Role
and Functions in Housing Sector
The National Housing Bank (NHB)
was set up in July 1988, under an Act of the Parliament. The Bank is wholly
owned by the Reserve Bank of India. The NHB at present has a paid-up capital
of Rs.350 crores. The NHB was conceived and promoted to function as the
apex institution in the housing sector. The need to set up this institution
stemmed from the fact that the housing sector had not received the attention
it required not only in terms of finance for individual loans but also
in terms of buildable or serviced land, building materials and cost effective
technology.
The objectives of the NHB
are
To promote a sound, healthy, viable
and efficient housing finance system to cater to all segments of the population.
To establish a network of housing
finance outlets to adequately serve different regions and different income
groups.
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To promote savings from housing.
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To make housing more affordable.
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To promote appropriate technologies
for housing.
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To augment the supply of land and of
building materials for housing.
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To enable public agencies to emerge,
primarily, as facilitators and suppliers of serviced land.
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To augment and upgrade the housing stock
in the country.
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To strengthen the backward and forward
linkages of the housing sector with rest of the economy.
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To augment the financial resources for
the sector.
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To enable the housing finance system
to access the capital market for resources.
NHB was set up at a time when the local
and regional level housing finance institutions were nearly absent and
the banking sector had no pressing priority to do housing finance at a
significant level. As a result, the sector has been grossly capital-deficient
and the housing shortage in the country has grown alarmingly. The purpose
of setting up more local and regional level specialised institutions is
to have dedicated outlets for supply of housing credit. NHB is of the opinion
that intervention through institutional credit can be made more effective
by adoption of different approaches to cater to the needs of different
income groups. With the setting up of NHB in 1988, there has been sustained
efforts at creating and supporting new set of specialised institutions
to serve as dedicated centres for housing credit. NHB's role in this regard
can be measured from the fact that from a handful of companies that were
acting as dedicated housing finance institutions when NHB came into existence,
there are now more than 345 such specialised institutions spread over the
vast span of the country. Also from 2 Housing Finance Companies (HFCs)
approved for refinance assistance in the year 1989, when NHB had just come
into existence, at present there are 29 HFCs whose disbursement of housing
loans was approximately Rs.7,400 crore during the year 1998-99.
The second important function of
NHB is the regulatory role assigned to it. This responsibility becomes
all the more relevant as the housing finance system enters a secondary
phase of development in terms of integration with the debt and capital
markets. The case for regulation also emanates from the need for a credible
and stable housing finance system. Without in any manner going against
the free market approach, NHB has attempted to put in place an effective
system of "responsive regulation". The housing finance system is still
evolving in the country and in this context it becomes necessary that it
exhibits a greater amount of stability in terms of resources development,
policy development and institution building. NHB has evolved over a period
of time directions and guidelines in keeping with the various functions
it has to carry out. NHB has come out with a guideline for approving HFCs
for its financial assistance and for participating in their equity. NHB
has also issued The Housing Finance Companies(NHB) Directions and guidelines
for prudential norms for income recognition, assets classification etc.
These guidelines have been formulated keeping in view the mandate given
to NHB to establish a sound and healthy housing finance system in the country.
With these guidelines in place and close monitoring and off-site and on-site
supervision by NHB, the HFCs may be considered as more organised segment
of the NBFCs group. Till date NHB has prohibited 31 HFCs from accepting
public deposits.
The third important role of NHB
is to provide financial assistance to the various banks and housing finance
institutions. As an apex refinance institution, the principal focus of
NHB's programmes is to generate large scale involvement of various primary
lending institutions to serve as dedicated outlets for assistance to the
housing sector. These institutions include scheduled banks (both commercial
and co-operative), regional rural banks, specialised housing finance institutions,
state-level agriculture and rural development banks and the state apex
co-operative housing finance societies. NHB has formulated schemes to support
all these agencies and help them to cater to the housing needs of the community
at large. NHB also undertakes direct financing in respect of government
sponsored bodies/institutions for projects only.
