 

The 11th Five-Year Plan has estimated an urban housing shortage of 24.7 million units with 99 per cent of the shortage pertaining to the economically weaker sections and the lower income groups.