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National Housing Bank (NHB)

What is National Housing Bank (NHB)?

National Housing Bank was established on July 9, 1988 under the National Housing Bank Act, 1987. It is a wholly-owned and apex bank of RBI (Reserve Bank of India). The Head Office of NHB is located in New Delhi.

The Preamble of the National Housing Bank Act, 1987 describes the basic functions of the NHB as –

“… to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support to such institutions and for matters connected therewith or incidental thereto…”

Objectives of National Housing Bank

  • To promote a sound, healthy, viable and cost effective housing finance system to cater to all segments of the population and to integrate the housing finance system with the overall financial system.

  • To promote a network of dedicated housing finance institutions to adequately serve various regions and different income groups.

  • To enlarge resources for the sector and channelise them for housing.

  • To make housing credit more affordable.

  • To regulate the activities of housing finance companies based on regulatory and supervisory authority derived under the Act.

  • To encourage augmentation of supply of buildable land and also building materials for housing and to upgrade the housing stock in the country.

  • To encourage public agencies to emerge as facilitators and suppliers of serviced land, for housing.

Organization of National Housing Bank

It has the following Departments for handling the activities 

  • Regulation & Supervision
  • Refinancing Operations
  • Direct Finance Operations 
  • Enabling Processes 
  • Information Technology 
  • Resource Mobilization and Management 
  • Development and Risk Management 
  • Board and CMD Secretariat 
  • Legal Department 

Milestones of National Housing Bank

YearMilestone
1988-89 1. Refinance Schemes for housing loans
2. Schemes for Land Development & Shelter Projects
3. Scheme for Equity Participation in Housing Finance Companies (HFCs)/ Building Materials Companies
1989-901. Home Loan Account Scheme
2. Housing Finance Companies (NHB) Directions, 1989
3. Raised Loan of US$25m (first tranche) under USAID Govt. Housing Guaranty Program
1990-91Notified as a Public Financial Institution
1991-921. Received a Loan Assistance of Yen 2,970 billion from OECF (now JBIC)
2. Scheme for Financing Housing Infrastructure
1992-931. Refinance Schemes for Slum Redevelopment Projects
1994-951. Launched the issue of Unsecured Bonds
2. Guidelines for Prudential Norms for HFCs
1997-981. Golden Jubilee Rural Housing Finance Scheme (GJRHFS)
2. Issued Tax-Free Bonds to finance GJRHFS
3. Drawn from ADB US$20m in 1997-98 and US$30m in 1998-99
1999-20001. Agreement for Cooperation with Canada Mortgage and Housing Corporation for introducing Mortgage Insurance and New Products in the Country
2000-011. First Residential Mortgaged Backed Securitization Issue in the Country
2. Guidelines for Entry of HFCs into Insurance Business
3. Refinance Scheme for the reconstruction of dwelling units in the earthquake affected areas in Gujarat
2001-021. Credit Enhancement of Bonds floated by HFCs
2002-031. Liberalized Refinance Scheme for Housing Loans
2004-061. First time provided Corporate Guarantee for RMBS
2. New Window of lending to Micro Finance Institutions
2005-061. Fraud Management Cell set up to disseminate information on frauds committed on housing loans
2006-071. NHB RESIDEX was launched (first official residential housing price index).
2. New Products Developed for unserved and underserved segments of Society

• Reverse Mortgage Loan for Senior Citizens
• Productive Housing in Rural Areas (PHIRA) i.e. Scheme for composite loans (housing and production) to rural families
• Refinance for Top-up loan for Indira Awas Yojana Beneficiaries
• Equity Participation in New Rural Housing Finance Companies
• Occasional Papers & Discussion Papers Series launched
2007-081. Rural Housing Fund was created with ` 1,000 crores allocation
2. Rural Housing Microfinance was launched
3. NHB-UNESCAP Study on pro-poor housing finance: 7 Asian Countries initiated
4. MOC with UNHABITAT signed for water and sanitation projects for housing
5. Home Loan Counselling: Diploma programme put in place (IIBF)

Finance Functions of NHB 

NHB supports housing finance sector by:

  • Extending refinance to different primary lenders in respect of.

  • Eligible housing loans extended by them to individual beneficiaries,

  • Project loans extended by them to various implementing agencies.

  • Lending directly in respect of projects undertaken by public housing agencies for house construction and development of housing related infrastructure.

  • Guaranteeing the repayment of principal and payment of interest on bonds issued by Housing Finance Companies.

  • Acting as Special Purpose Vehicle for securitizing the housing loan receivables.

Refinance Assistance of NHB

In India, a large number of Primary Lending Institutions are providing housing finance to individual borrowers, builders, corporate houses, etc. for purchase/construction of houses and for repair / up-gradation of an existing house. NHB extends refinance to the following categories of institutions in respect of the housing loans provided by them.

  • Housing Finance Company 
  • Scheduled Commercial Banks
  • Scheduled Urban Cooperative Banks
  • Regional Rural Banks
  • State Level Apex Co-operative Housing Finance Companies
  • Agriculture and Rural Development Banks

Promotion Functions of NHB

  • Promoting, establishing and supporting housing finance institutions.