During eleventh year of its operations
NHB has registered a growth of over 45% in its lending operations. NHB
has disbursed an aggregate financial assistance of Rs,774.25 crore during
the year 1998-99 (July-June) as against Rs.457.18 crore and Rs.532.98 crore
disbursed during the years 1996-97 and 1997-98 respectively. The cumulative
financial assistance extended by NHB till June 1999 amounted to Rs.4421.91
crore. Of the cumulative financial assistant of Rs.4421.91 crore extended
by NHB, 77.70% has gone to Housing Finance Companies (HFCs), 16.90% to
co-operative sector institutions and 5.40% to the banking sector.
The refinance assistance provided
by NHB to HFCs , has enabled them to increase their operations and cover
a larger section of the population. During the year, the outstanding deposits
and housing loan portfolios of the NHB approved HFCs have witnessed significant
growth. The public deposits of the NHB approved HFCs have increased from
Rs.5196.03 crore, as on March 31, 1997 to Rs.6631.30 crore, as on March
31, 1998 and to Rs.7326.70 core, as on March 31, 1999. Similarly, the housing
loans disbursed by these companies have grown from Rs.4627.74 crore during
1996-97 to Rs.5783.36 crore during 1997-98 and to Rs.7413.44 crore during
the year 1998-99. Thus, the HFCs have registered a 28.19% growth in the
volume of housing finance disbursed by them during the year 1998-99 as
compared with 24.97% during 1997-98. Also, there has been a marked growth
in the position of housing loans outstanding of these companies from Rs.15,489.32
crore, as on March 31,1997 to Rs.18,048.32 crore, as on March 31, 1998
to Rs.21,765.33 crore, as on March 31, 1999. Keeping in view the significant
performance of HFCs during the 8th Five Year Plan period, their contribution
to the overall flow of funds for housing sector has been raised from Rs.5000
crore during the 8th Plan period to Rs.9500 crore during the 9th Plan period.
The need for easy flow of institutional
credit for housing in rural areas was being considered necessary for quite
sometime. This formed the background for the announcement of a separate
scheme for financing rural housing by the Government of India. NHB formulated
the Swarna Jayanti Rural Housing Finance Scheme which was launched in August
1997. It envisages provision of institutional credit to individuals desirous
of constructing or acquiring new dwelling units and for extensions or repairs
of existing units, in the rural areas of the country. In view of a flexible
approach needed to modulate the options according to the shelter needs
of different sections of the population, the terms of loan under the scheme
has been suitably framed and is being operated through the banking sector,
the co-operative sector institutions and the HFCs which possess a substantial
geographic coverage, functional reach and necessary infrastructure to ensure
its effective operation. In this context, conscious about the long term
nature of housing finance, sufficient backup has been in-built by way of
refinance facility from NHB to all the eligible institutions in order to
supplement their efforts. The targets of financing 50,000 and 1,00,000
dwelling units during the first two years of operation of the scheme have
been successfully achieved by the various implementing institutions. For
the current year, a target of financing 1,25,000 dwelling units under the
scheme has been set.
NHB is also considering to mobilise
the support of NGO's and community based financial institutions in extending
housing finance to the people who have not had the access to the formal
sector credit. NHB is of the view that the sectoral policy environment
must also be sensitised to the needs and potentials of the informal sector.
Recognising the scope and potential
of mortgage securitisation as a viable and sustainable means for generation
of large volume of resources for the housing sector, NHB has taken various
initiatives towards asset securitisation. Even though a lot of work has
been done by NHB for the introduction of mortgage securitisation and eventually
a secondary mortgage market, several hurdles relating to legal, accounting
and taxation are being faced. High stamp duty on conveyance, cumbersome
and time consuming process of registration, absence of enabling legislation
and speedy foreclosure, lack of suitable provisions in Insurance Act, SEBI
guidelines etc. are some of the issues which are to be addressed urgently.
These aspects have been taken by NHB to overcome them through a combination
of operations and policy interventions . NHB`s pilot issue of MBS is likely
to be launched in the near future.
With flexible and responsive policy
measures , NHB is committed to the growth of Indian housing finance system. |