  • Granting loans and advances

  • Purchasing Housing finance companies shares and bonds

  • Guaranteeing the loan taken by housing finance companies from the open market

  • Underwriting the issue of securities of Housing finance companies

  • Discounting and rediscounting the bills of exchange of housing finance

  • Dealing with the Mortgage of Immovable properties belonging to housing finance institutions

  • Promoting mutual funds of housing finance

  • Conducting research and undertaking survey on construction activities

  • Initiating various schemes for the extension of housing unit

  • Coordinating with LIC, UTI, GIC and other financial institutions

Regulatory Functions of NHB

National Housing Bank is the regulatory authority of Indian housing finance system as per the act of National Housing Bank Act, 1987. The purpose of holding the controlling power is to regulate the housing finance institutions in the interest of the depositors and borrowers.

In addition to this provision, NHB issues directions and guidelines to HFCs for its financial assistance, prudential norms for income recognition, asset classification and Asset Liability Management System, etc.

The main businesses and finance products of NHB

  • Raising Resources by issuing bonds or debentures, borrowing from reserve bank of India and other financial institutions

  • NHB launched “Swarna Jayanti Rural Housing Finance Scheme” to make housing loans accessible to housing development works in rural India on the occasion of the golden jubilee of India’s Independence

  • Mortgage Backed Securitisation and development of secondary mortgage market in India

  • Mortgage Credit Guarantee scheme for protection of lenders against any default.

  • Providing Refinance to Housing Finance Institutions

  • National Housing Bank is engaged in Project Finance for largescale housing projects also.

  • The finance products by NHB include Equity Support and Reverse Mortgage loans along with the above listed services

Refinance Scheme for HFC

NHB currently has the following refinance schemes in operation for HFCs:

Liberalized Refinance Scheme (LRS)

  • Scheme Code – RH1

  • Purpose – To provide refinance assistance in respect of housing loans extended by HFCs for:
    • Construction / purchase of dwelling units
    • Repairs / renovation / upgradation of dwelling units

  • Eligible Loans
    • Loan size – Any – (Interest rates concession is provided upto lakhs)
    • Location – Rural or urban
    • Tenure – 1 year to 15 years
    • Ultimate borrowers – Any

Golden Jubilee Rural Housing Refinance Scheme (GJRHRS)

  • Scheme Code – RH2

  • Purpose – To provide refinance assistance in respect of housing loans extended by HFCs for:
    • Construction / purchase of dwelling units in rural areas
    • Repairs / renovation / upgradation of dwelling units in rural areas

  • Eligible Loans
    • Loan size – upto 15 lakhs
    • Location – Rural
  • Tenure – 1 year to 15 years
  • Ultimate borrowers – Any

Rural Housing Fund (RHF)

  • Scheme Code – RH3

  • Purpose – To provide refinance assistance in respect of housing loans extended by HFCs to borrowers belonging to ‘weaker sections’ for:
    • Construction / purchase of dwelling units in rural areas
    • Repairs / renovation / upgradation of dwelling units in rural areas

  • Eligible Loans
    • Loan size – upto 15 lakhs
    • Location – Rural
  • Tenure – 3 years to 7 years 
  • Ultimate borrowers – Persons belonging to weaker sections 

Energy Efficient Housing Refinance Scheme (EEHRS)

  • Scheme Code – RH4

  • Purpose – To provide refinance assistance in respect of housing loans extended by HFCs for construction / purchase of new energy efficient housing units in urban areas

  • Validity of Scheme – This Scheme shall remain valid till 31-12- 2013 or such further time as decided by NHB.

  • Eligible Loans
    • Type of housing unit – Having energy efficiency (EE) certificate recognized by National Housing Bank in consultation with KfW, based on TERI calculations
    • Loan size – any
    • Location – Urban
    • Date of origination of loan – Loans sanctioned and disbursed on or after 01-01-2011
  • Tenure – 1 year to 15 years
  • Ultimate borrowers – Any 

Special Refinance for Urban Low Income Housing

  • Scheme Code – RH5

  • Purpose – To provide refinance assistance in respect of housing loans extended by HFCs in urban areas for construction / purchase of new dwelling units, purchase of existing dwelling units and extension / up gradation / repairs of existing dwelling units

  • Eligible Loans
    • Loan size – upto 10 lakhs
    • Location – Urban
    • Date of origination of loan – Loans sanctioned and disbursed on or after 01-01-2012
    • Tenure – The tenure of refinance for a particular disbursement shall be co-terminus with the average residual tenure of the pool of housing loans included in that claim for disbursement, subject to minimum tenure of 5 years and maximum tenure of 15 years
    • Ultimate borrowers – Persons having annual household income not exceeding 2 lakhs

Refinance Scheme for Installation of Solar Water Heating and Solar Lighting Equipments in Homes

  • Scheme Code – RH6
  • Purpose – To provide refinance assistance in respect of loans extended by HFCs for purchase and installation of solar water heating systems and purchase and installation of solar lighting systems

Eligible Loans 

  • Loan size – upto 50,000 
  • Location – Rural / Urban 
  • Date of origination of loan – Loans disbursed on or after 01-07-2012 
  • Tenure – 3 years to 7 years 

Conclusion

Real estate finance has received a boost through a combination of growing demand and rising affordability. While the demand for housing has always been there and will be for the long run to come, its increased affordability has been the key to growth. Enhanced affordability has spurred an increase in the demand for real estate loans. The key to high growth rates in the housing finance business will continue to be affordability.

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